ABR Auto Pvt. Ltd., New Delhi V. ACIT, New Delhi

ITA 6236/DEL/2015

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 3032 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-12-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Assessment Year: 2009-2010
• Appeal Filed On: 24-11-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KAUSHLENDRA TIWARI
• Assessee Lawyers: AMARJEEET SINGH
• Keywords: Business income; Question of law; Wrong claim; Bad and doubtful debts
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH G, NEW DELHI BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER AND SHRI L.P. SAHU, ACCOUNTANT MEMBER I.T.A. NO. 6236/DEL/2015 A.Y. : 2009-10 M/S ABR AUTO PVT. LTD. B-5, CHIRAG ENCLAVE NEW DELHI 11-0 048 (PAN: AADCA5137C) VS. ACIT, CIRCLE 1(1), NEW DELHI (APPELLANT) (RESPONDENT) ASSESSEE BY : SH. AMARJEEET SINGH, CA DEPARTMENT BY : SH. KAUSHLENDRA TIWARI, SR. DR ORDER PER H.S. SIDHU, JM ASSESSEE HAS FILED THE APPEAL AGAINST THE ORDER D ATED 04.9.2015 PASSED BY THE LD. COMMISSIONER OF INCOME TAX (APPEA LS-I), NEW DELHI PERTAINING TO ASSESSMENT YEAR 2009-10. THE SOLITARY ISSUE RAISED IN THE APPEAL IS RELATING TO UPHOLDING THE PENALTY OF RS. 36,58,000/- U/S. 271(1)(C) OF THE I.T. ACT, 1961. 2. THE FACTS IN BRIEF ARE THAT ASSESSEE IS AN INVES TMENT COMPANY AND HAS MADE INVESTMENT IN THE SHARES OF CLOSELY HELD UNQUOTED COMPANIES. THE TOTAL AMOUNT OF INVESTMENT AS ON 31.3.2008 WAS RS. 8,04,71,569/-. THE ASSESSMENT IN THIS CASE WAS MADE MAKING THE FOL LOWING ADDITIONS:- A) DISALLOWANCE U/S. 14A RS. 4,07,158/- 2 B) DISALLOWANCE OF BAD DEBTS RS. 1,32,000/- C) DISALLOWANCE OF RETURN ON RS. 10,84,005/- INVESTMENTS D) DISALLOWANCE ON ACCOUNT OF SALE RS. 91,39,000/- OF RIGHTS CLAIMED AS CAPITAL LOSS THE DISALLOWANCES MADE BY THE AO WERE CONFIRMED BY THE LD. CIT(A). THEREAFTER, THE AO ISSUED NOTICE U/S. 274 READ WITH SECTION 271(1)(C) OF THE I.T. ACT, 1971 FOR LEVY OF PENALTY . THE PENALTY U/S. 271(1)(C) WAS LEVIED ON 31.3.2014 OF RS. 36,58,000/ -. 3. AGGRIEVED WITH THE SAID PENALTY ORDER, THE ASSES SEE FILED THE APPEAL BEFORE THE LD. CIT(A), WHO VIDE HIS IMPUGNED ORDER DATED 04.09.2015 HAS UPHELD THE PENALTY IN DISPUTE AND ACCORDINGLY, DISMISSED THE APPEAL OF THE ASSESSEE. 