FRANCIS P. CANDES, MUMBAI V. I.T.O. 11(2)(3), MUMBAI

ITA 5830/MUM/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 79069 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-06-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 01-04-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 21-09-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R K SAHU
• Assessee Lawyers: AJAY R SINGH

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'F' BENCH, MUMBAI BEFORE SHRI R.C. SHARMA, ACCOUNTANT MEMBER AND SHRI SANJAY GARG, JUDICIAL MEMBER ITA NO. 5830/MUM/2012 (ASSESSMENT YEAR: 2007-08) D R . FRANCIS P. CANDES LEO VILLA, MOUNT POINSUR I.C. COLONY, BORIVLI(W) MUMBAI-400 103. VS. INCOME TAX OFFICER RANGE 11 (2)(3) AAYAKAR BHAVAN, 4 TH FLOOR M.K. MARG MUMBAI-400 020. (APPELLANT) (RESPONDENT) PERMANENT ACCOUNT NO. : AA APC 4684 J ASSESSEE BY : SHRI AJAY R. SINGH REVENUE BY : SHRI R.K. SAHU DATE OF HEARING : 05/06 /2014 DATE OF PRONOUNCEMENT : 13/06/2014 O R D E R PER R.C. SHARMA, ACCOUNTANT MEMBER : THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A) DATED 17/08/2012 FOR THE ASSESSMENT YEAR 2007-08 IN THE MATTER OF IMPOSITION OF PENALTY U/S. 271(1)(C) OF THE INCOME TAX ACT. 2. IN THIS APPEAL THE ASSESSEE IS AGGRIEVED FOR PEN ALTY IMPOSED WITH REFERENCE TO DISALLOWANCE MADE U/S. 40(A)(IA) IN RE SPECT OF ROYALTY AND RENT PAID. 3. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PER USED. FACTS IN BRIEF ARE THAT DURING THE COURSE OF SCRUTINY ASSESS MENT, AO FOUND THAT ITA NO5830/M/12 AY:07-08 2 THE ASSESSEE HAD DEBITED ROYALTY TO COURT RECEIVER OF RS.42.00 LACS. IN THIS CONNECTION IT WAS SUBMITTED THAT THE ROYALTY W AS PAID TO COURT RECEIVER AS PER ORDER OF HONBLE COURT BECAUSE THER E WAS SOME DISPUTE BETWEEN THE EX-PARTNERS OF THE HI-TECH BLOOD TRANSF USION AND ALLIED SERVICES. ON THE PLEA THAT ASSESSEE HAS NOT DEDUCTE D TAX AT SOURCE U/S. 194J ON THE PAYMENT OF ROYALTY BY INVOKING PROVISIO NS OF SECTION 40(A)(IA), AO DISALLOWED PAYMENT FOR NON DEDUCTION OF TDS. SIMILARLY, AO DISALLOWED RENT PAYMENT OF RS.3.00 LACS ON THE PLEA THAT EVENTHOUGH ASSESSEE HAD DEDUCTED TAX AT SOURCE HE HAS NOT PROD UCED CHALLAN OF THE SAID TDS OR COPY OF RETURN OF TDS TO AO TO SHOW THA T THE TDS ON RENT HAS BEEN PAID TO THE GOVERNMENT WITHIN STIPULATED P ERIOD AS PROVIDED IN SECTION 40(A)(IA) OF THE ACT. BY THE IMPUGNED ORDER CIT(A) CONFIRMED THE ORDER OF ASSESSING OFFICER FOR LEVY OF PENALTY AGAI NST WHICH ASSESSEE IS IN FURTHER APPEAL BEFORE US. 4. IT WAS ARGUED BY THE LD. AUTHORIZED REPRESENTATI VE FOR THE ASSESSEE THAT PENALTY AND QUANTUM PROCEEDINGS ARE SEPARATE A ND DISTINCT PROCEEDINGS. THEREFORE, MERE DISALLOWANCE IN QUANTU M PROCEEDINGS CANNOT BE MADE REASON FOR LEVYING