DCIT 4(1), MUMBAI v. ISE SECURITIES & SERVICES LTD, NAVI MUMBAI

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES I MUMBAI BEFORE SHRI. D.K. AGARWAL (J.M.) AND SHRI T.R. SOOD (A.M.) ITA NO.254/MUM/2010 ASSESSMENT YEAR : 2003-2004 DCIT 4(1) 6 TH FLR. R.NO.640 AAYAKAR BHAVAN M.K. RD. MUMBAI 400 020. VS. ISE SECURITIES & SERVICES LTD. INTERNATIONAL INFOTECH PARK TOWER 7 5 TH FLR. VASHI RLY STATION COMPLEX SECTION 30A VASHI NAVI MUMBAI 400 703. PAN : AAACI6011L (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI S.K. SINGH RESPONDENT BY : SHRI AJAY R. SINGH O R D E R PER D.K. AGARWAL J.M. THIS APPEAL PREFERRED BY THE REVENUE IS DIRECTED AGAIN ST THE ORDER DATED 21.10.2009 PASSED BY THE LEARNED CIT(A) F OR THE ASSESSMENT YEAR 2003-04 CANCELLING THE PENALTY OF ` 11 41 910/- IMPOSED BY THE ASSESSING OFFICER U/S.271(1)(C) OF THE INCO ME TAX ACT 1961 (THE ACT). 2. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE ASSESSEE CO MPANY DERIVES INCOME FROM BROKERAGE INTEREST ANNUAL FEES AN D DIVIDEND. THE RETURN OF INCOME WAS FILED DECLARING A LOSS OF ` 5 42 676/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFI CER MADE VARIOUS DISALLOWANCES INCLUDING THE DISALLOWANCE OF D EPRECIATION ON COMPUTER SOFTWARE ` 3 90 000/- UNEXPLAINED CASH CREDIT U/S.68 ` 24 81 078/- AND ` 2 38 087/- PRIOR PERIOD EXPENSES ` 4 58 910/- AND ITA NO.254/MUM/2010 A.Y.: 2003-2004 2 DISALLOWANCE SEBI FEES ` 19 24 286/-. THE ASSESSING OFFICER AFTER SETTING OFF THE BROUGHT FORWARD DEPRECIATION AND BUSI NESS LOSS TO THE EXTENT OF ` 49 49 685/- COMPLETED ASSESSMENT AT NIL INCOME VIDE ORDER DATED 30.12.2005 PASSED U/S.143(3) OF THE ACT. THE ASSESSING OFFICER WHILE COMPLETING THE ASSESSMENT ALSO INITIATED PE NALTY PROCEEDINGS U/S.271(1)(C) OF THE ACT. IN RESPONSE TO NOT ICE TO SHOW CAUSE AS TO WHY PENALTY U/S.271(1)(C) SHOULD NOT BE IMPO SED IT WAS INTERALIA SUBMITTED BY THE ASSESSEE THAT THE ASSESSEE HAS FIL ED COMPLETE PARTICULARS AND THE CLAIM WAS MADE BY THE ASSESSEE IN GOOD FAITH WITH NO INTENTION TO CONCEAL THE FACTS AND THE IN COME OF THE ASSESSEE THEREFORE PENALTY IS NOT LEVIABLE. HOWEVER TH E ASSESSING OFFICER AFTER CONSIDERING THE ASSESSEES REPLY AND RELYING ON THE DECISION IN THE CASE OF UNION OF INDIA & ORS. VS. DHARMEN DRA TEXTILES PROCESS & ORS (2008) 14 DTR 114 (SC) HELD THAT THE ASSESSE E HAS FILED INACCURATE PARTICULARS OF ITS INCOME ON THE THREE ISSUES T HEREFORE IT IS A FIT CASE OF LEVY PENALTY AND ACCORDINGLY HE IMPOSED PEN ALTY OF ` 11 41 910/- VIDE ORDER DATED 30.03.2009 PASSED U/S.271 (1)(C) OF THE ACT. 3. ON APPEAL THE LEARNED CIT(A) WHILE HOLDING THAT THE EXPLANATION GIVEN BY THE ASSESSEE IS FOUND TO BE BONAFIDE AND THE AD DITION MADE BY THE ASSESSING OFFICER IS ON ACCOUNT OF DIFFERENCE OF OPIN ION THEREFORE IT IS NOT A CASE OF CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING INACCURATE PARTICULARS OF INCOME AND ACCORDIN GLY HE CANCELLED THE PENALTY IMPOSED BY THE ASSESSING OFFICER. 