M/s. Manmeet Nanda, New Delhi V. ACIT, New Delhi

ITA 5398/DEL/2012

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 69637 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 1 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-12-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 11-12-2013
• Assessment Year: 2006-2007
• Appeal Filed On: 23-10-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B SRINIVAS KUMAR

Judgement Text

ITA NO. 5398/DEL/2012 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH E, NEW DELHI BEFORE SMT. DIVA SINGH, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER I.T.A. NO. 5398 /DEL/201 2 A.Y. : 2006-07 MS. MANMEET NANDA, D-201, DEFENCE COLONY, NEW DELHI (PAN: ADNPN 1428R) VS. ACIT, CIRCLE 41(1), NEW DELHI (APPELLANT) (APPELLANT) (APPELLANT) (APPELLANT) (RESPONDENT) (RESPONDENT) (RESPONDENT) (RESPONDENT) ASSESSEE BY : SH. ANIL SHARMA, ADVOCATE DEPARTMENT BY : SH. B. SRINIVAS KUMAR, SR. D.R. ORDER ORDER ORDER ORDER PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-XXVII, NEW DEL HI DATED 03.8.2012 PERTAINING TO ASSESSMENT YEAR 2006-07. 2. THE ISSUE RAISED IN THE APPEAL IS THAT LD. CIT(A) ERRED IN CONFIRMING THE PENALTY OF RS. 66,444/- IMPOSED BY T HE ASSESSING OFFICER U/S. 271(1)(C) OF THE I.T. ACT. 3. IN THIS CASE RETURN SHOWING AN INCOME OF RS. 4,7 4,031/- WAS FILED ON 31.3.2007. IN THE RETURN OF INCOME THE ASSESSEE HA D DECLARED SHORT TERM CAPITAL GAINS (STCGS) AMOUNTING TO RS. 3,01,482/- O N REDEMPTION OF MUTUAL FUNDS. ON PERUSAL OF THE DETAILS IT WAS NOTI CED THAT THE GROSS STCGS EARNED BY THE ASSESSEE WERE RS. 5,18,039/- FR OM WHICH AMOUNT OF SHORT TERMS CAPITAL LOSS (STCL) OF RS. 2,16,557/- H AD BEEN REDUCED AND ITA NO. 5398/DEL/2012 2 THE NEXT TAXABLE STCGS HAD BEEN DECLARED AT RS. 3,0 1,482/-. FROM THE DETAILED WORKING OF THE NET STCGS, THE ASSESSING OF FICER NOTICED THAT THE ASSESSEE HAD NOT KEPT IN MIND THE PROVISIONS OF SEC TION 94(7) AND HAD NOT IGNORED THE LOSS ARISING ON PURCHASE AND SALE OF MUTUAL FUND UNITS TO THE EXTENT OF DIVIDEND RECEIVED. IN HIS LETTER DATED 14 .10.2008, THE ASSESSING OFFICER REQUESTED THE ASSESSEE TO FURNISH DETAILED WORKING LOSS DISALLOWABLE SPECIFICALLY KEEPING IN VIEW THE PROVI SIONS OF SECTION 94(7) OF THE ACT. THE ASSESSEE FILED A WRITTEN REPLY IN RESP ONSE TO THIS QUERY BY HIS LETTER DATED 18.11.2008 FILING A CHART SHOWING APP LICABILITY AND NON APPLICABILITY OF SECTION 94(7) IN RESPECT OF THE M UTUAL FUND TRANSACTIONS UNDERTAKEN BY HER. ON THE BASIS OF THIS INFORMATIO N THE AMOUNT OF LOSS DISALLOWABLE DUE TO APPLICABILITY TO SECTION 94(7) WAS SHOWN AT RS. 59,523/- FOR THREE MUTUAL FUND TRANSACTIONS. 3.1 HOWEVER, ON ANALYSIS OF THE DETAILS FURNISHED B Y THE ASSESSEE AND INFORMATION AVAILABLE ON RECORD, THE ASSESSING OFFI CER ARRIVED AT THE AMOUNT OF LOSS DISALLOWABLE AT RS. 2,17,138/- AND T HE ASSESSEE WAS SPECIFICALLY GIVEN A SHOW CAUSE NOTICE AS TO WHY TH E LOSS TO THE EXTENT OF RS. 2,17,138/- SHOULD NOT BE DISALLOWED AS PER THE PROVISIONS OF SECTION 94(7) OF THE ACT. THE ASSESSEE IN RESPONSE TO THIS SPECIFIC SHOW CAUSE NOTICE STATED BEFORE THE ASSESSING OFFICER THAT WOR KING OF THE