Allgrow Finance & Investment Pvt. Ltd., New Delhi V. ITO, New Delhi

ITA 6069/DEL/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 91151 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 7 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-06-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 09-06-2015
• Assessment Year: 1999-2000
• Appeal Filed On: 08-11-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AMIT JAIN SENIOR
• Keywords: Depreciation; Additional evidence; Question of law
• Section: 260A; 148; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH A : NEW DELHI) BEFORE SHRI N.K. SAINI, ACCOUNTANT MEMBER AND SHRI GEORGE GEORGE K, JUDICIAL MEMBER ITA NO.6069/DEL./2013 (ASSESSMENT YEAR : 1999-2000) M/S. ALLGROW FINANCE & INVESTMENT PVT. LTD. VS. ITO , WARD 1 (3), 202, FIRST FLOOR, OKHLA INDL. AREA PHASE-III, NEW DELHI. NEW DELHI 110 020. (PAN : AADPN0250A) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI TARUN ROHTAGI, CA REVENUE BY : SHRI AMIT JAIN, SENIOR DR DATE OF HEARING : 09.06.2015 DATE OF PRONOUNCEMENT : 12.06.2015 O R D E R PER GEORGE GEORGE K. : THIS APPEAL, AT THE INSTANCE OF THE ASSESSEE, IS DI RECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX-IV, NEW DEL HI DATED 29.08.2013. THE RELEVANT ASSESSMENT YEAR IS 1999-2000 . 2. THE GROUNDS RAISED BY THE ASSESSEE READ AS FOLLO WS :- L. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE WHETHER THE LEARNED CIT CA) WAS JUSTIFIED IN AFFIRM ING THE IMPOSITION OF PENALTY OF RS.6,56,258 U/S 271 (1 )(C) OF THE ACT? 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE, THE CIT (A) WAS NOT JUSTIFIED IN UPHOLDING TH E LEVY OF ITA NOS.6609/DEL./2013 2 PENALTY U/S 271(1) (C ) IN RESPECT OF ADDITION OF N OTIONAL INCOME OF RS.8,75,000 BEING UNREALISED INTEREST ON INTER CORPORATE DEPOSIT? 2.1 THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE THE LEARNED CIT (A) HAS ERRED IN LAW IN UPHOLDING T HAT THERE IS FURNISHING OF INACCURATE PARTICULARS / CON CEALMENT OF INCOME WITHIN THE MEANING OF SECTION 271(1)(C) O F THE ACT INSPITE OF THE ADDITION BEING MADE ON AN NOTION AL! DEEMED BASIS. 3. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE, THE LEARNED CIT (A) WAS NOT JUSTIFIED IN AFFI RMING THE LEVY OF PENALTY U/S 271(1) (C ) IN RESPECT OF DISALLOWANCE OF RS.10 LAKHS MADE OUT OF PROFESSIONA L EXPENSES. 3.1 WHETHER THE MERE DISALLOWANCE OF EXPENSES CAN AMOUNT TO CONCEALMENT OR FURNISHING OF INACCURATE PARTICULARS OF INCOME WITHIN THE MEANING OF SECTION 271(1) (C). 