DCIT4(1), MUMBAI v. CREDIT SUISSE SECURITIES (INDIA) P. LTD, MUMBAI

ITA 1104/MUM/2010 | 2003-2004
Pronouncement Date: 21-01-2011 | Result: Dismissed

Appeal Details

RSA Number 110419914 RSA 2010
Assessee PAN AAACC4388G
Bench Mumbai
Appeal Number ITA 1104/MUM/2010
Duration Of Justice 11 month(s) 11 day(s)
Appellant DCIT4(1), MUMBAI
Respondent CREDIT SUISSE SECURITIES (INDIA) P. LTD, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 21-01-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted C
Tribunal Order Date 21-01-2011
Date Of Final Hearing 12-01-2011
Next Hearing Date 12-01-2011
Assessment Year 2003-2004
Appeal Filed On 10-02-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH C : MUMBAI BEFORE SHRI D.K. AGARWAL (JM) AND SHRI B. RAMAKO TAIAH (AM) ITA NOS.1104 & 1105/MUM/2010 ( ASSESSMENT YEARS : 2003-04 & 2004-05) DY. COMMISSIONER OF INCOME TAX 4(1) AAYAKAR BHAVAN MUMBAI-400 020. ..( APPELLANT ) VS. M/S. CREDIT SUISSE SECURITIES (INDIA) PVT. LTD. 9 TH FLOOR CEEJAY HOUSE PLOT F SHIVSAGAR ESTATE DR. A.B. ROAD WORLI MUMBAI-400 019. ..( RESPONDENT ) P.A. NO. (AAACC4388G) APPELLANT BY : S/SHRI AJITKUMAR S INHA & P.M. DEVADASAN. RESPONDENT BY : S/SHRI F.V.IRANI & B HAVESH DHARIA. O R D E R PER D.K. AGARWAL (JM). THESE TWO APPEALS PREFERRED BY THE REVENUE ARE DIRECTE D AGAINST THE SEPARATE ORDERS DATED 10.11.2009 PASSED BY THE LEAR NED COMMISSIONER OF INCOME TAX (APPEALS) FOR THE ASST. YEARS 2003-04 & 2004-05. SINCE THE FACTS ARE IDENTICAL AND ISSUE INVOLV ED IS COMMON BOTH THESE APPEALS ARE DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. BRIEFLY STATED FACTS OF THE CASE EXTRACTED FROM I TA 1104/MUM/2010 FOR THE A.Y. 2003-04 ARE THAT THE ASSESS EE COMPANY ITA NOS.1104 & 1105/M/10 2 IS ENGAGED IN THE BUSINESS OF SHARES AND STOCK BROKING SECU RITIES TRADING AND MANAGEMENT SERVICES. THE ASSESSEE IS A MEMBER OF NATIONAL STOCK EXCHANGE AND BOMBAY STOCK EXCHANGE. IT FILED RETURN DECLARING TOTAL LOSS OF RS.18 84 24 440. DURING THE COU RSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER HAS DISCUSSED THE FOLLOWING ISSUES AS UNDER :- 3. INTEREST ACCRUED BUT NOT DUE : DURING THE COURSE OF ASSESSMENT PROCEEDINGS IT WAS INTER-A LIA OBSERVED BY THE ASSESSING OFFICER THAT IN THE COMPUTATION OF INCOME THE ASSESSEE HAS REDUCED AN AMOUNT OF RS.1 00 13 299 BEING INTEREST ACCRUED BUT NOT DUE ON GOVERNMENT SECURITY. ON BEING A SKED TO EXPLAIN IT WAS SUBMITTED BY THE ASSESSEE THAT THE INTEREST ACCRUED BUT NOT DUE RS.1 00 13 299 REPRESENTS THE AMOUNT OF INTER EST ON SECURITY FROM THE LAST COUPON DATE TO 31.3.2003 WHICH HAS BEEN ACCRUED BY THE COMPANY IN ITS BOOKS OF ACCOUNTS BASED ON MERCANTILE OR ACCRU AL SYSTEM OF ACCOUNTING. HOWEVER AS ON 31.3.2003 THE SAID INTEREST HAS NOT BECOME DUE TO THE COMPANY I.E. THE UNCONDITIONA L RIGHT TO RECEIVE THE SAID INCOME HAS NOT BEEN VESTED IN THE COMPA NY. THE RIGHT TO RECEIVE THE SAID INTEREST HAS BEEN ACCRUED TO T HE COMPANY ONLY ON THE COUPON DATE OF THE SECURITIES THAT FALLS AFT ER 31.3.2003. THE ASSESSEE AFTER RELYING ON VARIOUS DECISIONS FINALLY SUBM ITTED THAT THE INTEREST OF RS.1 00 13 299 IS NOT LIABLE TO BE ADD ED TO THE INCOME ITA NOS.1104 & 1105/M/10 3 OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION. HOWEVER THE A.O. DID NOT