The Dy. Commissioner of Income Tax, Chandigarh V. M/s Improvement Trust, Bathinda

ITA 537/ASR/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 0567 (ITAT-AMRITSAR)
• Duration Of Justice: 8 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-07-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2007-2008
• Appeal Filed On: 19-10-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: BHAWANI SHANKER
• Assessee Lawyers: Y K SUD
• Section: 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR. (CAMP AT JALANDHAR) BEFORE SH. A.D. JAIN, JUDICIAL MEMBER AND SH. T.S. KAPOOR, ACCOUNTANT MEMBER ITA NOS.537 TO540(ASR)/2015 ASSESSMENT YEARS:2007-08, 2008-09, 2009-10 & 2010 -11 PAN: AAATE1563E DY. COMMR. OF INCOME TAX, VS. IMPROVEMENT TRUST, CIRCLE-1, (EXEMPTION), DR. MELA RAM STREET, CHANDIGARH. BATHINDA (APPELLANT) (RESPONDENT) APPELLANT BY: SH.BHAWANI SHANKER, DR RESPONDENT BY: SH. Y.K. SUD, CA DATE OF HEARING: 29/06/2016 DATE OF PRONOUNCEMENT: 11/07/2016 ORDER PER A.D. JAIN, JM: THESE FOUR APPEALS BY THE DEPARTMENT ARE DIRECTED AGAINST FOUR DIFFERENT ORDERS OF LD. CIT(A), BATHINDA, DATED 21. 08.2015 & 28.08.2015 RELATING TO ASSESSMENT YEARS 2007-08 TO 2010-11. SI NCE THE ISSUE RAISED BY THE REVENUE IN ALL THESE APPEALS IS COMMON, THEY ARE BEING DISPOSED OF BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVE NIENCE. 2. THE REVENUE HAS RAISED ALMOST SIMILAR GROUNDS IN ALL THE APPEALS. HOWEVER, THE GROUNDS OF APPEAL TAKEN IN ITA NO.537 (ASR)/2015 FOR THE ASSESSMENT YEAR 2007-08, ARE REPRODUCED AS UNDER: 1. THAT THE ORDER OF THE LD. CIT(A) IS DEFECTIVE B OTH IN LAW AND FACTS OF THE CASE. 2 2. THAT THE ORDER OF THE LD. CIT(A) IS BAD IN LAW A S THE AMENDMENT IN SECTION 2(15) IS EFFECTIVE W.E.F. 01.0 4.2009 AND THE ASSESSMENT IN THE CASE HAS BEEN COMPLETED CONSIDERING THE ACTIVITIES OF THE ASSESSEE WHICH AR E NOT ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY. 3. THAT THE ORDER OF THE LD. CIT(A) IS BAD IN LAW I N DELETING THE PENALTY U/S 271(1)(C) OF THE ACT, AS THE ASSESSEE H AS WILLFUL SUPPRESSION OF CLOSING STOCK AND SUPPRESSION OF REC EIPTS HAVE BEEN DETECTED BY THE AO. THE VALUATION OF CLOS ING STOCK HAS BEEN CERTIFIED BY THE SPECIAL AUDIT AND IT IS N OT A CASE OF MERE DISALLOWANCE OF EXPENSES. 3. THE FACTS AS AVAILABLE FROM THE RECORD ARE THAT THE ASSESSEE- IMPROVEMENT TRUST IS A STATUTORY BODY CONSTITUTED U NDER THE PUNJAB TOWN IMPROVEMENT ACT, 1922 WITH THE OBJECT TO PROVI DE PUBLIC UTILITY SERVICES BY WAY OF ROADS, SEWERAGE, WATER SUPPLY, E LECTRICITY SUPPLY SYSTEMS, ETC., BESIDES PROVIDING HOUSING PLOTS FOR ALL SECTIONS OF THE SOCIETY. THERE ARE ABOUT 20 TRUSTS IN PUNJAB FOR TH E DEVELOPMENT OF CITIES, HOUSING ACCOMMODATION, RE-HOUSING SCHEME, D EVELOPMENT AND EXPANSION SCHEME, ETC. EARLIER, THE INCOME OF SUCH TRUSTS WAS EXEMPT U/S 10(20A) OF THE I.T.ACT, UPTO 31.03.2002. THE S AID SECTION WAS OMITTED FROM THE STATUTE AND ALL THE TRUSTS IN PUNJ AB APPLIED FOR REGISTRATION U/S 12A. THE AO FRAMED THE ASSESSMEN T OF THE ASSESSEE TRUST ON 02.07.2010 FOR THE ASSTT. YEARS 2007-08, I N THE STATUS OF AOP, BUT WITHOUT REGISTRATION. THE LD. CIT(A) DISMISSED THE ASSESSEES APPEAL AND CONFIRMED THE ASSESSMENT ORDER. THE ASSESSEE C HALLENGED THE ORDER BEFORE THE TRIBUNAL WITHOUT ANY SUCCESS. THE ASSES SEE WENT IN APPEAL BEFORE THE HONBLE HIGH COURT OF PUNJAB & HARYANA, WHO, VIDE ORDER 3 DATED 6 TH AUGUST, 2014, RESTORED THE MATTER TO THE ITAT, AM RITSAR FOR RECONSIDERATION OF THE ISSUE OF REGISTRATION IN VIE W OF THE AMENDED PROVISIONS OF THE INCOME TAX ACT, 1961 W.E.F. 01.0 4.2009. 4. NOW, THE ITAT, AMRITSAR, VIDE ITS ORDER DATED 10 .09.2015, IN THE CASE OF HOSHIARPUR IMPROVEMENT TRUST VS. INCOME TA X OFFICER, WARD-1, HOSHIARPUR, IN ITA NO.496(ASR)2013, FOR THE ASSESSM ENT YEAR 2009-10, HAS HELD THAT THE AUTHORITIES BELOW WERE NOT JUSTI FIED IN DECLINING THE BENEFIT OF SECTION 11 READ WITH SECTION 2(15) TO TH E ASSESSEE, AND IN HOLDING THAT THE ASSESSEE TRUST WAS NOT COVERED B Y ADVANCEMENT OF ANY OBJECT OF GENERAL PUBLIC UTILITY. SIMILARLY, THE AS SESSEES OWN APPEAL FOR THE ASSESSMENT YEAR 2008-09 HAS BEEN ADJUDICATED BY THIS BENCH VIDE ORDER DATED 02.06.2016, IN ITA NO.461(ASR)/2013, IN FAVOUR OF THE ASSESSEE, FOLLOWING THE AFORESAID ORDER OF THE TRIB UNAL I.E., DATED 10.09.2015. 5. THE AO ASSESSED THE INCOME AT RS.7,39,97,350/-, AS HE WAS OF THE VIEW THAT THE ASSESSEE HAD INTENTIONALLY AND DELIBE RATELY CONCEALED THE PARTICULARS OF INCOME/FURNISHED INACCURATE PARTICU LARS OF ITS INCOME. HE, THEREFORE, LEVIED PENALTY @ 100%, TO THE TUNE O F RS.2,49,07,509/-. 6. AGGRIEVED WITH THE ORDER OF THE AO, THE ASSESSEE FILED APPEAL BEFORE THE LD. CIT(A), WHO DELETED THE PENALTY IM POSED U/S 271(1)(C) OF THE ACT. 7. NOW, AGGRIEVED WITH THE ORDER OF THE LD. CIT(A), THE DEPARTMENT IS IN APPEAL BEFORE THIS BENCH. 4 8. THE LD. DR RELIED ON THE ORDER OF THE A.O., AND CONTENDED THAT THE ORDER OF THE LD. CIT(A) IS BAD IN LAW, AS THE AMEN DMENT IN SECTION 2(15) IS EFFECTIVE FROM 01.04.2009 AND THE ASSESSMENT IN THIS CASE HAS BEEN COMPLETED CONSIDERING THE ACTIVITIES OF THE ASSESS EE, WHICH ARE NOT FOR ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC U TILITY. HE FURTHER CONTENDED THAT THE LD. CIT(A) HAS ERRED IN DELETING THE PENALTY U/S 271(1)(C) OF THE ACT, AS THE ASSESSEE HAS WILLFULLY SUPPRESSED THE CLOSING STOCK. 