CLC Textile Park Pvt. Ltd., New Delhi V. ITO, New Delhi

ITA 5795/DEL/2016

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 6680 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 7 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-06-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 10-11-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S N MEENA
• Assessee Lawyers: DHANI RAM SHARMA
• Keywords: Retrospective amendment; Question of law; Capital expenditure; Set aside
• Section: 271(1)(c); 143(3); 143(1); 250; 274; 73; 2; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH B: NEW DELHI BEFORE, SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER ITA NO.5795/DEL/2016 (ASSESSMENT YEAR: 2009-10) CLC TEXTILE PARK PRIVATE LIMITED A-60, OKHLA INDUSTRIES AREA, PHASE-II, NEW DELHI-110016. PAN AADCC 3546M VS. INCOME TAX OFFICER, WARD- 6(2), NEW DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY SH. DHANI RAM SHARMA, CA RESPONDENT BY SH. S.N. MEENA, SR. DR ORDER PER SUDHANSHU SRIVASTAVA, JM: THIS APPEAL IS PREFERRED BY THE ASSESSEE AGAINST OR DER DATED 05.09.2016 PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-35, NEW DELHI {CIT(A)} FOR ASSESSMENT YEAR 2009-10, WHEREIN VIDE THE IMPUGNED ORDER, THE LD. FIRST APPEL LATE AUTHORITY HAS UPHELD THE IMPOSITION OF PENALTY OF RS.15,22,75 4/- IMPOSED 2 ITA NO.5795/DEL/2016 CLC TEXTILE PARK PRIVAT E LTD. VS. ITO U/S 271(1)(C) OF THE INCOME TAX ACT, 1961 (HEREINAF TER CALLED THE ACT). 2.0 THE ASSESSEE IS A PRIVATE LIMITED COMPANY INCO RPORATED ON 21.04.2008 AND THE CAPTIONED YEAR IS THE FIRST Y EAR OF OPERATIONS. DURING THE YEAR, THE ASSESSEE HAD UNDERTAKEN TRADIN G IN GARMENTS AND HAS ALSO EARNED INTEREST INCOME. THE ASSESSEE C OMPANY HAS ALSO UNDERTAKEN TWO INFRASTRUCTURE PROJECTS WHICH AR E IN THE INITIAL STAGES OF IMPLEMENTATION. RETURN DECLARING NIL INCO ME WAS FILED, WHICH WAS PROCESSED U/S 143(1) OF THE ACT AND THE CAS E WAS SUBSEQUENTLY SELECTED FOR SCRUTINY UNDER CASS. DURI NG THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NO TICED THAT THE ASSESSEE HAD EARNED INTEREST INCOME OF RS.5,91,850/ - ON FDR WITH BANKS AND HAD ALSO DEBITED THE PROFIT & LOSS ACCOUN T WITH AN AMOUNT OF RS.47,21,002/-. IT WAS OBSERVED BY THE ASS ESSING OFFICER THAT AFTER SETTING-OFF OF SUCH EXPENDITURE AGAINST THE INTEREST INCOME, A LOSS OF RS.41,29,152/- WAS CAPITALIZED UND ER THE HEAD PRE-OPERATIVE EXPENSES. THE ASSESSEE WAS ASKED TO CLARIFY THE SETTING-OFF OF EXPENSES AGAINST THE INTEREST INCOME . IT WAS THE ASSESSEES EXPLANATION THAT THE EARNING OF INTEREST WAS LINKED TO THE 3 ITA NO.5795/DEL/2016 CLC TEXTILE PARK PRIVAT E LTD. VS. ITO SETTING-UP OF THE PROJECT AND, THEREFORE, THE SAME SHOULD BE ALLOWED TO BE SET-OFF AGAINST CAPITAL EXPENDITURE. HOWEVER, THE ASSESSING OFFICER DID NOT ACCEPT THE ASSESSEES CONTENTION AN D HELD THAT THE INTEREST INCOME HAD TO BE TAXED SEPARATELY. FURTHER , THE ASSESSING OFFICER ALSO NOTICED THAT THE ASSESSEE HAD DECLARED SALE OF GARMENTS AND THE SALES AND PURCHASE WERE OF THE EQUAL AMOUNT I.E., RS.49,28,006/-. THE ASSESSEE WAS ALSO REQUIRED TO EX PLAIN HOW THERE WAS NO PROFIT NO LOSS IN THE TRADING ACTIVITY. IT WAS SUBMITTED BY THE ASSESSEE BEFORE THE ASSESSING OFFICER THAT E ARLIER THE ASSESSEE HAD DECIDED TO ENTER INTO TRADING IN FABRI CS, BUT LATER ON IT WAS DECIDED TO CLOSE THE TRADING BUSINESS IN AUGUST, 2008 ITSELF AND TO CONCENTRATE ON INFRASTRUCTURE PROJECTS ONLY AND, THEREFORE, THE GOODS PURCHASED EARLIER WERE DISPOSED OF AT COST ITS ELF. ACCORDINGLY, THERE WAS NO PROFIT, NO LOSS. THE ASSESSING OFFICER DID NOT ACCEPT THIS EXPLANATION OF THE ASSESSEE AND HELD THAT THE TRANSACTION OF SALE WAS NOTHING BUT A DEVICE TO INTRODUCE UNEXPLAIN ED CASH IN THE BOOKS OF THE ASSESSEE. ACCORDINGLY, AN ADDITION OF RS.49,28,006/- WAS MADE U/S 68 OF THE ACT AS UNEXPLAINED INCOME. TH E ASSESSMENT WAS COMPLETED AT AN INCOME OF RS.55,19,85 6/- AND 4 ITA NO.5795/DEL/2016 CLC TEXTILE PARK PRIVAT E LTD. VS. ITO PENALTY PROCEEDINGS UNDER 271(1)(C) OF THE ACT WERE ALSO INITIATED. 2.1 THE ASSESSEES APPEAL AGAINST THE QUANTUM ADDI TION WAS DISMISSED BY THE LD. FIRST APPELLATE AUTHORITY. THE ASSESSEE CARRIED THE MATTER TO THIS TRIBUNAL AND TRIBUNAL VIDE ITS O RDER DATED 24.06.2015 IN ITA NO.5667/DEL/2013 DELETED THE DISA LLOWANCE ON ACCOUNT OF INTEREST INCOME BUT UPHELD THE ADDITION OF RS.49,28,006/- MADE U/S 68 OF THE ACT. 2.2 SUBSEQUENTLY, THE ASSESSING OFFICER IMPOSED PE NALTY OF RS.15,22,754/- U/S 271(1)(C) OF THE ACT ON THE ADDI TION MADE TOWARDS UNEXPLAINED INCOME FOR FURNISHING INACCURATE PARTICULARS OF INCOME. THE ASSESSEES APPEAL BEFORE THE LD. CIT (A) CHALLENGING THE IMPOSITION OF PENALTY WAS DISMISSED AND NOW THE ASSESSEE IS BEFORE THIS TRIBUNAL CHALLENGING THE ORDER OF THE L D. CIT (A) IN CONFIRMING THE PENALTY OF RS.15,22,754/- BY RAISING THE FOLLOWING GROUNDS OF APPEAL: THAT THE CIT (APPEALS) ERRED ON FACTS AND IN LAW I N CONFIRMING THE PENALTY OF RS.15,22,754/- ON ACCOUNT OF SALES CONSIDERATION OF THE APPELLANT TREATED AS UNEXPLAINED INCOME UNDER SECTION 68. 5 ITA NO.5795/DEL/2016 CLC TEXTILE PARK PRIVAT E LTD. VS. ITO THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND OR VARY FROM THE ABOVE GROUNDS OF APPEAL AT OR BEFORE THE T IME OF HEARING. 