DCIT CIR 3(1), MUMBAI V. EMERSON PROCESS MANAGEMENT INDIA P.LD, MUMBAI

ITA 5314/MUM/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 0969 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 8 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-05-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Assessment Year: 2007-2008
• Appeal Filed On: 21-08-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A K NAYAKDR
• Assessee Lawyers: FONIM MEHTAAR
• Keywords: Sale consideration of property below Jantri Value; Transfer pricing; Difference of opinion
• Section: 50C; 115JB

Judgement Text

INCOME-TAX APPELLATE TRIBUNAL -EBENCH MUMBAI , , , BEFORE S/SHRI RAJENDRA,ACCOUNTANT MEMBER AND AMARJIT SINGH,JUDICIAL MEMBER ./I.T.A./5314/MUM/2014 , /ASSESSMENT YEAR: 2007-08 DCIT -3(1) 607,AAYKAR BHAVAN, MUMBAI-20 VS. M/S.EMERSON PROCESS MANAGEMENT INDIA PVT. LTD..601-02,B WING,DELPHI BUILDING, CENTRAL AVENUE,HIRANANDANI BUSINESS PRAK,POWAI,MUMBAI-400 076. PAN:AAACF 1667M ( /APPELLANT ) ( / RESPONDENT ) REVENUE BY: SHRI A. K.NAYAK,DR ASSESSEE BY: SHRI ALI ASGAR RAMPURWALA AND MS. FONIM MEHTA-AR / DATE OF HEARING: 23.03.2017 / DATE OF PRONOUNCEMENT: 03.05.2017 ,1961 254(1) ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA, AM - CHALLENGING THE ORDER DATED 12/05/2014 OF THE CIT ( A)-6,MUMBAI, THE ASSESSING OFFICER(AO) HAS FILED THE PRESENT APPEAL.ASSESSEE-COMPANY,ENGAG ED IN THE BUSINESS OF MANUFACTURING AND TRADING OF PROCESS CONTROL INSTRUMENTS,FILED ITS RE TURN OF INCOME ON 27/10/2007, DECLARING INCOME OF RS.21,47,56,506/-.THE AO COMPLETED THE ASSESSME NT U/S.143(3) R.W.S. 144(C) (13) OF THE ACT ON 20/09/2011,DETERMINING ITS INCOME AT RS.31,07,81 ,998/-. 2. EFFECTIVE GROUND OF APPEAL IS ABOUT DELETING THE PE NALTY LEVIED BY THE AO U/S. 271(1)(C) OF THE ACT.DURING THE ASSESSMENT PROCEEDINGS THE AO MADE D ISALLOWANCES/ADDITIONS UNDER THE HEADS TRANSFER PRICING ADJUSTMENTS (RS. 9.08 CRORES) AND SHORT-TERM CAPITAL GAINS(RS. 31.75 LAKHS). THE MATTER TRAVELLED UP TO THE TRIBUNAL.VIDE ITS OR DER,DATED 25/07/2012, THE TRIBUNAL DELETED THE TRANSFER PRICING ADJUSTMENT AND CONFIRMED THE ADDIT ION ON ACCOUNT OF COMPETITION OF STCG U/S. 50 READ WITH SECTION 50C OF THE ACT. THE AO HAD INITIATED PENALTY PROCEEDINGS ALLEGING T HAT THE ASSESSEE HAD FURNISHED INACCURATE PARTICULARS OF INCOME AND HAD CONCEALED PARTICULARS OF INCOME WITH AN INTENTION OF AVOIDING TAXES.AFTER CONSIDERING THE SUBMISSIONS OF THE ASSE SSEE, DATED 24/03/2011 AND 13/03/2013, THE AO HELD THAT ASSESSEE HAD CONTRAVENED THE PROVISION S OF SECTION 271(1)(C). IN HIS ORDER DATED 26/03/2013, HE LEVIED A PENALTY OF RS. 17.25 LAKHS. 