ACIT 3(2)(1), MUMBAI V. M J EXPORTS P.LTD, MUMBAI

ITA 808/MUM/2017

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 6765 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-06-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: I
• Assessment Year: 2007-2008
• Appeal Filed On: 03-02-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIRENDER SINGH
• Assessee Lawyers: H N MOTIWALLA
• Keywords: Question of law; Initiation of penalty proceedings
• Section: 260A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL I BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY , JUDICIAL MEMBER AND SHRI DR. A.L. SAINI , ACCOUNTANT MEMBER ITA NO. 808 / MUM . /2017 ( ASSESSMENT YEAR : 20 07 08 ) ASSTT. COMMISSIONER OF INCOME TAX WARD 3 (2)( 1 ), MUMBAI . APPELLANT V/S M.J. EXPORTS PVT. LTD. 113, JOLLY MAKER CHAMBER II NARIMAN POINT, MUMBAI 400 021 PAN AADCM7712M . RESPONDENT REVENUE BY : SHRI VIRENDER SINGH ASSESSEE BY : SHRI H.N. MOTIWALLA DATE OF HEARING 20 .0 6 .2018 DATE OF ORDER 27.06.2017 O R D E R PER SAKTIJIT DEY, J.M. AFORESAID APPEAL BY THE REVENUE IS AGAINST THE ORDER DATED 14 TH OCTOBER 2016, PASSED BY THE LEARNED COMMISSIONER (APPEALS) 8, MUMBAI, DELETING THE PENALTY IMPOSED UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT, 1961 (FOR SHORT THE ACT) AMOUNTING TO ` 1,25,52,047, FOR THE ASSESSMENT YEAR 2007 08. 2 . BRIEF FACTS ARE, THE ASSESSEE A COMPANY FILED ITS RETURN OF INCOME FOR THE IMPUGNED ASSESSMENT YEAR ON 18 TH OCTOBER 2007, DECLARING 2 M.J. EXPORTS PVT. LTD. TOTAL INCOME OF ` 7,33,274. DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER ON VERIFYING THE MATERIAL ON RECORD FOUND THAT IN COURSE OF ASSESSMENT PROCEEDINGS FOR ASSESSMENT YEAR 2006 07, AS PER AIR INFORMATION IT WAS FOUND THAT ASSESSEE HAS NOT DISCLOSED RENT RECEIVED FROM M/S. CHORDIA FASHIONS PVT. LTD. IN THE RETURN OF INCOME FILED BY IT. THEREFORE, THE ASSESSING OFFICER PROPOSED TO AD D THE SAID AMOUNT AT THE HANDS OF THE ASSESSEE. THOUGH, THE ASSESSEE OBJECTED TO THE PROPOSED ADDITION, HOWEVER, THE ASSESSING OFFICER REJECTING THE OBJECTIONS OF THE ASSESSEE ADDED THE RENTAL INCOME ALLEGED LY RECEIVED BY THE ASSESSEE FROM M/S. CHORDIA FAS HIONS PVT. LTD. WHILE COMPLETING THE ASSESSMENT FOR ASSESSMENT YEAR 2006 07. FOLLOWING THE SAME REASONING, THE ASSESSING OFFICER ADDED AN AMOUNT OF ` 30,29,390 AT THE HANDS OF THE ASSESSEE IN THE IMPUGNED ASSESSMENT YEAR AS WELL . FURTHER, HE NOTICED THAT T HE ASSESSEE HAS DEBITED AN AMOUNT OF ` 3,88,05,315, TO THE PROFIT & LOSS ACCOUNT TOWARDS INTEREST PAYMENT. ON VERIFYING THE DETAILS FURNISHED BY TH E ASSESSEE HE FOUND THAT THE SAID AMOUNT RELATES TO CUSTOM DUTY AND PENALTY LEVIED BY THE COLLECTOR OF CUSTOM S , MUMBAI, VIDE ORDER DATED 28 TH JANUARY 1994, TOWARDS GOODS IMPORTED BY THE ASSESSEE IN FINANCIAL YEAR 1998 99. HE OBSERVED THAT THE ASSESSEE HAS DISPUTED THE LEVY OF CUSTOM DUTY AND THE DISPUTE WENT UP TO THE HON'BLE SUPREME COURT AND THE HON'BLE SUPREME COURT VIDE ORDER DATED 14 TH AUGUST 2001, CONFIRMED THE LEVY OF CUSTOM DUTY. SINCE , THE ASSESSEE DID NOT PAY THE CUSTOM DUTY 3 M.J. EXPORTS PVT. LTD. WITHIN THE STIPULATED PERIOD OF THREE MONTHS FROM THE DATE OF DEMAND, THE CUSTOM AUTHORITIES PASSED AN ORDER LEVYING INTEREST OF ` 4,67,02,251, WHICH WAS DISPUTED BY THE ASSESSEE BEFORE THE HON'BLE HIGH COURT AND THE HON'BLE HIGH COURT, WHILE DISPOSING OFF ASSESSEES PETITION CONFIRMED THE PAYMENT OF INTEREST FOR AN AMOUNT OF ` 3,88,05,315. ON THE BASIS OF AFORESAID FACT S , THE ASSESSI NG OFFICER CALLED UPON THE ASSESSEE TO EXPLAIN WHY THE INTEREST PAYMENT SHOULD NOT BE DISALLOWED, AS SUCH EXPENDITURE CRYSTALLIZED IN FINANCIAL YEAR 2004 05. THOUGH, THE ASSESSEE OBJECTED TO THE PROPOSED DISALLOWANCE, HOWEVER, THE ASSESSING OFFICER REJECTI NG THE SUBMISSIONS OF THE ASSESSEE DISALLOWED THE INTEREST PAYMENT OF ` 3,88,04,103. ON THE BASIS OF AFORESAID ADDITIONS, THE ASSESSING OFFICER INITIATED PROCEEDINGS FOR IMPOSITION OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT AND ULTIMATELY PASSED AN ORDE R ON 28 TH MARCH 2013, IMPOSING PENALTY OF ` 1,25,50,047 UNDER SECTION 271(1)(C) OF THE ACT ALLEGING CONCEALMENT OF INCOME. AGAINST THE PENALTY ORDER SO PASSED, THE ASSESSEE PREFERRED APPEAL BEFORE THE FIRST APPELLATE AUTHORITY. 3 . AFTER CONSIDERING THE SUBMI SSIONS OF THE ASSESSEE, THE LEARNED COMMISSIONER (APPEALS) OBSERVED , AS REGARDS THE ADDITION OF RENTAL INCOME RECEIVED FOR ` 30,29,390, ASSESSEES APPEAL AGAINST IDENTICAL ADDITION IN ASSESSMENT YEAR 2006 07, HAS BEEN ADMITTED BY THE HON'BLE JURISDICTIONAL HIGH COURT, THEREFORE, THE ISSUE BEING DEBATABLE, 4 M.J. EXPORTS PVT. LTD. NO PENALTY UNDER SECTION 271(1)(C) OF THE ACT CAN BE IMPOSED. INSOFAR AS ADDITION MADE ON ACCOUNT OF DISALLOWANCE OF INTEREST PAID TO CUSTOMS DEPARTMENT, THE LEARNED COMMISSIONER (APPEALS) HELD THAT THE AS SESSEE CANNOT BE ACCUSED OF FURNISHING INACCURATE PARTICULARS OF INCOME IN RESPECT OF SUCH ADDITION. THEREFORE, PENALTY UNDER SECTION 271(1)(C) OF THE ACT CANNOT BE IMPOSED. THUS, HE DELETED THE PENALTY IMPOSED BY THE ASSESSING OFFICER. 4 . THE LEARNED DEPARTMENTAL REPRESENTATIVE RELYING UPON THE OBSERVATIONS MADE IN THE PENALTY ORDER SUBMITTED THAT THE ASSESSEE HAS DELIBERATELY FAILED TO OFFER THE RENTAL INCOME IN THE RETURN OF INCOME FILED FOR THE IMPUGNED ASSESSMENT YEAR. THEREFORE, IT IS A CLEAR CASE OF CONCEALMENT OF INCOME. INSOFAR AS THE DISALLOWANCE OF INTEREST EXPENDITURE IS CONCERNED, THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT THE ASSESSEE BEING AWARE OF THE FACT THAT THE EXPENDITURE HAS CRYSTALLIZED LONG BACK H AS CLAIMED THE DEDUCTION IN THE IMPUGNED ASSESSMENT YEAR. THEREFORE, THERE IS FURNISHING OF INACCURATE PARTICULARS OF INCOME. THUS, HE SUBMITTED THAT PENALTY IMPOSED BY THE ASSESSING OFFICER IS JUSTIFIED. 5 . THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED , INSOFAR AS THE ADDITION MADE ON ACCOUNT OF DISALLOWANCE OF INTEREST PAYMENT TO CUSTOMS DEPARTMENT IS CONCERNED, THE TRIBUNAL WHILE DECIDING ASSESSEES QUANTUM APPEAL HAS DELETED SUCH ADDITION. IN THIS CONTEXT, 5 M.J. EXPORTS PVT. LTD. HE DREW OUR ATTENTION TO THE ORDER PASSED BY THE CO ORDIN ATE BENCH IN ITA NO.4874 AND 4937/MUM./2012, DATED 17 TH MAY 2016. THUS, HE SUBMITTED THAT DUE TO SUCH RELIEF GRANTED BY THE TRIBUNAL, PENALTY IMPOSED ON THE DISALLOWANCE OF INTEREST PAID TO THE CUSTOMS DEPARTMENT, IN ANY CASE, WILL NOT SURVIVE. AS REGARDS ADDITION OF RENTAL INCOME, THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED THAT THE ASSESSEE HAS FURNISHED FULL PARTICULARS OF SUCH INCOME AND HAS ALSO STATED THE REASON FOR WHICH THE ASSESSEE HAS NOT OFFERED SUCH INCOME. EXPLAINING FURTHER, HE SUBMITTED T HAT WHEN IDENTICAL ISSUE AROSE IN COURSE OF ASSESSMENT PROCEEDINGS FOR ASSESSMENT YEAR 2006 07, THE ASSESSEE HAD FURNISHED FULL PARTICULARS OF THE RENTAL INCOME OF THE PROPERTY SITUATED AT SHIV SAGAR ESTATE AND HAS ALSO STATED THE REASON WHY IT CANNOT BE T AXED AT THE HANDS OF THE ASSESSEE. THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED , THOUGH THE TRIBUNAL WHILE DECIDING ASSESSEES QUANTUM APPEAL FOR THE IMPUGNED ASSESSMENT YEAR HAS UPHELD THE ADDITION MADE BY THE ASSESSING OFFICER, HOWEVER, SUBSTANTIAL QU ESTION OF LAW RAISED BY THE ASSESSEE IN THE APPEAL FILED UNDER SECTION 260A OF THE ACT BEFORE THE HON'BLE JURISDICTIONAL HIGH COURT HAS BEEN ADMITTED IN ASSESSMENT YEAR 2006 07. THUS, HE SUBMITTED THAT THE ISSUE RELATING TO ADDITION OF RENTAL INCOME BEING A DEBATABLE ISSUE, PENALTY UNDER SECTION 271(1)(C) OF THE ACT SHOULD NOT BE IMPOSED. 6 M.J. EXPORTS PVT. LTD. 6 . WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED MATERIALS ON RECORD. UNDISPUTEDLY, THE ADDITION MADE OF ` 3,88,04,103, ON ACCOUNT OF DISALLOWANCE OF INTEREST ON CUSTOM D UTY PAID BY THE ASSESSEE HAS BEEN DELETED BY THE TRIBUNAL WHILE DECIDING ASSESSEES APPEAL IN ITA NO.4874/MUM./2012, DATED 17 TH MAY 2016. THAT BEING THE CASE, PENALTY IMPOSED UNDER SECTION 271(1)(C) OF THE ACT ON THE BASIS OF SUCH ADDITION, IN ANY CASE, WO ULD NOT SURVIVE. THEREFORE, THE ORDER OF THE LEARNED COMMISSIONER (APPEALS) DELETING IMPOSITION OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT ON SUCH ADDITION DESERVES TO BE UPHELD. AS REGARDS IMPOSITION OF PENALTY ON THE ADDITION OF RENTAL INCOME OF ` 30, 29,390, UNDISPUTEDLY, SIMILAR ADDITION WAS MADE BY THE ASSESSING OFFICER IN ASSESSMENT YEAR 2006 07. IT IS THE CLAIM OF THE ASSESSEE THAT THE ASSESSEE NOT BEING THE OWNER OF THE PROPERTY IN QUESTION, THE RENTAL INCOME CANNOT BE ASSESSED AT ITS HAND. HOWEVE R, THE AFORESAID CLAIM OF THE ASSESSEE HAS NOT BEEN ACCEPTED BY THE DEPARTMENTAL AUTHORITIES IN ASSESSMENT YEAR 2006 07. THE TRIBUNAL HAS ALSO UPHELD SUCH ADDITION WHILE DECIDING ASSESSEES APPEAL. HOWEVER, IT IS A FACT ON RECORD , THE SUBSTANTIAL QUESTION OF LAW RAISED BY THE ASSESSEE ON THE AFORESAID ISSUE HAS BEEN ADMITTED BY THE HON'BLE JURISDICTIONAL HIGH COURT WHILE ENTERTAINING ASSESSEES APPEAL UNDER SECTION 260A OF THE ACT FOR THE ASSESSMENT YEAR 2006 07. IT IS RELEVANT TO OBSERVE , WHEN IDENTICAL DISPUTE ARISING IN THE IMPUGNED ASSESSMENT YEAR CAME UP FOR CONSIDERATION BEFORE THE TRIBUNAL IN ITA 7 M.J. EXPORTS PVT. LTD. NO.4874/MUM./2012, DATED 17 TH MAY 2016, THOUGH, THE TRIBUNAL TAKING NOTE OF THE FACT THAT IN PRECEDING ASSESSMENT YEAR THE ISSUE WAS DECIDE D AGAINST THE ASSESSEE HAS DECIDED THE ISSUE AGAINST THE ASSESSEE, HOWEVER, THE TRIBUNAL ALLOWED THE DECLARATION FILED BY THE ASSESSEE UNDER SECTION 158A(1) OF THE ACT AND DIRECTED THAT THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT ON THE SUBSTANTI AL QUESTION OF LAW RAISED BY THE ASSESSEE IN ASSESSMENT YEAR 2006 07 WILL BE BINDING UPON THE RESPECTIVE PARTIES. THUS, AS COULD BE SEEN FROM THE FACTS ON RECORD, ASSESSEES CLAIM THAT IT IS NOT THE OWNER OF THE PROPERTY, HENCE, RENTAL INCOME CANNOT BE ASS ESSED AT ITS HANDS HAS NOT ATTAINED FINALITY PENDING DECISION ON THE SUBSTANTIAL QUESTION OF LAW RAISED BY THE ASSESSEE IN ASSESSMENT YEAR 2006 07. IT IS FURTHER RELEVANT TO OBSERVE THAT THE ADDITION OF RENTAL INCOME IN THE IMPUGNED ASSESSMENT YEAR IS CLEA RLY ON THE BASIS OF SIMILAR ADDITION MADE IN ASSESSMENT YEAR 2006 07. IT IS ALSO EVIDENT; THE ASSESSEE HAS NOT OFFERED THE RENTAL INCOME ON THE REASONING THAT IT IS NOT THE OWNER OF THE PROPERTY. HOWEVER, ALL FACTS RELATING TO THE EARNING OF SUCH INCOME HA S BEEN FURNISHED BEFORE THE ASSESSING OFFICER. THAT BEING THE CASE, THE ASSESSEE CANNOT BE ACCUSED OF FURNISHING INACCURATE PARTICULARS OF INCOME OR CONCEALMENT OF INCOME . THEREFORE, IMPOSITION OF PENALTY ON THE BASIS OF SUCH ADDITION IS UNJUSTIFIED. 8 M.J. EXPORTS PVT. LTD. 7 . HAVING HELD SO, WE PROPOSE TO DEAL WITH THE ISSUE OF IMPOSITION OF PENALTY FROM ANOTHER ASPECT. ON A PERUSAL OF THE IMPUGNED ASSESSMENT ORDER, IT IS EVIDENT THAT THE ASSESSING OFFICER WHILE CONCLUDING THE ASSESSMENT PROCEEDINGS HAS INITIATED PROCEEDINGS FO R IMPOSITION OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT WITH THE FOLLOWING OBSERVING: PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) ARE HEREBY INITIATED 8 . NOWHERE IN THE ASSESSMENT ORDER THE ASSESSING OFFICER HAS RECORDED ANY SATISFACTION WHETHER THE A SSESSEE HAS CONCEALED ITS INCOME OR HAS FURNISHED INACCURATE PARTICULARS OF INCOME. THUS, IN THE ABSENCE OF RECORDING OF SATISFACTION WITH REGARD TO THE EXACT NATURE OF OFFENCE COMMITTED BY THE ASSESSEE TO ATTRACT THE PROVISIONS OF SECTION 271(1)(C) OF THE ACT , COUPLED WITH THE FACT THAT IN THE SHOW CAUSE NOTICE ISSUED UNDER SECTION 274 READ WITH SECTION 271(1)(C) OF THE ACT THE ASSESSING OFFICER HAS NOT SPECIFIED THE EXACT NATURE OF OFFENCE COMMITTED BY THE ASSESSEE, THE INITIATION OF PENALTY PROCEEDINGS IS VITIATED . F OR THIS REASON ALSO THE PENALTY ORDER PASSED UNDER SECTION 271(1)(C) OF THE ACT CAN NOT BE SUSTAINED. IN VIEW OF THE AFORESAID, WE UPHOLD THE ORDER OF THE LEARNED COMMISSIONER (APPEALS) DELETING THE PENALTY IMPOSED UNDER SECTION 271(1)(C) OF THE ACT. 9 M.J. EXPORTS PVT. LTD. 9 . IN THE RESULT, REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 27.06.2018 SD/ - DR. A.L. SAINI ACCOUNTANT MEMBER SD/ - SAKTIJIT DEY JUDICIAL MEMBER MUMBAI, DATED: 27.06.2018 COPY OF THE ORDER FORWARDED TO : ( 1 ) THE ASSESSEE; ( 2 ) THE REVENUE; ( 3 ) THE CIT(A); ( 4 ) THE CIT, MUMBAI CITY CONCERNED; ( 5 ) THE DR, ITAT, MUMBAI; ( 6 ) GUARD FILE . TRUE COPY BY ORDER PRADEEP J. CHOWDHURY SR. PRIVATE SECRETARY (SR. PRIVATE SECRETARY) ITAT, MUMBAI