Enefpy Fashions P.Ltd, New Delhi V. DCIT, Circle-8(1), New Delhi

ITA 7647/DEL/2018

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 9002 (ITAT-DELHI)
• Duration Of Justice: 9 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-09-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2014-2015
• Appeal Filed On: 03-12-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S L ANURAGI
• Assessee Lawyers: SUNIL ARORA
• Keywords: Cost of acquisition; Set aside; Capital Gains
• Section: 271(1)(c); 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : SMC : NEW DELHI BEFORE SHRI R.K. PANDA, ACCOUNTANT MEMBER ITA NO.7647/DEL/2018 ASSESSMENT YEAR: 2014-15 ENEFPY FASHIONS PVT. LTD., F-29, TOP FLOOR, OKHLA INDUSTRIAL AREA, PHASE-I, NEW DELHI. PAN: AADCP5697A VS. DCIT, CIRCLE-8(1), NEW DELHI. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI SUNIL ARORA, CA REVENUE BY : SHRI S.L. ANURAGI, SR.DR DATE OF HEARING : 05.08.2019 DATE OF PRONOUNCEMENT : 24.09.2019 ORDER THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 4 TH SEPTEMBER, 2018 OF THE CIT(A)-3, NEW DELHI, RELATING TO ASSESS MENT YEAR 2014-15. 2. LEVY OF PENALTY OF RS.4,33,050/- U/S 271(1)(C) O F THE IT ACT BY THE ASSESSING OFFICER WHICH HAS BEEN PARTIALLY REDUCED BY THE CIT (A) IS THE ONLY ISSUE RAISED BY THE ASSESSEE IN THE GROUNDS OF APPEAL. 3. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESS EE IS A PRIVATE LIMITED COMPANY AND FILED ITS RETURN OF INCOME ON 30.11.2014 DECLARING THE TOTAL INCOME AT RS.46,96,240/-. THE ASSESSING OFFICER COMPLETED THE ASSESSMENT U/S 143(3) ON 29.11.2016 ITA NO.7647/DEL/2018 2 DETERMINING THE TOTAL INCOME AT RS.47,70,210/- WHER EIN HE MADE CERTAIN ADDITIONS ON ACCOUNT OF DELAYED PAYMENT OF EMPLOYEES CONTRIBUTIO N TO PF, DISALLOWANCE U/S 40A(3), DISALLOWANCE OF LONG-TERM CAPITAL LOSS, ETC . IN APPEAL, THE LD.CIT(A) GAVE PART RELIEF TO THE ASSESSEE. THE ASSESSING OFFICER, THE REAFTER, INITIATED PENALTY PROCEEDINGS U/S 271(1)(C) OF THE IT ACT AND LEVIED A PENALTY OF RS.4,33,050/- ON ACCOUNT OF ADDITION SUSTAINED BY THE CIT(A) ON ACCOUNT OF LONG -TERM CAPITAL LOSS DECLARED BY THE ASSESSEE. IN APPEAL, THE LD.CIT(A) UPHELD THE ACTI ON OF THE ASSESSING OFFICER. HOWEVER, HE DIRECTED THE ASSESSING OFFICER TO COMPU TE THE TAX ON THE LONG-TERM CAPITAL GAIN @ 20% AS AGAINST 30% COMPUTED BY THE A SSESSING OFFICER. 