5314/M/14(07-08) M/S. EMERSON PROCESS MANAGEMENT INDIA PVT.LTD 2 3. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE PREF ERRED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY(FAA). BEFORE HIM, THE ASSESSEE MADE ELABO RATE SUBMISSIONS AND REFERRED TO THE SECTIONS OF 43 (6) (C) (I) (B),50 AND 50C OF THE AC T. IT RELIED UPON SEVERAL CASES AND ARGUED THAT THE ASSESSEE HAD NOT FURNISHED INACCURATE PARTICULA RS NOR HAD CONCEALED THE PARTICULARS OF INCOME. AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE, A SSESSMENT ORDER AND THE PENALTY ORDER, THE FAA HELD THAT THE AO HAD LEVIED PENALTY IN RESPECT OF THE ADDITION MADE IN VIEW OF PROVISIONS OF SECTION 50C BY TAKING ENHANCED VALUE OF CONSIDERATI ON FOR THE ASSET SOLD AS PER THE STAMP DUTY AUTHORITIES,THAT HE HAD ACCORDINGLY COMPUTED STCG O N THE SALE OF BUILDING. HE MADE A REFERENCE TO THE PROVISIONS OF SECTION 271(1)(C) AND HELD THA T ALL THE PARTICULARS ON FACTS RELEVANT FOR PURPOSE OF COMPUTATION OF TOTAL INCOME OF THE ASSES SEE WERE ON RECORD, THAT IT HAD NOT DECLARED ANY ON FIGURE IN ITS ACCOUNTS RESULTING IN FURNISHI NG INACCURATE PARTICULARS OF INCOME. HE REFERRED TO THE CASE OF RELIANCE PETRO PRODUCTS PRIVATE LTD. (322 ITR 158) AND HELD THAT CONCEALMENT PENALTY COULD NOT LEVIED MERELY BECAUSE THE AO AND THE ASSESSEE HELD A DIVERSE VIEW ON ALLOWABILITY OF A CLAIM FOR DEDUCTION.HE ALSO REFER RED TO THE CASE OF RENU HINGORANI (ITA/ 2210/ MUM/2010, DATED 22/12/2010) WHEREIN THE TRIBUNAL HA D,IN THE SIMILAR CIRCUMSTANCES, DELETED THE PENALTY LEVIED BY THE AO. HE FURTHER OBSERVED THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS AN ADDITION OF RS. 51.25 LAKHS WAS MADE UNDER THE H EAD STCG ON SALE OF BUILDING IN VIEW OF THE PROVISIONS OF SECTION 50C BY TAKING ENHANCED VALUE OF CONSIDERATION FOR THE PROPERTY SOLD AS PER THE STAMP DUTY AUTHORITIES,THAT ALL THE FACTS FOR C OMPUTATION OF INCOME WERE DISCLOSED BY THE ASSESSEE IN ITS RETURN OF INCOME,THAT PENALTY PROCE EDINGS AND THE ASSESSMENT PROCEEDINGS WERE INDEPENDENT OF EACH OTHER,THAT IT WAS NOT A FIT CAS E FOR LIVING PENALTY U/S. 271(1)(C). 