Late Purnima Bhandari through L/H Shri N.K. Dewan, New Delhi V. DCIT, New Delhi

ITA 6365/DEL/2015

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 5629 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 1 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-01-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 01-12-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: B K ANAND
• Keywords: Business income; Salary income; Corroborative evidences
• Section: 271(1)(c); 143(3); 27

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : A , NEW DELHI BEFORE SHRI AMIT SHUKLA , JUDICIAL M EMBER AND SH RI O.P. KANT , ACCOUNTANT MEMBER ITA NO .6365 /DE L/ 2015 ASSESSMENT YEAR : 2010 - 11 LATE PURNIMA BH ANDARI THROUGH L/H SHRI N.K. DEWAN, 45, GOLF LINKS, NEW DELHI VS. DCIT, CIRCLE - 14(2), C.R. BUILDING, I.P. ESTATE, NEW DELHI PAN : AAEBP4567H (APPELLANT) (RESPONDENT) APPELLANT BY SHRI B.K. ANAND, CA RESPONDENT BY SHRI PRAVEEN KUMAR, SR.DR ORDER PER O.P. KANT, A .M. : THIS APPEAL BY THE LEGAL HEIR OF THE ASSESSEE HAS BEEN FILED AGAINST THE ORDER DATED 23/09/2015 PASSED BY THE LD. COMMISSIONER OF INCOME - TAX (APPEALS) - 17, NEW DELHI [IN SHORT THE LD. CIT(A) ] IN RELATION TO PENALTY FOR FILING INACCURATE PARTICULARS OF INCO ME FOR ASSESSMENT YEAR 2010 - 11. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE REPRODUCED AS UNDER: 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LEARNED CIT (APPEAL) ERRED IN CONFIRMING THE PENALTY ORDER IN RESPECT OF PENALTY U/S 271 (1 )(C) OF THE ACT IN RESPECT OF DATE OF HEARING 17.01.2019 DATE OF PRONOUNCEMENT 30.01.2019 2 ITA NO. 6365/DEL/2015 ADDITIONS OF RS.66,94,673 AND RS.2,99,122 MADE TO THE RETURNED INCOME OF THE ASSES SEE. 2. THAT IN RESPECT OF THE ADDITION OF RS.66,94,673, THE LEARNED CIT (APPEAL) ERRED IN NOT HOLDING THAT A MERE FAILURE ON PART OF THE FIRM ENGAGED BY THE ASSESSEE TO CORRECTLY FURNISH HER RETURN OF INCOME TAX COULD NOT BE ENOUGH TO WARRANT PENALTY ON HER AS THERE WAS NOTHING TO SHOW THAT HER STATEMENT IN THIS REGARD WAS NOT A CORRECT OR A BONA - FIDE ONE. 3. THAT THE LEARNED CIT (APPEAL) ERRED IN NOT HOLDING THAT THE AO DISALLOWED ENTERTAINMENT EXPENSES OF RS.2,99,122 BEING OF A 'PERSONAL NATURE' AND THREFORE NO PENALTY FOR FURNISHING ANY INACCURATE PARTICULARS OF INCOME COULD BE LEVIED AS IT WAS ONLY A SUBJECTIVE ANALYSIS OF THE AO WHILE DISALLOWING THE CLAIM. 4. THAT THE ORDER OF THE LEARNED AUTHORITIES BELOW BEING CONTRARY TO THE FACTS AND CIRCUMST ANCES OF THE CASE AND IN LAW THE APPEAL BE ALLOWED. 