Income Tax Appellate Tribunal - Mumbai
Ferani Hotels Private Limited , Mumbai vs Deputy Commissioner Of Income Tax ... on 19 November, 2018
आयकर अपील य अ धकरण, मुंबई यायपीठ, 'एफ',मुंबई।
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES "F", MUMBAI ी जो ग दर संह, उपा य एवं ी जी. मंजन ू ाथ, लेखा सद य, के सम Before Shri Joginder Singh, Vice President, and Shri G. Manjunatha, Accountant Member ITA NO.5061/Mum/2017 Assessment Year: 2011-12 Ferani Hotels Private DCIT Limited Central Circle-4(1) Construction House-B बनाम/ Aaykar Bhavan 2nd Floor, 623, Linking Mumbai-400020 Road, Khar (West) Vs. Mumbai-400052 #नधा%&रती /Assessee) (राज व /Revenue) P.A. No.AAACF0693B #नधा%&रती क ओर से / Assessee by Shri Sanjay Sawant-AR राज व क ओर से / Revenue by Shri Rajeev Gubgotra-DR ु वाई क, तार-ख / Da te of Hearing :
सन 19/11/2018
घोषणा क, तार-ख/Date of Pronouncement 19/11/2018
2 ITA No.5061/Mum/2017
Ferani Hotels Private Limited
आदे श / O R D E R
Per Joginder Singh (Vice President)
This appeal is by the Assessee confirming the
penalty imposed under section 271(1)(c) of the Income Tax Act, 1961 (hereinafter the Act) amounting to Rs.30,591/-, by the Ld. First Appellate Authority.
2. During hearing the Ld. Counsel for the Assessee Shri. Sanjay Sawant contended that in the case of the Assessee the Tribunal vide order dated 18/08/2017 (ITA No.5218/Mum/2015 & 5219/Mum/2015) for A.Y. 2009-10 & 2010-11, held that no penalty is leviable under section 271(1)(c) of the Act. The Ld. DR though defended the imposition of penalty but did not controvert that the Tribunal has already taken a view vide aforesaid dated 18/08/2017. 2.1 We have considered the rival submissions and perused the material available on record. In view of the above arguments we are reproducing hereinunder the aforesaid order of the Tribunal dated 18/08/2017 for ready reference and analysis 3 ITA No.5061/Mum/2017 Ferani Hotels Private Limited "These appeals by the assessee are directed against order of Ld. CIT-A dated 28/08/2015 and pertain to assessment year 2009-10 & 2010-11 sustaining the addition u/s.271(1)(c) as under:-
Assessment Year Penalty (Rs.) 2009-10 5,69,713/- 2010-11 8,78,882/-
2. Since facts are similar, the appeals were heard together, and are being disposed of by this common order. The addition in this case was on account of bogus purchases for fixed assets. Furthermore, some part of the bogus purchase was for the project exempt u/s. 80IB(10). As a result of which despite making the addition, the AO has granted relief u/s.80IB(10). In such circumstances, the net effect of the finding in the assessment was that there was no change in the tax payable. This aspect was raised by the assessee before the learned CIT-A that since there is no change in the amount of tax payable, no penalty is leviable u/s.271(1)(c), however, this plea of assessee was dismissed by the authorities below. 4 ITA No.5061/Mum/2017
Ferani Hotels Private Limited
3. Before us, learned Counsel of the assessee has produced an order of Hon'ble Delhi High Court in the case of CIT vs. Nalwa Sons Investment Pvt. Ltd., 327 ITR 543. SLP against the said decision was dismissed by the Hon'ble Supreme Court reported in 21 Taxmann.com 184. The rates emanating the said decision is that when there is no change in the tax payable after the assessment and finding of concealment etc., no penalty u/s. 271(1)(c) is leviable as the machinery provision for the levy of penalty u/s. 271(1)(c) fails in as much as the said penalty is leviable with reference to the tax sought to be evaded.
4. In this regard, we may gainfully refer to the following decision of the Hon'ble High Court.
20. We have considered the rival submissions. Judgment of the Supreme Court in Gold Coin's (supra) clarifies that even if there are losses in a particular year, penalty can be imposed as even in that situation there can be a tax evasion. As per Section 271 (1) (c), the penalty can be imposed when any person has concealed the particulars of his income or furnished incorrect particulars of the income. Once this condition is satisfied, quantum of penalty is to be levied as per 5 ITA No.5061/Mum/2017 Ferani Hotels Private Limited clause (3) of Section 271 (1) ( c) which stipulates that the penalty shall not exceed three times " the amount of tax sought to be evaded". The expression "the amount of tax sought to be evaded" is clarified and explained in Explanation 4 thereto, as per which it has to have the effect of reducing the loss declared in the return or converting that loss into income. It is in this context that in Gold Coins (supra) the Supreme Court explained the legal position as under:- dated 24.7.1976 reported in 1977 (110) ITR 21 (St.) has also substantial relevance. Same reads as follows:- New Explanation 4 defined „the amount of tax sought to be evaded‟. According to the definition, this expression will ordinarily mean the difference between the tax on the total income assessed and the tax that would have been chargeable had such total income been reduced by the amount of income in respect of which particulars have been concealed. In a case, however, where on setting off the concealed income, against any loss incurred by the assessee under other head of income or brought forward from earlier years, the‟ total income is reduced to a figure lower than the concealed income or even to a minus figure, „the tax sought to be evaded‟ will mean the tax 6 ITA No.5061/Mum/2017 Ferani Hotels Private Limited chargeable on the concealed income as if it were the total income. Another exception to the general definition of the expression „tax sought to be evaded‟ given earlier is a case to which Explanation 3 applies. Here, the tax sought to be evaded will be the tax chargeable on the entire total income assessed. A combined reading of the Committee‟s recommendations and the Circular makes the position clear that Explanation 4 (a) to Section 271 (1) (c) intended to levy the penalty not only in a case where after addition of concealed income, a loss returned, after assessment becomes positive income but also in a case where addition of concealed income reduces the returned loss and finally the assessed income is also a loss or a minus figure. Therefore, even during the period between 1.4.1976 to 1.4.2003 the position was that the penalty was leviable even in a case where addition of concealed income reduces the returned loss. When the word "income" is read to include losses as held in Harprasad‟s case (supra) it becomes crystal clear that even in a case where on account of addition of concealed income the returned loss stands reduced and even if the final assessed income is a loss, still penalty was leviable thereon even during 7 ITA No.5061/Mum/2017 Ferani Hotels Private Limited the period 1.4.1976 to 1.4.2003. Even in the Circular dated 24.7.1976, referred to above, the position was clarified by Central Bureau of Direct Taxes (in short CBDT‟). It is stated that in a case where on setting off the concealed income against any loss incurred by the assessee under any other head of income or brought forward from earlier years, the total income is reduced to a figure lower than the concealed income or even to a minus figure the penalty would be imposable because in such a case "the tax sought to be evaded‟ will be tax chargeable on concealed income as if it is "total income".
21. The question, however, in the present case, would be, as to whether furnishing of such wrong particulars had any the effect on the amount of tax sought to be evaded. Under the scheme of the Act, the total income of the assessee is first computed under the normal provisions of the Act and tax payable on such total income is compared with the prescribed percentage of the „book profits‟ computed under section 115JB of the Act. The higher of the two amounts is regarded as total income and tax is payable with reference to such total 8 ITA No.5061/Mum/2017 Ferani Hotels Private Limited income. If the tax payable under the normal provisions is higher, such amount is the total income of the assessee, otherwise, „book profits‟ are deemed as the total income of the appellant in terms of Section 115JB of the Act.
22. In the present case, the income computed as per the normal procedure was less than the income determined by legal fiction namely „book profits‟ under Section 115 JB of the Act. On the basis of normal provision, the income was assessed in the negative i.e. at a loss of Rs. 369521018. On the other hand, assessment under Section 115 JB of the Act resulted in calculation of profits at Rs. 40163180.
23. In view thereof, in conclusion, the assessment order records as follows:- "Assessed at Rs. 40163180 u/s 115 JB, being higher of two. Interest u/s 234B and 234C has been charged as per the provisions of Income Tax Act, 1961. Penalty proceedings u/s 271 (1) © of the Income Tax Act, 1961 have been initiated. Issue necessary forms."
24. The income of the assessee was thus assessed under Section 115 JB and not under the normal provisions. It is in 9 ITA No.5061/Mum/2017 Ferani Hotels Private Limited this context that we have to see and examine the application of Explanation 4.
