DCIT 8(2), MUMBAI V. PARADISE PLASTICS ENTERPRISES LTD, MUMBAI

ITA 5522/MUM/2012

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 71622 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 1 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2008-2009
• Appeal Filed On: 03-09-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: T D SINGH
• Keywords: Capital asset; Bonafide belief; Capital receipt
• Section: 143(3); 115JB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C , BENCH, MUMBAI , BEFORE SHRI H.L.KARWA , PRESIDENT & SHRI N.K.BILLAIYA , AM ITA N O. 5522 / MUM/ 20 1 2 ( ASSESSMENT YEAR : 20 0 8 - 20 0 9 ) DCIT - 8(2), MUMBAI - 400 020 VS. PARADISE PLASTICS ENTERPRISES LTD., 1203, HIGHLAND PARK, LOKHANDWALA COMPLEX, ANDHERI (W) - 400 053 PAN/GIR NO. : A A B C P 5932 G ( APPELLANT ) .. ( RESPONDENT ) /REVENUE BY : SHRI T.D.SINGH /ASSESSEE BY : SHRI VIJAY MEHTA & SHRI ANU J KISNADWALA DATE OF HEARING : 2 8 TH DATE OF PRONOUNCEMENT : 31 ST OCTOBER, 2013 O R D E R PER N.K.BILLAIYA , AM : THIS APPEAL BY THE REVENUE IS PREFERRED AGAINST THE ORDER OF THE CIT(A) - 17 , MUMBAI , DATED 28 - 6 - 2012 , PERTAINING TO ASSESSMENT YEAR 20 0 8 - 200 9 . 2 . THE SOLE GRIEVAN CE OF THE REVENUE IS THAT THE CIT(A) ERRED IN DELETING THE PENALTY LEVIED UNDER SECTION 271(1)(C) OF THE ACT AMOUNTING TO RS. 69,95,807/ - . ITA NO. 5522 / 1 2 2 3 . THE ROOTS FOR LEVY OF PENALTY LIE IN THE ASSESSMENT ORDER PASSED UNDER SECTION 143(3) ON 23 - 12 - 2010 . DURING THE CO URSE OF THE SCRUTINY ASSESSMENT PROCEEDINGS, THE AO NOTICED THAT THE ASSESSEE HAS SHOWN CAPITAL RESERVES OF RS. 6,17,45,872/ - . THE AO FURTHER NOTICED THAT THE ASSESSEE COMPANY HAS OFFERED LONG TERM CAPITAL GAINS OF RS. 4,63,77,857/ - . THE ASSESSEE WAS ASKED TO FILE T HE DETAILS OF CAPITAL RESERVES. ON PERUSING THE DETAILS, THE AO OBSERVED THAT THE ASSESSEE HAS SHOWN SALE OF CAPITAL ASSETS DIRECTLY IN THE CAPITAL RESERVES. THE ASSESSEE WAS ASKED TO EXPLAIN AS TO WHY THE SALE CONSIDERATION OF CAPITAL ASSETS HAVE BEEN DIRECTLY TAKEN TO CAPITAL RESERVES AND NOT CONSIDERED IT FOR THE COMPUTATION OF BOOK PROFIT UNDER SECTION 115JB OF THE ACT. THE ASSESSEE FURNISHED A REVISED CALCULATION OF BOOK PROFIT UNDER SECTION 115JB AFTER CONSIDERING THE CAPITAL RECEIPTS INTO TH E BOOK PROFIT. THE WORKING OF THE ASSESSEE COMPANY WAS ACCEPTED THOUGH PENAL PROCEEDINGS UNDER SECTION 271(1)(C) OF THE ACT WAS INITIATED FOR FURNISHING INACCURATE PARTICULARS OF INCOME AS WELL AS CONCEALMENT OF PARTICULARS OF INCOME. THE ASSESSEE WAS SH OW CAUSED TO EXPLAIN AS TO WHY THE PENALTY SHOULD NOT BE LEVIED UNDER SECTION 271(1)(C) OF THE ACT FOR NOT SHOWING CAPITAL RECEIPT IN THE PROFIT AND LOSS ACCOUNT AS PER THE PROVISIONS OF THE COMPANIES ACT, 1956. THE ASSESSEE EXPLAINED THAT IT HAD RELIED UP ON SIX JUDICIAL DECISIONS, WHICH WERE IN FAVOUR OF THE ASSESSEE FOR DIRECTLY TAKING THE CAPITAL RECEIPTS TO THE CAPITAL RESERVES AND NOT ROUTING THROUGH THE PROFIT AND LOSS ACCOUNT. THE ASSESSEE FURTHER SUBMITTED ITA NO. 5522 / 1 2 3 THAT IF IT HAD CONTESTED IN QUANTUM APPEAL, IT WOULD HAVE SUCCEEDED ON THE POINT OF CAPITAL GAINS. THEREFORE, THERE IS NO QUESTION OF FILING OF INACCURATE PARTICULARS OF INCOME OR CONCEALMENT OF THE PARTICULARS OF INCOME. THE AO DID NOT ACCEPT THE SUBMISSIONS OF THE ASSESSEE AND RELIED UPON TWO JUD ICIAL DECISIONS ONE OF MUMBAI BENCH OF THE TRIBUNAL AND OTHER OF HYDERABAD BENCH OF THE TRIBUNAL. THE AO WAS OF THE FIRM BELIEF THAT THE ASSESSEE BY NOT SHOWING THE CAPITAL RECEIPTS THROUGH ITS PROFIT AND LOSS ACCOUNT HAS VIOLATED THE PROVISIONS OF PART II AND PART III OF SCHEDULE VI OF THE COMPANIES ACT BECAUSE OF WHICH THE BOOK PROFITS WERE NOT COMPUTED IN ACCORDANCE WITH LAW. THE AO WENT ON TO LEVY PENALTY UNDER SECTION 271(1)(C) OF THE ACT AT THE RATE OF 100% AMOUNTING TO RS. 69,95,807/ - . 4 . AGGRIE VED BY ACTION OF THE AO, THE ASSESSEE CARRIED THE MATTER BEFORE THE CIT(A) AND REITERATED ITS STAND THAT BY NOT SHOWING THE CAPITAL RECEIPTS IN THE PROFIT AND LOSS ACCOUNT THE ASSESSEE STRONGLY BELIEVED IN THE DECISIONS IN FAVOUR OF THE ASSESSEE. AFTER CON SIDERING THE FACTS AND SUBMISSIONS OF THE ASSESSEE, THE CIT(A) WAS CONVINCED THAT THIS IS NOT A FIT CASE FOR THE LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT. NOW, THE REVENUE IS IN APPEAL HERE BEFORE US. 5 . LEARNED DR STRONGLY SUPPORTED THE FINDING S OF THE AO. 6. PER CONTRA , LEARNED COUNSEL FOR THE ASSESSEE REITERATED WHAT HAS BEEN SUBMITTED BEFORE THE AUTHORITIES BELOW. ITA NO. 5522 / 1 2 4 7 . WE HAVE CAREFULLY PERUSED THE ORDERS OF THE AUTHORITIES BELOW AND THE RELEVANT MATERIAL EVIDENCE S BROUGHT ON RECORD . IT IS NOT IN DISPUTE THAT THE ASSESSEE HAS SHOWN SALE OF CAPITAL ASSETS DIRECTLY IN ITS CAPITAL RESERVE ACCOUNT. IT IS ALSO NOT IN DISPUTE THAT THIS ACTION OF THE ASSESSEE IS WELL SUPPORTED BY THE LEGAL DECISIONS ON THE BASIS OF WHICH THE CAPITAL RECEIPTS HAVE N OT BEEN CONSIDERED FOR COMPUTING THE PROFIT UNDER SECTION 115JB. THE ASSESSEE RELIED UPON THE FOLLOWING JUDICIAL DECISIONS : - I) KINETIC MOTOR CO. LTD. VS. DCIT, ( 262ITR 330 ) ; II) ACIT VS. VIJAY FURNITURE MFG.CO.PVT. LTD, ( ITANO. 7104/M/2005 ) (FB) ; III) ITO V. SANATAN TEXTRADE PVT. LTD., ( ITA NO. 1510/M/2002 ) ; IV) CIT VS. VIJAYSHREE FINANCE & INVESTMENT CO. P. LTD., 216 CTR 191 (MADRAS HIGH COURT) ; V) B JAMASJI MISTRY PVT. LTD. VS. ITO, ITA ( NO.6987/6988/M/2004 ) (D BENCH) ; VI) ITO VS. RACHNA MERCHAN DISE (P) LTD. ( ITA NO. 1114/M/2002 ) (J - BENCH) AND VII) ITO VS. SWADEE CHEMICAL PVT. LTD., ( ITA 1446/M/2002 (I BENCH) THUS, IT IS CLEAR THAT THE ASSESSEE WAS UNDER A BONAFIDE BELIEF BECAUSE OF THE AFORESAID JUDICIAL DECISIONS IN ITS FAVOUR. THE AO RELI ED UPON TWO DECISIONS FOR HIS ACTION. THIS ITSELF SHOWS THAT TWO VIEWS WERE POSSIBLE ON THE SAME SET OF FACTS. THAT BEING SO, WE AGREE WITH THE FINDINGS OF THE LEARNED CIT(A) THAT THIS IS NOT A FIT CASE FOR LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE A CT. WE, ACCORDINGLY, CONFIRM THE FINDINGS OF THE LEARNED CIT(A) AND DISMISS THE APPEAL FILED BY REVENUE. ITA NO. 5522 / 1 2 5 8 . RESULTANTLY , THE APPEAL OF THE REVENUE IS DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON 31/10 / 2013 . SD/ - ( ) ( H.L.KARWA ) SD/ - ( ) ( N.K.BILLAIYA ) / PRESIDENT / ACCOUNTANT MEMBER MUMBAI ; DATED : 31/10 / 2013 /PKM , PS COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / THE CIT(A) , MUMBAI. 4. / CIT 5. / DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY// / BY ORDER, ( ASSTT. REGISTRAR) / ITAT, MUMBAI