M/S. VARUN SHIPPING CO.LTD., MUMBAI v. ACIT. RG.5(3), MUMBAI

ITA 7284/MUM/2008 | 2004-2005
Pronouncement Date: 13-01-2010 | Result: Allowed

Appeal Details

RSA Number 728419914 RSA 2008
Assessee PAN MILLS2009T
Bench Mumbai
Appeal Number ITA 7284/MUM/2008
Duration Of Justice 1 year(s) 17 day(s)
Appellant M/S. VARUN SHIPPING CO.LTD., MUMBAI
Respondent ACIT. RG.5(3), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 13-01-2010
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted F
Tribunal Order Date 13-01-2010
Date Of Final Hearing 29-10-2009
Next Hearing Date 29-10-2009
Assessment Year 2004-2005
Appeal Filed On 26-12-2008
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH F MUMBAI BEFORE SHRI P.M.JAGTAP AM & SMT. P.MADHAVI DEVI JM I.T.A.NOS.7283 & 7284/MUM/2008 A.YS. 2003-04 AND 2004-05 M/S VARUN SHIPPING CO. LTD. LAXMI BUILDING 6 S.V.MARG BELLARD ESTATE MUMBAI 400 001 PAN NO.AAACV 1658 C VS. ASST. COMMISSIONER OF I.T. RANGE 5(3) MUMBAI. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI ARVIND SONDE. REVENUE BY : MRS. APARNA AGARWAL. O R D E R PER P.MADHAVI DEVI JM: THESE APPEALS BY THE ASSESSEE ARE DIRECTED AGAINST THE CIT[A] S ORDER DATED 24/10/2008 AND 17/11/2008 FOR THE ASSES SMENT YEARS 2003-04 AND 2004-05 RESPECTIVELY. IN BOTH THESE APP EALS THE ASSESSEE IS AGGRIEVED BY THE ORDER OF THE CIT[A] IN CONFIRM ING THE PENALTY LEVIED BY THE AO U/S.271[1][C] OF THE INCOME TAX AC T ON THE GROUND THAT THE ASSESSEE HAS FURNISHED INACCURATE PARTICUL ARS OF ITS INCOME AND BY FALSELY CLAIMING DEDUCTION U/S.33AC OF THE ACT H AS CONCEALED THE PARTICULARS OF ITS INCOME AND TRIED TO EVADE TAX ON INTEREST INCOME. AS FACTS ARE SIMILAR FOR BOTH THE ASSESSMENT YEARS AND THE ISSUES ARE COMMON BOTH THE APPEALS ARE HEARD TOGETHER AND ARE DECIDED BY THIS COMMON AND CONSOLIDATED ORDER. THE APPEAL FOR THE A .Y 2003-04 IS TAKEN UP FIRST. 2 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS IN THE BUSINESS OF OPERATION SHIPS. MOST OF THE VESSELS ARE HELD BY TH E ASSESSEE ON OWNERSHIP BASIS WHILE THE OTHERS ARE USED ON A BARE BOAT CHARTER/BARE BOAT CHARTER-CUM-DEMISE (BBCD) ARRANGEMENTS. DURI NG THE RELEVANT PREVIOUS YEAR THE ASSESSEE OWNED 10 VESSELS AND DE CLARED INCOME OF RS.230.25 CR. AND ALSO CLAIMED DEDUCTION OF RS.8.72 CR. U/S.33AC OF THE ACT. DURING THE ASSESSMENT PROCEEDINGS U/S.143(3) AO OBSERVED THAT THE ASSESSEE HAS CLAIMED TOTAL DEPRECIATION OF RS.4 6.36 CR. HE CALLED FOR THE DETAILS RELATING TO SUCH CLAIM. THE ASSESSE E FILED NECESSARY DETAILS AND AO NOTICED THAT THE ASSESSEE HAS CLAIME D DEPRECIATION ON THE FLEET AMOUNTING TO RS.45.27 CR. IN ORDER TO VER IFY THE CORRECTNESS OF THE CLAIM FURTHER DETAILS WERE CALLED FOR. THE ASS ESSEE SUBMITTED THE DETAILS AND THE AO OBSERVED THEREFROM THAT ASSESSEE HAS CLAIMED TO HAVE PURCHASED ONE VESSEL BY THE NAME OF NEEL AKAS H ON 31-12- 2002 FROM ITS SUBSIDIARY COMPANY VSC INTERNATIONAL PTE. LTD. (VIPL) FOR A CONSIDERATION OF RS.19.67 CR. AND ON THE VERY SA ME DAY I.E. 31-12- 2002 SOLD IT TO THE SAME PARTY I.E. VSC INTERNATIO NAL PTE. LTD. (VIPL) FOR A CONSIDERATION OF RS.20.23 CR. AO ASKED THE AS SESSEE TO FURNISH THE PURCHASE AND SALE BILLS. ASSESSEE SUBMITTED THE AGREEMENT DATED 25/03/2003 FROM THE PERUSAL OF WHICH AO OBSERVED TH AT THE ASSESSEE HAS CHARTERED THE SAID VESSEL FROM VSCIPL AND THAT THERE WAS NO PURCHASE OR SALE OF VESSEL FROM VIPL. IT WAS NOTICE D FROM THE AGREEMENT THAT THE ASSESSEE HAD CHARTERED THE SAID VESSEL FROM VIPL ON 6 TH MARCH 1998 ON A BBCD BASIS FOR A PERIOD OF FIVE YEARS W.E.F. 3 31/3/1998 AND BY THE AGREEMENT DATED 31/12/2002 TH E ASSESSEE HAD W.E.F. 31/12/2002 RELINQUISHED THEIR RIGHTS TITLE BENEFITS AND INTEREST TO DEMISE THE VESSEL ON PAYMENT OF THE DEMISE PRICE OF US$ 1.1 MILLION AND IT WAS FURTHER AGREED THAT THE OWNERS SHALL PAY THE DIFFERENCE BETWEEN THE MARKET VALUE OF VESSEL AND T HE DEMISE PRICE FOR SUCH RELINQUISHMENT BY RIGHTS. AO HELD THAT THE RI GHT OF THE ASSESSEE UNDER THE BBCD ARRANGEMENT WAS A CAPITAL ASSET AN D RELINQUISHMENT OF SUCH RIGHT AMOUNTED TO TRANSFER OF A CAPITAL A SSET AND CONSEQUENTLY THE INCOME IS TAXABLE AS CAPITAL GAINS. AS ASSESSEE HAD NOT OFFERED THE CAPITAL GAIN FOR TAX AO SOUGHT ASSESSEES EXPLANAT ION AS TO WHY IT SHOULD NOT BE TAXED AS CAPITAL GAIN. THE ASSESSEE V IDE LETTER DATED 10/3/2005 SUBMITTED THAT AS PER THE BBCD AGREEMENT ENTERED INTO IN 1998 THE ASSESSEE HAD A RIGHT TO PURCHASE THE SHIP AT DEMISE VALUE AND THEREFORE IT HAS PURCHASED THE SHIP AT SUCH V ALUE AND SOLD IT BACK TO THE OWNER AT MARKET VALUE AND THIS PURCHASE AND SALE HAS RESULTED IN REDUCTION OF NET BLOCK OF FIXED ASSETS RESULTING INTO CLAIM FOR DEPRECIATION ON LOWER VALUE OF NET BLOCK. IT WAS FU RTHER SUBMITTED THAT IN THE BOOKS OF ACCOUNTS VIPL HAS SHOWN PROFIT OF R S.488.96 CRORES ON SALE OF SHIP AND THIS PROFIT WAS THEN REDUCED FROM THE PROFIT WHILE COMPUTING THE INCOME BY THE ASSESSEE AS THE SAME IS CONSIDERED IN BLOCK OF ASSETS AND CONSEQUENTIAL DEPRECIATION AND THE TREATMENT GIVEN IS PROPER AND AS PER LAW. HOWEVER IN THE ALTERNATI VE AND WITHOUT PREJUDICE TO ITS CLAIM OF DEPRECIATION THE ASSESSE E SUBMITTED THAT EVEN IF IT IS TREATED AS A TRANSFER OF A CAPITAL ASSET THEN AS THE RIGHT HAD 4 ACCRUED TO THE ASSESSEE IN 1998 THE CAPITAL GAIN A RISING OUT OF THE RELINQUISHMENT OF THE RIGHTS SHOULD BE ASSESSED AS LONG TERM CAPITAL GAIN. AFTER CONSIDERING ASSESSEES SUBMISSIONS AO REJECTED THE FIRST LIMB OF THE ASSESSEES ARGUMENT THAT THERE WAS PURC HASE AND SALE OF VESSEL AND THAT NET BLOCK OF ASSETS HAS TO BE REDUC ED. HOWEVER HE ACCEPTED THE SECOND LIMB OF THE ARGUMENT THAT THE R ELINQUISHMENT OF THE RIGHT HAS RESULTED IN LONG TERM CAPITAL GAINS A ND TAXED THE CAPITAL GAINS ACCORDINGLY. 