Deloitte Haskins & Sells, Gurgaon V. DCIT, New Delhi

ITA 675/DEL/2015

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 2907 (ITAT-DELHI)
• Duration Of Justice: 5 year(s) 1 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-03-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 03-02-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JAGDISH SINGH
• Keywords: Principle of natural justice; Question of law; Initiation of penalty proceedings; Revised return; Capital Gains
• Section: 271(1)(c); 143(3); 37(1); 274; 73

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: B NEW DELHI BEFORE SHRI G.S. PANNU, VICE-PRESIDENT & SHRI K.NARASIMHA CHARY, JUDICIAL MEMBER ITA NO. 675/DEL/2015 ASSESSMENT YEARS: 2007-08 DELOITTE HASKINS & SELLS, VS. DCIT, CIRCLE 37(1) , 7 TH FLOOR, BUILDING 10, TOWER-B, NEW DELHI DLF CYBER CITY COMPLEX, DLF CITY, PHASE-II, GURGAON. PAN- AABFD 2095B (APPELLANT) (RESPONDENT) ASSESSEE BY: SHRI PERCY PARDIUALA, SR. ADV. SHRI NEERAJ SETH, ADVOCATE DEPARTMENT BY: SHRI JAGDISH SINGH, SR. DR DATE OF HEARING: 04/03/2020 DATE OF PRONOUNCEMENT: 04/03/2020 ORDER PER K. NARASIMHA CHARY, JM CHALLENGING THE ORDER DATED 04.11.2014 IN APPEAL NO . 55/2013-14 PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (A PPEALS)-XXVIII, NEW DELHI (LD. CIT(A)), FOR ASSESSMENT YEAR 2007-08, DELOITTE HASKINS & SELLS (THE ASSESSEE) PREFERRED THIS APPEAL. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A CHARTERED ACCOUNTANT FIRM AND HAD SHOWN INCOME UNDER THE HEAD S INCOME FROM PROFESSION AND SHORT TERM CAPITAL GAINS. FOR THE AS SESSMENT YEAR 2007-08, THEY FILED RETURN OF INCOME ON 11.11.2007 SHOWING P ROFIT AND GAINS OF 2 BUSINESS AMOUNTING TO RS 4,98,90,093/- AND SHORT TE RM CAPITAL GAIN OF RS 10,87,868/-. THE PROFIT AND GAIN OF BUSINESS AMOUNT ING TO RS 4,98,90,093/- WAS ADJUSTED AGAINST BROUGHT FORWARD LOSSES FROM THE EARLIER YEARS AND THEREFORE TOTAL INCOME WAS RETURN ED AT RS 10,87,868/- BEING SHORT TERM CAPITAL GAINS. BROUGHT FORWARD LOS SES CLAIMED IN THE RETURNED INCOME AMOUNTED TO RS. 5,38,53,703. HOWEVE R, THE LOSSES SET- OFF FROM PROFIT AND GAIN OF BUSINESS AMOUNTED TO RS 4,98,90,093/- AND THOSE CARRIED FORWARD TO BE SET-OFF IN FUTURE YEARS AMOUNTED TO RS. 39,63,610. THE RETURN SO FILED WAS REVISED ON 26.0 3.2009, SHOWING TOTAL INCOME AT RS 10,87,868/-. THE TAX RETURN WAS REVISE D TO GIVE EFFECT TO ADDITION MADE BY ASSESSING OFFICER IN THE ASSESSMEN T YEAR 2006-07 ON ACCOUNT OF INTEREST ON INCOME TAX AMOUNTING TO RS. 37,52,043/-. RETURN WAS REVISED TO CHANGE CARRY FORWARD OF LOSSES AT RS . 