ACCEPT THE ASSESSEES EXPLANATION. HE WAS OF THE V IEW THAT THERE IS NO DISPUTE THAT THE ASSESSEE IS FOLLOWING MERCANT ILE SYSTEM OF ACCOUNTING AND INCOME HAS TO BE RECOGNIZED ON ACCRUAL BASI S. THE A.O. FURTHER OBSERVED THAT THE ASSESSEE HAS OFFERED RS.2 36 32 961 BEING INTEREST ACCRUED IN EARLIER YEARS WHICH HAS ALREAD Y BEEN ASSESSED AS INCOME FOR THE A.Y. 2002-03 THEREFORE THE A .O. IN VIEW OF THE FINDING RECORDED IN THE ASST. YEAR 2002-03 AND KEEPING IN THE SECOND PROVISO TO SECTION 145 ADDED THE AMOUNT OF INTERE ST OF RS.1 00 13 299 TO THE INCOME OF THE ASSESSEE. 4. LEGAL AND PROFESSIONAL FEES : DURING THE COURSE OF ASSESSMENT PROCEEDINGS IT WAS FURTHER OBSERVED BY THE A.O. THAT THE ASSESSEE HAS CLAIMED LEGAL AND PROFE SSIONAL FEES OF RS.1 81 17 203 AS COMPARED TO RS.1 79 06 092 FOR THE EARLIER YEAR I.E. A.Y. 2002-03 WHEREIN A SPECIAL AUDIT U/S. 142(2A) OF THE INCOME TAX ACT 1961 (THE ACT) WAS CARRIED OUT AND THE SPECIAL AUDITOR AFTER CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE FOR THAT YEAR HAS OBSERVED THAT THE EXPENSES TO THE EXTENT OF RS.4 65 388 NAY BE DISALLOWED. ACCORDINGLY THE ASSESSEE WAS ASKED TO SUBSTANTI ATE HIS CLAIM. THE ASSESSEE AFTER FILING THE DETAILS OF LEGAL A ND PROFESSIONAL CHARGES SUBMITTED THAT THE OVERALL INCREASE IN THE LEGAL AND PROFESSIONAL FEES IS VERY MARGINAL WHICH INCLUDED AN AMO UNT OF ITA NOS.1104 & 1105/M/10 4 RS.76 52 980 BEING FEES PAID TO IL & FS LIMITED AND F EES OF RS.3 01 201 PAID TO CITI BANK RESPECTIVELY FOR SETTLEM ENT AND CUSTODY EXPENSES. THE LEGAL AND PROFESSIONAL FEES FOR THE YEAR ENDED 31.3.2002 DO NOT INCLUDE THE PAYMENT TO IL & FS LIMI TED AND CITI BANK. IF THESE FEES ARE EXCLUDED FROM THE LEGAL AND PROFESSIONAL FEES FOR THE YEAR ENDED 31.3.2003 THE TOTAL LEGAL AND P ROFESSIONAL FEES WOULD BE IN THE REGION OF RS.1 01 63 022 WHICH IS LOWE R THAN THE LEGAL AND PROFESSIONAL FEES FOR THE YEAR ENDED 31.3.2002 RS.1 70 96 092 I.E. BY ABOUT 43%. HOWEVER THE A.O. AFTER CONSIDERING THE ASSESSEES EXPLANATION OBSERVED THAT THE ASSESSEE HAS FAILED TO SUBMI T ANY ADDITIONAL DETAIL OR EXPLANATION OTHER THAN FILING A COPY OF SUBMISSION MADE FOR THE A.Y. 2002-03. THE A.O. KEEPING IN VIE W THE FINDING RECORDED IN THE ASSESSMENT ORDER FOR A.Y. 2002-03 HELD T HAT RS.18 00 000 ONLY ARE ALLOWABLE AS AN EXPENDITURE IN THE HANDS OF THE ASSESSEE AND BALANCE EXPENDITURE RS.25 26 480 HE DISALLOW ED ON THE GROUND THAT THE SAME IS NOT ATTRIBUTED TO THE BUSINESS A CTIVITY OF THE GROUP COMPANY OF THE ASSESSEE. 5. DISALLOWANCE OUT OF SETTLEMENT COST : DURING THE COURSE OF ASSESSMENT IT WAS ALSO OBSERVED BY THE A.O. THAT THE ASSESSEE HAS INCLUDED THE EXPENDITURE OF SETTLEMENT COST PAID TO M/S. IL & FS LIMITED AMOUNTING TO RS.76 52 980 UNDER THE HEAD LEGAL AND PROFESSIONAL CHARGES. THE ASSESSEE WAS ASKED TO SUBSTANT IATE HIS ITA NOS.1104 & 1105/M/10 5 CLAIM IN VIEW OF ADDITION MADE IN THE ASSESSMENT EARLIER FOR THE A.Y. 2002-03. IN RESPONSE THE ASSESSEE HAS MERELY SUBMITTED A COP Y OF THE STATEMENTS MADE DURING THE ASSESSMENT PROCEEDINGS FOR TH E A.Y. 2002-03. THE A.O. AFTER CONSIDERING THE ASSESSEES EXPLANA TION OBSERVED THAT IT IS A FACT THAT DURING THE PERIOD RELE VANT TO A.Y. 2003- 04 THERE IS NO BROKERAGE ACTIVITY CARRIED OUT BY THE A SSESSEE. SINCE THE ASSESSEE HAS FAILED TO SUBMIT FRESH DETAILS OR EXPLANA TION REGARDING ITS NEED TO MAKE THE PAYMENT TO M/S. IL & F S LTD IN VIEW OF THE FACT THAT ITS OPERATIONS IN INDIA HAS BEEN SUSPENDED THEREFORE THE A.O. DISALLOWED ENTIRE EXPENSES OF RS.76 52 980 FOR THE SAME REASON AS GIVEN IN THE ASSESSMENT ORDER FOR THE ASSESSMENT YEAR 200 2-03. 6. PRIOR PERIOD EXPENSES STOCK AWARD : APART FROM THIS THE A.O. DURING THE COURSE OF ASSESSMENT PROCEEDINGS ALSO OBSERVED THAT THE ASSESSEE HAS CLAIMED AN AMOUNT OF RS.1 07 08 810 AS STOCK AWARD PERTAINING TO EARLIER YEAR TO BE PAID DURING THE YEAR COVERED U/S. 43B OF THE ACT. IT WAS C LARIFIED BY THE ASSESSEE THAT THE GLOBALLY AS PART OF ITS PERFORMANCE INCENTIVE PACKAGE FOR EMPLOYEES ALL THE CREDIT SUISSE GROUP (C SG) COMPANIES HAVE A POLICY OF GRANTING CSG SHARES TO QUALIFIED EMPL OYEES IN JANUARY EACH YEAR. GENERALLY AFTER FOUR YEARS FROM THE ALLO TMENT THE COMPANY DELIVERS THE SHARES TO THE EMPLOYEES. IN INDIA AS INDIAN CITIZENS WERE NOT PERMITTED TO HOLD SHARES OF FOREIGN CO MPANIES THE ITA NOS.1104 & 1105/M/10 6 STOCK AWARD SCHEME OPERATED WITH THE MODIFICATION THAT T HE STOCK AWARDS WERE PAID IN CASH. ON THE DATE OF SETTLEMENT T HE FINAL STOCK AWARD QUANTUM WOULD BE ARRIVED AT BY MULTIPLYING TH E NUMBER OF SHARES BY THE VALUE OF CSG SHARES AS ON THE DATE OF SETT LEMENT. INCREASE IN THE VALUE OF THE SHARES AS COMPARED TO THE INITIAL VALUATION/PAYOUT WOULD ALSO BE PAID IN CASH. THE ASSESSING OFFICER AFTER CONSIDERING THE ASSESSEES EXPLANATION WAS OF THE VIE W THAT SINCE THE STOCK AWARD PERTAINING TO THE EARLIER YEARS AND PAID BY THE ASSESSEE DURING THE YEAR IS NOT COVERED BY SECTION 36(1)(II ) OF THE ACT THE PAYMENT MADE DURING THE YEAR IS NOT COVERED BY SECTION 43B OF THE ACT AND ACCORDINGLY HE DISALLOWED THE SAME BEING PR IOR PERIOD EXPENSES AND ADDED TO THE INCOME OF THE ASSESSEE. 7. THE A.O. AFTER MAKING SOME OTHER DISALLOWAN CES COMPLETED THE ASSESSMENTS AT A LOSS OF RS.15 67 31 855 VIDE ORDER DT.28.2 .2006 PASSED U/S.143(3) OF THE ACT. 8. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE A. O. ALSO INITIATED PENALTY PROCEEDINGS U/S.271(1)(C) OF THE ACT. IN RESPONSE TO NOTICE TO SHOW CAUSE AS TO WHY PENALTY SHOULD NOT BE IMPO SED THE ASSESSEE FILED HIS DETAILED SUBMISSION DT.25.3.2009 WHICH HA S BEEN SUMMARIZED BY THE A.O. AT PAGE 3 OF THE IMPUGNED PEN ALTY ORDER AS UNDER : ITA NOS.1104 & 1105/M/10 7 SECTION A : GENERAL SUBMISSIONS RELATING TO APPLICABILI TY OF SECTION 271(1)(C) OF THE ACT READ WITH EXPLANATION 1 THEREOF. SECTION B : SPECIFIC SUBMISSIONS ON APPLICABILITY OF SECTI ON 271(1)(C) OF THE ACT WITH RESPECT TO EACH OF THE ITEMS OF ADDITION/DISALLOWANCE MADE IN THE ASSESSMENT ORDER IN RESPECT OF WHICH PENALTY UNDER SECTION 271(1)(C) IS SOUGHT TO BELIEVED. IN SECTION A ASSESSEE COMPANY HAS SPECIFICALLY MENTIONED THAT EXPLANATION 1 TO SECTION 271(1)(C) DOES NOT APPLY IN I TS CASE FOR THE FOLLOWING REASONS : A) WHERE APPLICABLE THE COMPANY HAS CLEARLY PROVIDED RE LEVANT DISCLOSURE IN RESPECT OF VARIOUS CLAIMS IN THE COMPUTATION OF TOTAL INCOME FORMING PART OF THE RETURN OF INCOME RE AD WITH THE NOTES THERETO AND IN ITS AUDITED FINANCIAL STATEME NTS THE TAX AUDIT REPORT U/S.44AB OF THE ACT AND THE ACCOUNTAN TS REPORT IN FORM 3CEB IN RESPECT OF THE COMPANYS INTERN ATIONAL TRANSACTIONS; B) THE COMPANY ALSO COOPERATED WITH YOUR HONOURS PREDECESSO R IN PROVIDING DETAILED FACTUAL EXPLANATION (INCLUDIN G APPROPRIATE DOCUMENTS AND EVIDENCE) ALONG WITH LEGAL REASONING FOR THE BASIS OF ITS COMPUTATION AND ITS CLAIM IN RESPECT OF ALL ITEMS WHICH HAVE BEEN SUBJECTED TO DISALLOWANCES/ADDITIONS MADE IN THE ASSESSMENT ORDER FOR THE SUBJECT YEAR. C) THERE IS NO FALSITY IN THE CLAIMS MADE BY THE COMPANY. D) THE BASIS FOR YOUR PEDECESSORS NON-ACCEPTANCE OF THE COMPANYS POSITION ON EACH OF THE INDIVIDUAL ITEMS OF DISALLOWANCES/ADDITIONS IS PURELY ON THE POINT OF INTER PRETATION OF LAW. 9. THE A.O. AFTER CONSIDERING THE ASSESSEES EXPLAN ATION OBSERVED THAT IN THE QUANTUM APPEAL THE ASSESSEE COMPANY DID NO T PRESS VARIOUS GROUNDS OF APPEAL AGAINST THE ADDITIONS MADE B Y THE A.O. EXCEPT THE MEMBERSHIP CARD ISSUE PURELY BECAUSE IN VIEW O F THE ITA NOS.1104 & 1105/M/10 8 PROVISIONS OF SECTION 79 OF THE ACT I.E. THE COMPANY COULD NOT HAVE BENEFITTED FROM THE CARRY FORWARD OF BUSINESS LOSS IN RESP ECT OF THE ASSESSMENT YEAR IN QUESTION. ACCORDING TO THE A.O. THE SAI D SUBMISSION OF THE APPELLANT WILL NOT HAVE ANY EFFECT ON THE LEVIABILITY OF PENALTY U/S.271(1)(C) IN THIS CASE. THE A.O. AFTER RELY ING ON VARIOUS DECISIONS INCLUDING THE DECISION IN UNION OF INDIA AND OR S VS. DHARMENDRA TEXTILE PROCESSORS & ORS (2008) 14 DTR (SC) 144; (2008) 306 ITR 277 (SC) HELD THAT THE ASSESSEE COMPANY HAS FILED INACCURATE PARTICULARS OF ITS INCOME TO EVADE LEGITIMATE TAXES AND ALSO CONCEALED THE TRUE PARTICULARS OF ITS INCOME AND ACCORDINGLY HE IM POSED PENALTY OF RS.80 48 827 VIDE ORDER DT.30.3.2009 PASSED U/S. 27 1(1)(C) OF THE ACT. 10. ON APPEAL THE LD. CIT(A) OBSERVED AND HEL D THAT THE APPELLANT HAS DISCLOSED THE PARTICULARS OF INCOME IN THE TAX AUDIT R EPORT IT HAS GIVEN DETAILED EXPLANATION HAS RELIED ON VARIOUS CA SE LAWS AND THE ADDITION IS BASED ON DIFFERENCE IN VIEW BETWEEN THE A PPELLANT AND THE A.O. THEREFORE THE APPELLANT HAS NOT CONCEALED PARTI CULARS OF INCOME AND HAS NOT FURNISHED INACCURATE PARTICULARS OF SUCH INCOM E AND HAS DISCLOSED ALL MATERIAL FACTS REGARDING COMPUTATION OF T OTAL INCOME AND ACCORDINGLY HE CANCELLED THE PENALTY IMPOSED BY THE A.O. U/S. 271(1)(C) OF THE ACT. ITA NOS.1104 & 1105/M/10 9 11. BEING AGGRIEVED BY THE ORDER BY THE LD. CI T(A) THE REVENUE IS IN APPEAL BEFORE US. 12. COMMON GROUNDS TAKEN BY THE REVENUE FOR THE ASSESSMENT YEARS 2003-04 AND 2004-05 READ AS UNDER : 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE CIT(A) HAS ERRED IN DELETING THE PEN ALTY UNDER SECTION 271(1)(C) LEVIED BY THE ASSESSING OFFICER ON ACCOUNT OF (I) INTEREST ACCRUED BUT NOT DUE AND (II) DISALLOWANCE OF LEGAL AND PROFESSIONAL FEES AND OTHER DISALLOWANCES WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE HAS CONCEALED THE PARTICULARS OF ITS INCOME (I.E. INTEREST ACCRUED BUT NOT OFFERED FOR TAXATION) AND FUR NISHED INACCURATE PARTICULARS OF INCOME (DISALLOWANCE OF LEGAL & PROFESSIONAL FEES AND OTHER DISALLOWANCES). 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE IMPUGNED ORDER OF THE LD. CIT(A) IS CONTRARY TO LAW AND CONSEQUENTLY MERITS TO BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. 3. THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUND OR ADD A NEW GROUND WHICH MAY BE NECESSARY. 13. AT THE TIME OF HEARING THE LD. D.R. WHILE RELYING ON THE FINDING RECORDED IN THE ASSESSMENT ORDER AND IN THE PENALTY ORDE R SUBMITS THAT THE LD. CIT(A) HAS ERRED IN DELETING THE PENALT Y IMPOSED BY THE A.O. U/S. 271(1)(C) ON ACCOUNT OF (I) INTEREST ACCRUED BUT NOT DUE AND (II) DISALLOWANCE OF LEGAL AND PROFESSIONAL FEES AND OTH ER DISALLOWANCES WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE HAS CONCEALE D THE PARTICULARS OF ITS INCOME. HE FURTHER SUBMITS THAT DESPITE OF THE FACT THAT IN THE IMMEDIATELY PRECEDING YEAR SIMILAR DISALLO WANCES WERE ITA NOS.1104 & 1105/M/10 10 MADE AND UPHELD IN THE APPEAL THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION HAS AGAIN MADE THE SIMILAR CLAIM KNOWING FULLY THAT THE SIMILAR CLAIMS WOULD NOT BE ALLOWED IN THE ASSESSMENT PRO CEEDINGS THEREFORE THE ASSESSEE HAS FURNISHED INACCURATE PARTICULA RS OF INCOME AND LIABLE TO PENALTY. HE FURTHER SUBMITS THAT MERELY BECAUSE THE ASSESSEE DID NOT PRESS BEFORE THE LD. CIT(A) THE DISALLOWA NCE MADE IN THE ASSESSMENT ORDER DOES NOT MEAN THAT THE ASSESSEE HAS NOT CONCEALED THE PARTICULARS OF INCOME. THE RELIANCE WAS ALSO PLACED ON THE DECISION OF THE HONBLE APEX COURT IN DHARMENDRA T EXTILE PROCESSORS & ORS (SUPRA). HE THEREFORE SUBMITS THAT THE O RDER PASSED BY THE LD. CIT(A) BE REVERSED AND THAT OF A.O. BE RESTORED. 14. ON THE OTHER HAND THE LD. COUNSEL FOR THE ASSESSEE WHILE RELYING ON THE ORDER OF THE LD. CIT(A) IN DELETING THE PENALTY FURTHER SUBMITS THAT THE ASSESSEE HAS DISCLOSED ALL MATERIAL FACTS AL ONG WITH THE TAX AUDIT REPORT IN THE RETURN OF INCOME FILED B Y THE ASSESSEE. HE FURTHER SUBMITS THAT IN THE COMPUTATION OF INCOME FILED ALONG WITH THE RETURN OF INCOME THE ASSESSEE HAS ALSO MENTIONED NOTES FOR MING INTEGRAL PART OF COMPUTATION OF TOTAL INCOME ON EACH O F THE ABOVE DISALLOWANCES IN SUPPORT OF ITS CLAIM A COPY OF WHICH IS A PPEARING AT PAGES 1 TO 20 OF THE ASSESSEES PAPER BOOK. HE FURTHER SUBM ITS THAT IN RESPECT OF DISALLOWANCE OUT OF LEGAL AND PROFESSIONAL EXP ENSES APART FROM ABOVE EVIDENCE EVEN THE TRANSFER PRICING OFFICER (TPO) HAS NOT ITA NOS.1104 & 1105/M/10 11 MADE ANY ADJUSTMENT. HE FURTHER SUBMITS THAT THE DISALL OWANCE MADE BY THE A.O. IS PURELY BASED ON DIFFERENCE OF VIEW/OPIN ION ON THE PART OF THE A.O. IT HAS BEEN HELD IN A SERIES OF CASES THAT PEN ALTY IS NOT LEVIABLE WHERE THE ASSESSMENT IS COMPLETED ON THE BASIS OF DIFFERENCE OF VIEWS IN THE MATTER. HE FURTHER SUBMITS THAT THE RE TURN FOR THE YEAR UNDER CONSIDERATION WAS FILED ON 28.11.2003 WHEREAS ASSE SSMENT FOR THE A.Y. 2002-03 WAS COMPLETED MUCH LATER. HE FURTHER SUBMITS THAT THE APPEAL FOR THE YEAR UNDER CONSIDERATION IN WHICH T HE ASSESSEE HAS NOT PRESSED THE ABOVE DISALLOWANCES IN VIEW OF SECTION 79 OF THE ACT BECAUSE THE COMPANY COULD NOT HAVE BENEFITTED FROM THE CARRY FORWARD OF ANY BUSINESS LOSS IN RESPECT OF THE ASSESSMENT YEAR IN QU ESTION WAS DECIDED MUCH AFTER THE ASSESSMENTS COMPLETED FOR BOTH THE ASSESSMENT YEARS I.E. 2002-03 AND 2003-04. THEREFORE TH E SUBMISSION OF THE LD. D.R. THAT THE ASSESSEE AFTER KNOWING THE FACT THAT IN THE A.Y. 2002-03 SIMILAR DISALLOWANCES WERE MAD E AND DESPITE OF THE SAME THE ASSESSEE HAS MADE SIMILAR CLAIM IN THE YE AR UNDER CONSIDERATION IS DEVOID OF ANY MERIT. HE FURTHER SUBMI TS THAT IT IS NOT THE CASE OF THE REVENUE THAT THE ASSESSEE HAS NOT DISCLOSED ALL ITS PARTICULARS OF INCOME OR HAS NOT SUPPORTED ITS CLAIM WITHO UT ANY REASONABLE EXPLANATION THEREFORE MERELY BECAUSE IN T HE ASSESSMENT THE DISALLOWANCES WERE MADE DOES NOT MEAN THAT THE ASSE SSEE HAS CONCEALED ITS PARTICULARS OF INCOME. THE LD. COUNSEL FOR THE ASSESSEE ITA NOS.1104 & 1105/M/10 12 PLACED STRONG RELIANCE ON THE DECISION IN THE CASE OF CIT VS. RELIANCE PETROPRODUCTS PVT. LIMITED (2010) 322 ITR 158 (SC) WH EREIN THEIR LORDSHIPS AFTER CONSIDERING THE DECISION IN DHARMENDRA TE XTILE PROCESSORS & ORS (SUPRA) HAS RELIED ON THE DECISION OF HON BLE SUPREME COURT IN DILIP N SHROFF VS. JOINT CIT (2007) 291 ITR 519 (SC) AND SREE KRISHNA ELECTRICALS VS. STATE OF TAMIL NADU (2 009) 23 VST 249 (SC) AND HAS HELD THAT MERELY BECAUSE THE ASSESSEE HAD CLAIMED THE EXPENDITURE WHICH CLAIM WAS NOT ACCEPTED OR WAS NOT ACCEPTABLE BY THE REVENUE THAT BY ITSELF WOULD NOT IN OUR OPI NION ATTRACT THE PENALTY U/S. 271(1)(C) OF THE ACT. RELIANCE WAS ALSO PL ACED ON THE FOLLOWING DECISIONS : I) CEMENT MARKETING COMPANY. OF INDIA LTD. VS. ACIT (19 80) 124 ITR 15 (SC). II) PFIZER PHARMACEUTICALS (INDIA) PVT. LTD. VS. DCIT IN IT A NO.1111/MUM/2009 FOR THE A.Y. 2003-04 DATED 15.12.2 010. III) BAYER CROP SCIENCE LIMITED VS. DCIT IN ITA NO.2467/MU M/07 FOR THE ASST. YEAR 2001-02 DT 30.11.2010. HE THEREFORE SUBMITS THAT THE ORDER PASSED BY THE LD. CIT(A) IN DELETING THE PENALTY BE UPHELD. 15. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE R IVAL PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT ITA NOS.1104 & 1105/M/10 13 THERE IS NO DISPUTE THAT THE A.O. HAS IMPOSED PENALTY O N THE FOLLOWING DISALLOWANCES/ADDITIONS : I) INTEREST ACCRUED BUT NOT DUE RS.1013299 II) DISALLOWANCE OF LEGAL AND PROFESSIONAL FEES RS.25264 80 III) DISALLOWANCE OUT OF SETTLEMENT COST RS.7652980 IV) PRIOR PERIOD EXPENDITURE (STOCK AWARD) RS.10708810 TOTAL RS.21901569 ON APPEAL THE LD. CIT(A) DELETED THE PENALTY IMPOSE D BY THE A.O. ON THE GROUND THAT THE APPELLANT HAS DISCLOSED THE PARTICUL ARS OF INCOME IN THE TAX AUDIT REPORT IT HAS GIVEN DETAILED EXPLANAT ION HAS RELIED ON VARIOUS CASE LAWS AND THE ADDITION IS BASED ON DIFFERENCE IN VIEW OF BETWEEN THE APPELLANT AND THE A.O. ACCORDING TO THE R EVENUE SINCE THE DISALLOWANCES WERE MADE DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND APPEAL WAS WITHDRAWN BY THE ASSESSEE ON TH E ABOVE DISALLOWANCES THE ASSESSEE HAS FILED INACCURATE PARTICULARS OF INCOME AND CONCEALED THE PARTICULARS OF INCOME THEREFORE LIABLE TO PENALTY. PER CONTRA ACCORDING TO THE LD. COUNSEL FOR THE ASSESSEE THE ASSESSEE HAS NOT ONLY MADE FULL DISCLOSURE IN THE RETURN OF INCOM E BUT HAD ALSO EXPLAINED THE FACTUAL AND LEGAL BASIS OF CLAIMING THE ABOVE EXPENSES VIDE NOTES FORMING INTEGRAL PART OF COMPUTATION OF I NCOME. BESIDE THIS THE ASSESSEE HAS ALSO SUPPORTED HIS VIEWS ON THE BASIS O F LEGAL POSITION MENTIONED IN THE SAID NOTES. WE FURTHER FIND THAT IT IS NOT THE CASE OF THE REVENUE THAT THE ASSESSEE HAS NOT DISCLOSED COMP LETE PARTICULARS OF INCOME OR THE AFORESAID CLAIMS MADE BY THE ASSESSEE ITA NOS.1104 & 1105/M/10 14 WERE FOUND TO BE FALSE OR UNTRUE OR THE SAME ARE NOT ALLOWABLE UNDER THE ACT. MERELY BECAUSE THE ABOVE CLAIMS MADE BY THE ASSESSEE WERE NOT ACCEPTED IN THE ASSESSMENT PROCEEDINGS OR THE ASSESSEE HAS WITHDRAWN THE APPEAL FILED BY HIM THAT BY ITSELF DOE S NOT MEAN THAT THE ASSESSEE HAS CONCEALED THE PARTICULARS OF ITS INCOME OR HAS CON CEALED HIS INCOME. 