DISALLOWABLE LOSS AS PER SHOW CAUSE LETTER DATED 24.11.2008 WAS CORRECT. THEREAFTER, THE ASSESSMENT WAS COMPLETED BY ADDING THE AMOUNT O F RS. 2,17,138/- TO THE INCOME OF THE ASSESSEE UNDER THE HEAD INCOME FR OM CAPITAL GAIN. PENALTY PROCEEDINGS U/S. 271(1)(C) WERE ALSO INITIA TED. THE ASSESSING OFFICER ISSUED NOTICE TO THE ASSESSEE ASKING FOR EX PLANATION AS TO WHY THE PENALTY U/S. 271(1)(C) SHOULD NOT BE IMPOSED IN HER CASE. THE ASSESSEE IN RESPONSE TO THIS QUERY SUBMITTED BEFORE THE ASSESS ING OFFICER THAT INFORMATION REQUIRED FOR CALCULATION OF DISALLOWANC E U/S. 94(7) SUCH AS RECORD DATES WERE NOT AVAILABLE AT THE TIME OF FILI NG OF RETURN OF INCOME AND IT WAS NOT WILLFUL AND CONSCIOUS FAULT OF THE A SSESSEE. FURTHER, THE ASSESSEE HAD AGREED TO THE ADDITION MADE BY THE ASS ESSING OFFICER FOR PEACE OF MIND AND COOPERATION WITH THE DEPARTMENT A ND TAX INCLUDING INTEREST WAS DULY DEPOSITED. FURTHER, THE PROVISION S OF SECTION 94(7) WERE ITA NO. 5398/DEL/2012 3 NOT POPULAR AND WERE NOT IN FREQUENT USE BECAUSE O F WHICH THE REQUIRED INFORMATION UNDER SECTION COULD NOT BE INCORPORATED IN THE RETURN. AFTER CONSIDERING THIS EXPLANATION OF THE ASSESSEE, THE A SSESSING OFFICER IMPOSED A PENALTY U/S. 271(1)(C) AMOUNTING TO RS. 6 6,444/-. 4. UPON ASSESSEES APPEAL LD. CIT(A) CONFIRMED THE PENALTY. 5. AGAINST THE ABOVE ORDER THE ASSESSEE IS IN APPEA L BEFORE US. 6. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE R ECORDS. LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT THE ADDITION WAS IMPOSED DUE TO MISTAKE OF THE COUNSEL OF THE ASSESSEE. HENCE, HE SUBMITTED THAT THE ASSESSEE SHOULD NOT BE VISITED WITH THE RIGORS OF P ENALTY PROVISION U/S. 271(1)(C). LD. DEPARTMENTAL REPRESENTATIVE RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT THE ASSESSEE H AS BEEN ASSISTED BY THE PROFESSIONAL CHARTERED ACCOUNTANT AND HENCE THE PLEA OF MISTAKE ON THEIR PART IS NOT TENABLE. 7. WE HAVE CONSIDERED THE SUBMISSIONS AND PERUSED T HE RECORDS. WE FIND THAT THERE IS CONSIDERABLE COGENCY IN THE ASSE SSEES PLEA THAT ADDITION AROSE DUE TO THE MISTAKE OF THE COUNSEL OF THE ASSESSEE. WE FIND THAT THE CHARTERED ACCOUNTANT FIRM HAS ITSELF ACKN OWLEDGED THAT THERE WAS A MISTAKE ON THEIR PART. IN THIS REGARD, A WRI TTEN REPLY GIVEN TO THE ASSESSING OFFICER ON 03.12.2008 THROUGH THE CHARTER ED ACCOUNTANT FIRM WHICH IS REPRODUCED AS UNDER:- THAT WE HAVE GIVEN LETTER DATED 18.11.2008 IN WHI CH TAXABLE PORTION U/S. 94(7) FOR A.Y. 2006-07 HAS ALREADY BEE N SUBMITTED BEFORE YOUR HONOUR. AS REGARDS S.NO. 1 3 & 5 THE RECORD DATES WERE NOT AVAILABLE. IN THE ABSENCE OF RECORD DATE, WE WERE UNABLE TO CALCULATE THE DISALLOWANCE U/S. 94(7 ). HOWEVER, THE DETAILS YOU HAVE GIVEN IN YOUR LETTER DATED 24.11.2008 SEEMS TO BE CORRECT. THAT AS THE RECORD DATES WERE NOT AVAILABLE, THE CORRECT DISALLOWANCE U/S. 9 4(7) COULD NOT BE CALCULATED. PLEASE CONSIDER THE ABOVE FACTS AND OBLIGE. ITA NO. 5398/DEL/2012 4 8. FROM THE ABOVE, IT IS APPARENT THAT THE CHARTE RED ACCOUNTANT FIRM HAS FAILED TO GET THE RECORD DATES AND ACCORDINGLY FAILED TO CALCULATE CORRECT DISALLOWANCE. HENCE, IT IS APPARENT THAT TH E ABOVE ADDITION IN THIS REGARD AROSE NEITHER BECAUSE OF CONCEALMENT OR FURN ISHING OF INACCURATE PARTICULARS BY THE ASSESSEE, BUT DUE TO MISTAKE ON THE PART OF THE ASSESSEES COUNSEL. 