9. THE LD. COUNSEL FOR THE ASSESSEE, ON THE OTHER H AND, STRONGLY SUPPORTED THE ORDER OF THE LD. CIT(A). HE CONTENDED THAT THE LD. CIT(A) DELETED THE PENALTY BY HOLDING THAT QUANTUM ASSESSM ENT IN THE ASSESSEES CASE DOES NOT REPRESENT ADDITIONS ON ACC OUNT OF POSITIVE CONCEALMENT AND THUS, PENALTY IS NOT LEVIABLE. HE F URTHER SUBMITTED THAT THE ISSUE RELATING TO GRANT OF REGISTRATION AND WITH REGARD TO THE ACTION OF THE LD. CIT(A), BY WHICH, HE HAD CONFIRMED THE A DDITION MADE BY THE AO ON ACCOUNT OF VALUATION OF CLOSING STOCK, HAVE ALREADY BEEN DECIDED BY THE TRIBUNAL IN FAVOUR OF THE ASSESSEE BY HOLDIN G THE INCOME OF THE ASSESSEE TO BE ELIGIBLE FOR EXEMPTION U/S 11 OF THE ACT AND THEREFORE, THE ADDITION SUSTAINED BY THE LD. CIT(A) HAS BECOME INF RUCTUOUS. 10. WE HAVE HEARD THE RIVAL CONTENTIONS AND HAVE GO NE THROUGH THE MATERIAL AVAILABLE ON RECORD. WE HAVE ALSO THOROUGH LY GONE THROUGH THE ORDER OF THE LD. CIT(A) DELETING PENALTY IMPOSED BY THE AO BY HOLDING THAT THE ADDITIONS IN THE QUANTUM ASSESSMENT IN THE CASE OF THE ASSESSEE DO 5 NOT REPRESENT ADDITIONS ON ACCOUNT OF POSITIVE CONC EALMENT AND AS SUCH PENALTY IS NOT LEVIABLE. WE CONCUR WITH THE DETAILE D AND WELL REASONED FINDINGS GIVEN BY THE LD. CIT(A), IN HIS ORDER, WHI LE DELETING THE PENALTY. WE CONSIDER IT APPROPRIATE TO REPRODUCE THE SAME F OR SAKE OF CONVENIENCE AS UNDER: 12. THE ADDITIONS MADE IN THE CASE OF THE APPELLAN T BY OPERATION OF LAW MAY BE GOOD AND WORTHWHILE IN THE ASSESSMENT PROCEEDINGS BUT THE SAME CANNOT BE CONSIDERED RELEVANT FOR IMP OSING PENALTY WITH REFERENCE TO THE SAID ADDITIONS. IT HAS BEEN AD NAUSEAM DECLARED BY THE COURTS THAT FOR PENALTY TO BE EXIGI BLE, THERE HAS TO BE A CONSCIOUS ACT OF CONCEALMENT OR A REASONABLE INFE RENCE FROM THE ACT OF THE ASSESSEE THAT THE SAME WAS AIMED AT DELI BERATE AND ACTUAL CONCEALMENT. LAYING DOWN THE LAW ON THE SUBJ ECT OF PENALTY, THE APEX COURT IN THE CASE OF CIT VS. RELIANCE PETR O-PRODUCTS, MADE THE FOLLOWING OBSERVATIONS: SECTION 271(1)(C) APPLIES WHERE THE ASSESSEE HAS C ONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHED INACCURA TE PARTICULARS OF SUCH INCOME. THE PRESENT WAS NOT TH E CASE OF CONCEALMENT OF THE INCOME. AS REGARDS THE FURNISHIN G OF INACCURATE PARTICULARS, NO INFORMATION GIVEN IN THE RETURN WAS FOUND TO BE INCORRECT OR INACCURATE. THE WORD INACC URATE PARTICULARS MEANS THAT THAT THE DETAIL SUPPLIED I N THE RETURN ARE NOT ACCURATE, NOT EXACT OR CORRECT, NOT ACCORDI NG TO TRUTH OR ERRONEOUS. IN THE ABSENCE OF A FINDING BY THE AO TH AT ANY DETAILS SUPPLIED BY THE ASSESSEE IN ITS RETURN WER E FOUND TO BE INCORRECT OR ERRONEOUS OR FALSE, THERE WOULD BE NO QUESTION OF INVITING PENALTY UNDER SECTION 271(1)(C) THE ARGUMENT OF THE REVENUE THAT SUBMITTING AN INC ORRECT CLAIM FOR EXPENDITURE WOULD AMOUNT TO GIVING INACCU RATE PARTICULARS OF SUCH INCOME IS NOT CORRECT. BY NO ST RETCH OF IMAGINATION CAN BE MAKING OF AN INCORRECT CLAIM IN LAW TANTAMOUNT TO FURNISHING INACCURATE PARTICULARS. A MERE MAKING OF THE CLAIM, WHICH IS NOT SUSTAINABLE IN LA W, BY ITSELF, WILL NOT AMOUNT TO FURNISHING INACCURATE PARTICULAR S REGARDING THE INCOME OF THE ASSESSEE. IF THE CONTENTION OF TH E REVENUE IS ACCEPTED THEN IN CASE OF EVERY RETURN, WHERE THE CL AIM MADE IS NOT ACCEPTED BY THE AO FOR ANY REASON, THE ASSESSEE WILL INVITE PENALTY U/S 271(1)(C). THAT IS CLEARLY NOT T HE INTENDMENT THE LEGISLATURE. 