SHRESTH SECURITIES P. LTD, MUMBAI V. ACIT 5(3), MUMBAI

ITA 918/MUM/2009

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 49084 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 3 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-06-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Next Hearing Date: 26-05-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 11-02-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: KUBAL
• Keywords: Depreciation
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH E, MUMBAI BEFORE SHRI P.M. JAGTAP, AM AND SHRI V. DURGA RAO , JM I.T.A.NO.918/MUM/2009 ASSESSMENT YEAR: 2004-05 M/S. SHRESTH SECURITIES PVT. LTD., 104, SOMERSET HOUSE, 61-G OF BHULABHAI DESAI ROAD, MUMBAI 400 026 PAN:AAGCS 2817 Q VS. THE ASST. COMMISSIONER OF INCOME - TAX-(3), MUMBAI (APP ELLANT ) (RESPONDENT) APPELLANT BY : SHRI ANANT N. PAI RESPONDENT BY : SHRI M.R. KUBAL O R D E R PER P.M. JAGTAP, AM: IN THIS CASE THE APPEAL OF THE ASSESSEE FILED AGAIN ST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME-TAX(APPEALS)-V, MUMB AI, DATED 9 TH JANUARY, 2009 CONFIRMING THE PENALTY OF RS. 8,03,285/- IMPOSED BY THE ASSESSING OFFICER UNDER SECTION 271(1)(C) WAS DISMISSED BY THE TRIBUNAL VID E ITS ORDER DATED 27.10.2010. THEREAFTER, THE SAID ORDER WAS RECALLED BY THE TRIB UNAL VIDE ITS ORDER DATED 29.4.2011 PASSED IN M.A. NO. 58/MUM/2011 FOR THE LI MITED PURPOSE OF ADJUDICATING THE ADDITIONAL GROUNDS RAISED BY THE ASSESSEE WHIC H HAD REMAINED TO BE ADJUDICATED UPON. THE SAID GROUNDS READ AS UNDER: IN THE ASSESSMENT ORDER U/S.143(3), DEPRECIATION C LAIMED BY THE APPELLANT @ RS.22,39,123/- ON PREMISES, AIR CONDITI ONERS, FURNITURE & FIXTURES AND EQUIPMENT HAS BEEN DISALLOWED ON THE G ROUND THAT THE ASSETS WERE NOT USED FOR THE PURPOSES OF THE BUSINESS. CONSEQUENT TO THE DISALLOWANCE, BUSINESS LOSS WAS D ETERMINED AT RS.10,38,558/- WHICH WAS ADJUSTED AGAINST LONG TERM CAPITAL GAINS OF RS.55,79,558/- THEREBY RESULTING IN THE TOTAL INCOM E ASSESSED AT RS.45,51,030/-. IT SHOULD BE THUS CLEAR THAT THE TO TAL INCOME, BOTH BEFORE AND AFTER THE DISALLOWANCE, CONSISTED ONLY OF LONG TERM CAPITAL GAINS ON WHICH THE TAX RATE APPLICABLE WAS 10% PLUS SURCHARG E [PLEASE SEE ASSESSMENT ORDER SECOND LAST PAGE FOR WORKING] ITA NO.918/M/2009 M/S. SHRESTH SECURITIES PVT. LTD. 2 THIS MEANS EVEN IF PENALTY U/S.271(1)(C) IS TO BE L EVIED, THE TAX EVADED IS ONLY @10% RATE PLUS SURCHARGE AND NOT THE NORMAL R ATE APPLICABLE TO COMPANIES. 2. THE ASSESSING OFFICER HAS HOWEVER WORKED THE TAX EVADED AT RS.8,03,285/- ON THE DEPRECIATION DISALLOWED OF RS. 22,19,123/- THEREBY APPLYING THE NORMAL RATE OF TAX AND NOT THE CONCESS IONAL RATE APPLICABLE TO LONG TERM CAPITAL GAINS. THE PENALTY HAS ALSO BE EN LEVIED AT 100% OF THIS TAX AT RS. 8,03,285/- [PLEASE SEE LAST PAGE PARA NOS.7 & 8]. THIS MISTAKE HAS ALSO NOT BEEN OBSERVED BY THE COMMISSIO NER (APPEALS) WHILE CONFIRMING THE PENALTY. 3. BASED ON THE ABOVE FACTS, THE APPELLANT PROPOSES TO PREFER THE FOLLOWING ADDITIONAL GROUND FOR ADMISSION BY THE HO NBLE TRIBUNAL. GROUND NO.4. WITHOUT PREJUDICE TO THE ABOVE GROUND S, THE LEARNED COMMISSIONER (APPEALS) AND THE LEARNED ASSESSING OF FICER ERRED IN COMPUTING THE PENALTY AT RS.8,03,285 ON THE DEPRECI ATION DISALLOWED AT RS. 22,39,123/- WHEN THE TOTAL INCOME ASSESSED U/S. 143(3) AT RS. 45,41,030 CONSISTING ONLY OF LONG TERM CAPITAL GAIN S CHARGEABLE TO TAX AT CONCESSIONAL RATE OF 10%. 4. SINCE THE ABOVE GROUND IS BASED ON FACTS ALREADY EXISTING ON RECORD AND DOES NOT REQUIRE INVESTIGATION OF ANY NEW FACTS , ITS SUBMITTED THAT THE SAME IS ADMISSIBLE BY THE HONBLE TRIBUNAL IN TERMS OF THE DECISION OF THE SUPREME COURT IN NATIONAL THERMAL POWER CO.LTD. V. CIT (1998) 229 ITR 383 (SC). 2. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES ON THE ISSUE RAISED IN THE ADDITIONAL GROUND AS ABOVE AND ALSO PERUSED THE REL EVANT MATERIAL ON RECORD. THE ISSUE RAISED IN THE ADDITIONAL GROUND RELATES TO TH E DETERMINATION OF QUANTUM OF PENALTY IMPOSABLE UNDER SECTION 271(1)(C) BEING 100 % OF THE TAX SOUGHT TO BE EVADED. THE EXPRESSION THE AMOUNT OF TAX SOUGHT TO BE EVADED FOR THIS PURPOSE IS DEFINED IN EXPLANATION 4 TO SECTION 271(1)(C) AS FOLLOWS: FOR THE PURPOSE OF CLAUSE (III) OF THIS SUB-SECTI ON, THE EXPRESSION THE AMOUNT OF TAX SOUGHT TO BE EVADED- (A) IN ANY CASE WHERE THE AMOUNT OF INCOME IN RESPECT O F WHICH PARTICULARS HAVE BEEN CONCEALED OR INACCURATE PARTI CULARS HAVE BEEN FURNISHED HAS THE EFFECT OF REDUCING THE LOSS DECLA RED IN THE RETURN OR CONVERTING THAT LOSS INTO INCOME, MEANS THE TAX THA T WOULD HAVE BEEN CHARGEABLE ON THE INCOME IN RESPECT OF WHICH P ARTICULARS HAVE BEEN CONCEALED OR INACCURATE PARTICULARS HAVE BEEN FURNISHED HAD SUCH INCOME BEEN THE TOTAL INCOME; ITA NO.918/M/2009 M/S. SHRESTH SECURITIES PVT. LTD. 3 (B) IN ANY CASE TO WHICH EXPLANATION 3 APPLIES, MEANS T HE TAX ON THE TOTAL INCOME ASSESSED AS REDUCED BY THE AMOUNT OF A DVANCE TAX, TAX DEDUCTED AT SOURCE, TAX COLLECTED AT SOURCE AND SEL F-ASSESSMENT TAX PAID BEFORE THE ISSUE OF NOTICE UNDER SECTION 148; (C) IN ANY OTHER CASE, MEANS THE DIFFERENCE BETWEEN THE TAX ON THE TOTAL INCOME ASSESSED AND THE TAX THAT WOULD HAVE BEEN CH ARGEABLE HAD SUCH TOTAL INCOME BEEN REDUCED BY THE AMOUNT OF INC OME IN RESPECT OF WHICH PARTICULARS HAVE BEEN CONCEALED OR INACCUR ATE PARTICULARS HAVE BEEN FURNISHED. 3. THE LEARNED DEPARTMENTAL REPRESENTATIVE HAS SUBM ITTED THAT CLAUSE (A) OF EXPLANATION 4 IS APPLICABLE IN THE PRESENT CASE AND, THEREFORE, THE QUANTUM OF PENALTY DETERMINED BY THE ASSESSING OFFICER EQUAL T O THE TAX THAT WOULD HAVE BEEN CHARGEABLE ON THE INCOME IN RESPECT OF WHICH P ARTICULARS HAVE BEEN CONCEALED OR INACCURATE PARTICULARS HAVE BEEN FURNI SHED, HAD SUCH INCOME BEEN THE TOTAL INCOME OF THE ASSESSEE IS CORRECT. HOWEVE R, AS RIGHTLY POINTED OUT BY THE LEARNED COUNSEL FOR THE ASSESSEE FROM THE ASSESSME NT ORDER PASSED BY THE ASSESSING OFFICER, THE INCOME RETURNED BY THE ASSES SEE AS WELL AS FINALLY ASSESSED BY THE ASSESSING OFFICER FOR THE YEAR UNDER CONSIDE RATION WAS POSITIVE AND IT WAS NOT A CASE WHERE THE ADDITION MADE HAD THE EFFECT O F REDUCING THE LOSS DECLARED IN THE RETURN OR CONVERTING THAT LOSS INTO INCOME. TH E CASE OF THE ASSESSEE THUS IS COVERED BY CLAUSE (C) OF EXPLANATION 4 AND IN OUR OPINION, THE PENALTY UNDER SECTION 271(1)(C) IS IMPOSIBLE TO THE EXTENT OF 100 % OF THE DIFFERENCE BETWEEN THE TAX ON THE TOTAL INCOME ASSESSED AND THE TAX THAT W OULD HAVE BEEN CHARGEABLE HAD SUCH TOTAL INCOME BEEN REDUCED BY THE AMOUNT OF INCOME IN RESPECT OF WHICH PARTICULARS HAD BEEN CONCEALED OR INACCURATE PARTIC ULARS HAVE BEEN FURNISHED. WE, THEREFORE, FIND MERIT IN THIS ADDITIONAL GROUND FIL ED BY THE ASSESSEE AND ALLOWING THE SAME, WE DIRECT THE ASSESSING OFFICER TO RECOMP UTE THE PENALTY IMPOSIBLE U/S.271(1)(C) TAKING THE AMOUNT OF TAX SOUGHT TO B E EVADED AS PER CLAUSE (C) OF EXPLANATION 4. ITA NO.918/M/2009 M/S. SHRESTH SECURITIES PVT. LTD. 4 4. IN THE RESULT, THE APPEAL OF THE ASSESSEE STANDS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 3 RD DAY OF JUNE, 2011. SD. SD. (V. DURGA RAO) (P.M. JAGTAP) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED THE 3 RD JUNE, 2011. KN COPY TO: 1. THE ASSESSEE 2. THE REVENUE 3. THE CIT, M.C. XVIII, MUMBAI. 4. THE CIT(A)-XVIII, MUMBAI 5. THE DR E BENCH, MUMBAI BY ORDER /TRUE COPY/ ASST. REGISTRAR, ITAT, MUMBAI