ITO, New Delhi V. M/s Indian Oil Panipat Power Consortium Ltd., New Delhi

ITA 580/DEL/2011

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 3646 (ITAT-DELHI)
• Duration Of Justice: 4 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-06-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: I
• Next Hearing Date: 28-06-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 03-02-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MRS BANITA DEVI NAOREM

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES: I NEW DELHI BEFORE SMT. DIVA SINGH, JUDICIAL MEMBER AND SHRI B.K. HALDAR, ACCOUNTANT MEMBER ITA NO: 580/DEL/2011 A.Y. : 2004-2005 ITO, WARD 11(4) VS. M/S INDIAN OIL PANIPAT POWER C ONSORTIUM LTD. NEW DELHI H-1/204, SECOND FLOO R, VIKRAMADITYA TOWER AALAKNANDA TOWER, NEW DELHI 110 019 (APPELLANT) (RESPONDEN T) APPELLANT BY : MRS. BANITA DEVI NAOREM, SR.D.R. RESPONDENT BY : SRI RAJ KUMAR, C.A. O R D E R PER DIVA SINGH, JUDICIAL MEMBER THIS IS THE APPEAL FILED BY THE DEPARTMENT AGAINS T THE ORDER DATED 25.11.2010 OF LD.CIT(A)-XXX, NEW DELHI PERTAINING T O A.Y. 2004-05 WHEREIN THE FOLLOWING GROUNDS HAVE BEEN RAISED BY THE DEPARTMENT. 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE ORDER OF THE CIT(A) IS WRONG, , PERVERSE, ILLEGAL A ND AGAINST THE PROVISIONS OF LAW WHICH IS LIABLE TO BE SET ASIDE. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) ERRED IN DELETING THE PENALTY OF RS. 4,8 8,484/- IMPOSED ITA 580/DEL/2011 PAGE 2 OF 8 A.Y. 2004-2005 INDIAN OIL PANIPAT POWER CONSORTIUM LTD. U/S 271(1)(C ) OF THE I.T.ACT, 1961 VIDE AOS ORDER DATED 25.9.2009. 3. THE APPELLANT CRAVES TO LEAVE, TO ADD, ALTER OR AMEND ANY GROUND OF APPEAL RAISED ABOVE AT THE TIME OF THE HE ARING. 2. THE RELEVANT FACTS OF THE CASE ARE THAT THE ASSE SSEE IS A JOINT VENTURE BETWEEN THE INDIAN OIL CORPORATION (IOCL) A ND MARUBENI CORPORATION (MC), JAPAN FORMED FOR THE PURPOSE OF S ETTING UP A POWER PROJECT AT PANIPAT, HARYANA. AS PER THE STATEMENT OF FACTS AVAILABLE ON RECORD THE FUNDS WERE REQUIRED FOR CARRYING OUT TH E ACTIVITIES IN CONNECTION WITH THE PROJECT AS PER BUDGET PREPARED FOR THE PERIOD OCTOBER, 1999 TO SEPTEMBER 2000. THE ESTIMATED EX PENDITURE WAS MOSTLY ON ACCOUNT OF ACQUISITION OF LAND AND INFRA STRUCTURE DEVELOPMENT THEREON, FOR WHICH WITH THE BOARDS APPROVAL TO CA LL UP A SUM OF RS. 10 CRORES EACH FROM IOCL AND MC BY WAY OF ADDITIONAL E QUITY. AS PER THE STATEMENT OF FACTS LAND FOR THE SAID PROJECT WAS AL LOTTED BY THE HARYANA GOVERNMENT (DEVELOPMENT AND PANCHAYAT DEPARTMENT). HOWEVER, IN REGARD TO THE SAME THE ASSESSEE LEARNT THAT THERE WAS SOME DISPUTE WITH REGARD TO THE SAID LAND AND THAT A DECREE DATED 9. 