4. AT THE TIME OF HEARING, LD. AUTHORISED REPRESENT ATIVE OF THE ASSESSEE HAS STATED THAT ASSESSEE HAD APPEALED BE FORE THE LD. CIT(A) AGAINST THE ABOVE SAID ADDITIONS. HOWEVER, THE ASSE SSEE DID NOT PRESS FOR THE DISALLOWANCE MADE ON ACCOUNT OF BAD DEBTS OF R S. 1,32,000/- AND DISALLOWANCE OF EXPENSES ON ACCOUNT OF RETURN OF IN VESTMENT OF RS. 10,84,005/-. IN HIS APPELLATE ORDER DATED 01.2.201 3 THE LD. CIT(A) DID NOT ALLOW THE APPEAL OF THE ASSESSEE. THE ASSESSEE HAD FURTHER FILED APPEAL TO ITAT, NEW DELHI AGAINST DISALLOWANCE U/S . 14A OF RS. 4,07,158/- AND AGAINST LONG TERM CAPITAL LOSS TREAT ED AS BUSINESS INCOME OF RS. 91,39,000/- AND THE ITAT VIDE ITS ORD ER DATED 5.8.2016 IN ITA NO. 2375/DEL/2013 HAD ALLOWED THE APPEAL OF THE ASSESSE AND DELETED THE QUANTUM ADDITIONS OF RS. 4,07,158/- AND RS. 91, 39,000/-. HOWEVER, DURING THE PENALTY PROCEEDINGS, THE AO VIDE HIS ORD ER DATED 31.3.2014 3 IMPOSED PENALTY OF RS. 36,58,000/- U/S. 271(1)(C) O F THE ACT, IN RESPECT OF TOTAL ADDITIONS OF RS. 1,07,62,163/- ON THE ALLE GED GROUND THAT THE ASSESSEE HAD FURNISHED INACCURATE PARTICULARS OF I NCOME. IN VIEW OF THE ABOVE, LD. COUNSEL OF THE ASSESSEE STATED THAT OUT OF FOUR QUANTUM ADDITION ON WHICH THE PENALTY HAS BEEN IMPOSED, TW O QUANTUM ADDITION HAS ALREADY BEEN DELETED BY THE ITAT, A BENCH, NE W DELHI IN ITA NO. 2375/DEL/2013 (AY 2009-10) VIDE ORDER DATED 05.08. 2016. IN THIS BEHALF HE FILED THE COPY OF THE TRIBUNALS ORDER DA TED 05.08.2016 IN ASSESSEES OWN CASE AND REQUESTED THAT PENALTY IN D ISPUTE MAY BE DELETED, BECAUSE THE ASSESSEE HAS NOT FURNISHED ANY INACCURATE PARTICULARS OF INCOME. IT WAS FURTHER SUBMITTED T HAT AO DID NOT RECORD HIS SATISFACTION FOR INITIATION OF PENALTY PROCEEDI NGS AND FURTHER THAT QUANTUM AND PENALTY PROCEEDINGS ARE INDEPENDENT OF EACH OTHER AND PENALTY CANNOT BE IMPOSED SIMPLY ON THE BASIS OF F INDING RECORDED IN THE ASSESSMENT ORDER. LD. COUNSEL OF THE ASSESSEE HAS DRAW OUR ATTENTION TOWARDS THE ASSESSMENT ORDER DATED 30.12.2011 PASSE D U/S. 143(3)(II) OF THE ACT AND STATED THAT WHILE COMPLETING THE ASSESS MENT THE AO HAS OBSERVED .. PENALTY PROCEEDINGS U/S. 271(1) IS BEING INIT IATED SEPARATELY FOR FURNISHING INACCURATE PARTICULARS OF INCOME / CONCEALMENT INCOME. AND ATTACHING A PRINTED NOTICE WITH SUCH ORDER REQUIRING THE ASSESSEE TO SHOW CAUSE WHY PENALTY UN DER SECTION 271(1) OF THE ACT BE NOT LEVIED FOR CONCEALMENT / FILING O F INACCURATE PARTICULARS OF INCOME, IS NOT SUFFICIENT AND THE PENALTY PROCEE DINGS CANNOT BE SAID TO BE VALIDLY INITIATED UNDER SUCH CIRCUMSTANCES. HE F URTHER STATED THAT 4 NEITHER THE ASSESSMENT ORDER NOR THE PRINTED SHOW C AUSE NOTICE NOWHERE STATES THE SPECIFIC CHARGE OF ALLEGED CONCEALMENT A ND / OR FURNISHING OF INACCURATE PARTICULARS OF INCOME VIS--VIS ADDITION MADE. IN VIEW OF THE ABOVE, HE STATED THAT ENTIRE PENALTY PROCEEDINGS ST AND VITIATED, BECAUSE IT IS NOT IN ACCORDANCE WITH LAW AND IN ORDER TO SU PPORT HIS CONTENTION, HE PLACED THE RELIANCE ON THE FOLLOWING DECISIONS:- - HONBLE KARNATAKA HIGH COURT DECISION IN THE CASE OF CIT & ORS. VS. M/S MANJUNATHA COTTON AND GINNIG FACTORY & ORS. (2013) 359 ITR 565 - APEX COURT DECISION IN THE CASE OF CIT & ANR. VS. M/S SSAS EMERALD MEADOWS IN CC NO. 11485/2016 DATED 05.8.2016. IN VIEW OF ABOVE, HE REQUESTED THAT THE PENALTY IN DISPUTE MAY BE CANCELLED AND APPEAL OF THE ASSESSEE MAY BE ALLOW ED. 5. ON THE CONTRARY, LD. DR RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW AND ALSO FILED THE WRITTEN SUBMISSIONS, WHICH ARE REPRODUCED HEREUNDER:- SUB: WRITTEN SUBMISSION IN THE ABOVE CASE- REG. IN THE ABOVE CASE, IT IS HUMBLY SUBMITTED THAT THE FOLLOWING DECISIONS MAY KINDLY BE CONSIDERED: 1. UNION OF INDIA V. PHARAMENDRA TEXTILE PROCESSORS [(2007) 295 ITR 244] (COPY ENCLOSED) WHERE HON'BLE SUPREME COURT HELD THAT PENALTY UNDER SECTION 271 5 (1)(C) IS A CIVIL LIABILITY FOR WHICH WILLFUL CONCE ALMENT IS NOT AN ESSENTIAL INGREDIENT FOR ATTRACTING THE CIVI L LIABILITY AS IS THE CASE IN THE MATTER OF PROCEEDINGS UNDER SECTION 276C 2. CIT VS ZOOM COMMUNICATION (P.) LTD. [191 TAXMAN 179 (DELHI)/[2010] 327 ITR 510 (DELHI)/[2010 ] 233 CTR 465] WHERE HON'BLE DELHI HIGH COURT HELD TH AT IF ASSESSEE MAKES A CLAIM WHICH IS NOT ONLY INCORRE CT IN LAW, BUT IS ALSO WHOLLY WITHOUT ANY BASIS AND EXPLANATION FURNISHED BY HIM FOR MAKING SUCH- A CLA IM IS. NOT FOUND TO BE BONA FIDE, EXPLANATION 1 TO SEC TION 271 (1 )(C) WOULD COME INTO PLAY AND ASSESSEE WILL BE LIABLE TO PENALTY 3. MAK DATA P. LTD. VS. CIT 38 TAXMANN.COM 448 (SC). WHERE HONBLE SUPREME COURT HELD THAT UNDER EXPLANATION 1 TO S. 271(1), VOLUNTARY DISCLOSURE O F CONCEALED INCOME DOES NOT ABSOLVE ASSESSEE OF SECTI ON 271(1) PENALTY IF THE ASSESSEE FAILS TO OFFER AN EXPLANATION WHICH IS BONAFIDE AND PROVES THAT ALL T HE MATERIAL FACTS HAVE BEEN DISCLOSED. 5. CIT VS. GATES FOAM & RUBBER CO [91 ITR 467] CIT VS INDIA SEAFOOD [105 ITR 708] WHERE HON'BLE KERALA 6 HIGH COURT HELD THAT CLAIMING EXCESSIVE DEDUCTION A LSO AMOUNTS TO CONCEALMENT OF INCOME 6. STEEL INGOTS LTD VS. CIT [296 ITR 228] WHERE HON'BLE MADHYA PRADESH HIGH COURT HELD THAT IN CASE OF CONCEALMENT OF TRUE INCOME CHARGEABLE. TO TAX BY MAKING BOGUS CLAIM, LEVY OF PENALTY U/S 271 (1 )(C) READ WITH EXPLANATION 1 IS JUSTIFIED 7. CIT VS ESCORTS FINANCE LTD [183 TAXMAN 453 (DELHI)/[2010] 328 ITR 44 (DELHI)/[2009] 226 CTR 10 5] WHERE HON'BLE DELHI HIGH COURT HELD THAT IF CLAIM M ADE IN RETURN OF INCOME APPEARS TO BE EX FACIE BOGUS, I T WOULD BE TREATED AS A CASE OF CONCEALMENT OR FURNIS HING OF INACCURATE PARTICULARS AND PENALTY PROCEEDING WO ULD BE JUSTIFIED. 6. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS AND PERUSED THE RELEVANT RECORDS. WE FIND THAT ASSESSEE HAD APPEALE D BEFORE THE LD. CIT(A) AGAINST THE QUANTUM ADDITIONS I.E. DISALLOWA NCE U/S. 14A AMOUNTING TO RS. 4,07,158/- AND DISALLOWANCE ON ACC OUNT OF LONG TERM CAPITAL LOSS TREATED AS BUSINESS INCOME AMOUNTING T O RS. 91,39,000/-. HOWEVER, THE ASSESSEE DID NOT PRESS FOR OTHER DISAL LOWANCES MADE ON ACCOUNT OF BAD DEBTS OF RS. 1,32,000/- AND DISALLOW ANCE OF EXPENSES ON ACCOUNT OF RETURN OF INVESTMENT OF RS. 10,84,005/-. WE FURTHER FIND THAT IN HIS APPELLATE ORDER DATED 01.2.2013 THE LD. CIT (A) DID NOT ALLOW THE 7 APPEAL OF THE ASSESSEE AND AGGRIEVED WITH THE ACTIO N OF THE LD. CIT(A), TE ASSESSEE APPEALED BEFORE THE TRIBUNAL AGAINST DISA LLOWANCE U/S. 14A OF RS. 4,07,158/- AND AGAINST LONG TERM CAPITAL LOSS T REATED AS BUSINESS INCOME OF RS. 91,39,000/- AND THE ITAT VIDE ITS ORD ER DATED 5.8.2016 IN ITA NO. 2375/DEL/2013 HAD SET ASIDE THE FINDING OF THE LD. CIT(A) ON THE ISSUE U/S. 14A AND RESTORE THE MATTER TO THE FILE OF THE AO FOR FRESH ADJUDICATION AFTER DUE VERIFICATION OF THE CLAIM O F THE ASSESSEE REGARDING NO EXPENDITURE HAVING BEEN INCURRED AND ALLOWED TH E ISSUE RELATING TO LONG TERM CAPITAL LOSS TREATED AS BUSINESS INCOME O F RS. 91,39,000/- BY DELETED THIS ADDITION. WE FURTHER NOTE THAT DURING THE PENALTY PROCEEDINGS, THE AO VIDE HIS ORDER DATED 31.3.2014 IMPOSED PENALTY OF RS. 36,58,000/- U/S. 271(1)(C) OF THE ACT, IN RESPE CT OF ALL THE FOUR ADDITIONS OF RS. 1,07,62,163/- MENTIONED IN THE GR OUNDS OF APPEAL, AS AFORESAID, ON THE ALLEGED GROUND THAT THE ASSESSEE HAD FURNISHED INACCURATE PARTICULARS OF INCOME. 6.1 AFTER PERUSING THE ASSESSMENT ORDER, WE FIND TH AT AO ALSO DID NOT RECORD HIS SATISFACTION FOR INITIATION OF PENALTY P ROCEEDINGS, BECAUSE WHILE PASSING THE ASSESSMENT ORDER DATED 30.12.2011 PASSE D U/S. 143(3)(II) OF THE ACT, THE AO HAS STATED THAT .. PENALTY PROCEEDINGS U/S. 271(1) IS BEING INITIATED SEPARATELY FOR FURNISHING INACCURAT E PARTICULARS OF INCOME / CONCEALMENT INCOME., WHICH IS NOT SUFFICIENT AND THEREFORE, THE PENALTY PROCEEDINGS CANNOT BE SAID TO BE VALIDL Y INITIATED UNDER SUCH