4. BEING AGGRIEVED BY THE ORDER OF THE LEARNED CIT( A) THE REVENUE IS IN APPEAL BEFORE US CHALLENGING ALL THE GROUNDS DELE TION OF PENALTY OF ` 11 41 910/- IMPOSED BY THE ASSESSING OFFICER. ITA NO.254/MUM/2010 A.Y.: 2003-2004 3 5. AT THE TIME OF HEARING THE LEARNED DR SUBMITS THAT FOR THE REASONS AS MENTIONED IN THE PENALTY ORDER THE LEARNED CIT(A) WAS NOT JUSTIFIED IN CANCELLING THE PENALTY IMPOSED BY THE ASSESSI NG OFFICER. THE LEARNED DR WHILE PLACING RELIANCE ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF DHARMENDRA TEXTILE PROCESSO RS (2008) 306 ITR 277 (SC) SUBMITS THAT THE ORDER PASSED B Y THE ASSESSING OFFICER IN IMPOSING THE PENALTY BE RESTORED. 6. ON THE OTHER HAND THE LEARNED COUNSEL FOR THE ASSE SSEE AT THE OUTSET SUBMITS THAT THE TRIBUNAL IN THE ASSESSEES OWN CASE I N THE QUANTUM APPEAL HAS DELETED THE ADDITION OF UNEXPLAIN ED CASH CREDIT OF ` 24 81 078/- AND ADDITION OF ` 2 38 087/- IN RESPECT OF DIVIDEND RECEIVED ON UNCLAIMED SECURITIES THEREFORE THE PENALTY ON THE ABOVE TWO ADDITIONS IS NOT LEVIABLE. WITH REGARD TO THE I MPOSITION OF PENALTY ON THE DISALLOWANCE OF WRONG CLAIM OF DEPRECIATION HE SU BMITS THAT THE ASSESSEE HAS FILED COMPLETE DETAIL OF DEPRECIATION ALONG W ITH DOCUMENTARY EVIDENCE OF PURCHASES OF THE SAME. HE FURTHER SUBMITS THAT OUT OF TOTAL COST OF ` 54 00 000/- CERTAIN COMPONENT OF ` 6.50 LAKHS WERE WITHHELD AND WERE NOT INSTALLED DURING THE RELEVANT PREVIOUS YEAR AND THE ASSESSEE AGREED FOR DISALLOWANCE OF DEPRECIATION ON THE SAID ASSETS OF ` 6.50 LAKHS THEREFORE THERE IS NO CONCEALMENT ON THE PART OF THE ASSESSEE. THE RELIANCE WAS ALSO PLACED ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. RELIANCE PETROPRODUCTS PVT. LTD. (2010) 322 ITR 158(SC) AND TH E ORDER OF THE TRIBUNAL IN M/S. APW PRESIDENT SYSTEMS LTD. VS. DCIT IN ITA NO.182/M/09 ASSESSMENT YEAR 2003-04 DATED 31.05.2010. HE THEREFORE SUBMITS THAT THE ORDER PASSED BY THE LD CIT(A ) IN CANCELLING THE PENALTY BE UPHELD. ITA NO.254/MUM/2010 A.Y.: 2003-2004 4 7. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE RI VAL PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIN D THAT THERE IS DISPUTE THAT THE ASSESSING OFFICER HAS IMPOSED PENALTY ON WRONG CLAIM OF DEPRECIATION UNEXPLAINED CASH CREDIT AND DIVIDEND R ECEIVED ON UNEXPLAINED STOCK. WE FURTHER FIND THAT IT IS ALSO NOT IN DISPUTE THAT THE TRIBUNAL IN ASSESSEES OWN CASE (SUPRA) HAS DELETED THE ADDITION OF CASH CREDIT ` 24 81 078/- AND WITH REGARD TO THE ADDITION OF DIV IDEND RECEIVED ON UNCLAIMED STOCK THE TRIBUNAL WHILE OBSERVING THAT THE BONAFIDE OF THE ASSESSEE IS NOT IN DISPUTE DIRECTED THE ASSE SSING OFFICER TO VERIFY WHETHER THE ASSESSEE HAS OFFERED THE SAI D AMOUNT IN ASSESSMENT YEAR 2006-07 AND IF IT IS SO THERE IS NO REASON TO MAKE THE ADDITION IN ASSESSMENT YEAR 2003-04. WITH REGARD TO T HE CLAIM OF DEPRECIATION ON COMPUTER SOFTWARE THE LEARNED CIT(A) I N THE IMPUGNED ORDER HAS OBSERVED AND HELD AS UNDER: (I) SO FAR AS THE WRONG CLAIM OF DEPRECIATION IS CO NCERNED IN THE ASSESSMENT ORDER DATED 30.12.2005 THE ASSESSING OF FICER HAS DISCUSSED THIS ISSUE AT PARA 3 PAGE 1 WHEREIN HE H AS STATED THAT THE ASSESSEE SUBMITTED THE DETAILS AND DOCUMENTARY EVIDENCES IN SUPPORT OF THE CLAIM OF DEPRECIATION AND IT IS SEEN THAT THE ASSESSEE COMPANY HAS PLACED PURCHASE ORDER DATED 04 .03.2002 BUT OUT OF TOTAL COST OF ` 54 00 000/- CERTAIN COMPONENTS OF ` 6 50 000/- WERE WITHHELD AND THE SAME WERE NOT INST ALLED DURING THE RELEVANT PREVIOUS YEAR THEREFORE THE CLAIM OF DEPRECIATION OF ` 3 90 000/- WAS DISALLOWED AND PENALTY U/S.271(1)(C) WAS INITIATED. (II)THE APPELLANT FURNISHED A COPY OF LETTER DATED 8 TH JULY 2005 FILED IN THE OFFICE OF THE ASSESSING OFFICER ON 11 TH JULY 2005 AS IS OBVIOUS FROM THE STAMP OF THE SAID OFFICE ON THE LE TTER. THE APPELLANT IN RESPONSE TO ASSESSING OFFICERS NOTICE U/S.142(1) DATED 2 ND JUNE 2005 ALONG WITH QUESTIONNAIRE SUBMITTED AS PER PARA 13 PAGE 12 OF THE LETTER BEFORE ASSESSING OFF ICER THAT THE COMPONENTS WORTH ` 6 50 000/- WERE NOT SUPPLIED OR INSTALLED DURING THE YEAR. AT THE BOTTOM OF PARA 13 THE APP ELLANT WROTE AS UNDER: WE THEREFORE REQUEST YOU TO KINDLY DISALLOW DEPR ECIATION @60% OF ` 6 50 000/- I.E. 3 90 000/- WHILE FINALIZING THE AS SESSMENT ITA NO.254/MUM/2010 A.Y.: 2003-2004 5 (III)IT IS THUS ABSOLUTELY OBVIOUS THAT THE APPELL ANT BROUGHT TO THE KNOWLEDGE OF THE ASSESSING OFFICER AT THE FIRST HE ARING ITSELF IN COURSE OF ASSESSMENT PROCEEDINGS THAT DEPRECIATION OF ` 3 90 000/- SHOULD BE DISALLOWED. AS THE EXPLANATIO N OF THE APPELLANT IS FOUND TO BE BONAFIDE IT IS HELD THAT PENALTY ON WRONG CLAIM OF DEPRECIATION IS NOT WARRANTED. FROM THE ABOVE WE OBSERVE THAT THERE IS NO DISPUTE THA T THE ASSESSEE HAS DISCLOSED ALL THE MATERIAL FACTS RELATING TO THE CLA IM OF DEPRECIATION AND HAS ALSO AGREED FOR THE DISALLOWANCE OF DEPRECIATION AMOUNTING TO ` 3.90 LAKHS DURING THE COURSE OF ASSESSMENT PROCEEDINGS. 8. IN ORDER TO APPLY THE PROVISIONS OF SEC.271(1)(C) TH ERE HAS TO BE CONCEALMENT OF PARTICULARS OF THE INCOME OF THE ASSESSEE. S ECONDLY THE ASSESSEE MUST HAVE FURNISHED INACCURATE PARTICULARS OF HIS INCOME. 9. IN A RECENT JUDGMENT OF THE HONBLE APEX COURT 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) AND UNION OF INDIA V S. DHARAMENDRA TEXTILE PROCESSORS (2008) 306 ITR 277(SC) HAVE OBSERVED AND HELD (PAGE 158 HEAD NOTES) AS UNDER: A GLANCE AT THE PROVISIONS OF SECTION 271(1)(C) OF THE INCOME- TAX ACT 1961 SUGGESTS THAT IN ORDER TO BE COVERED BY IT THERE HAS TO BE CONCEALMENT OF THE PARTICULARS OF THE INCOME OF THE ASSESSEE. SECONDLY THE ASSESSEE MUST HAVE FURNISHED INACCURA TE PARTICULARS OF HIS INCOME. THE MEANING OF THE WORD PARTICULAR S USED IN SECTION 271(1)(C) WOULD EMBRACE THE DETAILS OF THE CLAIM MADE. WHERE NO INFORMATION GIVEN IN THE RETURN IS FOUND T O BE INCORRECT OR INACCURATE THE ASSESSEE CANNOT BE HELD GUILTY O F FURNISHING INACCURATE PARTICULARS IN ORDER TO EXPOSE THE ASSES SEE TO PENALTY UNLESS THE CASE IS STRICTLY COVERED BY THE PROVISIO N THE PENALTY PROVISION CANNOT BE INVOKED. BY NO STRETCH OF IMAG INATION CAN MAKING AN INCORRECT CLAIM TANTAMOUNT TO FURNISHING INACCURATE PARTICULARS. THERE CAN BE NO DISPUTE THAT EVERYTHIN G WOULD DEPEND UPON THE RETURN FILED BY THE ASSESSEE BECAUSE THAT IS THE ONLY DOCUMENT WHERE THE ASSESSEE CAN FURNISH THE PARTICU LARS OF HIS INCOME. WHEN SUCH PARTICULARS ARE FOUND TO BE INACC URATE THE ITA NO.254/MUM/2010 A.Y.: 2003-2004 6 LIABILITY WOULD ARISE. TO ATTRACT PENALTY THE DET AILS 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 QUESTION OF INVITING THE PENALTY UNDER SECTION 271(1)(C). A MERE MAKING OF A CLAIM WHICH IS NOT SUSTAINABLE IN LAW BY ITSELF WILL NOT AMOUNT TO FURNISHING INACC URATE PARTICULARS REGARDING THE INCOME OF THE ASSESSEE. SUCH A CLAIM MADE IN THE RETURN CANNOT AMOUNT TO FURNISHING INACCURATE PARTI CULARS 10. IN CIT VS. M/S. SIDHARTHA ENTERPRISES LUDHIANA (20 10) 322 ITR 80 (P&H). THEIR LORDSHIPS WHILE DISTINGUISHING THE DE CISION IN UNION OF INDIA VS. DHARAMENDRA TEXTILE PROCESSORS (2008) 306 ITR 277(SC) HAVE HELD (HEADNOTE) :- HELD DISMISSING THE APPEAL THAT PENALTY ORDER UN DER SECTION 271(1)(C) OF THE INCOME TAX ACT 1961 WAS IMPOSED ONLY WHEN THERE WAS SOME ELEMENT OF DELIBERATE DEFAULT AND NO T A MERE MISTAKE. THE FINDING HAD BEEN RECORDED ON THE FACT S THAT THE FURNISHING OF INACCURATE PARTICULARS WAS SIMPLY A M ISTAKE AND NOT A DELIBERATE ATTEMPT TO EVADE TAX. THE VIEW TAKEN BY THE TRIBUNAL COULD NOT BE HELD TO BE PERVERSE. 11. 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 T URNOVER I.E. TRADING IN RAW WOOL AND KNITTED CLOTH WAS DEBATABLE AND THIS ISSUE WAS LATER SETTLED BY THE JUDGMENT OF THIS COURT IN LIBERTY INDIA VS. CIT (2007) 293 ITR 520 (P&H) UPHELD BY THE SUPREME C OURT IN LIBERTY INDIA VS. CIT (2009) 317 ITR 218. THEREFOR E THE TRIBUNAL HAS RIGHTLY COME TO THE CONCLUSION THAT THE ASSESSE E DID NOT DELIBERATELY OR CONSCIOUSLY CONCEAL THE TRUE PARTIC ULARS OF INCOME NOR FURNISHED INACCURATE PARTICULARS OF INCOME. TH E DELETION OF PENALTY WAS JUSTIFIED. ITA NO.254/MUM/2010 A.Y.: 2003-2004 7 12. RESPECTFULLY FOLLOWING THE ABOVE DECISIONS AND KEEP ING IN VIEW THAT IT IS NOT THE CASE OF THE REVENUE THAT THE ASSESSEE HAS NOT FILED THE COMPLETE PARTICULARS OF THE CLAIM OR THE CLAIM MADE BY THE ASSESSEE WAS FOUND TO BE FALSE OR UNTRUE BASED ON NO MATER IAL OR BONAFIDE BELIEF WE ARE OF THE VIEW THAT THERE IS NO CONCEALMENT ON THE PART OF THE ASSESSEE WHICH MAY CALL FOR LEVY OF PENALTY U /S.271(1)(C) OF THE ACT . ACCORDINGLY WE ARE INCLINED TO UPHOLD THE OR DER OF THE LEARNED CIT(A) IN DELETING THE PENALTY IMPOSED BY TH E ASSESSING OFFICER. THE GROUNDS TAKEN BY THE REVENUE ARE THEREFO RE REJECTED. 13. IN THE RESULT REVENUES APPEAL STANDS DISMISSED. ORDER PRONOUNCED ON THIS 11 TH DAY OF FEBRUARY 2011. SD/- (T.R. SOOD) ACCOUNTANT MEMBER SD/- (D.K. AGARWAL) JUDICIAL MEMBER MUMBAI DATED 11 TH FEBRUARY 2011. JANHAVI COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. COMMISSIONER OF INCOME TAX (APPEALS)- MUM BAI 4. COMMISSIONER OF INCOME TAX CITY- MUMBAI 5. DEPARTMENTAL REPRESENTATIVE BENCH MUMBAI //TRUE COPY// BY ORDER ASSTT. REGISTRAR ITAT MUMBAI