Income Tax Appellate Tribunal - Chennai
Shriram Properties & Construction, ... vs Department Of Income Tax on 12 March, 2012
IN THE INCOME TAX APPELLATE TRIBUNAL
'A' BENCH, CHENNAI
BEFORE Dr. O.K.NARAYANAN, VICE-PRESIDENT
AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER
ITA No. 1296(Mds)/2011
Assessment Year : 2007-08
The Assistant Commissioner Vs. M/s. Shriram Properties &
of Income-tax, Construction,
Company Circle-VI(2), No.14, New No.35,
Chennai -34. Vaidhyaram Street,
T.Nagar, Chennai - 17.
PAN - AACCS 0655 G
(Appellant) (Respondent)
Appellant by : Shri Shaji P. Jacob, IRS, Addl.
Commissioner of Income-tax
Respondent by : Shri R. Sivaraman, Advocate
Date of Hearing : 12th March, 2012
Date of Pronouncement : 16th March, 2012
ORDER
PER Dr.O.K.NARAYANAN, VICE-PRESIDENT:
This appeal filed by the Revenue relates to the assessment year 2007-08. The appeal is directed against the order of the Commissioner of Income-tax(Appeals) -V at Chennai dated :- 2 -: ITA 1296/11 15.4.201. The appeal arises out of the penalty order passed under sec.271(1)(c) of the Income-tax Act, 1961.
2. The grounds raised by the Revenue are that the Commissioner of Income-tax(Appeals) has erred in deleting the penalty levied under sec.271(1)(c) on a sum of ` 2,01,96,000/- and that the Commissioner of Income-tax(Appeals) has failed to note that it is only after the Assessing Officer took action to disallow the claims made by the assessee and only just a day before the completion of assessment, the assessee offered the revised adjusted statements in the guise of avoiding protracted litigation and to buy peace with the Department. It is the case of the Revenue that the reliance placed by the Commissioner of Income-tax(Appeals) on the decision of the Hon'ble Supreme Court in the case of CIT v. Reliance Petro Products Ltd. (322 ITR 158) is misplaced and he should have applied the ratio laid down by the Hon'ble Delhi High Court in the case of CIT v. Zoom Communications P. Ltd. (327 ITR
510).
3. The assessee is engaged in the business of real estate development. The assessee filed its return for the impugned :- 3 -: ITA 1296/11 assessment year on an income of ` 72,96,012/-. In the course of scrutiny assessment, the assessee filed a revised memo of computation declaring the income of ` 6,18,75,460/-. The assessment was completed on 31.12.2009 on a total income of `14,60,47,384/- which was later revised on 17.1.2010 to an income of ` 8,60,47,384/-. The revision was necessitated as a result of rectification of mistake in computing the income.
4. In the revised computation of income the assessee has offered for taxation the following amounts :
i) Contribution to trust fund ` 3,00,00,000/-
ii) Provision for diminution in
value of investments ` 3,00,00,000/-
iii) Sundry balances written off ` 2,41,71,933/-
5. As the above three amounts were disallowed and added back to the income of the assessee-company, penalty proceedings were initiated with reference to the above said three amounts.
Regarding the contribution to trust fund, the assessee explained that the contribution was made to Shriram Ownership Trust in the interest of assessee's own business, as the trustees rendered :- 4 -: ITA 1296/11 valuable services in carrying on the business of the assessee- company. In that business sense, the assessee claimed it as an allowable expenditure, relying on the decision of the Hon'ble Supreme Court in the case of SA Builders vs. CIT (288 ITR 1). According to the assessee, to avoid protracted litigation, it offered the same for the assessment. In the matter of diminution in value of investments, the assessee stated that the investments were made in Millennium Business Solutions Ltd. for the purpose of joint development in real estate. As the business generated from that combination was not at the expected level, the assessee estimated that value of the investment would have to come down. Accordingly, that portion of diminution reflected in its investment has been written off, as a commercial expediency and again relying on the decision of the Hon'ble Supreme Court in the case of SA Builders vs. CIT (288 ITR 1), this amount was also offered by the assessee to avoid protracted litigation.
6. Regarding the sundry balances written off, the assessee explained that they were in the nature of revenue expenditure, as they were incurred in the course of carrying on the business and they were written off in books and expended wholly and exclusively :- 5 -: ITA 1296/11 for business. The assessee stated that this addition has been taken in first appeal before the Commissioner of Income- tax(Appeals), where the matter is pending. So, the assessee prayed for dropping the penalty propositions.
7. In the penalty proceedings, it is the contention of the assessing authority that the assessee has not filed the revised memo before issue of notice under sec.143(2) and, therefore, it cannot be held that the assessee had voluntarily offered these amounts for assessment. He also held that filing of revised computation would not amount to filing of revised return. He accordingly, rejected the contentions of the assessee and levied penalty. While imposing the penalty, he levied the penalty with reference to first two items and kept in abeyance the issue with reference to the addition in the matter of sundry balances written off.
8. In first appeal, the Commissioner of Income-tax(Appeals) held that the Assessing Officer was not justified in splitting the amounts of additions for imposing penalty, as piecemeal levy of penalty is not justified. He did not approve the action of the :- 6 -: ITA 1296/11 Assessing Officer in keeping the matter of sundry amounts written off, in abeyance. He found that the question of levy of penalty on that amount has already become academic in view of the decision in the quantum appeal. Ultimately, the Commissioner of Income- tax(Appeals) considered the penalty relating to only those two items of ` 3 crores each.
9. The Commissioner of Income-tax(Appeals) found that the assessee had explained the circumstances in which the claims were made in the original return and also the circumstances under which the amounts were offered for taxation by filing revised computation. It was already made clear before the Assessing Officer that the claims were being dropped to avoid protracted litigation and to buy peace with the Department. The Commissioner of Income-tax(Appeals) found that the character of offering made by the assessee will not change for the reason that the assessee had not filed a revised return but filed only a revised computation. The Commissioner of Income-tax(Appeals) held that the decision of the Hon'ble Supreme Court in the case of SA Builders vs. CIT (288 ITR 1) applies to the present case. He held that there is no case of any concealment or filing of inaccurate :- 7 -: ITA 1296/11 particulars. He observed that as held by the Punjab & Haryana High Court in the case of CIT vs. SSP Ltd. (189 Taxman 282), mere erroneous claim on the absence of any concealment or giving inaccurate particulars is no ground for levy of penalty. In the light of the above finding, the penalty was deleted.
10. We considered the matter in detail. The details of the three items considered by the assessing authority in his penalty proposition were properly disclosed in the statement of accounts filed by the assessee. The question of addition made in respect of writing off of sundry balances has already become an academic issue in the light of the order passed in the quantum appeal filed by the assessee. The two issues considered by the Assessing Officer to levy penalty are ` 3 crores as contribution to trust fund and ` 3 crores as provision for diminution in value of investments. Regarding the contribution to trust fund, the assessee was of the view that it could be a payment deductible in computing the taxable income, as the contribution was made by the assessee in the interests of business carried on by it. The assessee has explained that, de facto speaking, the contribution was made in the light of commercial expediency and the assessee claimed it as a deduction :- 8 -: ITA 1296/11 in the light of the decision of the Hon'ble Supreme Court in the case of SA Builders vs. CIT (288 ITR 1). Regarding the provision for diminution in value of investments also the assessee has furnished all the details including its business with Millennium Business Solutions Ltd. Therefore, there is no case of non-furnishing of particulars or furnishing of inaccurate particulars. Although the claims of deductions made by the assessee may not be admissible, but that does not make the particulars furnished by the assessee as "inaccurate particulars". So as to qualify the particulars as "inaccurate", the particulars furnished by the assessee must be some way distant from the actual position. Here, the position has been correctly explained by the assessee. The dispute was only on the question, whether the deductions could be allowed or not.
11. The case is, whether there is any concealment, as such. The assessee has offered the amounts for taxation by filing a revised computation. The fact that the assessee has not filed any revised return, does not dilute the effect of the offer made by the assessee. If the assessee was making a claim for further deduction, sometimes it would have been relevant to see whether the assessee had filed a revised return or not. In the present case, the :- 9 -: ITA 1296/11 assessee is offering additional items for taxation. Such offer can be made in the course of assessment proceedings, even without filing a revised computation. The action of the assessee does not become prejudicial to the interests of the Revenue. Therefore, there is no much force in the argument of the assessing authority that the assessee had not filed any revised return. That is too a pedantic argument.
12. Again, on the concealment, what we find is that the assessing authority could have added those two items even if the assessee has not offered those items for taxation by filing a revised computation. Even in such a case where the additions were made by the assessing authority without any offer coming from the assessee, it is doubtful whether such additions would make way for imposing penalty. This is because, the assessee was harping on a situation which could have been favourable to him. Therefore, that is a matter of opinion. If there are some premises relevant for the assessee to form an opinion, the assessee is free to form such an opinion to its advantage. There is no fault in that. Therefore, in the present case, it is very difficult to hold a view that there is any concealment of income. The law becomes liable against the :- 10 -: ITA 1296/11 assessee only when the assessee has concealed the particulars of its income. Here, there is no such concealment of particulars.
13. The Hon'ble Supreme Court in the case of CIT v. Reliance Petro Products Ltd. (322 ITR 158) has held that merely because the assessee had claimed the expenditure, which claim was not accepted or was not acceptable to the Revenue, that by itself would not attract the penalty under sec.271(1)(c). Punjab & Haryana High Court in the case of CIT v. SSP Ltd. (189 Taxman 282) has observed that mere erroneous claim in the absence of any concealment or giving of inaccurate particulars is no ground for levy of penalty. The Hon'ble Delhi High Court in the case of CIT v. Deeksha Holidays Ltd. (186 Taxman 183) has held that where the assessee had disclosed all the facts before the Assessing Officer and the Assessing Officer, on consideration of the evidence furnished by the assessee, come to the conclusion that the claim has not been substantiated with sufficient evidence, does not automatically result in levy of penalty. Where the assessee has disclosed all material facts in regard to the claim made, the onus placed upon the assessee stood discharged. After examining the facts of the present case in the light of judicial pronouncements :- 11 -: ITA 1296/11 mentioned above, we are of the considered opinion that the Commissioner of Income-tax(Appeals) has rightly deleted the penalty.
14. In result, this appeal filed by the Revenue is dismissed.
Order pronounced on Friday, the 16th of March, 2012 at Chennai.
Sd/- Sd/-
(Challa Nagendra Prasad) (Dr. O.K.Narayanan)
Judicial Member Vice-President
Chennai,
Dated the 16th March, 2012.
mpo*
Copy to: (1) Petitioner
(2) Respondent
(3) CIT
(4) CIT(A)
(5) D.R.
(6) G.F.