4. AGGRIEVED WITH SUCH ORDER OF THE CIT(A), THE ASS ESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 5. THE LD. COUNSEL FOR THE ASSESSEE, AT THE OUTSET, MADE TWO FOLD ARGUMENTS. SO FAR AS THE VALIDITY OF PENALTY IS CONCERNED, THE LD. CO UNSEL DREW THE ATTENTION OF THE BENCH TO PAGE 6 AND PAGE 23 OF THE PAPER BOOK AND DREW TH E ATTENTION OF THE BENCH TO THE COMPUTATION OF THE INDEXED COST OF ACQUISITION. HE SUBMITTED THAT WHILE FILING THE RETURN, THERE WAS AN INADVERTENT ERROR IN MENTIONIN G THE VALUE FOR WHICH ALL THESE MISTAKES OCCURRED AND THE MISTAKE WAS NOT DELIBERAT E. FURTHER, THE RETURNED INCOME WAS ACCEPTED AS SUCH. REFERRING TO THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF PRICE WATERHOUSE COOPERS (P) LTD. VS. CIT, 348 ITR 306 , HE SUBMITTED THAT THE HON'BLE SUPREME COURT IN THE SAID DECISION HAS HELD THAT THROUGH A BONA FIDE AND INADVERTENT ERROR, THE ASSESSEE WHILE SUBMITTING IT S RETURN, FAILED TO ADD THE PROVISION ITA NO.7647/DEL/2018 3 FOR GRATUITY TO ITS TOTAL INCOME WHICH CAN ONLY BE DESCRIBED AS A HUMAN ERROR WHICH WE ARE ALL PRONE TO MAKE. CALIBER AND EXPERTISE OF TH E ASSESSEE HAS LITTLE OR NOTHING TO DO WITH THE INADVERTENT ERROR. THAT THE ASSESSEE SHOU LD HAVE BEEN CAREFUL CANNOT BE DOUBTED, BUT, THE ABSENCE OF DUE CARE IN A CASE DOE S NOT MEAN THAT THE ASSESSEE IS GUILTY OF EITHER FURNISHING INACCURATE PARTICULARS OR ATTEMPTING TO CONCEAL ITS INCOME. ACCORDINGLY, THE PENALTY LEVIED BY THE ASSESSING OF FICER AND SUSTAINED BY THE TRIBUNAL AS WELL AS THE HON'BLE HIGH COURT WAS CANCELLED. R ELYING ON VARIOUS OTHER DECISIONS, HE SUBMITTED THAT PENALTY U/S 271(1)(C) OF THE IT A CT IS NOT JUSTIFIED IN THE PRESENT CASE. SO FAR AS THE SECOND LIMB OF HIS ARGUMENT IS CONCER NED, THE LD. COUNSEL REFERRING TO THE COPY OF NOTICE ISSUED FOR LEVY OF PENALTY, SUBMITTE D THAT THE INAPPROPRIATE WORDS IN THE SAID NOTICE HAVE NOT BEEN STRUCK OFF. THEREFORE, T HE VERY BASIS OF THE LEVY OF PENALTY BY THE ASSESSING OFFICER AND UPHELD BY THE CIT(A) I S NOT JUSTIFIED. REFERRING TO THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE O F CIT VS. SSAS EMERALD MEADOWS (2016) 73 TAXMAN.COM 241 (KAR.), HE SUBMITTED THAT THE HON'BLE SUPREME COURT HAS DISMISSED THE SLP FILED BY THE REVENUE AGAINST THE DECISION OF THE HON'BLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. MANJUNATHA COTTON AND GINNING FACTORY (2013 ) 359 ITR 565 , WHEREIN IT HAS BEEN HELD THAT WHERE INAPPROPRIATE WORDS HAVE NOT BEEN STRUCK OFF, LEVY OF PENALTY U/S 271(1)(C) OF THE IT ACT IS NOT SUSTAINABLE AS IT IS NOT KNOWN UNDER WHICH LIMB OF THE PROVISIONS THE PENALTY HAS BEEN LEVIED. HE ACCORDINGLY SUBMITTED THAT BOTH LEGALLY AND FACTUALLY PENALTY U /S 271(1)(C) OF THE IT ACT CANNOT BE LEVIED. ITA NO.7647/DEL/2018 4 6. THE LD. DR, ON THE OTHER HAND, HEAVILY RELIED ON THE ORDER OF THE ASSESSING OFFICER AND THE CIT(A) AND SUBMITTED THAT THEY HAVE GIVEN JUSTIFIABLE REASONS AS TO WHY PENALTY U/S 271(1)(C) OF THE IT ACT IS LEVIABLE . 7. I HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BO TH THE SIDES AND PERUSED THE ORDERS OF THE AUTHORITIES BELOW. I FIND THE PENALTY IN THE INSTANT CASE HAS BEEN LEVIED BY THE ASSESSING OFFICER U/S 271(1)(C) OF THE IT ACT O N THE GROUND THAT THE ASSESSEE HAS DELIBERATELY CONCEALED THE PARTICULARS OF INCOME TO THE EXTENT OF RS.14,43,477/- BY CLAIMING HIGHER INDEXED COST OF ACQUISITION WHILE C OMPUTING THE LONG-TERM CAPITAL GAIN. I FIND THE ASSESSING OFFICER COMPUTED THE PE NALTY @ 100% OF THE TAX SOUGHT TO BE EVADED ON THE LONG-TERM CAPITAL GAIN BY APPLYING THE TAX RATE OF 30% WHEREAS THE LD.CIT(A) WHILE CONFIRMING THE LEVY OF PENALTY HAS DIRECTED THE ASSESSING OFFICER TO COMPUTE THE TAX SOUGHT TO BE EVADED BY COMPUTING TH E SAME @ 20% WHICH IS APPLICABLE TO LONG-TERM CAPITAL GAINS. IT IS THE S UBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT DUE TO INADVERTENT ERROR WHILE COMPUT ING THE INDEXED COST OF ACQUISITION AND IMPROVEMENT OF THE SAID PROPERTY, THE ASSESSEE INADVERTENTLY TOOK THE COST INFLATION INDEX FOR THE FINANCIAL YEAR 2008-09 FOR THE ENTIRE AMOUNT OF COST INCURRED OF RS.3,58,28,614/- INSTEAD OF TAKING THE COST INFLATI ON INDEX OF THE RESPECTIVE YEARS IN WHICH COST WAS INCURRED I.E., ASSESSMENT YEARS 2009 -10, 2011-12 AND 2012-13. FURTHER, IT IS ALSO THE SUBMISSION OF THE LD. COUNS EL THAT THE ASSESSING OFFICER HAS NOT STRUCK OFF THE INAPPROPRIATE WORDS IN THE PENALTY N OTICE AND, THEREFORE, IT IS NOT CLEAR AS TO UNDER WHICH LIMB OF THE PROVISION I.E., FOR CONC EALMENT OF INCOME OR FOR FURNISHING ITA NO.7647/DEL/2018 5 INACCURATE PARTICULARS THE PENALTY HAS BEEN LEVIED. IT IS ALSO THE SUBMISSION OF THE LD. COUNSEL THAT BY CLAIMING THE LONG-TERM CAPITAL LOSS THE ASSESSEE HAS NOT SET OFF THE SAME AGAINST ANY OTHER INCOME AND THE MISTAKE WAS A BSOLUTELY INADVERTENT AND HUMAN ERROR. 8. I FIND SOME FORCE IN THE ABOVE ARGUMENT OF THE L D. COUNSEL FOR THE ASSESSEE. FROM THE DETAILS FURNISHED BY THE LD. COUNSEL IN TH E PAPER BOOK, I FIND THERE WAS A CALCULATION ERROR WHILE COMPUTING THE INDEXED COST OF ACQUISITION AND IMPROVEMENT OF THE SAID PROPERTY. THE TOTAL COST OF THE PROPERTY AT RS.3,55,28,614/- CONSISTING OF THE COST OF PURCHASE AND COST OF IMPROVEMENT IS NOT IN DISPUTE. THE ONLY DISPUTE IS THAT THE ASSESSEE WHILE COMPUTING THE INDEXED COST OF AC QUISITION HAS APPLIED THE COST INFLATION INDEX FOR ASSESSMENT YEAR 2008-09 FOR THE ENTIRE AMOUNT AS AGAINST APPLYING THE SAME FOR F.YS 2008-09, 2010-11 AND 2011-12 WHEN THE ASSESSEE HAD PURCHASED THE PROPERTY AND INCURRED CERTAIN EXPENSES. I, THEREFO RE, FIND SOME FORCE IN THE ARGUMENT OF THE LD. COUNSEL THAT IT WAS JUST A HUMAN ERROR A ND WAS NOT A DELIBERATE ATTEMPT ON THE PART OF THE ASSESSEE TO EITHER CONCEAL ITS PARTICUL ARS OF INCOME OR FURNISH INACCURATE PARTICULARS OF INCOME. THE HON'BLE SUPREME COURT I N THE CASED OF PRICE WATERHOUSE COOPERS (P) LTD. (SUPRA) WHILE CANCELLING THE PENALTY LEVIED U/S 271(1)(C) O F THE IT ACT HAS OBSERVED AS UNDER:- 17. HAVING HEARD LEARNED COUNSEL FOR THE PARTIES, WE ARE OF THE VIEW THAT THE FACTS OF THE CASE ARE RATHER PECULIAR AND SOMEWHAT UNIQUE. THE ASSESSEE IS UNDOUBTEDLY A REPUTED FIRM AND HAS GREAT EXPERTISE AVAILABLE WITH IT. NOTWITHSTANDING THIS, IT IS POSSIBLE THAT EVEN THE ASSESSEE COULD MAKE A 'SILLY' MISTAKE AND INDEED THIS HAS BEEN ACKNOWLEDGED BOTH BY THE TRIBUNAL AS WELL AS BY THE HIGH COURT ITA NO.7647/DEL/2018 6 18. THE FACT THAT THE TAX AUDIT REPORT WAS FILED AL ONG WITH THE RETURN AND THAT IT UNEQUIVOCALLY STATED THAT THE PROVISION FOR PAYMENT WAS NOT ALLOWABLE UNDER SECTION 40A(7) OF THE ACT INDICATES THAT THE ASSESSEE MADE A COMPUTATION ERROR IN ITS RETURN OF INCOME. APART FROM THE FACT THAT THE ASSESSEE DID NOT NOTICE THE ERROR, IT WAS NOT EVEN NOTICED EVEN BY THE ASSE SSING OFFICER WHO FRAMED THE ASSESSMENT ORDER. IN THAT SENSE, EVEN THE ASSESSING OFFICER SEEMS TO HAVE MADE A MISTAKE IN OVERLOOKING THE CONTENTS OF THE TAX AUDI T REPORT. 19. THE CONTENTS OF THE TAX AUDIT REPORT SUGGEST TH AT THERE IS NO QUESTION OF THE ASSESSEE CONCEALING ITS INCOME. THERE IS ALSO NO QU ESTION OF THE ASSESSEE FURNISHING ANY INACCURATE PARTICULARS. IT APPEARS T O US THAT ALL THAT HAS HAPPENED IN THE PRESENT CASE IS THAT THROUGH A BONA FIDE AND IN ADVERTENT ERROR, THE ASSESSEE WHILE SUBMITTING ITS RETURN, FAILED TO ADD THE PROV ISION FOR GRATUITY TO ITS TOTAL INCOME. THIS CAN ONLY BE DESCRIBED AS A HUMAN ERROR WHICH WE ARE ALL PRONE TO MAKE. THE CALIBRE AND EXPERTISE OF THE ASSESSEE HAS LITTLE OR NOTHING TO DO WITH THE INADVERTENT ERROR. THAT THE ASSESSEE SHOULD HAV E BEEN CAREFUL CANNOT BE DOUBTED, BUT THE ABSENCE OF DUE CARE, IN A CASE SUC H AS THE PRESENT, DOES NOT MEAN THAT THE ASSESSEE IS GUILTY OF EITHER FURNISHING IN ACCURATE PARTICULARS OR ATTEMPTING TO CONCEAL ITS INCOME. 20. WE ARE OF THE OPINION, GIVEN THE PECULIAR FACTS OF THIS CASE, THAT THE IMPOSITION OF PENALTY ON THE ASSESSEE IS NOT JUSTIF IED. WE ARE SATISFIED THAT THE ASSESSEE HAD COMMITTED AN INADVERTENT AND BONA FIDE ERROR AND HAD NOT INTENDED TO OR ATTEMPTED TO EITHER CONCEAL ITS INCOME OR FUR NISH INACCURATE PARTICULARS. 9. RESPECTFULLY FOLLOWING THE ABOVE DECISION AND CO NSIDERING THE PECULIAR CIRCUMSTANCES OF THE CASE, I AM OF THE CONSIDERED O PINION THAT IT IS NOT A FIT CASE FOR LEVY OF PENALTY U/S 271(1)(C) OF THE IT ACT. I, TH EREFORE, SET ASIDE THE ORDER OF THE CIT(A) AND CANCEL THE PENALTY SO LEVIED. 10. EVEN OTHERWISE ALSO FROM A PERUSAL OF THE NOTIC E ISSUED BY THE ASSESSING OFFICER FOR LEVYING PENALTY U/S 271(1)(C) OF THE ACT IT IS SEEN THAT THE INAPPROPRIATE WORDS HAVE NOT BEEN STRUCK OFF. I FIND RECENTLY THE HON'BLE D ELHI HIGH COURT IN THE CASE OF PCIT VS. SAHARA INDIA LIFE INSURANCE CO. LTD., VIDE ITA NO.475/2019, ORDER DATED 2 ND AUGUST, 2019, HAS OBSERVED AS UNDER:- ITA NO.7647/DEL/2018 7 '21. THE RESPONDENT HAD CHALLENGED THE UPHOLDING OF THE PENALTY IMPOSED UNDER SECTION 271(1)(C) OF THE ACT, WHICH WAS ACCEP TED BY THE ITAT. IT FOLLOWED THE DECISION OF THE KARNATAKA 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 FURNISHING OF INACCURA TE PARTICULARS OF INCOME. THE KARNATAKA HIGH COURT HAD FOLLOWED THE ABOVE JUDGMEN T IN THE SUBSEQUENT ORDER IN COMMISSIONER OF INCOME TAX V. SSA'S EMERALD MEAD OWS (2016) 73 TAXMAN.COM 241(KAR), THE APPEAL AGAINST WHICH WAS D ISMISSED BY THE SUPREME COURT OF INDIA IN SLP NO. 11485 OF 2016 BY ORDER DA TED 5TH AUGUST, 2016. 22. ON THIS ISSUE AGAIN THIS COURT IS UNABLE TO FIN D ANY ERROR HAVING BEEN COMMITTED BY THE ITAT. NO SUBSTANTIAL QUESTION OF L AW ARISES.' 11. THEREFORE, ON THIS ACCOUNT ALSO I.E., FOR NON-S TRIKING OFF OF THE INAPPROPRIATE WORDS IN THE PENALTY NOTICE, THE PENALTY LEVIED BY THE ASSESSING OFFICER AND SUSTAINED BY THE CIT(A) IS NOT JUSTIFIED. IN VIEW OF THE ABO VE DISCUSSION, THE PENALTY LEVIED BY THE ASSESSING OFFICER AND SUSTAINED BY THE CIT(A) I S DELETED AND THE GROUNDS RAISED BY THE ASSESSEE ARE ALLOWED. 12. IN THE RESULT, THE APPEAL FILED BY THE AS SESSEE IS ALLOWED. THE DECISION WAS PRONOUNCED IN THE OPEN COURT ON 2 4.09.2019. SD/- (R.K. PANDA) ACCOUNTANT MEMBE R DATED: 24 TH SEPTEMBER, 2019 DK ITA NO.7647/DEL/2018 8 COPY FORWARDED TO : 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ASSTT. REGISTRAR, ITAT, NEW DELHI