4. THAT THE LEARNED CIT (A) HAS FAILED TO APPRECIAT E THAT ASSESSMENT AND PENALTY PROCEEDINGS ARE TWO DIF FERENT PROCEEDINGS. 5. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE THE LEARNED CIT (A) OUGHT TO HAVE HELD THAT THE PEN ALTY ORDER IS VOID AB INTIO IN ABSENCE OF RECORDING OF D ISCERNIBLE SATISFACTION AS TO THE FACT OF FURNISHING INACCURAT E PARTICULARS/ CONCEALMENT IN THE ASSESSMENT ORDER DA TED 16.12.2011. 6. THAT THE APPELLANT CRAVES FOR LEAVE TO ADD, ALTE R, MODIFY ANY OF THE GROUNDS OF APPEAL MENTIONED ABOVE AT THE TIME OF HEARING. 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE AS FOL LOWS. THE ASSESSEE COMPANY IS A NON-BANKING FINANCIAL CO MPANY (NBFC) REGISTERED WITH THE RESERVE BANK OF INDIA (R BI). THE RETURN OF ITA NOS.6609/DEL./2013 3 INCOME WAS FILED PURSUANT TO A NOTICE U/S 148 OF TH E ACT DECLARING INCOME OF RS.29,16,891/-. THE ASSESSMENT WAS COMPLETED VI DE ORDER DATED 22.02.2006 ON A TOTAL INCOME OF RS.48,03,140/-. TH E ASSESSING OFFICER MADE THREE ADDITIONS, NAMELY, (I) RS.8,75,000/- ON ACCOUNT OF INTEREST ON LOAN; (II) RS.10 LACS ON ACCOUNT OF DISALLOWANCE OF PROFESSIONAL CHARGES; AND (III) RS.11,250/- ON ACCOUNT OF DISALLOWANCE OF DEPRECIATION. THE ASSESSING OFFICER ALSO INITIATED PENALTY PROCEEDING S U/S 271(1)(C) OF THE ACT. AGGRIEVED BY THE ADDITIONS, ASSESSEE PREFERRE D AN APPEAL TO THE CIT (A). THE CIT (A) VIDE HIS ORDER DATED 31.08.2010 D ELETED THE ADDITIONS OF RS.8,75,000/- AND RS.11,250/-. THE CIT (A), HOWEVE R, CONFIRMED THE ADDITION OF RS.10 LACS ON ACCOUNT OF PAYMENT OF PRO FESSIONAL CHARGES. AS AGAINST THE CONFIRMATION OF ADDITION OF RS.10 LACS MADE BY THE CIT (A), THE ASSESSEE PREFERRED AN APPEAL. THE DEPARTMENT ALSO FILED AN APPEAL TO THE TRIBUNAL ON DELETION OF ADDITION OF RS.8,75,000/-. THE TRIBUNAL VIDE ORDER DATED 16.12.2011 IN ITA NO.4684/DEL./2010 ALLOWED T HE DEPARTMENTS APPEAL AND DISMISSED THE ASSESSEES APPEAL, THEREBY CONFIRMING THE ASSESSMENT ORDER WITH RESPECT TO ADDITIONS OF BOTH OF RS.10 LACS AND RS.8,75,000/-. ON RECEIPT OF THE ORDER OF THE TRIB UNAL, THE ASSESSING OFFICER IMPOSED A PENALTY OF RS.6,56,258/- ON THE A DDITION OF RS.10 LACS AND RS.8,75,000/- SUSTAINED BY THE TRIBUNAL. AGAIN ST THE ORDER OF PENALTY IMPOSED U/S 271(1)(C), ASSESSEE PREFERRED AN APPEAL TO THE FIRST APPELLATE ITA NOS.6609/DEL./2013 4 AUTHORITY. THE CIT (A) DISMISSED THE APPEAL FILED BY THE ASSESSEE. THE RELEVANT FINDING OF THE CIT (A) READS AS FOLLOWS :- 4.3.2 EXPLANATION 1 TO SECTION 271(1)(C) PROVIDES THAT WHERE AN ASSESSEE FAILS TO OFFER