6 THE LAW LAID DOWN IN DILIP SHROFF AS TO THE MEANIN G OF THE WORDS CONCEAL AND INACCURATE CONTINUES TO BE GO OD LAW BECAUSE WHAT WAS OVERRULED IN DHARMEDRA TEXTILES PROCESSORS WAS ONLY THAT PART IN DILIP SHROFF WHERE IT WAS HELD THAT MENS REA WAS AN ESSENTIAL REQUIREMENT FOR PENALTY U/S 271(1)(C) OF THE ACT. 13. IT HAS BEEN SUCCESSFULLY RULED BY THE VARIOUS C OURTS OF LAW THAT DISALLOWANCE OF AN EXPENSE PER SE CANNOT MEAN THAT THE ASSESSEE HAS FURNISHED INCORRECT PARTICULARS OF ITS INCOME. CONCEALMENT INVOLVES PENAL ACTION. IT HAS TO BE PRO VED AS A CONSCIOUS ACT. IN ORDER TO JUSTIFY LEVY OF PENALTY, CIRCUMSTANCES MUST SHOW THAT THE ASSESSEE IS HAVING AN INTENTION TO CONCEAL INCOME AND TO EVADE PAYMENT OF TAX BALJI VEGETABLE PRODUCTS (P) LTD. VS. CIT, 290 ITR 172 (KAR.). IT IS TRUE TH AT DIRECT EVIDENCE MAY NOT BE AVAILABLE IN EVERY CASE. YET, I T MUST BE PROVED AS A NECESSARY COROLLARY FROM THE FACTS AND CIRCUMSTANCES ESTABLISHED ON RECORD CIT VS. AJAI B SINGH & CO. 119 TAXMAN 825 (P&H). IN OTHER WORDS, THE MERE FACT THAT CERTAIN AMOUNTS CLAIMED BY THE ASSESSEE HAD BEEN DISALLOWED AND TREATED AS INCOME DOES NOT NECESSARI LY LEAD TO THE CONCLUSION THAT THE ASSESSEE IS GUILTY OF FRAUD OR WILLFUL NEGLECT. THE FACT THAT THE EXPLANATION TO SECTION 2 71(1)(C) REQUIRED THE ASSESSEE TO SHOW THAT THERE WAS NO FRA UD OR WILLFUL NEGLIGENCE DOES NOT IN ANYWAY ENABLE THE RE VENUE TO CONTEND THAT THERE IS A PRESUMPTION OF FRAUD OR NEG LIGENCE WITHOUT ADDUCING ANY EVIDENCE WHATEVER TO SUBSTANTI ATE SUCH ASSERTION CIT VS. INDEN BISLERS, 118 TAXMAN 766 ( MAD.). THE FURNISHING OF INACCURATE INFORMATION RELATES TO FUR NISHING OF FACTUALLY INCORRECT DETAILS AND INFORMATION ABOUT I NCOME. THE ADMISSION OR REJECTION OF CLAIM IS A SUBJECTIVE EXE RCISE AND WHETHER A CLAIM IS ACCEPTED OR REJECTED HAS NOTHING TO DO WITH FURNISHING OF INACCURATE PARTICULARS OF INCOME. WHA T IS A CORRECT CLAIM AND WHAT IS AN INCORRECT CLAIM IS A M ATTER OF OPINION. RAISING A LEGAL CLAIM, EVEN IF IT IS ULTIM ATELY FOUND TO BE LEGALLY UNACCEPTABLE, CANNOT AMOUNT TO FURNISHIN G OF INACCURATE PARTICULARS OF INCOME. A BONA FIDE LEGAL CLAIM BY THE ASSESSEE BEING VISITED WITH PENALTY CONSEQUENCE S ONLY BECAUSE IT HAS NOT BEEN ACCEPTED BY THE TAX AUTHOR ITY OR JUDICIAL AUTHORITIES, IS AN ABSURDITY. IN ANY EVIDE NT, THE CONNOTATIONS OF EXPRESSION PARTICULARS OF INCOME DO NOT EXTEND TO THE ISSUES OF INTERPRETATION OF LAW AND A S SUCH MAKING A CLAIM, WHICH IS FOUND TO BE UNACCEPTABLE I N LAW, CANNOT BE TREATED AS FURNISHING OF INACCURATE PARTI CULARS OF 7 INCOME EQUEST INDIA (P) LTD. VS. ITO (2010) 41 SO T 225 (MUM). 