4. DURING THE COURSE OF HEARING BEFORE US,THE DEPARTME NTAL REPRESENTATIVE(DR)STATED THAT THE ASSESSEE HAD FILED WRONG COMPUTATION OF INCOME WITH REGARD TO STCG,IT DID NOT OFFER ANY EXPLANATION,THAT THE TRIBUNAL HAD UPHELD THE ADDITI ON MADE BY THE AO WHILE DECIDING THE APPEAL FILED BY IT. THE AUTHORISED REPRESENTATIVE (AR) ARGUED THAT COMP UTATION WAS INTEGRAL PART OF THE RETURN OF INCOME, THAT ASSESSEE HAD SOLD THREE PROPERTIES DUR ING THE YEAR UNDER CONSIDERATION, THAT AT THE TIME OF FILING OF RETURNS IT HAD OFFERED STCG AND H AD PAID TAXES ACCORDINGLY, THAT PROVISIONS OF SECTION 50C WERE APPLICABLE FOR COMPUTING THE CAPIT AL GAINS,THAT IN CASE UNDER CONSIDERATGION PROVISIONS OF SECTION 50 WOULD APPLY.HE REFERRED TO THE CASES OF PANCHIRAM NAHATA(127TTJ128) 5314/M/14(07-08) M/S. EMERSON PROCESS MANAGEMENT INDIA PVT.LTD 3 FORTUNE HOTELS AND ESTATES PRIVATE LTD (INCOME TAX APPEAL 1164 OF 2012) OF HONORABLE BOMBAY HIGH COURT AND BHARAT HOMES LTD. (ITA/6466/ MUMBAI/ 2013-AY. 2006-07,DATED 09/10/2015). 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US. WE FIND THAT THE ASSESSEE HAD,DURING THE YEAR UNDER APPEAL,SOLD THRE E PROPERTIES,THAT THE TRIBUNAL HAD UPHELD THE ORDER OF THE FAA CONFIRMING THE ADDITION MADE BY TH E AO,THAT THE AO HAD LEVIED PENALTY U/S. 271(1)(C) AFTER HIS ORDER WAS CONFIRMED.WE FIND THA T THE ASSESSEE HAD FILED ALL THE DETAILS ABOUT THE ASSETS SOLD DURING THE YEAR,THAT FIGURES PICKED UP BY THE AO FOR MAKING ADDITION ARE PART OF THE RETURN OF INCOME FILED BY THE ASSESSEE.THUS,IN OUR OPINION,PRIMA FACIE THE ASSESSEE HAD NOT CONCEALED ANY PARTICULAR OF INCOME.THERE WAS DIFFER ENCE OF OPINION BETWEEN THE AO AND THE ASSESSEE ABOUT THE TREATMENT TO BE GIVEN TO THE AMO UNT IN QUESTION.NO AUTHORITY IS REQUIRED TO BE CITED TO HOLD THAT ASSESSMENT AND PENALTY PROCEEDIN GS ARE TWO INDEPENDENT PROCEEDINGS AND THAT QUANTUM ADDITION SHOULD NOT AND CANNOT RESULT IN AU TOMATIC LEVY OF CONCEALMENT PENALTY.THE AO IS REQUIRED TO CONSIDER THE EXPLANATION FILED BY TH E ASSESSEE DURING THE PENALTY PROCEEDINGS TO DECIDE THE LEVY OF PENALTY.IF A CLAIM MADE BY AN AS SESSEE IS NOT PERMISSIBLE LEGALLY,IT CANNOT BE HELD THAT BY LODGING SUCH A CLAIM IT HAD FILED INAC CURATE PARTICULARS.IN THE CASE UNDER CONSI - DERATION,THE AO MADE THE ADDITIONS INVOKING THE PRO VISIONS OF SECTION 50 C OF THE ACT.EVEN AT THE TIME OF PENALTY ORDER THERE WAS NO UNANIMITY TH AT THE PROVISIONS OF SECTION 50C WOULD BE APPLICABLE TO SECTION 48 ONLY OR THEY WOULD BE APPL ICABLE TO SECTION 50 ALSO.THUS,THERE WAS DIFFERENCE OF OPINION ABOUT THE ADDITION.SO IN OUR OPINION,PENALTY WAS NOT LEVIABLE FOR SUCH A DISPUTED ISSUE.WE FIND THAT IN THE CASE OF PANCHIR AM NAHATA (SUPRA) THE TRIBUNAL HAS HELD THAT WHERE IT WAS NOT IN DISPUTE THAT SOLD ASSET WAS DEP RECIABLE ASSET,THE AO WAS NOT JUSTIFIED IN ADOPTING THE VALUE AS PER