M/s. Yum! Restaurants Marketing Pvt. Ltd., Gurgaon V. ITO, New Delhi

ITA 6598/DEL/2015

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 3743 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 2 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-02-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Assessment Year: 2000-2001
• Appeal Filed On: 11-12-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SURENDER PAL
• Assessee Lawyers: ANANYA KAPOOR S
• Keywords: Depreciation; Question of law; Difference of opinion; Capital expenditure
• Section: 271(1)(c); 143(3); 143(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : F : NEW DELHI BEFORE SHRI R.K. PANDA, ACCOUNTANT MEMBER AND MS SUCHITRA KAMBLE, JUDICIAL MEMBER ITA NO.6598/DEL/2015 ASSESSMENT YEAR : 2000-01 YUM ! RESTAURANTS MARKETING PVT. LTD., 12 TH FLOOR, TOWER D, GLOBAL BUSINESS PARK, MG ROAD, GURGAON. PAN: AAACY1883E VS. ITO, WARD-27(4), NEW DELHI. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI SALIL KAPOOR & MS ANANYA KAPOOR, ADVOCATES REVENUE BY : SHRI SURENDER PAL, SR. DR DATE OF HEARING : 12.02.2019 DATE OF PRONOUNCEMENT: 15.02.2019 ORDER PER R.K. PANDA, AM: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 07 TH SEPTEMBER, 2015 OF THE CIT(A)-9, NEW DELHI, RELATING TO ASSES SMENT YEAR 2000-01. 2. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESS EE IS A COMPANY IN RESTAURANT BUSINESS. IT FILED ITS RETURN OF INCOME ON 29 TH DECEMBER, 2000 DECLARING TOTAL LOSS OF RS.99,81,920/-. THE RETURN WAS PROCESSED U/S 143(1) ON 8 TH MAY, 2001. SUBSEQUENTLY, ON THE BASIS OF THE REPORT OF THE SPECIAL AUDITOR, THE CASE OF THE ASSESSEE WAS REOPENED ITA NO.6598/DEL/2015 2 BY ISSUE OF NOTICE U/S 148. THE ASSESSING OFFICER COMPLETED THE ASSESSMENT U/S 143(3)/147 ON 29 TH DECEMBER, 2006 DETERMINING THE TOTAL INCOME OF THE ASSESSEE AT RS.2,54,61,031/-. HOWEVER, AFTER ALLOWING CARRIED FORWARD BUSINESS LOSS AND DEPRECIATION OF EARLIER YEARS, THE TOTAL INCOME WAS DETERMINED AT NIL. THE ASSESSEE PREFERRED APPEAL BEFORE THE CIT(A) AGAINST THE VARI OUS ADDITIONS/DISALLOWANCES MADE BY THE ASSESSING OFFICER. HOWEVER, THERE WAS NOT M UCH RELIEF AND THE LD.CIT(A) UPHELD THE FINDINGS OF THE ASSESSING OFFICER. THER EAFTER, THE ASSESSING OFFICER INITIATED PENALTY PROCEEDINGS U/S 271(1)(C) OF THE IT ACT ON ACCOUNT OF THE FOLLOWING THREE ADDITIONS:- A) EXCESS LEASE RENT FOR MD - RS.12,60,000/- B) DISALLOWANCE ON ACCOUNT OF PERSONAL EXPENSES - RS.4 5,000/- C) ADDITION ON ACCOUNT OF CAPITAL NATURE OF EXPENSES - RS.30,880/- TOTAL - RS.13,35,880/- 3. REJECTING VARIOUS EXPLANATIONS GIVEN BY THE ASSE SSEE, THE ASSESSING OFFICER LEVIED PENALTY OF RS.5,28,340/- U/S 271(1)(C). IN APPEAL, THE LD.CIT(A) CONFIRMED THE PENALTY SO LEVIED BY THE ASSESSING OFFICER U/S 271( 1)(C) OF THE ACT. 4. AGGRIEVED WITH SUCH ORDER OF THE CIT(A), THE ASS ESSEE IS IN APPEAL BEFORE THE TRIBUNAL BY RAISING THE FOLLOWING GROUNDS:- THE FOLLOWING GROUNDS OF APPEAL ARE MUTUALLY EXCLU SIVE OF AND WITHOUT PREJUDICE TO EACH ANOTHER- 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AN D IN LAW, THE LD. CIT(A) ERRED IN UPHOLDING THE ORDER OF THE LD. AO L EVYING PENALTY ON THE APPELLANT UNDER SECTION 271(1 )(C) OF THE ACT AMOUN TING TO RS. 5,46,098. ITA NO.6598/DEL/2015 3 2. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN UPHOLDING THE LEVY OF PENALTY I N RESPECT OF THE ALLEGED EXCESSIVE LEASE RENTALS PAID FOR OBTAINING RENT FRE E ACCOMMODATION FOR THE MANAGING DIRECTOR MERELY BECAUSE THE ADDITION WAS U PHELD BY THE HON'BLE INCOME TAX APPELLATE TRIBUNAL (TTAT) IN THE QUANTUM PROCEEDINGS. 3. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN UPHOLDING THE LEVY OF PENALTY I N RESPECT OF THE ALLEGED PERSONAL EXPENDITURE AND CAPITAL EXPENDITURE MERELY BECAUSE THE DISALLOWANCE WAS UPHELD BY THE CIT(A) IN THE QUANTUM PROCEEDINGS . 4. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN UPHOLDING THE LEVY OF PENALTY M ERELY BECAUSE HIS PREDECESSOR HAS UPHELD THE PENALTY ON SIMILAR ISSUE S IN OTHER YEARS. 5. THAT THE LD. CIT(A) HAS FAILED TO APPRECIATE THE SE TTLED JUDICIAL POSITION THAT ASSESSMENT PROCEEDINGS ARE SEPARATE AND DISTIN CT FROM PENALTY PROCEEDINGS AND THE FACT THAT SOME ADDITION IS MADE IN THE ASSE SSMENT COULD NOT AUTOMATICALLY JUSTIFY THE IMPOSITION OF PENALTY UNDER SECTION 271 (L)(C) OF THE ACT. 6. THAT THE LD. CIT(A) HAS COMPLETELY FAILED TO APPREC IATE THAT PENALTY UNDER SECTION 271(L)(C) OF THE ACT CANNOT BE LEVIED MERELY BECAUSE OF REJECTION OF A BONA FIDE CLAIM OF THE APPELLANT. 5. THE ASSESSEE HAS ALSO FILED APPLICATION DATED 4 TH FEBRUARY, 2019 FOR ADMISSION OF FOLLOWING ADDITIONAL GROUNDS:- GROUND 7: 'THAT THE NOTICE ISSUED UNDER SECTION 271(1)(C)/ 2 74 OF THE ACT, AND THE ORDER PASSED UNDER SECTION 271(L)(C) OF THE ACT ARE ILLEGAL, BAD IN LAW AND WITHOUT JURISDICTION. GROUND 8: 'THAT THE PENALTY HAS BEEN INITIATED VIDE NOTICE UN DER SECTION 271(L)(C)/ 274 OF THE ACT WITHOUT ANY SPECIFIC CHAR GE, HENCE, THE SAID NOTICE AND THE ORDER PASSED UNDER SECTION 271(L)(C) OF THE ACT ARE ILLEGAL, BAD IN LAW AND WITHOUT JURISDICTION. GROUND 9: 'THAT SATISFACTION RECORDED/CHARGE LEVIED WHILE COM PLETING THE ASSESSMENT, AND WHILE LEVYING THE PENALTY ARE DIFFE RENT AND HENCE THE NOTICE ISSUED UNDER SECTION 274 OF THE ACT, AND THE ORDER PASSED UNDER SECTION 27L(L)(C) OF THE ACT ARE ILLEGAL, BAD IN LAW AND WITHOUT JURI SDICTION. GROUND 10: THAT THE LEVY OF PENALTY IS ILLEGAL, UNJUST AND NO T IN ACCORDANCE WITH LAW AS THE MANDATORY REQUIREMENTS OF SECTION 2 71(L)(C) HAVE NOT BEEN MET IN THE INSTANT CASE. ITA NO.6598/DEL/2015 4 GROUND 11: THAT THE SAID ADDITIONS MADE BY THE AO ARE BASED O N DIFFERENCE OF OPINION ON ACCOUNT OF ALLOWABILITY OF THE CLAIM OF THE ASSESSE, AND AS SUCH NO PENALTY CAN BE LEVIED IN SUCH CASES. 