2. B RIEFLY STATED FACTS OF THE CASE ARE THAT THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF PROVIDING DESIGN CONSULTANCY UNDER HER PROPR IETORSHIP BUSINESS STYLED AS C OUNTR Y H OUSE . CONSEQUENT TO FILING OF RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION ON 27/09/2010 DECLAR ING TOTAL TAXABLE INCOME OF RS.6,65,780/ - , THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY AND SCRUTINY ASSESSMENT UNDER SECTION 143(3) OF THE INCOME - TAX ACT, 1961 (IN SHORT THE A CT ) WAS COMPLETED ON 31/03/2013 , AFTER MAKING FOLLOWING FOUR ADDITIONS/DISALLOWANCES: ( I ) LONG - TERM CAPITAL LOSS OF RS. 66,94,673/ - REMAIN TO BE ADDED BACK TO BUSINESS PROFIT IN THE COMPUTATION OF INCOME 3 ITA NO. 6365/DEL/2015 ( II ) ENTERTAINMENT EXPENSES OF RS.2,99, 122/ - CLAIMED BY THE ASSE SSEE FOR ENTERTAINING CUSTOMERS DISALLOWED IN ABSENCE OF SUPPORTING EVIDENCES ( III ) DONATION OF RS. 25,000 / - CLAIMED AS DEDUCTION WAS DISALLOWED IN ABSENCE OF DOCUMENTARY EVIDENCE ( IV ) SALARY INCOME SHOWN IN THE RETURN OF INCOME SHORT BY A N AMOUNT OF RS. 14,00,000/ - 2. 1 I N THE ASSESSMENT ORDER UNDER SECTION 143(3) OF THE A CT DATED 31/03/2013, THE ASSESSING OFFICER INITIATED PENALTY PROCEEDINGS UNDER SECTION 271 ( 1 )(C) OF THE A CT FOR FURNISHING INACCURATE PARTICULARS OF THE INCOME. THE ASSESSING OFFICER ISSUED A SHOW CAUS E NOTICE ON 22/02/2013 AND IN RESPONSE TO WHICH, THE ASSESSEE FILED REPLY ON 07/05/2013. THEREAFTER , THE ASSESSING OFFICER AGAIN ISSUED NOTICE, HOWEVER, THE SAME WAS NOT REPLIED BY THE ASSESSEE. THE ASSESSING OFFICER HAS NOTED IN THE IMPUGNED PENALTY ORDE R THAT THE ASSESSEE DID NOT APPEAL AGAINST THE ASSESSMENT ORDER AND THUS THE ASSESSEE HAS ACCEPTED FILING OF INACCURATE PARTICULARS OF INCOME AND HE LEVIED PENALTY AMOUNTING TO RS. 26,01,400/ - I.E. 100% OF THE TAX SOUGHT TO BE EVADED ON THE INCOME OF RS. 84, 18, 800 / - . 2.2 ON FURTHER APPEAL, THE LD. CIT(A) DELETED PENALTY ON THE ADDITION/DISALLOWANCES RELATED TO DONATION OF RS. 25,000/ - AND SALARY AMOUNT OF R S. 14,00,000/ - AND SUSTAINED THE PENALTY IN RESPECT OF THE BALANCE ADDITION O F LONG - TERM CAPITAL LOSS OF RS. 66,94,673/ - AN D ENTERTAINMENT EXPENSES OF RS. 2,99,122/ - . AGGRIEVED WITH THE PENALTY SUSTAINED, THE ASSESSEE IS IN APPEAL RAISING THE GROUNDS AS REPRODUCED ABOVE. 4 ITA NO. 6365/DEL/2015 3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD , INCLUDING THE ORDER OF THE LOWER AUTHORITIES. WE FIND THAT PENALTY HAS BEEN SUSTAINED IN RESPECT OF THE TWO ADDITIONS/DISALLOWANCES. 