4. THE AO FURTHER OBSERVED THAT THE ASSESSEE HAD RE CEIVED INTEREST INCOME OF RS.1 03 95 219/- WHICH HAS BEEN OFFERED A S BUSINESS INCOME BY THE ASSESSEE AND THE ASSESSEE HAS CLAIMED DEDUCT ION U/S.33AC IN RESPECT OF THE SAID AMOUNT ALSO. AO ASKED THE ASSES SEE TO EXPLAIN AS TO WHY THE SAID AMOUNT SHOULD NOT BE TAXED AS INCOM E FROM OTHER SOURCES AND DEDUCTION U/S.33AC SHOULD NOT BE REDUCE D TO THAT EXTENT. THE ASSESSEE FURNISHED ITS REPLY STATING THAT THE I NTEREST INCOME IS RECEIVED ON- 1. FDS WITH BANKS FOR CERTAIN GUARANTEES GIVEN AND/ OR OVERDRAFTS ALLOWED 2. DEPOSIT KEPT AS PART OF LEASE AGREEMENT 3. VARIOUS ICDS GIVEN 4. BANK ACCOUNT OF AMERICAN EXPRESS BANK ETC. AND THIS INTEREST RECEIPT IS INTEGRAL PART OF THE B USINESS ACTIVITIES OF THE ASSESSEE AND NOT INCOME FROM OTHER SOURCES. IT WAS ALSO SUBMITTED THAT THE INTEREST RECEIPT REDUCES INTEREST EXPENSES WHICH HAVE BEEN 5 ALLOWED AS DEDUCTIBLE EXPENDITURE AND THEREFORE T HIS INCOME IS ASSESSABLE AS PROFITS AND GAINS OF BUSINESS. THE AO CONSIDERED THE ASSESSEES SUBMISSIONS ON THE ALLOWABILITY OF ASSES SEES CLAIM OF DEDUCTION U/S.33AC OF THE ACT AND HELD THAT DEDUCTI ON U/S.33AC IS TO BE ALLOWED IN RESPECT OF PROFIT DERIVED FROM THE BU SINESS OF OPERATION OF SHIPS. HE CONSIDERED VARIOUS JUDICIAL PRONOUNCEM ENTS ON THE ISSUE AS TO WHETHER THE INTEREST RECEIPT IS TO BE TAXED U NDER THE HEAD INCOME FROM OTHER SOURCES OR BUSINESS INCOME AN D HELD THAT THE INTEREST INCOME HAS TO BE HELD AS BUSINESS INCOME O NLY WHEN THERE IS A CLEAR AND STATED INTENTION OF THE ASSESSEE TO CARRY ON THE BUSINESS OF LENDING OF MONEY OR MONEY LENDING AND SUCH AN INTE NTION HAS TO BE GATHERED WITH REFERENCE TO ALL THE ACTIVITIES OF AD VANCING MONEY WHICH SHOULD BE PERMITTED BY THE OBJECTS OF THE COMPANY A ND ALSO BY THE RESOLUTION OF THE BOARD OF DIRECTORS TO CARRY ON TH E BUSINESS OF MONEY LENDING AND SINCE NO SUCH EVIDENCE HAS BEEN BROUGHT ON RECORD BY THE ASSESSEE TO ESTABLISH THE SAME HE ASSESSED IT AS I NCOME FROM OTHER SOURCES ONLY. HE ACCORDINGLY EXCLUDED THE INTEREST AMOUNT OF RS.1 03 95 219/- FROM BUSINESS INCOME AND BROUGHT I T TO TAX AS INCOME FROM OTHER SOURCES. 5. AS REGARDS THE CLAIM OF DEDUCTION U/S.33AC OF T HE ACT HE OBSERVED THAT THE ASSESSEE HAS MADE CLAIM OF DEDUCT ION U/S.33AC AMOUNTING TO RS.8 72 00 000/- AND THE SAME HAS BEEN TRANSFERRED TO THE SPECIAL RESERVE. AFTER GIVING EFFECT TO THE TRE ATMENT GIVEN TO THE INTEREST INCOME AS INCOME FROM OTHER SOURCES HE OB SERVED THAT THE 6 PROFIT DERIVED BY THE ASSESSEE FROM ITS SHIPPING BU SINESS COMES TO RS.6 15 12 647/- AND HE RESTRICTED THE DEDUCTION TO THAT EXTENT. 