GABRIEL INDIA LTD, MUMBAI v. ADDL CIT 5(1), MUMBAI

ITA 1911/MUM/2010 | 2004-2005
Pronouncement Date: 11-03-2011 | Result: Dismissed

Appeal Details

RSA Number 191119914 RSA 2010
Assessee PAN AAACG1994N
Bench Mumbai
Appeal Number ITA 1911/MUM/2010
Duration Of Justice 1 year(s) 1 day(s)
Appellant GABRIEL INDIA LTD, MUMBAI
Respondent ADDL CIT 5(1), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 11-03-2011
Appeal Filed By Assessee
Order Result Dismissed
Bench Allotted G
Tribunal Order Date 11-03-2011
Date Of Final Hearing 06-04-2011
Next Hearing Date 06-04-2011
Assessment Year 2004-2005
Appeal Filed On 10-03-2010
Judgment Text
1 IN THE INCOME TAX APPELLATE TRIBUNAL G BENCH MUMBAI BEFORE SHRI RAJENDRA SINGH(AM) AND SHRI V.D.RAO (JM) ITA NO.1911/M/2010 ASSESSMENT YEAR 2004-05 M/S. GABRIEL INDIA LTD. THE ADDL.CIT RAMGE 5(1) 10 PRASAD CHAMBERS AAYAKAR BHAVAN M.K.MARG OPERA HOUSE MUMBAI 400 004. MUMBAI 400 020. PAN : AAACG 1994 N APPELLANT RESPONDENT ASSESSEE BY : SHRI SUNIL BHANDARI REVENUE BY : SHRI A.K. NAYAK O R D E R PER RAJENDRA SINGH (AM) THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER DATED 1.1.10 OF THE CIT(A) FOR THE ASSESSMENT YEAR 2004-05. THE ONL Y DISPUTE RAISED BY THE ASSESSEE IS REGARDING LEVY OF PENALTY UNDER SECTION 271(1)(C). 2. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT TH E AO IN THE ASSESSMENT ORDER HAD MADE ADDITION OF RS.8 27 261/- ON ACCOUNT OF FOREIGN TRAVEL EXPENSES WHICH INCLUDED EXPENDITURE OF RS.3 52 851/ - INCURRED ON THE FOREIGN VISIT OF THE SPOUSE OF THE CHAIRMAN. HE HAD ALSO DI SALLOWED LONG TERM CAPITAL LOSS OF RS.1 01 95 517/- ON ACCOUNT OF SALE OF UNIT S OF UTI-64. THERE WERE OTHER ADDITIONS ALSO WHICH ARE NOT RELEVANT AS PENA LTY LEVIED IN RESPECT OF THOSE ADDITIONS HAS BEEN DELETED BY THE CIT(A) AND THE RE VENUE IS NOT IN APPEAL. THE 2 CIT(A) HAS CONFIRMED PENALTY UNDER SECTION 271(1)(C ) IN RESPECT OF THE DISALLOWANCE OF FOREIGN TRAVEL EXPENDITURE OF RS.3 52 851/- IN RESPECT OF FOREIGN VISIT OF THE SPOUSE OF THE CHAIRMAN AND ON ACCOUNT OF DISALLOWANCE OF LONG TERM CAPITAL LOSS OF RS.1 01 95 517/-. THE ABOVE DISALLO WANCES HAVE BEEN CONFIRMED BY THE TRIBUNAL IN THE ORDER DATED 20.10.10 IN ITA NO.7354/M/2007. THE TRIBUNAL IN THE QUANTUM ORDER HELD THAT THE ASSESSE E HAD NOT BEEN ABLE TO SUBSTANTIATE THE CLAIM THAT THE PRESENCE OF CHAIRMA NS WIFE WAS NECESSARY AS PER INTERNATIONAL CONVENTION. THE TRIBUNAL ALSO OBS ERVED THAT CAPITAL GAIN ARISING FROM SALE OF UNITS OF UTI WAS EXEMPT UNDER SECTION 10(33) OF THE INCOME-TAX ACT AND THEREFORE LOSS CLAIMED IN RESPEC T OF SALE OF UNITS HAS TO BE IGNORED. THE TRIBUNAL THEREFORE CONFIRMED THE DISAL LOWANCE MADE ON THE ABOVE TWO COUNTS. THE CIT(A) IN THE PENALTY ORDER HELD TH AT THE ASSESSEE HAD FURNISHED INACCURATE PARTICULARS OF INCOME BY CLAIM ING DEDUCTION ON ACCOUNT OF FOREIGN TRAVEL EXPENDITURE OF THE WIFE OF THE CHAIR MAN AND BY CLAIMING THE LOSS ON SALE OF UNITS OF UTI. AGGRIEVED BY THE SAID DECI SION THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 3. BEFORE US THE LEARNED AR FOR THE ASSESSEE SUBMIT TED THAT THE ASSESSEE HAD NOT CONCEALED PARTICULARS OF INCOME AS DETAILS REGARDING THE FOREIGN TRAVEL EXPENDITURE AND THE LONG TERM CAPITAL LOSS HAD BEEN GIVEN. HE ALSO REFERRED TO THE COMPUTATION OF INCOME PLACED AT PAGE 9 OF THE P APER BOOK IN WHICH THE ASSESSEE HAD APPENDED A NOTE IN WHICH IT WAS MENTIO NED THAT SECTION 10(33) WAS ACTIVATED ONLY IN CASE OF CAPITAL GAIN ARISING FROM TRANSFER OF UNITS. IT WAS SUBMITTED THAT SECTION 10(33) WAS INSERTED BY THE F INANCE ACT 2003 W.E.F. 1.4.2003 AFTER THE UNIT TRUST OF INDIA (TRANSFER OF UNDERTAKING REPEAL ACT) 2002 HAD COME INTO FORCE DUE TO THE FINANCIAL MESS FACED BY THE UTI. HE REFERRED THE EXPLANATORY NOTE EXPLAINING THE PROVIS IONS OF SECTION 10(33) AND 3 THE CBDT CIRCULAR NO.7 DATED 5.9.2003 TO POINT OUT THAT THE EXEMPTION HAD BEEN PROVIDED AS AN INCENTIVE TO THE FINANCIAL SECT OR. IT WAS POINTED OUT THAT SECTION 10(33) WAS AN INCENTIVE TO THE INVESTORS DU E TO THE FINANCIAL MISS MANAGEMENT OF UTI AND THEREFORE IT SHOULD BE STRICT LY CONSTRUED AND APPLICATION SHOULD BE RESTRICTED TO ONLY THE GAIN A ND NOT LOSSES. IT WAS ALSO SUBMITTED THAT THE ASSESSEE HAD GIVEN COMPLETE DETA ILS AND THE ISSUE WAS DEBATABLE AND THEREFORE NO PENALTY COULD BE LEVIED. IT WAS POINTED OUT THAT THERE WAS NO DELIBERATE ACT ON THE PART OF THE ASSE SSEE FOR CONCEALMENT OF ANY INCOME AND THEREFORE THE LEARNED AR PLACED RELIANCE ON THE JUDGMENT OF HONBLE SUPREME COURT IN CASE OF RELIANCE PETRO PRO DUCT PVT. LTD. (213 CTR 320) AND THE DECISION OF PUNE BENCH OF TRIBUNAL IN CASE OF KANBAY SOFTWARE INDUSTRIES PVT. LTD. (31 SOT 153) AND ALSO ON THE J UDGMENT OF HONBLE HIGH COURT OF RAJASTHAN IN CASE OF CHANDRAPAL BAGGA VS I TAT (261 ITR 67). 3.1 THE LEARNED DR ON THE OTHER HAND STRONGLY SUPPO RTED THE ORDERS OF AUTHORITIES BELOW. IT WAS ARGUED THAT THE ASSESSEE HAD MADE CLAIM OF EXPENDITURE ON ACCOUNT FOREIGN TRAVEL OF THE WIFE O F THE CHAIRMAN WITHOUT GIVING DETAILS AS TO HOW THE TRAVEL OF THE WIFE WAS WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. THE ASSESSEE HAD ALSO MADE CLA IM OF LONG TERM CAPITAL LOSS WHICH WAS AGAINST THE SETTLED PRINCIPLES OF LA W THAT WHEN INCOME IS EXEMPT FROM TRANSACTIONS LOSS FROM THE SAME TRANSACTIONS HAS TO BE IGNORED. HE PLACED RELIANCE ON THE JUDGMENT OF HONBLE SUPREME COURT IN CASE OF HARPRASAD & CO. PVT. LTD. (99 ITR 118) IN SUPPORT OF THE SAID PROPOSITION. IT WAS FURTHER ARGUED THAT MAKING CLAIM AGAINST THE CLEAR PROVISIO N OF LAW OR SETTLED PRINCIPLES OF LAW AMOUNTED TO MAKING FALSE CLAIM AND NOT WRONG CLAIM AND DISALLOWANCE OF SUCH CLAIM AMOUNTED TO CONCEALMENT OR FURNISHING OF INACCURATE PARTICULARS OF INCOME. HE PLACED RELIANCE ON THE JUDGMENT OF HONB LE HIGH COURT OF DELHI IN 4 CASE OF CIT VS ESCORT FINANCE LTD. (183 TAXMAN 453) . IT WAS ACCORDINGLY URGED THAT PENALTY IN THIS CASE WAS LEVIABLE AND THEREFOR E THE ORDER OF CIT(A) SHOULD BE UPHELD. 4. WE HAVE PERUSED THE RECORDS AND CONSIDERED THE R IVAL CONTENTIONS CAREFULLY. THE DISPUTE IS REGARDING LEVY OF PENALTY UNDER SECTION 271(1)(C) IN RESPECT OF DISALLOWANCE OF FOREIGN TRAVEL EXPENDITU RE OF THE WIFE OF THE CHAIRMAN AND DISALLOWANCE OF CLAIM OF LONG TERM CAP ITAL LOSS ON ACCOUNT OF SALE OF UNITS OF UTI-64. BOTH THE DISALLOWANCE HAVE BEEN UPHELD BY THE TRIBUNAL IN THE ORDER DATED 20.10.10 IN ITA NO.7354/M/2007. PEN ALTY UNDER SECTION 271(1)(C) HAS ALSO BEEN LEVIED BY THE AO IN RESPECT OF THE ABOVE TWO DISALLOWANCES WHICH HAS BEEN UPHELD BY THE CIT(A). THE CASE OF THE ASSESSEE IS THAT IT HAD NOT CONCEALED ANY PARTICULARS OF INCOME AND FULL DETAILS REGARDING FOREIGN TRAVEL EXPENDITURE OF THE WIFE OF THE CHAIR MAN AND LONG TERM CAPITAL LOSS HAD BEEN GIVEN. THEREFORE PENALTY CANNOT BE I MPOSED ONLY FOR DISALLOWANCE OF CLAIM. RELIANCE HAS BEEN PLACED ON THE JUDGMENT OF HONBLE SUPREME COURT IN CASE OF RELIANCE PETRO PRODUCT PVT . LTD. (213 CTR 320) IN WHICH IT HAS BEEN HELD THAT MAKING INCORRECT OR WRO NG CLAIM DID NOT AMOUNT TO FURNISHING INACCURATE PARTICULARS OF INCOME. THERE IS HOWEVER A DIFFERENCE BETWEEN MAKING A CLAIM WHICH IS FOUND TO BE WRONG O R MAKING A BOGUS CLAIM. IT IS A SETTLED PRINCIPLE OF LAW AS HELD BY HONBLE SUPREME COURT IN CASE OF HARPRASAD & CO PVT. LTD. (99 ITR 118) THAT IN CASE OF LOSS IS FROM A SOURCE OR HEAD INCOME FROM WHICH IS NOT EXIGIBLE TO TAX THE LOSS FROM THE SAID SOURCE OR HEAD OF INCOME HAS TO BE IGNORED. IN THIS CASE INCO ME FROM THE SALE OF UNITS OF UTI-64 WAS EXEMPT UNDER SECTION 10(33) AND THEREFOR E FOLLOWING THE PRINCIPLE LAID DOWN BY THE HONBLE SUPREME COURT THE LOSS COU LD NOT BE CLAIMED BY THE ASSESSEE. THE ASSESSEE HOWEVER CLAIMED THE LOSS CON TRARY TO THE SETTLED 5 PRINCIPLE OF LAW WHICH WOULD AMOUNT TO MAKING A FAL SE CLAIM. THIS VIEW IS SUPPORTED BY THE JUDGMENT OF HONBLE HIGH COURT OF DELHI IN CASE OF CIT VS ESCORT FINANCE (183 TAXMAN 453). IN THAT CASE THE A SSESSEE BEING A FINANCE COMPANY HAD CLAIMED DEDUCTION UNDER SECTION 35D WHI CH WAS APPLICABLE ONLY TO INDUSTRIAL UNDERTAKING THE HONBLE HIGH COURT HE LD THAT THE CLAIM WAS EXFACIE INADMISSIBLE. IT WAS THEREFORE NOT A WRONG CLAIM BU T FALSE CLAIM. THE HIGH COURT HELD THAT MAKING SUCH CLAIM AMOUNTED TO CONCEALING OR FURNISHING INACCURATE PARTICULARS OF INCOME. THE HIGH COURT IN THE SAID C ASE HAD CONSIDERED THE JUDGMENT OF HONBLE SUPREME COURT IN CASE OF RELIAN CE PETRO PRODUCTS PVT. LTD. (SUPRA). THEREFORE IN OUR VIEW THE CLAIM MADE BY TH E ASSESSEE WHICH WAS BOGUS AMOUNTED TO CONCEALING PARTICULARS OF INCOME OR FURNISHING INACCURATE PARTICULARS OF INCOME. MAKING A CLAIM ADOPTING ANY INTERPRETATION CANNOT BE CONSIDERED AS A BONAFIDE CLAIM PARTICULARLY WHEN TH E INTERPRETATION IS CONTRARY TO THE LAW DECLARED BY THE APEX COURT. THEREFORE BY APPENDING A NOTE TO THE COMPUTATION OF INCOME AND MENTIONING THAT SECTION 1 0(33) WAS ACTIVATED ONLY IN CASE OF GAIN CANNOT BE CONSIDERED TO BE A CASE O F BONAFIDE CLAIM. IT MAY ALSO BE NOTED THAT THE ASSESSEE IS A COMPANY WHICH IS AS SISTED BY A CHARTERED ACCOUNTANT WHO ARE WELL EQUIPPED IN THE INCOME-TAX MATTERS. THEREFORE MAKING A CLAIM ADOPTING AN INTERPRETATION AGAINST THE SETT LED PRINCIPLE OF LAW CANNOT BE CONSIDERED AS BONAFIDE CLAIM. THE CLAIM AS WE HAVE HELD EARLIER HAS TO BE CONSIDERED AS FALSE/ BOGUS CLAIM ATTRACTING PENALTY UNDER SECTION 271(1)(C). 5. THE LEARNED AR FOR THE ASSESSEE HAS ARGUED THAT EXEMPTION UNDER SECTION 10(33) HAD BEEN PROVIDED AS AN INCENTIVE TO THE UTI INVESTORS BECAUSE OF FINANCIAL MESS CREATED BY THE UTI MANAGEMENT. TH EREFORE THE EXEMPTION SHOULD APPLY ONLY TO GAIN AND NOT TO LOSSES. REFERE NCE HAS BEEN MADE TO EXPLANATORY NOTE RELATING TO THE INSERTION OF THE P ROVISIONS OF SECTION 10(33) 6 AND CBDT CIRCULAR EXPLAINING THAT THE SAID SECTION HAD BEEN INSERTED AS AN INCENTIVE TO THE FINANCIAL SECTOR. THIS HOWEVER DOE S NOT ALTER THE SETTLED POSITION OF LAW THAT IN CASE THE GAIN FROM A SOURCE WAS EXEMPT THE LOSS HAS TO BE IGNORED. THE EXEMPTION UNDER SECTION 10(33) HAD BEEN SPECIFICALLY ALLOWED IN RESPECT OF SALE OF UNITS OF UTI-64 AND EXEMPTION GIVEN IS ALWAYS AN INCENTIVE. IN FACT IN CASE OF HARPRASAD & CO (SUPRA ) THE CAPITAL GAIN FROM IMPUGNED TRANSACTIONS WAS EXEMPT FROM TAX AND THERE FORE IT WAS HELD THAT LOSS HAS TO BE IGNORED. THE ASSESSEE HAD MADE A CLAIM AG AINST THE SETTLED PRINCIPLE OF LAW WHICH AS POINTED OUT EARLIER AMOUNTED TO MAK ING A BOGUS CLAIM IN VIEW OF THE JUDGMENT OF HONBLE HIGH COURT OF DELHI IN C ASE OF CIT VS ESCORT FINANCE LTD (SUPRA). IT HAS ALSO BEEN ARGUED THAT PENALTY CAN BE IMPOSED ONLY IN CASE OF DELIBERATE ACT OF MAKING A BOGUS/WRONG CLAIM. TH IS ASPECT IS ALSO SETTLED BY THE JUDGMENT OF HONBLE SUPREME COURT IN CASE OF DH ARMENDRA TEXTILES AND PROCESSORS & OTHERS (306 ITR 277) IN WHICH IT HAS B EEN HELD THAT PENALTY UNDER SECTION 271(1)(C) IS ONLY A CIVIL LIABILITY AND THA T WILLFUL CONCEALMENT IS NOT REQUIRED TO BE PROVED BY THE REVENUE. THEREFORE THE ARGUMENT BASED ON DELIBERATE OR CONSCIOUS ACT HAS TO BE REJECTED. IN RESPECT OF EXPENDITURE ON FOREIGN TRAVEL OF THE WIFE ALSO WE FIND THAT THE A SSESSEE HAD GIVEN NO DETAILS AS TO HOW THE EXPENDITURE WAS NECESSARY FOR THE PURPOS E OF BUSINESS. THE WIFE OF THE CHAIRMAN OF THE ASSESSEE COMPANY WAS NOT CONNEC TED WITH THE BUSINESS ACTIVITY AND THEREFORE MAKING SUCH CLAIM WAS PRIMA FACIE BOGUS AND IT COULD NOT BE CONSIDERED AS A BONAFIDE CLAIM PARTICULARLY WHEN NO DETAILS WERE GIVEN TO SHOW THAT THE VISIT WAS FOR THE PURPOSE OF BUSINESS . MAKING SUCH CLAIM WOULD AMOUNT TO DEEMED CONCEALMENT OF PARTICULARS OF INCO ME IN TERMS OF THE EXPLANATION 1 TO SECTION 271(1)(C). THE JUDGMENT OF HONBLE SUPREME COURT IN CASE OF RELIANCE PETRO PRODUCTS PVT. LTD. (SUPRA) W ILL NOT BE OF ANY HELP TO THE ASSESSEE AS THE SAME WAS LIMITED TO PENALTY FOR FUR NISHING INACCURATE 7 PARTICULARS OF INCOME AND THE ISSUE REGARDING CONCE ALMENT OF PARTICULARS OF INCOME WAS NOT BEFORE THE HONBLE SUPREME COURT. M OREOVER IN THAT CASE CLAIM HAD BEEN FOUND TO BE WRONG AND NOT EX-FACIE B OGUS. 6. IN VIEW OF THE FOREGOING DECISION WE ARE OF THE CONSIDERED VIEW THAT PENALTY IN THIS CASE HAD BEEN RIGHTLY LEVIED. WE TH EREFORE CONFIRM THE ORDER OF CIT(A) LEVYING THE PENALTY. 7. IN THE RESULT THE APPEAL OF THE ASSESSEE IS DISM ISSED. 8. THE DECISION WAS PRONOUNCED IN THE OPEN COURT ON 11.03.2011. SD/- SD/- ( V.D. RAO ) (RAJENDRA SINGH) JUDICIAL MEMBER ACCOUNTANT MEMBER DATE : 11.03.2011 AT :MUMBAI COPY TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) MUMBAI CONCERNED 4. THE CIT MUMBAI CITY CONCERNED 5. THE DR G BENCH ITAT MUMBAI // TRUE COPY// BY ORDER ASSISTANT REGISTRAR ITAT MUMBAI BENCHES MUMBAI ALK