16. IN ORDER TO APPLY THE PROVISIONS OF SECTION 271(1) (C) THERE HAS TO BE CONCEALMENT OF PARTICULARS OF INCOME SECONDLY TH E ASSESSEE MUST HAVE FURNISHED INACCURATE PARTICULARS OF INCOME. 17. IN A RECENT JUDGMENT OF THE HONBLE APEX CO URT IN CIT VS. RELIANCE PETROPRODUCTS PVT. LTD. (2010) 322 ITR 158(SC ) THEIR LORDSHIPS AFTER CONSIDERING VARIOUS DECISIONS INCLUDING DIL IP N. SHROFF VS. JCIT (2007) 291 ITR 519(SC) UNION OF INDIA VS. DHARAMENDRA TEXTILE PROCESSORS (2008) 306 ITR 277(SC) AND SREE KRI SHNA ELECTRICALS VS. STATE OF TAMIL NADU (2009) 23 VST 249 ( SC) HAVE OBSERVED AND HELD (PAGE 158 HEADNOTES) AS UNDER: A GLANCE AT THE PROVISIONS OF SECTION 271(1)(C) OF THE INCOME- TAX ACT 1961 SUGGESTS THAT IN ORDER T O BE COVERED BY IT THERE HAS TO BE CONCEALMENT OF TH E PARTICULARS OF THE INCOME OF THE ASSESSEE. SECONDL Y THE ASSESSEE MUST HAVE FURNISHED INACCURATE PARTICULARS OF HIS INCOME. THE MEANING OF THE WORD PARTICULARS USED IN SECTION 271(1)(C) WOULD EMBRACE THE DETAILS OF THE CLAIM MADE. WHERE NO INFORMATION GIVEN IN THE RETURN IS FOUND TO BE INCORRECT OR INACCURATE THE ASSESSEE CANNOT BE HEL D GUILTY OF FURNISHING INACCURATE PARTICULARS. IN OR DER TO EXPOSE THE ASSESSEE TO PENALTY UNLESS THE CASE IS STRICTLY COVERED BY THE PROVISION THE PENALTY ITA NOS.1104 & 1105/M/10 15 PROVISION CANNOT BE INVOKED. BY NO STRETCH OF IMAGINATION CAN MAKING AN INCORRECT CLAIM TANTAMOUNT TO FURNISHING INACCURATE PARTICULARS. THERE CAN BE NO DISPUTE THAT EVERYTHING WOULD DEPEND UPON THE RETURN FILED BY THE ASSESSEE BECAUSE THAT IS THE ONLY DOCUMENT WHERE THE ASSESSEE CAN FURNISH THE PARTICULARS OF HIS INCOME. WHEN SUCH PARTICULARS ARE FOUND TO BE INACCURATE THE LIABILITY WOULD ARISE. TO ATTRACT PENALTY THE DETAILS SUPPLIED IN THE RETURN MUST NOT BE ACCURATE NOT EXACT OR CORRECT NOT ACCORDING TO THE TRUTH OR ERRONEOUS. WHERE THERE IS NO FINDING THAT ANY DETAILS SUPPLIE D BY THE ASSESSEE IN ITS RETURN ARE FOUND TO BE INCORRECT OR ERRONEOUS OR FALSE THERE IS NO QUESTIO N OF INVITING THE PENALTY UNDER SECTION 271(1)(C). A ME RE MAKING OF A CLAIM WHICH IS NOT SUSTAINABLE IN LAW BY ITSELF WILL NOT AMOUNT TO FURNISHING INACCURATE PARTICULARS REGARDING THE INCOME OF THE ASSESSEE. SUCH A CLAIM MADE IN THE RETURN CANNOT AMOUNT TO FURNISHING INACCURATE PARTICULARS. 18. IN CIT VS. SIDDHARTHA ENTERPRISES (2010) 322 I TR 80 (P & H) THEIR LORDSHIPS WHILE DISTINGUISHING THE DECISION IN UNIO N OF INDIA VS. DHARAMENDRA TEXTILE PROCESSORS (2008) 306 ITR 277(SC) H AVE HELD (HEADNOTE) :- HELD DISMISSING THE APPEAL THAT PENALTY ORDER UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT 1961 WAS IMPOSED ONLY WHEN THERE WAS SOME ELEMENT OF DELIBERATE DEFAULT AND NOT A MERE MISTAKE. THE FINDING HAD BEEN RECORDED ON THE FACT S THAT THE FURNISHING OF INACCURATE PARTICULARS WAS SIMPLY A MISTAKE AND NOT A DELIBERATE ATTEMPT TO EVADE TAX. THE VIEW TAKEN BY THE TRIBUNAL COULD NO T BE HELD TO BE PERVERSE. 19. RECENTLY IN CIT VS. ARISUDANA SPINNING MILLS LTD . (2010) 326 ITR 429 (P&H) IT HAS BEEN HELD (HEADNOTE) : HELD DISMISSING THE APPEAL THAT WHEN THE RETURNS OF INCOME WERE FILED THE ISSUE WITH REGARD TO ENTITLEMENT OF DEDUCTION UNDER SECTION 80-IA ON THE PROFITS DERIVED FROM TRADING TURNOVER I.E. TRADING IN RAW WOOL AND KNITTED CLOTH WAS DEBATABLE AND THIS ISSUE WAS LATER SETTLED BY THE JUDGMENT OF THIS COU RT ITA NOS.1104 & 1105/M/10 16 IN LIBERTY INDIA VS. CIT (2007) 293 ITR 520 (P&H) UPHELD BY THE SUPREME COURT IN LIBERTY INDIA VS. CI T (2009) 317 ITR 218. THEREFORE THE TRIBUNAL HAS RIGHTLY COME TO THE CONCLUSION THAT THE ASSESSEE DI D NOT DELIBERATELY OR CONSCIOUSLY CONCEAL THE TRUE PARTICULARS OF INCOME NOR FURNISHED INACCURATE PARTICULARS OF INCOME. THE DELETION OF PENALTY WAS JUSTIFIED. 20. RESPECTFULLY FOLLOWING THE ABOVE DECISIONS INC LUDING THE RATIO OF DECISIONS RELIED ON BY THE LD. COUNSEL FOR THE ASSESSEE AND KEEPING IN VIEW THAT THE CLAIM MADE BY THE ASSESSEE WAS BASED ON BON A FIDE BELIEF WHICH WAS NOT FOUND TO BE FALSE OR UNTRUE WE ARE OF THE VIEW THAT THERE IS NO CONCEALMENT ON THE PART OF THE ASSESSEE W HICH MAY CALL FOR LEVY OF PENALTY U/S. 271(1)(C) OF THE ACT. ACCO RDINGLY WE ARE INCLINED TO UPHOLD THE FINDING OF THE LD. CIT(A) IN DELETING THE PENALTY IMPOSED BY THE A.O. THE GROUNDS TAKEN BY THE REVENUE ARE THEREFORE REJECTED. ITA NO.1105/MUM/2010 (A.Y. 2004-05) 21. AT THE TIME OF HEARING IT HAS BEEN AGREED BY B OTH THE PARTIES THAT THE FACTS IN THE PRESENT APPEAL ON WHICH PENALTY HAS BEEN IMPOSED BY THE A.O. ARE SIMILAR TO THE FACTS OF THE CASE FOR THE A.Y. 2003-04 THEREFORE THE PLEA TAKEN BY THEM FOR THE A.Y. 2003-04 MAY BE CONSIDERED WHILE DECIDING THE APPEAL FOR THE A.Y. 2 004-05. 22. THAT BEING SO AND IN THE ABSENCE OF ANY DISTINGUISH ED FEATURES BROUGHT ON RECORD BY THE REVENUE AND KEEPING IN VIEW OF OUR FINDING RECORDED IN REVENUES APPEAL FOR THE A.Y. 200 3-04 AS ABOVE WE ITA NOS.1104 & 1105/M/10 17 HOLD THAT THERE IS NO CONCEALMENT ON THE PART OF THE A SSESSEE WHICH MAY CALL FOR LEVY OF PENALTY U/S. 271(1)(C) OF THE ACT AND ACCORDINGLY WE DO NOT FIND ANY ERROR IN THE ORDER OF THE LD. CI T(A) IN DELETING THE PENALTY IMPOSED BY THE ASSESSING OFFICER. THE GROUNDS TA KEN BY THE REVENUE ARE THEREFORE REJECTED. 23. IN THE RESULT THE REVENUES APPEALS STAND DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 21.01.2011. SD/- SD/- (B.RAMAKOTAIAH) ( D.K. AGARWAL ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI DATED: 21.01.2011. *GPR COPY TO: THE APPELLANT THE RESPONDENT THE CIT CONCERNED MUMBAI THE CIT(A) CONCERNED MUMBAI THE DR C BENCH TRUE COPY BY ORDER DY/ASSTT. REGISTRAR ITAT MUMBAI. ITA NOS.1104 & 1105/M/10 18 DATE INITI ALS 1. DRAFT DICTATED ON .. SR.PS/PS 2. DRAFT PLACED BEFORE AUTHOR . SR.PS/PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER . . JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER . JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS ON SR.PS/PS 6. KEPT FOR PRONOUNCEMENT ON .. .. SR.PS/PS 7. FILE SENT TO THE BENCH CLERK .. .. SR.PS/PS 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK 9. DATE ON WHICH FILE GOES TO THE A.R. . . 9. DATE OF DISPATCH OF ORDER