4. THE FIRST ADDITION IN RESPECT OF WHICH PENALTY HAS BEEN SUSTAINED IS OF RS. 66,94,673/ - . THE ASSESSING OFFICER OBSERVE D FROM THE PROFIT AND LOSS ACCOUNT THAT THE ASSESS EE HAS DEBITED AN AMOUNT OF RS. 66,94,673/ - ON ACCOUNT OF THE LONG - TERM CAPITAL LOSS, HOWEVER WHILE CALCULATING THE TAXABLE INCOME, THE ASSESSEE WAS REQUIRED TO ADD BACK SAME IN THE COMPUTATION OF INCOME, BUT IT WAS LEFT TO BE ADDED IN THE COMPUTATION OF INCOME AND HENCE THE INCOME WAS CALCULATED L ESS BY WAY OF THE AMOUNT OF RS.66,94, 673/ - . A CCORDINGLY , HE MADE THE ADDITION. BEFORE US, THE LD. COUNSEL HAS FILED COPY OF THE PROFIT AND LOSS ACCOUNT ALONG WITH RE LEVANT SCHEDULES OF THE PROFIT AND LOSS ACCOUNT. WE FIND THAT THE ASSESSEE HAS DEBITED LO NG - TERM CAPITAL LOSSES (EQUITY), AMOUNTING TO RS.66,94, 673/ - UNDER S CHEDULES VII ( SELLING AND ADMINISTRATE EXPENSES ) OF PROFIT AND LOSS ACCOUNT . BEFORE THE LD. CIT(A) , IT WAS CONTENDED ON BEHALF OF THE ASSESSEE THAT SHE HAD ENGAGED SERVICES OF A FIRM OF CHARTERED ACCOUNTANTS FOR PREPARING AND FILING HER RETURN THROUGH E - FILING SERVICES. IT WAS FURTHER SUBMITTED THAT THIS MISTAKE WAS ADMITTED BY THE ASSESSEE AND NO APPE AL WAS FILED AGAINST THE ADDITION MADE IN THE ASSESSMENT ORDER. IT WAS FURTHER CONTENDED THAT THE MISTAKE WAS COMMITTED AT THE OFFICE OF THE CHARTERED A CCOUNTANTS, WHO WERE ENGAGED FOR FILING TAX RETURN AND ON BEING POINTED OUT BY THE ASSESSING OFFICER, TH E CHARTERED ACCOUNTANTS ACCEPTED THIS MISTA KE. THIS WAS ACCEPTED AS A BONA FIDE MISTAKE BY THE ACCOUNTANT AND IT WAS 5 ITA NO. 6365/DEL/2015 SUBMITTED THAT THERE WAS NO INTENTION ON THE PART OF THE ASSESSEE TO FILE INACCURATE PARTICULARS OF HER INCOME. IN SUPPORT OF THE CONTENTIO N, RELIANCE WAS PLACED ON THE ORDER OF T HE ITAT , MUMBAI BENCH IN ITA NO.2924/MUM/2011 IN THE CASE OF SHRI SURESH KUMAR GULATI , WHEREIN RELYING ON THE JUDGEMENT OF THE HON BLE SUPREME COURT IN THE CASE OF PRICE WATERHOUSE COOPERS PRIVATE LIMITED , 348 ITR 30 6 (SC), IT WAS HELD THAT PENALTY UNDER SECTION 271(1)(C) OF THE A CT NEED NOT BE LEVIED WHERE THERE HAS BEEN SOME MISTAKE IN COMPUTATION OF THE TOTAL INCOME, MERELY AS A TECHNICAL FAULT. 4.1 THE LD. CIT(A) , HOWEVER , WAS OF THE VIEW THAT IT WAS NOT A TECHNICAL OR CLERICAL MISTA KE OR IT IS NOT THE CASE OF ANY AD - HOC ADDITION MADE OR ANY CLAIM OF EXPENDITURE WAS DISALLOW ED. ACCORDING TO THE LD. CIT(A), IT WAS A DELIBERATE ATTEMPT ON THE PART OF THE ASSESSEE NOT TO SHOW THE CORRECT INCOME. THE LD. CIT(A) REFERRED TO THE DECISION OF THE HON BL E SUPREME COURT IN THE CASE OF U NION OF INDIA VS. DHARMENDRA T EXTILE P ROCESSORS , 295 ITR 244(SC) TO EMPHASIZE THAT E XPL ANATION - 1, APPENDED TO SECTION 27 1 ( 1 )(C) INDICATE ELEMENT OF STR ICT LIABILITY ON THE ASSESSEE FOR CONCEALMENT OR FURNISHING INACCURATE PARTICULARS OF INCOME WHILE FILING RETURN OF INCOME. FURTHER, HE REFERRED TO THE DECISION IN THE CAS E OF ACIT VS JASUBHAI BUSINESS SERVICE P RIVATE L IMITED , (2006) 5 SOT 36 MUM, WHEREIN IT IS HELD THAT ANY FACT MATERIAL FOR DETERMINATION OF AN ITEM AS INCOME OR MATERIAL FOR CORRECT COMPUTATION IS NOT FILED OR THAT FILE ED IS NOT CORRECT, THEN THE ASSESSEE WOULD BE LIABL E FOR PENALTY UNDER SECTION 27 1 ( 1 )(C) OF THE ACT. THE LD. CIT(A) ALSO R EFERRED TO THE OTHER DECISIONS MENTIONED IN THE IMPUGNED ORDER INCLUDING THE DECISION OF THE HON BLE DELHI HIGH COURT IN THE CASE OF CIT 6 ITA NO. 6365/DEL/2015 VERSUS ESCORT FINANCE LTD (183 TAXMAN 453) (DEL) 292 ITR 658 , WHEREIN IT IS OBSERVED THAT IF CLAIM MADE IN RETURN APPEA RS TO BE EX FACIE BOGUS, IT WOULD BE TREATED AS CASE OF CONCEALMENT OR FURNISHING OF INACCURATE PARTICULARS OF INCOME PARTICULARLY WHEN THE DEPARTMENT IS ACCEPTING THE RETURN OF INCOME IN 95% OF THE CASES WITHOUT SUBJECTING THEM TO SCRUTINY/VERIFICATION. 4 .2 BEFORE US, THE LD. COUNSEL REITERATED THE SUBMISSIONS MADE BEFORE THE LD. CIT(A), WHEREAS THE LD. DR RELIED ON THE FINDING OF THE LD. CIT(A). 4.3 IN THE INSTANT CASE , THE ASSESSEE HAS FURNISHED ALL INFORMATION RELATED TO THE LONG - TERM CAPITAL LOSS INCL UDING THE COPY OF PROFIT AND LOSS ACCOUNT AND RELEVANT SCHEDULE OF SELLING AND ADMINISTRATIVE EXPENSES. IN THE SELLING AND ADMINISTRATIVE EXPENSES, THE ITEM OF LONG - TERM CAPITAL LOSS (EQUITY) HAS BEEN CLEARLY MENTIONED. THE LONG - TERM CAPITAL LOSS NOT BEING PART OF THE BUSINESS INCOME, THE ASSESSEE WAS REQUIRED TO ADD BACK THE SAME FOR THE PURPOSE OF COMPUTING INCOME UNDER THE HEAD PROFIT AND GAINS OF BUSINESS . THERE IS NO DISPUTE ON THE FACT THAT THIS ITEM HAS NOT BEEN ADDED BACK TO THE PROFIT IN CASE OF THE BUSINESS UNDER THE COMPUTATION OF INCOME, WHICH RESULTED IN UNDERSTATEMENT OF INCOME IN THE RETURN OF INCOME FILED. IN VIEW OF EXPL ANATION - 1 BELOW THE SECTION 27 1 ( 1 )(C) OF THE A CT, THE PENALTY IS LEVIABLE WHERE THE ASSESSEE OFFERS AN E XPLANATION WHICH IS NOT ABLE TO SUBSTANTIA TE OR FAILS TO PROVE THAT SUCH E XPLANATION IS BONAFIDE AND ALL THE FACTS RELATING TO THE SAME AND MATERIAL TO THE COMPUTATION OF HIS TOTAL INCOME HAVE BEEN DISCLOSED BY HIM. IN THE INSTANT CASE , ASSESSEE HAS FURNISHED EXPLANATION T HUS WE HAV E TO EXAMINE, WHETHER THE EXPLANATION FURNISHED IS BONA FIDE AND THE ASSESSEE HAS DISCLOSE D ALL 7 ITA NO. 6365/DEL/2015 MATERIAL FACTS TO THE COMPUTATION OF HIS TOTAL INCOME. WE NOTE THAT ALL THE FACTS IN RESPECT O F LONG - TERM CAPITAL LOSS OF RS. 66,94,673/ - WAS AVAILABLE B EFORE THE ASSESSING OFFICER IN THE PROFIT AND LOSS ACCOUNT AND SCHEDULE OF SELLING AND ADMINISTRATIVE EXPENSES. ONLY MISTAKE WAS MADE ON THE PART OF THE ACCOUNTANT WHO PREPARED THE COMPUTATION OF THE INCOME. BUT THE MATERIAL FACTS ABOUT THE LONG - TERM CAPIT AL LOSS WAS FULLY DISCLOSE D IN THE PROFIT AND LOSS ACCOUNT. ON BEING POINTED OUT THIS MISTAKE, THE ASSESSEE HAS ADMITTED AND EVEN DID NOT FILE ANY FURTHER APPEAL O N THE ADDITION. THIS SHOWS BONA FIDE ON THE PART OF THE ASSESSEE AND WE DO NOT FIND ANY DELIBE RATE ATTEMPT ON THE PART OF THE ASSESSEE FOR NOT OFFERING THE INCOME IN THE RETURN OF INCOME, PARTICULARLY WHEN SAID ITEM HAS ALREADY BEEN DISCLOSED IN THE PROFIT AND LOSS ACCOUNT. IN VIEW OF ABOVE FACTS AND CIRCUMSTANCES AND THE EXPLANATION - 1 TO SECTION 2 7 1 (1)(C) OF THE A CT, WE DO NOT FIND ANY MERIT IN SUSTAINING THE PENALTY BY THE LD. CIT(A) AND ACCORDINGLY, WE DELETE THE SAME. 5 . SIMILARLY, IN RESPECT OF THE SECOND ADDITION OF DISALLOWANCE O F ENTERTAINMENT EXPENSES OF RS. 2,99,122/ - IS CONCERNED, THE ASSESSEE EXPLAINED THAT EXPENSES WERE INCURRED ON ARRANGING PARTIES AND GET TOGETHER IN RELATION TO DESIGN CONSULTANCY BUSINESS OF THE ASSESSEE. THE CONTENTION OF THE ASSESSING OFFICER IS THAT THE ASSESSEE FAILED TO SUBSTANTIATE HER CLAIM AND ACCORDING TO HIM THAT EXPENSES WERE OF PERSONAL NATURE. THUS , THE CLAIM HAS NOT BEEN FOUND ACCEPTABLE BY THE ASSESSING OFFICER . WE NOTE THAT HON BLE SUPREME COURT IN THE CASE OF R ELIANCE PETRO PRODUCTS PRIVATE LIMITED (2010) 189 TAXMAN 322 (SC ) HAS HELD THAT MERELY BECAUSE ASSESSEE HAD CLAIMED 8 ITA NO. 6365/DEL/2015 THE EXPENDITURE, WHICH CLAIM WAS NOT ACCEPTE D OR WAS NOT ACCEPTABLE TO THE R EVENUE, THAT BY ITSELF WOULD NOT ATTRACT THE PENALT Y UNDER SECTION 27(1)(C) OF THE A CT. THUS , RESPECTFULLY, FOLLOWING THE ABOVE D ECISION OF THE HON BLE SUPREME COURT, THE PENALTY IN RESPECT OF THE REJECTION OF THE CLAIM OF ENTERTAI NMENT EXPENSES AMOUNTING TO RS.2, 99,122/ - CANNOT BE LEVIED. ACCORDINGLY, WE SET ASIDE THE FINDING OF THE LD. CIT(A) AND THE ASSESSING OFFICER ON THE ISSUE IN DISPUTE AND DIRECT THE ASSESSING OFFICER TO CANCEL THE CORRESPONDING PENALTY. 6. THE GROUND S NO. 1 TO 3 OF THE APPEAL ARE ACCORDINGLY ALLOWED. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER IS PRONOUN CED IN THE OPEN COURT ON 3 0 T H JANUARY , 201 9 . S D / - S D / - [ AMIT SHUKLA ] [O.P. KANT] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 3 0 T H JANUARY, 2019 . RK / - [D.T.D.S] COPY FORWARDED TO: 1 . APPELLANT 2 . RESPONDENT 3 . CIT 4 . CIT(A) 5 . DR ASST. REGISTRAR, ITAT, NEW DELHI