M/s. Rani Shaver Poultry Breeding Farms Pvt. Ltd., New Delhi V. DCIT, New Delhi

ITA 6146/DEL/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 90938 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 4 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-04-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 10-04-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 18-11-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIKRAM SAHAY
• Assessee Lawyers: P N MEHTA
• Keywords: Revenue expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES : F NEW DELHI BEFORE SHRI G.C. GUPTA, VICE PRESIDENT AND SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER ITA NO: 6146/DEL/2013 ASSESSMENT YEAR : - 2008-09 RANI SHAVER POLUTRY BREEDING FARMS PVT. LTD. VS. DCIT 3, SHOPPING CENTRE, CIRCLE-15(1) WEST END, C.R. BUILDING, NEW DELHI. NEW DELHI. (PAN AAACR3036Q) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI P.N. MEHTA, CA RESPONDENT BY :SHRI VIKRAM SAHAY, SR. DR DATE OF HEARING :10.4.2015 DATE OF PRONOUNCEMENT : 17 .4.2015 O R D E R PER INTURI RAMA RAO, AM THIS IS AN APPEAL FILED BY THE ASSESSEE COMPANY SEEKING THE DELETION OF PENALTY OF RS. 6,27,710/- LEVIED U/S 271(1)(C) OF T HE INCOME TAX ACT, 1961 RAISING THE FOLLOWING GROUNDS OF APPEAL :- 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE TH E COMMISSIONER (APPEALS) HAS ERRED IN UPHOLDING PENALTY LEVIED BY THE ASSESSING OFFICER UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT. 2. THAT THE LD. COMMISSIONER (APPEALS) HAS UPHELD THE CONTENTION OF THE ASSESSEE THAT THE ASSESSEE HAS NOT CONCEALED THE PA RTICULARS OF INCOME, BASED ON WHICH THE ASSESSING OFFICER HAS LE VIED THE PENALTY. 3. THAT THE COMMISSIONER (APPEALS) HAS CONFIRMED THE L EVYING OF PENALTY LEVIED BY THE ASSESSING OFFICER ON THE PLEA THAT TH E ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF INCOME. ITA NO. 6146/DEL/2013 M/S. RANI SHAVER POULTRY BREEDING FARMS VS. DCIT 2 4. THAT THE MERE FACT THAT THE ASSESSEE HAD CLAIMED TH E EXPENDITURE FOR WHICH COMPLETE DETAILS WERE FILED, WHICH WAS NOT AC CEPTABLE TO THE REVENUE BY ITSELF DOES NOT ATTRACTED THE LEVY OF PE NALTY UNDER SECTION 271(1)(C) AND THEREFORE, THE COMMISSIONER(APPEALS) HAS ERRED IN UPHOLDING THE PENALTY LEVIED BY THE ASSESSING OFFIC ER. 5. THAT THE ADDITION TO THE DISCLOSED INCOME WAS MADE ON ESTIMATE BASIS AND AS SUCH THE COMMISSIONER (APPEALS) HAS ERRED IN UPHOLDING THE PENALTY LEVIED BY THE ASSESSING OFFICER. 2. THOUGH AS MANY AS FIVE GROUNDS OF APPEAL A RE RAISED, ALL THE GROUNDS RELATE TO THE LEVY OF PENALTY U/S 271 (1) OF THE INCOME T AX ACT. THE BRIEF FACTS LEADING TO THE PRESENT APPEAL ARE AS FOLLOWS :- THE APPELLANT IS A COMPANY AND WAS ENGAGED IN T HE BUSINESS OF POULTRY BREEDING. HOWEVER, DUE TO UNFAVOURABLE CONDITIONS IN THE BUSI NESS, THE BUSINESS ACTIVITY WAS DISCONTINUED AND THE SURPLUS FUNDS WERE INVESTED IN VARIOUS MUTUAL FUNDS AND SECURITIES. THE INCOME THEREON WAS OFFERED TO TAX F ROM WHICH A DEDUCTION OF EXPENDITURE OF RS. 25.83 LAC WAS CLAIMED, BUT THE A O ALLOWED TO THE EXTENT OF RS. 63,000/- ONLY. THE APPEAL FILED BEFORE THE COMMISSI ONER OF INCOME TAX(APPEALS) WAS DISMISSED. THE TRIBUNAL ALSO DISMISSED THE ORDE R OF CIT(A) VIDE ORDER DATED 16.3.2012 IN ITA NO. 12/DEL/2012. 3. THE AO INITIATED THE PENALTY PROCEEDINGS BY ISSUING SHOW CAUSE NOTICE DATED 17.10.2012 U/S 275 R.W.S 271(1) OF THE ACT. IN RES PONSE TO THE SAID SHOW CAUSE NOTICE, THE APPELLANT HAD FILED A REPLY DATED 22.10 .2012 WHEREIN IT WAS PLEADED THAT NO PENALTY BE LEVIED FOR MERE DISALLOWANCE OF A CLA IM. THE AO FINALLY LEVIED PENALTY OF RS. 6,27,710/- U/S 271(1) VIDE ORDER DATED 29. 10.2012. ITA NO. 6146/DEL/2013 M/S. RANI SHAVER POULTRY BREEDING FARMS VS. DCIT 3 4. AGGRIEVED BY THIS PENALTY ORDER THE APPE LLANT HAD PREFERRED AN APPEAL BEFORE THE CIT(A) WHO DISMISSED THE APPEAL PLACING A RELIANCE ON THE DECISION OF CIT VS. ZOOM COMMUNICATION (P) LTD. (SUPRA). AGGRIEVED THE PRESENT APPEAL. 5. IT WAS ARGUED BEFORE US THAT MERE DISALLOWAN CE OF CLAIM DOES NOT LEAD TO THE CONCLUSION THAT THE APPELLANT HAS FURNISHED INACCUR ATE PARTICULARS OF INCOME OR CONCEALED PARTICULARS OF INCOME AND THEREFORE PENAL TY IS NOT LEVIABLE. ON THE OTHER HAND, LD. DR HAS ARGUED THAT COMMISSIONER OF INCOME TAX CONFIRMED THE ORDER OF PENALTY FOLLOWING THE RATIO LAID DOWN FROM THE JURI SDICTION HIGH COURT IN THE CASE OF CIT VS. ZOOM COMMUNICATION (P) LTD. (SUPRA) AND, T HEREFORE, PENALTY SHOULD BE CONFIRMED. 6. WE HAVE HEARD THE RIVAL PARTIES. WE FIND FRO M THE PENALTY ORDER DATED 29.10.2012 PASSED U/S 271(1) OF THE INCOME TAX A CT, IT IS NOT CLEAR WHETHER THE APPELLANT IS HELD GUILTY OF FURNISHING INACCURATE P ARTICULARS OF INCOME OR CONCEALING THE PARTICULARS OF INCOME, WHICH IS A SINE-QUA-NON FOR LEVYING OF PENALTY U/S 271(1). IT IS ALSO NOT CLEAR AS TO WHICH INFORMATI ON FURNISHED BY THE APPELLANT IS FOUND TO BE FALSE AS A RESULT OF WHICH THE ADDITION WAS ENTAILED. IN THE ABSENCE OF SUCH FINDING, THE PENALTY ORDER IS