Delhi High Court
The Commissioner Of Income Tax vs Jubilant Enpro Pvt. Ltd. on 28 September, 2010
Author: Manmohan
#1
$~
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ ITA 1471/2010
THE COMMISSIONER OF INCOME TAX ..... Appellant
Through: Mr. Sanjeev Sabharwal, Advocate
versus
JUBILANT ENPRO PVT. LTD. ..... Respondent
Through: Mr. Ajay Vohra, Advocate with
Ms. Kavita Jha, Advocate.
% Date of Decision: 28th September, 2010
CORAM:
HON'BLE THE CHIEF JUSTICE
HON'BLE MR. JUSTICE MANMOHAN
1. Whether the Reporters of local papers may be allowed to see the judgment?
2. To be referred to the Reporter or not?
3. Whether the judgment should be reported in the Digest?
MANMOHAN, J
1. The present appeal has been filed under Section 260A of Income
Tax Act, 1961 (for brevity "Act") challenging the order dated 09th
October, 2009 passed by the Income Tax Appellate Tribunal (in short
"Tribunal") in ITA No. 2658/Del/2008, for the Assessment Year 1999-
2000.
2. Mr. Sanjeev Sabharwal, learned counsel for the revenue
submitted that the Tribunal had erred in law in dismissing the revenue's
appeal whereby the penalty under Section 271(1)(c) of the Act
amounting to ` 6,25,000/- imposed by the Assessing Officer (in short,
"AO") had been deleted.
3. In the present case, we find that the Tribunal has given cogent
reasons for setting aside the penalty levied under Section 271(1)(c) of
the Act. The relevant portion of the impugned order of the Tribunal is
reproduced hereinbelow:-
"7. Now, coming to the first item, regarding imposition of
penalty under Section 271(1)(c) of the Income Tax Act, 1961
for disallowance of expenses amounting to Rs.1,03,684/-under
the production sharing the contract, we find that it remained
undisputed that the expenditure on this count during the
assessment year 1998-99 was based on unaudited statement of
account received from PSC. The Assessing Officer disallowed
an amount which was an excess expenditure claimed by the
assessee on account of difference between unaudited and
audited figures received from PSC. The assessee has adjusted
this difference which occurred in assessment year 1998-99 in
the revised return of the current assessment year 1999-2000.
This fact has also been accepted by the Assessing Officer in
para 6 of the assessment order for assessment year 1998-99. In
our opinion, as the assessee has shown the difference between
the provisional and audited figures of the expenses pertaining
to relevant previous year, i.e. 1998-99 in the books of account
of financial year 1999-2000 by crediting the same against
expenses incurred for that year there was no deliberate attempt
on the part of the assessee to either conceal particulars of
income or furnish inaccurate particulars thereof, while
claiming the expenses of Rs.1,03,684/- on the basis of
unaudited statement of accounts provided by the operator of
PSC. Hence, in the facts and circumstances, no penalty under
Section 271(1)(c) of the Act is eligible on this term.
Consequently, the orders of tax authorities below on this count
are set aside and the Assessing Officer is directed to delete the
impugned penalty amount on this item.
xxx xxx xxx
9. According to learned AR of the assessee, the impugned
amount of Rs.16,398/- disallowable under section 43B of the
Act was not added back in the return of income for the relevant
previous year as the tax audit report pertaining to the accounts
of consortium was not available with the assessee before the
date of filing of the return income by the assessee. This fact
remained uncontroverted before us. Further, according to
learned AR, the assessee was, therefore, unaware of the
disallowance, if any, under Section 43B of the Act. Hence, in
our opinion in the facts and circumstances, there was no
deliberate attempt on the part of the assessee to either conceal
the particulars of income or furnish inaccurate particulars
thereof and the penalty on this item was no leviable.
Consequently, the orders of tax authorities below in this regard
are set aside and the Assessing Officer is directed to delete the
penalty imposed under Section 271(1)(c) of the Income Tax Act,
1961 on this count."
10. Now, we shall consider the third item of penalty under
Section 271(1)(c) of the Income Tax Act, 1961 relating to
payment of interest on late deposit of service tax amounting to
Rs.832/-. The assessee claimed that this disallowance was not
penal in nature but was compensatory in nature. In support of
the contention, the learned AR submitted that due to smallness
of tax effect, he did not press this item before the Tribunal,
otherwise, as per the decision of Apex Court in the case of
Lachman Dass Mathura Dass Vs. CIT, 254 ITR 799, wherein
their Lordships had held that interest on arrears of sales tax or
on the outstanding balance of sales tax is compensatory and
not penal in nature and its accordingly, an allowable deduction
against profit of the business. In this view of the matter, we are
of the opinion that the interest payable for late deposit of
service tax, being an admissible deduction, the disallowance
made by the Assessing Officer, even if not challenged by the
assessee, does not call for imposition of penalty under Section
271(1)(c) of the Income Tax Act, 1961. Accordingly, the orders
of tax authorities below in the regard are set aside and the
Assessing Officer is directed to delete the impugned penalty
amount imposed under Section 271(1)(c) of the Income Tax
Act, 1961 on this count.
xxx xxx xxx
12. The issue whether such disallowable item of interest
under section 10A of the Income Tax Act, 1961 calls for penalty
under section 271(1)(c) of the income Tax Act, 1961 came up
for consideration before the Tribunal in the case of ACIT Vs.