3.0 AT THE OUTSET, THE LD. AUTHORIZED REPRESENTAT IVE (AR) SUBMITTED THAT THE ASSESSEE HAD FILED ADDITIONAL GR OUND OF APPEAL WHICH WAS PURELY LEGAL IN NATURE. IT WAS SUBMITTED THA T THE ADDITIONAL GROUND BE ADMITTED AS IT WENT INTO THE VE RY ROOT OF THE MATTER CHALLENGING THE LEGALITY OF IMPOSITION OF TH E PENALTY. THE ADDITIONAL GROUND READS AS UNDER: THAT THE ASSESSING OFFICER ERRED ON FACTS AND IN LAW IN LEVYING PENALTY OF RS.15,22,754/- ON ACCOUNT OF SAL ES CONSIDERATION WITHOUT SPECIFYING THE CHARGE WHETHER THE PENALTY IS FOR INACCURATE PARTICULAR OF INCOME OR CONCEALMENT OF INCOME IN THE ASSESSMENT ORDER UNDER SECTION 143(3) WHEREIN THE PENALTY WAS INITIATED NO R IN THE SHOW CAUSE NOTICE UNDER SECTION 274 OF THE ACT AND CONSEQUENTLY THE IMPUGNED PENALTY ORDER PASSED PURS UANT TO DEFECTIVE INITIATION IS WITHOUT JURISDICTION AND IS BAD IN LAW. 3.1 THE LD. AUTHORIZED REPRESENTATIVE SUBMITTED TH AT THE NOTICE ISSUED U/S 274 OF THE ACT WAS DEFECTIVE IN AS MUCH AS IT DID NOT SPECIFY THE LIMB UNDER WHICH THE PENALTY WAS BEIN G INITIATED I.E., WHETHER THE PENALTY WAS BEING PROPOSED TO BE I MPOSED FOR CONCEALMENT OF INCOME OR FOR FURNISHING INACCURATE PARTICULARS OF 6 ITA NO.5795/DEL/2016 CLC TEXTILE PARK PRIVAT E LTD. VS. ITO INCOME. HE DREW OUR ATTENTION TO COPY OF THE SAID N OTICE DATED 29.12.2011 AND SUBMITTED THAT IN THE SAID NOTICE IR RELEVANT PORTION HAS NOT BEEN CROSSED OUT AND, THEREFORE, IN VIEW OF THE SETTLED LAW THAT NO PENALTY COULD BE IMPOSED IF THE CHARGE WAS NOT SPECIFIC, THE SUBSEQUENT LEVY OF PENALTY WAS BAD IN LAW AND WAS LIAB LE TO BE DELETED. 4.0 PER CONTRA, THE LD. SR. DEPARTMENT REPRE SENTATIVE (DR) OPPOSED THE ADMISSION OF ADDITIONAL GROUND. HE SUBM ITTED THAT A MERE TECHNICAL ERROR IN HAVING FAILED TO CROSS OUT THE IRRELEVANT PORTION DOES NOT MAKE THE LEVY OF PENALTY ILLEGAL. THE LD. SR. DR ARGUED THAT EVEN THE TRIBUNAL HAD UPHELD THE QUANTU M ADDITION MADE U/S 68 OF THE ACT AND, THEREFORE, THE PENALTY HAD BEEN RIGHTLY IMPOSED. THE LD. SR. DR ARGUED THAT THE ASSESSEE SH OULD BE DIRECTED TO ARGUE ON THE MERITS OF THE LEVY OF PENA LTY RATHER THAN TAKING SHELTER BEHIND A MERE TECHNICAL ERROR. THE L D. SR. DR PLACED HEAVY RELIANCE ON THE CURRENT FINDINGS OF BOTH THE LOWER AUTHORITIES AS WELL AS THE ORDER OF THE ITAT AND REITERATED THA T THE PENALTY HAD BEEN RIGHTLY IMPOSED. 7 ITA NO.5795/DEL/2016 CLC TEXTILE PARK PRIVAT E LTD. VS. ITO 5.0 WE HAVE HEAD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE HAVE ALSO CONSIDERED THE ASS ESSEES PLEA FOR ADMITTING THE ADDITIONAL GROUND OF APPEAL AND IT IS OUR CONSIDERED OPINION THAT SINCE THE ADDITIONAL GROUND RAISES AN IMPORTANT LEGAL ISSUE WHICH CHALLENGES THE VERY FOUNDATION OF THE IN ITIATION OF PENALTY PROCEEDINGS, THE SAME DESERVES TO BE ADMITT ED. ACCORDINGLY, WE ADMIT THE ADDITIONAL GROUND AND PROCEED TO ADJUDI CATE THE SAME. 5.1 IT IS EVIDENT FROM THE NOTICE U/S 274 R.W.S. 2 71 OF THE ACT FOR THE IMPUGNED YEAR THAT THE ASSESSING OF FICER HAS NOT SPECIFICALLY MENTIONED AS TO UNDER WHICH LI MB OF SECTION 271(L)(C) OF THE ACT THE PENALTY PROCEEDING S HAD BEEN INITIATED BY HIM, I.E., WHETHER FOR CONCEALMEN T OF PARTICULARS OF INCOME OR FOR FURNISHING OF INACCURA TE PARTICULARS OF INCOME. THE HONBLE HIGH COURT OF KA RNATAKA IN THE CASE OF CIT VS. MANJUNATHA COTTON & GINNING FACTOR, REPORTED IN 359 ITR 565 (KAR) HAS, UNDER IDENTICAL FACTS, HELD AS UNDER - '(P) NOTICE UNDER SECTION 274 OF THE ACT SHOULD SPECIFICALLY STATE THE GROUNDS MENTIONED IN SECTION 271(L)(C), I.E., WHETHER IT IS FOR 8 ITA NO.5795/DEL/2016 CLC TEXTILE PARK PRIVAT E LTD. VS. ITO CONCEALMENT OF INCOME OR FOR FURNISHING OF INACCURATE PARTICULARS OF INCOME. (Q) SENDING PRINTED FORM WHERE ALL THE GROUND MENTIONED IN SECTION 271 ARE MENTIONED WOULD NOT SATISFY REQUIREMENT OF LAW.' 5.2 THE SAID ABOVE-SAID JUDGMENT OF THE HONBLE HI GH COURT OF KARNATAKA IN THE CASE OF C IT VS. MANJUNATHA COTTON & GINNING FACTOR (SUPRA) HAS BEEN FOLLOWED B Y THE HONBLE HIGH COURT OF KARNATAKA IN THE CASE OF COMMISSIONER OF INCOME TAX VS. SSAS EMERALD MEADOW S, REPORTED IN (2016) 73 TAXMANN.COM 241 (KAR) AND THE RELEVANT PARAGRAPHS OF THE SAID JUDGMENT READ AS UN DER- '2. THIS APPEAL HAS BEEN FILED RAISING THE FOLLOWIN G SUBSTANTIAL QUESTIONS OF LAW, WHETHER, OMISSION IF ASSESSING OFFICER TO EXPLICITL Y MENTION THAT PENALTY PROCEEDINGS ARE BEING INITIATE D FOR FURNISHING OF INACCURATE PARTICULARS OR THAT FOR CONCEALMENT OF INCOME MAKES THE PENALTY ORDER LIABL E FOR CANCELLATION EVEN WHEN IT HAS BEEN PROVED BEYOND REASONABLE DOUBT THAT THE ASSESSEE HAD CONCEALED INCOME IN THE FACTS AND CIRCUMSTANCES OF THE CASE? WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, THE TRIBUNAL WAS JUSTIFIED IN LAW IN HOLDING THAT THE PENALTY NOTICE UNDER SECTION 274 R.W.S. 271(I)( C) IS BAD IN LAW AND INVALID DESPITE THE AMENDMENT OF SEC TION 271 (1 B) WITH RETROSPECTIVE EFFECT AND BY VIRTUE O F THE AMENDMENT, THE ASSESSING OFFICER HAS INITIATED THE PENALTY BY PROPERLY RECORDING THE SATISFACTION FOR THE SAME ? 9 ITA NO.5795/DEL/2016 CLC TEXTILE PARK PRIVAT E LTD. VS. ITO (3) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE, THE TRIBUNAL WAS JUSTIFIED IN DECIDING TH E APPEALS AGAINST THE REVENUE ON THE BASIS OF NOTICE ISSUED UNDER SECTION 274 WITHOUT TAKING INTO CONSIDERATION THE ASSESSMENT ORDER WHEN THE ASSESSI NG OFFICER HAS SPECIFIED THAT THE 'ASSESSEE HAS CONCEA LED PARTICULARS OF INCOME? 3. THE TRIBUNAL HAS ALLOWED THE APPEAL FILED BY TH E ASSESSEE HOLDING THE NOTICE ISSUED BY THE ASSESSING OFFICER UNDER SECTION 274 READ WITH SECTION 271(L)( C) OF THE INCOME TAX ACT. 1961 FOR SHORT 'THE ACT') TO BE BAD IN LAW AS IT DID NOT SPECIFY WHICH LIMB OF SECTION 271 (L)(C) OF THE ACT: THE PENALTY PROCEEDINGS HAD BEEN INITIA TED I.E., WHETHER FOR CONCEALMENT OF PARTICULARS OF INC OME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME THE TRIBUNAL, WHILE ALLOWING THE APPEAL OF THE ASSESSEE , HAS RELIED ON THE DECISION OF THE DIVISION BENCH OF THI S COURT RENDERED, IN THE CASE OF CIT V. MANJUNATHA COTTON & GINNING FACTORY [2013] 359ITR 565/218 TAXMAN 423/35 TAXMANN.COM 250 (KAR.). 4. IN OUR VIEW, SINCE THE MATTER IS COVERED BY JUD GMENT OF THE DIVISION BENCH OF THIS COURT, WE ARE OF THE OPINION, NO SUBSTANTIAL QUESTION OF LAW ARISES IN T HIS APPEAL FOR DETERMINATION BY THIS COURT. THE APPEAL IS ACCORDINGLY DISMISSED. 5.3 FURTHER, THE SLP FILED BY THE REVENUE AGAINST THE JUDGMENT OF THE KARNATAKA HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME TAX VS. SSAS EMERALD MEADOW S (SUPRA) WAS DISMISSED BY THE HONBLE SUPREME COURT OF INDIA. THEREFORE, RESPECTFULLY FOLLOWING THE JUDGME NT OF THE HONBLE KARNATAKA HIGH COURT AS ABOVE-MENTIONED WE ARE 1 0 ITA NO.5795/DEL/2016 CLC TEXTILE PARK PRIVAT E LTD. VS. ITO OF THE CONSIDERED VIEW THAT THE ASSESSING OFFICER I S REQUIRED TO SPECIFY WHICH LIMB OF SECTION 271 (1)(C) OF THE ACT, THE PENALTY PROCEEDINGS HAD BEEN INITIATED, I.E., WHETH ER FOR CONCEALMENT OF PARTICULARS OF INCOME OR FOR FURNISH ING OF INACCURATE PARTICULARS OF INCOME. FROM THE PERUSAL OF THE NOTICES, IT IS CLEAR THAT THE ASSESSING OFFICER HAS NOT SPECIFIED AS TO UNDER WHICH LIMB OF THE SECTION THE PENALTY WAS IMPOSABLE. THE NOTICES, IN FACT, ARE IN THE STA NDARD PRO FORMA WHEREIN THE IRRELEVANT CLAUSES HAVE NOT BEEN STRUC K OFF. THIS INDICATES NON APPLICATION OF MIND ON THE PART OF THE ASSESSING OFFICER WHILE ISSUING THE PENALTY NOT ICES. THUS, IN THE CIRCUMSTANCES AND FACTS OF THE CASE, T HE PENALTY PROCEEDINGS INITIATED BY THE ASSESSING OFFI CER ARE BAD IN LAW AND DESERVE TO BE DELETED. ACCORDINGLY, THE IMPUGNED ORDER IS SET ASIDE AND THE AO IS DIRECTED TO DELETE THE PENALTY. 1 1 ITA NO.5795/DEL/2016 CLC TEXTILE PARK PRIVAT E LTD. VS. ITO 6.0 IN THE FINAL RESULT, THE APPEAL OF THE ASSESSE E STANDS ALLOWED. ORDER PRONOUNCED ON 12/06/2020. SD/- SD/- (PRASHANT MAHARISHI) (SUDHANSHU SRIVASTAVA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 12/06/2020 PK/PS COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI