DCIT CIR. - 1(1), MUMBAI V. M/s. FGP LTD., MUMBAI

ITA 6141/MUM/2006

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 1469 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 6 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-06-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 10-06-2010
• Assessment Year: 1999-2000
• Appeal Filed On: 20-11-2006
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A P SINGH
• Assessee Lawyers: ARVIND SONDE
• Keywords: Cost of acquisition

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES F, MUMBAI BEFORE SHRI R.S.SYAL, AM AND SHRI VIJAY PAL RAO, JM ITA NO.6141/MUM/2006 : ASST.YEAR 1999-2000 THE DY.COMMISSIONER OF INCOME-TAX CIRCLE 1(1) MUMBAI. VS. M/S.FGP LIMITED COMMERCIAL UNION HOUSE 9 WALLACE STREET, MUMBAI 400 001. PA NO.AAACF1671M. (APPELLANT) (RESPONDENT) CO NO.63/MUM/2007 : ASST.YEAR 1999-2000 M/S.FGP LIMITED COMMERCIAL UNION HOUSE 9 WALLACE STREET, MUMBAI 400 001. VS. THE JOINT COMMISSIONER OF INCOME-TAX (OSD) RANGE 1(1) MUMBAI. (CROSS OBJECTOR) (RESPONDENT) REVENUE BY : SHRI A.P.SINGH RESPONDENT BY : SHRI ARVIND SONDE O R D E R PER R.S.SYAL, AM : THIS APPEAL BY THE REVENUE AND CROSS-OBJECTION BY THE ASSESSEE ARISE OUT OF THE ORDER PASSED BY THE COMMISSIONER OF INCOME-TAX (APPEALS) ON 12.09.2006 DELETING THE PENALTY OF RS.3.10 CRORE IMPOSED BY TH E ASSESSING OFFICER U/S.271(1)(C) IN RELATION TO THE ASSESSMENT YEAR 1 999-200. 2. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT TH E ASSESSEE WAS ENGAGED IN THE BUSINESS OF MANUFACTURE AND SALE OF FIBER GLASS. IT FILED RETURN DECLARING LOSS OF RS.3,01,65,689. THE ENTIRE FIBER GLASS REINFORCEM ENT BUSINESS (MAINLY CONSISTING OF MANUFACTURING FACILITY AT THIMMAPUR P LANT AND MACHINERY FROM THANE PLANT) WAS SOLD TO VERTROTEX INDUSTRIES (INDI A) PRIVATE LIMITED. THE A.O. NOTED THAT THE ASSESSEE HAD CLAIMED THE EXCLUSION O F CONSIDERATION OF RS.5 CRORE RECEIVED TOWARDS SELF GENERATED ASSETS (DESIGNS AND DISTRIBUTION NET WORK) FROM THE COMPUTATION OF CAPITAL GAIN ON THE BASIS OF THE DECISION OF THE HONBLE SUPREME ITA NO.6141/M/2006 & CO 63/M/2007 M/S.FGP LIMITED. 2 COURT IN THE CASE OF CIT VS. B.C.SRINIVASA SHETTY (128 ITR 294) . THE A.O. OPINED THAT THE SAID JUDGEMENT HAS BEEN NEUTRALIZED TO A G REAT EXTENT BY WAY OF AMENDMENT TO SECTION 55(2). SIMILARLY THE ASSESSING OFFICER REFUSED TO ACCEPT CERTAIN OTHER CLAIMS MADE BY THE ASSESSEE. APPEAL W AS FILED BEFORE THE CIT(A). AGAINST THE PART RELIEF ALLOWED IN THE FIRST APPEAL , BOTH THE SIDES PREFERRED APPEALS TO THE TRIBUNAL. EXCEPT FOR THE CONSIDERATION RECEI VED ON TRANSFER OF DESIGN WHICH WAS HELD BY THE TRIBUNAL TO BE LIABLE FOR CAPITAL G AIN, THE ASSESSEE SUCCEEDED ON OTHER TWO ISSUES, WHICH HAVE BEEN CONSIDERED BY THE AO FOR THE PURPOSES OF PENALTY U/S 271(1)(C). AS THE ADDITIONS IN RESPECT OF OTHER TWO ISSUES HAVE BEEN FINALLY DELETED BY THE TRIBUNAL, THERE IS NO QUESTI ON OF IMPOSING PENALTY ON SUCH ITEMS. WE SHALL RESTRICT OURSELVES IN CONSIDERING W HETHER PENALTY U/S 271(1)(C) CAN BE IMPOSED W.R.T. THE ADDITION SUSTAINED BY THE TRI BUNAL TOWARDS TRANSFER OF DESIGN. 3. BEFORE US THE LEARNED DEPARTMENTAL REPRESENTATIV E CONTENDED THAT THE ASSESSEE FURNISHED INACCURATE PARTICULARS OF HIS IN COME BY WAY OF CLAIMING THE CONSIDERATION FOR THE TRANSFER OF DESIGN AS IMMUNED FROM CAPITAL GAIN, AS NOT HAVING ANY COST OF ACQUISITION. IN SUPPORT OF HIS CONTENTION THAT PENALTY WAS EXIGIBLE, HE RELIED ON THE ORDER PASSED BY THE TRIB UNAL IN ACIT VS. JASUBHAI BUSINESS SERVICE (P.) LTD. [(2006) 5 SOT 36 (MUM.)] . 4. IN THE OPPOSITION THE LEARNED COUNSEL FOR THE ASSESSEE RELIED ON THE IMPUGNED ORDER. HE INVITED OUR ATTENTION TOWARDS THE FACT TH AT THE ASSESSEE HAD COMPLETE DISCLOSURE OF ALL THE NECESSARY FACTS IN THIS REGAR D IN THE COMPUTATION OF INCOME AND HENCE BY NO STRETCH OF IMAGINATION IT COULD BE SAI D THAT THERE WAS CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS BY T HE ASSESSEE. HE RELIED ON THE RECENT JUDGEMENT OF THE HONBLE SUPREME COURT IN TH E CASE OF CIT VS. RELIANCE PETROPRODUCTS PVT. LTD. [(2010) 322 ITR 158 (SC)] FOR BRINGING HOME THE PROPOSITION THAT PENALTY IS NOT MAINTAINABLE IN SUC H CIRCUMSTANCES. ITA NO.6141/M/2006 & CO 63/M/2007 M/S.FGP LIMITED. 3 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. IT IS TRITE THAT SIMPLY BECAUSE AN ADDITION HAS BEEN UPHELD BY THE TRIBUNAL IN THE QUANTUM PROCEEDINGS DOES NOT LEAD TO INESCAPABL E CONCLUSION THAT PENALTY WILL AUTOMATICALLY FOLLOW. BOTH THE ASSESSMENT AND PENAL TY PROCEEDINGS ARE DISTINCT FROM EACH OTHER. WE FIND THAT THE TRIBUNAL IN QUA NTUM PROCEEDINGS HAS HELD THAT CAPITAL GAIN IS CHARGEABLE ON THE TRANSFER OF DESIG N TRANSFERRED BY THE ASSESSEE. THE ASSESSEE CLAIMED THE NON-APPLICABILITY OF THE PROVI SIONS OF CAPITAL GAIN ON THE TRANSFER OF DESIGN BY RELYING ON THE JUDGMENT IN TH E CASE OF B.C.SRINIVASA SHETTY (SUPRA). THE VIEW ADOPTED BY THE ASSESSEE WAS NOT KEPT SEC RET BUT PROPERLY DISCLOSED BY WAY OF NOTE IN THE COMPUTATION OF INCO ME FILED ALONG WITH THE RETURN OF INCOME. THE ASSESSING OFFICER CAME TO THE CONCLU SION THAT THE SAID AMOUNT WAS LIABLE TO BE CONSIDERED FOR CAPITAL GAIN. HOWEVER T HE LD. CIT(A) AGREED WITH THE VIEW POINT OF THE ASSESSEE, BUT THE TRIBUNAL RESTOR ED THE AOS POINT OF VIEW. THIS DISCUSSION INDICATES THAT THE ASSESSEE ENTERTAINED A BONA FIDE BELIEF THAT THE SALE CONSIDERATION ON THE TRANSFER OF DESIGN IS NOT CHAR GEABLE TO TAX UNDER THE HEAD CAPITAL GAIN. SUCH A VIEW WAS PROPERLY DEPICTED BY WAY OF SEPARATE NOTE IN THE COMPUTATION OF INCOME. IT IS ALTOGETHER DIFFERENT I SSUE THAT SUCH VIEW OF THE ASSESSEE DID NOT FIND FAVOUR WITH THE AO, WHO HELD OTHERWISE. BUT HOW AND UNDER WHICH CIRCUMSTANCES CAN IT BE DESCRIBED AS CONCEALM ENT OR FURNISHING OF INACCURATE PARTICULARS OF INCOME IS ANYBODYS GUESS. IF SUCH A DDITIONS ARE HELD TO BE CALLING FOR PENALTY, THEN PROBABLY THE ASSESSEE WOULD BE LEFT WITHOUT ANY OPTION TO LODGE ANY LEGAL CLAIM IN THE FEAR OF ITS REJECTION ATTRACTING PENALTY U/S 271(1)(C). THIS IS NOT AND HAS NEVER BEEN THE INTENT OF LAW. RECENTLY TH E HONBLE SUPREME COURT IN RELIANCE PETROPRODUCTS PVT. LTD. (SUPRA) HAS HELD THAT MERE MAKING OF A CLAIM WHICH IS NOT SUSTAINABLE IN LAW, BY ITSELF, WILL NO T ATTRACT PENALTY U/S.271(1)(C). IN VIEW OF THE FOREGOING DISCUSSION WE APPROVE THE VI EW TAKEN BY THE LEARNED CIT(A) ON THIS ISSUE. 6. THE LEARNED A.R. DID NOT PRESS THE CROSS OBJECTI ON FILED BY THE ASSESSEE. ITA NO.6141/M/2006 & CO 63/M/2007 M/S.FGP LIMITED. 4 7. IN THE RESULT, THE APPEAL OF THE REVENUE AS WELL AS THE CROSS OBJECTION OF THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED ON THIS 18 TH DAY OF JUNE, 2010 . SD/- SD/- (VIJAY PAL RAO) (R.S.SYAL) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI : 18 TH JUNE, 2010 . DEVDAS* COPY TO : 1. THE APPELLANT. 2. THE RESPONDENTS. 3. THE CIT CONCERNED 4. THE CIT(A)-I, MUMBAI. 5. THE DR/ITAT, MUMBAI. 6. GUARD FILE. TRUE COPY. BY ORDER ASSISTANT REGISTRAR, ITAT, MUMBAI. ITA NO.6141/M/2006 & CO 63/M/2007 M/S.FGP LIMITED. 5 DATE INITIAL 1. DRAFT DICTATED ON 10 .06.2010 SR.PS 2. DRAFT PLACED BEFORE AUTHOR 10 .06.2010 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS/PS 6. KEPT FOR PRONOUNCEMENT ON SR.PS 7. FILE SENT TO THE BENCH CLERK SR.PS 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 9. DATE OF DISPATCH OF ORDER.