6.2000 HAD BEEN GRANTED IN CIVIL SUIT NO. 513/98, TO THE EFFECT THA T THE GRAM PANCHAYAT WAS NOT EMPOWERED TO SELL THE LAND. AS PER THE STA TEMENT OF FACTS THE ASSESSEE WROTE A LETTER DT. 14.11.2000 IN CONNECTI ON THEREWITH TO THE CONCERNED AUTHORITY, AND THE MATTER WENT IN APPEAL BEFORE THE ADJ, PANIPAT WHO DECIDED THAT THE GRAM PANCHAYAT WAS ENT ITLED TO SELL THE LAND, VIDE ORDER DT. 31.3.2001. IT IS ALSO STATED B Y THE ASSESSEE THAT THE ITA 580/DEL/2011 PAGE 3 OF 8 A.Y. 2004-2005 INDIAN OIL PANIPAT POWER CONSORTIUM LTD. POWER PURCHASE AGREEMENT (WITH HVPNL) AND FUEL SUPP LY AGREEMENT (WITH IOCL) WERE ALSO NOT FINALIZED. AS A RESULT O F THESE FACTS THE PROJECT VIABILITY WAS BEING REVIEWED. IN VIEW OF THESE F ACTS, THE FUNDS WERE NOT DEPOSITED WITH THE CONCERNED AUTHORITY FOR ACQUISIT ION OF LAND (HARYANA GOVERNMENT) AND WERE INSTEAD KEPT IN FIXED DEPOSITS WITH ICICI BANK AND STANDARD CHARTERED BANK DURING THE FINANCIAL YEAR 2 003-04, BEING THE PREVIOUS YEAR RELEVANT TO A.Y. 2004-05. 3. IN THE YEAR UNDER CONSIDERATION THE ASSESSEE SET OFF THE TOTAL RECEIPTS ON ACCOUNT OF INTEREST ON FIXED DEPOSITS AMOUNTING TO RS. 94,06,060/- AND INTEREST ON INCOME TAX REFUND OF R S. 13,95,673/- AGAINST PRE OPERATIVE EXPENSES. THE AO DID NOT ACC EPT THIS TREATMENT AND ASSESSED THE INTEREST RECEIPTS UNDER THE HEAD INCOME FROM OTHER SOURCES AND TAXED ACCORDINGLY. IN APPEAL BEFORE T HE CIT(A) THE ACTION OF THE AO WAS UPHELD. HOWEVER BEFORE THE ITAT THE ASSESSEES CLAIM WAS ACCEPTED TO THE EXTENT OF INTEREST ON FDS AMOUNTING TO RS. 94,06,060/- WHICH HAD BEEN HELD TO HAVE RIGHTLY BEEN CAPITALIZ ED AGAINST PRE OPERATIVE EXPENSES. 4. THE PENALTY PROCEEDINGS HAD BEEN STARTED AGAINS T THE ASSESSEE BY THE AO, ON BOTH THE COUNTS HAD BEEN KEPT IN ABEYAN CE TILL THE OUTCOME OF THE ORDER OF THE TRIBUNAL IN QUANTUM PROCEEDING S. THE AO ACCORDINGLY IN REGARD TO THE ADDITION NAMELY INCOM E TAX REFUND OF RS. 13,95,673/- CONSIDERING THE EXPLANATION OF THE ASSE SSEE HELD THAT THE ITA 580/DEL/2011 PAGE 4 OF 8 A.Y. 2004-2005 INDIAN OIL PANIPAT POWER CONSORTIUM LTD. ASSESSEE HAS CONCEALED THE PARTICULARS OF ITS INCOM E AND IMPOSED PENALTY OF RS. 4,88,484/-. 5. IN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY C ONSIDERING THE EXPLANATION OF THE ASSESSEE AND THE FOLLOWING JUDGE MENTS THE CIT(A) QUASHED THE PENALTY ORDER. CIT VS. RELIANCE PETROPRODUCTS P.LTD. 322 ITR 158 ( SC) HINDUSTAN STEEL LTD. VS STEEL OF ORISSA, 83 ITR 26 (SC) ACIT VS. DELHI CLOTH AND GENERAL MILLS CO.LTD. 157 ITR 822 (DEL) CIT VS. DHOOLIE TEA CO.LTD. 231 ITR 65 (CAL) CIT VS. SKYLINE AUTO PRODUCTS P.LTD. 271 ITR 335 (M P) DILIP N.SHROFF VS JCIT, 291 ITR 519 (SC) T.ASHOK PAI VS CIT, 292 ITR 11 (SC) CIT VS. TEXTILES AND GENERAL TRADING CO. 244 ITR 87 6 (DEL) CHANDRAPAL BAGGA VS ITAT AND ANOTHER, 261 ITR 67 (R AJ.) AGGRIEVED BY THIS THE DEPARTMENT IS IN APPEAL BEFOR E THE TRIBUNAL. 6. LD.D.R. PLACED HEAVY RELIANCE ON THE PENALTY ORD ER. 7. THE AUTHORISED REPRESENTATIVE OF THE ASSESSEE, O N THE OTHER HAND, RELIED UPON THE IMPUGNED ORDER AND THE JUDGEMENTS R ELIED UPON THEREIN CONTENDED THAT IN THE PECULIAR FACTS OF THE PRESENT CASE IT CANNOT BE HELD THAT THE ASSESSEE HAS CONCEALED THE PARTICULARS OF HIS INCOME. ATTENTION WAS INVITED TO PAGE 8 AND 11 OF THE PAPER BOOK WHER EIN THE ASSESSEE HAS CLEARLY DISCLOSED IN ITS BALANCE SHEET AND SCHEDULE III THEREOF THAT THE AMOUNT OF RS. 13,95,673/- WAS RECEIVED AS INTEREST ON INCOME TAX REFUNDS. ATTENTION ALSO WAS INVITED TO PAGE 3 PARA 1 OF THE IMPUGNED ORDER ON THE BASIS OF WHICH IT WAS CONTENDED THAT A S PER THE COMPUTATION OF TOTAL INCOME FILED BY THE ASSESSEE ALONG WITH T HE RETURN THE ASSESSEE HAD GIVEN THE FOLLOWING SPECIFIC NARRATION. ITA 580/DEL/2011 PAGE 5 OF 8 A.Y. 2004-2005 INDIAN OIL PANIPAT POWER CONSORTIUM LTD. A SUM OF RS. 94,06,060/- HAS ACCRUED TO THE ASSESS EE AS INTEREST ON FIXED DEPOSITS HELD WITH ICICI BANK LTD . AND STANDARD CHARTERED BANK AND RS. 13,95,673/- INTERES T RECEIVED ON REFUND FROM INCOME TAX AUTHORITY AND TH E SAID AMOUNT HAS BEEN ADJUSTED FROM THE PRE-OPERATIVE EXP ENSES IN ACCORDANCE WITH THE RECOGNIZED ACCOUNTING PRINCIPLE S. IT IS THE CONTENTION OF THE ASSESSEE THAT THE SAID INTEREST I S COMPENSATORY IN NATURE AND HENCE, IS NOT TAXABLE AS INCOME. AS SUCH IT WAS ARGUED THAT IT CANNOT BE SAID THAT T HE ASSESSEE HAD CONCEALED PARTICULARS OF ITS INCOME AS FULL NARRAT ION OF FACTS AND ADEQUATE DISCLOSURES WERE THERE IN THE RETURN ITSE LF. IT WAS ALSO SUBMITTED THAT THE ASSESSEE HAD PAID THE ENTIRE TA X AND ADVANCE TAX AND HAD ONLY PUT UP A LEGAL CLAIM BEFORE THE TAX A UTHORITIES REGARDING NON TAXABILITY OF INTEREST INCOME BY STATING THAT SUCH INTEREST SHOULD BE SET OFF AGAINST PRE-OPERATIVE EXPENSES IN ACCORDANC E WITH RECOGNIZED ACCOUNTING PRINCIPLES. IT WAS HIS SUBMISSION THAT HAD THE ASSESSEES PLEA BEEN ACCEPTED BY THE A.O. INITIALLY WHICH WAS ULTIMATELY ACCEPTED BY THE TRIBUNAL OCCASION TO EARN INTEREST ON REFUND WOULD NOT HAVE ARISEN. IT WAS ALSO HIS SUBMISSION THAT THE FACT REMAINS THAT THE ASSESSEE HAD IT FULLY DISCLOSED RELEVANT PARTICULAR S OF INCOME AND HAD CONTESTED THE ISSUE RIGHT UP TO THE TRIBUNAL AND TH US EVEN IF BEFORE THE TRIBUNAL THE INTEREST ON REFUND WAS FINALLY HELD TO BE NOT ACCEPTABLE FOR PRE-OPERATIVE EXPENSES AND THE CLAIM OF ASSESSEE WA S REJECTED, IT CANNOT BE SAID THAT THE CLAIM OF THE ASSESSEE WAS NOT BONA FIDE CLAIM OR THAT THE ASSESSEE HAD FURNISHED INACCURATE PARTICULARS OF IN COME. IT WAS ITA 580/DEL/2011 PAGE 6 OF 8 A.Y. 2004-2005 INDIAN OIL PANIPAT POWER CONSORTIUM LTD. VEHEMENTLY CONTENDED BY HIM THAT NO INCORRECT OR F ALSE INFORMATION HAD BEEN GIVEN BY THE ASSESSEE. APART FROM HEAVILY REL YING ON THE JUDGEMENT OF THE APEX COURT IN THE CASE OF CIT VS. RELIANCE PETRO PRODUCTS 325 ITR 158 (SC) WHICH HAD BEEN TAKEN INTO CONSIDERATION BY THE CIT(A) RELIANCE WAS FURTHER PLACED UPON THE JUDGEMENTS OF THE JURIS DICTIONAL HIGH COURT IN THE CASE OF CIT VS MUSHASHI AUTO PARTS 330 ITR 5 45 (DELHI) FOR THE PROPOSITION THAT WHERE THE ASSESSEE HAD SHOWN THE FACT IN THE BALANCE SHEET THAT INTEREST INCOME IS SET OFF AGAINST PRE-O PERATIVE EXPENSES IT CANNOT BE HELD THAT THERE WAS NON DISCLOSURE OF MAT ERIAL FACTS BY THE ASSESSEE WHICH COULD WARRANT LEVY OF PENALTY. IN TH E FACTS OF THE PRESENT CASE IT WAS SUBMITTED THAT THE FULL DISCLOSURE WAS THERE IN THE BALANCE SHEET AS WELL AS IN THE NARRATION IN THE COMPUTATIO N OF INCOME FILED ALONG WITH THE RETURN. RELIANCE WAS FURTHER PLACED ON C IT VS KRISHNA MARUTI LTD. (DELHI) 330 ITR 547 FOR THE PROPOSITION THAT W HERE THE ASSESSEES CLAIM THAT A PARTICULAR EXPENDITURE IS REVENUE EXPE NDITURE IS NOT ACCEPTED AND PENALTY WAS IMPOSED HOLDING THE EXPEND ITURE TO BE CAPITAL IN NATURE THE ISSUE BEING DEBATABLE IT WAS HELD THA T THE PENALTY IS NOT ATTRACTED. IN THE FACTS OF THE PRESENT CASE IT WAS SUBMITTED THAT NECESSARY FACTS WERE AVAILABLE BEFORE THE AO AND SI MPLY BECAUSE THE CLAIM OF THE ASSESSEE IS NOT ACCEPTED PENAL ACTION WAS NOT ATTRACTED AND THE CIT(A) HAS RIGHTLY QUASHED THE PENALTY ORDER. ITA 580/DEL/2011 PAGE 7 OF 8 A.Y. 2004-2005 INDIAN OIL PANIPAT POWER CONSORTIUM LTD. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. ON CAREFUL CONSIDERATION OF T HE SAME WE ARE OF THE VIEW THAT IN THE PECULIAR FACTS AND CIRCUMSTANCES OF THE CASE IT CANNOT BE SAID THAT THE ASSESSEE HAS CONCEALED THE PARTICU LARS OF INCOME FOR WHICH COUNT THE AO HAS HELD THE ASSESSEE LIABLE. I T IS SEEN THAT THE BREAK-UP AND CORRECT NARRATION IS GIVEN IN SCHEDULE III OF THE BALANCE SHEET AND ALSO IN THE NARRATION APPENDED TO THE COM PUTATION OF INCOME ATTACHED ALONG WITH THE RETURN. THIS FACT HAS BEEN SPECIFICALLY NOTED BY THE CIT(A) AT PAGE 3 OF THE IMPUGNED ORDER AND HAS NOT BEEN ASSESSED BY THE REVENUE. THE JUDGEMENT OF THE APEX COURT NAMEL Y RELIANCE PETROPRODUCTS FURTHER SUPPORTS THE CASE OF THE ASS ESSEE. THUS ON A CAREFUL CONSIDERATION OF THE ENTIRE GAMUT OF FACTS, CIRCUMSTANCES, EXPLANATION AND POSITION OF LAW WE ARE UNABLE TO CO ME TO ANY OTHER CONCLUSION THAN THE ONE ARRIVED AT BY THE CIT(A). ACCORDINGLY FOR THE REASONS GIVEN HEREINABOVE THE DEPARTMENTAL GROUND I S DISMISSED. 8. IN THE RESULT THE APPEAL FILED BY THE DEPARTMEN T IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH JUNE, 2011. SD/- SD/- (B.K. HALDAR ) (DIVA SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED:30 TH JUNE, 2011 *MANGA ITA 580/DEL/2011 PAGE 8 OF 8 A.Y. 2004-2005 INDIAN OIL PANIPAT POWER CONSORTIUM LTD. COPY OF THE ORDER FORWARDED TO: 1. APPELLANT; 2.RESPONDENT; 3.CIT; 4.CI T(A); 5.DR; 6.GUARD FILE BY ORDER DY. REGISTRAR // C O P Y //