THE PAPER BASE COMPANY LIMITED, v. ACIT Circle 16 (1),

ITA 3198/DEL/2006 | 2001-2002
Pronouncement Date: 07-01-2011 | Result: Allowed

Appeal Details

RSA Number 319820114 RSA 2006
Assessee PAN AAACT4334K
Bench Delhi
Appeal Number ITA 3198/DEL/2006
Duration Of Justice 4 year(s) 3 month(s)
Appellant THE PAPER BASE COMPANY LIMITED,
Respondent ACIT Circle 16 (1),
Appeal Type Income Tax Appeal
Pronouncement Date 07-01-2011
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted H
Tribunal Order Date 07-01-2011
Date Of Final Hearing 25-10-2010
Next Hearing Date 25-10-2010
Assessment Year 2001-2002
Appeal Filed On 07-10-2006
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL [ DELHI BENCH H DELHI ] BEFORE SHRI A. D. JAIN JM AND SHRI K. D. RANJAN AM I. T. A. NO. 3198 (DEL) OF 2006 ASSESSMENT YEAR : 2001-02. THE PAPERBASE COMPANY LIMITED ASSTT. COMMISSIONER OF INCOME-T AX 124 J A N P A T H VS. C I R C L E : 16 (1) N E W D E L H I 110 001. N E W D E L H I . PAN / GIR NO. AAA CT 4334 K. ( APPELLANT ) ( RESPONDENT ) ASSESSEE BY : SHRI AKHIL MAHAJAN C. A.; DEPARTMENT BY : MS. REENA S. PURI [C IT] D.R.; O R D E R. PER K. D. RANJAN AM : THIS APPEAL BY THE ASSESSEE FOR ASSESSMENT YEAR 20 01-02 ARISES OUT OF ORDER OF THE LD. CIT (APPEALS)-XIX NEW DELHI. 2. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE REPRODUCED AS UNDER :- ' 1. THE ORDER UNDER SECTION 271(1)(C) OF THE INCO ME TAX ACT 1961 IS WRONG OPPOSED TO EVIDENCES ON RECORD AND IS INVALID; 2. THE PROVISIONS OF SECTION 271(1)(C) OF THE I. T. ACT ARE NOT APPLICABLE AT ALL; 2 I. T. A. NO. 3198 (DEL) OF 2006 3. IN THE ABSENCE OF A PRIMARY SATISFACTIO N ARRIVED AT AND RECORDED BY THE AO THE ENTIRE PENALTY PROCEEDINGS ARE VITIATED IN LAW AND THE PENALTY ORDER MAY PLEASE BE ANNULLED; 4. THE APPELLANT HAS NEITHER CONCEALED PAR TICULARS OF INCOME NOR FURNISHED INACCURATE PARTICULARS OF INCOME AND THEREFORE TH E PROVISIONS OF SECTION 271(1)(C) OF THE I. T. ACT ARE NOT APPLICABLE; 5. THE AO HAS ERRED IN HOLDING ..THE EX PLANATION OF THE APPELLANT THAT THE PROVISIONS OF SECTION 50-B OF THE ACT WILL NOT APPLY IN CASE OF NEGATIVE NET WORTH IS NOT A BONA FIDE EXPLANATION SINCE THE APP ELLANT VERY MUCH KNEW THAT IT HAS GAINED MORE THAN THE SALE CONSIDERATION OF RS.7 5 LAKHS IS ERRONEOUS AND THE SAME MAY PLEASE BE EXPUNGED FROM THE PENALT Y ORDER AND THE PENALTY LEVIED MAY PLEASE BE CAN CELLED; 6. THE AO HAS ERRED IN HOLDING ..I DO N OT THEREFORE FIND IT TO BE A CASE OF MERE DISALLOWANCE OF THE CLAIM OF EXEMPTION SINC E IN MY CONSIDERED VIEW SUCH CLAIM HAS BEEN MADE BY THE APPELLANT NOT BASED ON A BONA FIDE BELIEF. SUCH ORDER IS MECHANICAL ERRONEOUSLY UNDERSTOOD AND THU S THE PENALTY ORDER MAY PLEASE BE CANCELLED; 7. THE APPELLANT HAVING ADMITTED LOSS AND THE INCOME ALSO DETERMINED AT A NEGATIVE FIGURE THE PROVISIONS OF SECTION 271(1)(C ) OF THE I. T. ACT ARE NOT APPLICABLE AT ALL; 8. WITHOUT PREJUDICE TO THE ABOVE GROUNDS CHALLENGING LEVY OF PENALTY THE LD. CIT (A) HAS ERRED IN CONFIRMING THE AMOUNT OF T AX SOUGHT TO BE EVADED BY APPLYING THE REGULAR TAX RATE OF 35 PER CENT AND SU RCHARGE. 3. THE ONLY ISSUE IN THE ASSESSEES APPEAL PERTAINS TO PENALTY UNDER SECTION 271(1)(C) OF THE INCOME-TAX ACT 1961 [HEREINAFTER REFERRED TO AS TH E ACT]. THE FACTS OF THE CASE STATED IN BRIEF ARE THAT THE RETURN OF LOSS OF RS.3 26 06 790/- WAS FIL ED BY THE ASSESSEE ON 30/10/2001. THE 3 I. T. A. NO. 3198 (DEL) OF 2006 ASSESSMENT WAS COMPLETED BY MAKING THE ADDITION ON ACCOUNT OF LONG TERM CAPITAL GAINS AND MARKETING EXPENSES WHICH WAS UPHELD BY THE LD. CIT (A). THE AO IMPOSED PENALTY UNDER SECTION 271(1)(C) OF THE ACT IN RESPECT OF ADDITION S TO THE EXTENT OF RS.6 08 57 275/- MADE BY THE AO. 4. ON APPEAL THE LD. CIT (APPEALS) DELETED THE PEN ALTY IN RESPECT OF MARKET SURVEY EXPENSES ON THE GROUND THAT PENALTY UNDER SECTION 271(1)(C) WAS INITIATED BY THE LD. CIT (A) AND THEREFORE THE AO WAS NOT JUSTIFIED IN IMPOSING THE PENALTY IN RESPECT OF MARKET SURVEY EXPENSES. HOWEVER HE OBSERVED THAT SINCE PENALTY PROCEEDINGS ON THIS ISSUE HAVE BEEN INITIATED BY THE LD. CIT (A) THE SAME SHALL BE FINALIZED IN THE DUE COU RSE. AS REGARDS THE PENALTY IMPOSED IN RESPECT OF CAPITAL GAINS THE LD. CIT (A) CONFIRMED THE IMP OSITION OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT BY HOLDING THAT THE EXPLANATION OFFERED BY THE ASSESSEE WAS NOT BONAFIDE FOR THE CLAIM THAT THE CAPITAL GAINS WERE NOT CHARGEABLE TO TAX A S PER SECTION 50-B OF THE ACT. 5. BEFORE US THE LD. AR OF THE ASSESSEE SUBMITTED THAT ITAT VIDE ORDER DATED 21 ST SEPTEMBER 2007 IN ITA. NO. 477 (DEL) OF 2004 HAS D ELETED THE ADDITION CONFIRMED BY THE LD. CIT (A) ON ACCOUNT OF CAPITAL GAINS. AS REGARDS TH E CONFIRMING THE DISALLOWANCE IN RESPECT OF MARKET EXPENSES THE ISSUE HAS BEEN SET ASIDE TO TH E FILE OF THE LD. CIT (A) FOR FRESH ADJUDICATION WHETHER THE EXPENDITURE WAS INCURRED BY THE ASSESS EE FOR BUSINESS EXPEDIENCY OR NOT. IN VIEW OF THE ABOVE IT HAS BEEN PLEADED THAT THE PENALTY U/S . 271(1)(C) CANNOT BE IMPOSED IN RESPECT OF CAPITAL GAINS WHICH STANDS DELETED. ON THE OTHER HAND THE LD. CIT DR SUPPORTED THE ORDER OF THE LD. CIT (APPEALS). 6. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. AS REGARDS THE LEVY OF PENALTY UNDER SECTION 271(1)(C) IN RESPECT OF CAPITAL GAINS THE ADDITION HAS BEEN DELETED BY THE ITAT VIDE THEIR ORDER DATED 21 ST SEPT. 2007. THEREFORE PENALTY UNDER SECTION 271(1)(C) CANNOT BE LEVIED. OUR VIEW IS SU PPORTED BY THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF K. C BUILDERS VS. ACIT 265 ITR 562 (SC) WHEREIN IT HAS BEEN HELD THAT WHERE ADDITIONS MADE IN THE ASSESSMENT ORDER ON THE BASIS OF WHICH PENALTY FOR CONCEALMENT IS 4 I. T. A. NO. 3198 (DEL) OF 2006 LEVIED ARE DELETED THERE REMAINS NO BASIS AT ALL FOR LEVYING PENALTY FOR CONCEALMENT AND THEREFORE IN SUCH A CASE NO PENALTY CAN SURVIVE AN D THE PENALTY IS LIABLE TO BE CANCELLED. ORDINARILY PENALTY CANNOT STAND IF THE ASSESSMENT I TSELF IS SET ASIDE. RESPECTFULLY FOLLOWING THE DECISION OF HONBLE SUPREME COURT IT IS HELD THAT PENALTY UNDER SECTION 271(1)(C) IS NOT IMPOSABLE. 7. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. THE ORDER PRONOUNCED IN THE OPEN COURT ON : 07 TH JANUARY 2011. SD/- SD/- [ A. D. JAIN ] [ K. D. RANJAN ] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 07 TH JANUARY 2011. *MEHTA * COPY OF THE ORDER FORWARDED TO : - 1. APPELLANT. 2. RESPONDENT. 3. CIT 4. CIT (APPEALS) 5. DR ITAT NEW DELHI. TRUE COPY. BY ORDER. ASSISTANT REGISTRAR ITAT. 5 I. T. A. NO. 3198 (DEL) OF 2006