25. Judgment in the case of Gold Coins (supra), obviously, does not deal with such a situation. What is held by the Supreme Court in that case is that even if in the income tax return filed by the assessee losses are shown, penalty can still be imposed in a case where on setting off the concealed income against any loss incurred by the assessee under other head of income or brought forward from earlier years, the total income is reduced to a figure lower than the concealed income or even a minus figure. The court was of the opinion that „the tax sought to be evaded‟ will mean the tax chargeable not as if it were the total income. Once, we apply this rationale to Explanation 4 given by the Supreme Court, in the present case, it will be difficult to sustain the penalty proceedings. Reason is simple. No doubt, there was concealment but that had its repercussions only when the assessment was done under the normal procedure. The assessment as per the normal procedure was, however, not acted upon. On the contrary, it is the deemed income assessed 10 ITA No.5061/Mum/2017 Ferani Hotels Private Limited under Section 115 JB of the Act which has become the basis of assessment as it was higher of the two. Tax is thus paid on the income assessed under Section 115 JB of the Act. Hence, when the computation was made under Section 115 JB of the Act, the aforesaid concealment had no role to play and was totally irrelevant. Therefore, the concealment did not lead to tax evasion at all.
26. The upshot of the aforesaid discussion would be to sustain the order of the Tribunal, though on different grounds. Therefore, while we do not agree with the reasoning and approach of the Tribunal, for our reasons disclosed above, we are of the opinion that penalty could not have been imposed even in respect of claim of depreciation made by the assessee. This appeal is accordingly dismissed.
5. As in the above case law, in the present case also we find that the concealment / inaccurate particulars did not lead to any tax evasion in this assessment year as there is no change in the tax payment pursuant to the assessment on this issue. Hence we hold that no penalty is leviable u/s. 271(1)(c). Hence, these appeals filed by the assessee stand allowed. 11 ITA No.5061/Mum/2017
Ferani Hotels Private Limited
6. In the result, appeals by the assessee stand allowed."
2.2 We find that on identical facts, that too in the case of the Assessee, the Tribunal considering the provisions of the Act, various judicial pronouncements and thereafter deleted the penalty. We further note that Hon'ble Delhi High Court in CIT Vs Nalwa Sons Investment Ltd. (2010) 327 ITR 543 [Delhi], against which SLP was filed by the Department and the same was dismissed by Hon'ble Apex Court (2012) 21 taxmann.com 184(Supreme Court) vide order dated 04/05/2012. The said decision was followed by the Tribunal in Ruchi Strips & Alloys Ltd. V. Dy. CIT [ITA No.s 6940 & 6941 (Mum) and also in BSEL Infrastructure Realty Ltd. Vs. ACIT [2012] 137 ITD 61 dated 13/04/2012. It is further noted that the assessee vide letter dated 10/12/2013, filed before the Ld. Assessing Officer, categorically denied of any 12 ITA No.5061/Mum/2017 Ferani Hotels Private Limited accommodating bills. The project was under
section 80-IB(10) and the sale from this project were offered to tax. The Ld. Assessing Officer made addition/disallowances under normal computation of the Act, whereas income was finally computed on the basis of book profit under 115JB of the Act. It is further noted that in para 7.6 of the assessment order it is mention that the assessee booked bills from the parties as mentioned in table 7.1 in the books of the Dindoshi Project of the assessee. This project was eligible under section 80-IB(10) of the Act and sale from this project has been offered to tax in this year and deduction under section 80-IB(10) was claimed. The Bogus Purchases were added to the business income of the assessee and claimed deduction 80-IB(10) were allowed to the assessee.
Considering the totality of facts and the decision from Hon'ble Apex Court in CIT Vs Reliance Petroproducts [2010] 322 ITR 158 (Supreme 13 ITA No.5061/Mum/2017 Ferani Hotels Private Limited Court) and the explanation of the assessee we deem it appropriate to delete the penalty. Finally, the appeal of the assessee is allowed. This order was pronounced in open Court in the presence of Ld. Representatives from both sides at the conclusion of the hearing on 19/11/2018.
Sd/- Sd/-
(G.Manjunatha) (Joginder Singh)
लेखा सद य / ACCOUNTANT MEMBER उपा य /VICE PRESIDENT
मब
ुं ई Mumbai; 2दनांक Dated : 19/11/2018
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आदे श क "#त%ल&प अ'े&षत/Copy of the Order forwarded to :
अपीलाथ4 / The Appellant
1.
2. 56यथ4 / The Respondent.
3. आयकर आय8 ु त,(अपील) / The CIT, Mumbai.
4. आयकर आय8 ु त / CIT(A)- , Mumbai
5. :वभागीय 5#त#न ध, आयकर अपील-य अ धकरण, मब ंु ई / DR, ITAT, Mumbai
6. गाड% फाईल / Guard file.
आदे शानस ु ार/ BY ORDER, उप/सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपील य अ धकरण, मब ंु ई / ITAT, Mumbai