2,11,567 (RS. 39,63,610 - RS. 37,52,043). IN REVISED RETURN, BROU GHT FORWARD LOSSES WERE CLAIMED AT RS 5,01,01,660/- (ALL PERTAINING TO AY 2 006-07). HOWEVER, THE LOSSES SET-OFF FROM PROFIT AND GAIN OF BUSINESS AMO UNTED TO RS. 4,98,90,093 AND THOSE CARRIED FORWARD TO BE SET-OFF IN FUTURE YEARS AMOUNTED TO RS. 2,11,567. THE ASSESSING OFFICER, HO WEVER, COMPLETED THE ASSESSMENT U/S. 143(3) ON 30.12.2009, DETERMINI NG TOTAL INCOME OF ASSESSEE AT RS.3,92,04,485/- BY MAKING ADDITION OF RS.6,64,276/- ON ACCOUNT OF FBT EXPENSES BOOKED IN THE PROFIT AND LO SS ACCOUNT, RS.1,19,39,046/- ON ACCOUNT OF CLIENT DEPOSIT RECEI VED AND RS.1,00,27,303/- ON ACCOUNT OF RECEIPTS NOT SHOWN A S INCOME. ASSESSEE PREFERRED APPEAL BEFORE THE LD. CIT(A), WHO AFTER C ONSIDERING THE SUBMISSIONS OF THE ASSESSEE CONFIRMED THE ADDITION MADE ON ACCOUNT OF FBT EXPENSES BOOKED IN PROFIT AND LOSS ACCOUNT, BUT REDUCED THE ADDITIONS ON ACCOUNT OF CLIENT DEPOSIT RECEIVED AND THE RECEIPTS NOT 3 SHOWN AS INCOME TO RS. 43,789/- AND RS.80,48,137/- RESPECTIVELY. THE ASSESSING OFFICER, THEREFORE, INITIATING PENALTY PR OCEEDINGS U/S. 271(1)(C) BY ISSUING NOTICE U/S. 274 READ WITH SECTION 271 OF THE ACT ON 20.09.2012 AND BEING NOT SATISFIED WITH THE SUBMISSIONS OF THE ASSESSEE, IMPOSED A PENALTY OF RS.48,93,726/- U/S. 271(1)(C) OF THE ACT . 3. AGGRIEVED BY SUCH PENALTY, ASSESSEE PREFERRED AP PEAL BEFORE THE LD. CIT(A) AND CONTENDED THAT NO PENALTY WAS WARRAN TED AS THE ASSESSEE MADE A CLAIM UNDER A BONA FIDE BELIEF AND ALL THE RELEVANT FACTS WERE DISCLOSED IN ITR AND FINANCIAL STATEMENTS OF THE AS SESSEE COMPANY. CIT(A), HOWEVER, PARTLY ALLOWED THE APPEAL OF THE A SSESSEE BY DELETING THE PENALTY ONLY ON THE ADDITION OF RS.75,978/- MAD E ON ACCOUNT OF PAYMENT TO ONE OF ITS CLIENTS, AF FERGUSON & CO. A GGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US. 4. LD. AR SUBMITTED AT THE OUTSET THAT IN THIS MATT ER, THERE IS NEITHER CONCEALMENT OF INCOME NOR FURNISHING OF INACCURATE PARTICULARS THEREOF INASMUCH AS ALL THE MATERIAL PARTICULARS NECESSARY FOR ASSESSMENT WERE FURNISHED ALONG WITH ITR. WHILE DRAWING OUR ATTENTI ON TO THE ASSESSMENT ORDER, PENALTY ORDER AND THE NOTICE ISSUED UNDER SE CTION 274 READ WITH SECTION 271 OF THE ACT, FURTHER ARGUMENT OF THE LD. AR IS IN RESPECT OF THE SATISFACTION OF THE ASSESSING OFFICER AND BASING HI S STAND ON THE DECISIONS OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. MANJUNATHA COTTON AND GINNING FACTORY (2013) 359 ITR 565, COMM ISSIONER OF INCOME TAX V. SSAS EMERALD MEADOWS (2016) 73 TAXMAN.COM 2 41 (KAR) AND ALSO THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COU RT IN THE CASE OF LD. PCIT VS. SAHARA INDIA LIFE INSURANCE CO LTD IN ITA NO. 475 AND BATCH OF 2019, THE LD. AR SUBMITTED THAT THE PENALTY CANNOT BE SUSTAINED. 4 5. PER CONTRA, PLACING RELIANCE ON THE DECISION OF THE HONBLE MADRAS HIGH COURT IN THE CASE OF SUNDARAM FINANCE LTD VS. CIT (2018) 403 ITR 407 (MADRAS), LD. DR SUBMITTED THAT THE ASSESSEE UNDERS TOOD THE PURPORT OF THE NOTICE AND WITHOUT RAISING ANY OBJECTION WHATSO EVER THEY HAVE PARTICIPATED IN THE PENALTY PROCEEDINGS AS WELL AS THE PROCEEDINGS BEFORE THE LD. CIT(A) AND, THEREFORE, NO PREJUDICE WAS CAU SED TO THE CASE OF THE ASSESSEE. HE THEREFORE, PRAYED TO DISMISS THE APPEA L. 6. WE HAVE GONE THROUGH THE RECORD IN THE LIGHT OF THE SUBMISSIONS MADE ON EITHER SIDE. IT COULD BE SEEN FROM THE ASSE SSMENT ORDER THAT THE LEARNED ASSESSING OFFICER PROPOSED THE PROCEEDINGS UNDER SECTION 271(1)(C) OF THE ACT FOR CONCEALING THE PARTICULARS OF INCOME AND FURNISHING OF INACCURATE PARTICULARS THEREOF. WHEN IT CAME TO THE NOTICE ISSUED UNDER SECTION 274 READ WITH SECTION 271 OF T HE ACT, SUCH A NOTICE DOES NOT SPECIFY WHETHER IT IS FOR CONCEALMENT OF I NCOME OR FOR FURNISHING OF INACCURATE PARTICULARS THEREOF, AGAINST WHICH TH E ASSESSEE HAD TO DEFEND ITSELF. ORDER UNDER SECTION 271(1)(C) OF THE ACT NARRATES THAT THE PENALTY WAS LEVIABLE UNDER SECTION 271(1)( C ) OF T HE ACT FOR CONCEALMENT OF INCOME AND FURNISHING OF INACCURATE PARTICULARS THEREOF. IN THIS FACT SITUATION WE SHALL REFER TO THE DECISIONS RELIED UP ON BY THE LD. AR. 7. IN THE CASE OF CIT VS MANJUNATHA COTTON & GINNING FACTORY, 359 ITR 565 (KAR) ,VIDE PARAGRAPH 60, THE HONBLE KARNATAKA HIGH COUR T HAS HELD AS FOLLOWS :- 60. CLAUSE (C) DEALS WITH TWO SPECIFIC OFFENCES, T HAT IS TO SAY, CONCEALING PARTICULARS OF INCOME OR FURNISHING INAC CURATE PARTICULARS OF INCOME. NO DOUBT, THE FACTS OF SOME CASES MAY ATTRACT BOTH THE OFFENCES AND IN SOME CASES THERE M AY BE OVERLAPPING OF THE TWO OFFENCES BUT IN SUCH CASES T HE INITIATION OF THE PENALTY PROCEEDINGS ALSO MUST BE FOR BOTH THE O FFENCES. BUT 5 DRAWING UP PENALTY PROCEEDINGS FOR ONE OFFENCE AND FINDING THE ASSESSEE GUILTY OF ANOTHER OFFENCE OR FINDING HIM G UILTY FOR EITHER THE ONE OR THE OTHER CANNOT BE SUSTAINED IN LAW. IT IS NEEDLESS TO POINT OUT SATISFACTION OF THE EXISTENCE OF THE GROU NDS MENTIONED IN SECTION 271(1)(C) WHEN IT IS A SINE QUA NON FOR INI TIATION OR PROCEEDINGS, THE PENALTY PROCEEDINGS SHOULD BE CONF INED ONLY TO THOSE GROUNDS AND THE SAID GROUNDS HAVE TO BE SPECI FICALLY STATED SO THAT THE ASSESSEE WOULD HAVE THE OPPORTUNITY TO MEET THOSE GROUNDS. AFTER, HE PLACES HIS VERSION AND TRIES TO SUBSTANTIATE HIS CLAIM, IF AT ALL, PENALTY IS TO BE IMPOSED, IT SHOU LD BE IMPOSED ONLY ON THE GROUNDS ON WHICH HE IS CALLED UPON TO ANSWER . IT IS NOT OPEN TO THE AUTHORITY, AT THE TIME OF IMPOSING PENALTY T O IMPOSE PENALTY ON THE GROUNDS OTHER THAN WHAT ASSESSEE WAS CALLED UPON TO MEET. OTHERWISE THOUGH THE INITIATION OF PENALTY PROCEEDI NGS MAY BE VALID AND LEGAL, THE FINAL ORDER IMPOSING PENALTY W OULD OFFEND PRINCIPLES OF NATURAL JUSTICE AND CANNOT BE SUSTAIN ED. THUS ONCE THE PROCEEDINGS ARE INITIATED ON ONE GROUND, THE PE NALTY SHOULD ALSO BE IMPOSED ON THE SAME GROUND. WHERE THE BASIS OF THE INITIATION OF PENALTY PROCEEDINGS IS NOT IDENTICAL WITH THE GROUND ON WHICH THE PENALTY WAS IMPOSED, THE IMPOSITION OF PENALTY IS NOT VALID. THE VALIDITY OF THE ORDER OF PENALTY MUST BE DETERMINED WITH REFERENCE TO THE INFORMATION, FACTS AND MATERIALS I N THE HANDS OF THE AUTHORITY IMPOSING THE PENALTY AT THE TIME THE ORDER WAS PASSED AND FURTHER DISCOVERY OF FACTS SUBSEQUENT TO THE IMPOSITION OF PENALTY CANNOT VALIDATE THE ORDER OF PENALTY WHI CH, WHEN PASSED, WAS NOT SUSTAINABLE. 8. IN COMMISSIONER OF INCOME TAX V. SSAS EMERALD M EADOWS (2016) 73 TAXMAN.COM 241 (KAR) THE HONBLE KARNATAKA HIGH COURT CONSIDERED THE QUESTION OF LAW AS TO,- WHETHER, OMISSION IF ASSESSING OFFICER TO EXPLICITL Y MENTION THAT PENALTY PROCEEDINGS ARE BEING INITIATED FOR FURNISH ING OF INACCURATE PARTICULARS OR THAT FOR CONCEALMENT OF INCOME MAKES THE PENALTY ORDER LIABLE FOR CANCELLATION EVEN WHEN IT HAS BEEN PROVED BEYOND REASONABLE DOUBT THAT THE ASSESSEE HAD CONCEALED IN COME IN THE FACTS AND CIRCUMSTANCES OF THE CASE? 9. AND THE HONBE HIGH COURT ANSWERED THE SAME IN F AVOUR OF THE ASSESSEE OBSERVING THAT: 6 THE TRIBUNAL HAS ALLOWED THE APPEAL FILED BY THE AS SESSEE HOLDING THE NOTICE ISSUED BY THE ASSESSING OFFICER UNDER SE CTION 274 READ WITH SECTION 271(1)(C) OF THE INCOME TAX ACT, 1961 (FOR SHORT THE ACT) TO BE BAD IN LAW AS IT DID NOT SPECIFY WHICH LIMB OF SECTION 271(1)(C) OF THE ACT, THE PENALTY PROCEEDINGS HAD B EEN INITIATED I.E., WHETHER FOR CONCEALMENT OF PARTICULARS OF INC OME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME. THE TRIBUNAL, WHILE ALLOWING THE APPEAL OF THE ASSESSEE, HAS RELIED ON THE DECIS ION OF THE DIVISION BENCH OF THIS COURT RENDERED IN THE CASE O F COMMISSIONER OF INCOME TAX -VS- MANJUNATHA COTTON AND GINNING FACTORY (2013) 359 ITR 565. IN OUR VIEW, SINCE THE MATTER IS COVERED BY JUDGMENT OF THE DIVISION BENCH OF THIS COURT, WE ARE OF THE OPINION, NO SUBSTANTIAL QUESTION OF L AW ARISES IN THIS APPEAL FOR DETERMINATION BY THIS COURT. THE APPEAL IS ACCORDINGLY DISMISSED. 10. THE SPECIAL LEAVE PETITION FILED BY THE REVENUE CHALLENGING THE AFORESAID JUDGEMENT OF THE HIGH COURT WAS DISMISSED BY THE HONBLE SUPREME COURT HOLDING: WE DO NOT FIND ANY MERIT IN THIS PETITION. THE SPEC IAL LEAVE PETITION IS, ACCORDINGLY, DISMISSED. 11. IN PCIT VS. SAHARA INDIA LIFE INSURANCE COMPANY LIMITED CASE ITA NO 475/2019 AND BATCH ORDER DATED 02/08/2019, HONB LE DELHI HIGH COURT, UPHELD THE VIEW TAKEN BY THE TRIBUNAL BASING ON THE DECISION OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF MAN JUNATHA COTTON AND GINNING FACTORY (SUPRA) AND SSAS EMERALD MEADOWS ( SUPRA) WHEREIN IT WAS HELD THAT THE NOTICE ISSUED BY THE LEARNED ASSE SSING OFFICER WOULD BE BAD IN LAW IF IT DID NOT SPECIFY UNDER WHICH LIMB O F SECTION 271(1)(C) OF THE ACT THE PENALTY PROCEEDINGS HAD BEEN INITIATED I.E ., WHETHER FOR CONCEALMENT OF PARTICULARS OF INCOME OR FOR FURNISH ING OF INACCURATE PARTICULARS THEREOF. RELEVANT OBSERVATIONS OF THE HONBLE HIGH COURT READ THAT,- 7 21. THE RESPONDENT HAD CHALLENGING THE UPHOLDING O F THE PENALTY IMPOSED UNDER SECTION 271(1)(C) OF THE ACT, WHICH WAS ACCEPTED BY THE ITAT. IT FOLLOWED THE DECISION OF K ARNATAKA HIGH COURT IN CIT V. MANJUNATHA COTTON & GINNING FACTORY 359 ITR 565 (KAR) AND OBSERVED THAT THE NOTICE ISSUED BY THE AO WOULD BE BAD IN LAW IF IT DID NOT SPECIFY WHICH LIMB OF SECTION 271(1)(C) THE PENALTY PROCEEDINGS HAD BEEN INITIATED UNDER I.E. W HETHER FOR CONCEALMENT OF PARTICULARS OF INCOME OR FOR FURNISH ING OF INACCURATE PARTICULARS OF INCOME. THE KARNATAKA HIG H COURT HAD FOLLOWED THE ABOVE JUDGEMENT IN THE SUBSEQUENT ORDE R IN COMMISSIONER OF INCOME TAX V. SSAS EMERALD MEADOWS (2016) 73 TAXMAN.COM 241 (KAR), THE APPEAL AGAINST WHICH WAS DISMISSED BY THE SUPREME COURT OF INDIA IN SLP NO. 11485 OF 2016 BY ORDER DATED 5 TH AUGUST, 2016. 22. ON THIS ISSUE AGAIN THIS COURT IS UNABLE TO FIN D ANY ERROR HAVING BEEN COMMITTED BY THE ITAT. 12. IT IS, THEREFORE, CLEAR THAT FOR THE AO TO ASSU ME JURISDICTION U/S 271(1)(C), PROPER NOTICE IS NECESSARY AND THE DEFEC T IN NOTICE U/S 274 OF THE ACT VITIATES THE ASSUMPTION OF JURISDICTION BY THE LEARNED ASSESSING OFFICER TO LEVY ANY PENALTY. IN THIS CASE, FACTS ST ATED SUPRA, CLEARLY ESTABLISH THAT THE NOTICE ISSUED UNDER SECTION 274 READ WITH 271 OF THE ACT IS DEFECTIVE AND, THEREFORE, WE FIND IT DIFFICU LT TO HOLD THAT THE LEARNED AO RIGHTLY ASSUMED JURISDICTION TO PASS THE ORDER L EVYING THE PENALTY. AS A CONSEQUENCE OF OUR FINDINGS ABOVE, WE DIRECT THE ASSESSING OFFICER TO DELETE THE PENALTY IN QUESTION. 13. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D. ORDER PRONOUNCED IN THE OPEN COURT ON 4 TH MARCH, 2020. SD/- SD/- (G.S. PANNU) (K.NARASIMHA CHARY) VICE PRESIDENT JUDICIAL MEMBER DATED: 04/03/2020