M/s. HCL Technologies etc. and ITAT, „C‟ Bench, Delhi vide a
consolidated order dated 31st March, 2009 passed in ITA
No.1445/Del/2008 assessment year 1998-99, ITA
No.1320/Del/2008 assessment year 2003-04 and ITA
No.1446/Del/2008 assessment year 2003-04 while considering
a number of disallowable item under section 10A for imposition
of penalty under section 271(1)(c)of the Income Tax Act, 1961,
in which one of the temps also was disallowance of interest
received on FDRs under section 10A, held that penalty under
section 271(1)(c) of the Income Tax Act, 1961 was not leviable,
while observing as under:-
"3. .........The case of the assessee before us and
before the Ld. CIT(A) was that the claim for
deduction under section 10A on the aforesaid items
was made bonafidely, as there were differing
decisions of the Tribunal in the matter. Therefore, if
subsequent decision of the Hon‟ble High Court or
the Hon‟ble Supreme Court reverses the finding of
the Tribunal, then a claim made in consonance with
the order of the Tribunal does not lead to an
inference of concealment of income. We find that
the learned DR was not able to rebut this argument.
We also find that the learned CIT(A) has specifically
held that all the facts relating to computation of
income had been disclosed and, thereafter specific
claims for deduction were made. In such
circumstances, we are of the view that decision in
the case of Dharmendra Textile Processors &
Others (supra) does not support the case of the
revenue as the decision is that the matter has to be
decided in the light of statutory language contained
in section 271(1)(c) and Explanation offered by the
assessee could not be said to be mala fide.
Therefore, we are of the view that the learned
CIT(A) was right in deleting the penalty."
13. ........Hence, following the decision (supra), it is held
that the tax authorities below erred in imposing/sustaining the
impugned penalty amount levied on the disallowable interest
amounting to Rs.1,67,822/- under section 10A of the Income
Tax Act, 1961........
xxx xxx xxx
15. The issue whether disallowance made by the Assessing
Officer under Explanation 73 of the Act towards fall in value of
shares held in stock in trade calls for penalty under section
271(1)(c) of the Income Tax Act, 1961 came up for
consideration before ITAT, Delhi „H‟ Bench, in DCIT Vs. Artic
Investment (P) Ltd. and Tribunal vide order dated 11th April,
2008 passed in ITA No.194/Del/2007 decided the issue in
favour of the assessee and cancelled the impugned penalty
imposed by the Assessing Officer while observing in para 7 & 8
of the order as under:-
"7. We have considered the rival submission and
also perused the relevant material on record. It is
observed that the assessee in the present case is an
investment company which is engaged in the inter
alia in the business of dealing in shares and
securities. During the year under consideration, a
loss was suffered by it in the said activity of
purchase and sale of shares and having regard to
the nature of said transactions as well as the nature
of its own business, the assessee company was
under a belief that the said transactions were
forming part of its business and the loss suffered in
the said transactions was its business loss.
Although the said treatment given by the assessee
company to the loss as its business loss was not
accepted by the AO keeping in view the deeming
fiction created in the provisions of Explanation to
Section 73 and this position was accepted even by
the assessee, we are of the view that it cannot be
said that the claim of the assessee for such business
loss was not based on a bona fide belief entertained
by it having regard to the nature of the relevant
transactions as well as the said change in the head
of income by the AO from "business loss" to
"speculative loss" had made the assessee
disentitled to thereby resulted in addition to the
total income of the assessee, the question needs to
be considered here is whether such a mere change
in the head of the income would amount to
concealment by the assessee as envisaged in
section 271(1)(c) of the Income Tax Act, 1961. It is
observed that this question has been answered by
the Hon‟ble Delhi High Court in favour of the
assessee in its judgment in the case of Auric
Investments & Securities Ltd. (supra) cited by the
learned counsel for the assessee wherein it was
held that mere treatment of the business loss as
speculation loss by the AO does not automatically
justify inference of concealment of the income
justifying imposition of penalty under section
271(1)(c) of the Income Tax Act, 1961................"
16. ............ In this view of the matter and respectfully
following the decision (supra) of the Bench, it is held that the
penalty under section 271(1)(c) of the Income Tax Act, 1961
on this count on a sum of Rs.16,77,065/- was not leviable and,
therefore, the order of tax authorities below in this regard are
set aside and the Assessing Officer is directed to delete the
impugned penalty amount levied on this item."
4. From the aforesaid, it is apparent that the respondent-assessee
had made full disclosure and there was neither any concealment of
income nor furnishing of inaccurate particulars. In fact, the Tribunal
has found that the justification furnished by the respondent-assessee
was bonafide. Consequently, keeping in view the conclusion of facts
arrived at by the Tribunal, the explanation offered by the respondent-
assessee is bona fide and the respondent-assessee's case would fall
within the ambit of Explanation 1 to Section 271 of Act.
5. Accordingly, the respondent-assessee is not liable to pay penalty
under Section 271(1)(c) of Act and thus the present appeal being devoid
of merits is dismissed in limine but with no order as to costs.
MANMOHAN, J
CHIEF JUSTICE
SEPTEMBER 28, 2010
js
