RELIANCE INFRASTRUCTURE LTD ( FORMERLY KNOWN AS BSES LTD), NAVI MUMBAI V. ACIT RG 10(1), MUMBAI

ITA 5900/MUM/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 8190 (ITAT-MUMBAI)
• Duration Of Justice: 11 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-08-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 1998-1999
• Appeal Filed On: 23-08-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PRADEEP KUMAR SINGH
• Keywords: Business expenditure; Bonafide belief; Bonafide mistake

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES D , MUMBAI BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA, JUDICIAL MEMBER ITA NO. : 5900/MUM/2011 ASSESSMENT YEAR : 1998-99 M/S. RELIANCE INFRASTRUCTURE LIMITED (FORMERLY KNOWN AS BSES LTD.) H BLOCK, 1 ST FLOOR, DHIRUBHAI AMBANI KNOWLEDGE CITY, NAVI MUMBAI-400 710 PAN NO: AACCR 7446 Q VS. ACIT - 10(1) AAYKAR BHAVAN, M. K. ROAD, MUMBAI-400 020 (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI JITENDRA SANGHAVI & SHRI AMIT KHATIWALA RESPONDENT BY : SHRI PRADEEP KUMAR SINGH DATE OF HEARING : 16.07.2012 DATE OF PRONOUNCEMENT : 01.08.2012 ORDER PER AMIT SHUKLA, J.M. : THIS APPEAL HAS BEEN PREFERRED BY THE ASSESSEE AGA INST ORDER DATED 01.06.2011 PASSED BY THE LD. CIT(A) -21, MUMBAI IN RELATION TO THE PENALTY PROCEEDINGS U/S.271(1)(C) FOR THE A.Y. 1998 -99. THE ONLY ISSUE INVOLVED IN THIS APPEAL IS LEVY OF PENALTY OF `. 31,36,815/- ON ACCOUNT OF DISALLOWANCE OF INTEREST U/S.220(2) AMOUNTING TO `. 89,62,329/-. ITA NO : 5900/MUM/2011 M/S. RELIANCE INFRASTRUCTURE LIMITED 2 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E UNDER THE HEAD INTEREST AND OTHER CHARGES HAD DEBITED AN AMOUNT OF `. 2056.50 LAKHS ON ACCOUNT OF GUARANTEE & OTHER CHARGES. DURING T HE ASSESSMENT PROCEEDINGS FROM THE PERUSAL OF THESE DETAILS, THE A.O. NOTICED THAT THE ASSESSEE HAS ALSO CLAIMED AN AMOUNT OF `. 89,62,329/- IN RESPECT OF INTEREST PAID U/S.220(2) FOR THE A.Y. 1991-92. THE A.O. WAS OF THE OPINION THAT INTEREST IN QUESTION WAS CLEARLY IN TH E NATURE OF INCOME-TAX AND WAS NOT ALLOWABLE EXPENDITURE UNDER THE PROVISI ONS OF THE ACT. THE A.O. REQUIRED THE ASSESSEE AS TO WHY SUCH AN INTERE ST AMOUNT SHOULD NOT BE DISALLOWED AND ADDED BACK TO THE TOTAL INCOME. IN RESPONSE, THE ASSESSEE AGREED THAT THE SAID CLAIM WAS CLEARLY DI SALLOWABLE AND DUE TO BONAFIDE MISTAKE THE SAID INTEREST WAS GROUPED UNDE R THE HEAD GUARANTEE AND OTHER CHARGES. THEREFORE, THE SAME WAS ADDED BACK IN THE COMPUTATION OF INCOME. ACCORDINGLY, THE SAID C LAIM OF `. 89,62,329/- STOOD DISALLOWED. 3. THE A.O. THEREAFTER, INITIATED THE PENALTY PROCE EDINGS U/S.271(1)(C) ON THIS DISALLOWANCE. BEFORE THE A.O. IN THE PENAL TY PROCEEDINGS, IT WAS SUBMITTED THAT THE AMOUNT OF INTEREST U/S.220(2) WA S INCLUDED DUE TO BONAFIDE MISTAKE MADE IN THE COMPUTATION OF INCOME AND IT HAD NEITHER CONCEALED ANY INCOME NOR HAD FURNISHED ANY INACCURA TE PARTICULARS OF INCOME THEREOF. IT WAS FURTHER EXPLAINED THAT DUR ING F.Y. 1997-98 IT HAD RECEIVED INTEREST U/S.244A AMOUNTING TO `. 