DCIT 10(2), MUMBAI V. GODREJ & BOYCE MFG CO. LTD, MUMBAI

ITA 5631/MUM/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 88142 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-01-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Assessment Year: 2002-2003
• Appeal Filed On: 04-09-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R N DSOUZA
• Assessee Lawyers: SONALEE GODBOLE
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

G IN THE INCOME TAX APPELLATE TRIBUNAL G BENCH, MUMBAI BEFORE SHRI VIJAY PAL RAO, JM AND SHRI D. KARUNAKAR A RAO, AM ./ I.T.A. NO.5631 /MUM/2013 ( / ASSESSMENT YEAR : 2002-03 DY. COMMISSIONER OF INCOME TAX 10(2), ROOM NO. 432, 4 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI -400 020. / VS. M/S GODREJ & BOYCE MFG. CO. LTD., (M/S LAWKIM LTD HAS NOW MERGED WITH GODREJ BOYCE MFG. CO. LTD.), LAWKIN MOTORS GROUP, PLANT 19A, PIROJSHANAGAR, LBS ROAD, VIKHROLI EAST, MUMBAI 400 079. ./ PAN : AAACL2462N ( / APPELLANT ) .. ( / RESPONDENT ) A PPELLANT BY SHRI R.N. DSOUZA RESPONDENT BY MS. SON ALEE GODBOLE / DATE OF HEARING : 13-1-2015 / DATE OF PRONOUNCEMENT : 21-01-2015 [ !' / O R D E R PER VIJAY PAL RAO, J.M . : THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 28-06-2013 OF LD. CIT(A)- 13, MUMBAI ARISING FROM P ENALTY ORDER PASSED U/S 271(1)(C) OF THE INCOME TAX ACT, 1961 PERTAINING TO A.Y. 2002-03. 2. THE ASSESSEE EARNED DIVIDEND INCOME OF RS. 43,87 ,088/- DURING THE YEAR UNDER CONSIDERATION WHICH IS EXEMPT U/S 10(34) /35 OF THE ACT. DURING THE ASSESSMENT PROCEEDINGS, THE A.O. MADE DISALLOWA NCE U/S 14A OF THE ACT ON ACCOUNT OF INTEREST OF RS. 39,05,000/-. ON APPEA L, THE LD. CIT(A) CONFIRMED ITA 5631/M/13 2 THE DISALLOWANCE U/S 14A OF THE ACT ON ACCOUNT OF I NTEREST EXPENDITURE. HOWEVER, THE DISALLOWANCE U/S 14A ON ACCOUNT OF ADM INISTRATIVE EXPENSES WAS RESTRICTED TO 2% OF DIVIDEND INCOME. THE DISAL LOWANCE CONFIRMED BY THE LD. CIT(A) WAS FURTHER UPHELD BY THE TRIBUNAL. IN THE MEANTIME, THE A.O. INITIATED THE PROCEEDING U/S 271(1)(C) OF THE ACT F OR LEVY OF PENALTY AND IMPOSED PENALTY OF RS. 14,25,408/- VIDE ORDER DATED 26-04-2012. THE ASSESSEE CHALLENGED THE ACTION OF THE A.O. FOR LEVY OF THE PENALTY U/S 271(1)(C) OF THE ACT AGAINST THE DISALLOWANCE MADE U/S 14A OF THE ACT BEFORE THE LD. CIT(A). THE LD. CIT(A) DELETED THE PENALTY SO IMPO SED BY THE A.O. VIDE HIS IMPUGNED ORDER BY FOLLOWING THE JUDGMENT OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. RELIANCE PETROPRODUCTS P. LTD. 322 ITR 158 (SC). 3. BEFORE US, THE LD. D.R. HAS SUBMITTED THAT THE P ROVISIONS OF SECTION 14A OF THE ACT ARE EXIST IN THE STATUTE SINCE 1961 THER EFORE THE ASSESSEE WAS DUTY BOUND TO MADE THE DISALLOWANCE U/S 14A OF THE ACT I N RESPECT OF THE EXPENDITURE ATTRIBUTABLE TO THE EXEMPT INCOME AND T HERE WAS FAILURE ON THE PART OF THE ASSESSEE TO MAKE THE DISALLOWANCE BY FU RNISHING IN-ACCURATE PARTICULARS OF INCOME. IN SUPPORT OF THIS CONTENTIO N, HE RELIED UPON THE JUDGMENT OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. ZOOM COMMUNICATION P. LTD. (2010) 327 ITR 510. 4. ON THE OTHER HAND, THE LD. A.R. HAS SUBMITTED TH AT THERE IS NO CONCEALMENT OR FURNISHING OF IN-ACCURATE PARTICULAR S BY THE ASSESSEE WHEN THE ASSESSEE HAS FURNISHED ALL THE DETAILS AND PART ICULARS IN RESPECT OF THE DIVIDEND INCOME AS WELL AS THE EXPENDITURE INCURRED BY THE ASSESSEE. HE HAS FURTHER SUBMITTED THAT THE INVESTMENT IN QUESTION W AS MADE BY THE ASSESSEE IN THE EARLIER YEAR AND THERE WAS NO FRESH INVESTME NT DURING THE YEAR UNDER CONSIDERATION, THEREFORE, THERE WAS NO EXPENDITURE INCURRED BY THE ASSESSEE ON ACCOUNT OF INTEREST FOR EARNING THE DIVIDEND INC OME FOR THE YEAR UNDER CONSIDERATION. HE HAS RELIED UPON THE DECISION OF HONBLE SUPREME COURT IN ITA 5631/M/13 3 THE CASE OF RELIANCE PETROPRODUCTS PVT. LTD. (SUPRA ) AS WELL AS A SERIES OF DECISIONS OF THE TRIBUNAL ON THIS POINT. 5. HAVING CONSIDERED THE RIVAL SUBMISSION AS WELL A S MATERIAL AVAILABLE ON RECORD, WE NOTE THAT IT IS NOT A CASE OF BOGUS CLAI M OF EXPENDITURE BY THE ASSESSEE BUT THE DISALLOWANCE WAS MADE BY THE A.O. U/S 14A OF THE ACT BECAUSE THE ASSESSEE HAS EARNED DIVIDEND INCOME DUR ING THE YEAR UNDER CONSIDERATION. THE DISALLOWANCE U/S 14A OF THE ACT IS PURELY ON ACCOUNT OF LEGAL PROVISION AND BASED ON THE ESTIMATE AS THE EX PENDITURE INCURRED BY THE ASSESSEE IS NOT IN DISPUTE. PRIOR TO INTRODUCTION O F RULE 8D, IT IS ALWAYS A SUBJECTIVE DECISION TO FIND OUT HOW MUCH EXPENDITUR E IS TO BE ALLOCATED FOR EARNING THE DIVIDEND INCOME. THE ASSESSEE CLAIMED THAT NO EXPENDITURE WAS INCURRED FOR EARNING THE DIVIDEND INCOME THOUGH THE CLAIM OF THE ASSESSEE WAS NOT ACCEPTED BY THE A.O. THEREFORE, MERELY BEC AUSE THE DISALLOWANCE MADE U/S 14A WOULD NOT IPSO FACTO LEAD TO THE CONCL USION THAT THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF INCOME. AN IDENTICAL ISSUE HAS BEEN CONSIDERED BY THE HONBLE SUPREME COURT IN THE CASE RELIANCE PETROPRODUCTS PVT. LTD. (SUPRA) IN PARA 10 TO 12 OF ITS ORDER AS UNDER:- 9 . WE ARE NOT CONCERNED IN THE PRESENT CASE WITH THE MENS REA . HOWEVER, WE HAVE TO ONLY SEE AS TO WHETHER IN THIS CASE, AS A M ATTER OF FACT, THE ASSESSEE HAS GIVEN INACCURATE PARTICULARS. IN WEBSTERS DICTIONARY, THE WORD 'INACCURATE' HAS BEEN DEFINED AS : 'NOT ACCURATE, NOT EXACT OR CORRECT; NOT ACCORDING TO TRUTH; ERRONEOUS; AS AN INACCURATE STATEMENT, COPY OR TRANSCRIPT.' WE HAVE ALREADY SEEN THE MEANING OF THE WORD 'PARTI CULARS' IN THE EARLIER PART OF THIS JUDGMENT. READING THE WORDS IN CONJUNCTION, THEY MUST MEAN THE DETAILS SUPPLIED IN THE RETURN, WHICH ARE NOT ACCUR ATE, NOT EXACT OR CORRECT, NOT ACCORDING TO TRUTH OR ERRONEOUS. WE MUST HASTEN TO ADD HERE THAT IN THIS CASE, THERE IS NO FINDING THAT ANY DETAILS SUPPLIED BY THE ASSESSEE IN ITS RETURN WERE FOUND TO BE INCORRECT OR ERRONEOUS OR F ALSE. SUCH NOT BEING THE CASE, THERE WOULD BE NO QUESTION OF INVITING THE PE NALTY UNDER SECTION 271(1)( C ) OF THE ACT. A MERE MAKING OF THE CLAIM, WHICH IS NOT SUSTAINABLE IN LAW, BY ITSELF, WILL NOT AMOUNT TO FURNISHING INACC URATE PARTICULARS REGARDING ITA 5631/M/13 4 THE INCOME OF THE ASSESSEE. SUCH CLAIM MADE IN THE RETURN CANNOT AMOUNT TO THE INACCURATE PARTICULARS. 10 . IT WAS TRIED TO BE SUGGESTED THAT SECTION 14A OF T HE ACT SPECIFICALLY EXCLUDED THE DEDUCTIONS IN RESPECT OF THE EXPENDITU RE INCURRED BY THE ASSESSEE IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE ACT. IT WAS FURTHER POINTED OUT THAT THE DIVIDENDS FROM THE SHARES DID NOT FORM THE PART OF THE TOTAL INCOME. IT WAS, THEREFORE, REITERATED BEFORE US THAT THE ASSESSING OFFICER HAD CORRECTLY REACHED TH E CONCLUSION THAT SINCE THE ASSESSEE HAD CLAIMED EXCESSIVE DEDUCTIONS KNOWING T HAT THEY ARE INCORRECT; IT AMOUNTED TO CONCEALMENT OF INCOME. IT WAS TRIED TO BE ARGUED THAT THE FALSEHOOD IN ACCOUNTS CAN TAKE EITHER OF THE TWO FO RMS; ( I ) AN ITEM OF RECEIPT MAY BE SUPPRESSED FRAUDULENTLY; ( II ) AN ITEM OF EXPENDITURE MAY BE FALSELY (OR IN AN EXAGGERATED AMOUNT) CLAIMED, AND BOTH TYPES A TTEMPT TO REDUCE THE TAXABLE INCOME AND, THEREFORE, BOTH TYPES AMOUNT TO CONCEALMENT OF PARTICULARS OF ONES INCOME AS WELL AS FURNISHING O F INACCURATE PARTICULARS OF INCOME. WE DO NOT AGREE, AS THE ASSESSEE HAD FURNIS HED ALL THE DETAILS OF ITS EXPENDITURE AS WELL AS INCOME IN ITS RETURN, WHICH DETAILS, IN THEMSELVES, WERE NOT FOUND TO BE INACCURATE NOR COULD BE VIEWED AS THE CONCEALMENT OF INCOME ON ITS PART. IT WAS UP TO THE AUTHORITIES TO ACCEPT ITS CLAIM IN THE RETURN OR NOT. MERELY BECAUSE THE ASSESSEE HAD CLAI MED THE EXPENDITURE, WHICH CLAIM WAS NOT ACCEPTED OR WAS NOT ACCEPTABLE TO THE REVENUE, THAT BY ITSELF WOULD NOT, IN OUR OPINION, ATTRACT THE PENAL TY UNDER SECTION 271(1)( C ). IF WE ACCEPT THE CONTENTION OF THE REVENUE THEN IN CAS E OF EVERY RETURN WHERE THE CLAIM MADE IS NOT ACCEPTED BY ASSESSING OFFICER FOR ANY REASON, THE ASSESSEE WILL INVITE PENALTY UNDER SECTION 271(1)( C ). THAT IS CLEARLY NOT THE INTENDMENT OF THE LEGISLATURE. 6. IN THE CASE OF ZOOM COMMUNICATION (SUPRA) THE DI SALLOWANCE WAS OF A IMPERMISSIBLE CLAIM THEREFORE THE SAID DECISION WOU LD NOT APPLY IN THE FACT OF THE CASE IN HAND. SINCE THE ISSUE IS COVERED BY THE DECISION OF HONBLE SUPREME COURT, THEREFORE, WE DO NOT FIND ANY ERROR OR ILLEGALITY IN THE IMPUGNED ORDER OF THE LD. CIT(A) IN DELETING THE P ENALTY LEVIED U/S 271(1)(C) OF THE ACT. ITA 5631/M/13 5 7. IN THE RESULT, APPEAL FILED BY THE REVENUE IS D ISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 21 ST JAN. 2015 !' # $% &! ' 21-01-2015 ( ) SD/- SD/- (D.KARUNAKARA RAO) (VIJAY PAL RAO ) JUDICIAL MEMBER ACCOUNTANT MEMBER $ 5 MUMBAI ; &! DATED 21-01-2015 [ .6../ R.K. , SR. PS ! '#$% &%# / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. 7 () / THE CIT(A) 21, MUMBAI 4. 7 / CIT- -10, MUMBAI 5. :;( 66<= , <= , $ 5 / DR, ITAT, MUMBAI G BENCH 6. (?@ A / GUARD FILE. ' / BY ORDER, : 6 //TRUE COPY// (/') * ( DY./ASSTT. REGISTRAR) , $ 5 / ITAT, MUMBAI