CIRCUMSTANCES. HOWEVER, NOWHERE IN THE ASSESSMENT O RDER STATES THE SPECIFIC CHARGE OF ALLEGED CONCEALMENT AND / OR FUR NISHING OF INACCURATE 8 PARTICULARS OF INCOME. THEREFORE, THE ENTIRE PENALT Y PROCEEDINGS STAND VITIATED, BECAUSE IT IS NOT IN ACCORDANCE WITH LAW, IN VIEW OF THE LAW SETTLED IN THE FOLLOWING CASE LAWS. I) CIT & ANR. VS. M/S SSAS EMERALD MEADOWS 2015 (11) TMI 1620 KARNATAKA HIGH COURT HAS HELD THAT TRIBUNAL HAS CORRECTLY ALLOWED THE APPEAL FILED BY THE ASSESSEE HOLDING THE NOTICE ISSUED BY THE ASSESSING OFFICER UNDER SECTION 274 READ WITH SECTION 271(1)(C) TO BE BAD IN LAW AS IT DID NOT SPECIFY WHICH LIMB OF SECTION 271(1) OF THE ACT, THE PENALTY PROCEEDINGS HAD BEEN INITIATED I.E., WHETHER FOR CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME. THE TRIBUNAL, WHILE ALLOWING THE APPEAL OF THE ASSESSEE, HAS RELIED ON THE DECISION OF THE DIVISION BENCH OF THIS COURT RENDERED IN THE CASE OF COMMISSIONER OF INCOME TAX VS. MANJUNATHA COTTON AND GINNING FACTORY (2013) (7) TMI 620- KARANATAKA HIGH COURT. THUS SINCE THE MATTER IS COVERED BY JUDGMENT OF THE DIVISION BENCH OF THIS COURT, WE ARE OF THE OPINION NO SUBSTANTIAL QUESTION OF LAW ARISES DECIDED IN FAVOUR OF ASSESSEE. II) CIT & ANR. VS. M/S SSAS EMERALD MEADOWS HONBLE SUPREME COURT OF INDIA REPORTED IN 2016 (8) TMI 1145 SUPREME COURT. THE APEX COURT HELD THAT HIGH COURT ORDER CONFIRMED (2015) (11) TMI 1620 (SUPRA) KARNATAKA HIGH COURT. NOTICE ISSUED BY AO UNDER SECTION 274 READ WITH SECTION 271(1)(C) TO BE BAD IN LAW AS IT DID 9 NOT SPECIFY WHICH LIMB OF SECTION 271(1) OF THE ACT, THE PENALTY PROCEEDINGS HAD BEEN INITIATED I.E., WHETHER FOR CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME DECIDED IN FAVOUR OF ASSESSEE. 6.2 IN THE BACKGROUND OF THE AFORESAID DISCUSSIONS AND RESPECTFULLY FOLLOWING THE PRECEDENTS, WE DELETE THE PENALTY IN DISPUTE AND DECIDE THE ISSUE IN FAVOR OF THE ASSESSEE AND AGAINST THE REVE NUE. SINCE WE HAVE DELETED THE PENALTY AND DID NOT DISCUSS THE PENALTY ISSUE ON MERIT, HENCE, THE CASE LAWS CITED BY THE LD. DR ARE NOT USEFUL AT THIS JUNCTURE, BECAUSE THESE CASE LAWS ARE ON THE MERITS OF THE CASE, WHIC H WE HAVE NOT DISCUSSED. 7. IN THE RESULT, THE APPEAL FILED BY THE ASSESS EE STANDS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 04/12/2017. SD/- SD/- [L.P. SAHU] [H.S. SIDHU] ACCOUNTANT MEMBER JUDICIAL MEMBER DATE 04/12/2017 SRBHATNAGAR COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY OR DER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES