DCIT,Circle -6(1), Mohali V. Sh Ramesh Kumar Dudani, Mohali

ITA 671/CHANDI/2015

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 95645 (ITAT-CHANDIGARH)
• Duration Of Justice: 3 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-10-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2009-2010
• Appeal Filed On: 03-07-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: SANJAY KUMAR SHARMA
• Keywords: Depreciation; Earning of tax free income; Capital receipt
• Section: 14A; 10

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES, CHANDIGARH BEFORE SHRI H.L.KARWA, HON'BLE VICE PRESIDENT & MS. RANO JAIN, ACCOUNTANT MEMBER ITA NO. 671/CHD/2015 ASSESSMENT YEAR: 2009-10 THE DCIT, CIRCLE 6(1), VS. SH. RAMESH KUMAR DUDANI , MOHALI MOHALI PAN NO. ABBPD0633J (APPELLANT) (RESPONDENT) APPELLANT BY : SH. VIVEK NANGIA RESPONDENT BY : SH. SANJAY KUMAR SHARMA DATE OF HEARING : 30.09.2015 DATE OF PRONOUNCEMENT : 26.10.2015 ORDER PER H.L.KARWA, VP THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINS T THE ORDER OF CIT(A)- 2, CHANDIGARH DATED 20.04.2015 IN CANCELLING THE PE NALTY OF RS. 25,24,868/- IMPOSED U/S 271(1)(C) OF THE INCOME-TAX ACT, 1961 ( IN SHORT 'THE ACT') RELATING TO ASSESSMENT YEAR 2009-10. 2. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT IN THE ASSESSMENT PROCEEDINGS CERTAIN EXPENSES WERE REALLOCATED BETWEEN ASSESSEE AND TWO PROPRIETORSHIP CONCERNS NAMELY THEOG UNIT (THE UNIT ELIGIBLE FOR D EDUCTION U/S 80IC OF THE ACT) AND MOHALI UNIT (THE UNIT NOT ELIGIBLE FOR DEDUCTIO N U/S 80IC OF THE ACT) WAS ENHANCED BY RS. 58,91,946/-. THE ASSESSING OFFICER HAD ALSO MADE DISALLOWANCE 2 OF RS. 15,36,321/- U/S 14A OF THE ACT. PENALTY PROC EEDINGS U/S 271(1)(C) OF THE ACT WERE INITIATED ON BOTH THESE ADDITIONS. THE MAI N CONTENTION OF THE ASSESSEE BEFORE THE ASSESSING OFFICER WAS THAT THE ADDITIONS WERE MADE ON ESTIMATED BASIS AND, THEREFORE, PENALTY WAS NOT LEVIABLE. THE ASSES SING OFFICER DID NOT FIND MERIT IN THE ASSESSEES SUBMISSIONS AND IMPOSED A M INIMUM PENALTY OF RS. 25,24,868/-. 3. ON APPEAL, LD. CIT(A) CANCELLED THE PENALTY ON T HE AMOUNT OF RS. 58,91,946/- STATING THAT THE SAID ADDITION WAS MADE ON ESTIMATED BASIS AND ON ACCOUNT OF REALLOCATION OF EXPENSES BETWEEN UNIT EL IGIBLE FOR DEDUCTION U/S 80IC AND THE UNIT NOT SO ELIGIBLE. ACCORDING TO CI T(A), IT WAS AN ESTIMATED DISALLOWANCE, THEREFORE, PENALTY U/S 271(1)(C) OF THE ACT SHOULD NOT HAVE BEEN LEVIED IN VIEW OF THE JUDGEMENT OF HON'BLE JURISDIC TIONAL HIGH COURT IN THE CASE OF CIT VS. M/S SSP LTD. (2010) 328 ITR 643 (P& H). 