6. RELYING ON THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF NTPC LTD., 229 ITR 383, THE LD. COUNSEL FOR THE ASSESSEE SUBMI TTED THAT THIS GROUND BEING PURELY LEGAL IN NATURE AND NO FRESH FACTS ARE REQUIRED TO BE INVESTIGATED, THE ADDITIONAL GROUNDS RAISED BY THE ASSESSEE BE ADMITTED FOR ADJUDICATION . 7. THE LD. DR, ON THE OTHER HAND, OPPOSED THE ADMISSIO N OF THE ADDITIONAL GROUND RAISED BY THE ASSESSEE. HE SUBMITTED THAT THE ASSE SSEE HAS NEITHER OBJECTED BEFORE THE ASSESSING OFFICER NOR RAISED ANY GROUND BEFORE THE CIT(A) ON THE ISSUE OF NON-STRIKING OF THE INAPPROPRIATE WORDS AND, THEREFORE, THE ASSE SSEE SHOULD BE PRECLUDED FROM RAISING THESE ADDITIONAL GROUNDS. EVEN OTHERWISE A LSO REFERRING TO THE COPY OF THE ASSESSMENT ORDER, THE LD. DR DREW THE ATTENTION OF THE BENCH TO THE LAST PAGE OF THE ASSESSMENT ORDER AND SUBMITTED THAT THE ASSESSING O FFICER WHILE INITIATING THE PENALTY PROCEEDINGS U/S 271(1)(C) HAS CATEGORICALLY MENTION ED THAT THE SAME ARE INITIATED SEPARATELY FOR FURNISHING INACCURATE PARTICULARS OF INCOME AND THEREBY CONCEALING INCOME. 8. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES AND PERUSED THE RELEVANT MATERIAL ON RECORD. SINCE THE ADDITIONAL GROUNDS RAISED BY THE ASSESSEE ARE PURELY LEGAL ONES AND NO FRESH FACTS ARE REQUIRED T O BE INVESTIGATED, THEREFORE, WE ADMIT THE ADDITIONAL GROUNDS RAISED BY THE ASSESSEE. ITA NO.6598/DEL/2015 5 9. THE LD. COUNSEL FOR THE ASSESSEE, REFERRING TO THE NOTICE ISSUED U/S 274 READ WITH SECTION 271 OF THE IT ACT DATED 29 TH DECEMBER, 2006, DREW THE ATTENTION OF THE BENCH TO THE SAID NOTICE AND SUBMITTED THAT THE INAPPROPR IATE WORDS IN THE SAID NOTICE HAS BEEN STRUCK OFF BY THE ASSESSING OFFICER. THEREFOR E, IT IS NOT DISCERNIBLE FROM THE PENALTY NOTICE AS TO UNDER WHICH LIMB OF THE PROVIS IONS THE ASSESSING OFFICER HAS INITIATED THE PENALTY PROCEEDINGS AND LEVIED PENALT Y U/S 271(1)(C). REFERRING TO THE COPY OF THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEARS 2006-07, 2002-03 AND 2003-04 VIDE ITA NOS.894, 895, 896/DEL/ 2013, ORDER DATED 28 TH JUNE, 2017, SHE SUBMITTED THAT UNDER IDENTICAL CIRCUMSTAN CES, THE TRIBUNAL HAS CANCELLED THE PENALTY SO LEVIED BY THE ASSESSING OFFICER AND UPHE LD BY THE CIT(A). THEREFORE, THIS BEING A COVERED MATTER IN FAVOUR OF THE ASSESSEE, T HE PENALTY SO LEVIED BY THE ASSESSING OFFICER AND UPHELD BY THE CIT(A) SHOULD BE CANCELLE D. 9.1 SO FAR AS THE MERIT OF THE CASE IS CONCERNED, THE L D. COUNSEL FOR THE ASSESSEE, REFERRING TO THE ORDER OF THE TRIBUNAL, SUBMITTED T HAT OUT OF THE THREE ADDITIONS ON WHICH PENALTY HAS BEEN LEVIED BY THE ASSESSING OFFI CER, THE DISALLOWANCE OF ALLEGED PERSONAL EXPENDITURE HAS BEEN ALLOWED BY THE TRIBUN AL AT PARA 7.2 OF THE ORDER. HOWEVER, THE REMAINING TWO ADDITIONS HAVE BEEN CONF IRMED BY THE TRIBUNAL. RELYING ON VARIOUS DECISIONS INCLUDING THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS. RELIANCE PETRO PRODUCTS PVT. LTD., REPORTED IN 322 ITR 158 (SC) , SHE SUBMITTED THAT MERE MAKING OF A CLAIM WHICH IS NOT SUSTAINABLE IN LAW BY ITSELF WILL NOT AMOUNT TO FURNISHING INACCURATE PARTICULARS REGARDI NG THE INCOME OF THE ASSESSEE. SUCH ITA NO.6598/DEL/2015 6 A CLAIM MADE IN THE RETURN CANNOT AMOUNT TO FURNISH ING OF INACCURATE PARTICULARS. SHE ACCORDINGLY SUBMITTED THAT BOTH LEGALLY AND FACTUAL LY THE PENALTY LEVIED BY THE ASSESSING OFFICER AND SUSTAINED BY THE CIT(A) IS NO T JUSTIFIED. 