9. IN THIS REGARD, WE DRAW SUPPORT FROM THE HONBLE APEX COURT DECISION IN THE CASE OF PRICE WATERHOUSE COOPERS P VT. LTD. VS. C.I.T. AND ANR. 348 ITR 306 (SC). IN THIS CASE IT WAS HELD, ALLOWING THE APPEAL, THAT THE FACTS OF THE CASE WERE PECULIAR AND SOMEWHAT UN IQUE. NOTWITHSTANDING THAT THE ASSESSEE WAS A REPUTED FIR M AND HAD GREAT EXPERTISE AVAILABLE WITH IT, IT WAS POSSIBLE THAT E VEN THE ASSESSEE COULD MAKE SILLY MISTAKE. THE FACT THAT THE TAX AUDIT REPORT WAS FILED ALONG WITH THE RETURN AND THAT IT UNEQUIVOCALLY STATED THAT THE PROVISION FOR PAYMENT WAS NOT ALLOWABLE UNDER SECTION 40A(7) OF T HE ACT INDICATED THAT THE ASSESSEE MADE A COMPUTATION ERROR IN ITS RETURN OF INCOME. THE CONTENTS OF THE TAX AUDIT REPORT SUGGESTED THAT THE RE WAS NO QUESTION OF THE ASSESSEE CONCEALING ITS INCOME OR OF THE ASSESS EE FURNISHING ANY INACCURATE PARTICULARS. APART FROM THE FACT THAT THE ASSESSEE DID NOT NOTICE THE ERROR, IT WAS NOT EVEN NOTICED EVEN BY T HE ASSESSING OFFICER WHO FRAMED THE ASSESSMENT ORDER. ALL THAT HAD HAPP ENED WAS THAT THROUGH A BONA FIDE AND INADVERTENT ERROR, THE ASSE SSEE WHILE SUBMITTING ITS RETURN, FAILED TO ADD THE PROVISION FOR GRATUI TY TO ITS TOTAL INCOME. THE ASSESSEE SHOULD HAVE BEEN CAREFUL BUT THE ABSENCE O F DUE CARE, IN A CASE SUCH AS THE PRESENT, DID NOT MEAN THAT THE ASSESSEE WAS GUILTY OF EITHER FURNISHING INACCURATE PARTICULARS OR ATTEMPTING TO CONCEAL ITS INCOME. ON THE PECULIAR FACTS OF THIS CASE, THE IMPOSITION OF PENALTY ON THE ASSESSEE WAS NOT JUSTIFIED. 10. IN THIS REGARD, WE ALSO PLACE RELIANCE UPON THE HO NBLE APEX COURT DECISION IN THE CASE OF CIT VS. RELIANCE PETR O PRODUCTS LTD. IN CIVIL APPEAL NO. 2463 OF 2010. IN THIS CASE VIDE O RDER DATED 17.3.2010 IT HAS BEEN HELD THAT THE LAW LAID DOWN I N THE DILIP SHEROFF ITA NO. 5398/DEL/2012 5 CASE 291 ITR 519 (SC) AS TO THE MEANING OF WORD CO NCEALMENT AND INACCURATE CONTINUES TO BE A GOOD LAW BECAUSE WH AT WAS OVERRULED IN THE DHARMENDER TEXTILE CASE WAS ONLY THAT PART IN DILIP SHEROFF CASE WHERE IT WAS HELD THAT MENSREA WAS A E SSENTIAL REQUIREMENT OF PENALTY U/S 271(1)(C). THE HONBLE APEX COURT ALSO OBSERVED THAT IF THE CONTENTION OF THE REVENUE IS A CCEPTED THEN IN CASE OF EVERY RETURN WHERE THE CLAIM IS NOT ACCEPTE D BY THE ASSESSING OFFICER FOR ANY REASON, THE ASSESSEE WI LL INVITE THE PENALTY U/S 271(1)(C). THIS IS CLEARLY NOT THE INTE NDMENT OF LEGISLATURE. 11. RESPECTFULLY FOLLOWING THE ABOVE PRECEDENT AND THE DISCUSSION HEREINABOVE, WE DELETE THE PENALTY IN THIS CASE. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE ST ANDS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 11/12/2013, U PON CONCLUSION OF HEARING. SD/- SD/- [ [[ [DIVA SINGH DIVA SINGH DIVA SINGH DIVA SINGH] ]] ] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER DATE 11/12/2013 SRBHATNAGAR SRBHATNAGAR SRBHATNAGAR SRBHATNAGAR COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: - -- - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES ITA NO. 5398/DEL/2012 6