4. IT IS OBSERVED THAT THE ISSUE IS SQUARELY COVERE D IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE BY THE DECISION OF ITAT DIV ISION BENCH, CHANDIGARH DATED 6.8.2015 PASSED IN ASSESSEES CASE IN ITA NO. 1149/CHD/2014 RELATING TO ASSESSMENT YEAR 2008-09. WHILE DECIDING A SIMILAR I SSUE IN FAVOUR OF THE ASSESSEE, THE TRIBUNAL CONFIRMED THE ORDER OF CIT(A ) IN CANCELLING THE PENALTY LEVIED U/S 271(1)(C) OF THE ACT, OBSERVING S UNDER: - 8. WE HAVE CONSIDERED RIVAL SUBMISSIONS. IT IS NO T IN DISPUTE THAT AT THE ASSESSMENT PROCEEDINGS, CERTAIN EXPENSES WERE RE-ALLOCATED BETWEEN ASSESSEES TWO PROPRIETOR SHIP CONCERNS WITH REGARD TO CLAIM OF DEDUCTION UNDER SE CTION 80IC OF THE ACT. THE ADDITION WAS MADE ON ESTIMATE BASIS ON ACCOUNT OF RE-ALLOCATION OF THE EXPENSES BETWEEN TH E UNIT ELIGIBLE FOR DEDUCTION UNDER SECTION 80IC OF THE AC T AND UNIT NOT SO ELIGIBLE. THE CONTENTION OF THE ASSESSEE WA S, THEREFORE, CORRECT THAT RE-ALLOCATION OF THE EXPENSES HAVE BEE N MADE ON ESTIMATE BASIS. THE ITAT CHANDIGARH BENCH IN THE C ASE OF M/S 3 ROYAL CEMENT COMPANY VS ITO IN ITA/1069 TO 1071/CHD /2014 FOR ASSESSMENT YEAR 2005-06 TO 2007-08 VIDE ORDER D ATED 26.02.2015 CANCELLED THE PENALTY ON ACCOUNT OF TRAN SPORT SUBSIDYS DEDUCTION CLAIMED UNDER SECTION 80IC OF T HE ACT. THE FINDINGS IN PARA 5 TO 8 OF THE ORDER ARE REPROD UCED AS UNDER : 5. WE HAVE HEARD LD. REPRESENTATIVES OF BOTH THE P ARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE AUTHORITIES BELOW AND LD. DR RELIED UPON ORD ER OF THE LD. CIT(APPEALS). THE HON'BLE PUNJAB & HARYANA HIG H COURT IN THE CASE OF CIT VS RAJ OVERSEAS (SUPRA) HE LD AS UNDER : THE ASSESSEE CLAIMED DEDUCTION UNDER SECTION 80-IB OF THE INCOME- TAX ACT, 1961, IN RESPECT OF INCOME FROM DUTY DRAW BACK. THE ASSESSING OFFICER DISALLOWED THE CLAIM ON THE GROUN D THAT THE INCOME DERIVED FROM DUTY DRAW BACK WAS NOT INCOME D ERIVED FROM THE INDUSTRIAL UNDERTAKING. PENALTY WAS ALSO LEVIED . THE COMMISSIONER (APPEALS) UPHELD THE VIEW OF THE ASSES SING OFFICER BUT THE TRIBUNAL DELETED THE PENALTY. ON APPEAL TO THE HIGH COURT: HELD, DISMISSING THE APPEAL, THAT IN VIEW OF THE FA CTUAL FINDING OF THE TRIBUNAL, IT COULD NOT BE DISPUTED THAT THE ISSUE W AS DEBATABLE AND DEDUCTION CLAIMED BY THE ASSESSEE DID NOT LACK BONA FIDES. PENALTY COULD NOT BE IMPOSED UNDER SECTION 271(L)(C). 6. THE HON'BLE PUNJAB & HARYANA HIGH COURT IN THE C ASE OF CIT VS GURDASPUR CO-OPERATIVE SUGAR MILLS LTD. & ANOTHER 354 ITR 27 HELD AS UNDER : HELD, THAT THERE WAS NO DISPUTE ABOUT THE QUANTUM O F RECEIPT OF GRANT-IN-AID FROM THE STATE GOVERNMENT. THE ASSE SSEE REFLECTED THE RECEIPT AS CAPITAL RECEIPT, WHEREAS I T HAD BEEN TREATED AS A REVENUE RECEIPT. THE ISSUE, WHETHER TH E AMOUNT OF GRANT-IN-AID WAS A CAPITAL RECEIPT OR A REVENUE RECEIPT, WAS A DEBATABLE ISSUE. THERE WAS NO FURNISHING OF