EQUANT INDIA P. LTD, MUMBAI V. DCIT CIR 3(1), MUMBAI

ITA 7976/MUM/2010

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 2459 (ITAT-MUMBAI)
• Duration Of Justice: 5 year(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-11-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 26-08-2015
• Assessment Year: 2005-2006
• Appeal Filed On: 18-11-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SU JIT BANGAR
• Assessee Lawyers: ARPIT AGRAWAL
• Keywords: Gift; Depreciation; Reasonable cause; Revised return
• Section: 143(3); 142(1)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI . . , , ! , ' BEFORE S/SHRI B.R.BASKARAN, ACCOUNTANT MEMBER AND AMARJIT SINGH, JUDICIAL MEMBER / I .T.A. NO.7976/MUM/2010 ( / ASSESSMENT YEAR: 2005-06) EQUANT INDIA PVT. LTD. OFFICE LEVEL 8, WING BETA, I-THINK TECHNO CAMPUS, OPP. CROMPTON GREAVES COMPOUND, KANJURMARG(E), MUMBAI-400042 / VS. DY. COMMISSIONER OF INCOME TAX. CIRCLE 3(1), MUMBAI # ./ $ ./ PAN/GIR NO. : AAACE8702A ( #% / APPELLANT ) .. ( &'#% / RESPONDENT ) ASSESSEE BY: SHRI. DHANESH BAFNA & SHRI. ARPIT AGRAWAL DEPARTMENT BY: SHRI. SUJIT BANGAR 4 / DATE OF HEARING: 26.08.2015 567 4 /DATE OF PRONOUNCEMENT: 18.11.2015 8 / O R D E R PER AMARJIT SINGH, JM: THE APPEAL IN ITA NO.7976/MUM/2010 FOR THE ASSESSME NT YEAR 2005-06 HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER DA TED 03.09.2010 OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-7, MUMBAI [HER EINAFTER REFERRED TO AS THE LEARNED CIT(A)] PASSED IN APPEAL NO.CIT(A)-7/ DCIT.3(1)/IT-294/09-10. THE ASSESSEE HAS CHALLENGED THE ABOVE MENTIONED ORD ER ON THE FOLLOWING GROUNDS:- 1. THAT ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE COMMISSIONER OF INCOME TAX (APPEALS) - VII, MUMBAI (BRIEFLY 'THE CIT(A)' ITA NO.7976/M/10 ASSESSMENT YEAR: 2005-06 2 HAS ERRED IN UPHOLDING LEVY OF PENALTY OF RS.75,11 ,443/- IMPOSED UNDER SECTION 271(1 )(C) OF THE INCOME TAX ACT, 1961 ('TH E ACT'). 2. THAT ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) IN HOLDING THAT DIFFERENCE BETWEEN LOSS ORIGINALLY RETURNED ON THE BASIS OF PROVISIONAL BALANCE SHEET AND PROFIT & LOSS ACCOUNT AND INCOME DECLARED ON THE BASIS OF AUDITED ACCOUNT REPRESENTED CONCEALED INCOME AND / OR FURNISHING OF INACCURATE PARTICULARS OF INCOME. 3. THAT ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED IN HOLDING THAT THE PRESENT CASE WAS SQUARELY COVERED BY EXPLANATION TO SECTION 271(1 )(C) OF THE ACT. 4. THAT ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED IN HOLDING THAT RATIO OF JUDGMENT OF HON'BLE SUPREME COURT IN UOI V. DHARMENDRA TEXTILES (2008) 306 ITR 277. 5. THAT ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE ORDER PASSED BY THE CIT(A) IS BAD IN LAW AND DESERVES TO BE SET ASIDE. 2. THE FACTS OF THE CASE ARE THAT THE ASSESSEE HAD FILED ITS RETURN OF INCOME ON 31.10.2005 DECLARING LOSS TO THE TUNE OF RS.41,64,8 60/-. SUBSEQUENTLY, THE CASE WAS SELECTED FOR SCRUTINY AND A NOTICE U/S. 143(2) OF THE INCOME TAX ACT, 1961(IN SHORT THE ACT). WAS ISSUED ON 23.10.2006 . ALSO A NOTICE U/S. 142(1) OF THE WAS ISSUED ON 08.10.2007, SEEKING DETAILS ON VARIOUS POINTS. APART FROM THE GENERAL REQUIREMENT TO SUBSTANTIATE THE INCOME/ LOSS SHOWN IN THE INCOME-TAX RETURN, THE ASSESSEE WAS ASKED TO SHOW-CAUSE WHY TH E ACCOUNTS SHOULD NOT BE GOT AUDITED U/S 142(2A) OF THE ACT SINCE THE LOSS O F RS.41,64,860/- SHOWN IN THE INCOME-TAX RETURNS WAS BASED ON UN-AUDITED ACCOUNTS . ON 14.12.2007, THE ASSESSEE SUBMITTED THE AUDITED REPORT AND ALSO FILE D A REVISED COMPUTATION OF ITS TOTAL INCOME. IN THIS COMPUTATION, THE INCOME OF R S.1,63,62,413/- WAS SHOWN AGAINST THE LOSS TO THE TUNE OF RS.41,64,860/- AS P ER THE INCOME-TAX RETURN. THE A.O. PASSED THE ASSESSMENT ORDER U/S. 143(3) OF THE ACT DECLARING INCOME TO THE TUNE OF RS.1,63,62,413/- AND ALSO INITIATED PENALTY U/S.271(1)(C) OF THE ACT. LATER ON, THE PENALTY WAS IMPOSED TO THE TUNE OF RS .75,11,443/- WITH RESPECT TO THE DIFFERENCE BETWEEN THE INCOME SHOWN IN THE INCO ME-TAX RETURN AND FINALLY ITA NO.7976/M/10 ASSESSMENT YEAR: 2005-06 3 ASSESSED. THE A.O. CONCLUDED THAT THE INCOME OF RS .2,05,27,273/- FOR TAX IS AS A RESULT OF SCRUTINY ASSESSMENT. 3. THE A.O. PASSED THE ORDER U/S. 271(1)(C) BY RECO RDING THE FOLLOWING REASONS:- SO FAR AS THE CLAIM OF THE ASSESSEE REGARDING ABSE NCE OF ANY MALAFIDE INTENTION IS CONCERNED, IT IS NOTED THAT A FTER AMENDMENT OF SECTION 271(1)(C) WITH EFFECT FROM 1.4.1976 WHEN EX PLANATION 1 WAS ADDED TO IT AND W.E.F. 1 4.1989,WHEN THE WORD DELI BERATELY HAD BEEN REMOVED FROM THE SECTION 271(1)(C), THE SITUATIONS ENTIRELY CHANGED. THE LEGISLATURE HAD SHIFTED THE ONUS ON THE ASSESSE E TO PROVE THAT IT HAD NEITHER FURNISHED INACCURATE PARTICULARS OF INCOME BY CONCEALING THEM OR IT IS NOT COVERED EVEN UNDER THE DEEMING PROVISI ONS PROVIDED BY EXPLANATION 1, ACCORDING TO WHICH AN ASSESSEE WAS D EEMED TO HAVE CONCEALED THE PARTICULARS OF ITS INCOME AND FURNISH INACCURATE PARTICULARS OF ITS INCOME FOR THE PURPOSE OF SECTIO N 271(1)(C)IN RESPECT OF ANY EXPENSE CLAIMED IN THE RETURN OR INCOME, UND ER THE FOLLOWING CIRCUMSTANCES.- (I) IF THE ASSESSEE DID NOT SUBMIT: ANY EXPLANATION , (II) IF THE EXPLANATION SUBMITTED BY THE AS ASSESSE E WAS FOUND FALSE BY THE AUTHORITIES. (II) IF THE ASSESSEE FAILED TO SUBSTANTIATE ITS CLA IM MADE AND PROVE THAT THE CLAIM MADE WAS BONAFIDE AND THAT AL L THE FACTS RELATING TO THE SAME AND MATERIAL TO THE COMPUTATION OF ITS INCOME HAD BEEN DISCLOSED IN VIEW OF THE ABOVE PROVISION, THE ONUS WAS ON THE ASSESSEE AND IT COULD NOT DISCHARGE THE SAME. ACCORDING TO T HE PROVISIONS OF EXPLANATION 1 TO SECTION 271(1)(C), THE ASSESSEE HA S TO BE DEEMED TO HAVE CONCEALED IT INCOME BY FILING INACCURATE PARTI CULARS OF ITS INCOME, FOR THE PURPOSE OF SECTION 271(1)(C). THE ASSESSEE IS THEREFORE DEEMED TO HAVE CONCEALED THE PARTICULARS OF ITS INCOME. IN VIEW OF THE ABOVE DISCUSSION, IT ALSO GETS PROVE D THAT THE CONCEALED INCOME COULD BE BROUGHT TO TAX ONLY AS A RESULT OF SCRUTINY BY THE DEPARTMENT. HAD THE CASE NOT BEEN SELECTED F OR SCRUTINY AND THE RELEVANT QUERIES NOT BEEN RAISED DURING THE ASSESSM ENT PROCEEDING, THE ASSESSEE COMPANY WOULD NOT HAVE RECOMPUTED ITS INCO ME AND OFFERED THE SAME FOR TAX. I, THEREFORE, HOLD THAT THE ASSESSEE HAS CONCEALED THE PARTICULARS OF ITS INCOME/FURNISHED INACCURATE PART ICULARS OF INCOME AS ITA NO.7976/M/10 ASSESSMENT YEAR: 2005-06 4 ENVISAGED BY SECTION 271(1)(C) OF THE INCOME-TAX AC T, 1961, IN RESPECT OF ME AMOUNT OR RS.2,05,27,273/-.' 4. SUBSEQUENTLY, THE ASSESSEE FILED AN APPEAL BEFOR E THE LEARNED.CIT(A)-7, MUMBAI AND THE LEARNED CIT(A) UPHOLD THE PENALTY IM POSE BY THE A.O. AND RECORDED THE FOLLOWING REASONS: I HAVE CONSIDERED THE FACTS OF THE CASE. IT IS AN UN-DENIED FACT THAT INCOME-TAX RETURN WAS FILED AT LOSS OF RS.41,6 4,860/- AND FINALLY ASSESSED AT RS.1,63,62,413/- AND THE DIFFERENCE WAS DUE TO CONCEALMENT OF INCOME AS WELL AS FURNISHING OF INAC CURATE PARTICULARS IN THE INCOME- TAX RETURN AND THEREFORE COVERED BY THE PROVISIONS OF SECTION 271(1 )(C) OF THE INCOME-TAX ACT. THE ONLY ASPECT FOR CONSIDERATION IS WHETHER THE ASSESSEE HAD REASONABL E CAUSE FOR THE FAILURE. ACCORDING TO THE APPELLANT, THE RETURN OF INCOME WAS BASED ON PROVISIONAL BALANCE-SHEET AND IN THE EARLIER YEARS ALSO THE INCOME-TAX RETURN WAS FILED ON THE BASIS OF PROVISIONAL BALANC E-SHEET AND IT WAS SUBSEQUENTLY REVISED. IF A RETURN IS REVISED AS PE R LAW, IT SUBSTITUTES THE EARLIER RETURN AND NO ADVERSE CONCLUSION CAN BE DRAWN. HOWEVER, IN THE PRESENT CASE, THERE IS NO SUCH REVISION OF R ETURN. ONLY A COMPUTATION OF INCOME HAS BEEN FILED AND THAT TOO A FTER THE A.O. ISSUED NOTICE U/S 143(2)/ 142(1) OF THE INCOME-TAX ACT. NOT GETTING THE ACCOUNTS AUDITED IN TIME AND THEREFORE FILING THE R ETURN ON THE BASIS OF PROVISIONAL BALANCE-SHEET CANNOT BE A REASONABLE CA USE FOR FURNISHING INACCURATE PARTICULARS OR CONCEALMENT OF INCOME IN THE RETURN. IF THIS LOGIC IS ACCEPTED, THEN PROBABLY IT WILL BE CONVENI ENT FOR EVERY ASSESS E TO JUST FILE THE INCOME-TAX RETURN BASED ON PROVIS IONAL BALANCE-SHEET AND PROFIT AND LOSS ACCOUNT' AND FILE REVISED COMPU TATION WHEN A NOTICE IS ISSUED BY THE INCOME-TAX DEPARTMENT. I, THEREFORE, DO NOT FIND ANY REASONABLE CAUSE FOR THE FAILURE AND THE A .O. AS RIG Y IMPOSED PENALTY U/S .271 (1 )(C) OF THE INCOME-TAX ACT. 5. WE HAVE HEARD THE REPRESENTATIVE OF THE PARTIES AND HAVE GONE THROUGH THE MATERIALS FILED. THE REPRESENTATIVE OF THE ASSESSE E HAS ARGUED THAT THE ASSESSEE HAD FILED THE PROVISIONAL RETURN AND SUBSE QUENTLY, REVISED/AUDITED ACCOUNT WAS FILED AFTER RECEIPT OF THE NOTICE AND THERE WAS NO CONCEALMENT OF ANY PARTICULARS TO EVADE THE INCO ME AND DID NOT FURNISH ITA NO.7976/M/10 ASSESSMENT YEAR: 2005-06 5 ANY INACCURATE PARTICULARS. HOWEVER, REVISED RETUR N HAS BEEN FILED AFTER CONCLUDING THE AUDIT, WHEREIN, THE ASSESSEE COMPANY MAINLY LOWERED ITS CLAIMS OF DEPRECIATION UNDER THE ACT, OFFERED ADVAN CE WRITTEN OFF AS INCOME AND OFFERED DISALLOWANCE U/S. 40(A) FOR THE TAX. THEREFORE, UNDER THE SAID CIRCUMSTANCE, NO PENALTY IS LEVIABLE AND I N VIEW OF THE LAW SETTLED IN THE CASE OF BANGALORE STEEL DISTRIBUTORS VS. INC OME TAX OFFICER, ITAT, BANGALORE BENCH, ACIT PANIPAT CIRCLE, PANIPAT VS. ASHOK RAJ NATH PRONOUNCED ON 31.08.2012, ITAT DELHI BENCH. I T IS ALSO SPECIFICALLY ARGUED THAT THE ASSESSEE VOLUNTARILY O FFERED THE TAX WITHOUT POINTING OUT BY THE AO ANY ILLEGALITY OR UNANIMOUS, HENCE NO PENALTY IS LEVIABLE U/S. 271(1)(C) IN VIEW OF THE LAW SETTLED IN CASE OF CIT VS. HARNARAIN (2012) 67 DTR(DEL) 172 IN ITA NO. 2072 OF 2010 DATED 31 ST OCTOBER 2011. 6. ON THE OTHER HAND, THE LEARNED DR STRONGLY PLACE RELIANCE ON THE ORDER OF THE LEARNED CIT(A) AND ARGUED THAT THE ASSESSEE HAS ONLY OFFERED THE INCOME WHEN THE CASE CAME UP FOR SCRUTINY ASSESSMEN T. THEREFORE, THE PENALTY U/S. 271(1)(C) HAS RIGHTLY BEEN IMPOSED. 7. WITH DUE REGARDS THE CONTENTION RAISED BY THE LE GAL REPRESENTATIVE OF THE PARTIES, IT CAME INTO THE NOTICE THAT IT IS NOT DIS PUTED THAT INITIALLY THE APPELLANT FILED THE RETURN OF INCOME ON 31.10.05 DE CLARING THE LOSS TO THE TUNE OF RS.41,64,860/-. LATER ON, THE CASE WAS SEL ECTED FOR SCRUTINY AND A NOTICE U/S 143(2) WAS ISSUED ON 23.10.2006. ALSO, NOTICE U/S. 142(1) WAS ISSUED ON 08.10.2007 SEEKING DETAILS ON VARIOUS POI NTS. THE ASSESSEE WAS ASKED TO SHOW-CAUSE WHY THE ACCOUNTS SHOULD NOT BE GOT AUDITED U/S. 142(2A) OF THE ACT, SINCE THE LOSS OF EARLIER RETUR N WAS BASED ON UN- AUDITED ACCOUNTS. THEREFORE, AFTER IN PURSUANCE OF THE SAID NOTICES THE ASSESSEE SHOWED HIS INCOME TO THE TUNE OF RS.1,63,6 2,413/- AGAINST THE LOSS WHICH HAS BEEN SHOWN IN THE EARLIER RETURN TO THE TUNE OF ITA NO.7976/M/10 ASSESSMENT YEAR: 2005-06 6 RS.41,64,860/-. THE A.O. HAS ALSO SPECIFICALLY MEN TIONED IN HIS ORDER THAT THE REVISED COMPUTATION FILED BY THE ASSESSEE MAINLY ON THE BASIS OF LOWERING ITS CLAIMS OF DEPRECIATION UNDER THE ACT, OFFERED ADVANCE WRITTEN OFF AS INCOME AND OFFERED DISALLOWANCE U/S. 40(A) F OR THE TAX. NO DOUBT, IN THE VIEW OF THE ORDER OF THE A.O. THE REVISED CO MPUTATION HAS BEEN FILED WHILE THE FIGURE HAS ALREADY BEEN REFLECTED I N THE RETURN OF INCOME FILED ON 31.10.2005. THE ORDER OF A.O. NO WERE SPE AKS ABOUT THE CONCEALMENT OF THE PARTICULARS TO EVADE THE TAX AND ALSO NOWHERE SPEAKS ABOUT THE FURNISHING OF INACCURATE PARTICULARS TO E VADE THE TAX. THE ONLY REASON WHICH HAS BEEN STATED BY THE LEARNED CIT(A) THAT THE ASSESSEE FILED THE REVISED RETURN ONLY AFTER ISSUANCE OF NOTICE, I S NOT SUFFICIENT REASON TO IMPOSE THE PENALTY UPON THE ASSESSEE. THE SIMILAR QUESTION CAME BEFORE THE CO-ORDINATE BENCH OF BANGALORE IN CASE OF BANGA LORE STEEL DISTRIBUTORS VS. INCOME TAX OFFICER, ITAT, BANGALOR E BENCH. THE HEAD NOTE READ AS UNDER : PENALTY UNDER SECTION 271(1)(C) CONCEALMENT OR IGINAL RETURNS FILED BY THE ASSESSEE SUBSEQUENTLY REVISED ON THE BASIS OF SUBSEQUENTLY AUDITED ACCOUNTS SURVEY CONDUCTED IN BETWEEN FILING OF ORIGINAL AND REVISED RETURNS REVEALING NOTHING DISC RIMINATORY- INCOME FINALLY ASSESSED IN KEEPING WITH THE REVISED RETURN S ASSESSING OFFICER LEVYING PENALTY UNDER SECTION 271(1)(C) ON ACCOUNT OF DIFFERENCE IN INCOME ORIGINALLY RETURNED AND INCOME AS FINALLY AS SESSED-NOT JUSTIFIED-THE ORIGINAL RETURNS HAVING BEEN FILED ON UNAUDITED ACCOUNTS AND REVISED RETURNS AFTER CONDUCTING AUDIT AND NOTH ING INCRIMINATING HAVING BEEN FOUND IN SEARCH, THE REVISED RETURNS WE RE VALID AND CONCEALMENT, IF ANY, CAN BE CONSIDERED QUA REVISED ONLY-NO PENALTY LEVIABLE ON THE FACTS OF THE CASE. ACIT PANIPAT CIRCLE, PANIPAT VS. ASHOK RAJ NATH P RONOUNCED ON 31.08.2012, ITAT DELHI BENCH ALSO LEADS THE FACTS A ND CIRCUMSTANCE OF THE PRESENT CASE WHEREIN THE PENALTY WAS NOT HELD T O BE JUSTIFIED. MOREOVER, VOLUNTARILY DISCLOSURE OF THE INCOME IN T HE REVISED COMPUTATION NOWHERE CAME IN THE AMBIT OF SECTION OF 271(1)(C) OF THE ACT ITA NO.7976/M/10 ASSESSMENT YEAR: 2005-06 7 AS HELD IN THE CASE OF CIT VS. HARNARAIN (2012) 67 DTR(DEL) 172 IN ITA NO. 2072 OF 2010 DATED 31 ST OCTOBER 2011. THE HEAD NOTE READ AS UNDER : PENALTY UNDER SECTION 271(1)(C) CONCEALMENT GI FT AMOUNT VOLUNTARILY OFFERED AS TAXABLE INCOME AO INCLUDED THE AMOUNT OF GIFT IN THE TOTAL INCOME OF THE ASSESSEE MERELY ON THE B ASIS OF LATTERS DECLARATION-AO DID NOT POINT OUT OR REFER TO ANY EV IDENCE OR MATERIAL TO SHOW AND ESTABLISH THAT THE GIFT RECEIVED BY THE ASSESSEE WAS BOGUS OR SHAM-ALSO, IT IS NOT THE CASE OF THE REVENUE THA T MATERIAL WAS FOUND DURING THE SEARCH AT THE RESIDENTIAL PREMISES OF TH E ASSESSEE INDICATING THAT THE GIFT WAS AN ARRANGED AFFAIR TO ACCOMMODATE ASSESSEES UNACCOUNTED MONEY-IN RESPONSE TO A QUERY IN THE QUE STIONNAIRE, ASSESSEE HAD FURNISHED THE DETAILS OF THE GIFT RECE IVED BY HIM IN THE RELEVANT YEAR AND HAD ALSO FURNISHED A COPY OF THE GIFT DEED ALONG WITH HIS REPLY-FURTHER, IT WAS CLARIFIED BY THE ASSESSEE THAT THE GIFT UNDER CONSIDERATION WAS GENUINE AND THE RELATED DOCUMENTS WERE SENT TO THE AO-THUS, THERE WAS NO DETECTION BY THE AO THAT THE GIFT WAS NOT GENUINE-SURRENDER OF THE AMOUNT BY THE ASSESSEE AFT ER RECEIPT OF THE QUESTIONNAIRE COULD NOT LEAD TO AN INFERENCE THAT I T WAS NOT VOLUNTARY- PENALTY RIGHTLY DELETED. IN VIEW OF THE SAID FACTS AND CIRCUMSTANCES, WE AR E OF THE VIEW THAT THE NO PENALTY IS LEVIABLE ON THE ASSESSEE IN VIEW OF T HE PROVISIONS U/S. 271(1)(C) OF THE ACT, HENCE THE ORDER OF LEARNED CI T(A) IS HEREBY TO BE SET ASIDE. 8. IN THE RESULT, THE PRESENT APPEAL OF THE ASSESSE E IS HEREBY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT AT THE TIME OF HEARING ON 18 TH NOVEMBER, 2015 SD/- S D/- (B.R.BASKARAN) (AMARJIT SINGH) / ACCOUNTANT MEMBER ! /JUDICIAL MEMBER MUMBAI; 9 DATED : 18 TH NOVEMBER, 2015 MP MP MP MP ITA NO.7976/M/10 ASSESSMENT YEAR: 2005-06 8 / COPY OF THE ORDER FORWARDED TO : 1. #% / THE APPELLANT 2. &'#% / THE RESPONDENT. 3. : ( ) / THE CIT(A)- 4. : / CIT 5. ;<= &!! , , / DR, ITAT, MUMBAI 6. =>? @ / GUARD FILE. / BY ORDER, '; &! //TRUE COPY// / !' (DY./ASSTT. REGISTRAR) '# $ , / ITAT, MUMBAI