M/s. Chanduka Trading (P) Ltd., New Delhi v. ITO, New Delhi

ITA 3284/DEL/2010 | 2006-2007
Pronouncement Date: 28-01-2011 | Result: Allowed

Appeal Details

RSA Number 328420114 RSA 2010
Assessee PAN AAACC1005G
Bench Delhi
Appeal Number ITA 3284/DEL/2010
Duration Of Justice 6 month(s) 23 day(s)
Appellant M/s. Chanduka Trading (P) Ltd., New Delhi
Respondent ITO, New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 28-01-2011
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted B
Tribunal Order Date 28-01-2011
Date Of Final Hearing 07-09-2010
Next Hearing Date 07-09-2010
Assessment Year 2006-2007
Appeal Filed On 05-07-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL [ DELHI BENCH B DELHI ] BEFORE SHRI RAJPAL YADAV JM & SHRI K. D. RA NJAN AM I. T. APPEAL NO. 3284 (DEL) OF 2010. ASSESSMENT YEAR : 2006-07. M/S. CHANDUKA TRADING (P.) LTD. THE INCOME-TAX OFFICER A3/3A GREEN APARTMENT VS. W A R D : 3 (3) P A S C H I M V I H A R N E W D E L H I. N E W D E L H I 110 063. P A N / G I R NO. AAA CC 1005 G. ( APPELLANT ) ( RESPONDENT ) ASSESSEE BY : SHRI K. SAMPATH ADV.; DEPARTMENT BY : SHRI MANISH GUPTA SR. D. R.; O R D E R. PER K. D. RANJAN AM : THIS APPEAL BY THE ASSESSEE FOR ASSESSMENT YEAR 200 6-07 ARISES OUT OF THE ORDER OF THE LD. CIT (APPEALS)-VI NEW DELHI. 2. THE GROUND OF APPEAL RAISED BY THE ASSESSEE READ S AS UNDER :- THAT ON FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW THE AUTHORITIES BELOW ERRED IN HOLDING THE ASSESSEE GUILTY OF FURNISHING INACCURATE PARTICULARS OF INCOME AND THEREBY IMPOSING PENALTY UNDER SECTION 271(1)(C) OF THE I. T. ACT 1961 IN A SUM OF RS.48 572/-. THE ORDER IS ARBITRARY ERRONEOUS AND UNLAWFUL AND IT IS PRAYED THAT THE SAME MUST BE QUASHED. ' 3. THE FACTS OF THE CASE STATED IN BRIEF ARE THAT T HE ASSESSEE DURING RELEVANT ASSESSMENT YEAR INCURRED EXPENSES OF RS.7 21 500/- ON ACCOUNT OF PA YMENT OF FEE TO ROC FOR INCREASE IN 2 I. T. APPEAL NO. 3284 (DEL) OF 2010. AUTHORIZED SHARE CAPITAL AND CLAIMED DEDUCTION UNDE R SECTION 35-D OF THE ACT OF RS.1 44 300/- BEING 1/5 TH OF THE EXPENDITURE. THE ASSESSING OFFICER DISALLO WED THE CLAIM OF THE ASSESSEE AND INITIATED PENALTY PROCEEDINGS UNDER SECTION 271(1)( C) OF THE ACT. 4. DURING THE COURSE OF PENALTY PROCEEDINGS IT WAS SUBMITTED THAT THE ROUTINE DISALLOWANCE OF EXPENSES COULD NOT LEAD TO AUTOMATIC INFERENCE T HAT THE ASSESSEE HAD CONCEALED INCOME OR FURNISHED INACCURATE PARTICULARS OF SUCH INCOME. T HE DOCUMENTS/DETAILS AS DESIRED WERE PROVIDED IN THE RETURN OF INCOME. HOWEVER THIS CONTENTION OF THE ASSESSEE WAS REJECTED AND THE ASSESSING OFFICER IMPOSED PENALTY OF RS.48 573/- BEING HUNDRE D PER CENT OF TAX SOUGHT TO BE EVADED ON AN INCOME OF RS.1 44 300/-. 5. BEFORE THE LD. CIT (APPEALS) IT WAS SUBMITTED TH AT ALL EXPENSES WERE DOCUMENTED AND PROVIDED AT THE TIME OF ASSESSMENT FOR SCRUTINY. A ROUTINE DISALLOWANCE OF EXPENSES CANNOT LEAD TO AUTOMATIC INFERENCE OF THE ASSESSEE FURNISHING I NACCURATE PARTICULARS OF HIS INCOME. THE PREPONDERANCE OF PROBABILITY WAS THEREFORE IN FAV OUR OF THE ASSESSEE HOLDING THAT THE DISCLOSURE MADE BY THE ASSESSEE WERE TRUE AND FULL AND WERE IN ACCORDANCE WITH THE REQUIREMENT OF LAW. IT WAS ALSO SUBMITTED THAT THE CLAIM WAS MADE ON THE B ASIS OF CERTIFICATION OF ACCOUNTS PREPARED BY THE CHARTERED ACCOUNTANT. THEREFORE PENALTY UNDER SECTION 271(1)(C) OF THE ACT WAS NOT IMPOSABLE. 6. THE LD. CIT (APPEALS) REFERRED TO SCHEDULE 10 OF MISC. EXPENDITURE WHICH PROVIDED DETAILS OF CAPITAL ISSUE EXPENSES OF RS.7 21 500/- OUT OF WHICH AN AMOUNT OF RS.1 44 300/- WAS WRITTEN OFF DURING THE YEAR. THE LD. CIT (APPEALS) RELYING ON THE DECISION OF THE ITAT IN THE CASE OF CIT VS. TEL ABRIDGE INTERNATIONAL LTD. 126 TTJ 672 HELD THAT ON SIMILAR CLAIM THE PENALTY WAS IMPOSABLE. THE LD. CIT (APPEALS) C ONFIRMED THE PENALTY BY OBSERVING AS UNDER :- IN LIGHT OF THE ABOVE DECISIONS I FIND THAT THE A SSESSING OFFICER WAS JUSTIFIED IN INVOKING THE PROVISIONS OF SECTION 271(1)(C). LD. AR HAS REFERRED TO CERTAIN JUDGEMENTS. HOWEVER FACTS OF THOSE CASES ARE NOT COMPARABLE WITH THE PRESENT 3 I. T. APPEAL NO. 3284 (DEL) OF 2010. APPEAL. TO ELABORATE LD. AR RELIED ON THE CASE OF CIT VS. RELIANCE PETRO PRODUCTS PVT. LTD. 322 ITR 158. HOWEVER IN THAT CASE THE A DDITION IN RESPECT OF INTEREST ON EXPENDITURE WAS MADE. THE SAID EXPENDITURE WAS CLA IMED BY THE ASSESSEE ON THE BASIS OF EXPENDITURE MADE FOR PAYING THE INTEREST ON THE LOANS INCURRED BY IT BY WHICH AMOUNT THE ASSESSEE PURCHASED SOME IPL SHARES BY WA Y OF ITS BUSINESS POLICIES. THE COMPANY CLAIMED DISALLOWANCE OF THE AMOUNT OF EXPEN DITURE FOR RS.28 77 242/- UNDER SECTION 14-A OF THE ACT. IN RESPONSE TO SHOW CAUSE NOTICES THE ASSESSEE EXPLAINED THAT THERE WAS NO CONCEALMENT OR FURNISHING OF INACCURAT E PARTICULARS OF INCOME. THE ADDITION WAS MERELY ON DIFFERENCE OF OPINION AND IN ITS CASE FOR EARLIER YEAR THE DISALLOWANCE ON INTEREST STOOD DELETED. THE HONBL E SUPREME COURT HAS HELD IN THAT CASE THAT MERELY BECAUSE THE ASSESSEE HAD CLAIMED T HE EXPENDITURE WHICH CLAIM WAS NOT ACCEPTED OR WAS NOT ACCEPTABLE TO THE REVENUE THAT BY ITSELF WOULD NOT ATTRACT THE PENALTY UNDER SECTION 271(1)(C). HONBLE SUPREME C OURT ALSO OBSERVED IN THAT CASE THAT THE ASSESSEE HAD FURNISHED ALL THE DETAILS OF ITS EXPENDITURE AS WELL AS INCOME IN ITS RETURN WHICH DETAILS IN THEMSELVES WERE NOT FOUN D TO BE INACCURATE NOR COULD BE VIEWED AS THE CONCEALMENT OF INCOME ON ITS PART. I N THE PRESENT CASE THE FACTUAL POSITION IS DIFFERENT. AS ALREADY DISCUSSED THE A SSESSEE HAS NOT GIVEN ACCURATE OR COMPLETE PARTICULARS IN THE RETURN OF INCOME. IT I S ALSO NOT A CASE OF MERE DISALLOWANCE OF THE CLAIM MADE BY THE ASSESSEE. TH E ASSESSEE HAS MADE AN INADMISSIBLE CLAIM WHICH HAS BEEN DETECTED DUE TO THE EXAMINATION MADE BY THE ASSESSING OFFICER. 7. BEFORE US THE LD. AR OF THE ASSESSEE SUBMITTED T HAT THE ASSESSEE CLAIMED DEDUCTION ON THE BASIS OF TAX REPORT WHEREIN THE CHARTERED ACCOUNTAN T OF THE ASSESSEE TREATED THE AMOUNT OF EXPENDITURE AS AMORTIZED. THE CLAIM OF THE ASSESSE E WAS NOT FAKE. THE ASSESSEE HAD INCURRED EXPENDITURE IN RESPECT OF PAYMENT OF FEE TO ROC FOR INCREASE IN AUTHORIZED SHARE CAPITAL. HE ALSO SUBMITTED THAT IN SCHEDULE 10 OF THE BALANCE SHEET DETAILS OF CAPITAL ISSUE EXPENSES HAVE BEEN GIVEN. THEREFORE THE ASSESSEE WAS UNDER BONAFIDE BELIEF THAT HE WAS ENTITLED FOR DEDUCTION UNDER SECTION 35-D OF THE ACT. HE PLACED RELIANCE ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. RELIANCE PETROPRODUCTS P. LTD. 322 ITR 158 (SC). HE FURTHER SUBMITTED THAT THE 4 I. T. APPEAL NO. 3284 (DEL) OF 2010. LD. CIT (A) HAS PLACED RELIANCE ON THE DECISION OF CIT VS. ESCORTS FINANCE LTD. 183 TAXMAN 453 (DEL.) WHICH WAS DELIVERED ON 20 TH AUGUST 2009 WHEREAS THE DECISION OF HONBLE SUPRE ME COURT IN THE CASE OF RELIANCE PETROPRODUCTS (SUPRA) WAS DELIVERED ON 17 TH MARCH 2010. IN THE CASE OF ESCORTS FINANCE LTD. (SUPRA) HONBLE DELHI HIGH COURT HAS HELD THAT PENALTY MAY BE IMPOSED WHEN THE ASSESSEES CLAIM IS EX FACIE BOGUS . IT IS NOT THE CASE OF THE REVENUE THAT THE ASSESSEE HAS NOT PAID FEE TO THE REGISTRAR OF COMPA NIES. THE REVENUE HAS ACCEPTED THE FACTUM OF SUCH PAYMENT. THEREFORE IT IS INCORRECT TO SAY THAT THE ASSESSEES CLAIM IS EX FACIE BOGUS. IN THE CASE OF RELIANCE PETRO PRODUCTS P. LTD. (SUPRA) HONBLE SUPREME COURT HAD RELIED ON THE DECISION OF DILIP SHROFF 291 ITR 519 (SC) WHICH HAS BEEN OVER-RULED BY THE HONBLE SUPREME COURT IN THE CASE OF DHARMENDRA TEXTILE PROCESSORS (306 ITR 277) (SC). SINCE THE DECISION RELIED UPON BY THE REVENUE ARE BASED UPON THE VIEW IN THE CASE OF DHARMENDRA TEXTILE PROCESSORS CASE REFERENCE TO THE DECISION OF HON BLE SUPREME COURT IN THE CASE OF RELIANCE PETRO PRODUCTS IS CRUCIAL AND THERE IS CONCEPTUAL D IFFERENCE IN THE APPROACH. HONBLE SUPREME COURT HAS HELD THAT WHERE NO INFORMATION IS GIVEN I N THE RETURN IS FOUND TO BE INCORRECT OR INACCURATE THE ASSESSEE CANNOT BE HELD GUILTY FOR F URNISHING INACCURATE PARTICULARS. THE MERE 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. HE THEREFORE SUBMITTED THAT ASSESSEES CASE IS COVERED BY THE DECISION OF HONB LE SUPREME COURT IN THE CASE OF RELIANCE PETRO PRODUCTS (SUPRA). HE FURTHER SUBMITTED THAT IN THE CASE OF CIT VS. SINGH ENTERPRISES [ITA. NO. 80 OF 2006] THE ASSESSEE HAD CLAIMED BROKERAGE DEDUCTION ON ITS RENTAL INCOME WHICH WAS DISALLOWED AS INADMISSIBLE UNDER SECTION 23(1) OF T HE ACT IT HAS BEEN HELD BY HONBLE DELHI HIGH COURT THAT SUCH A CASE WOULD NOT TRIGGER PENAL PROVISIONS SINCE THE ASSESSEE HAD GIVEN COMPLETE DETAILS OF RENT RECEIVED AND BROKERAGE CLA IMED. ON THE OTHER HAND THE LD. SR. DR SUBMITTED THAT THE ASSESSEES CLAIM DOES NOT FALL U NDER SECTION 35-D(2) OF THE ACT. HE PLACED RELIANCE ON THE DECISION OF HONBLE DELHI HIGH COUR T IN THE CASE OF ESCORTS FINANCE LTD. (SUPRA). HE FURTHER SUBMITTED THAT THIS DECISION HAS NOT BEE N OVER-RULED BY THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF RELIANCE PETRO PRODUCT S (SUPRA) AS THE ISSUE BEFORE THE HONBLE SUPREME COURT WAS DIFFERENT. 5 I. T. APPEAL NO. 3284 (DEL) OF 2010. 8. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. FROM THE ORDER OF THE LD. CIT (APPEALS) WE FIND THAT THE CHARTERED ACCOUNTANT OF THE ASSESSEE IN THE TAX AUDIT REPORT HAS GIVEN DETAILS OF MISCELLANEOUS EXPENDITURE IN SCHEDULE 10. AS PER SCHEDULE 10 CAPITAL ISSUE EXPENSES ARE AT RS.7 21 500/- OUT OF WHICH 1/5 TH WAS AMORTIZED DURING THE YEAR UNDER CONSIDERATION. IT IS NOT A CASE OF ASSESSING OFFICER THAT THE ASSESSEE HAD NOT PAID THE FEE TO THE REGISTRAR OF COMPANIES FOR INCREASE OF SHARE CA PITAL. THEREFORE IT IS NOT AN EX FACIE BOGUS CLAIM. THE ASSESSEE HAS INCURRED EXPENDITURE WHICH HAS BEEN TREATED BY THE CHARTERD ACCOUNTANT AS AMORTIZED UNDER SECTION 35-D(2) OF THE ACT. THE CLAIM OF THE ASSESSEE WAS DISALLOWED. HONBLE SUPREME COURT IN THE CASE OF RELIANCE PETRO PRODUCTS LTD. (SUPRA) HAS HELD THAT WHERE NO INFORMATION GIVEN IN THE RETURN IS FOUND TO BE I NCORRECT OR INACCURATE THE ASSESSEE CANNOT BE HELD GUILTY FOR FURNISHING INACCURATE PARTICULARS. MERE MAKING OF A CLAIM WHICH IS NOT SUSTAINABLE IN LAW BY ITSELF WILL NOT AMOUNT TO FU RNISHING OF INACCURATE PARTICULARS REGARDING THE INCOME OF THE ASSESSEE. IN THE CASE BEFORE US THE ASSESSEE HAD MADE A CLAIM WHICH IS NOT SUSTAINABLE IN THE LAW. THEREFORE MAKING OF A CLA IM FOR DEDUCTION UNDER SECTION 35-D OF THE ACT CANNOT BE SAID THAT THE ASSESSEE HAD FURNISHED INAC CURATE PARTICULARS OF HIS INCOME. THE ASSESSEE HAD DISCLOSED THE INFORMATION IN SCHEDULE 10 OF THE BALANCE SHEET. THEREFORE PENALTY PROVISIONS ARE NOT ATTRACTED IN THIS CASE. LIKEWISE HONBLE DELHI HIGH COURT IN THE CASE OF SINGH ENTERPRISES (SUPRA) HAS HELD THAT WHERE DETAILS OF RENT RECEIVED AND BROKERAGE CLAIMED WERE GIVEN IN THE RETURN OF INCOME THE PENALTY PROCEEDINGS CO ULD NOT HAVE BEEN INITIATED. RESPECTFULLY FOLLOWING THE PRECEDENT IT IS HELD THAT MERE MAKIN G A CLAIM NOT SUSTAINABLE IN LAW WILL NOT ATTRACT PENALTY PROVISIONS. ACCORDINGLY WE DELETE THE PENALTY IMPOSED BY THE ASSESSING OFFICER AND CONFIRMED BY THE LD. CIT (APPEALS). 9. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. THE ORDER PRONOUNCED IN THE OPEN COURT ON : 28 TH JANUARY 2011. SD/- SD/-. [ RAJPAL YADAV ] [ K. D. RANJAN ] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 28 TH JANUARY 2011 . *MEHTA * 6 I. T. APPEAL NO. 3284 (DEL) OF 2010. 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.