Ishwar Constructions Pvt. Ltd., Pune V. ITO,Wd.-1(4), Pune

ITA 885/PUN/2011

• Counselvise Citation: 88524514 RSA 2011
• Duration Of Justice: 1 year(s) 9 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-04-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 31-01-2013
• Assessment Year: 2003-2004
• Appeal Filed On: 20-06-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: SUNIL PATHAK
• Keywords: Capital asset; Opportunity of being heard; Principle of natural justice; Revenue expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE: SHRI R.S. PADVEKAR, JUDICIAL MEMBER AND SHRI R.K. PANDA, ACCOUNTANT MEMBER ITA NO.885/PN/2011 ASSESSMENT YEAR : 2003 - 04 ISHWAR CONSTRUCTION PVT. LDT. PARMAR TRADE CENTRE, C-WING, 12 CANNOUGHT ROAD, PUNE-411001 VS. ITO, WD-1(4), PUNE (APPELLANT) (RESPONDENT) PAN NO. AAAC14136J APPELLANT BY: SHRI SUNIL PATHAK RESPONDENT BY: SHRI SANTOSH KUMAR DATE OF HEARING : 21-03-2013 DATE OF PRONOUNCEMENT : 01-04-2013 ORDER PER R.S. PADVEKAR, JM:- THIS APPEAL IS FILED BY THE ASSESSEE CHALLENGING THE IMPUGN ED ORDER OF THE LD.CIT(A)-1, PUNE DATED 05-11-2010 FOR THE A.Y. 2003-04. THE ASSESSEE HAS TAKEN THE FOLLOWING GROUNDS IN THE APPEAL: 1. THE LEARNED CIT(A) ERRED IN CONFIRMING THE LEVY OF PEN ALTY U/S. 271(C) OF RS. 5,50,000/-. 2. THE LEARNED CIT(A) ERRED IN HOLDING THAT THE ASSESSEE HAD ARTIFICIALLY CREATED THE LOSS AND HENCE, THE LEVY OF PENALTY WAS JUSTI FIED. 3. THE LEARNED CIT(A) FAILED TO APPRECIATED THAT THE LOSS INCU RRED BY THE ASSESSEE ON ACCOUNT OF EXTINGUISHMENT OF THE SHARES OF PANCHGANI PLANTATIONS PVT. LTD., WAS NOT ARTIFICIALLY CREATED AND THEREFORE, THE QUESTION OF FILING INACCURATE PARTICULARS OF INCOME SIMPLY DOES NOT ARISE. 4. THE LEARNED CIT(A) FAILED TO APPRECIATE THAT--- A. THE ASSESSEE HAD NEITHER CONCEALED ANY INCOME NOR FI LED ANY INACCURATE PARTICULARS OF INCOME AND HENCE, THE LEVY OF PENALTY WAS NOT JUSTIFIED AT ALL. B. THE ASSESSEE WAS JUSTIFIED I CLAIMING THE LOSS OF EXT INGUISHMENT OF SHARES AS A BUSINESS LOSS AND SINE THE ISSUE INVOLVED WAS A DEBATABLE ONE, NO PENALTY COULD HAVE BEEN LEVIED. 5. WITHOUT PREJUDICE TO THE ABOVE GROUNDS, IT IS SUBMITTE D THAT THE LOSS ON EXTINGUISHMENT OF INVESTMENT WAS A CAPITAL LOSS AND NO PENALTY COULD BE LEVIED MERELY BECAUSE OF CHANGE IN THE HEAD OF INCOM E. 2 ITA NO.885/PN/2011 ISHWAR CONSTRUCTIONS PVT. LTD., PUNE 2. THE FACTS WHICH ARE RECORDED BY THE ASSESSING OFFICER ARE AS UNDER. WHILE COMPLETING THE ASSESSMENT IT WAS NOTICED TH AT THE ASSESSEE COMPANY HAS DEBITED AN AMOUNT OF RS.14,60,760/ - TOWARDS LOSS OF EXTINGUISHMENT OF INVESTMENT IN THE P&L ACCOUNT. T HE ASSESSING OFFICER HELD THAT THE SHARES OF RS.14,60,760/- PURCHASED BY THE ASSE SSEE COMPANY WAS A CAPITAL INVESTMENT AND THE LOSS SO ARISEN FROM EXTINGUISHMENT OF SAID INVESTMENT CANNOT BE REVENUE LOSS WHICH CAN BE DEBITED TO THE PROFIT AND LOSS A/C. HENCE, ENTIRE CLAIM OF T HE ASSESSEE COMPANY WAS DISALLOWED AND ADDED BACK TO THE TOTAL INCOM E OF THE ASSESSEE. THE ASSESSING OFFICER ALSO INITIATED PENALTY PROC EEDINGS ON THE SAID DISALLOWANCE U/S.271(1)(C) OF THE ACT AND LEVIED THE PENALT Y OF RS.5,50,000/-. THE ASSESSEE CHALLENGED THE PENALTY LEVIED B Y THE ASSESSING OFFICER BEFORE THE LD.CIT(A) BUT WITHOUT SUCCESS. THE LD. CIT(A) CONFIRMED THE PENALTY LEVIED BY THE ASSESSING OFFICER. 3. WE HAVE HEARD THE PARTIES AND PERUSED THE RECORD. WE FIND THAT IN RESPECT OF THE CLAIM OF THE LOSS ON EXTINGUISHMENT OF THE SHARES, THE MATTER WAS CARRIED UPTO TRIBUNAL IN THE APPEAL BEING ITA NO. 67/PN/2007 AND VIDE ORDER DATED 03-06-2011, THE MATT ER WAS SET ASIDE TO THE FILE OF THE LD. CIT(A) GIVING THE REASONS AS UNDER: WE HAVE HEARD THE PARTIES AND PERUSED THE ORDERS O F THE REVENUE. WE FIND THAT THE 2.3 IS THE ONLY RELEVANT PARAGRAPHS F OR THE ISSUE UNDER CONSIDERATION, WHICH READS AS FOLLOWS: AS REGARDS THE ALTERNATE PLEA OF THE APPELLANT THAT THE ASSESSING OFFICER WAS NOT JUSTIFIED IN NOT COMPUTIN G THE LOSS AS LONG TERM CAPITAL LOSS, IT MAY BE MENTIONED THAT IN CA SE OF CAPITAL ASSET, LOSS AND PROFIT ARISING AS A RESULT OF TRANSFER IS TO BE COMPUTED. SINCE THE APPELLANT HAS FAILED TO PRO VE THAT THERE WAS ANY TRANSFER IN THE PRESENT CASE THERE WA S NOT NEED FOR THE ASSESSING OFFICER TO COMPUTE THE CAPITA L LOSS. THE ALTERNATE PLEA FAILS. FROM THE ABOVE, IT IS EVIDENT THAT THE CIT(A) HAS NOT G ONE INTO THE APPLICABILITY OF PROVISIONS OF SECTION 2(47) OF THE A CT IN GENERAL AND TO THE CONCEPT OF EXTINGUISHMENT OF RIGHTS THE EXPRES SIONS USED IN THE 3 ITA NO.885/PN/2011 ISHWAR CONSTRUCTIONS PVT. LTD., PUNE SAID CLAUSE, IN PARTICULAR. THEREFORE, WE ARE OF THE OPINION THAT THE CIT(A) HAS NOT ADJUDICATED THE ISSUE IN MANNER SPECI FIED IN SECTION 250(6) OF THE ACT. THEREFORE, WE FEEL THAT MATTER SHO ULD BE SET ASIDE TO THE FILE OF THE CIT(A) WITH DIRECTION TO PASS A SPEAKI NG ORDER IN HIS REGARD AS PER PROVISIONS OF SECTION 250(6) OF THE ACT . THE CIT(A) SHALL PROVIDE A REASONABLE OPPORTUNITY OF BEING HEARD TO T HE ASSESSEE. ACCORDINGLY, THE GROUNDS 3 TO 5 ARE SET ASIDE. 4. THE LEARNED COUNSEL VEHEMENTLY ARGUED THAT OTHERW ISE ALSO THE ISSUE IS DEBATABLE AND SQUARELY COVERED IN FAVOUR OF THE ASSESSEE THAT NO PENALTY CAN BE LEVIED. THE LEARNED COUNSEL PLACED HEAVY RELIANCE ON THE FOLLOWING DECISIONS: 1. DCIT VS. GUJRAT SMALL INDUSTRIES CORPORATION 84 TTJ 22(AHD). 2. CIT VS. GANESHAN BUILDERS 299 ITR 403 (MAD) HE FURTHER PLEADED THAT EVEN IF THE TRIBUNAL CONFIRMS THAT THE CLAIM OF THE ASSESSEE CANNOT BE ALLOWED AS A REVENUE EXPENDITUR E BUT THE CLAIM MADE BY THE ASSESSEE WAS A BONAFIDE CLAIM AND IN VIEW OF THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF RELIANCE PETRO PRODUCT PVT. LTD. 322 ITR 158 (SC), IN THE CASE OF BONAFIDE CLAIM NO PENA LTY CAN BE LEVIED. HE FURTHER ARGUED THAT OTHERWISE ALSO NOTHING HAS BEEN CONCEALED BY THE ASSESSEE NOR ANY INACCURATE PARTICULAR S ARE FILED AND HENCE, THERE IS NO JUSTIFICATION TO SUPPORT THE ACTION OF T HE ASSESSING OFFICER FOR LEVY OF PENALTY U/S. 271(1)(C) OF THE ACT. HE THE REFORE PLEADED FOR DELETING THE ENTIRE PENALTY.PER CONTRA THE LD.DR SUPPO RTED THE ORDER OF THE CIT(A). 5. WE FIND THAT ADMITTEDLY THE ISSUE IS IN RESPECT OF WHE THER A PARTICULAR EXPENDITURE IS A REVENUE EXPENDITURE OR A CAP ITAL EXPENDITURE. IT IS SEEN THAT THE TRIBUNAL HAS UPHELD THE VIEW TAKEN B Y THE ASSESSING OFFICER THAT THE ASSESSEES CLAIM WAS IN NATURE OF CAPITAL EXPENDITU RE AND WAS NOT ALLOWABLE AS A DEDUCTION. THE TRIBUNAL RESTORED TH E ISSUE TO THE FILE OF THE CIT(A) FOR FRESH ADJUDICATION. AS PER WELL SETTLED PRINCIPLES IF 4 ITA NO.885/PN/2011 ISHWAR CONSTRUCTIONS PVT. LTD., PUNE THE CLAIM OF THE ASSESSEE IS BONAFIDE THEN AS HELD IN THE C ASE OF RELIANCE PETRO PRODUCT PVT. LTD. (SUPRA) THERE IS NO JUSTIFICATION TO LEVY THE PENALTY MERELY BECAUSE CLAIM IS REJECTED. AS PER THE ARGUMENT OF THE LEARNED COUNSEL THE ISSUE IS LIMITED TO THE NATURE OF THE EXPENDIT URE BUT NOT BEYOND THAT. IN OUR OPINION, THOUGH THERE IS A SUBSTANC E IN THE ARGUMENT OF LEARNED COUNSEL FOR THE ASSESSEE BUT IN VIE W OF THE FACT THAT THE ISSUE HAS BEEN SET ASIDE TO THE FILE OF THE LD.CIT(A) IN THE QUANTUM PROCEEDING HENCE, THIS MATTER CAN ALSO BE SENT BACK TO THE FILE OF THE CIT(A) TO DECIDE THE SAME AFRESH IN THE LIGHT OF OUR ABOVE OBSERVATIONS AND AFTER GIVING RECONSIDERATION TO THE ENTIRE MATTER. NE EDLESS TO SAY CIT(A) IS DIRECTED TO GIVE REASONABLE OPPORTUNITY OF BEING H EARD TO THE ASSESSEE AS PER THE PRINCIPLES OF NATURAL JUSTICE. 6. IN THE RESULT, THE ASSESSEES APPEAL IS ALLOWED FOR ST ATISTICAL PURPOSE. PRONOUNCED IN THE OPEN COURT ON 01-04-2013 SD/- SD/- (R.K. PANDA) (R.S. PADVEKAR) ACCOUNTANT MEMBER JUDICIAL MEMBER RK/PS PUNE, DATED: 1 ST APRIL, 2013 COPY TO 1 ASSESSEE 2 DEPARTME NT 3 THE CIT(A) - I , PUNE 4 THE CIT - 1 , PUNE 5 THE DR, ITAT B BENCH , PUNE . 6 GUARD FILE. // TRUE COPY // BY ORDER PRIVATE SECRETARY, INCOME TAX APPELLATE TRIBUNAL, PUNE