ITO Ward-I, V. Shamli Cold Storage,

ITA 904/DEL/2008

• Counselvise Citation: [2010] 119 COUNSELVISE.COM (IT) 5732 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-03-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 30-03-2010
• Assessment Year: 1997-1998
• Appeal Filed On: 07-03-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B K RAO
• Assessee Lawyers: K L ANEJA
• Keywords: Bonafide belief; Difference of opinion; Valuation report

Judgement Text

ITA NO. 904/DEL/08 & CO NO. 159/DEL/08 A.Y. 1997-98 1 IN THE INCOMETAX APPELATE TRIBUNAL DELHI BENCH G: NEW DELHI BEFORE SHRI C.L. SETHI, JUDICIAL MEMBER & SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER ITA NO. 904/DEL/2008 A.Y. : 1997-98 ITO, WARD-1, VS. M/S SHAMLI COLD STORAGE, PALIKA BAZAR, NEAR BUDANA, KUDANA ROAD, SHAMLI, BUS STAND, SHAMLI (UP). DISTT. MUZAFFARNAGAR ( UP) (PAN: AAGCS 4109M) AND C.O. NO. 159/DEL/08 (IN ITA NO. 904/DEL/08) A.Y. 1997-98 M/S SHAMLI COLD STORAGE, ITO, WARD-1, C/O M/S K.L. ANEJA, ADVOCATE, PALIKA BAZAR, NE AR BUDANA, DIMANPURA, SHAMLI (DISTT. MUZAFFARNAGAR) BUS STAND, SHAMLI (UP). (PAN: AAGCS 4109M) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI K.L. ANEJA, ADV. DEPARTMENT BY : SHRI B.K. RAO, SR. DR O R D E R PER SHAMIM YAHYA : AM THIS APPEAL BY THE REVENUE AND CROSS OBJECTION BY T HE ASSESSEE EMANATE OUT OF ORDER OF THE LD. CIT(A) DATED 7.12.2007 THE ASSESSMENT YEAR 1997-98. REVENUES APPEAL 2. THE ISSUE RAISED IS THAT THE LD. CIT(A) HAS ERR ED IN LAW AND ON FACTS IN CANCELLING THE PENALTY U/S 271(1)(C) IMPOSED BY THE AO AT RS. 3,50,000/- ON ITA NO. 904/DEL/08 & CO NO. 159/DEL/08 A.Y. 1997-98 2 DIFFERENCE OF INVESTMENT DETECTED BY DVO. IT IS CLE AR CASE OF FURNISHING INACCURATE PARTICULARS AND CONCEALMENT OF INVESTMENT. 3. THE FACTS OF THE CASE LEADING TO LEVY OF PENALTY AS EMANATING FROM THE PENALTY ORDER ARE STATED AS UNDER:- DURING THE RELEVANT PERIOD THE ASSESSEE WAS ENGAGE D IN CONSTRUCTION OF COLD STORAGE. DURING THE COURSE OF ASSESSMENT PRO CEEDINGS THE ASSESSEE WAS REQUIRED TO PROVE THE GENUINENESS OF INVESTMEN T SHOWN AT RS. 14,59,998/- AS AGAINST RS. 24,28,680/- DETERMINED B Y THE DVO IN CONSTRUCTION OF COLD STORAGE. IN RESPONSE THE ASSES SEE SUBMITTED THAT VARIOUS OLD MATERIALS WERE USED IN THE CONSTRUCTION OF THE BUILDING. HOWEVER, THE ASSESSEE COULD PRODUCED THE PERSONS/ PARTIES FROM WHOM OLD MATERIALS WERE PURCHASED. THEREFORE, THE AO MA DE ADDITION OF RS. 9,82,682/-. IN THE REMAND PROCEEDINGS ALSO THE ASSE SSEE WAS REQUIRED TO PRODUCE THE COLD STORAGE. HOWEVER, THE ASSESSEE AGAIN FAILED TO PRODUCE THE PERSONS/PARTIES FROM WHOM OLD MATERIAL WAS PURC HASED. DURING THE COURSE OF APPELLATE PROCEEDINGS ALSO THE LD. CIT(A) , MUZAFFARNAGAR CONFRONTED THE ASSESSEE WITH THE REMAND REPORT DAT ED 27.1.2005 OF THE AO WHEREIN, THE AO HAD REPORTED THAT DESPITE OPPORT UNITIES GIVEN TO THE ASSESSEE, THE ASSESEE FAILED TO PRODUCED THESE PART IES FOR EXAMINATION BEFORE HIM. BUT THE ASSESSEE SIMPLY REITERATED HIS ARGUMENTS THAT HE HAD PURCHASE OLD MATERIAL FROM THESE PARTIES AT CONFESS IONAL RATES AND THAT IS THE MAIN REASON FOR DIFFERENCE IN COST OF CONSTRUCT ION. ON THE BASIS OF THE ABOVE FACTS, THE LD. CIT(A) , MUZAFFARNAGAR CONFIR MED THE ADDITION MADE BY THE AO TO THE EXTENT OF RS. 8,42,654/-. ITA NO. 904/DEL/08 & CO NO. 159/DEL/08 A.Y. 1997-98 3 3.1 AFTER STATING THE ABOVE AO PROCEEDED TO LEVY OF PENALTY BY HOLDING AS UNDER:- IN VIEW OF THE ABOVE FACTS, THE ASSESSEE HAS DELI BERATELY FURNISHED INACCURATE PARTICULARS. I, THEREFORE, HOLD THE ASS ESSEE IN DEFAULT AND THE ASSESSEE IS LIABLE FOR PENALTY U/S 271(1)(C). THE M INIMUM AND MAXIMUM PENALTY WORKS OUT IN THIS CASE AT RS. 3,37,062/- AN D RS. 10,11,186/-. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, I IMPOSE A PEN ALTY OF RS. 3,50,000/- U/S 271(1)(C) OF THE IT ACT, 1961. 3.2 UPON ASSESSEE APPEAL LD. CIT(A) CONSIDERED THE ISSUE AND DELETED THE LEVY OF PENALTY BY HOLDING AS UNDER:- THUS, AFTER GOING THROUGH THE ENTIRE DOCUMENTS PL ACED ON RECORD AND ALL FACTS AND RIVAL CONTENTIONS; I AM SATISFIED THAT TH E APPELLANT HAS NOT CONCEALED PARTICULARS OF INCOME, OR FURNISHED INACC URATE PARTICULARS. SIMPLY BECAUSE THE DEPARTMENTAL AUTHORITIES, I.E. THE ASSE SSING OFFICER AS WELL AS VALUATION OFFICER HAVE ESTIMATED THE COST OF CONST RUCTION IGNORING APPELLANTS SUBMISSIONS, THAT TOO WITHOUT REJECTING BOOKS OF ACCOUNT MAINTAINED BY THE APPELLANT IN REGULAR COURSE AND NOT TAKING CARE OF THE APPELLANTS SUBMISSIONS IN ENTIRETY, THE APPELLANT CAN NOT BE HELD TO BE LIABLE FOR PENAL PROCEEDINGS NOWITHSTANDING PENDENC Y OF APPEAL BEFORE THE HONBLE INCOME TAX APPELLATE TRIBUNAL AT THE INSTAN CE OF APPELLANT IN QUANTUM PROCEEDINGS. I HAVE NO HESITATION IN HOLDIN G THAT APPELLANT IS NOT LIABLE TO PENAL PROCEEDINGS WHATSOEVER AND AS SUCH, LEVIED BY THE ASSESSING OFFICER IS HEREBY CANCELLED. 3.3 AGAINST THIS ORDER THE REVENUE IS IN APPEAL BEF ORE US. ITA NO. 904/DEL/08 & CO NO. 159/DEL/08 A.Y. 1997-98 4 3.4 LD. DR SUBMITTED THAT ACTION OF THE LD. CIT(A) IN DELETING THE PENALTY IS NOT JUSTIFIED. HE CLAIMED THAT HONBLE APEX COURT IN THE CASE OF DHARMENDER TEXTILE HAS HELD THAT PENALTY U/S 271(1)(C) IS CIVIL LIABIL ITY AND IT GETS ATTRACTED AUTOMATICALLY WHENEVER ANY ADDITION IS MADE. 3.5 LD. COUNSEL OF THE ASSESSEE ON THE OTHER HAND S UBMITTED THAT THERE IS NO CASE OF CONCEALMENT OR FURNISHING OF INACCURATE PA RTICULARS IN THIS CASE. THE MATTER ONLY RELATES TO THE DIFFERENCE OF OPINIO N BY THE VALUATION OFFICER AS AGAINST THAT REFLECTED IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE. HE SUPPORTED THE ORDER OF THE LD. CIT(A). 3.6 WE HAVE HEARD BOTH THE COUNSELS AND PERUSED THE RECORDS. WE FIND THAT SECTION 271(1(C) OF THE ACT POSTULATES IMPOSITION O F PENALTY FOR FURNISHING OF INACCURATE PARTICULARS AND CONCEALMENT OF INCOME. WE FIND THAT THE COST OF CONSTRUCTION BY THE ASSESSEE HAS BEEN REFLECTED IN THE BOOKS OF ACCOUNTS MAINTAINED IN THE REGULAR COURSE. THE SAME HAS NO T BEEN REJECTED. IT IS ONLY BASED UPON THE VALUATION REPORT OF THE DVO THAT ADD ITION HAS BEEN MADE. SO THIS IS ONLY A MATTER OF DIFFERENCE IN OPINION AND THERE IS NO CASE OF CONCEALMENT OR FURNISHING OF INACCURATE PARTICULARS. HENCE IN OU R CONSIDERED OPINION THE CONDUCT OF THE ASSESSEE IS NOT AT ALL CONTUMACIOUS TO ATTRA CT THE LEVY OF PENALTY U/S 271(1)(C) OF THE ACT. IN THIS REGARD, WE PLACE R ELIANCE FROM THE APEX COURT DECISION RENDERED BY A LARGER BENCH COMPRISING OF THREE OF THEIR LORDSHIPS IN THE ITA NO. 904/DEL/08 & CO NO. 159/DEL/08 A.Y. 1997-98 5 CASE OF HINDUSTAN STEEL VS. STATE OF ORISSA IN 83 ITR 26 WHEREIN IT WAS HELD THAT AN ORDER IMPOSING PENALTY FOR FAILURE TO CARRY OUT A STATUTORY OBLIGATION IS THE RESULT OF A QUASI-CRIMINAL PROCEEDINGS, AND PENALTY WILL NOT ORDINARILY BE IMPOSED UNLESS THE PARTY OBLIGED EITHER ACTED DELIBERATELY IN DEFIANCE OF LAW OR WAS GUILTY OF CONDUCT CONTUMACIOUS OR DISHONEST, OR ACTED IN C ONSCIOUS DISREGARD OF ITS OBLIGATION. PENALTY WILL NOT ALSO BE IMPOSED MEREL Y BECAUSE IT IS LAWFUL TO DO SO. WHETHER PENALTY SHOULD BE IMPOSED FOR FAILURE TO PE RFORM A STATUTORY OBLIGATION IS A MATTER OF DISCRETION OF THE AUTHORITY TO BE EXERC ISED JUDICIALLY AND ON A CONSIDERATION OF ALL THE RELEVANT CIRCUMSTANCES. E VEN IF A MINIMUM PENALTY IS PRESCRIBED, THE AUTHORITY COMPETENT TO IMPOSE THE P ENALTY WILL BE JUSTIFIED IN REFUSING TO IMPOSE PENALTY, WHEN THERE IS A TECHNIC AL OR VENIAL BREACH OF THE PROVISIONS OF THE ACT, OR WHERE THE BREACH FLOWS FR OM A BONAFIDE BELIEF THAT THE OFFENDER IS NOT LIABLE TO ACT IN THE MANNER PRESCRI BED BY THE STATUTE. 3.7. AS REGARDS THE DECISION OF THE HONBLE APEX C OURT IN THE CASE OF DHARMENDRA TEXTILE PROCESSORS, WE FIND THAT THE SAM E IS NOT APPLICABLE IN THE PRESENT CASE, AS IN THE PRESENT CASE WE DO NOT FIND THERE IS ANY CONCEALMENT OR FURNISHING OF INACCURATE PARTICULARS BY ASSESSEE. T HE INTERPOLATION OF THIS CASE LAW BY THE LD. DR IS MISPLACED. WE FURTHER FIND THAT THE HONBLE APEX COURT IN THE ITA NO. 904/DEL/08 & CO NO. 159/DEL/08 A.Y. 1997-98 6 CASE OF CIT VS. ATUL MOHAN BINDAL 317 ITR 1 HAS ITSELF EXPLAINED THE RATIO OF THE DECISION AS UNDER IN PARA 23 PAGE 13. 23. THE DECISION IN DHARMENDRA TEXTILE MUST, THERE FORE, BE UNDERSTOOD TO MEAN THAT THOUGH THE APPLICATION OF SECTION 11AC WOULD DEPEND UPON THE EXISTENCE OR OTHERWISE OF THE CONDITIONS E XPRESSLY STATED IN THE SECTION, ONCE THE SECTION IS APPLICABLE IN A CA SE THE CONCERNED AUTHORITY WOULD HAVE NOT DISCRETION IN QUANTIFYING THE AMOUNT AND PENALTY MUST BE IMPOSED EQUAL TO THE DUTY DETERMINE D UNDER SUB- SECTION (2) OF SECTION 11A. THAT IS WHAT DHARMENDR A TEXTILE DECIDES. 3.8 WE WOULD ALSO LIKE TO REFER TO THE LATEST HON BLE APEX COURT DECISION IN THE CASE OF CIT VS. RELIANCE PETRO PRODUCTS LTD. WHERE IN IT HAS BEEN INTER-ALIA HELD THAT THE LAW LAID DOWN IN THE DILIP SHEROFF CASE 29 1 ITR 519 (SC) AS TO THE MEANING OF WORD CONCEALMENT AND INACCURATE CONTINUES T O BE A GOOD LAW BECAUSE WHAT WAS OVERRULED IN THE DHARMENDER TEXTILE CASE WAS O NLY THAT PART IN DILIP SHEROFF CASE WHERE IT WAS HELD THAT MENSREA WAS A ESSENTIAL REQUIREMENT OF PENALTY U/S 271(1)(C). THE HONBLE APEX COURT ALSO OBSERVED TH AT IF THE CONTENTION OF THE REVENUE IS ACCEPTED THEN IN CASE OF EVERY RETURN W HERE THE CLAIM IS NOT ACCEPTED ITA NO. 904/DEL/08 & CO NO. 159/DEL/08 A.Y. 1997-98 7 BY THE AO FOR ANY REASON, THE ASSESSEE WILL INVITE THE PENALTY U/S 271(1)(C). THIS IS CLEARLY NOT THE INTENDMENT OF LEGISLATURE. 3.9 IN THE BACKGROUND OF THE AFORESAID DISCUSSION AND PRECEDENT, WE UPHOLD THE ORDER OF THE LD. CIT(A) AND DELETE THE LEVY OF PENALTY. ASSESSEES CROSS OBJECTION 4. IN THE CROSS OBJECTION THE ASSESSEE HAS SUPPORTED THE ORDER OF THE LD. CIT(A). SINCE WE HAVE ALREADY UPHELD THE CIT(A)S ORDER IN REVENUES APPEAL ABOVE, THIS CROSS OBJECTION BECOMES INFRUCTUOUS AN D IS DISMISSED AS SUCH. 5. IN THE RESULT, APPEAL BY THE REVENUE IS DISMISS ED AND C.O. BY THE ASSESSEE IS DISMISSED AS INFRUCTUOUS. ORDER PRONOUNCED IN THE OPEN COURT ON 30/03/2010 UP ON CONCLUSION OF THE HEARING. SD/- SD/- [C.L. SETHI] [SHAMIM YAHYA] JUDICIAL MEMBER ACCOUNTANT MEMBER DATE: 30/03/ 2010 SRB COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, DEPUTY REGISTRAR, ITAT, DELHI BENCHES