The ITO, Ward-2(2), RAJKOT-GUJARAT V. Smt. Parul Hiten Desai, RAJKOT-GUJARAT

ITA 564/RJT/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 6644 (ITAT-RAJKOT)
• Duration Of Justice: 2 year(s) 5 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-03-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2008-2009
• Appeal Filed On: 30-09-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: YOGESH PANDE
• Assessee Lawyers: RD LALCHANDANI
• Keywords: Gift; Question of law

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH , RAJKOT BEFORE SHRI S.V. MEHROTRA , ACCOUNTANT MEMBER AND SHRI K. NARASIMHA CHARY , MEMBER ITA NO. 564 / RJT /201 4 : ASS T. YEAR : 2008 - 09 ITO, WARD - 2(2), RAJKOT (APPELLANT) VS SMT. PARUL HITEN DESAI, ILA VILLA, ASHAPURA ROAD, RAJKOT (RESPONDENT) PAN : ABIPD9934D APPELLANT BY : SHRI YOGESH PANDE, DR RESPONDENT BY : SHRI R.D. LALCHANDANI, ADV. DATE OF HEARING : 2 3 /0 3 /201 7 DATE OF PRONOUNCEMENT : 24 /0 3 /201 7 O R D E R PER K. NAR A SIMHA CHARY, MEMBER, JM : THIS IS AN APPEAL CHALLENGING THE ORDER DATED 7.7.2014 PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) - III, RAJKOT (FOR SHORT HEREINAFTER REFERRED TO AS LD. CIT(A) ) IN APPEAL NO.CIT(A) - III/0005/13 - 14 WHEREUNDER THE LD. CIT(A) DELETED THE PENALTY IMPOSED BY THE ASSESSING OFFICER. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS AN INDIVIDUAL DERIVING INCOME FROM BUSINESS ACTIVITIES OF TRADING IN MINERALS AND CHEMICALS UNDER THE NAME AND STYLE OF AKASH INDUSTRI ES, BESIDES INCOME FROM HOUSE PROPERTY. FOR THE ASSESSMENT YEAR 2008 - 09, SHE 2 SMT. PARUL HITEN DESAI ITA NO. 564/RJT/2014 HAS FILED HER RETURN OF INCOME ON 25.8.2009 SHOWING THE INCOME AS NIL. DURING THE PROCEEDINGS U/S 143 OF THE INCOME TAX ACT, 1961 (FOR SHORT HEREINAFTER REFERRED TO AS THE ACT ), THE ASSESSING OFFICER NOTICED THAT DURING THE RELEVANT YEAR THE ASSESSEE RECEIVED GIFT OF RS.3,40,74,262/ - BY WAY OF ENTRY DATED 31.3.2007 FROM HER FATHER BESIDES SOME CASH. THE PLEA OF THE ASSESSEE WAS THAT SHE HAS TAKEN LOAN FROM HER FATHER FOR BUSIN ESS PURPOSE AND IT IS ONLY A TRADING LIABILITY. HOWEVER, THE ASSESSING OFFICER PROCEEDED TO ADD THE ENTIRE AMOUNT OF RS.3,40,74,262/ - TO THE INCOME OF THE ASSESSEE AND INITIATED PROCEEDINGS U/S 271(1)(C) OF THE ACT FOR FILING INACCURATE PARTICULARS OF INC OME. HOWEVER, ON THE QUANTUM ADDITION, IN APPEAL, THE LD. CIT(A) AND ALSO THE COORDINATE BENCH OF THIS TRIBUNAL HELD THAT THE WAIVER OF INTEREST LIABILITY OF RS.33,90,939/ - ALONE CONSTITUTES PROFIT CHARGEABLE TO TAX IN TERMS OF PROVISION CONTAINED IN SEC. 41(1) OF THE ACT. THE LD. CIT(A) , IN THIS CASE , OBSERVED THAT THE CLOSING BALANCE AT THE END OF THE FINANCIAL YEAR 2006 - 07 OF THE ASSESSEE AMOUNTED TO RS.3,40,74,263/ - AND THE SAME INCLUDES INTEREST COMPONENT OF RS.33,90,939/ - AND THE ASSESSEE HAS DEBITED THE AMOUNT PAYABLE TO HER FATHER WITH AN AMOUNT OF RS.3,40,74,263/ - BY WAY OF A JOURNAL ENTRY DATED 1.4.2007 AND CREDITING HER CAPITAL ACCOUNT WITH A SIMILAR AMOUNT ON ACCOUNT OF WAIVER OF OUTSTANDING BALANCE AS ON 31.3.2007, WHICH WAS CLAIMED BY THE ASSESSEE AS GIFT RECEIVED FROM HER FATHER. ON AN APPRECIATION OF ALL THESE FACTS , LD. CIT(A) HELD THAT ALL THE FACTUAL INFORMATION WAS ALREADY FURNISHED BY THE ASSESSEE IN THE BOOKS OF ACCOUNT AND IT IS NOT THE CASE OF FURNISHING OF INACCURATE PAR TICULARS OF INCOME, BUT IT IS ONLY A PURE QUESTION OF LAW AS TO THE ACCOUNTING TREATMENT FOR RECOGNIZING THE INCOME INSOFAR AS THE WAIVER OF INTEREST LIABILITY OF ASSESSEE IS 3 SMT. PARUL HITEN DESAI ITA NO. 564/RJT/2014 CONCERNED. PLACING RELIANCE ON THE DECISION REPORTED IN RELIANCE PETROPRODUCTS ( P) LTD., 322 ITR 158 (2010) (SC) , THE LD. CIT(A) CONCLUDED THAT THE PENALTY PROCEEDINGS CANNOT BE SUSTAINED IN RESPECT OF A DEBATABLE QUESTION OF LAW. CHALLENGING THE IMPUGNED ORDER, REVENUE IS IN APPEAL BEFORE US. 3. IT IS THE ARGUMENT OF THE LD. DR THAT THE LD. CIT(A) FAILED TO TAKE COGNIZANCE OF THE FACT THAT THE ORDER OF THE LD. CIT(A) AND THE ITAT IN RESPECT OF QUANTUM ADDITION ARE UNDER CHALLENGE BEFORE THE HON BLE JURISDICTIONAL HIGH COURT, AS SUCH, DELETION OF THE PENALTY AT THIS STAGE DOES NOT ARI SE. ACCORDING TO HIM, UNLESS THE PROCEEDINGS HAD ATTAINED FINALITY, IT CANNOT BE SAID THAT SINCE THE QUANTUM IS DELETED PENALTY CANNOT BE SUSTAINED. 4. PER CONTRA, IT IS THE ARGUMENT OF THE LD. AR THAT IN THIS MATTER, THE LD. CIT(A) NOT ONLY OBSERVED TH AT THE QUANTUM WAS DELETED BY BOTH CIT(A) AS WELL AS THE TRIBUNAL, BUT HE ALSO DEALT WITH THE MERITS OF THE CASE AND SINCE THE ISSUE INVOLVED IN THIS MATTER IS A DEBATABLE QUESTION OF LAW, BY FOLLOWING THE BINDING PRECEDENTS, THE LD. CIT(A) DELETED THE PEN ALTY, AS SUCH, THERE ARE NO GROUNDS TO INTERFERE WITH THE FINDINGS OF THE LD. CIT(A) AND THE SAME HAVE TO BE UPHELD. 5. WE HAVE CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. HERE, IN THIS MATTER, VIDE PARA 6 AND 7 THE LD. CIT(A) HAS CLEARLY DELINEATED THE FACTS AND HIS OBSERVATIONS ARE AS FOLLOWS : - 6. FROM THE ABOVE DISCUSSION, IT IS QUITE EVIDENT THAT THE APPELLANT TOOK LOAN FROM HER FATHER NAMELY SHRI JAYANTKUMAR DOSHI REGULARLY IN THE PAST 7 TO 9 YEARS, AS A RESULT OF WHICH THE CLOSING BALANCE AT THE END OF THE FINANCIAL YEAR 2006 - 07 AMOUNTED TO RS. 3,40,74,263/ - , WHICH ALSO INCLUDES THE INTEREST COMPONENT OF RS. 33,90,939/ - . THE APPELLANT HAS DEBITED THE AMOUNT PAYABLE TO HER FATHER WITH AN 4 SMT. PARUL HITEN DESAI ITA NO. 564/RJT/2014 AMOUNT OF RS.3,40,74,263/ - BY A JOURNAL ENTRY DATED 01/04/2007 AND CREDITING HER CAPITAL ACCOUNT WITH A SIMILAR AMOUNT ON ACCOUNT OF WAIVER OF OUTSTANDING BALANCE AS ON 31/03/2007, WHICH THE APPELLANT CLAIMED AS GIFT RECEIVED FROM HER FATHER. ALL THESE ACCOUNTING ENTRIES AND TRANSACTIONS ARE DULY REFL ECTED IN THE AUDITED ACCOUNTS FURNISHED BY THE APPELLANT ALONG WITH RETURN OF INCOME FOR RESPECTIVE ASSESSMENT YEARS. THE DISPUTE IN QUESTION NOW REMAINED IS A PURE QUESTION OF LAW WITH REFERENCE TO THE ACCOUNTING TREATMENT FOR RECOGNIZING THE INCOME IN SO FAR AS WAIVER OF INTEREST LIABILITY BY THE APPELLANT. BOTH THE CIT(A) - III, RAJKOT AND HON'BLE ITAT, RAJKOT BENCH, RAJKOT HAVE HELD THAT THE WAIVER OF INTEREST LIABILITY AT RS.33,90,939/ - CONSTITUTE PROFITS CHARGEABLE TO TAX IN TERMS OF PROVISIONS CONTAIN ED IN SECTION 41 (1) OF THE IT ACT, 1961. THE MATTER IS NOW PENDING BEFORE THE HON'BLE HIGH COURT OF GUJARAT FOR ANSWERING THE SUBSTANTIAL QUESTION OF LAW RAISED BY BOTH THE REVENUE AND THE APPELLANT. THE HON'BLE SUPREME COURT IN THE CASE OF RELIANCE PETRO PRODUCTS (P) LTD. 322 ITR 158 (2010) (SC) WHILE DEALING WITH THE ISSUE OF LEVY OF PENALTY U/S 271(1)(C) OF THE IT ACT, 1961 HAS HELD IN THE FOLLOWING MANNER : WE HAVE ALREADY SEEN THE MEANING OF THE WORD 'PARTICULARS' IN THE EARLIER PART OF THIS JUDGMENT. READING THE WORDS IN CONJUNCTION, THEY MUST MEAN THE DETAILS SUPPLIED IN THE RETURN, WHICH ARE NOT ACCURATE, 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 SUPPL IED BY THE ASSESSEE IN ITS RETURN WERE FOUND TO BE INCORRECT OR ERRONEOUS OR FALSE. SUCH NOT BEING THE CASE, THERE WOULD BE NO QUESTION OF INVITING THE PENALTY 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 INACCURATE PARTICULARS REGARDING THE INCOME OF THE ASSESSEE. SUCH CLAIM MADE IN THE RETURN CANNOT AMOUNT TO THE INACCURATE PARTICULARS. 7. IN VIEW OF THE ABOVE LAW LAID DOWN BY THE APEX COURT, THE APPELLANT'S CASE WILL NOT ATTRACT THE PENAL PROVISIONS U/S. 271(1)(C) OF THE IT ACT, 1961. THE CASE LAW REFERRED TO IN BY THE ASSESSING OFFICER IN THE PENALTY ORDER CANNOT BE MADE APPLICABLE TO THE FACTS OF THE APPELLANT'S CASE. SINCE THE FACTUAL INFORMATION IS ALREADY SUP PLIED BY THE APPELLANT IN THE BOOKS OF ACCOUNTS MAINTAINED, IT CANNOT BE SAID THAT THE PARTICULARS OF INCOME FURNISHED BY THE APPELLANT FOUND TO BE INACCURATE. THE ISSUE IN QUESTION IS BEING PURELY A LEGAL ONE AND ALSO THE SAME IS DEBATABLE, AS THE MATTER IS PENDING BEFORE THE HON'BLE HIGH COURT OF GUJARAT FOR ADJUDICATING THE SUBSTANTIAL QUESTIONS OF LAW RAISED BY BOTH THE REVENUE AND THE APPELLANT, PENALTY LEVIED BY THE ASSESSING OFFICER U/S. 271(1)(C) OF THE IT ACT, 1961 CANNOT BE SUSTAINED. THEREFORE, T HE PENALTY LEVIED AT RS. 10,74,080/ - U/S. 271(1)(C) OF THE IT ACT, 1961 STANDS DELETED. THIS GROUND OF APPEAL IS ALLOWED. 6. IT IS, THEREFORE, VERY CLEAR THAT THOUGH THE LD. CIT(A) PASSED AN OBSERVATION THAT BOTH CIT(A) - 3, RAJKOT AND THE ITAT, RAJKOT BENCH HAVE HELD THAT WAIVER OF INTEREST LIABILITY OF RS.33,90,939/ - CONSTITUTES PROFIT CHARGEABLE TO TAX IN TERMS OF PROVISIONS CONTAINED IN SEC. 41(1) OF THE ACT, AND THE MATTER IS NOW PENDING BEFORE THE HON BLE GUJARAT HIGH 5 SMT. PARUL HITEN DESAI ITA NO. 564/RJT/2014 COURT FOR ANSWERING A S UBSTANTIAL QUESTION OF LAW RAISED BY BOTH THE REVENUE AND THE ASSESSEE, HE DID NOT BASE D HIS CONCLUSION ON THIS FACT ALONE. AS A MATTER OF FACT, ON THE OTHER HAND, THE LD. CIT(A) OBSERVED THAT SINCE ALL THE FACTUAL INFORMATION WAS RECORDED IN THE BOOKS OF ACCOUNT OF THE ASSESSEE AS FURNISHED BEFORE THE AUTHORITIES, THERE WAS NO FURNISHING OF INACCURATE PARTICULARS OF INCOME BY THE ASSESSEE, AND ON THAT SCORE, BY FOLLOWING THE DECISIONS OF THE APEX COURT IN RELIANCE PETROPRODUCTS (P) LTD. (SUPRA) THE LD. CI T(A) DELETED THE PENALTY. THE REVENUE FAILED TO CONTROVERT THE OBSERVATIONS OF THE LD. CIT(A) THAT THE ISSUE INVOLVED IN THIS MATTER GIVING RISE TO THE PENALTY PROCEEDINGS IS A DEBATABLE QUESTION OF LAW AS TO THE TREATMENT OF AMOUNT FOR RECOGNIZING THE IN COME. SO LONG AS THIS FACTUAL OBSERVATION STARES AT THE FACE OF REVENUE, REVENUE CANNOT CHALLENGE THE DELETION OF THE PENALTY SINCE THE LD. CIT(A) BASED HIS CONCLUSION ON BINDING PRECEDENTS OF THE HON BLE SUPREME COURT IN RELIANCE PETROPRODUCTS (P) LTD. ( SUPRA). APPLICABILITY OF THE RATIO OF THIS DECISION CANNOT BE DISPUTED, AS SUCH, WE DO NOT FIND ANY ILLEGALITY OR IRREGULARITY IN THE FINDING REACHED BY THE LD. CIT(A) AND WE ACCORDINGLY CONFIRM THE SAME. HENCE, THE GROUNDS OF APPEAL ARE DISMISSED. 7. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 2 4 T H MARCH, 2017. SD/ - SD/ - ( S.V. MEHROTRA ) ACCOUNTANT MEMBER ( K. NARASIMHA CHARY ) JUDICIAL MEMBER RAJKOT , DATE : 2 4 T H MARCH , 201 7 *SSL* 6 SMT. PARUL HITEN DESAI ITA NO. 564/RJT/2014 COPY TO : 1) THE APPELLANT 2) THE RESPONDENT 3) THE CIT(A) CONCERNED 4) THE CIT CONCERNED 5) THE D.R, RAJKOT 6) GUARD FILE BY ORDER DY./ASSTT. REGISTRAR I.T.A.T, RAJKOT