6. AGGRIEVED BY BOTH THE ADDITIONS ASSESSEE FILED AN APPEAL BEFORE THE CIT[A] REITERATING THE SUBMISSIONS MADE BEFORE THE AO. AS REGARDS THE ISSUE OF DEPRECIATION IT WAS SUBMITTED THAT THE PURCHASE OF A SHIP RESULTED INTO ADDITION TO THE BLOCK OF ASSET S AND THE SALE ACCORDINGLY REDUCED THE BLOCK OF ASSETS. THE CIT[A] OBSERVED THAT DURING THE PERIOD OF FINANCIAL LEASE THE ASSET WAS NOT OWNED BY THE ASSESSEE AND IT WAS FOR THIS REASON THAT IN 1998 WHEN THE AGREEMENT OF LEASE WAS ENTERED INTO THE VALUE OF THE SHIP WA S NEVER ADDED TO THE BLOCK OF ASSETS AND CONSEQUENTLY NO DEPRECIATION WA S CLAIMED BY THE ASSESSEE ON THE VALUE OF THE SHIP. HE THEREFORE HEL D THAT WHAT IS TO BE CONSIDERED IS WHETHER ON 31-12-2002 WHEN THE SHIP W AS PURCHASED CONSEQUENT TO DEMISE AGREEMENT AND WAS SIMULTANEOUS LY SOLD THE RESULTANT PROFIT CAN AT ALL BE CONSIDERED FOR REDUC TION OF BLOCK OF ASSETS. HE HELD THAT THE PURCHASE OF SHIP CANNOT BE CONSIDE RED TO BE INDEPENDENT OF ITS SIMULTANEOUS SALE AND THAT THE A O HAS RIGHTLY HELD THAT THE ASSESSEE WAS BOUND BY THE TERMS OF BBCD TO PURCHASE THE SHIP. BUT IT HAS MADE THE SALE OF THE SHIP WHICH C AN BE LOOKED AT AS RELINQUISHMENT OF THE RIGHT TO PURCHASE. IT CAN ALS O BE LOOKED AT AS PURCHASE AND SIMULTANEOUS SALE TRANSACTION AND SINC E THE INTENTION WAS NOT TO USE IT AS BUSINESS ASSET ON PURCHASE I T COULD BE LOOKED AT AS A NON BUSINESS ASSET RESULTING INTO CAPITAL GAIN S ON ITS TRANSFER AND THEREFORE WHETHER ONE TREATS THE TRANSACTION AS A R ELINQUISHMENT OR AS 7 A PURCHASE AND SALE TRANSACTION IT WILL IN ANY CAS E RESULT INTO CAPITAL GAINS. HE ALSO CONSIDERED THE REVENUES CONTENTION THAT IN THE ASSESSMENT ORDER FOR A.Y 04-05 AN IDENTICAL TRANSA CTION WAS INVOLVED AND ON FACTS THE TRANSACTION HAS BEEN TREATED AS NO N GENUINE AND THE INCOME RESULTING THEREFROM HAS BEEN TAXED AS INCOME FROM OTHER SOURCES. AFTER PERUSING THE VARIOUS CONTENTIONS OF THE ASSESSEE AS WELL AS THE AGREEMENT HE HELD THAT THE AGREEMENT IN 199 8 IS A BBCD AGREEMENT AND ALSO THAT THE PARTIES TO THE AGREEMEN T HAD EVERY RIGHT TO PREPONE THE EXECUTION OF THE AGREEMENT. HE ALSO CONSIDERED THAT THE ASSESSEE HAD APPROVALS FROM RBI FOR EXECUTION O F THE AGREEMENT. HE ALSO CONSIDERED THE AS-19 FOR COMING TO THE CONC LUSION THAT LEASE AGREEMENT AND HIRE PURCHASE AGREEMENT CAN BE TERMIN ATED OR ALTERED AT ANY TIME BEFORE THE END OF THE AGREEMENT AND THE REFORE HE CAME TO THE CONCLUSION THAT THE SAID AGREEMENT IS GENUINE. LATER HE PROCEEDED TO CONSIDER WHETHER RELINQUISHMENT HAS TAKEN PLACE W.E.F. 31-12-02. HE THEREFORE REVERSED THE FINDING OF THE AO THAT THE WHOLE TRANSACTION IS SHAM BUT CONFIRMED THE ORDER OF THE AO AS FAR AS ASSESSMENT OF THE INCOME UNDER THE HEAD CAPITAL GA INS IS CONCERNED. 7. AS REGARDS THE ISSUE OF TAXING OF INTEREST UNDER THE HEAD INCOME FROM OTHER SOURCES HE UPHELD THE FINDING OF THE AO. AGGRIEVED ASSESSEE FILED AN APPEAL BEFORE THE ITAT ONLY WITH REGARD TO THE ASSESSMENT OF INTEREST INCOME UNDER THE HEAD INCOME FROM OTHER SOURCES WHICH HAS BEEN ALLOWED BY THE ITAT. N O GROUND OF 8 APPEAL WAS RAISED WITH REGARD TO THE ADDITION ON AC COUNT OF CAPITAL GAINS. 8. MEANWHILE AO INITIATED PENALTY PROCEEDINGS U/S. 271[1][C] OF THE ACT BY ISSUING LETTER DATED 22-2-2008 REQUIRING THE ASSESSEE TO FURNISH EXPLANATION FOR THE LEVY OF PENALTY U/S.271 [1][C] OF THE ACT. ASSESSEE FURNISHED ITS REPLY VIDE LETTER DATED 5-3- 2008 STATING THAT THE VESSEL NEEL AKASH WAS NOT CONSIDERED AS PART OF F IXED ASSETS IN THE YEAR 1998 ONWARDS AND NO DEPRECIATION WAS CLAIMED O N IT BECAUSE OWNERSHIP OF THE SAME WAS NOT WITH THE ASSESSEE AND IT IS ONLY ON THE SETTLEMENT OF THE DEMISE PRICE THAT THE TRANSACTION HAS BEEN TREATED AS PURCHASE OF SHIP AND SIMULTANEOUS SALE ON THE PAYME NT OF THE MARKET VALUE OF THE SHIP AND THEREFORE THE DIFFERENCE OF T HE AMOUNT HAS BEEN REDUCED FROM THE BLOCK OF ASSETS AND CLAIM OF DEPRE CIATION WAS MADE ON NET BLOCK OF ASSETS. IT WAS SUBMITTED THAT THE D ETAILS RELATING TO PROFIT ON SALE OF SHIP HAS BEEN DISCLOSED IN THE AU DITED ACCOUNTS OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION AND THE A DDITION/DEDUCTION ON ACCOUNT OF SUCH PURCHASE AND THEN SALE OF SHIP NEEL AKASH HAS BEEN FULLY DISCLOSED IN THE DEPRECIATION CALCULATIO N FILED ALONG WITH THE TAX AUDIT REPORT AND THE ASSESSMENT OF THE SAID INC OME AS LONG TERM CAPITAL GAINS BY BOTH THE AO AS WELL AS THE CIT[A] IS ONLY A DIFFERENCE OF OPINION AND CERTAINLY NOT CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME AND THEREFORE THE LEVY OF PENALTY U/S.271[1][C] IS NOT JUSTIFIED. AO HOWEVER WAS NOT SATISFIED WITH THE ASSESSEES EXPLANATION AND HELD THAT NOT OFFERING O F CAPITAL GAINS OF 9 RS.4 55 37 481/- BY THE ASSESSEE AMOUNTS TO CONCEAL MENT OF INCOME. HE THEREFORE LEVIED THE MINIMUM PENALTY. 9. AS REGARDS THE INTEREST INCOME AND THE CLAIM OF DEDUCTION U/S.33AC OF THE ACT AO HELD THAT THE ASSESSEE BY F URNISHING INACCURATE PARTICULARS OF INCOME HAS FALSELY CLAIMED DEDUCTIO N U/S.33AC KNOWING FULLY WELL THAT THE INTEREST INCOME EARNED BY IT CA NNOT BE INCLUDED IN BUSINESS INCOME FOR CLAIMING DEDUCTION U/S.33AC. HE THEREFORE LEVIED MINIMUM PENALTY U/S.271[1][C] OF THE ACT. 10. AGGRIEVED ASSESSEE FILED AN APPEAL BEFORE THE CIT[A] . THE CIT[A] CONSIDERED THE ASSESSEE CONTENTIONS ON BOTH THE ISSUES AND AFTER REFERRING TO THE DECISION OF THE HON'BLE SUPR EME COURT IN THE CASE OF DHAMENDRA TEXTILES CONCLUDED THAT THE PENALTY IS LEVIABLE IF CLAIM FOR DEDUCTION IS NOT A BONA FIDE CLAIM AND THE ASSE SSEE HAS CONSCIOUSLY FURNISHED INACCURATE PARTICULARS OF INCOME. HE THU S HELD THAT THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF IN COME WITHOUT ANY BONA FIDE CAUSE AND ACCORDINGLY UPHELD THE PENALTY LEVIED BY THE AO ON BOTH THE ADDITIONS. AGGRIEVED ASSESSEE IS IN SE COND APPEAL BEFORE US. 11. THE LD. COUNSEL FOR THE ASSESSEE SHRI ARVIND S ONDE REITERATED THE SUBMISSIONS MADE BY THE ASSESSEE BEFORE THE AUT HORITIES BELOW THAT FOR THE LEVY OF PENALTY U/S.271[1][C] THE AO HAS TO BE SATISFIED THAT THE ASSESSEE HAS NOT OFFERED ANY EXPLANATION O R THAT THE EXPLANATION OFFERED BY THE ASSESSEE IS NOT BONA FID E OR CORRECT OR THAT THE ASSESSEE HAS FAILED TO SUBSTANTIATE ITS EXPLANA TION. HE SUBMITTED 10 THAT THE ASSESSEE HAS FURNISHED ALL THE DETAILS REL ATING TO THE PURCHASE AND SALE OF THE SHIP AS WELL AS THE DEPRECIATION CL AIMED BY IT. HE DREW OUR ATTENTION TO PAGES 65 & 66 OF THE PAPER BOOK SH OWING THE WRITTEN DOWN VALUE OF THE BLOCK OF ASSETS TO DEMONSTRATE TH AT ALL THE DETAILS HAVE BEEN FURNISHED AND ALL THE FACTS HAVE BEEN DIS CLOSED BY THE ASSESSEE. AS REGARDS TREATING INTEREST INCOME AS IN COME FROM OTHER SOURCES HE SUBMITTED THAT THE SAME HAS BEEN DELETE D BY THE TRIBUNAL AND HENCE THE PENALTY HAS NO LEGS TO STAND. THE LD. COUNSEL HAS ALSO FILED A STATEMENT SHOWING THE TAX IMPACT ON THE CLA IM FOR DEPRECIATION AND LONG TERM CAPITAL GAINS AFTER TAKING INTO EFFEC T 33AC AND COST INDEXATION ON LONG TERM CAPITAL GAIN AND STATED THA T IT IS VERY NEGLIGENT AS TOTAL TAX SAVING IS ONLY RS.40 61 029/- FOR BOTH THE ASSESSMENT YEARS 03-04 AND 04-05 TAKEN TOGETHER. THUS ACCORDI NG TO HIM CLAIM OF DEPRECIATION ON THE BLOCK OF ASSETS WAS MADE BON AFIDELY AND THERE IS NO CASE FOR LEVY OF PENALTY U/S.271[1][C] OF THE INCOME TAX ACT. 13. THE LD. DR ON THE OTHER HAND SUPPORTED THE OR DERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT THE ASSESSEE H AS NOT OFFERED THE LONG TERM CAPITAL GAINS AND HAS CLAIMED DEDUCTION U /S.33AC ON INTEREST INCOME ALSO WHICH CLEARLY SHOWS THE INTENTION OF TH E ASSESSEE TO EVADE TAX AND THEREFORE LEVY OF PENALTY IS JUSTIFIABLE. 14. HAVING HEARD BOTH THE PARTIES AND HAVING CONSID ERED THEIR RIVAL CONTENTIONS WE FIND THAT THE LEVY OF PENALTY IS ON TWO GROUNDS (I) LONG TERM CAPITAL GAINS AND (II) INTEREST INCOME CL AIMED AS DEDUCTION U/S.33AC. THE TRIBUNAL HAS ALREADY DELETED THE ADDI TION ON ACCOUNT OF 11 INTEREST INCOME AND AS A CONSEQUENCE LEVY OF PENAL TY ON THIS COUNT IS TO BE DELETED. AS REGARDS THE LEVY OF PENALTY ON NO N OFFERING OF INCOME AS LONG TERM CAPITAL GAINS WE FIND THAT THE STAND OF THE AO IS THAT THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF IT S INCOME. FROM PERUSAL OF PAGES 65 & 66 OF THE PAPER BOOK FILED BY THE ASSESSEE RELATING TO THE WORKING OF DEPRECIATION FOR THE YEA R ENDED 26-3-2003 WE FIND THAT A NOTE IS APPENDED TO THE SAID WORKING STATING THAT ADDITION TO THE BLOCK OF ASSETS INCLUDES THE SHIP NEEL-AKASH SOLD IN F.Y 97-98 AND REACQUIRED IN THE YEAR UNDER CONSIDERATIO N AND HENCE ACTUAL COST OF THE SHIP HAS BEEN WORKED OUT TO RS.8 84 84 080/- CALCULATED AS PER EXPLANATION 4 TO SEC.43(1) OF THE ACT AS AGAINS T RS.9 50 74 029/- PAID FOR THE SAME. AT PAGE 67 OF THE PAPER BOOK IS THE LIST OF ADDITIONS WHEREIN ADDITION OF NEEL AKASH AT THE DEMISE VALUE OF RS.1 10 MILLION IS MENTIONED. THUS IT CAN BE SEEN THAT THE ASSESSE E HAS FURNISHED ALL THE DETAILS BEFORE THE AO AT THE TIME OF ASSESSMENT OF ITS INCOME. FOR THE LEVY OF PENALTY U/S.271[1][C] OF THE ACT THE A SSESSEE SHOULD NOT HAVE OFFERED ANY EXPLANATION OR THE EXPLANATION OFF ERED BY THE ASSESSEE SHOULD HAVE BEEN FOUND TO BE NOT CORRECT. IN THE CASE BEFORE US SUCH CIRCUMSTANCES DO NOT EXIST. THE ASSESSEE H AS OFFERED THE EXPLANATION WHICH HAS NOT BEEN FOUND TO BE INCORREC T. THE AO HAS NOT ACCEPTED THE ASSESSEES CLAIM AND HAS ONLY TREATED THE TRANSACTION AS RELINQUISHMENT OF THE RIGHTS AS AGAINST PURCHASE AN D SALE OF SHIP CLAIMED BY THE ASSESSEE. THE CIT[A] HAS PLACED REL IANCE UPON THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE O F DHARMENDRA 12 TEXTILE PROCESSORS FOR HOLDING THAT THE LEVY OF PEN ALTY IS ONLY A CIVIL LIABILITY. THE A BENCH OF THE ITAT AT PUNE IN TH E CASE OF KANBAY SOFTWARE INDIA (P) LTD. VS. DCIT (2009) 31 SOT 153 [PUNE] HAS CONSIDERED THE DECISION OF THE SUPREME COURT IN THE CASE OF DHARMENDRA TEXTILE PROCESSORS AND HAS HELD THAT WHE RE ALL RELEVANT FACTS MATERIAL TO THE COMPUTATION OF TOTAL INCOME WERE DULY FURNISHED BY THE ASSESSEE AND NO DEFICIENCY IN FURNISHING OF SUCH FACTS WAS POINTED OUT BY THE LOWER AUTHORITY THERE WAS NO CA USE OF ACTION FOR DEEMING FICTION BEING FIGURED BY THE CONDUCT OF THE ASSESSEE. IT WAS FURTHER HELD THAT WHERE AN EXPLANATION HAS BEEN OFF ERED BY THE ASSESSEE IN DISCHARGE OF THE ONUS CAST UPON HIM BY THE EXPLANATION 1 TO SEC.271[1][C] IT IS NOT FOR THE AO TO PONDER OV ER WHAT SHOULD HAVE HAPPENED IN IDEAL CIRCUMSTANCES AND REJECT THE EXP LANATION BUT HE IS TO CONSIDER THE EXPLANATION OBJECTIVELY AND UNLESS HE FINDS SAME AGAINST HUMAN PROBABILITIES OR UNLESS THERE ARE ANY REAL INCONSISTENCIES OR FACTUAL ERRORS IN SUCH AN EXPLANATION THE AO OU GHT TO ACCEPT THE SAME. THE HON'BLE SUPREME COURT IN THE CASE OF RAJA STHAN SPINNING AND WEAVING MILLS 2009 TAX INDIA ONLINE 63 SC-CX E XPLAINED THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE O F DHARMENDRA TEXTILE PROCESSORS AND HAS HELD THAT PENALTY IS NOT TO BE LEVIED AUTOMATICALLY IN EVERY CASE OF NON-PAYMENT OR SHORT PAYMENT OF TAX BUT THE CONDITIONS EXPRESSLY MENTIONED IN THE SECTI ON FOR ITS APPLICATION SHOULD BE SATISFIED. IN VIEW OF THE ABOVE DECISION WE FIND THAT THE ASSESSEE HAS FURNISHED ALL THE PARTICULARS RELEVANT FOR THE COMPUTATION 13 OF ITS INCOME AND THERE IS NO FURNISHING OF ANY INA CCURATE PARTICULARS OF INCOME JUSTIFYING THE PENALTY U/S.271[1][C] OF THE INCOME TAX ACT. THE PENALTY IS ACCORDINGLY DELETED. 15. FOR THE A.Y 2004-05 THE LEVY OF PENALTY U/S.27 1[1][C] IS ON ACCOUNT OF ADDITION OF LONG TERM CAPITAL GAINS ON P URCHASE AND SALE OF THE VESSEL NEEL KAMAL WHERE EXCEPT FOR THE QUANT UM FACTS AND CIRCUMSTANCES ARE SIMILAR. THE OTHER GROUNDS FOR LE VY OF PENALTY ARE (I) THE DISALLOWANCE OF EXCESS CLAIM MADE U/S.33A C ON INTEREST INCOME (II) PROFIT ON RECRUITMENT OF PERSONNEL AND (III) AGENCY DIVISION PROFIT. 16. AS REGARDS TREATMENT OF INTEREST INCOME AS INCO ME FROM OTHER SOURCES WE FIND THAT THE TRIBUNAL HAS ALREADY DELE TED THE SAID ADDITION AND HAS DIRECTED THE AO TO TREAT THE INCOME AS BUSI NESS INCOME AND THEREFORE PENALTY TO THAT EXTENT STANDS DELETED. 17. AS REGARDS PENALTY ON ACCOUNT OF ADDITION OF LO NG TERM CAPITAL GAIN FOR THE DETAILED REASONS GIVEN BY US IN THE O UR ORDER FOR A.Y 03- 04 THIS GROUND OF APPEAL IS ALLOWED AND THE PENALT Y LEVIED IS DELETED. 18. AS REGARDS PENALTY LEVIED ON THE DISALLOWANCE OF EXCESS DEDUCTION OF RS.3 46 505/- ON ACCOUNT OF PROFIT ON RECRUITMENT OF PERSONNEL AND RS.90 249/- ON AGENCY AND SHIPPING DI VISION PROFIT IT WAS SUBMITTED BY THE LD. COUNSEL FOR THE ASSESSEE T HAT THE ASSESSEE ADVISES FOREIGN PRINCIPALS OPERATING CREWS SHIPS TO HIRE THE INDIAN FOOD AND BEVERAGE PERSONNEL AND HENCE THESE RECEIPTS FOR M PART OF THE BUSINESS ACTIVITIES AND WERE OFFERED AS ITS BUSINES S INCOME. SIMILARLY 14 INCOME OF THE AGENCY SHIPPING DIVISION IS ON ACCOUN T OF VISA PROCESSING FEE ETC. AND AO HAS ESTIMATED THE INCOME FROM THESE TWO ACTIVITIES ON ADHOC BASIS. HE SUBMITTED THAT EVEN I F THESE RECEIPTS ARE TREATED AS INCOME FROM OTHER SOURCES THERE WAS NO EFFECT ON THE ASSESSED INCOME AND THERE WAS NO LOSS OF TAX TO THE REVENUE. HE SUBMITTED THAT ALL THE DETAILS WERE FURNISHED BEFOR E THE REVENUE AUTHORITIES AND THE EXPLANATION OFFERED BY THE ASSE SSEE WAS NOT FOUND TO BE FALSE AND THEREFORE LEVY OF PENALTY IS NOT JU STIFIABLE. 19. THE LD. DR ON THE OTHER HAND SUPPORTED THE OR DERS OF THE AUTHORITIES BELOW. 20. HAVING HEARD BOTH THE PARTIES WE FIND THAT THE ASSESSEE HAS FURNISHED ALL THE DETAILS NECESSARY FOR THE COMPUTA TION OF ITS INCOME BEFORE THE AUTHORITIES BELOW. FOR THE DETAILED REAS ONS GIVEN FOR DELETING THE PENALTY LEVIED ON ACCOUNT OF ADDITION OF LONG TERM CAPITAL GAIN THE PENALTY LEVIED ON THIS GROUND IS ALSO DEL ETED. 21. IN THE RESULT ASSESSEES APPEALS ARE ALLOWED. ORDER PRONOUNCED ON THIS 13 TH DAY OF JANUARY 2010. SD/- SD/- (P.M.JAGTAP) (P.MADHAVI DEVI) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI: 13 TH JANUARY 2010. P/-* 15 COPY TO- 1) APPELLANT 2) RESPONDENT 3) CITA MUMBAI. 4) CIT CITY MUMBAI 5) DR BENCH MUMBAI TRUE COPY BY ORDER DY /ASST.REGISTRAR ITAT MUMBAI. SR.NO. PARTICULARS DATE INITIALS 1 DRAFT DICTATED ON 4-1-10 P 2 DRAFT PLACED BEFORE AUTHOR 11-1-10 P 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER 5 APPROVED DRAFT COMES TO SR.PS/PS 6 ORDER KEPT FOR PRONOUNCEMENT 7 FILE SENT TO BENCH CLERK 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER