ACIT, Jaipur V. RAVINDRA KUMAR TONGIA, Jaipur

ITA 754/JPR/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 99589 (ITAT-JAIPUR)
• Duration Of Justice: 3 year(s) 3 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-12-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 07-09-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: O P BHATEJA
• Assessee Lawyers: RAJIV SOGANI C A DHK
• Keywords: Business income; Depreciation; Opportunity of being heard; Difference of opinion; Avoidance of tax
• Section: 143(3)

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR JH VH-VKJ-EHUK] YS[KK LNL; ,OA JH YFYR DQEKJ] U;KF; D LNL; DS LE{K BEFORE: SHRI T.R.MEENA, AM & SHRI LALIET KUMAR, JM VK;DJ VIHY LA -@ ITA NO. 754/JP/2012 FU/KZKJ.K O'K Z @ ASSESSMENT YEAR : 2007-08. ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-7, JAIPUR. CUKE VS. RAVINDRA KUMAR TONGIA, R/8/A, YUDHISTAR MARG, C- SCHEME, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO. ABNPT 5694 H VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT JKTLO DH VKSJ LS@ REVENUE BY : SHRI O.P. BHATEJA (ADDL.CIT) FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI RAJIV SOGANI (C.A.) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 30/11/2015. MN?KKS'K .KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 14/12/2015. VKNS'K@ ORDER PER T.R. MEENA, A.M. THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER DATED 06/06/2012 OF THE LEARNED C.I.T.(A)-II JAIPUR, FOR A .Y. 2007-08. THE EFFECTIVE GROUND OF APPEAL IS AS UNDER:- (I) THE CIT(A) HAS ERRED IN DELETING THE PENALTY UND ER SECTION 271(1)(C) OF THE I.T. ACT, IMPOSED ON ACCOUN T OF INACCURATE PARTICULARS FURNISHED IN RESPECT OF THE RECEIPTS OF RS. 1 CRORE TOWARDS NON-COMPETITION FEES IN 2 ITA NO. 754/JP/2012 ACIT VS RAVINDRA KUMAR TONGIA THE FACTS AND CIRCUMSTANCES DIFFERENTIATED FROM THE FACTS AND CIRCUMSTANCES IN THE DECISIONS RELIED UPO N BY THE CIT(A). 2. THE SOLE GROUND OF REVENUES APPEAL IS AGAINST DE LETING THE PENALTY IMPOSED U/S 271(1)(C) OF THE INCOME TAX ACT, 1961 (I N SHORT THE ACT) AT RS. 24,12,540/-. THE ASSESSEE IS A DOCTOR BY PROFESS ION. HE FILED RETURN ON 01/11/2007 DECLARING TOTAL INCOME OF RS. 1,12,30,63 0/-. THE CASE WAS SCRUTINIZED U/S 143(3) OF THE ACT. THE LD ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAD RECEIVED RS. 1 CRORE FROM M/S CARD IAC CARE & ALLIED HEALTH (P) LTD. TOWARDS NON COMPETITION FEES DURING YEAR UNDER CONSIDERATION BUT ONLY RS. 29,26,667/- WAS COMPUTED INCOME UNDER THE HEAD INCOME FROM BUSINESS AND PROFESSION FOR TAXATI ON, THEREFORE, THE ASSESSING OFFICER GAVE REASONABLE OPPORTUNITY OF BE ING HEARD, WHICH WAS AVAILED BY THE ASSESSEE. AFTER CONSIDERING THE ASSE SSEES REPLY, THE LD ASSESSING OFFICER MADE ADDITION OF RS. 70,83,333/- U/S 28(VA)(A) OF THE ACT. HE FURTHER MADE ADDITION ON ACCOUNT OF INTERES T ON MORTGAGE LOAN WHICH WAS PERTAINED TO LOAN TAKEN FROM ICICI FOR THE PURPOSE OF HOUSE CONSTRUCTION. HOWEVER, THE INTEREST WAS DEBITED AGAIN ST THE BUSINESS INCOME, THEREFORE, ADDITION OF RS. 7,85,660/- WAS MA DE BY THE ASSESSING OFFICER. FURTHER THERE WAS A DISCREPANCY IN THE DEPR ECIATION CLAIMED BY THE 3 ITA NO. 754/JP/2012 ACIT VS RAVINDRA KUMAR TONGIA ASSESSEE IN CASE OF TEMPORARY STRUCTURE. THE ASSESSE E CLAIMED 100% DEPRECIATION ON TEMPORARY STRUCTURE WHEREAS THE ASSE SSING OFFICER ALLOWED DEPRECIATION @ 10%. THE TOTAL ADDITION WAS MADE BY THE ASSESSING OFFICER AT RS. 1,53,693/- UNDER THE HEAD DEPRECIATION ON BU ILDING. THE PENALTY PROCEEDING U/S 271(1)(C) HAS BEEN INITIATED BY THE ASSESSING OFFICER FOR FURNISHING INACCURATE PARTICULARS OF INCOME. BEFORE IMPOSING PENALTY U/S 271(1)(C), THE LD ASSESSING OFFICER GAVE REASONABLE OPPORTUNITY OF BEING HEARD, WHICH HAS BEEN REPRODUCED BY THE ASSESSING OF FICER ON PAGE NO. 3 AND 4. AFTER CONSIDERING THE ASSESSEES REPLY, THE LD ASSESSING OFFICER HELD THAT THE ASSESSEE COULD NOT FURNISH ACCURATE PARTIC ULARS OF HIS INCOME AS UNDER: (1) IN RESPECT OF RECEIPT FROM COMPANY ON ACCOUNT O F NON- COMPETITION, THE ASSESSEE HAD RECEIVED THE WHOLE AMO UNT IN THE RELEVANT PREVIOUS YEAR AND HENCE THE INCOME ON THIS ACCOUNT WAS LIABLE TO TAX IN THE SAME RELEVANT YEAR. BUT THE ASSESSEE HAD OFFERED ONLY RS. 29,26,667/- OUT OF TH E INCOME OF RS. 1 CRORE FOR TAXATION PURPOSE. IT BECOMES CLEAR THAT THE ASSESSEE HAD CONCEALED HIS INCOME BY NOT OFFERING T HE FULL AMOUNT IN THE RELEVANT ASSESSMENT YEAR. (2) IN RESPECT OF DEPRECIATION ON BUILDING, THE ADD ITION MADE BY THE ASSESSING OFFICER WAS CONFIRMED BY THE LD CIT(A) BY 4 ITA NO. 754/JP/2012 ACIT VS RAVINDRA KUMAR TONGIA REDUCTION IN QUANTUM OF ADDITION. IN THIS CASE, THE ASSESSEE HAD FURNISHED INACCURATE CLAIM OF DEPRECIATION FOR IMPUGNED BUILDING BY CLAIMING TO BE A TEMPORARY STRUCTURE. THE LD ASSESSING OFFICER HELD THAT THE ASSESSEE HAD BOTH CONCEALED HIS INCOME AND HAD FURNISHED INACCURATE PARTICULARS OF HIS INCOME, THEREFORE, SHE IMPOSED PENALTY U/S 271(1)(C) OF THE ACT AT RS. 24,12,540/-, WHICH IS 100% OF TAX SOUGHT TO BE EVADED ON CONCEALED INCOME . 3. BEING AGGRIEVED BY THE ORDER OF THE ASSESSING OF FICER, THE ASSESSEE THE MATTER BEFORE THE LD CIT(A), WHO HAD DELETED THE PENALTY BY OBSERVING THAT THE ASSESSING OFFICER IMPOSED PENALTY ON TWO CO UNTS FIRSTLY HE HAS NOT OFFERED FULL AMOUNT OF NON-COMPETITION FEES IN THE RELEVANT ASSESSMENT YEAR AND THE ADDITION IN RESPECT OF ABOVE ASPECT IS CONF IRMED BY THE HONBLE ITAT AND SECONDLY THE ADDITION MADE IN RESPECT OF DE PRECIATION OF BUILDING, WHICH WAS PARTLY CONFIRMED BY THE CIT(A) AND THE ASSES SEE DID NOT PREFER ANY APPEAL IN THIS REGARD. AS THE ASSESSING OFFICER WAS SATISFIED THAT THE ASSESSEE HAS CONCEALED THE INCOME ON BOTH COUNTS, T HEREFORE, HE IMPOSED PENALTY OF RS. 24,12,540/-. THE ASSESSEE HAS SUBMITT ED ALL THE DETAILED INFORMATION AND SUPPORTING DOCUMENTS IN RESPECT OF CLAIM MADE TOWARDS BIFURCATION OF NON-COMPETITION FEES IN DIFFERENT AS SESSMENT YEARS AND DEPRECIATION CLAIMED @ 100% ON TEMPORARY STRUCTURE. THUS, HE HELD THAT 5 ITA NO. 754/JP/2012 ACIT VS RAVINDRA KUMAR TONGIA THE ASSESSEE HAS NOT FILED ANY INACCURATE PARTICULA RS OR CONCEALED INFORMATION ON THIS ACCOUNT. THE ASSESSEE DID OFFER THE ENTIRE NON COMPETITION FEES OF RS. 1 CRORE IN THREE ASSESSMENT YEARS AND TAXES WERE ALSO PAID THEREON. THUS, IT WAS EVIDENT THAT THE ASSE SSEE HAS NO INTENTION TO SUPPRESS HIS INCOME OR AVOIDANCE OF TAX, AS SUCH . THE ADDITION IN THIS REGARD WAS RESULTANT TO THE DIFFERENCE OF OPINION ON THE PART OF ASSESSING OFFICER AND THE ASSESSEE I.E. YEAR OF ASSESSABILTY. THEREFORE, THERE WERE TWO VIEWS ON THIS ISSUE AND IT IS DEBATABLE, FOR WHICH HE RELIED UPON THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN TH E CASE OF HARSHVARDHAN CHEMICALS & MINERALS LTD. (259 ITR 212). THE LD ASSES SING OFFICER IMPOSED THE PENALTY UNDER THIS SECTION ON THE BASIS OF FIND ING GIVEN IN THE ASSESSMENT ORDER AND NO NEW MATERIAL HAS BROUGHT ON RECORD WHILE IMPOSING PENALTY TO ESTABLISH THAT THE EXPLANATION FILED BY THE ASSESSEE WERE FALSE OR INCORRECT AND SIMPLY RELIED UPON THE F ACT THAT SUCH ADDITIONS HAVE BEEN CONFIRMED AT THE APPEAL STAGE. THE ASSESSM ENT PROCEEDINGS AND PENALTY PROCEEDING ARE DIFFERENT IN NATURE AS THE C ONSIDERATION ARISES IN THE IMPOSITION OF PENALTY AND ARE DIFFERENT IN THE ASSE SSMENT ORDER. THEREFORE, BOTH ARE REQUIRED TO BE DEALT IN DIFFERENT MANNER A ND ANY ADDITION MADE IN ASSESSMENT PROCEEDINGS MAY NOT BY ITSELF JUSTIFIED IN IMPOSING THE PENALTY. THE LD CIT(A) HAS RELIED ON THE DECISION OF HONBLE R AJASTHAN HIGH COURT IN 6 ITA NO. 754/JP/2012 ACIT VS RAVINDRA KUMAR TONGIA THE CASE OF GOSWAMI SMT. CHANDRALATA BAHUJI (125 ITR 700). IT IS TRUE THAT THE DISCREPANCY OBSERVED DURING THE ASSESSMENT PROC EEDINGS WERE FOUND SUFFICIENT TO MAKE ADDITION TOWARDS THE ISSUE, AS DI SCUSSED ABOVE, IF IN THIS REGARD, IT IS HELD THAT THE ASSESSING OFFICER HAS N OT SPELT OUT ANY OTHER ADDITIONAL OR CONCRETE GROUNDS TO JUSTIFY THE IMPOS ITION OF CONCEALMENT PENALTY ON SUCH FINDINGS AND IMPOSED THE PENALTY IN RATHER BRIEF AND MECHANICAL MANNER. HE FURTHER RELIED ON THE DECISIO N IN THE CASE OF RELIANCE PETRO PRODUCTS PVT. LTD. (322 ITR 158) WHERE IN IT HAS BEEN HELD THAT MERELY REJECTION OF ANY CLAIM OF THE ASSESSEE, WILL NOT AUTOMATICALLY ENTAIL TO THE CONCEALMENT PENALTY, UNLESS SOME INAC CURATE PARTICULARS ARE FILED IN THIS REGARD. HE FURTHER RELIED ON THE DECI SION OF HON'BLE SUPREME COURT IN THE CASE OF T.ASHOK PAI (281 ITR 11), HON'BL E RAJASTHAN HIGH COURT DECISION IN THE CASE OF ORIENTAL POWER CABLE L TD. (303 ITR 49) WHEREIN IT HAS BEEN HELD THAT PENALTY CANNOT BE SIMP LY IMPOSED FOR THE REASONS THAT THE ADDITION MADE U/S 143(3) HAS BEEN ADMITTED OR CONFIRMED AT APPELLATE LEVEL. IN CASE OF ELILLY LILLY & COMPA NY (312 ITR 225) THE HON'BLE SUPREME COURT HAS HELD THAT PENALTY PROCEED ING IS NOT AN AUTOMATIC OR MANDATORY FALLOUT OF THE ADDITION MADE DURING THE ASSESSMENT PROCEEDINGS, THEREFORE, THE SAME SHOULD NOT BE LEVI ED IN ROUTINE MANNER. SOME ADDITIONAL FACTS ARE REQUIRED TO BE BROUGHT TO THE LIGHT FOR IMPOSITION 7 ITA NO. 754/JP/2012 ACIT VS RAVINDRA KUMAR TONGIA OF SUCH CONCEALMENT PENALTY. HOWEVER, IN THE PRESENT CASE, THE LD ASSESSING OFFICER SIMPLY RELIED UPON THE FACT THAT THE ABOVE ADDITIONS HAVE BEEN UPHELD BY THE APPELLATE AUTHORITY AND BROUGHT NOTHING ON RECORD TO PROVE THAT THE APPELLANT HAS IN FACT SUBMITTED INAC CURATE PARTICULARS OR CONCEALED THE INCOME AS SUCH. HE FURTHER RELIED ON THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF DILIP N SHAROFF (291 I TR 520). AFTER CONSIDERING THE LEGAL AS WELL AS FACTUAL POSITION ON THIS ISSUE, THE LD CIT(A) DELETED THE PENALTY. 4. NOW REVENUE IS IN APPEAL BEFORE US. THE LD DR VEHE MENTLY SUPPORTED THE ORDER OF THE ASSESSING OFFICER AND ARGUED THAT THE ADDITION MADE BY THE ASSESSING OFFICER HAS BEEN CONFIRMED BY THE HON BLE ITAT, THEREFORE, PENALTY LEVIED BY THE ASSESSING OFFICER IS JUSTIFIE D. HE RELIED ON THE DECISION IN THE CASE OF MAHINDRA INTERTRADE LTD. VS DCIT (2011) 16 TAXMANN.COM 77 (MUM) WHEREIN THE HONBLE ITAT HAS HEL D THAT THE ASSESSEE DECLARED LOSS IN RETURN BUT CERTAIN ADDITI ONS WERE MADE BY THE ASSESSING OFFICER U/S 143(3), WHICH WAS CONFIRMED BY THE LD CIT(A) AND WELL AS HONBLE ITAT, HELD THAT THE ASSESSEE HAS FILE D INACCURATE PARTICULARS OF INCOME. THE HONBLE ITAT BY DELIVERING THE DECISIO N HAS CONSIDERED THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF RE LIANCE PETROPRODUCTS PVT. LTD. (SUPRA) AND HON'BLE DELHI HIGH COURT DECI SION IN THE CASE OF CIT 8 ITA NO. 754/JP/2012 ACIT VS RAVINDRA KUMAR TONGIA VS. ZOOM COMMUNICATION LTD. (2010) 327 ITR 510. HE F URTHER RELIED ON THE DECISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. PRAKASH S VYAS (2015) 58 TAXMANN.COM 334 (GUJ) WHEREIN IT HAS BEEN HELD THAT THE TRIBUNAL WAS NOT JUSTIFIED IN DELETING THE PENALTY BE CAUSE TAX APPEAL IS ADMITTED AND NOT MAKE THE ISSUE DEBATABLE. THEREFORE , HE PRAYED TO CONFIRM THE PENALTY. 5. AT THE OUTSET, THE LD AR OF THE ASSESSEE HAS SUB MITTED THAT THE FIRST APPEAL FOR QUANTUM PROCEEDING WAS ALLOWED, WHICH SUGGE STS THAT THE STAND TAKEN BY THE ASSESSEE WAS PLAUSIBLE ONE. THE HONBLE ITAT DIRECTED THE ASSESSING OFFICER BY ALLOWING THE REVENUES APPEAL I N QUANTUM PROCEEDING TO MODIFY THE SUBSEQUENT TWO YEARS INCOME BY REDUCI NG THE AMOUNT DISCLOSED BY THE ASSESSEE. IT IS SHOWN THAT THE ASSE SSEE HAS NOT CONCEALED ANY PARTICULARS OF INCOME AND NOT CONCEALED THE INC OME. THE ONLY DIFFERENCE IN VIEW POINT WAS THE YEAR OF TAXABILITY. HE FURTHER ARGUED THAT THE LD CIT(A) HAS EXAMINED ALL THE FACTUAL AND LEGAL ISSUE AND ALLOWED THE APPEAL IN THE FAVOUR OF THE ASSESSEE. HE AGAIN REFE RRED THE CASE LAW CONSIDERED BY THE LD CIT(A) IN HIS ORDER. 6. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. AS PER AGREEMENT BETWEEN THE ASSESSEE 9 ITA NO. 754/JP/2012 ACIT VS RAVINDRA KUMAR TONGIA AND M/S CARDIAC CARE & ALLIED HEALTH (P) LTD., THE ASSESSEE WAS REQUIRED TO NOT TO DIRECTLY OR INDIRECTLY COMPETE WITH THE BUSIN ESS OF THE COMPANY FOR A PERIOD OF 2 YEARS FROM THE DATE OF CHANGE OF THE MA NAGEMENT. THE ASSESSEE SHALL NOT OWN A BUSINESS SUBSTANTIALLY SIMI LAR TO OR COMPETITIVE WITH PRESENT BUSINESS OF THE COMPANY. THESE RESTRICTI ONS ON COMPETITION WOULD BE OPERATIVE ONLY FOR TWO YEARS FROM THE DATE O F CHANGE OF MANAGEMENT. IF DR. RAVINDRA KUMAR TONGIA FAILS TO ME ET THE OBLIGATION OF HIS CLAUSE, HE WOULD PAY RS. 4 LACS PER MONTH FOR TH E BALANCE PERIOD REMAINING OUT OF AGREED PERIOD OF 2 YEARS AS PENALT Y TO THE SECOND PARTY. THE SECOND PARTY WOULD PAY RS. 50 LACS PER ANNUM TOTA LING RS. 100 LACS IN ADVANCE TO THE ASSESSEE, THEREFORE, THERE WAS A REST RICTION IMPOSED IN THE AGREEMENT ITSELF BY THE SECOND PARTY ON THE ASSESSE E. ACCORDINGLY, THE ASSESSEE BIFURCATED NON-COMPETITION FEES PROPORTION ATELY IN THREE YEARS. THE ASSESSEE HAS GIVEN NOTE IN COMPUTATION OF INCOME ABOUT RECEIPT OF NON-COMPETITION FEES AND PROPORTIONATELY INCOME DIS CLOSED ON ACCOUNT OF THIS. THEREFORE, THE ASSESSEE HAS NOT FURNISHED ANY INACCURATE PARTICULARS OF INCOME BUT THE YEAR OF ASSESSABILITY WAS DISPUTED BE TWEEN THE REVENUE AND THE ASSESSEE, WHICH HAS BEEN DECIDED BY THE COORDIN ATE BENCH I.E. YEAR OF THE RECEIPT U/S 28(VA)(A) OF THE ACT. IT IS A FACT THAT THE ISSUE WAS DEBATABLE AND THE LD DR HAS NOT CONTROVERTED THE FI NDING GIVEN BY THE LD 10 ITA NO. 754/JP/2012 ACIT VS RAVINDRA KUMAR TONGIA CIT(A). THE CASE LAWS REFERRED BY THE LD CIT(A) AS WELL AS THE AR ARE SQUARELY APPLICABLE ON CASE OF THE ASSESSEE ON NON- COMPETITION FEES. FURTHER ISSUE OF DEPRECIATION IS ALSO DEBATABLE AS IT IS ALLOWED 100% DEPRECIATION OR 10% DEPRECIATION BUT PARTICULARS OF TEMPORARY SHADE AND INVESTMENT MADE THEREIN HAS BEEN DISCLOSED BY THE A SSESSEE. THEREFORE, WE UPHOLD THE ORDER OF THE LD CIT(A). 7. IN THE RESULT, THE REVENUES APPEAL IS DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON 14/12/2015. SD/- SD/- YFYR DQEKJ VH-VKJ-EHUK (LALIET KUMAR) (T.R. MEENA) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 14 TH DECEMBER,2015 RANJAN* VKNS'K DH IZFRFYFI VXZSFKR @ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ @ THE APPELLANT- THE ACIT, CIRCLE-7, JAIPUR. 2. IZR;FKHZ @ THE RESPONDENT- SHRI RAVINDRA KUMAR TONGIA, JAIPUR. 3. VK;DJ VK;QDR @ CIT 4. VK;DJ VK;QDRVIHY @ THE CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ @ DR, ITAT, JAIPUR 6. XKMZ QKBZY @ GUARD FILE (ITA NO.754/JP/2012) VKNS'KKUQLKJ @ BY ORDER, LGK;D IATHDKJ @ ASST. REGISTRAR