14. IT IS INTERESTING TO READ THE NOTICEABLE OBSERV ATIONS OF THE HONBLE DELHI HIGH COURT WHILE DECIDING THE CASE OF CIT VS. VIRGO MARKETING (P) LTD. (2008) 172 TAXMAN 83., WHE RE IT WAS HELD THAT IF THE AO TAKES A VIEW CONTRARY TO THAT E XPRESSED BY THE ASSESSEE, IT DOES NOT PER SE MEAN THAT THE ASSE SSEE HAS ADOPTED AN ILLEGAL DEVICE FOR REDUCING ITS TAX LIAB ILITY. IN HOLDING SO, IT WAS OBSERVED: EVEN THOUGH THE LAW HAS BEEN SETTLED BY THIS COU RT IN A VERY LARGE NO. OF CASES, PART FROM RAM COMMERCIAL ENTERPRISES CASE SUCH AS DIWAN ENTERPRISES VS. CIT (2000) 246 ITR 571 (DELHI) AND CIT VS. B.R. SHARMA 275 ITR 303/146 TAXMAN 1 (DELHI), THE REVENUE IS STILL FILING THESE SORT OF APPEALS FOR NO APPARENT REASON. BY THIS CASUAL ATTI TUDE OF THE REVENUE, THE REGISTRY (APART FROM THIS COURT) HAS B EEN PUT UNDER SEVERE PRESSURE IN DEALING WITH A LARGE INFLU X OF APPEALS, WHICH PRIMA FACIE DO NOT HAVE ANY MERIT. B Y THIS FLOOD OF LITIGATION, THE REVENUE IS ENSURING THAT M ORE IMPORTANT CASES, WHERE STAKES ARE MUCH HIGHER AND WHERE PERHA PS THE REVENUE HAS A BETTER CASE, GET RECEIVED INTO THE BA CKGROUND AND THEIR TURN CANNOT COME UP IN THE NEAR FUTURE. W E HAVE BEEN REPEATEDLY OBSERVING THIS BUT NO EFFECT. 15. ON A CONSPECTUS OF THE ENTIRE FACTS AND CIRCUMS TANCES OF THE CASE, IT IS HELD THAT THE ADDITIONS MADE IN THE QUA NTUM ASSESSMENT IN THIS CASE OF THE APPELLANT DO NOT REP RESENT ADDITIONS ON ACCOUNT OF POSITIVE CONCEALMENT. PENA LTY IS, THUS, UNAMBIGUOUSLY, NOT LEVIABLE. THE ASSESSING OFFICER IS, THUS, DIRECTED O DELETE THE PENALTY. IT IS ORDERED ACCORD INGLY. 11. FOR THE ABOVE DISCUSSION, WE DO NOT FIND ANY IN FIRMITY IN THE WELL REASONED AND WELL VERSED ORDER OF THE LD. CIT(A), D ELETING THE PENALTY AND THE SAME IS ACCORDINGLY UPHELD. 12. THERE IS NO REBUTTAL FROM THE DEPARTMENT TO THE CATEGORICAL FINDINGS OF THE LD. CIT(A). ACCORDINGLY, THE APPE AL OF THE REVENUE IS DISMISSED. 8 13. NOW, WE TAKE UP THE APPEALS OF THE REVENUE FOR THE ASSESSMENT YEARS 2008-09, 2009-10 & 2010-11. THE ISSUE IN DISP UTE IN THESE APPEALS IS EXACTLY SIMILAR TO THAT WE HAVE DECIDED HEREINABOVE IN ITA NO.537(ASR)/2015 FOR THE ASSESSMENT YEAR 2007-08, T HEREFORE, THE FINDINGS GIVEN THEREIN WILL APPLY EQUALLY MUTATIS M UTANDIS, TO THESE APPEALS AS WELL. HENCE, ALL THESE THREE APPEALS OF THE REVENUE ARE ALSO DISMISSED. 14. IN THE RESULT, ALL THE FOUR APPEALS ARE DISMIS SED. ORDER PRONOUNCED IN THE OPEN COURT ON 11/0 7/ 2016. SD/- SD/- (T.S. KAPOOR) (A.D. JAIN) ACCOUNTANT MEMBER JUDICIAL MEMBER /SKR/ DATED: 11 /07/2016 COPY OF THE ORDER FORWARDED TO: 1. THE ASSESSEE:THE IMPROVEMENT TRUST, BATHINDA. 2. THE DCIT, CIRCLE-1(EXEMPTION),CHANDIGARH 3. THE CIT(A), BATHINDA 4. THE CIT, BATHINDA. 5. THE SR DR, ITAT, AMRITSAR. TRUE COPY BY ORDER INCOME TAX APPELLATE TRIBUNAL, AMRITSAR BENCH: AMRITSAR.