M/S GOYAL FARMS PVT. LTD., JAIPUR V. ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-5, JAIPUR

ITA 875/JPR/2019

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 0075 (ITAT-JAIPUR)
• Duration Of Justice: 5 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-11-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2014-2015
• Appeal Filed On: 17-06-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ROONIPAL JCIT DHK
• Keywords: Bonafide belief; Initiation of penalty proceedings; Capital receipt
• Section: 271(1)(c); 273B; 143(3)

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES B, JAIPUR JH FOT; IKY JKO] U;KF;D LNL; ,OA JH FOE FLAG ;KNO] YS[KK LNL; DS LE{K BEFORE: SHRI VIJAY PAL RAO, JM & SHRI VIKRAM SINGH YADAV, AM VK;DJ VIHY LA -@ ITA NO. 875/JP/2019 FU/KZKJ.K O'KZ@ ASSESSMENT YEAR : 2014-15 M/S GOYAL FARMS PVT. LTD., 14-B, GOVIND MARG, ADARSH NAGAR, JAIPUR. CUKE VS. ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE-5, JAIPUR. LFKK;H YS[KK LA -@THVKBZVKJ LA -@ PAN/GIR NO.: AABCG 5969 J VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS @ ASSESSEE BY : SHRI P.C. PARWAL (CA) JKTLO DH VKSJ LS @ REVENUE BY : SMT. ROONI PAL (JCIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 11/11/2019 MN?KKS 'K.KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 25/11/2019 VKNS'K@ ORDER PER: VIJAY PAL RAO, J.M. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 22/05/2019 OF LD. CIT(A)-2, JAIPUR ARISING FROM THE PENALTY ORDER PASSED U/S 271(1)(C) OF THE INCOME TAX ACT, 1961 (IN SHORT, THE ACT) FOR THE A.Y. 2014-15. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL: 1. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE, THE ORDER PASSED U/S 271(1)(C) IS ILLEGAL AND BAD IN LAW. 2. THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW IN CONFIRMING THE LEVY OF PENALTY OF RS. 6,39,560/- U/S 271(1)(C) OF THE IT ACT, 1961. 3. THE ASSESSEE CRAVES TO AMEND, ALTER AND MODIFY ANY OF THE GROUNDS OF APPEAL. ITA 875/JP/2019_ M/S GOYAL FARMS PVT. LTD. VS ACIT 2 4. THE APPROPRIATE COST BE AWARDED TO THE ASSESSEE. 2. THE ASSESSEE COMPANY FILED ITS RETURN OF INCOME ON 31/10/2014 DECLARING TOTAL INCOME OF RS. 2,78,97,770/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE A.O. OBSERVED THAT THE ASSESSEE HAS CREDITED AN AMOUNT OF RS. 31,04,681/- AS PRIOR PERIOD INCOME IN ITS P&L ACCOUNT BUT THE SAME WAS REDUCED IN COMPUTATION OF TOTAL INCOME AND NO TAX WAS PAID ON THE SAME. THE ASSESSEE EXPLAINED THAT THE SAID AMOUNT WAS AN ADVANCE RECEIVED BY THE ASSESSEE AGAINST THE PROPERTY IN EARLIER YEARS WHICH HAS BEEN WRITTEN OFF DURING THE YEAR UNDER CONSIDERATION BY CREDITING TO P&L ACCOUNT AS PRIOR PERIOD INCOME. THE ASSESSEE FURTHER EXPLAINED THAT THE ASSESSEE WAS UNDER BONAFIDE BELIEF THAT THE SAME IS A CAPITAL RECEIPT NOT LIABLE FOR TAX AND THEREFORE WHILE FILING THE RETURN OF INCOME, REDUCED THE SAME FROM COMPUTATION OF TOTAL INCOME. THE A.O. COMPLETED THE ASSESSMENT U/S 143(3) OF THE ACT BY MAKING THE ADDITION OF THE SAID AMOUNT OF RS. 31,04,681/- BY HOLDING THAT THE ASSESSEE COULD NOT SPECIFY WHICH LIABILITY HAS BEEN WRITTEN OFF AND ADVANCE PERTAINED TO WHICH PROPERTY AS WELL AS THE YEAR TO WHICH THIS LIABILITY RELATES TOO. ACCORDINGLY, THE A.O. INITIATED THE PROCEEDINGS U/S 271(1)(C) OF THE ACT AND LEVIED THE PENALTY OF RS. 6,39,560/- BEING 100% OF THE TAX SOUGHT TO BE EVADED WHILE PASSING THE ORDER U/S ITA 875/JP/2019_ M/S GOYAL FARMS PVT. LTD. VS ACIT 3 271(1)(C) OF THE ACT ON 23/06/2017. THE ASSESSEE CHALLENGED THE ACTION OF THE A.O. BEFORE THE LD. CIT(A) BUT COULD NOT SUCCEED. 3. BEFORE US, THE LD AR OF THE ASSESSEE HAS REFERRED TO THE COMPUTATION OF INCOME AND SUBMITTED THAT SINCE THIS WAS AN ADVANCE RECEIVED BY THE ASSESSEE AGAINST THE PROPERTY AND WRITTEN OFF DURING THE YEAR UNDER CONSIDERATION, THEREFORE, THE ASSESSEE HAS REDUCED THE SAME WHILE COMPUTING THE TOTAL INCOME. THE FACTS AND PARTICULARS ARE CLEARLY AVAILABLE ON RECORD AND THE ASSESSEE CANNOT BE HELD GUILTY OF EITHER CONCEALMENT OF THE INCOME OR FURNISHING INACCURATE PARTICULARS OF INCOME. IT IS ONLY A CLAIM OF THE ASSESSEE BASED ON BONAFIDE BELIEF AND DISALLOWANCE OF THE SAME BY THE A.O. WOULD NOT IPSO FACTO AMOUNTS TO CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING INACCURATE PARTICULARS OF INCOME. IN SUPPORT OF HIS CONTENTION, HE HAS RELIED UPON THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS RELIANCE PETROPRODUCTS PVT. LTD. 322 ITR 158 (SC). THE LD. AR ALSO RELIED UPON THE FOLLOWING DECISIONS: (I) EQUEST INDIA (P) LTD. VS ITO (2010) 41 SOT 225 (II) ACIT VS TORQUE PHARMACEUTICALS (P) LTD. (2015) 173 TTJ (CHD) 132 ITA 875/JP/2019_ M/S GOYAL FARMS PVT. LTD. VS ACIT 4 THE LD AR HAS ALSO CHALLENGED THE VALIDITY OF THE INITIATION OF PROCEEDINGS U/S 271(1)(C) OF THE ACT ON THE GROUND THAT WHILE ISSUING THE SHOW CAUSE NOTICE, THE A.O. HAS NOT SPECIFIED THE LIMB WHETHER THE PENALTY PROCEEDINGS WERE INITIATED FOR CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING INACCURATE PARTICULARS OF INCOME. HE HAS REFERRED TO THE REPLY FILED BY THE ASSESSEE TO THE SHOW CAUSE NOTICE AND SUBMITTED THAT THE ASSESSEE HAS CLEARLY EXPLAINED THE REASONS FOR REDUCING THE SAID AMOUNT FROM THE COMPUTATION OF INCOME AND THE SAID EXPLANATION IS BONAFIDE IN NATURE. FURTHER THE INITIATION OF THE PROCEEDINGS IS BAD IN LAW IN VIEW OF THE VARIOUS DECISIONS. HE HAS RELIED UPON THE FOLLOWING DECISIONS: (I) CIT VS SSAS EMERALD MEADOWS (2016) 242 TAXMAN 180 (SC) (II) GULAM FAROOQ PANSARI VS ITO (2018) 168 DTR 42 (JP TRIB) (III) CIT VS M/S MANJUNATHA COTTON & GINNING FACTORY & ORS. 359 ITR 565 (KAR.) THUS, THE LD AR HAS SUBMITTED THAT THE PENALTY LEVIED BY THE A.O. U/S 271(1)(C) OF THE ACT IS NOT JUSTIFIED AND THE SAME MAY BE DELETED. 4. ON THE OTHER HAND, THE LD DR HAS SUBMITTED THAT THIS CASE OF FURNISHING INACCURATE PARTICULARS OF INCOME WHEN THE ASSESSEE HAS MADE A CLAIM WHICH IS ABSOLUTELY NOT PERMISSIBLE. THE A.O. HAS GIVEN A CATEGORICAL FINDING THAT THE ASSESSEE HAS NOT EXPLAINED THE NECESSARY ITA 875/JP/2019_ M/S GOYAL FARMS PVT. LTD. VS ACIT 5 PARTICULARS EVEN THE YEAR IN WHICH THE ADVANCE WERE RECEIVED AND THE PROPERTY AGAINST WHICH ADVANCE WERE RECEIVED. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS RELEVANT MATERIAL ON RECORD. THERE IS NO DISPUTE THAT THE ASSESSEE HAS REDUCED THE TOTAL INCOME AN AMOUNT OF RS. 31,04,681/- WHICH CREDITED TO THE P&L ACCOUNT ON ACCOUNT OF ADVANCE WRITTEN OFF. THUS, THE SAID AMOUNT WAS FIRST CREDITED TO THE P&L ACCOUNT BY THE ASSESSEE BEING THE ADVANCE RECEIVED IN THE EARLIER YEARS WERE WRITTEN OFF DURING THE YEAR UNDER CONSIDERATION AND THEREAFTER WHILE COMPUTING THE TOTAL INCOME THE ASSESSEE HAS REDUCED THIS AMOUNT BY TREATING THE SAME AS CAPITAL RECEIPT AND NO INCOME CHARGEABLE TO TAX. DURING THE ASSESSMENT PROCEEDINGS, THE A.O. ISSUED SHOW CAUSE NOTICE TO THE ASSESSEE, THE ASSESSEE EXPLAINED THE REASONS FOR REDUCING THIS AMOUNT IN THE COMPUTATION AND ALSO AGREED TO OFFER FOR TAX TO AVOID THE LONG DRAWN PROCESS OF LITIGATION. THIS EXPLANATION OF THE ASSESSEE IS REPRODUCED BY THE A.O. IN PARA 5.1 OF THE ASSESSMENT ORDER. THE LD. CIT(A) HAS ALSO RECORDED IN THE FINDING THAT IN THE ASSESSMENT PROCEEDINGS, THE ASSESSEE AGREED FOR ADDITION OF THE SAME. THUS, IT IS CLEAR THAT SO FAR AS THE PARTICULARS OF THE SAID AMOUNT OF RS, 31,04,681/- CREDITED TO THE P&L ACCOUNT AND THEN REDUCED WHILE COMPUTING THE INCOME WERE FURNISHED ITA 875/JP/2019_ M/S GOYAL FARMS PVT. LTD. VS ACIT 6 IN THE RETURN OF INCOME AND AVAILABLE WITH THE A.O. AT THE TIME OF THE ASSESSMENT PROCEEDINGS. THE ASSESSEE HAS ALSO EXPLAINED THE REASON FOR REDUCING THE SAID AMOUNT FROM THE TOTAL INCOME. THUS, ONCE ALL THE DETAILS AND PARTICULARS WERE FURNISHED BY THE ASSESSEE DURING THE ASSESSMENT PROCEEDINGS AND THE A.O. HAS NOT BRINGING ANYTHING CONTRARY TO THE SAID EXPLANATION WHILE MAKING THE ADDITION TO THE TOTAL INCOME OF THE ASSESSEE THEN THE EXPLANATION OF THE ASSESSEE THAT THIS AMOUNT WAS REDUCED FROM THE TOTAL INCOME ON A BONAFIDE BELIEF THAT THE SAME IS A CAPITAL RECEIPT NOT CHARGEABLE TO TAX RATHER IT WILL BE REDUCED FROM THE COST OF THE ASSET AT THE TIME OF SALE, WOULD BE REGARDED AS REASONABLE AND BONAFIDE EXPLANATION AS PER THE PROVISIONS OF SECTION 273B OF THE ACT. IN THE CASE OF EQUEST INDIA (P) LTD. VS ITO (SUPRA) THE MUMBAI BENCHES OF THE TRIBUNAL HAS CONSIDERED THIS ISSUE IN PARA 4 AS UNDER: 4. A PLAIN READING OF THE TRIBUNALS ORDER IN THE QUANTUM PROCEEDINGS WOULD SHOW THAT THE STAND OF THE ASSESSING OFFICER HAS BEEN CONFIRMED ON THE GROUND THAT THE 'BUSINESS ACTIVITY OF THE ASSESSEE IS TO OWN AND MAINTAIN THE RACE HORSES, SINCE DOMINANT PURPOSE OF ALL HIS ACTIVITIES IS TO ACQUIRE AND MAINTAIN THE RACE HORSES' AND THAT THE ACTIVITY OF LEASING MARES FOR BREEDING, ENTERING INTO LEASE OPTIONS AND ALL OTHER ACTIVITIES ARE WHOLLY INCIDENTAL TO THE MAIN ACTIVITY OF OWNING AND MAINTAINING THE RACE HORSES. AS TO WHETHER THE DOMINANT PURPOSE OF ALL THE ACTIVITIES IS TO OWN AND MAINTAIN RACE HORSES OR NOT IS ESSENTIALLY A SUBJECTIVE AREA, AND THE PERCEPTIONS MAY DIFFER. MERELY BECAUSE THE ASSESSEE HAS A DIFFERENT ITA 875/JP/2019_ M/S GOYAL FARMS PVT. LTD. VS ACIT 7 PERCEPTION OF THE SITUATION THAN THE ASSESSING OFFICER, EVEN THOUGH, IN THE ULTIMATE ANALYSIS, THE STAND OF THE ASSESSING OFFICER IS TO BE UPHELD, IT CANNOT BE SAID THAT THE ASSESSEE HAS CONCEALED ANY PARTICULARS. THE EXPRESSION FURNISHING OF INACCURATE PARTICULARS OF INCOME HAS ALSO NOT BEEN DEFINED IN THE ACT. THE EXPRESSION INACCURATE REFERS TO NOT IN CONFORMITY WITH THE FACT OR TRUTH AND THAT IS THE MEANING WHICH, IN OUR CONSIDERED VIEW, IS RELEVANT IN THE CONTEXT OF FURNISHING OF INACCURATE PARTICULARS. THE EXPRESSION PARTICULARS REFERS TO FACTS, DETAILS, SPECIFICS, OR INFORMATION ABOUT SOMEONE OR SOMETHING. THEREFORE, THE PLAIN MEANING OF THE EXPRESSION FURNISHING OF INACCURATE PARTICULARS OF INCOME IMPLIES FURNISHING OF DETAILS OR INFORMATION ABOUT INCOME WHICH ARE NOT IN CONFORMITY WITH THE FACTS OR TRUTH. THE DETAILS OR INFORMATION ABOUT INCOME DEAL WITH THE FACTUAL DETAILS OF INCOME AND THIS CANNOT BE EXTENDED TO AREAS WHICH ARE SUBJECTIVE SUCH AS THE STATUS OF TAXABILITY OF AN INCOME, ADMISSIBILITY OF A DEDUCTION AND INTERPRETATION OF LAW. THE FURNISHING OF INACCURATE INFORMATION THUS RELATES TO FURNISHING OF FACTUALLY CORRECT DETAILS AND INFORMATION ABOUT INCOME. THE ADMISSION OR REJECTION OF A CLAIM IS A SUBJECTIVE EXERCISE AND WHETHER A CLAIM IS ACCEPTED OR REJECTED HAS NOTHING TO DO WITH FURNISHING OF INACCURATE PARTICULARS OF INCOME. THE AUTHORITIES BELOW HAVE APPARENTLY PROCEEDED TO TREAT ASSESSEES MAKING AN INCORRECT CLAIM OF INCOME AS FURNISHING OF INACCURATE PARTICULARS. WHAT IS A CORRECT CLAIM AND WHAT IS AN INCORRECT CLAIM IS A MATTER OF OPINION. IN OUR CONSIDERED VIEW, RAISING A LEGAL CLAIM, EVEN IF IT IS ULTIMATELY FOUND TO BE LEGALLY UNACCEPTABLE, CANNOT AMOUNT TO FURNISHING OF INACCURATE PARTICULARS OF INCOME. INACCURATE, AS WE HAVE NOTED ABOVE, IS SOMETHING FACTUALLY INCORRECT AND INTERPRETATION OF LAW CAN NEVER BE A FACTUAL ASPECT. THE DEVELOPMENT OF LAW IS A DYNAMIC PROCESS WHICH IS AFFECTED BY THE INNUMERABLE FACTORS, AND IT IS ALWAYS AN ONGOING EXERCISE. IN SUCH CIRCUMSTANCES, A BONA FIDE LEGAL CLAIM BY THE ASSESSEE BEING VISITED WITH PENAL CONSEQUENCES ONLY BECAUSE IT HAS NOT ITA 875/JP/2019_ M/S GOYAL FARMS PVT. LTD. VS ACIT 8 BEEN ACCEPTED THUS FAR BY THE TAX AUTHORITIES OR JUDICIAL AUTHORITIES IS AN ABSURDITY. IN ANY EVENT, AS WE HAVE NOTED ABOVE, THE CONNOTATIONS OF EXPRESSION PARTICULARS OF INCOME DO NOT EXTEND TO THE ISSUES OF INTERPRETATION OF LAW AND AS SUCH MAKING A CLAIM, WHICH IS FOUND TO BE UNACCEPTABLE IN LAW, CANNOT BE TREATED AS FURNISHING OF INACCURATE PARTICULARS OF INCOME. IN THIS VIEW OF THE MATTER, THE CASE OF THE ASSESSEE CANNOT BE SAID TO BE A CASE OF FURNISHING OF INACCURATE PARTICULARS OF INCOME, IN ITS NATURAL SENSE, EITHER. THIS SCHOOL OF THOUGHT HAS NOW BEEN CONFIRMED BY THE HONBLE SUPREME COURT, IN THE CASE OF CIT V. RELIANCE PETROPRODUCTS (P.) LTD. [2010] 322 ITR 158 WHEREIN THEIR LORDSHIPS WERE CONCERNED WITH THE QUESTION WHETHER 'IN THIS CASE, AS A MATTER OF FACT, THE ASSESSEE HAS GIVEN INACCURATE PARTICULARS', AS HAS BEEN THE QUESTION IN THE PRESENT CASE, AND IT IS IN THIS CONTEXT THAT THEIR LORDSHIPS NOTED THAT 'IN THIS CASE, THERE IS NO FINDING THAT ANY DETAILS SUPPLIED BY THE ASSESSEE IN ITS RETURN WERE FOUND TO BE INCORRECT OR ERRONEOUS OR FALSE' AND ADD THAT 'SUCH BEING THE CASE, THERE WOULD BE NO QUESTION OF INVITING THE PENALTY UNDER SECTION 271(1)(C) OF THE ACT' AND THAT 'A MERE MAKING OF THE CLAIM, WHICH IS NOT SUSTAINABLE IN LAW, BY ITSELF, WILL NOT AMOUNT TO FURNISHING INACCURATE PARTICULARS REGARDING INCOME OF THE ASSESSEE'. THE SITUATION THAT WE ARE DEALING WITH IS MATERIALLY SIMILAR INASMUCH AS THE PENALTY HAS BEEN IMPOSED ONLY FOR CONCEALMENT OF PARTICULARS AND IT HAS NOT BEEN THE CASE OF THE REVENUE AT ANY STAGE THAT ANY FACTUAL PARTICULARS FURNISHED BY THE ASSESSEE ARE FALSE. THE PENALTY HAS BEEN IMPOSED BECAUSE OF LEGAL INADMISSIBILITY OF THE CLAIM OF DEDUCTION, WHICH IS REJECTED ON THE GROUNDS OF APPLICATION OF SECTION 74A OF THE ACT. IN VIEW OF THESE DISCUSSIONS, AS ALSO BEARING IN MIND ENTIRETY OF THE CASE, WE ARE OF THE CONSIDERED VIEW THAT IT WAS INDEED NOT A FIT CASE FOR IMPOSITION OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT. WE, THEREFORE, DIRECT THE ASSESSING OFFICER TO DELETE THE IMPUGNED PENALTY. ITA 875/JP/2019_ M/S GOYAL FARMS PVT. LTD. VS ACIT 9 ACCORDINGLY, IN VIEW OF THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS RELIANCE PETROPRODUCTS PVT. LTD. (SUPRA) AS WELL AS DECISION OF MUMBAI BENCHES OF THE ITAT IN THE CASE OF EQUEST INDIA (P) LTD. VS ITO (SUPRA), THE EXPLANATION FURNISHED BY THE ASSESSEE FALLS IN THE AMBIT OF BONAFIDE AND REASONABLE EXPLANATION AS PER PROVISIONS OF SECTION 273B OF THE ACT. HENCE, THE PENALTY LEVIED U/S 271(1)(C) OF THE ACT IS DELETED. 6. SINCE WE HAVE DELETED THE PENALTY ON MERITS, THEREFORE, WE DO NOT PROPOSE TO GO INTO THE ISSUE OF VALIDITY OF INITIATION OF PENALTY PROCEEDINGS FOR WANT OF SPECIFYING LIMB IN THE SHOW CAUSE NOTICE AS THE SAME BECOME ACADEMIC IN NATURE. 7. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 25 TH NOVEMBER, 2019. SD/- SD/- FOE FLAG ;KNO FOT; IKY JKO (VIKRAM SINGH YADAV) (VIJAY PAL RAO) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 25 TH NOVEMBER, 2019 *RANJAN VKNS'K DH IZFRFYFI VXZSFKR @ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ @ THE APPELLANT- M/S GOYAL FARMS PVT. LTD., JAIPUR. 2. IZR;FKHZ @ THE RESPONDENT- THE A.C.I.T., CIRCLE-5, JAIPUR. 3. VK;DJ VK;QDR @ CIT 4. VK;DJ VK;QDRVIHY @ THE CIT(A) ITA 875/JP/2019_ M/S GOYAL FARMS PVT. LTD. VS ACIT 10 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ @ DR, ITAT, JAIPUR 6. XKMZ QKBZY @ GUARD FILE (ITA NO. 875/JP/2019) VKNS'KKUQLKJ @ BY ORDER, LGK;D IATHDKJ @ ASST. REGISTRAR