Manu Bali, Delhi V. ACIT, New Delhi

ITA 790/DEL/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 3974 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 7 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-10-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Assessment Year: 2011-2012
• Appeal Filed On: 15-02-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S S RANA
• Assessee Lawyers: AJAY KUMAR MATTA
• Keywords: Depreciation; Retrospective amendment; Question of law; Wrong claim; Unabsorbed depreciation
• Section: 143(3)

Judgement Text

1 IN THE INCOME TAX APPELATE TRIBUNAL DELHI BENCH G: NEW DELHI BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER ITA NO. 790/DEL/2016 A.Y. : 2011-12 MANU BALI, VS. ACIT, CIRCLE 32(1), C/O MATTA & ASSOCIATES, CIVIC CENTRE, 877, AGGARWAL CYBER PLAZA-II, NEW DELHI NETAJI SUBHASH PLACE, PITAMPURA, DELHI 11 0034 (PAN: AAAPB4096P) (APPELLANT) (RESPONDENT) ASSESSEE BY : SH. AJAY KUMAR MATTA, ADV. DEPARTMENT BY : SH. S.S. RANA, CIT(DR) O R D E R PER H.S. SIDHU, JM THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDE R OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS-18), NEW DELHI DAT ED 02.11.2015 PERTAINING TO ASSESSMENT YEAR 2011-12. 2. THE GROUNDS OF APPEAL RAISED IN THE ASSESSEES APPEAL READ AS UNDER:- 1. THAT THE LD. CIT(A) HAS GROSSLY ERRED BY CONFIRMING THE PENALTY IMPOSED BY THE ASSESSING AUTHORITY OF RS. 98,996/- UNDER SECTION 271(1)(C) OF THE I.T. ACT, 19 61. 2 2. THAT THE LD. CIT(A), NEW DELHI HAS FURTHER ERRED BY NOT APPRAISING HIMSELF ABOUT THE WHOLE FACTS OF THE CASE BE FORE CONFIRMING THE PENALTY IMPOSED BY AO OF RS. 98,996/-. 3. THAT THE LD. CIT(A) HAS FURTHER ERRED BY APPROVI NG THE ACTION OF THE AO. THAT THE ABOVE GROUNDS ARE WITHOUT PREJUDICE TO EACH OTHER. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND OR F OREGO ANY OF THE GROUNDS OF APPEAL BEFORE OR AT THE TIME O F HEARING. 3. THE BRIEF FACTS OF THE CASE ARE THAT A RETURN SHOWI NG INCOME OF RS. 1,23,83,470/- WAS FILED ON 21.7.2011. THE ASSESSEE DERIVES INCOME FROM HOUSE PROPERTY AND OTHER SOURCES. IN THIS CASE AS SESSMENT WAS COMPLETED VIDE ORDER DATED 03.2.2014 AT TOTAL INCOME OF RS. 1,27,03,849/- BY MAKING DISALLOWANCE OF EXPENDITURE CLAIMED U/S. 5 7 OF THE I.T. ACT, 1961 AMOUNTING TO RS. 3,20,377/-. THE AO HAD INITIATED PENALTY PROCEEDINGS U/S. 271(1) OF THE ACT ON THE DISALLOWANCE OF RS. 3,20,377 /- IN THE ASSESSMENT ORDER. THE ASSESSEE HAS FILED APPEAL AGAINST THE ASSESSM ENT ORDER FOR THE YEAR UNDER CONSIDERATION. IN OTHER WORDS, THE ASSESSEE HA S ACCEPTED THE ADDITION MADE DURING THE COURSE OF ASSESSMENT PROCEEDINGS. THE FACTS ON THE ISSUE OF ADDITION OF RS. 3,20,377/- ARE THAT ON PERUSAL OF THE 3 COMPUTATION, THE AO OBSERVED THAT AN AMOUNT OF RS. 30,58,142/- HAD BEEN CLAIMED AD DEDUCTION U/S. 57 OF THE I.T. ACT, 1961. TH E ASSESSEE WAS ASKED TO EXPLAIN VIDE ORDER SHEET ENTRY DATED 25.11.2013 HOW DEDUCTION CLAIMED U/S. 57 OF THE ACT HAS BEEN INCURRED TO EARN INCOME FR OM OTHER SOURCES. IN RESPONSE THE ASSESSEE FILED THE REPLY VIDE SUBMISSION DATE D 9.12.2013. FURTHER TO VERIFY THE CLAIM OF THE ASSESSEE, THE ASSESSEE WAS ASKED VIDE ORDER SHEET ENTRY DATED 9.12.2013 TO PRODUCE NARRATIO N OF ALL THE ENTRIES OF OVERDRAFT ACCOUNT OUT OF WHICH LOANS HAVE BEEN TAKEN A ND INTEREST IS BEING PAID. IN RESPONSE TO THE SAME, THE ASSESSEE GAVE THE REP LY DATED 18.12.2013. THE REPLY OF THE ASSESSEE WAS CONSIDERED BY THE AO BUT FOUND PARTIALLY ACCEPTABLE. THEREAFTER, THE AO OBSERVED TH AT DEDUCTION OF PROCESSING CHARGES PAID BY THE ASSESSEE WAS NOT ALLOWABLE SI NCE THE PURPOSE OF OPENING THIS OD ACCOUNT HAD NOT BEEN MADE CLE AR BY THE ASSESSEE. THE NUMBER OF WITHDRAWALS FOR PERSONAL / OTH ER PURPOSES WAS MORE THAN THE WITHDRAWALS FOR EARNING INCOME FROM OTH ER SOURCES. THE OTHER FACTS RELATED TO RENTAL INCOME OF THE ASSESSEE WER E CONSIDERED. THE AMOUNT OF INTEREST WAS DISALLOWED AS DEDUCTION U/S. 5 7 OF THE ACT COMES TO RS. 3,20,377/-. THEREFORE, AN AMOUNT OF RS. 3,20,377/ - WAS DISALLOWED AND ADDED BACK TO THE INCOME OF THE ASSESSEE UNDER THE INCOM E FROM OTHER SOURCES. ACCORDINGLY, NOTICE U/S. 271(1)(C) READ WITH SEC TION 274 OF THE I.T. ACT, 1961 WAS ISSUED ON 3.2.2014 AND IN RESPONSE TO THE SAME ASSESSEE FURNISHED ITS REPLY DATED 10.2.2014 AND AFTER CONSIDER ING THE SAME, THE AO 4 LEVIED THE PENALTY U/S. 271(1)(C) BY OBSERVING THAT TH E ASSESSEE HAS FURNISHED INACCURATE PARTICULARS WITHIN THE MEANING OF EXPLANATION 1 TO THE SUB-SECTION (1) OF SECTION 271(1) OF THE I.T. ACT, 1961 WHERE PENALTY SHOULD INVARIABLY BE IMPOSED. AO FURTHER OBSERVED THAT THE ACT OF ASSESSEE WAS A DELIBERATE ACT TO EVADE THE TAX ON AMOUNT OF R S. 3,20,377/- AND AN ACT COMMITTED FOR CONCEALMENT OF THE PARTICULARS OF HIS I NCOME AND FURNISHING INACCURATE PARTICULARS OF HIS INCOME. HENCE, HE LEVIED THE MINIMUM AND MAXIMUM PENALTY OF RS. 98,996/- U/S. 271 (1) OF THE I.T. ACT, 1961 VIDE ORDER DATED 27.8.2014. 4. AGAINST THE PENALTY ORDER THE ASSESSEE APPEALED BEF ORE THE LD. CIT(A), WHO VIDE IMPUGNED ORDER DATED 02.11.2015 HAS DISMISSED THE APPEAL OF THE ASSESSEE. 5. AT THE TIME OF HEARING, LD. COUNSEL OF THE ASSESSEE HAS DRAW OUR ATTENTION TOWARDS THE ASSESSMENT ORDER DATED 03.2.2014 PASSED U/S. 143(3) OF THE ACT AND STATED THAT WHILE COMPLETING THE ASSESSME NT THE AO HAS INITIATED THE PENALTY PROCEEDINGS U/S. 271(1) OF THE ACT FOR CONCEALMENT OF INCOME AND FOR FURNISHING OF INACCURATE PARTICULARS WITH IN THE MEANING OF EXPLANATION 1 TO THE SUB-SECTION (1) OF SECTION 271(1)( C) OF THE I.T. ACT. SIMILARLY, HE ALSO DRAW OUR ATTENTION TOWARDS THE PEN ALTY ORDER DATED 27.8.2014 WHEREIN THE AO HAS OBSERVED THAT THE ACT O F THE ASSESSEE WAS A DELIBERATE ACT TO EVADE THE TAX ON AMOUNT OF RS. 3,2 0,377/- AND AN ACT COMMITTED FOR CONCEALMENT OF THE PARTICULARS OF HIS INCO ME AND FURNISHING 5 INACCURATE PARTICULARS OF HIS INCOME AND IMPOSED THE PENA LTY OF RS. 98,996/- U/S. 271(1) OF THE ACT ON THE AMOUNT ADDED FOR WHICH INACCURATE PARTICULARS HAS BEEN FURNISHED. IN VIEW OF THE ABOVE, H E STATED THAT ENTIRE PENALTY PROCEEDINGS STAND VITIATED, BECAUSE IT IS N OT IN ACCORDANCE WITH LAW AND IN ORDER TO SUPPORT HIS CONTENTION, HE PLACED TH E RELIANCE ON THE FOLLOWING DECISIONS:- - HONBLE KARNATAKA HIGH COURT DECISION IN THE CASE OF CIT & ORS. VS. M/S MANJUNATHA COTTON AND GINNIG FACTORY & ORS . (2013) 359 ITR 565 - APEX COURT DECISION IN THE CASE OF CIT & ANR. VS. M/ S SSAS EMERALD MEADOWS IN CC NO. 11485/2016 DATED 05.8.2016. IN VIEW OF ABOVE, HE REQUESTED THAT THE PENALTY IN D ISPUTE MAY BE CANCELLED AND APPEAL OF THE ASSESSEE MAY BE ALLOWED. 6. ON THE CONTRARY, LD. DR RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW AND ALSO FILED THE WRITTEN SUBMISSIONS, WHICH ARE REPRODUCED HEREUNDER:- SUB: WRITTEN SUBMISSION IN THE ABOVE CASE- REG. IN THE ABOVE CASE, IT IS HUMBLY SUBMITTED THAT THE FOLLOWING DECISIONS MAY KINDLY BE CONSIDERED: 6 1. UNION OF INDIA V. PHARAMENDRA TEXTILE PROCESSORS [(2007) 295 ITR 244] (COPY ENCLOSED) WHERE HON'BLE SUPREME COURT HELD THAT PENALTY UNDER SECTION 271 (1 )(C) IS A CIVIL LIABILITY FOR WHICH WILLFUL CONCEALMENT IS NOT AN ESSENTIAL INGREDIENT FOR ATTRACTING THE CIVIL LIABILI TY AS IS THE CASE IN THE MATTER OF PROCEEDINGS UNDER SECTION 276C 2. CIT VS ZOOM COMMUNICATION (P.) LTD. [191 TAXMAN 179 (DELHI)/[2010] 327 ITR 510 (DELHI)/[2010] 233 C TR 465] WHERE HON'BLE DELHI HIGH COURT HELD THAT IF ASSESSE E MAKES A CLAIM WHICH IS NOT ONLY INCORRECT IN LAW, BUT IS A LSO WHOLLY WITHOUT ANY BASIS AND EXPLANATION FURNISHED BY HIM FOR MAKING SUCH- A CLAIM IS. NOT FOUND TO BE BONA FIDE, EXPLANATION 1 TO SECTION 271 (1 )(C) WOULD COME INTO PLAY AND ASSESSEE WILL BE LIABLE TO PENALTY 3. CIT VS MOSER BAER INDIA LTD. (184 TAXMAN 8 (SC)/[2009] 315 ITR 460 (SC)/[2009] 222 CTR 213) (COPY ENCLOSED) WHERE HON'BLE SUPREME COURT CONFIRMED PENALTY UNDER SECTION 271 (1 )(C) FOR WRONG ADJUSTMENT OF UNABSORBED DEPRECIATION. 4. CIT VS GOLD COIN HEALTH FOOD (P.) LTD (172 TAXMAN 386 (SC)/[2008] 304 ITR 308 (SC)/[2008] 218 CTR 359 ) 7 (COPY ENCLOSED) WHERE HON'BLE DELHI SUPREME COURT HELD THAT AMENDMENT MADE IN EXPLANATION 4 TO SECTION 271(1)(C)(III) WITH EFFECT FROM 1-4-2003 IS CLARIFICATO RY AND, THEREFORE, WILL HAVE RETROSPECTIVE EFFECT 5. CIT VS. GATES FOAM & RUBBER CO [91 ITR 467] CIT VS INDIA SEAFOOD [105 ITR 708] WHERE HON'BLE KERALA HI GH COURT HELD THAT CLAIMING EXCESSIVE DEDUCTION ALSO AMOUN TS TO CONCEALMENT OF INCOME 6. STEEL INGOTS LTD VS. CIT [296 ITR 228] WHERE HON'B LE MADHYA PRADESH HIGH COURT HELD THAT IN CASE OF CONCEALMENT OF TRUE INCOME CHARGEABLE. TO TAX BY MAKIN G BOGUS CLAIM, LEVY OF PENALTY U/S 271 (1 )(C) READ WITH EXPLANATION 1 IS JUSTIFIED 7. CIT VS ESCORTS FINANCE LTD [183 TAXMAN 453 (DELHI)/[2010] 328 ITR 44 (DELHI)/[2009] 226 CTR 10 5] WHERE HON'BLE DELHI HIGH COURT HELD THAT IF CLAIM MADE IN RETURN OF INCOME APPEARS TO BE EX FACIE BOGUS, IT WOUL D BE TREATED AS A CASE OF CONCEALMENT OR FURNISHING OF INACCURATE PARTICULARS AND PENALTY PROCEEDING WOULD BE JUSTIFIED. 8 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE ORD ERS PASSED BY THE REVENUE AUTHORITIES ALONGWITH THE RELEVANT RECORDS AV AILABLE WITH US ESPECIALLY THE ASSESSMENT ORDER, PENALTY ORDER AND THE WRITTEN SUBMISSIONS FILED BY THE LD. DR. AFTER PERUSING THE AFORESAID RE CORDS, WE ARE OF THE CONSIDERED VIEW THAT IN THE ASSESSMENT ORDER DATED 03.2. 2014 PASSED U/S. 143(3) OF THE ACT, THE AO WHILE COMPLETING THE ASSESSM ENT INITIATED THE PENALTY PROCEEDINGS U/S. 271(1) OF THE ACT FOR CONCEALME NT OF INCOME AND FOR FURNISHING OF INACCURATE PARTICULARS WITHIN THE ME ANING OF EXPLANATION 1 TO THE SUB-SECTION (1) OF SECTION 271(1)(C) OF THE I.T . ACT. WE FURTHER NOTE THAT SIMILARLY IN THE PENALTY ORDER DATED 27.8.2014 THE AO HAS OBSERVED THAT THE ACT OF THE ASSESSEE WAS A DELIBERATE ACT TO EVADE TH E TAX ON AMOUNT OF RS. 3,20,377/- AND AN ACT COMMITTED FOR CONCEALMENT OF THE PARTICULARS OF HIS INCOME AND FURNISHING INACCURATE PARTICULARS OF HIS IN COME AND IMPOSED THE PENALTY OF RS. 98,996/- U/S. 271(1) OF THE ACT ON THE AMOUNT ADDED FOR WHICH INACCURATE PARTICULARS HAS BEEN FURNISHED. IN V IEW OF THE ABOVE, IN OUR CONSIDERED OPINION, THE ENTIRE PENALTY PROCEEDING S STAND VITIATED BECAUSE THE ASSESSMENT ORDER AS WELL AS PENALTY ORDER AR E NOT SUSTAINABLE IN THE EYES OF LAW, IN VIEW OF THE FOLLOWING CASE LAW S. I) CIT & ANR. VS. M/S SSAS EMERALD MEADOWS 2015 (11) TMI 1620 KARNATAKA HIGH COURT HAS HELD THAT TRIBUNAL HAS CORRECTLY ALLOWED THE APPEAL FILED BY THE ASSESSEE HOLDING THE NOTICE ISSUED BY THE ASSESSING OFFICER UNDER SECTION 274 READ WITH 9 SECTION 271(1)(C) TO BE BAD IN LAW AS IT DID NOT SPECIFY WHICH LIMB OF SECTION 271(1) OF THE ACT, THE PENALTY PROCEEDINGS HAD BEEN INITIATED I.E., WHETHE R FOR CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME. THE TRIBUNAL, WHILE ALLOWING THE APPEAL OF THE ASSESSEE, HAS RELIED ON THE DECISION OF THE DIVISION BENCH OF THIS COURT RENDERED IN THE CASE OF COMMISSIONER OF INCOME TAX VS. MANJUNATHA COTTON AND GINNING FACTORY (2013) (7) TMI 620- KARANATAKA HIGH COURT. THUS SINCE THE MATTER IS COVERED BY JUDGMENT OF THE DIVISION BENCH OF THIS COURT, WE ARE OF THE OPINION N O SUBSTANTIAL QUESTION OF LAW ARISES DECIDED IN FAVOUR OF ASSESSEE. II) CIT & ANR. VS. M/S SSAS EMERALD MEADOWS HONBLE SUPREME COURT OF INDIA REPORTED IN 2016 (8) TMI 1145 SUPREME COURT. THE APEX COURT HELD THAT HIGH COURT ORDER CONFIRMED (2015) (11) TMI 1620 (SUPRA) KARNATAKA HIGH COURT. NOTICE ISSUED 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 THE ACT, THE PENALTY PROCEEDINGS HAD BEEN INITIATED I.E., WHETHER FOR CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME DECIDED IN FAVOUR OF ASSESSEE. 7.1 IN THE BACKGROUND OF THE AFORESAID DISCUSSIONS AND RE SPECTFULLY FOLLOWING THE PRECEDENTS, WE DELETE THE PENALTY IN DISPUTE ON THE LEGAL 10 GROUND ITSELF AND DECIDE THE ISSUE IN FAVOR OF THE ASSESS EE AND AGAINST THE REVENUE. SINCE WE HAVE DELETED THE PENALTY ON THE L EGAL GROUND ITSELF AND DID NOT DISCUSS THE PENALTY ISSUE ON MERIT, HENCE, THE CASE LAWS CITED BY THE LD. DR ARE NOT USEFUL AT THIS JUNCTURE, BECAUSE THESE CASE LAWS ARE ON THE MERITS OF THE CASE, WHICH WE HAVE NOT DISCUSSED. 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE STANDS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 05/10/2017. SD/- SD/- [PRASHANT MAHARISHI] [H.S. SIDHU] ACCOUNTANT MEMBER JUDICIAL MEMBER DATE: 05/10/2017 SRBHATNAGAR COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4.CIT (A) 5. DR , ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES