M/s. Globe Capital Market Ltd., New Delhi V. DCIT, New Delhi

ITA 6089/DEL/2015

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 3933 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 11 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Assessment Year: 2005-2006
• Appeal Filed On: 10-11-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ASHIMA NEB
• Keywords: Earning of tax free income; Question of law; Wrong claim
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH E NEW DLEHI BEFORE SHRI N.K. SAINI, HONBLE VICE PRESIDENT AND SHRI K. NARASIMHA CHARY, JUDICIAL MEMBER I.T.A. NO.6089/DEL/2015 ASSESSMENT YEAR: 2005-06 M/S GLOBE CAPITAL MARKET LTD., VS DY. COMMISSIONER OF INCOME-TAX, 609, ANSAL BHAWAN, CIRCLE 10(1), NEW DELHI.16 K.G. MARG, CONNAUGHT PLACE, NEW DELHI. PAN: AAACG4267G (APPELLANT) (RESPONDENT) ASSESSEE BY: SHRI VED JAIN, ADVOCATE RESPONDENT BY: MS ASHIMA NEB, SR. DR DATE OF HEARING: 18.10.2018 DATE OF PRONOUNCEMENT: 31 .10.2018 ORDER PER NARASIMHA K. CHARY, JM CHALLENGING THE ORDER DATED 8.09.2015 IN APPEAL NO.122/14- 15, THE COMMISSIONER OF INCOME-TAX (APPEALS)-4, NEW DELHI {FOR SHORT CIT(A)}, ASSESSEE IS IN APPEAL BEFORE US. 2 2. BRIEFLY STATED FACTS OF THE CASE ARE THAT FOR THE ASSESSMENT YEAR 2005-06, THE ASSESSEE FILED RETURN OF INCOME ON 31.10.2005 DECLARING AN INCOME OF RS.14,59,08,790/- AND THE ASSESSMENT WAS COMPLETED AT AN INCOME OF RS.14,81,68,060/- BY ADDING A SUM OF RS.22,59,270/- U/S 14A OF THE INCOME-TAX ACT, 1961 (THE ACT). SIMULTANEOUSLY, LEARNED AO INITIATED PROCEEDINGS U/S 271(1)(C) OF THE ACT AND CONCLUDED THE SAME BY ORDER DATED 31.3.2014 WITH THE LEVY OF PENALTY OF RS.8,26,667/-. WHEN THE ASSESSEE PREFERRED APPEAL, LEARNED CIT(A) BY WAY OF IMPUGNED ORDER DISMISSED THE SAME HOLDING THAT SINCE THE QUANTUM APPEAL OF THE ASSESSEE WAS DISMISSED BY THE FIRST APPELLATE AUTHORITY, THE AO WAS RIGHT IN IMPOSING THE PENALTY. HENCE, THE ASSESSEE IS IN APPEAL BEFORE US. 3. IT IS THE ARGUMENT OF THE LEARNED AR THAT THE ASSESSEE COMPANY HAD DULY SUBMITTED BEFORE THE AO THAT NO EXPENDITURE WITH REGARD TO THE EARNING OF THE DIVIDEND INCOME WAS INCURRED BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION BUT BRUSHING IT ASIDE, LEARNED AO ESTIMATED THE DISALLOWANCE AT 10% OF THE DIVIDEND AMOUNT TO REACH THE AMOUNT TO BE ADDED AT RS.22,59,270/- U/S 14A OF THE ACT. HE FURTHER SUBMITTED THAT THE QUANTUM APPEAL PREFERRED BY THE ASSESSEE WAS DISMISSED BY THE LEARNED CIT(A) HOLDING THAT THE DISALLOWANCE MADE BY THE AO WAS VERY REASONABLE IN COMPARISON TO THE DIVIDEND INCOME EARNED BY THE ASSESSEE DURING THE YEAR UNDER 3 CONSIDERATION BUT IN VIEW OF THE SMALLNESS OF THE QUANTUM INVOLVED, ASSESSEE DID NOT PREFER ANY FURTHER APPEAL TO THE TRIBUNAL AGAINST SUCH ORDER. BASING ON THIS, LEARNED AR SUBMITS THAT IT IS NOT A CASE OF CONCEALMENT OF INCOME OR FURNISHING INACCURATE PARTICULARS THEREOF. ADDITION WAS MADE ONLY ON ESTIMATE BASIS AFTER REJECTING THE CONTENTION OF THE ASSESSEE THAT NO EXPENDITURE WAS INCURRED FOR EARNING THE DIVIDEND INCOME. 4. IN SUPPORT OF THIS CONTENTION, LEARNED AR PLACED RELIANCE ON THE DECISION OF THE RAJASTHAN HIGH COURT IN THE CASE OF CIT VS MAHENDRA SINGH KHEDIA IN ITA NO.174 OF 2010 DATED 19.3.2012. FURTHER IN SUPPORT OF THE CONTENTION THAT MERE REJECTION OF THE CONTENTION OF THE ASSESSEE FOR A CLAIM DOES NOT IPSO FACTO TANTAMOUNT TO EITHER CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS THEREOF, LEARNED AR PLACED RELIANCE ON THE DECISION OF THE APEX COURT IN THE CASE OF CIT VS RELIANCE PETROPRODUCTS P. LTD. (2010) 322 ITR 158. 5. LEARNED DR SUBMITTED THAT INASMUCH AS THE ASSESSEE PREFERRED A FALSE CLAIM TO SAY THAT NO EXPENDITURE WAS INCURRED TO EARN THE DIVIDEND INCOME AND IT WAS FOUND TO BE SO BY THE AUTHORITIES BELOW, THE CONDUCT OF THE ASSESSEE AMOUNTS TO CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS THEREOF. SHE FURTHER PLACED RELIANCE ON A DECISION REPORTED IN CIT VS B.A. BALASUBRAMANIAM AND 4 BROS. (1985) 152 ITR 529 IN SUPPORT OF HER CONTENTION THAT EVEN WHEN AN ADDITION WAS MADE ON ESTIMATE BASIS, PROCEEDINGS U/S 271(1)(C) OF THE ACT ARE MAINTAINABLE. 6. WE HAVE GONE THROUGH THE RECORD. IN THIS MATTER, THE ASSESSEE EARNED THE DIVIDEND INCOME OF RS.2,25,92,701/- AND CLAIMED IT AS EXEMPT WHILE STATING THAT NO EXPENDITURE WITH REGARD TO THE EARNING OF SUCH EXEMPT INCOME WAS INCURRED BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION. NO DOUBT, LEARNED AO ESTIMATED THE EXPENDITURE AT 10% OF THE DIVIDEND INCOME TO MAKE AN ADDITION OF RS.22,59,270/- WHICH WAS ACCEPTED BY THE LEARNED CIT(A). IT IS, THEREFORE, EVIDENT THAT IT IS NOT A CASE OF CONCEALMENT OF INCOME OR FURNISHING INACCURATE PARTICULARS THEREOF BUT A CASE WHERE A CLAIM OF THE ASSESSEE WAS NOT ACCEPTED BY THE LEARNED AO. LEARNED AO DID NOT MAKE THE ADDITION BASING ON THE ENTRIES OF THE BOOKS OF ACCOUNTS OF THE ASSESSEE BUT HE DID SO ONLY ON ESTIMATE. 7. IT IS SUBMITTED BY THE LEARNED AR THAT THE DECISION RELIED UPON BY THE LEARNED DR HAS NO APPLICATION TO THE FACTS OF THE CASE INASMUCH AS SUCH A DECISION WAS RENDERED UNDER THE PROVISIONS OF THE ACT LONG PRIOR TO THEIR AMENDMENT THAT AS THE PROVISION STANDS NOW, SUCH DECISION HAS NO APPLICATION. HE PLACED RELIANCE ON THE DECISION OF THE RAJASTHAN HIGH COURT IN THE CASE OF CIT VS MAHENDRA SINGH KHEDIA (SUPRA), WHEREIN IT WAS HELD AS UNDER: 5 8. THE ABOVE FINDING OF THE TRIBUNAL MAKES IT CLEAR THAT ADDITIONS MADE BY THE ASSESSING OFFICER WERE BASED ON ESTIMATION ONLY. A FACT OR ALLEGATION BASED ON ESTIMATION CANNOT BE SAID TO BE CORRECT ONLY, IT CAN BE INCORRECT ALSO. THEREFORE, IN THE FACTS AND CIRCUMSTANCES OF THE CASE, PENALTY WAS WRONGLY LEVIED BY THE ASSESSING OFFICER. THE BASIS FOR LEVYING PENALTY IN THE PRESENT CASE IS ONLY ESTIMATION, WHICH IS PURELY A QUESTION OF FACT AND THERE IS A CONCURRENT FINDING OF FACT RECORDED BY FIRST APPELLATE AUTHORITY AS WELL AS THE APPELLATE TRIBUNAL BOTH. 9. THE INCOME TAX APPEAL CAN BE ADMITTED ONLY ON SUBSTANTIAL QUESTION OF LAW, BUT IN OUR VIEW NO SUBSTANTIAL QUESTION OF LAW IS INVOLVED IN THE PRESENT APPEAL SO AS TO ENTERTAIN IT. THE APPELLATE AUTHORITY AS WELL AS THE APPELLATE TRIBUNAL BOTH HAVE RECORDED A CONCURRENT FINDING OF FACT THAT ADDITIONS IN THE PRESENT CASE ARE BASED ON ESTIMATION ONLY. 8. FURTHER MERELY BECAUSE THE CLAIM OF THE ASSESSEE WAS HELD TO BE NOT SUSTAINABLE BY THE LEARNED AO THAT DOES NOT AUTOMATICALLY MEAN THAT THE ASSESSEE CONCEALED THE INCOME OR FURNISHED THE INACCURATE PARTICULARS THEREOF AS IS HELD BY THE HONBLE APEX COURT IN THE CASE OF RELIANCE PETROPROUDCTS LTD. (SUPRA). IT IS NOT THE CASE OF THE REVENUE THAT ANY NEW INCOME HAD TO BE UNEARTHED DURING THE COURSE OF ASSESSMENT PROCEEDINGS BUT IT IS ONLY BASING ON THE FACTS AND FIGURES SUBMITTED BY THE ASSESSEE, LEARNED AO MADE THE ADDITION, THAT TOO, ON ESTIMATE BASIS. LEARNED CIT(A) CONFIRMED THE PENALTY ON THE GROUND THAT THE APPEAL AGAINST THE QUANTUM ADDITION WAS DISMISSED. NO OTHER GROUND COULD BE MADE BEFORE THE FIRST APPELLATE AUTHORITY TO SUSTAIN THE PENALTY. IN THESE CIRCUMSTANCES, 6 WE ARE OF THE CONSIDERED OPINION THAT THE DECISION OF THE RAJASTHAN HIGH COURT IN THE CASE OF RAJASTHAN HIGH COURT IN THE CASE OF CIT VS MAHENDRA SINGH KHEDIA (SUPRA) AND THE HONBLE APEX COURT IN THE CASE OF RELIANCE PETROPRODUCTS LTD. (SUPRA) ARE APPLICABLE TO THE FACTS OF THE CASE. BY RESPECTFULLY FOLLOWING THE SAME, WE HOLD THAT THE DISALLOWANCE OF EXPENDITURE ON ESTIMATE BASIS BY INVOKING SECTION 14A OF THE ACT DOES NOT IPSO FACTO AMOUNT TO CONCEALMENT OF INCOME OR FURNISHING INACCURATE PARTICULARS THEREOF AND THE PENALTY CANNOT BE SUSTAINED. WE ACCORDINGLY WHILE QUASHING THE PENALTY PROCEEDINGS, DIRECT THE AO TO DELETE THE PENALTY LEVIED. 9. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 31 ST OCTOBER, 2018. SD/- SD/- (N.K. SAINI) (K. NARASIMHA CHARY) VICE PRESIDENT JUDICIAL MEMBER DATED: 31 ST OCTOBER, 2018 VJ COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT ASSTT. REGISTRAR 7 DRAFT DICTATED ON 22 .1 0.2018 DRAFT PLACED BEFORE AUTHOR 2 3 .10 .2018 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER 3 1 . 1 0 . 2 0 1 8 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. 3 1 . 1 0 . 2 0 1 8 APPROVED DRAFT COMES TO THE SR.PS/PS 3 1 . 1 0 . 2 0 1 8 KEPT FOR PRONOUNCEMENT ON 3 1 . 1 0 . 2 0 1 8 DATE OF UPLOADING ORDER ON THE WEBSITE 2 . 1 1 . 2 0 1 8 FILE SENT TO THE BENCH CLERK 2 . 1 1 . 2 0 1 8 DATE ON WHICH FILE GOES TO THE AR DATE ON WHICH FILE GOES TO THE HEAD CLERK. DATE OF DISPATCH OF ORDER.