10. THE LD. DR, ON THE OTHER HAND, HEAVILY RELIED ON TH E ORDER OF THE CIT(A). REFERRING TO THE ORDER OF THE CIT(A), HE SUBMITTED THAT AN ENTITY M/S MEZBAAN HOTELIERS (P) LTD. (WHOSE DIRECTORS WERE THE FATHER AND WIFE OF THE MANAGING DIRECTOR OF THE ASSESSEE) HAD ENTERED INTO A LEASE AGREEMENT WITH ONE MRS. SURENDRA JUDGE FOR TAKING A HOUSE PROPERTY ON LEASE. THE ANNUAL LEASE RENTALS SETTLED WITH MRS. SURENDRA JUDGE WERE RS.2,40,000/- PER ANNUM. THE ASSESSEE C OMPANY THEN TOOK THIS HOUSE PROPERTY ON SUB-LEASE FROM M/S MEZBAAN HOTELIERS FO R PROVIDING RESIDENCE TO ITS MANAGING DIRECTOR MR. SANDEEP KOHLI. THE ANNUAL LEA SE RENT HAS BEEN SETTLED OF RS.15 LACS PER ANNUM. THE ASSESSEE HAD ALSO PAID A SECUR ITY OF RS.50 LACS AND ALSO SPENT HUGE AMOUNT FOR RENOVATION. THE TAX AUDITOR HAD NO T REPORTED THIS TRANSACTION FOR THE PURPOSE OF SECTION 40(A)(2)(B) OF THE ACT. 11. HE SUBMITTED THAT HOW A PROPERTY WHICH FETCHED RS.2 0,000/- IN THE HANDS OF THE ORIGINAL LAND OWNER CAN FETCH A RENT OF RS.1,25,000 /- PER MONTH BY WAY OF AN AGREEMENT. THUS, THE CONDUCT OF THE ASSESSEE SHOWS IN VOLUMES. HE ACCORDINGLY SUBMITTED THAT AT LEAST PENALTY LEVIED BY THE ASSES SING OFFICER AND CONFIRMED BY THE CIT(A) ON THIS ISSUE BE CONFIRMED. 12. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES AND PERUSED THE ORDERS OF THE AUTHORITIES BELOW. WE HAVE ALSO CONS IDERED VARIOUS DECISIONS CITED ITA NO.6598/DEL/2015 7 BEFORE US. A PERUSAL OF THE NOTICE ISSUED U/S 274 READ WITH SECTION 271 OF THE IT ACT DATED 29 TH DECEMBER, 2006 SHOWS THAT THE ASSESSING OFFICER HA S NOT STRUCK OFF THE INAPPROPRIATE WORDS IN THE NOTICE. WHILE IMPOSING THE PENALTY, THE ASSESSING OFFICER DID NOT MENTION UNDER WHICH LIMB THE PENALTY HAS BE EN IMPOSED. IT IS ALSO OBSERVED FROM THE PENALTY ORDER THAT THE ASSESSING OFFICER W HILE LEVYING PENALTY HAS ALSO REFERRED TO THE ORDERS OF HIS PREDECESSOR FOR ASSES SMENT YEARS 2006-07, 2002-03 AND 2003-04. WE FIND IDENTICAL ISSUE HAD COME UP BEFOR E THE TRIBUNAL IN ASSESSEES OWN CASE AND THE TRIBUNAL, VIDE ITA NOS. 894, 895, 896/ DEL/2013, ORDER DATED 28 TH JUNE, 2017, FOR ASSESSMENT YEARS 2006-07, 2002-03 AND 200 3-04 RESPECTIVELY HAS CANCELLED THE PENALTY SO LEVIED BY OBSERVING AS UNDER:- 10. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE ORDERS PASSED BY THE REVENUE AUTHORITIES ALONG WITH THE RELEVANT RECORDS AVAILABLE WITH US. FIRSTLY, WE HAVE PERUSED THE ASSESSMENT ORDER DATED 11.10.2010 PASSED U/S. 143(3) OF THE ACT AND FOUND THAT AO WHILE COMPLETING THE ASSESSMENT HAS NOT RECORDED THE SATISFACTION AND HAS NOT INITIATED THE PENALTY PROC EEDINGS. SIMILARLY, AT THE TIME OF IMPOSING THE PENALTY U/S. 271(1) OF THE ACT, T HE AO HAS LEVIED THE PENALTY, BUT DID NOT MENTION UNDER WHICH LIMB THE PENALTY H AS BEEN IMPOSED WHETHER IT IS ON ACCOUNT OF INACCURATE PARTICULARS OF INCOME OR C ONCEALMENT OF INCOME. THEREFORE, THE ENTIRE PENALTY PROCEEDINGS STAND VIT IATED. IN VIEW OF ABOVE, THE PENALTY IS NOT SUSTAINABLE IN THE EYES OF LAW. OUR AFORESAID VIEW IS FORTIFIED BY THE FOLLOWING DECISIONS:- I) CIT & ANR. VS. M/S SSAS EMERALD MEADOWS 20 15 (11) TMI 1620 KARNATAKA HIGH COURT HAS HELD THAT TRIBUNA L HAS CORRECTLY ALLOWED THE APPEAL FILED BY THE ASSESSEE HOLDING T HE 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 O F SECTION 271(1) OF THE ACT, THE PENALTY PROCEEDINGS HAD BEEN INITIA TED I.E., WHETHER FOR CONCEALMENT OF PARTICULARS OF INCOME OR FURNISH ING OF INACCURATE PARTICULARS OF INCOME. THE TRIBUNAL, WHILE ALLOWIN G THE APPEAL OF THE ASSESSEE, HAS RELIED ON THE DECISION OF THE DIV ISION BENCH OF THIS COURT RENDERED IN THE CASE OF COMMISSIONER OF INCOM E TAX VS. MANJUNATHA COTTON AND GINNING FACTORY (2013) (7) T MI 620- KARANATAKA HIGH COURT. THUS SINCE THE MATTER IS COV ERED BY JUDGMENT OF THE DIVISION BENCH OF THIS COURT, WE AR E OF THE OPINION ITA NO.6598/DEL/2015 8 NO SUBSTANTIAL QUESTION OF LAW ARISES DECIDED IN FAVOUR OF ASSESSEE. II) CIT & ANR. VS. M/S SSAS EMERALD MEADOWS HON BLE SUPREME COURT OF INDIA REPORTED IN 2016 (8) TMI 1145 SU PREME COURT. THE APEX COURT HELD THAT HIGH COURT ORDER CONFIRME D (2015) (11) TMI 1620 (SUPRA) KARNATAKA HIGH COURT. NOTICE ISS UED BY AO 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 TH E ACT, THE PENALTY PROCEEDINGS HAD BEEN INITIATED I.E., WHETHE R FOR CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING OF INACCURAT E PARTICULARS OF INCOME DECIDED IN FAVOUR OF ASSESSEE. 10.1 IN THE BACKGROUND OF THE AFORESAID DISCUSSIONS AND RESPECTFULLY FOLLOWING THE PRECEDENTS, WE DELETE THE PENALTY IN DISPUTE AN D DECIDE THE ISSUE IN FAVOR OF THE ASSESSEE AND AGAINST THE REVENUE. 13. SINCE THE FACTS OF THE IMPUGNED APPEAL ARE IDENTICA L TO THE FACTS OF THE CASE DECIDED BY THE TRIBUNAL IN ASSESSEES OWN CASE FOR PRECEDING YEARS, THEREFORE, RESPECTFULLY FOLLOWING THE SAME, WE CANCEL THE PENA LTY SO LEVIED BY THE ASSESSING OFFICER AND UPHELD BY THE CIT(A) DUE TO NON-STRIKIN G OFF THE INAPPROPRIATE WORDS IN THE NOTICE. THE ADDITIONAL GROUNDS RAISED BY THE A SSESSEE ARE ACCORDINGLY ALLOWED. SINCE, THE ASSESSEE SUCCEEDS ON THE ADDITIONAL GROU NDS, THE GROUNDS ON MERIT ARE NOT BEING ADJUDICATED BEING ACADEMIC IN NATURE. 14. IN THE RESULT, THE APPEAL FILED BY THE ASS ESSEE IS ALLOWED. THE DECISION WAS PRONOUNCED IN THE OPEN COURT ON15 .02.2019. SD/- SD/- (SUCHITRA KAMBLE) (R.K. PANDA) JUDICIAL MEMBER ACCOUNTANT MEMFBER DATED: 15 TH FEBRUARY, 2019 DK ITA NO.6598/DEL/2015 9 COPY FORWARDED TO 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ASSTT. REGISTRAR, ITAT, NEW DELHI