STAMP DUTY AUTHORITIES.IN THE CASE OF BHARAT HOMES LTD.,(SUPRA)WE HAVE DEALT WITH THE IDENTICAL ISSUE.WE ARE REPRODUC ING THE FACTS AND OTHER RELEVANT PORTION OF THE SAID ORDER AND IT READS AS FOLLOW: 2. BRIEFLY THE FACTS ARE, THE ASSESSEE A COMPANY FI LED ITS RETURN OF INCOME FOR THE AY. UNDER CONSIDERATION ON 29TH NOVEMBER 2006, DECLARING LOSS OF RS. 12,80,636, UNDER THE NORMAL PROVISIONS AND BOOK PROFIT OF RS. 73,03,098 UNDER S ECTION 115JB OF THE INCOME TAX ACT, 1961 (FOR SHORT 'THE ACT'). DURING THE ASSESSMENT PROCEEDINGS , THE ASSESSING OFFICER, ON VERIFYING THE MATERIAL ON RECORD, FOUND THAT THE ASSESSEE, DURING THE RELEVANT PREVIOUS YEAR, HAS SOLD TWO OFFICE PREMISES AT PRIME PLAZA, SANTACRUZ, MUMBAI, FOR A D ECLARED SALE CONSIDERATION OF RS. 2,07,90,000, FOR EACH OF THE OFFICE PREMISES. WHERE AS, THE DY. REGISTRAR, ANDHERI, MUMBAI, WHILE REGISTERING THE SALE DOCUMENTS HAS VALUED EACH OF T HE FLAT AT RS. 2,23,87,054, FOR STAMP DUTY PURPOSE. THEREFORE, ALLEGING THAT SALE CONSIDERATIO N SHOWN BY THE ASSESSEE IS LESSER THAN THE MARKET VALUE BY RS. 15,97,054, IN RESPECT OF EACH F LAT THE ASSESSING OFFICER SOUGHT TO INVOKE THE PROVISIONS OFSECTION 50C OF THE ACT. THOUGH THE ASS ESSEE OBJECTED TO INVOKING THE PROVISIONS 5314/M/14(07-08) M/S. EMERSON PROCESS MANAGEMENT INDIA PVT.LTD 4 OF SECTION 50C, BUT THE ASSESSING OFFICER, REJECTIN G ASSESSEE'S CONTENTION, INVOKED THE PROVISIONS OF SECTION 50C OF THE ACT AND CONSIDERED THE TOTAL SALE CONSIDERATION FOR THE TWO FLATS OF RS. 4,47,74,108, BEING THE VALUE ADOPTED BY THE REGISTE RING AUTHORITY FOR STAMP DUTY PURPOSE. THIS RESULTED IN ADDITION OF RS. 31,94,108, AS SHORT BHA RAT HOMES LIMITED TERM CAPITAL GAIN. BEING AGGRIEVED OF SUCH ADDITION, THOUGH THE ASSESS EE PREFERRED AN APPEAL BEFORE THE LEARNED COMMISSIONER (APPEALS), BUT AS IT APPEARS, THE FIRS T APPELLATE AUTHORITY CONFIRMED THE APPLICATION OF PROVISIONS OF SECTION 50C OF THE ACT. ON THE BAS IS OF ADDITION MADE, THE ASSESSING OFFICER INITIATED PROCEEDINGS UNDER SECTION 271(1)(C)(1)(C) OF THE ACT ALLEGING FURNISHING OF INACCURATE PARTICULARS OF INCOME AND ISSUED A SHOW CAUSE NOTIC E TO THE ASSESSEE. THOUGH, THE ASSESSEE IN ITS EXPLANATION REQUESTED FOR DROPPING THE PENALTY PROC EEDINGS BY STATING THAT THE ASSESSEE HAS NOT FURNISHED INACCURATE PARTICULARS OF INCOME AND THE ADDITION WAS AS A RESULT OF ADDITION MADE BY INVOKING THE PROVISIONS OF SECTION 50C OF THE ACT B UT THE ASSESSING OFFICER, REJECTING THE EXPLANATION OF THE ASSESSEE, PASSED AN ORDER DATED 25TH MARCH 2011, IMPOSING PENALTY UNDER SECTION 271(1)(C)(1)(C) OF THE ACT FOR AN AMO UNT OF RS. 10,75,136, BEING 100% OF THE TAX SOUGHT TO BE EVADED. BEING AGGRIEVED OF THE PENALTY ORDER, THE ASSESSEE PREFERRED APPEAL BEFORE THE FIRST APPELLATE AUTHORITY, INTER-ALIA, ON THE G ROUND THAT WHEN THE ADDITION HAS BEEN MADE BY APPLYING THE PROVISIONS OF SECTION 50C OF THE ACT, IT IS A DEBATABLE ISSUE, HENCE, PENALTY IS NOT IMPOSABLE. IN THIS CONTEXT, HE RELIED UPON THE DECI SION OF THE HON'BLE RAJASTHAN HIGH COURT IN CIT V/S HARSHVARDHAN CHEMICALS & MINERALS LTD., 259 ITR 212 (RAJ.). HE ALSO RELIED UPON THE DECISION OF THE HON'BLE SUPREME COURT IN CIT V/S RE LIANCE PETROPRODUCTS PVT. LTD., [2010] 322 ITR 158 (SC), TO SUBMIT BHARAT HOMES LIMITED THAT M AKING OF AN LEGALLY INADMISSIBLE CLAIM BY ITSELF WOULD NOT LEAD TO A CASE OF FURNISH ING OF INACCURATE PARTICULARS OF INCOME. 3. THE LEARNED COMMISSIONER (APPEALS), AFTER CONSID ERING THE SUBMISSIONS OF THE ASSESSEE, OBSERVED THAT THE ASSESSEE HAS FURNISHED ALL PARTIC ULARS OF THE TRANSACTIONS RELATING TO THE SALE OF THE PROPERTY AS WELL AS VALUE ADOPTED BY THE STAMP VALUATION AUTHORITY. HENCE, QUESTION OF FURNISHING OF INACCURATE PARTICULARS OF INCOME DOES NOT ARISE. FURTHER, HE OBSERVED THAT THE ISSUE WHETHER THE VALUE ADOPTED BY THE STAMP VALUATION AU THORITY FOR STAMP DUTY PURPOSE IS THE ACTUAL CONSIDERATION RECEIVED BY THE ASSESSEE IS A DEBATAB LE ISSUE IN VIEW OF THE DEEMING PROVISIONS OF SECTION 50C OF THE ACT. HENCE, IT CANNOT BE SAID THAT THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF INCOME. ON THE AFORESAID OBSERVATION , HE DELETED THE IMPOSITION OF PENALTY. 4. WHEN THE CASE WAS CALLED FOR HEARING, NONE APPEA RED ON BEHALF OF THE ASSESSEE. THEREFORE, HAVING HEARD THE LEARNED DEPARTMENTAL REPRESENTATIV E AND ON A PERUSAL OF THE MATERIAL AVAILABLE ON RECORD, WE DO NOT FIND ANY INFIRMITY IN THE ORDE R OF THE LEARNED COMMISSIONER (APPEALS) IN DELETING THE PENALTY IMPOSED UNDER SECTION 271(1)(C )(1)(C) OF THE ACT. AS CAN BE SEEN, THE ADDITION MADE ON ACCOUNT OF SHORT TERM CAPITAL GAIN WAS UNDE R SECTION 50C, AS A RESULT OF THE VALUATION MADE BY THE STAMP VALUATION AUTHORITY FOR STAMP DUT Y PURPOSE. ON A PLAIN READING OF THE AFORESAID PROVISION, IT IS ABSOLUTELY CLEAR THAT IN A CASE BHARAT HOMES LIMITED WHERE THE DECLARED SALE CONSIDERATION BY THE ASSESSEE IS LESS ER THAN THE VALUE ADOPTED BY THE STAMP VALUATION AUTHORITY FOR STAMP DUTY PURPOSE SUCH VAL UE SHALL BE THE SALE CONSIDERATION DEEMED TO HAVE BEEN RECEIVED BY THE ASSESSEE OF COURSE, SUBJE CT TO THE PROVISIONS CONTAINED UNDER SUB- SECTIONS (2) AND (3) OF THE ACT. THUS, FROM THE AFO RESAID PROVISIONS, IT IS CLEAR THAT FOR APPLYING THE SAID PROVISION, THE ASSESSING OFFICER NEED NOT HAVE TO ESTABLISH WHETHER ACTUAL SALE CONSIDERATION RECEIVED BY ASSESSEE IS THE VALUE ADO PTED BY THE STAMP VALUING AUTHORITY FOR STAMP DUTY PURPOSE. HOWEVER, AS FAR AS IMPOSITION OF PENA LTY UNDER SECTION 271(1)(C)(1)(C) OF THE ACT IS CONCERNED, THE ASSESSING OFFICER HAS TO PROVE THE F ACT THAT THE ASSESSEE ACTUALLY RECEIVED AS SALE CONSIDERATION, THE AMOUNT DETERMINED AS THE VALUE F OR STAMP DUTY PURPOSE. THERE IS NOT EVEN A SINGLE EVIDENCE BROUGHT ON RECORD BY THE ASSESSING OFFICER WHICH COULD EVEN REMOTELY ESTABLISH THAT THE ASSESSEE HAS RECEIVED ANYTHING OVER AND AB OVE THE DECLARED SALE CONSIDERATION. MERELY BECAUSE THE ADDITION WAS MADE BY APPLYING THE PROVI SIONS OF SECTION 50C OF THE ACT ON THE BASIS OF VALUE DETERMINED BY THE STAMP VALUATION AUTHORIT Y, THE ASSESSEE CANNOT BE SADDLED WITH PENALTY UNDER SECTION 271(1)(C)(1)(C) OF THE ACT EITHER FOR FURNISHING OF INACCURATE PARTICULARS OF INCOME 5314/M/14(07-08) M/S. EMERSON PROCESS MANAGEMENT INDIA PVT.LTD 5 OR FOR CONCEALMENT OF INCOME. MOREOVER, IN THE PRES ENT CASE, THE ASSESSING OFFICER HAS IMPOSED PENALTY FOR FURNISHING INACCURATE PARTICULARS OF IN COME. HOWEVER, AS COULD BE SEEN, THE ASSESSEE HAS FURNISHED ALL PARTICULARS BHARAT HOMES LIMITED RELATING TO THE SALE OF PROPERTY BEFORE THE ASSESSING OFFICER. IN THESE CIRCUMSTANCES, THE ALLEGATION BY THE ASSESSING OFFICER THAT THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF IN COME IS WITHOUT ANY SUBSTANCE. IN VIEW OF THE AFORESAID, WE DO NOT SEE ANY REASON TO INTERFERE WI TH THE ORDER OF THE LEARNED COMMISSIONER (APPEALS) AND CONSEQUENTLY, THE SAME IS HEREBY UPHE LD. 5. IN THE RESULT, REVENUE'S APPEAL STANDS DISMISSED . CONSIDERING THE ABOVE AND RESPECTFULLY FOLLOWING TH E CASES REFERRED TO BY THE ASSESSEE,WE HOLD THAT THE ORDER OF THE FAA DOES NOT SUFFER FROM ANY LEGAL OR FACTUAL INFIRMITY.SO.CONFIRMING HIS ORDER,WE DECIDE THE EFFECTIVE GROUND OF APPEAL AGAI NST THE AO. AS A RESU LT,APPEAL FIELD BY THE AO STANDS DISMISSED. ORDER PRONOU NCED IN THE OPEN COURT ON 3 RD MAY, 2017. 3 2017 SD/- SD/- ( /AMARJIT SINGH ) ( / RAJENDRA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; /DATED : 03 .05.2017. JV.SR.PS. / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR E BENCH, ITAT, MUMBAI / , , . . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, MUMBAI.