BOMBAY M,ETRO MOTORS P.LTD ATLAS METRO POLICE METRO MOTORS P. LTD, MUMBAI V. ACIT 2(1), MUMBAI

ITA 8282/MUM/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 83988 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 10 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-10-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 29-04-2014
• Assessment Year: 2003-2004
• Appeal Filed On: 08-12-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: VIJAY C KOTHARI
• Keywords: Wrong claim
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUM BAI , . . , ! BEFORE SHRI JOGINDER SINGH, JM AND SHRI N. K. BILL AIYA, AM ' #$ ./ I.T.A. NO. 8282/MUM/2011 ( / ASSESSMENT YEAR: 2003-04) BOMBAY METRO MOTORS PVT. LTD. ALIAS METRO POLICE METRO MOTORS PVT. LTD., MEHTA HOUSE, 79-91, BOMBAY SAMACHAR MARG, FORT, MUMBAI-400 001 / VS. ASST. CIT-2(1), AAYKAR BHAVAN, M. K. MARG, MUMBAI-400 020 & ./''' ./PAN/GIR NO. AAACB 0469 R ( #$&( /APPELLANT ) : ( )*&( / RESPONDENT ) #$&( + , / APPELLANT BY : SHRI VIJAY C. KOTHARI )*&( + , / RESPONDENT BY : SHRI VIJAY KUMAR BORA - ./ + 0 1 / DATE OF HEARING : 27.10.2014 234 + 0 1 / DATE OF PRONOUNCEMENT : 29.10.2014 '5 / O R D E R PER N. K. BILLAIYA, AM: THIS APPEAL BY THE ASSESSEE IS PREFERRED AGAINST TH E ORDER BY THE CIT(A)-4, MUMBAI DATED 13.09.2011, PERTAINING TO ASSESSMENT Y EAR (A.Y.) 2003-04. 2. THE SOLE GRIEVANCE OF THE ASSESSEE IS THAT THE L D. CIT(A) ERRED IN CONFIRMING THE LEVY OF PENALTY U/S.271(1)(C) OF THE ACT AMOUNTING TO RS.7,52,795/-. 3. THE ASSESSEE IS TRADING IN SPARE PARTS OF MOTOR VEHICLES AND ALSO SERVICING THE VEHICLES. DURING THE COURSE OF ASSESSMENT PROCEEDIN GS, THE ASSESSING OFFICER (A.O.) NOTICED THAT THE ASSESSEE HAS SHOWN SHARE OF PROFIT FROM A PARTNERSHIP BUSINESS AMOUNTING TO RS.30 LACS WHICH WAS CLAIMED AS EXEMPT. THE ASSE SSEE WAS ASKED TO EXPLAIN WHY THE EXPENSES CLAIMED RELATABLE TO THE EXEMPTED PROFIT S HOULD NOT BE DISALLOWED. ON RECEIVING 2 ITA NO. 8282/MUM/2011 (A.Y. 2003-04) BOMBAY METRO MOTORS PVT. LTD. VS. ASST. CIT NO SATISFACTORY EXPLANATION, THE A.O. PROCEEDED BY DISALLOWING RS.20,48,423/-. HOWEVER, AT THE SAME TIME, THE ASSESSMENT WAS MADE U/S.115JB OF THE ACT ON THE BOOK PROFIT. THE A.O. INITIATED THE PENALTY PROCEEDINGS U/S.271(1)(C ) OF THE ACT ON THE DISALLOWANCE MADE BY HIM. 4. THE A.O. COMPLETED THE PENALTY PROCEEDINGS BY LE VYING PENALTY OF RS.7,52,795/- HOLDING THAT THE DISALLOWANCE OF EXPENSES HAS RESUL TED INTO POSITIVE INCOME, THEREBY SETTING OFF AGAINST CARRY FORWARD LOSSES. HAD THERE BEEN NO DISALLOWANCE, THE ASSESSEE WOULD OTHERWISE HAVE BEEN CARRIED FORWARD THE EXCES SIVE LOSSES FOR SET OFF FROM FUTURE BUSINESS PROFIT. THE A.O. CONCLUDED BY HOLDING THAT THE ASSESSEE HAS CONCEALED THE INCOME BY FURNISHING THE INACCURATE PARTICULARS OF INCOME. 5. THE ASSESSEE CARRIED THE MATTER BEFORE THE LD. C IT(A) AND REITERATED ITS CLAIM THAT THE DISALLOWANCES MADE BY THE A.O. WERE NOT CONTEST ED IN QUANTUM APPEAL FOR THE SIMPLE REASON THAT THE ASSESSEE HAD DECLARED TOTAL LOSS OF RS.5,48,760/-. THE EXPLANATION OF THE ASSESSEE DID NOT FIND FAVOUR WITH THE LD. CIT(A). T HE LD. CIT(A) CONFIRMED THE PENALTY. AGGRIEVED BY THIS, THE ASSESSEE IS BEFORE US. 6. THE LD. COUNSEL FOR THE ASSESSEE PUT FORWARD TWO PROPOSITIONS. FIRSTLY, IT IS THE SAY OF THE LD. COUNSEL THAT THE APPLICATION OF SECTION 14A TO THE SHARE OF PROFITS RECEIVED BY A PARTNER IS A DEBATABLE ISSUE. THE LD. COUNSEL RELIE D UPON THE DECISION OF THE TRIBUNAL IN ITA NOS. 7888/MUM/2003 AND 993/MUM/2007. THE SECOND PROPOSITION OF THE LD. COUNSEL IS THAT SINCE THE INCOME HAS BEEN ASSESSED U/S.115JB, PENALTY CANNOT BE LEVIED U/S.271(1)(C) OF THE ACT. IN SUPPORT OF THIS, THE L D. COUNSEL RELIED UPON THE DECISION OF THE HONBLE DELHI HIGH COURT IN CIT VS. NALWA SONS INVESTMENTS LTD. [2010] 327 ITR 543 (DEL). PER CONTRA , THE LD. DEPARTMENTAL REPRESENTATIVE (DR) STRONGLY SUPPORTED THE FINDINGS OF THE REVENUE AUTHORITIES. 7. HAVING CONSIDERED THE RIVAL SUBMISSIONS, WE HAVE CAREFULLY PERUSED THE ORDERS OF THE AUTHORITIES BELOW. WE HAVE ALSO GONE THROUGH TH E ASSESSMENT ORDER DATED 28.02.2006. THE UNDISPUTED FACT IS THAT THE ASSESSEE RETURNED A LOSS OF RS.5,48,760/-. THE ASSESSMENT WAS COMPLETED BY DISALLOWING RS.20,48,423/- WHICH A CCORDING TO THE A.O. WAS THE 3 ITA NO. 8282/MUM/2011 (A.Y. 2003-04) BOMBAY METRO MOTORS PVT. LTD. VS. ASST. CIT EXPENSES RELATABLE TO THE EXEMPTED SHARE OF PROFIT FROM THE PARTNERSHIP BUSINESS. IT IS ALSO AN UNDISPUTED FACT THAT THE INCOME WAS FINALLY ASSE SSED U/S.115JB OF THE ACT ON THE BOOK PROFIT, AS THE TAX ON BOOK PROFIT WAS MORE THAN THA T COMPUTED BY NORMAL PROVISIONS OF THE ACT. THE POINT OF DISPUTE IS WHETHER THE PENALTY CA N BE LEVIED ON SUCH DISALLOWANCES MADE U/S.14A OF THE ACT. IT IS AN ADMITTED FACT THA T THE TRIBUNAL IN ITA NOS. 7888/MUM/2003 AND 993/MUM/2007 HAVE HELD THAT THE P ROVISIONS OF SECTION 14A ARE NOT APPLICABLE TO THE SHARE OF PROFITS RECEIVED BY A PA RTNER. THESE DECISIONS CLEARLY MAKE THE ISSUE DEBATABLE. ON THIS VERY FACT, PENALTY U/S.271 (1)(C) OF THE ACT CANNOT BE LEVIED ON DEBATABLE ISSUE. FURTHER, THE PENALTY HAS BEEN LEVI ED MERELY ON THE BASIS OF THE DISALLOWANCES MADE BY THE A.O. NOWHERE THE REVENUE AUTHORITIES HAVE MENTIONED THAT IT IS A CASE OF FALSE CLAIM. ONLY BECAUSE CERTAIN EXPE NDITURE HAVE BEEN DISALLOWED CANNOT BY ITSELF JUSTIFY THE LEVY OF PENALTY U/S.271(1)(C) OF THE ACT. WE DRAW SUPPORT FROM THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE O F CIT V. RELIANCE PETROPRODUCTS (P.) LTD . [2010] 322 ITR 158 (SC). 8. TO COMPLETE THE ADJUDICATION, THE HONBLE DELHI HIGH COURT IN THE CASE OF NALWA SONS INVESTMENTS LTD. (SUPRA) HAS HELD THAT WHERE THE TAX IS PAID ON THE INCOME ASSESSED U/S.115JB OF THE ACT, CONCEALMENT OF INCOME WOULD H AVE NO ROLE TO PLAY AND WOULD NOT LEAD TO TAX EVASION. THEREFORE, PENALTY CANNOT BE I MPOSED ON THE BASIS OF DISALLOWANCES OR ADDITIONS MADE UNDER THE REGULAR PROVISIONS. 9. CONSIDERING ALL THE FACTS IN TOTALITY AND IN LIG HT OF THE JUDICIAL DECISIONS DISCUSSED HEREINABOVE, WE SET ASIDE THE FINDINGS OF THE LD. C IT(A) AND DIRECT THE A.O. TO DELETE THE PENALTY LEVIED U/S.271(1)(C) OF THE ACT. 10. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. $6 407 896 0 + #$ . : 0 + 0 ! ORDER PRONOUNCED IN THE OPEN COURT ON OCTOBER 29 TH , 2014 SD/- SD/- (JOGINDER SINGH) (N. K. BILLAIYA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER - / MUMBAI; ; DATED : 29.10.2014 4 ITA NO. 8282/MUM/2011 (A.Y. 2003-04) BOMBAY METRO MOTORS PVT. LTD. VS. ASST. CIT ... ./ ROSHANI , SR. PS ! ' #$%& ' &$ / COPY OF THE ORDER FORWARDED TO : 1. #$&( / THE APPELLANT 2. )*&( / THE RESPONDENT 3. ' ' - <0 ( #$ ) / THE CIT(A) 4. ' ' - <0 / CIT - CONCERNED 5. ?.@ )08 , ' #$ 1 #8 4 , - / / DR, ITAT, MUMBAI 6. A9 B/ / GUARD FILE ! ( / BY ORDER, )/(* + (DY./ASSTT. REGISTRAR) , - / / ITAT, MUMBAI