DCIT CEN CIR 3, MUMBAI V. SWAN ENERGY LTD, MUMBAI

ITA 6063/MUM/2014

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 0368 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 10 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-08-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Assessment Year: 2009-2010
• Appeal Filed On: 29-09-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: H N SINGH
• Keywords: Business income; Valuation report; Revised return; Revenue expenditure
• Section: 143(3); 14A; 115JB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH E MUMBAI BEFORE SHRI MAHAVIR SINGH (JUDICIAL MEMBER) AND SHRI N.K. PRADHAN (ACCOUNTANT MEMBER) ITA NO. 6063/MUM/2014 ASSESSMENT YEAR: 2009 - 10 DCIT , CENTRAL CIRCLE - 3(1) OLD CGO BUILDING ANNEXE, 9 TH FLOOR M.K. ROAD, MUMBAI - 400020. VS. M/S SWAN ENERGY LTD. (FORMERLY SWAN MILLS LTD.) FELLTHAM, HOUSE, 2 ND FLOOR J.N. HEREDIA MARG, BALLARD ESTATE, MUMBAI - 400001 PAN NO. AABCS7890Q APPELLANT RESPONDENT REVENUE BY : SHRI H.N. SINGH , DR ASSESSEE BY : SHRI J.P. BAIRAGRA , AR DATE OF HEARING : 18 /05/2017 DATE OF PRONOUNCEMENT : 10/08/2017 ORDER PER N.K. PRADHAN, A.M . THIS IS AN APPEAL FILED BY THE REVENUE. THE REL EVANT ASSESSMENT YEAR IS 2009 - 10 . THE APPEAL IS DIRECTED AGAINST THE ORDER OF THE COMMISS IONER OF INCOME TAX (APPEALS) - 13 , MUMBAI AND ARISES OUT OF THE PENALTY ORDER PASSED U/S 271(1)(C) OF THE INCOME TAX ACT 1961, (THE ACT). ITA NO. 6063/MUM/2014 2 2. THE GROUND OF APPEAL R EAD S AS UNDER: - WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) IS JUSTIFIED IN DELETING THE PENALTY U/S 271(1)(C) OF RS.15,22,98,265/ - WITHOUT APPRECIATING THE FACT THAT A SUM OF RS.44.71 CRORES RELATED TO REPAYMENT OF PRINCIPAL AMOUNT OF LOAN WAS WRONGLY CLAIMED BY THE ASSESSEE AND DISALLOWANCE U/S 14A HAS BEEN ACCEPTED BY THE ASSESSEE? 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSESSEE FILED ITS RETURN OF INCOME FOR THE IMPUGNED ASSESSMENT YEAR ON 29.09.2009 DECLARING TOT AL INCOME AT RS.22,88,81,924/ - . THE ASSESSING OFFICER (AO) COMPLETED THE ASSESSMENT U/S 143(3) DETERMINING THE TOTAL INCOME AT RS.257,01,22,273/ - . THE APPEAL BY THE REVENUE IS AGAINST THE ORDER PASSED BY THE AO U/S 271(1)(C) BEING PENALTY LEVIED ON THE FOL LOWING DISALLOWANCES: (I) DISALLOWANCE U/S 14A OF RS.9,45,855/ - (II) ADDITION FOR DEDUCTION MADE IN SALE CON SIDERATION OF TOWER A OF RS.44 ,71,22,000/ - . 3.1 AGGRIEVED BY THE PENALTY ORDER PASSED BY THE AO, THE ASSESSEE FILED AN APPEAL BEFORE THE LD. CIT(A). REGARDING THE PENALTY LEVIED ON DISALLOWANCE U/S 14A OF RS.9,45,855/ - , THE LD. CIT(A) HELD THAT (I) THE DISALLOWANCE U/S 14A MADE BY THE AO HA S BEEN REDUCE D SUBSTANTIALLY BY THE FIRST APPELLATE AUTHORITY, (II) DISALLOWANCES MADE U/S 14A ARE MADE DUE TO THE PROVISIONS OF THE SECTION, AND ALSO ON THE BASIS OF DETAILS AND ITA NO. 6063/MUM/2014 3 PARTICU LARS FURNISHED BY THE ASSESSEE AND (III) THIS IS NOT A CASE OF FURNISHING INACCURAT E PARTICULARS. THEREFORE, THE LD. CIT(A) FOLLOWING THE DECISION IN THE CASE OF CIT VS. SSP LTD. 189 TAXMAN 282 (P&H), RELIANCE PETROPRODUCTS 322 ITR 158 (SC), CIT VS. HERO CYCLES 323 ITR 518 DELETED THE PENALTY IMPOSED BY THE AO ON THE ABOVE AMOUNT OF RS .9,45,855/ - . 3.2 REGARDING THE PENALTY IMPOSED ON ADDITION OF RS.4 4 ,71,22,000/ - THE LD. CIT(A) HELD THAT (I) A READING OF THE ORDER OF THE ITAT IN THE CASE OF THE ASSESSEE IN QUANTUM PROCEEDING PASSED ON 03.05.2013 MAKES IT CLEAR IN PRINCIPLE THAT THE TRI BUNAL APPROVED DISALLOWANCE OF ONLY THE PRINCIPAL LOAN AMOUNT WHICH WAS STATED TO BE RS.44,7 1 ,22,000/ - AS COMING OUT FROM THE ANNUAL REPORT OF THE ASSESSEE; THE MATTER REGARDING BALANCE ADDITION WAS SET ASIDE BY THE TRIBUNAL TO THE FILE OF THE AO FOR CONSIDERING THE ISSUE AFRESH, (II) THE RELEVANT FACT WAS DECLARED BY THE ASSESSEE IN THE RETURN OF INCOME UNDER THE HEADING NOTES JUST BELOW THE COMPUTATION OF B OOK PROFIT U/S 115JB OF THE ACT AND (III) NO FURTHER ADDITION HAS BEEN MADE BY THE AO BESIDES THE PRINCIPAL AMOUNT OF LOAN OF RS.44,71,22,000/ - WHICH WAS FOUND NOT ADMISSIBLE DEDUCTION FOR THE VERY REASON THAT IT WAS NOT A REVENUE EXPENDITURE. THE LD. CIT(A) THUS FOUND THAT THE ASSESSEE NEITHER CONCEALED ITS INCOME NOR FILED INACCURATE PARTICULA RS OF SUCH INCOME. THEREFORE, SHE DELETED THE PENALTY IMPOSED ON ADDITION OF RS.4 4 ,71,22,000/ - MADE BY THE AO. ITA NO. 6063/MUM/2014 4 THUS T HE APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF PENALTY U/S 271(1)(C) WAS ALLOWED BY THE LD. CIT(A). 4. BEFORE US, THE LD. DR RELIES ON THE ORDER IN THE CASE OF CIT VS. N.G. TECHNOLOGIES LTD. (2015) 57 TAXMANN.COM 389 (DELHI) AND N.G. TECHNOLOGIES (IN LIQUIDATION) VS. CIT (2016) 70 TAXMANN.COM 37 (SC). 5. ON THE OTHER HAND, THE LD. COUNSEL OF THE ASSESSEE SUPPORTS THE ORDER PASSED BY T HE CIT(A) ALLOWING THE APPEAL OF THE ASSESSEE. HE ALSO RELIES INTER ALIA ON (I) THE DECISION DATED 6 TH SEPTEMBER 2016 IN ASSESSEE S OWN CASE BY THE BOMBAY HIGH COURT FOR THE IMPUGNED ASSESSMENT YEAR (ITA NO. 2083 OF 2013), (II) THE DECISION DATED 5 TH JANU ARY 2017 IN THE CASE OF CIT VS. SHRI SAMSON PERINCHERY BY THE BOMBAY HIGH COURT (ITA NO. 953, 1097, 1154 AND 1226 OF 2014), (III) CIT VS. SSAS EMERALD MEDOWS (2016) 73 TAXMANN.COM 248 (SC), (IV) T. ASHOK PAI VS. CIT (2007) 161 TAXMAN 340 (SC), (V) ACIT VS . VIP INDUSTRIES (2009) 30 SOT 254 (MUM). 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIALS ON RECORD. WE BEGIN WITH THE DECISION RELIED ON BY THE LD. DR. IN THE CASE OF N.G. TECHNOLOGIES LTD. (SUPRA) IT IS HELD THAT WHERE AGAINST BASIC PRINCIPAL OF ACCOUNTANCY, THE ASSESSEE CLAIMED CAPITAL LOSS ON SALE OF FIXED ASSETS IN PROFIT AND LOSS ACCOUNT AND HAD NOT REVISED RETURN VOLUNTARILY, PENALTY FOR CONCEALMENT OF INCOME WAS JUSTIFIED. WE FIND THAT THE CA SE OF THE ASSESSEE IN THE INSTANT APPEAL IS DISTINGUISHABLE FROM THE ABOVE CASE RELIED ON BY THE LD. DR AS EVIDENT FROM THE FACTS DELINEATED HERE - IN - ABOVE. ITA NO. 6063/MUM/2014 5 6.1 WE FIND THAT THE AO IN HIS SHOW CAUSE NOTICE DATED 27.12.2011 ISSUED TO THE ASSESSEE HAS TICKED THE RELEVANT PORTION WHILE INITIATING THE PENALTY PROCEEDINGS. HENCE, THE CASE OF THE ASSESSEE IS DISTINGUISHABLE FROM THE DECISION RELIED ON BY THE LD. COUNSEL MENTIONED AT SERIAL NO. (II), (III) AND (IV) IN PARA 5 HERE - IN - ABOVE. 6 .2 WE NOW COME TO THE PENALTY IMPOSED ON DISALLOWANCE OF RS.9,45,855/ - . THE ASSESSEE - COMPANY HAD RECEIVED DIVIDEND INCOME OF RS.5,41,828/ - ON INVESTMENTS MADE IN THE LIQUID MUTUAL FUNDS DURI NG THE IMPUGNED ASSESSMENT YEAR . IT HAD NOT MADE ANY DISALLOWANCE U/S 14A IN THE COMPUT ATION OF INCOME. IN THE ASSESSMENT ORDER PASSED U/S 143(3), THE AO MADE A DISALLOWANCE OF RS.1,07,96,075/ - U/S 14A. IN APPEAL THE LD. CIT(A) DELETED THE DISALLOWANCE MADE TOWARDS INDIRECT EXPENSES OF RS.98,50,220/ - AND CONFIRMED THE DISALLOWANCE OF ADMINIS TRATIVE EXPENSES OF RS.9,45,885/ - . THE ASSESSEE - COMPANY DID NOT PRESS THE MATTER AT THE TIME OF HEARING BEFORE THE TRIBUNAL ON ACCOUNT OF SMALLNESS OF THE AMOUNT INVOLVED. A SIMILAR ISSUE AROSE IN RELIANCE PETROPRODUCTS (P) LTD. ( (SUPRA ) . T HE HONBLE SUPREME COURT HAS HELD THAT A MERE MAKING OF CLAIM, WHICH IS NOT SUSTAINABLE IN LAW, BY ITSELF, WILL NOT AMOUNT TO FURNISHING INACCURATE PARTICULARS REGARDING INCOME OF THE ASSESSEE. WE FOLLOW THE ABOVE DECISION AND UPHOLD THE ORDER OF THE LD. CIT(A) ON THE ABOVE ISSUE. 6.3 NOW WE DISCUSS THE PENALTY IMPOSED ON ADDITION OF RS.4 4 ,71,22,000/ - . THE ASSESSEE - COMPANY HAD TAKEN A BRIDGE LOAN FROM ITA NO. 6063/MUM/2014 6 PEERLESS GENERAL FINANCE & INVESTMENT COMPANY LTD. (PGFICL) FROM TIME TO TIME FOR ITS BUSINESS PURPOSE AGAINST THE MORT G AGE OF ITS LAND AT KURLA WHERE IT HAD ITS TEXTILE MILL AND WAS SHOWN AS FIX ED ASSETS IN THE BALANCE SHEET. IT HAD DEPOSITED ITS TITLE DEEDS OF THE SAID LAND. IT HAD TAKEN LOAN FROM PGFICL AS ON 31.03.1995 AGGREGATING TO RS.4 4 .71 CRORES. WE FIND THAT THE ASSESSEE - COMPANY HAS DECLARED IN ITS COMPUTATION U/S 115JB THE FOLLOWING NOTE: DURING THE YEAR THE COMPANY SOLD A BUILDING AT KURLA VIDE AGREEMENT DATED 13.08.2008 TO ESSAR TECHNOLOGY PARK PVT. LTD. FOR A CONSIDERATION OF RS. 256 CRORES . HOWEVER, IN VIEW OF THE CONSENT TERMS WITH PGFICL , APPROVED BY HONBLE BOMBAY HIGH COURT, SUM OF RS.225 CRORES PAID TO THEM BY PURCHASER AND ONLY A SUM OF RS. 31 CRORE RECEIVED BY THE ASSESSEE - COMPANY. HENCE ONLY SUM OF RS.31 CRORES IS INCLUDED IN THE OT HER INCOME. 6.4 AT THIS JUNCTURE WE REFER TO THE ORDER DATED 03.05.2013 OF THE ITAT IN THE CASE OF THE ASSESSEE FOR THE IMPUGNED ASSESSMENT YEAR ON THE ABOVE ISSUE. WE EXTRACT THE RELEVANT PARAS AS UNDER: '23. THUS, IN ALL FAIRNESS, THE ISSUE OF ALLOWABLITY OF DEDUCTION OF BALANCE AMOUNT NEEDS TO BE VERIFIED BY THE AO AND THEREFORE, IN THE INTEREST OF JUSTICE, THE MATTER IS RESTORED BACK TO THE FILE OF THE A SSESSING O FFICER TO EXAMINE THE ISSUE AFRESH. WHILE EXAMINING THIS ISSUE, THE ASSESSING OFF ICER WILL ALSO LOOK INTO THE ALLOWABLITY OF ANY DEDUCTION OR LOSS OF EXCESS AMOUNT OF PRINCIPAL LOAN AMOUNT OF RS.41,72,22,000/ - WHILE COMPUTING THE PROFIT AND GAIN OF BUSINESS OR PROFESSION UNDER SECTION 28, BECAUSE THE ASSESSING OFFICER AS WELL ITA NO. 6063/MUM/2014 7 AS THE CO MMISSIONER (APPEALS) HAVE TREATED THE ENTIRE AMOUNT OF RS.225 CRORES AS BUSINESS INCOME OF THE ASSESSEE. THE ASSESSING OFFICER WILL ALSO LOOK INTO THE PLEADINGS/DECREE S OF BOMBAY HIGH COURT, BY WHICH THE ASSESSEE WAS REQUIRED TO HAND OVER THE CONSTRUCTED AR EA OF 1,50,000 SQ. FT., WHICH WAS LATER ON ENHANCED TO 1,62,000 SQ. FT. TO SEE WHETHER THE OBLIGATION WHICH WAS TO BE DISCHARGED IN PURSUANCE OF SUCH A DECREE WAS IN THE NATURE OF COMPENSATION FOR DELAYED PAYMENT OR IN THE NATURE OF ANY KIND OF INTEREST, W HICH WAS NOT PROVIDED IN BOOKS. ULTIMATELY, IN THE C OMPUTATION OF BUSINESS INCOME UNDER SECTION 28, WHAT IS CHARGED TO TAX IS THE PROFIT S OR GAINS OF BUSINESS OR PROFESSION AND ONLY THE NET AMOUNT EARNED ON CARRYING ON BUSINESS, WHICH NECESSARILY REQUIRES DEDUCTION OF EXPENDITURE OR LOSS INCURRED IN CARRYING ON SUCH BUSINESS. THIS FUNDAMENTAL PRINCIPLE OF LAW HAS TO BE KEPT IN MIND. 24. THUS THE ISSUE OF ALLOWABLITY OF DEDUCTION/ BUSINESS LOSS ON ACCOUNT OF EXCESS AMOUNT OVER THE PRINCIPAL LOAN IS RESTORED TO THE FILE OF ASSESSING OFFICER WHO SHALL EXAMINE THE SAME AFRESH AND IN ACCORDANCE WITH THE PROVISIONS OF LAW . THE ASSESSING OFFICER IS ALSO DIRECTED TO EXAMINE THE EXACT AMOUNT OF PRINCIPAL AMOUNT ALSO WHILE CONSIDERING THE SAME, AS WE HAVE CONSIDERED T HE AMOUNT ON THE BASIS OF ANNUAL REPORTS FILED BEFORE US. SINCE PRINCIPAL AMOUNT CAN BE EXAMINED, THE ISSUE OF EXCLUDING THE COST OF CONSTRUCTED AREA ON THE BASIS OF VALUATION REPORT AS CLAIMED BY THE ASSESSEE DOES NOT ARISE. TO THE EXTENT OF PRINCIPAL AMO UNT, AS PER RECORD, THE SAME CANNOT BE ALLOWED AS DEDUCTION. WHILE EXAMINING THE ISSUE OF ALLOWABLITY OF DEDUCTION, THE ASSESSING OFFICER WILL PROVIDE DUE AND EFFECTIVE OPPORTUNITY OF HEARING TO THE ASSESSEE. CONSEQUENTLY, WE SET ASIDE THE IMPUGNED ORDER S PASSED BY THE ASSESSING OFFICER /COMMISSIONER (APPEALS) AND TREAT THE GROUND RAISED BY THE ASSESSEE AS PARTLY AL LOWED FOR STATISTICAL PURPOSES. ITA NO. 6063/MUM/2014 8 6.5 THE AO VIDE ORDER DATED 29.07.2013 HAS EXAMINED THE ISSUE WHICH WAS SET ASIDE BY THE ITAT AND ALLOWED THE DEDUCTION OF RS.177.28 CRORES AND MADE ADDITION OF RS.4 4 .71 CRORES BEING AMOUNT OF PRINCIPAL LOAN AFTER VERIFICATION. 6.6 THE APPEAL OF THE REVENUE ON THE ABOVE ISSUE WAS NOT ADMITTED BY THE HONBLE BOMBAY HIGH COURT VIDE ORDER DATED 06.09.2016. 6.7 IN E.I.D. PARRY (I) LTD. : THIRU AROORAN SUGARS LTD. VS. ASST. CCT, (2000) 117 STC 457, 473 - 74 (SC), THE HONBLE SUPREME COURT HAS HELD: WHERE THE ASSESSEE HAS DISCLOSED ALL THE FACTS RELATI NG TO A TRANSACTION BUT HAS NOT INCLUDED THE RESULTANT INCOME IN ITS RETURN ON THE BONA FIDE BELIEF THAT SUCH INCOME WAS ELIGIBLE FOR EXEMPTION UNDER SECTION 54F, FROM THE MERE FACT THAT THE CLAIM OF THE ASSESSEE HAS BEEN NEGATIVED BY THE ASSESSING OFFICER , IT DOES NOT AMOUNT TO CONCEALMENT OF INCOME OR FURNISHING OR INACCURATE PARTICULARS OF INCOME BY THE ASSESSEE. 6.8 THEREFORE, THE LD. CIT(A) HAS RIGHTLY DELETED THE PENALTY U/S 271(1)(C) IMPOSED ON THE ADDITION OF RS. 4 4 ,71,22,000/ - . 7. IN VIEW OF THE ABOVE REASONS WE UPHOLD THE ORDER OF THE LD. CIT(A) AND DISMISS THE APPEAL FILED BY THE REVENUE. ORDER PRONOUNCED IN THE OPEN C OURT ON 10/08/2017 . SD/ - SD/ - (MAHAVIR SINGH) (N.K. PRADHAN) J UDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED: 10/08/2017 RAHUL SHARMA, SR. P.S. ITA NO. 6063/MUM/2014 9 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A) - 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE . BY ORDER, //TRUE COPY// (DY./ASSTT. REGISTRAR) ITAT, MUMBAI