AN EXPLANATIO N OR OFFERS AN EXPLANATION WHICH IS FOUND BY THE AO TO B E FALSE OR ASSESSEE OFFERS AN EXPLANATION WHICH HE IS NOT A BLE TO SUBSTANTIATE AND FAILS TO PROVE THAT SUCH AN EXPLAN ATION IS BONA FIDE, THE AMOUNT ADDED OR DISALLOWED IN COMPUT ING THE TOTAL INCOME OF SUCH PERSON SHALL BE DEEMED TO REPRESENT THE INCOME IN RESPECT OF WHICH PARTICULAR S HAVE BEEN CONCEALED. THUS, EXPLANATION 1 TO SECTION 271( 1)(C) CREATES A LEGAL FICTION TO TREAT THE ADDITION AS DE EMED CONCEALMENT. IN THE CASE UNDER CONSIDERATION, THE EXPLANATION OFFERED BY THE APPELLANT IN RESPECT OF THE AMOUNT OF RS.18,75,000/- HAS NOT BEEN FOUND TO BE C ORRECT BY THE HON'BLE ITAT. THEREFORE, THE AMOUNT OF RS.18,75,000/- IS TREATED AS CONCEALMENT OF INCOME IN THE CASE OF UNION OF INDIA VS. DHARMENDRA TEXTILES PROCESSORS, 306 ITR 277, IT WAS HELD BY THE APEX CO URT THAT PENALTY IS A CIVIL LIABILITY AND MENS REA DOES NOT APPLY TO PENALTY PROCEEDINGS. IN VIEW OF THE ABOVE DISCUS SION, I DO NOT FIND ANY INFIRMITY IN THE PENALTY LEVIED BY THE AO. I AM OF THE CONSIDERED VIEW THAT IT IS A FIT CASE FOR THE LEVY OF PENALTY U/S 271 (1 )(C) OF THE ACT. THEREFORE, THE PENALTY OF RS.6,56,258/- LEVIED BY THE AO IS CONFIRMED. GROUND S OF APPEAL ARE REJECTED. 4. AGAINST THE CONFIRMATION OF PENALTY IMPOSED U/S 271(1)(C) OF THE ACT, ASSESSEE IS IN SECOND APPEAL BEFORE US. 5. ON MERITS, THE LD. COUNSEL FOR THE ASSESSEE REIT ERATED THE SUBMISSIONS MADE BEFORE THE INCOME-TAX AUTHORITIES. FURTHER, I T WAS SUBMITTED BY THE LD. COUNSEL THAT AS AGAINST THE TRIBUNAL ORDER IN T HE QUANTUM ASSESSMENT, ASSESSEE HAD PREFERRED AN APPEAL U/S 260A OF THE AC T TO THE HONBLE HIGH COURT AND THE HONBLE HIGH COURT HAD DELETED THE AD DITION OF ITA NOS.6609/DEL./2013 5 RS.8,75,000/-. AS AGAINST THE ADDITION OF RS.10 LA CS, IT WAS SUBMITTED THAT THE HONBLE HIGH COURT HAS CONFIRMED THE ADDITION S TATING THAT THERE IS NO SUBSTANTIAL QUESTION OF LAW. ON THE ISSUE OF JURIS DICTION, IT WAS CONTENDED BY THE LD. COUNSEL THAT NO PROPER RECORDING OF SATI SFACTION IS MADE BY THE ASSESSING OFFICER FOR INITIATING PENALTY PROCEEDING S. IT WAS FURTHER SUBMITTED THAT NOTICE U/S 274 READ WITH SECTION 271 FOR INITIATION OF PENALTY IS VAGUE, SINCE THE ASSESSEE WAS NOT SHOW-CAUSED AS TO WHETHER PENALTY HAS BEEN INITIATED FOR CONCEALMENT OF INCOME OR FOR FUR NISHING INACCURATE PARTICULARS OF INCOME. 6. LD. DR RELIED ON THE ORDERS OF THE INCOME-TAX AU THORITIES. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. AS REGARDS THE ADDITION OF RS.8,75,000/- O N WHICH THE PENALTY HAS BEEN IMPOSED, WE NOTICE THAT THE SAID ADDITION HAS BEEN DELETED BY THE HONBLE HIGH COURT IN ITA 17/2015 VIDE JUDGMENT DAT E 20.01.2015. A COPY OF THE HONBLE HIGH COURT JUDGMENT IS PLACED O N RECORD AT PAGES 42 TO 46 OF THE PAPER BOOK FILED BY THE ASSESSEE. THE RELEVANT FINDING OF THE HONBLE HIGH COURT READ AS UNDER :- 5. WE HAVE CONSIDERED THE SUBMISSIONS OF THE PARTI ES. THE CIT(APPEALS) TOOK INTO ACCOUNT NOT ONLY THE ADDITIONAL EVIDENCE (ESPECIALLY THE LETTER WHICH WA S DOUBTED BY THE ITAT) BUT ALSO THE FACT THAT THE AO DID NOT MAKE ANY ENQUIRY. SIGNIFICANTLY, THERE WAS A REMAND DIRECTED BY THE CIT (APPEALS) IN THE COURSE OF WHIC H APPARENTLY, THE AO MADE NO ATTEMPT TO HOLD FURTHER ENQUIRIES. IN THE ABSENCE OF ANY CONCRETE MATERIAL, AND HAVING REGARD TO THE CIRCUMSTANCES THAT THE ASSESSE E IN ITA NOS.6609/DEL./2013 6 FACT MAINTAINED THE MERCANTILE SYSTEM OF ACCOUNT, T HE FAILURE OF THE AO TO EXERT HIMSELF AND REQUISITION THE BOOKS OF ACCOUNT AND OTHER MATERIAL FROM THE M/S. E SCORTS LTD. IF HE FELT THAT IN FACT SUCH AMOUNTS WERE PAYA BLE CONTRACTUALLY OR OTHERWISE, IN OUR OPINION, COULD N OT HAVE RESULTED IN THE ADDITION WHICH WAS ULTIMATELY DIREC TED. HAVING REGARD TO THESE CIRCUMSTANCES, THIS COURT IS OF THE OPINION THAT THE ASSESSEE, ON THE BASIS OF THE MATE RIALS ON RECORD, WAS ENTITLED TO SUCCEED ON THIS QUESTION AN D THE ITAT WRONGLY INTERFERED WITH THE CIT (APPEALS)S DETERMINATION. ACCORDINGLY, THE IMPUGNED ORDER IS S ET ASIDE. THE APPEAL IS CONSEQUENTLY ALLOWED ALONG WIT H THE PENDING APPLICATIONS. SINCE THE ADDITION OF RS.8,75,000/- IN THE QUANTUM ASSESSMENT HAS BEEN DELETED BY THE HONBLE JURISDICTIONAL HIGH COURT, T HE PENALTY IMPOSED ON THE SAME HAS LOST IT SUBSTRATUM AND PENALTY ON THIS ADDITION IS, THEREFORE, DELETED. 8. AS REGARDS THE ADDITION OF RS.10 LACS, IT WAS SU BMITTED BY THE LD. COUNSEL THAT THESE ARE PROFESSIONAL CHARGES PAID TO BHAAV PORTFOLIO PRIVATE LIMITED FOR GETTING RBI REGISTRATION. IT WAS FURTH ER SUBMITTED THAT THOUGH NO AGREEMENT WAS PRODUCED BEFORE THE ASSESSING OFFI CER REGARDING WORK ASSIGNED TO BHAAV PORTFOLIO PRIVATE LIMITED, THE SA ME WAS PRODUCED BEFORE THE CIT (A), WHICH WAS NOT ACCEPTED. A COPY OF THE AGREEMENT ENTERED BY THE ASSESSEE COMPANY WITH BHAAV PORTFOLI O PRIVATE LIMITED IS PLACED AT PAGES 50 51 OF THE PAPER BOOK. AS PER THE TERMS OF AGREEMENT, BHAAV PORTFOLIO PRIVATE LIMITED WAS APPOINTED FROM 01.04.1998 TO 31.03.1999 AND RENEWAL FOR A FURTHER PERIOD AS MUTU ALLY AGREED UPON. AS ITA NOS.6609/DEL./2013 7 PER THE TERMS OF THE AGREEMENT, BHAAV PORTFOLIO PRI VATE LIMITED WAS TO RENDER PROFESSIONAL SERVICES AND ADVICE IN THE FOLL OWING AREAS :- I) TO PURSUE THE APPLICATION WITH RBI, DEAL WITH T HE OBJECTIONS OF RBI AND ENSURE REGISTRATION WITH RBI AS A NBFC AFTER COMPLYING WITH THE CONDITIONS OF RBI. II) AFTER REGISTRATION WITH RBI TO MANAGE THE FUNDS AVAILABLE WITH THE COMPANY IN ACCORDANCE WITH THE R ULES OF RBI. III) TO ENSURE REGULAR COMPLIANCE AS PRESCRIBED BY RBI FROM TIME TO TIME. IV) OTHER AREAS RELATING TO NBFC MAY BE ASSIGNED TO YOU BY THE COMPANY FROM TIME TO TIME. IN LIEU OF THE AFORESAID SERVICES, THE ASSESSEE HAD CLAIMED TO HAVE PAID RS.10 LACS FOR THE RELEVANT YEAR. THIS PAYMENT ADM ITTEDLY IS NOT TO A RELATED PARTY. THE DISALLOWANCE OF RS.10 LACS WAS CONFIRMED BY THE TRIBUNAL HOLDING THAT EXPENDITURE IS NOT WARRANTED IN THE FACTS AND CIRCUMSTANCES OF THE CASE. THE PRIMARY REASONING O F TRIBUNAL FOR HOLDING SO WAS THAT RBI LICENCE WAS GRANTED TO ASSESSEE COM PANY ON 06.03.1998, WHEREAS BHAAV PORTFOLIO PRIVATE LIMITED WAS APPOIN TED AS A CONSULTANT TO ASSESSEE COMPANY ONLY W.E.F. 01.04.1998. ON PERUSA L OF THE RBI LETTER DATED 04.09.1998 (PLACED AT PAGE 47 OF THE PAPER BO OK), IT IS CLEAR THAT RBI GRANTED REGISTRATION TO THE ASSESSEE COMPANY ON 04. 09.1998 AND NOT 06.03.1998 (THOUGH W.E.F. 06.03.1998). THE ASSESSM ENT PROCEEDINGS AND PENALTY PROCEEDINGS ARE TWO SEPARATE AND DISTINCT P ROCEEDINGS. THE FACT THAT CERTAIN ADDITIONS WERE MADE IN THE ASSESSMENT PROCEEDINGS WOULD NOT ITA NOS.6609/DEL./2013 8 AUTOMATICALLY JUSTIFY FOR IMPOSITION OF PENALTY U/S 271(1)(C) OF THE ACT. THE ASSESSEE IS ALWAYS AT LIBERTY TO ARGUE IN PENAL TY PROCEEDINGS BASED ON THE EXISTING MATERIAL OR RELYING ON SOME NEW EVIDEN CE OR DOCUMENTS THAT THE PENALTY IS NOT EXIGIBLE ON THE FACTS AND CIRCUM STANCES OF THE CASE. IN THE INSTANT CASE, THE LD. AR BY RELYING ON THE RBI LETTER DATED 04.09.1998 HAD CLEARLY DEMONSTRATED THAT RBI REGISTRATION WAS GRANTED TO THE ASSESSEE ON 04.09.1998, SO THE ASSESSEES EXPLANATION THAT T HE PAYMENTS TO BHAAV PORTFOLIO PRIVATE LIMITED IS BONAFIDE AND GENUINE S INCE THEY HAVE BEEN AUTHORISED TO OBTAIN RBI LICENCES, CANNOT BE TOTALL Y BRUSHED ASIDE AS FALSE WARRANTING IMPOSITION OF PENALTY U/S 271(1)(C). TH E HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF NEW HOLLAND TRACTORS INDI A (P) LTD. VS. CIT IN ITA 182/2002 JUDGMENT DATED 25 TH SEPTEMBER, 2014 AT PARA 26 OBSERVED AS FOLLOWS : 26. THE WORD CONCEAL INHERENTLY AND PER SE REFER S TO AN ELEMENT OF MENS REA, ALBEIT THE EXPRESSION FURNISHI NG OF INACCURATE PARTICULARS IS MUCH WIDER IN SCOPE. THE WORD CONCEAL IMPLIES INTENTION TO HIDE AN ITEM OF INCO ME OR A PORTION THEREOF. IT AMOUNTS TO SUPPRESSION OF TRUTH OR A FACTUM SO AS TO CAUSE INJURY TO THE OTHER. (SEE CIT VS. A.SUBRAMANIA PILLAI (1997) 226 ITR 403 (MAD). THE W ORD CONCEAL MEANS TO HIDE OR TO KEEP SECRET. AS HELD IN LAW LEXICON, THE SAID WORD IS DERIVED FROM THE LATIN WO RD CONCELARE WHICH IMPLIES CON AND CELARE TO HID E. IT MEANS TO HIDE OR WITHDRAW FROM OBSERVATION, TO COVE R OR KEEP FROM SIGHT, TO PREVENT DISCOVERY OF, TO WITHHO LD KNOWLEDGE OF. THE WORD INACCURATE IN WEBSTERS DICTIONARY HAS BEEN DEFINED AS NOT ACCURATE, NOT E XACT OR CORRECT, NOT ACCORDING TO TRUTH, ERRONEOUS, AS INAC CURATE STATEMENT, COPY OR TRANSCRIPT. THE WORD PARTICULA R MEANS DETAIL OR DETAILS OF A CLAIM OR SEPARATE ITEM S OF AN ITA NOS.6609/DEL./2013 9 ACCOUNT (SEE CIT VS. RELIANCE PETROPRODUCTS PVT.LTD . (2010) 322 ITR 158 (SC). THUS THE WORDS FURNISHED INACCURATE PARTICULARS IS BROADER AND WOULD REFER T O INACCURACY WHICH WOULD CAUSE UNDER DECLARATION OR ESCAPEMENT OF INCOME. IT MAY REFER TO PARTICULARS W HICH SHOULD HAVE BEEN FURNISHED OR WERE REQUIRED TO BE FURNISHED OR RECORDED IN THE BOOKS OF ACCOUNTS ETC. (SEE CIT VS. RAJ TRADING CO. (1996) 217 ITR 208 (RAJ.) INACCURACY OR WRONG FURNISHING OF INCOME WOULD BE COVERED BY THE SAID EXPRESSION, THOUGH THERE ARE DE CISIONS THAT ADHOC ADDITION PER SE WITHOUT OTHER OR CORROBO RATING CIRCUMSTANCES MAY NOT REFLECT FURNISHED INACCURAT E PARTICULARS. LASTLY, AT TIMES AND IT IS FAIRLY COMM ON, THE CHARGE OF CONCEALMENT AND FURNISHING OF INACCURAT E PARTICULARS MAY OVERLAP. IN VIEW OF THE ABOVE MENTIONED JUDGMENT OF THE HON BLE JURISDICTIONAL HIGH COURT, IT CANNOT BE STATED THAT ASSESSEE HAS C ONCEALED INCOME BY FURNISHING INACCURATE PARTICULARS OF INCOME AND EXP LANATION GIVEN BY THE ASSESSEE CANNOT BE BRUSHED ASIDE TOTALLY FALSE. TH EREFORE, THE PENALTY LEVIED ON THE ADDITION OF RS.10 LACS IS NOT WARRANT ED ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND WE DELETE THE SAME. IT ORDERED ACCORDINGLY. 9. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON THIS 12 TH DAY OF JUNE, 2015. SD/- SD/- (N.K. SAINI) (GEORGE GEORGE K) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED THE 12 TH DAY OF JUNE, 2015 TS ITA NOS.6609/DEL./2013 10 COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A)-XXV, NEW DELHI. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.