LIABLE TO BE QUA SHED. WE REFER IN THIS REGARD THE FOLLOWING JUDICIAL PRECEDENTS : A). CIT VS. BALBIR SINGH 2008J 304 ITR 125/2 007J 164 TAXMAN 65 PUNJ AND HAR B). NATIONAL TEXTILES V. CIT 2001J 249 ITR 1 25/114 TAXMAN 203 (GUJ) ITA NO. 6146/DEL/2013 M/S. RANI SHAVER POULTRY BREEDING FARMS VS. DCIT 4 C). NAINU MAL HET CHAND V. CIT (2007) 294 IT R 185 ALL D) CIT V. SUPER METAL RE-ROLLERS (2004) 265 ITR 82 (DEL) E) DIWAN ENTERPRISES V. CIT (2000) 246 ITR 571 (DEL) F) CIT V. SHIVNARAYAN JAMNALAL & CO. (199 8) 232 ITR 311 (MP) G) CIT VS. ABDUL MAJEED (T) 232 ITR 50 (KE R.) 7. ON MERE READING OF THE PENALTY ORDER, IT I S CLEAR THAT THE PENALTY WAS LEVIED MERELY BECAUSE THE CLAIM MADE BY THE ASSESSEE CAME TO BE DISALLOWED IN THE ASSESSMENT ORDER. THIS DOES NOT LEAD TO CONCLUSION THAT ASSESSEE IS A GUILTY OF CONDUCT AS ENVISAGED U/S 271(1) OF THE INCOME TAX ACT. IT IS WELL SETTLED PROPOSITION OF LAW THAT NO PENALTY CAN BE LEVIED U/ S 271(1) FOR MERE DISALLOWANCE OF THE CLAIM MADE IN THE ASSESSMENT PROCEEDINGS. WE SHALL PROFITABLY REFER TO THE FOLLOWING JUDICIAL DECISIONS :- A) THE DELHI HC IN THE CASE OF KARAN RAGHAV EXPORTS PV T. LTD. VS. CIT (349 ITR 112) HAS HELD THAT CLAIM MADE BY THE ASSES SEE MIGHT HAVE BEEN REJECTED BUT IT WOULD NOT BE SAID THAT CLAIM W AS NOT PLAUSIBLE OR LEGALLY TENABLE AND THEREFORE IT CANNOT BE SAID THA T THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF INCOME. B) IN THE CASE OF BALAJI DISTILLERIES LTD. VS. CIT (214 TAXMAN 96 MADRAS) IT HAS BEEN HELD THAT WHEN ADDITIONS WERE CONFIRMED NO T FOR LACK OF BONAFIDES BUT FOR REJECTING THE EXPLANATION OF THE ASSESSEE THE PENALTY CANNOT BE LEVIED U/S 271(1)(C). C) IN THE CASE OF CIT VS. INTERNATIONAL AUDIO VISUAL COMPANY (288 ITR 570) IT HAS BEEN HELD THAT WHEN ALL FACTS RELATING TO CLAIM WERE DISCLOSED, BUT CLAIM WAS NOT ALLOWED, IT DOES NOT S UGGEST THAT PARTICULARS OF INCOME OF THE ASSESSEE OR CONCEALMEN T OF HIS TRUE INCOME HAS BEEN MADE. ITA NO. 6146/DEL/2013 M/S. RANI SHAVER POULTRY BREEDING FARMS VS. DCIT 5 D) THE DELHI HIGH COURT IN THE CASE OF CIT VS. DCM (37 TAXMAN.COM 477) HELD THAT LAW DOES NOT BAR OR PROHIBIT AS ASSESSE E FOR MAKING A CLAIM HE BELIEVES MAY BE ACCEPTED OR IS PLAUSIBLE. WHEN S UCH A CLAIM IS MADE DURING THE COURSE OF REGULAR OR SCRUTINY ASSES SMENT, LIBERAL VIEW IS REQUIRED TO BE TAKEN AS NECESSARILY THE CLAIM IS BOUND TO BE CAREFULLY SCRUTINIZED BOTH ON FACTS AND IN LAW. THREAT OF PEN ALTY CANNOT BECOME A GAG OR HAUNT AN ASSESSEE FOR MAKING A CLAIM WHICH MAY BE ERRONEOUS OR WRONG WHEN IT IS MADE DURING THE COURS E OF THE ASSESSMENT PROCEEDINGS. NORMALLY PENALTY PROCEEDING S IN SUCH CASES SHOULD NOT BE INITIATED UNLESS THERE ARE VALID OR G OOD REASONS TO SHOW THAT FACTUAL CONCEALMENT HAS BEEN MADE OR INACCURAT E PARTICULARS ON FACTS WERE PROVIDED IN THE COMPUTATION. 8. THE RATIO LAID DOWN BY THE HONBLE DELHI HI GH COURT IN THE CASE OF CIT VS. ZOOM COMMUNICATION (P) LTD. (SUPRA) IS NOT APPLICA BLE FOR SIMPLE REASON THAT IT IS A CASE WHERE THE CLAIM MADE WAS FOUND TO BE NOT BONAF IDE, WHEREAS IN THE PRESENT CASE THE CLAIM CANNOT BE CALLED NOT BONAFIDE, IN AS MUCH AS THERE IS CLEAVAGE OF JUDICIAL OPINION TO THE EFFECT THAT EVEN WHEN BUSI NESS ACTIVITY IS LULL, THE EXPENDITURE INCURRED IN RUNNING THE COMPANY CAN BE CLAIMED AS A REVENUE EXPENDITURE. THEREFORE, IN OUR CONSIDERED OPINION THE ADDITION M ADE IN THE QUANTUM PROCEEDINGS IS NOT FREE FROM DOUBT. WE ARE OF THE CONSIDERED OP INION THAT THE PRESENT CASE IS COVERED BY THE RATIO OF THE HONBLE APEX COURT IN T HE CASE OF CIT VS RELIANCE PETROPRODUCTS PVT. LTD. 322 ITR 158(SC) WHICH READ S AS UNDER :- WE HAVE ALREADY SEEN THE MEANING OF THE WORD PART ICULARS IN THE EARLIER PART OF THIS JUDGMENT. READING THE WORDS IN CONJUNC TION, THEY MUST MEAN THE DETAILS SUPPLIED IN THE RETURN, WHICH ARE NOT ACCUR ATE, NOT EXACT OR CORRECT, NOT ACCORDING TO TRUTH OR ERRONEOUS. WE MUST HASTEN TO ADD HERE THAT IN THIS CASE, THERE IS NO FINDING THAT ANY DETAILS SUPPLIED BY THE ASSESSEE IN ITS RETURN WERE FOUND TO BE INCORRECT OR ERRONEOUS OR FALSE. S UCH NOT BEING THE CASE, THERE WOULD BE NO QUESTION OF INVITING THE PENALTY UNDER SECTION 271(1)(C) OF THE ACT. A MERE MAKING OF THE CLAIM, WHICH IS NOT S USTAINABLE IN LAW, BY ITSELF, WILL NOT AMOUNT TO FURNISHING INACCURATE PARTICULAR S REGARDING THE INCOME OF THE ASSESSEE. SUCH CLAIM MADE IN THE RETURN CANNOT AMOUNT TO THE INACCURATE PARTICULARS. ITA NO. 6146/DEL/2013 M/S. RANI SHAVER POULTRY BREEDING FARMS VS. DCIT 6 9. FOLLOWING THE RATIO LAID DOWN BY HONBLE A PEX COURT IN THE ABOVE CASE, WE HAVE NO HESITATION TO QUASH THE PENALTY LEVIED U/S 271(1)(C) OF THE INCOME TAX ACT. 10. IN THE RESULT APPEAL FILED BY THE ASSES SEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 17 TH APRIL, 2015. SD/- SD/- (G.C. GUPTA) (INTURI RAMA RAO) VICE PRESIDENT ACCOUNTANT MEMBER DATED: THE 17 TH APRIL, 2015 VEENA COPY OF THE ORDER FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR 6. GUARD FILE BY ORDER DY. REGISTRAR