PENALTY U/S. 271( 1)(C). OUR ATTENTION WAS DRAWN TO THE ORDER OF THE TRIBUNAL DATED 20/04/ 2011 IN ITA NO.5945/M/2010 DIRECTING AO TO RESTRICT THE DISALLO WANCE IN RESPECT OF ROYALTY PAYMENT MADE AFTER 13/07/2006. IT WAS ALSO SUBMITTED THAT PAYMENT SO MADE WAS NOT ROYALTY WITHIN THE MEANING OF EXPLANATION TO SECTION 9(1)(VI) AND (B) SINCE RS.31,50,000/- HAS B EEN PAID TO THE COURT RECEIVER BEFORE THE END OF THE RELEVANT PREVIOUS YE AR I.E. ON 31/03/2007, THE SAID SUM IS NOT PAYABLE AS AT THE YEAR END, HEN CE CAN NOT BE SUBJECT MATTER OF DISALLOWANCE U/S. 40(A)(IA). IT WAS FURTH ER SUBMITTED THAT PROVISIONS OF SECTION 194J ARE NOT APPLICABLE TO AN INDIVIDUAL ASSESSEE IN RESPECT OF ROYALTY PAYMENTS. ITA NO5830/M/12 AY:07-08 3 5. ON THE OTHER HAND THE LD. DR RELIED ON THE ORDER OF THE LOWER AUTHORITIES AND CONTENDED THAT SINCE THERE WAS FAIL URE ON PART OF THE ASSESSEE TO DEDUCT TAX AT SOURCE, AO WAS JUSTIFIED IN LEVYING THE PENALTY FOR THE DISALLOWANCE MADE BY INVOKING THE PROVISION S OF SECTION 40(A)(IA). 6. WE HAVE CONSIDERED THE RIVAL CONTENTIONS, CAREFU LLY GONE THROUGH THE ORDERS OF AUTHORITIES BELOW AND FOUND FROM RECO RD THAT THE ASSESSEE HAS PAID A SUM OF RS.42.00 LACS TO COURT RECEIVER A S PER DIRECTION OF THE HIGH COURT FOR CALLING BIDS FROM THE PARTNERS FOR T HE PURPOSE OF FIXING ROYALTY AND THE HIGHER BIDDER WOULD BE APPOINTED AG ENT OF RECEIVER WHO SHALL CARRY ON THE BUSINESS OF BLOOD BANK WHICH WAS BEING CARRIED ON BY ERSTWHILE PARTNERSHIP FIRM. THE LICENCE TO OPERATE THE BLOOD BANK WAS OBTAINED BY THE ASSESSEE IN HIS INDIVIDUAL CAPACITY AS AGENT OF THE COURT RECEIVER AND THERE WAS NO USER OF SUCH LICENCE OF T HE ERSTWHILE PARTNERSHIP FIRM BY HIM (ASSESSEE ). HOWEVER, AO DI SALLOWED THE CLAIM BY INVOKING THE PROVISIONS OF SECTION 40(A)(IA). IN AP PEAL FILED BEFORE THE TRIBUNAL, THE TRIBUNAL DIRECTED TO RESTRICT THE DIS ALLOWANCE IN RESPECT OF SUCH PAYMENT MADE AFTER 13/07/2006. AGAINST THE ORD ER OF THE TRIBUNAL THE ASSESSEE FILED MISCELLANEOUS APPLICATION WHEREI N THE TRIBUNAL HELD THAT THE PLEA OF THE ASSESSEE THAT PROVISIONS OF SE CTION 194J WAS NOT APPLICABLE CAN NOT BE CHALLENGED IN MISCELLANEOUS A PPLICATION, IN SO FAR AS SAME WAS NOT CHALLENGED AT THE TIME OF HEARING O F MAIN APPEAL. HOWEVER THE TRIBUNAL HELD THAT SAME IS A DEBATABLE ISSUE. THERE IS NO DISPUTE TO THE PROPOSITION THAT PENALTY AND QUANTUM PROCEEDINGS ARE SEPARATE AND DISTINCT. THE ARGUMENT OF THE LD. AUTH ORIZED REPRESENTATIVE WAS THAT THE PROVISIONS OF SECTION 194J WERE NOT AP PLICABLE TO AN INDIVIDUAL ASSESSEE IN RESPECT OF PAYMENT OF ROYALT Y. ROYALTY HAS BEEN DEFINED IN EXPLANATION 2 TO SECTION 9(10)(VI) OF TH E ACT. IN THE PRESENT CASE, AS PER THE ORDER OF THE BOMBAY HIGH COURT DAT ED 18 TH JUNE, 2003 THE COURT RECEIVER HAS ALLOWED THE ASSESSEE TO CARR Y ON THE BUSINESS OF THE ERSTWHILE PARTNERSHIP FIRM AS HIS AGENT. THEREF ORE, THE PAYMENT OF ITA NO5830/M/12 AY:07-08 4 RS.42 LACS TO THE COURT RECEIVER IS FOR ALLOWING TH E ASSESSEE TO CARRY ON THE BUSINESS OF THE FIRM. 7. AS PER OUR CONSIDERED VIEW, MERE DISALLOWANCE OF ANY CLAIM WILL NOT MAKE THE CASE FIT FOR LEVY OF PENALTY AS PER VERDIC T OF HON'BLE SUPREME COURT IN THE CASE OF RELIANCE PETRO PRODUCTS (P) LTD. (322 ITR 158). HON'BLE SUPREME COURT IN THIS CASE AFTER CONSIDERING THE PR OPOSITION OF LAW LAID DOWN IN THE CASE OF DILIP N. SHROFF 291 ITR 519 (SC) AND DHARAMENDRA TEXTILE PROCESSORS 306 ITR 277 (SC) , HELD AS UNDER:- A MERE MAKING OF THE CLAIM, WHICH IS NOT SUSTAINAB LE IN LAW, BY ITSELF, WILL NOT AMOUNT TO FURNISHING INACCURATE PA RTICULARS REGARDING THE INCOME OF ASSESSEE. SUCH CLAIM MADE I N THE RETURN CANNOT AMOUNT TO THE INACCURATE PARTICULARS. MERELY BECAUSE THE ASSESSEE HAD CLAIMED THE EXPENDI TURE, WHICH CLAIM WAS NOT ACCEPTED OR WAS NOT ACCEPTABLE TO THE REVENUE, THAT BY ITSELF WOULD NOT, IN OUR OPINION, ATTRACT THE PE NALTY UNDER SECTION 271(1)(C). IF WE ACCEPT THE CONTENTION OF T HE REVENUE THEN IN CASE 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 IN TENDMENT OF THE LEGISLATURE. FULL DISCLOSURE WAS MADE BY THE ASSESSEE WITH RESPE CT TO THE EXPENDITURE CLAIMED. THEREFORE, MERE DISALLOWANCE O F LEGAL CLAIM CAN NOT BE MADE THE BASIS FOR LEVY OF PENALTY U/S. 271(1)(C ) OF THE ACT. THUS THERE WAS NO JUSTIFICATION FOR LEVY OF PENALTY FOR SUCH D ISALLOWANCE. ACCORDINGLY ASSESSING OFFICER IS DIRECTED TO DELETE THE SAME. 7.1 SIMILARLY AO HAS ALSO LEVIED PENALTY BY DISALLO WING PAYMENT OF RENT OF U/S. 40(A)(IA). HOWEVER, VIDE ORDER DATED 20/04/ 2011 VIDE PARA 3.2 TRIBUNAL HAS RESTORED THE MATTER TO THE FILE OF THE AO FOR PASSING A FRESH ORDER AFTER ALLOWING OPPORTUNITY OF HEARING TO ASSE SSEE. ITA NO5830/M/12 AY:07-08 5 8. AS THE MATTER HAS ALREADY BEEN RESTORED WITH RES PECT TO DISALLOWANCE OF RENT MADE IN QUANTUM PROCEEDINGS, T HE PENALTY IMPOSED BY AO HAS NO LEGS TO STAND. IN THE FITNESS OF THING S LEVY OF PENALTY IS ALSO SET ASIDE TO THE FILE OF ASSESSING OFFICER FOR DECI DING AFRESH AFTER DECIDING QUANTUM ADDITION/DISALLOWANCE, AS SET ASIDE BY THE TRIBUNAL IN ITS ORDER DATED 20/04/2011. 9. IN THE RESULT APPEAL OF THE ASSESSEE IS ALLOWED IN TERMS INDICATED HEREIN ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON 13 TH JUNE, 2014. SD/- SD/- (SANJAY GARG) JUDICIAL MEMBER (R.C. SHARMA ) ACCOUNTANT MEMBER MUMBAI, DATED: 13/06/2014 JV. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR BENCH TRUE COPY BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.