711.21 LAKHS WHICH WAS ITA NO : 5900/MUM/2011 M/S. RELIANCE INFRASTRUCTURE LIMITED 3 CREDITED TO THE P & L ACCOUNT AND HAD PAID INTEREST U/S.220(2) AT `. 89.62 LAKHS WHICH WAS DEBITED TO THE P & L ACCOUNT UNDER THE HEAD GUARANTEE & COMMISSIONER CHARGES. ACCORDINGLY, THE ASSESSEE OFFERED TO TAX ON THE NET INTEREST INCOME OF `. 621.59 LAKHS. SINCE THE INTEREST U/S.220(2) WAS CLUBBED WITH GUARANTEE AND OTHER CHARGES, IT WAS NOT POSSIBLE FOR APPELLANT TO IDENTIFY THE INTEREST EXPENDITURE AND OFFER THE SAME FOR DISALLOWANCE. ON THIS EXPLANATION OF NETTING OFF I NTEREST AND BONAFIDE MISTAKE, IT WAS REQUESTED THAT THE PENALTY PROCEEDI NGS SHOULD BE DROPPED. HOWEVER, THE A.O. DID NOT AGREE WITH THE ASSESSEES CONTENTION AND AFTER RELYING UPON THE VARIOUS COURT DECISIONS, HE LEVIED THE PENALTY OF `. 31,36,815/-. 4. BEFORE THE LD. CIT(A) THE SAME CONTENTIONS WERE REITERATED AND WAS SUBMITTED THAT PURELY DUE TO BONAFIDE MISTAKE THAT THE SAID INTEREST U/S. 220(2) COULD NOT BE ADDED BACK IN THE COMPUTATION O F INCOME. RELIANCE WAS ALSO PLACED ON THE DECISION OF RELIANCE PETRO PRODUCTS LTD. REPORTED IN 322 ITR 158 . THE LD. CIT(A) TOO CONFIRMED THE SAID PENALTY ON THE GROUND THAT THE CLAIMING OF INTEREST PAID U/ S.220 WAS NOT ONLY ON INCORRECT CLAIM BUT ALSO GOES IN REDUCING THE INTER EST INCOME AND, THEREFORE, PENALTY HAS BEEN RIGHTLY LEVIED. 5. BEFORE US, THE LEARNED SR. COUNSEL SUBMITTED THA T THIS WAS A MISTAKE ON FACTUAL ASPECT AND EXPENDITURE WAS CLAIM ED ON A BONAFIDE ITA NO : 5900/MUM/2011 M/S. RELIANCE INFRASTRUCTURE LIMITED 4 BELIEF THAT THE SAME WAS GUARANTEE & COMMISSION CH ARGES. HE FURTHER CONTENTED THAT THE VARIOUS DECISIONS OF THE TRIBUNA L HAVE HELD THAT THE INTEREST RECEIVED AND INTEREST PAID TO INCOME TAX D EPARTMENT CAN BE NETTED AND SAME IS PERMISSIBLE. IN THIS REGARD REL IANCE WAS PLACED ON THE DECISION OF THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF DCIT VS. BANK OF AMERICA NT & SA, REPORTED IN (2011) 47 SOT 124, WHEREIN THE HON'BLE ITAT AFTER TAKING INTO ACCOUNT SEVERAL DECISIONS OF THE HIGH COURT AND TRIBUNAL HAS COME TO CONCLUSION THAT NETT ING OF INTEREST U/S.244 AND 220(2) IS PERMISSIBLE. LASTLY, HE SUBM ITTED THAT ON THESE FACTS THERE CANNOT BE CASE OF FURNISHING OF ANY INA CCURATE PARTICULARS OF INCOME, AS THE MOMENT THE A.O. BROUGHT TO THE NOTIC E OF THE ASSESSEE, IT HAD AGREED FOR DISALLOWANCE. IN SUPPORT OF THIS CO NTENTION, HE HAS RELIED UPON THE DECISION OF THE ITAT MUMBAI BENCH IN THE C ASE OF M/S. B. S. I. S LTD., IN ITA NO. 2935/MUM/2003. 6. ON THE OTHER HAND, THE LEARNED SR. DR SUBMITTED THAT THERE COULD NOT BE ANY BETTER CASE FOR CONFIRMING THE PENALTY, AS UNDER NO PROVISION OF LAW INTEREST U/S.220 CAN BE HELD TO BE ALLOWABLE EXPENDITURE. SUCH A CLAIM DEFINITELY AMOUNTS TO FURNISHING OF INACCURAT E PARTICULARS OF INCOME. HE THUS RELIED UPON THE FINDINGS OF THE LD . CIT(A). 7. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS AND ALSO PERUSED THE MATERIAL PLACED ON RECORD. FROM THE RE CORDS IT IS SEEN THAT ITA NO : 5900/MUM/2011 M/S. RELIANCE INFRASTRUCTURE LIMITED 5 THE ASSESSEE UNDER THE HEAD INTEREST AND OTHER CHA RGES HAS DEBITED AN AMOUNT OF `. 2056 LAKHS ON ACCOUNT OF GUARANTEE AND OTHER CHARG ES WHICH ALSO INCLUDES INTEREST U/S.220(2) PAID TO THE INCOME TAX DEPARTMENT FOR A SUM OF `. 89,62,329/- FOR THE A.Y. 1991-92. BEFORE THE A.O. FOLLOWING EXPLANATION WAS GIVEN DURING THE COU RSE OF THE PENALTY PROCEEDINGS: 8. WE WOULD LIKE TO BRING OUT TO YOUR HONOUR THAT DURING THE FINANCIAL YEAR 1997-98 WE HAD RECEIVED INTEREST U/S.244A AMOUNTING TO `. 711.21 LAKHS WHICH WAS CREDITED TO THE PROFIT AND LOSS ACCOUNT AND HAD PAID INTEREST U/S.220(2) O F `. 89.62 LAKHS WHICH WAS DEBITED TO THE PROFIT & LOSS ACCOUN T UNDER THE HEAD GUARANTEE & COMMISSION CHARGES. ACCORDI NGLY, WE HAD OFFERED TO TAX THE NET INTEREST INCOME OF `. 621.59 LAKHS. SINCE THE INTEREST U/S.220(2) WAS CLUBEED W ITH GUARANTEE AND COMMISSION CHARGES, IT WAS NOT POSSIB LE FOR US TO IDENTIFY THE INTEREST EXPENDITURE AND OFFER THE SAME FOR DISALLOWANCE. WE HAD CLAIMED THE INTEREST EXPENDIT URE AS AN ALLOWABLE EXPENSES SINCE THE SAME WAS INCLUDED WITH GUARANTEE AND COMMISSION CHARGES WHICH QUALIFY AS E LIGIBLE BUSINESS EXPENDITURE. IT WAS A MISTAKE ON OUR PART AND PENALTY PROCEEDING S CANNOT BE INITIATED SINCE WE HAD CLAIMED THE EXPENDITURE O N A BONAFIDE BELIEF THAT THE SAME WERE GUARANTEE AND CO MMISSION CHARGES. WE RELY ON THE FOLLOWING JUDGMENTS IN SUP PORT OF OUR CONTENTION THAT PENALTY PROCEEDINGS UNDER SECTION 2 71(1)(C) CANNOT BE INITIATED IN CASE OF BONAFIDE MISTAKES : CIT VS. RELIANCE PETROPRODUCTS LTD. [2010 (322 ITR 158) (SC)]. CIT VS. SHAHABAD CO-OP SUGAR MILLS LTD. [322 ITR 73 ] P & H]. CIT V. MILEX CABLE INDUSTRIES (261 ITR 675) [GUJARA T HIGH COURT] COLOUR HOUSE VS. ACIT (53 ITD PAGE 245) CIT VS. SHANTI SPORTS ENTERPRISES (217 ITR 243) CIT VS. ASK ENTERPRISES LTD. (230 ITR 48) [BOMBAY H C]. 7.1 THUS THE ASSESSEE HAS GIVEN ALL THE PARTICULARS EXCEPT FOR THE FACT THAT IN THE COMPUTATION OF INCOME SUCH INTEREST WAS NOT ADDED BACK TO ITA NO : 5900/MUM/2011 M/S. RELIANCE INFRASTRUCTURE LIMITED 6 THE TOTAL INCOME AND THE SAME WAS IMMEDIATELY INCLU DED WHEN THE A.O. POINTED OUT, AT THE FIRST INSTANCE. FROM THE ABOVE EXPLANATION, IT CAN BE INFERRED THAT THE ASSESSEE HAD A BONAFIDE BELIEF TH AT THE INTEREST RECEIVED U/S.244A AMOUNTING TO `. 711.21 LAKHS AND INTEREST PAID U/S.220 OF `. 89.62 LAKHS CAN BE NETTED AND THE NET INTEREST IS T O BE OFFERED FOR TAX. THIS VIEW OF THE ASSESSEE AS SUBMITTED BY THE LEARN ED COUNSEL IS ALSO SUPPORTED BY THE VARIOUS DECISIONS OF THE ITAT MUMB AI BENCHES. THEREFORE, SUCH AN EXPLANATION CANNOT BE HELD TO BE INCORRECT OR MALAFIDE. THE ASSESSEES CASE IS ALSO COVERED BY T HE RATIO AND PRINCIPLE LAID DOWN BY THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS. RELIANCE PETROPRODUCTS LTD. (SUPRA) , WHEREIN THE LORDSHIP HAS OBSERVED AND HELD AS UNDER :- A GLANCE AT THE PROVISIONS OF SECTION 271(1)(C) OF THE INCOME-TAX ACT, 1961, SUGGESTS THAT IN ORDER TO BE COVERED BY IT, THERE HAS TO BE CONCEALMENT OF THE PARTICULARS OF THE INCOME OF THE ASSESSEE. SECONDLY, THE ASSESSEE MUST HAVE F URNISHED INACCURATE PARTICULARS OF HIS INCOME. THE MEANING O F THE WORD 'PARTICULARS' USED IN SECTION 271(1)(C) WOULD EMBRA CE THE DETAILS OF THE CLAIM MADE. WHERE NO INFORMATION GIV EN IN THE RETURN IS FOUND TO BE INCORRECT OR INACCURATE, THE ASSESSEE CANNOT BE HELD GUILTY OF FURNISHING INACCURATE PART ICULARS. IN ORDER TO EXPOSE THE ASSESSEE TO PENALTY, UNLESS THE CASE IS STRICTLY COVERED BY THE PROVISION, THE PENALTY PROV ISION CANNOT BE INVOKED. BY NO STRETCH OF IMAGINATION CAN MAKING AN INCORRECT CLAIM TANTAMOUNT TO FURNISHING INACCURATE PARTICULARS. THERE CAN BE NO DISPUTE THAT EVERYTHIN G WOULD DEPEND UPON THE RETURN FILED BY THE ASSESSEE, BECAU SE THAT IS THE ONLY DOCUMENT WHERE THE ASSESSEE CAN FURNISH TH E PARTICULARS OF HIS INCOME. WHEN SUCH PARTICULARS AR E FOUND TO BE INACCURATE, THE LIABILITY WOULD ARISE. TO ATTRAC T PENALTY, THE DETAILS SUPPLIED IN THE RETURN MUST NOT BE ACCURATE , NOT EXACT OR CORRECT, NOT ACCORDING TO THE TRUTH OR ERRONEOUS . ITA NO : 5900/MUM/2011 M/S. RELIANCE INFRASTRUCTURE LIMITED 7 WHERE THERE IS NO FINDING THAT ANY DETAILS SUPPLIED BY THE ASSESSEE IN ITS RETURN ARE FOUND TO BE INCORREC T OR ERRONEOUS OR FALSE THERE IS NO QUESTION OF INVITING THE PENALTY UNDER SECTION 271(1)(C). A MERE MAKING OF A CLAIM, WHICH IS NOT SUSTAINABLE IN LAW, BY ITSELF, WILL NOT AMOUNT TO F URNISHING INACCURATE PARTICULARS REGARDING THE INCOME OF THE ASSESSEE. SUCH A CLAIM MADE IN THE RETURN CANNOT AMOUNT TO FU RNISHING INACCURATE PARTICULARS. 8. THUS IN VIEW OF THE FACTS AND CIRCUMSTANCES OF T HE CASE WE DO NOT FIND ANY REASON TO CONFIRM THE PENALTY LEVIED BY TH E A.O. U/S.271 (1)(C) AND ACCORDINGLY THE SAME IS CANCELLED. 9. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON THIS 1 ST DAY OF AUGUST, 2012. SD/- SD/- ( B. RAMAKOTAIAH ) ( AMIT SHUKLA ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DT: 01.08.2012 COPY FORWARDED TO : 1. THE APPELLANT, 2. THE RESPONDENT, 3. THE C.I.T. 4. CIT (A) 5. THE DR, - BENCH, ITAT, MUMBAI //TRUE COPY// BY ORDER ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI ROSHANI