DCIT CENT. CIR. - 3, MUMBAI V. Smt. MADHU GUPTA, MUMBAI

ITA 6144/MUM/2005

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 7437 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 5 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-03-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 14-01-2010
• Assessment Year: 2000-2001
• Appeal Filed On: 14-10-2005
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANIL KUMAR SINGH
• Assessee Lawyers: Y P TRIVEDI
• Keywords: Deemed dividend

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH E MUMBAI BEFORE SHRI P.M.JAGTAP, AM & SMT. P.MADHAVI DEVI, JM I.T.A.NO.6144/MUM/2005 - A.Y 2000-01 DY. COMMISSIONER OF I.T., CENTRAL CIRCLE-3, MUMBAI. VS. MRS. MADHU GUPTA, C -11, NEHA APARTMENT, JUHU TARA ROAD, JUHU, MUMBAI 400 049. PAN NO.ADNPG 1712 D (APPELLANT) (RESPONDENT) REVENUE BY : SHRI ANIL KUMAR SINGH. ASSESSEE BY : SHRI Y.P.TRIVEDI & MS. USHA DALAL. O R D E R PER P.MADHAVI DEVI, JM: THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST CI T(A)S ORDER DATED 26-8-2005. 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LD. CIT(A) ERRED IN DELETING THE PENALTY ON DEEMED DIVIDEND OF RS.5,12,969/- WITHOUT APPRECIATING THE CIT(A)S ORDER IN QUANTUM APPEAL ON THIS HAS NOT ACCEPTED BY THE REVENUE AND APPEAL FILED, THERE FORE, IN TERMS OF PROVISO TO SECTION 275 INSERTED W.E.F. 01-06-2003, PENALTY ON THE SAID AMOUNT WAS CORRECTLY LEVIED. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE PENALTY LEVIED U/S.271[1][C] OF THE ACT ON THE DEEMED DIVIDEND OF RS.48,94,700/- U/S.2[22][E] OF T HE ACT WHICH IS U8PHELD IN THE QUANTUM APPEAL AND IN HOLDING THAT S AME DID NOT AMOUNT TO FILING OF INACCURATE PARTICULARS OF INCOM E BY THE ASSESSEE. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE PENALTY ON THE FACTS AND CIRC UMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING T HE PENALTY ON DISALLOWANCE OF RS.20,000/- OUT OF FOREIGN TRAVELIN G EXPENSES WHICH THE ASSESSEE FAILED TO PROVE THE SOURCES OF FUND FO R ACQUIRING 500 US DOLLARS, THE ADDITION WHICH IS CONFIRMED IN APPEAL, FOR WHICH THE ASSESSEE FURNISHED INACCURATE PARTICULARS OF HER IN COME IN VIEW OF PROVISIONS OF CLAUSE A OF EXPLANATION I TO SECTION 271[1][C] OF THE ACT. 4. (A) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE PENALTY LEVIED ON DISA LLOWANCE OF RS.26,613/- MADE OUT OF TELEPHONE EXPENSES AND RS.2 0,173/- MADE OUT OF ELECTRICITY EXPENSES HOLDING THAT ASSESSEE H AS NOT FURNISHED INACCURATE PARTICULARS OF INCOME OR CONCEALED INCOM E. 2 (B) THE CIT(A) HAS NOT APPRECIATED THE FACT THAT AS SESSEE FURNISHED INACCURATE PARTICULARS OF HER INCOME BY CLAIMING IN ADMISSIBLE EXPENDITURE BY VIRTUE OF CLAUSE B OF EXPLANATION 1 TO SECTION 271 OF THE ACT, THE ADDITION WHICH HAS BEEN CONFIRMED IN A PPEAL. 5 THE ORDER OF THE LEARNED CIT(A) BE SET AS IDE AND THAT OF THE AO BE RESTORED. 3. AS REGARDS GROUND NOS.1 & 2 BRIEF FACTS ARE THA T THE AO LEVIED A PENALTY U/S.271[1][C] ON THE GROUND THAT THE ASSE SSEE HAS RECEIVED AN ADVANCE OF RS.48,95,000/- FROM M/S. INTEL MANSIO N PVT. LTD. AND RS.5,12,959/- ON ACCOUNT OF LOAN FROM G.G.PHOTO LTD . HE HELD THAT THE ASSESSEE IS A SUBSTANTIAL SHAREHOLDER IN BOTH THE C OMPANIES AND, THEREFORE, THE SAID AMOUNT IS TO BE TREATED AS DEEM ED DIVIDEND U/S.2[22][E] OF THE ACT. ON APPEAL TO THE CIT(A), T HE CIT(A) DELETED THE ADDITION. AGGRIEVED, ASSESSEE FILED AN APPEAL B EFORE THE TRIBUNAL. DURING THE PENDANCY OF THE APPEAL BEFORE THE TRIBUN AL, THE AO IMPOSED THE PENALTY U/S.271[1][C] OF THE ACT BY HOL DING THAT THE REVENUE HAS NOT ACCEPTED THE DECISION OF THE CIT(A) AND THE APPEAL IS PENDING BEFORE THE ITAT. 4. AT THE TIME OF HEARING, THE LD.COUNSEL FOR THE A SSESSEE SUBMITTED THAT THE QUANTUM APPEAL HAD COME UP BEFOR E F BENCH OF THE TRIBUNAL IN I.T.[SS]A NOS.562 TO 568/M/03 AND I .T.A.NOS.6645 TO 6648/M/03 AND THE TRIBUNAL VIDE ITS ORDERS DATED 26 -2-2007 HAD CONFIRMED THE ORDER OF THE CIT(A). HE HAS PLACED A COPY OF THE ORDER BEFORE US AND THE SAME IS TAKEN ON RECORD. THUS, AC CORDING TO THE LD.COUNSEL FOR THE ASSESSEE, THE BASIS FOR THE LEVY OF PENALTY HAS ITSELF BEEN WIPED OUT BY THE TRIBUNAL, AND THEREFORE THE P ENALTY HAS TO BE DELETED. 3 5. THE LD.DR, HOWEVER, STRONGLY PLACED RELIANCE ON THE ORDER OF THE AO. 6. HAVING HEARD BOTH THE PARTIES AND HAVING CONSID ERED THEIR RIVAL CONTENTIONS, WE AGREE WITH THE CONTENTIONS OF THE L D.COUNSEL FOR THE ASSESSEE THAT WHEN THE VERY BASIS FOR LEVY OF PENAL TY IS DELETED BY THE TRIBUNAL, THE PENALTY HAS NO LEGS TO STAND. ACCORDI NGLY, GROUNDS OF APPEAL NOS.1 & 2 ARE DISMISSED. 7. AS REGARDS GROUND NO.3, AO HAS MADE A DISALLOWA NCE OUT OF FOREIGN TRAVEL EXPENSES ON THE GROUND THAT THE ASSE SSEE FAILED TO PROVE THE SOURCE OF MONEY. AS REGARDS GROUND NO.4, THE PE NALTY IS LEVIED ON ACCOUNT OF DISALLOWANCE OUT OF TELEPHONE AND ELECTR ICITY EXPENSES. 8. THE LD.DR PLACED RELIANCE UPON THE ORDER OF THE AO WHILE THE LD.COUNSEL FOR THE ASSESSEE SUBMITTED THAT MERE DIS ALLOWANCE OF THE EXPENDITURE WILL NOT AMOUNT TO FURNISHING OF INACCU RATE PARTICULARS OF INCOME BY THE ASSESSEE. THUS, ACCORDING TO HIM, PEN ALTY IS NOT LEVIABLE. 9. HAVING HEARD BOTH THE PARTIES, WE FIND THAT THE PENALTY IS ON THE GROUND OF DISALLOWANCE OF THE FOREIGN TRAVEL EXPENS ES, ELECTRICITY AND TELEPHONE EXPENSES. THE ADDITIONS HAVE BEEN CONFIRM ED BY THE CIT(A) AND THE ASSESSEE HAD NOT PREFERRED ANY APPEAL BEFOR E THE TRIBUNAL. HOWEVER, MERE DISALLOWANCE WILL NOT ATTRACT THE PEN ALTY. THE AO SHOULD BE SATISFIED THAT THE ASSESSEE HAD FURNISHED INACCURATE PARTICULARS OF ITS INCOME OR HAS CONCEALED ITS INCO ME. THE ASSESSEE SHOULD NOT HAVE OFFERED ANY EXPLANATION FOR THE DEF AULT OR THE EXPLANATION OFFERED BY THE ASSESSEE SHOULD HAVE BEE N FOUND TO BE 4 FALSE. THERE IS NO SUCH FINDING BY THE AO THAT THE EXPLANATION OFFERED BY THE ASSESSEE IS FALSE OR THAT THE PARTICULARS OF INCOME FURNISHED BY THE ASSESSEE ARE INCORRECT. THE HONBLE SUPREME CO URT IN A RECENT DECISION IN THE CASE OF CIT VS. RELIANCE PETRO PROD UCT HAS HELD THAT MAKING OF AN INCORRECT CLAIM IN LAW WILL NOT AMOUNT TO FURNISHING OF INACCURATE PARTICULARS REGARDING THE INCOME OF THE ASSESSEE AND THE PENALTY U/S.271[1][C] IS NOT LEVIABLE. THE HONBLE SUPREME COURT IN THE CASE OF DILIP SHROFF [291 ITR 591] HAS ALSO HELD TH AT THE LAW LAID DOWN AS TO THE MEANING OF THE WORDS CONCEALED AND INA CCURATE CONTINUES TO BE GOOD LAW BECAUSE WHAT WAS OVER-RULED IN DHARM ENDRA TEXTILES PROCESSORS [206 ITR 271] [S.C] WAS ONLY THAT PART T O DILIP SHROFF WHERE IT WAS HELD THAT MENS REA WAS AN ESSENTIAL REQUIREM ENT FOR PENALTY U/S.271[1][C] OF THE ACT. THUS, IT CAN BE SEEN THA T DISALLOWANCE ON AN ADHOC BASIS ON THE CLAIM OF THE ASSESSEE WILL NOT A TTRACT THE LEVY OF PENALTY U/S.271[1][C] OF THE ACT. ACCORDINGLY, GROU NDS OF APPEAL NOS. 3 & 4 ARE REJECTED. 10. IN THE RESULT, REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED ON THIS 31ST DAY OF MARCH, 2010. SD/- SD/- (P.M.JAGTAP) (P.MADHAVI DEVI) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI: 31 ST MARCH, 2010. P/-*