INACCURATE PARTICULARS. PENALTY COULD NOT BE IMPOSE D. 7. CONSIDERING THE FACTS OF THE CASE IN THE LIGHT O F THE ABOVE DECISIONS, WE ARE OF THE VIEW PENALTY IS NOT LEVIABLE. THE ASSESSEE MADE CLAIM OF DEDUCTION UNDER SECTION 80IC OF THE ACT ON TRANSPORT SUBSIDY. ACCORDING TO THE SUB MISSION OF ASSESSEE, SIMILAR CLAIM WAS ALLOWED BY ASSESSING OF FICER IN PAST. THE AUTHORITIES BELOW, FOLLOWING THE DECISIO N OF THE HON'BLE SUPREME COURT IN THE CASE OF LIBERTY INDIA (SUPRA) DECLINED THE CLAIM OF DEDUCTION AGAINST THE ASSESSE E. THIS DECISION IS DELIVERED ON 31.08.2009 AND BY THAT TIM E, THE RETURNS OF INCOME OF THE ASSESSEE WERE ALREADY FILE D CLAIMING 4 DEDUCTION UNDER SECTION 80IC OF THE ACT AS PER PAST PRACTICE. THERE WERE CERTAIN DECISIONS IN FAVOUR OF THE ASSES SEE MAKING CLAIM OF DEDUCTION UNDER SECTION 80IC OF THE ACT. THUS, AT THE STAGE OF LEVY OF PENALTY, THE ISSUE WAS DEBATAB LE. THE ASSESSEE DISCLOSED ALL THE PARTICULARS OF INCOME IN THE RETURN OF INCOME ON THE BASIS OF THE PAST PRACTICE AS WELL AS CERTAIN DECISIONS IN FAVOUR OF THE ASSESSEE. THEREFORE, CL AIM OF ASSESSEE COULD NOT BE SAID TO BE BOGUS AND ASSESSEE HAS NOT CONCEALED ANY PARTICULARS OF INCOME AS WELL AS DID NOT FILE ANY INACCURATE PARTICULARS OF INCOME. IN VIEW OF T HE ABOVE DISCUSSION, WE ARE OF THE VIEW PENALTY UNDER SECTIO N 271(1)(C) OF THE ACT SHOULD NOT BE LEVIED AGAINST THE ASSESSE E IN THESE ASSESSMENT YEARS. WE, ACCORDINGLY SET ASIDE THE OR DERS OF AUTHORITIES BELOW AND CANCEL THE PENALTY. 8. IN THE RESULT, ALL THE APPEALS OF THE ASSESSEE A RE ALLOWED. 9. IT MAY ALSO BE NOTED HERE THAT ASSESSEE HAS CLAI MED DEDUCTION UNDER SECTION 80IC OF THE ACT IN RESPECT OF UNIT AT THEOG (HIMACHAL PRADESH). THE COMPLETE DETAILS OF BOTH THE UNITS WERE FURNISHED BEFORE ASSESSING OFFICER WITH REGARD TO PROFITS EARNED AND THE EXPENSES INCURRED BY ASSESSE E IN RESPECT OF BOTH THE UNITS, WHETHER ELIGIBLE FOR DED UCTION UNDER SECTION 80IC OR NOT. THE ASSESSING OFFICER FOUND T HAT IN THE UNIT FOR WHICH DEDUCTION UNDER SECTION 80IC HAS BEE N CLAIMED, PROFIT IS HIGHER AS COMPARED TO THE UNIT NOT ELIGIB LE FOR DEDUCTION UNDER SECTION 80IC. THE ASSESSING OFFICE R EXAMINED THE NATURE OF BUSINESS, DEPRECIATION CLAIM ED, EXPENDITURE CLAIMED AND ADMINISTRATIVE EXPENSES AND ON COMPARISON FOUND THAT IN THE UNIT FOR WHICH DEDUCTI ON UNDER SECTION 80IC HAS BEEN CLAIMED, EXPENSES ARE MORE AS COMPARED TO THE UNIT WHICH IS NOT ELIGIBLE FOR DEDU CTION UNDER SECTION 80IC OF THE ACT. THUS, THE ASSESSING OFFIC ER, ON THE BASIS OF DETAILS FURNISHED IN THE RETURN OF INCOME AS WELL AS DETAILS FURNISHED AT THE ASSESSMENT STAGE RE-ALLOCA TED THE EXPENDITURE IN RESPECT OF BOTH THE UNITS ON ESTIMAT E BASIS AND MADE THE ADDITION ON WHICH PENALTY WAS LEVIED. THU S, THE ASSESSEE DECLARED ALL THE PARTICULARS IN THE RETURN OF INCOME AS WELL AS AT THE ASSESSMENT STAGE. THEREFORE, IT IS NOT A CASE FOR FURNISHING INACCURATE PARTICULARS OF INCOME SO AS TO LEVY THE PENALTY UNDER SECTION 271(1)(C) OF THE ACT. IT IS ALSO NOT A CASE OF CONCEALMENT OF PARTICULARS OF INCOME BECAUS E THE ASSESSEE DECLARED ALL THE PARTICULARS AND THE ASSES SEE HAS NOT ACCEPTED THE VIEW OF THE DEPARTMENT AND IS IN FURTH ER LITIGATION ON QUANTUM MATTER. THESE FACTS, THEREFO RE, CLEARLY SHOW THAT THE PENALTY WAS LEVIED ON ACCOUNT OF ESTI MATED ADDITION MADE ON ACCOUNT OF RE-ALLOCATION OF EXPENS ES BETWEEN UNIT ELIGIBLE FOR DEDUCTION UNDER SECTION 80ICA AND NOT SO ELIGIBLE. THEREFORE, IT IS NOT A FIT CASE OF LEVY OF THE PENALTY. 5 10. CONSIDERING THE FACTS OF THE CASE IN THE LIGHT OF THE ABOVE DECISIONS AND DECISION OF THE HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF M/S S.S.P. LTD. ( SUPRA) WE DO NOT FIND ANY ERROR IN THE ORDER OF THE LD. CIT(A PPEALS) IN CANCELING THE PENALTY. 11. IN THE RESULT, DEPARTMENTAL APPEAL IS DISMISSED . 5. THE FACTS OF THE CASE AND THE ISSUE INVOLVED IN THIS YEAR ARE SIMILAR TO THAT OF ASSESSMENT YEAR 2008-09. RESPECTFULLY FOLLOWING THE ORDER OF THE TRIBUNAL PASSED IN ASSESSEES CASE IN ITA NO. 1149/CHD/2014 RELATING TO ASSESSMENT YEAR 2008-09 WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT(A) IN CANCELLING THE PENALTY. 6. WHILE FRAMING THE ASSESSMENT, THE ASSESSING OFFI CER MADE ADDITION OF RS. 15,36,321/- BY INVOKING THE PROVISIONS OF SECTION 1 4 READ WITH RULE 8-D OF I.T. RULES, 1962. DURING THE ASSESSMENT YEAR UNDER CONSI DERATION, THE ASSESSEE HAD RECEIVED DIVIDEND INCOME TO THE TUNE OF RS. 8,79,70 0/- WHICH WAS CLAIMED AS EXEMPT UNDER THE PROVISIONS OF SECTION 10 OF THE AC T. HOWEVER, THE ASSESSING OFFICER DISALLOWED THE CLAIM OF THE ASSESSEE. THE ASSESSING OFFICER INITIATED PENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT AND HE LD THAT THE ASSESSEE HAD FURNISHED INACCURATE PARTICULARS OF INCOME TO THE T UNE OF RS. 15,36,321/-. ACCORDINGLY, ASSESSING OFFICER LEVIED MINIMUM PENAL TY ON THE ABOVE AMOUNT. 7. ON APPEAL, THE LD. CIT(A) CANCELLED THE PENALTY, OBSERVING AS UNDER:- 5.1 THE DISALLOWANCE OF EXPENSES U/S 14A HAS BEEN MADE BY THE ASSESSING OFFICER ON PROPORTIONATE / ESTIMAT ED BASIS. THE APPELLANT HAD NOT CONCEALED THE PARTICULARS OF HIS INCOME OR HAD NOT FURNISHED INACCURATE PARTICULARS AND SO THE CONCEALMENT PENALTY ON SUCH DISALLOWANCE CANNOT BE 6 LEVIED IN VIEW OF THE JUDGEMENT OF THE HON'BLE SUPR EME COURT IN THE CASE OF RELIANCE PETROPRODUCTS PVT LTD (322 ITR 158). HENCE, THE CONCEALMENT PENALTY LEVIED ON THE ADDITION MADE US/ 14A IS ALSO CANCELLED. 8. IT IS OBSERVED THAT THE ASSESSING OFFICER HAS MA DE THE DISALLOWANCE OF EXPENSES U/S 14A ON ESTIMATE BASIS. WE ARE FULLY IN AGREEMENT WITH THIS OBSERVATION OF THE CIT(A) THAT THE ASSESSEE HAS NO T CONCEALED THE PARTICULARS OF ITS INCOME OR FURNISHED INACCURATE PARTICULARS OF I NCOME AND, HENCE, NO PENALTY U/S 271(1)(C) OF THE ACT IS LEVIABLE ON THE ADDITIO N MADE U/S 14A OF THE ACT. IT IS TRUE THAT DISALLOWANCE OF EXPENSES U/S 14A HAS B EEN MADE BY THE ASSESSING OFFICER ON PROPORTIONATE / ESTIMATE BASIS. ON THE CONTRARY, THE PLEA TAKEN BY THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDING S WAS THAT ASSESSEE HAS NOT INCURRED ANY EXPENDITURE FOR EARNING THE EXEMPT INC OME. THE FURTHER CONTENTION RAISED WAS THAT ASSESSEE IS DEALING IN PURCHASE / S ALE OF SHARES OR MUTUAL FUNDS. THE FACT IS THAT THIS ACTIVITY IS BEING UNDERTAKEN BY THE ASSESSEE HIMSELF AND NO PART OF THE BUSINESS MODULE IS ENGAGED BY HIM AND N EITHER ANY EXPENDITURE IS INCURRED AGAINST SUCH TAX FREE INCOME. IT WAS CLA IMED THAT INVESTMENT IN MUTUAL FUNDS HAS ALSO BEEN OUT OF THE PERSONAL CAPITAL OF THE ASSESSEE. IN THE INSTANT CASE, THE ASSESSING OFFICER HAS NOT GIVEN ANY FINDI NG TO THE EFFECT THAT THE ASSESSEE HAD INCURRED ANY EXPENSES FOR EARNING EXEM PT INCOME. AS PER THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. DEEPAK MITTAL (2014) 361 ITR 131(P&H) DISALLOWANCE UNDER SECTION 14A REQUIRES FINDING OF INCURRING OF EXPENDITURE WHERE IT IS FOUND THAT FOR EARNING EXEMPTED INCOME NO EXPENDITURE HAS BEEN INCURRED, D ISALLOWANCE UNDER SECTION 14A CANNOT BE ACCEPTED. IN THE INSTANT CASE, QUESTI ON IS STILL OPEN AS TO WHETHER THE ASSESSEE HAD INCURRED EXPENDITURE FOR EARNING E XEMPT INCOME AS THE ASSESSEES CONTENTION IS THAT NO EXPENDITURE HAS BE EN INCURRED FOR EARNING EXEMPT INCOME. THE ISSUE IS NOT FREE FROM DEBATE. EVEN OTHERWISE ALSO, THE 7 ASSESSING OFFICER HAS NOT GIVEN ANY FINDING THAT TH E DETAILS SUPPLIED BY THE ASSESSEE IN ITS RETURN WERE FOUND TO BE FALSE. THE HON'BLE SUPREME COURT IN THE CASE OF RELIANCE PETROPRODUCTS PVT. LTD (2010) 322 ITR 158 (SC) RULED THAT A MERE MAKING OF A CLAIM, WHICH IS NOT SUSTAINABLE IN LAW, BY ITSELF WILL NOT AMOUNT TO FURNISHING OF INACCURATE PARTICULARS REGA RDING THE INCOME OF THE ASSESSEE. IN THAT VIEW OF THE MATTER, NO PENALTY U /S 271(1)(C) OF THE ACT IS LEVIABLE IN THIS CASE ACCORDINGLY, WE UPHOLD THE OR DER OF CIT(A). 9. IN THE RESULT, THE REVENUES APPEAL IS DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON 26.10.2015 SD/- SD/- (RANO JAIN) (H.L.KARWA) ACCOUNTANT MEMBER VICE PRESIDENT DATED : 26 TH OCTOBER, 2015 RKK COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR