Income Tax Appellate Tribunal - Delhi
Hamdaan Exports , New Delhi vs Assessee on 4 January, 2016
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH: 'C' NEW DELHI
BEFORE SHRI H. S. SIDHU, JUDICIAL MEMBER
AND
SHRI O.P. KANT, ACCOUNTANT MEMBER
I.T.A. No. 1094/Del/2012
Assessment Year: 2005-06
M/s Hamdaan Exports, Vs. DCIT, CC-5,
C/o Sh. Andleeb Sehgal, New Delhi
C-28, Sujan Singh Park,
New Delhi - 110 003
(PAN: AAFAH4100L)
(APPELLANT) (RESPONDENT)
Assessee by: Shri D.P. Sachdeva, CA
Revenue by: Shri T. Vasanthan, Sr. DR
Date of Hearing on : 03/12/2015
Order Pronounced on : 04/1/2016
ORDER
PER H.S. SIDHU, JM
This appeal is filed by the Assessee against the Order dated 03.12.2011 passed by the Ld. CIT(A), New Delhi relating to Assessment Year 2005-06 on the following grounds:-
"1. That on the facts and in the circumstances of the petitioner firm's case, the learned CIT(A) is wrong in upholding the penalty of Rs. 9,18,665/- imposed under section 271(1)(c) of the Income Tax Act, 1961 by the Ld. AO.
2. That the order passed under section 250 of the Income Tax Act, 1961 is bad in law.
ITA NO. 1094/DEL/2012 (AY 2005-06)
2. The brief facts of the case are that the assessment was completed u/s. 148/143(3) of the Income Tax Act, 1961 on 28.12.2007 at a total income of Rs. 25,10,530/- against the NIL income returned by the Assessee. AO made the addition of Rs. 15,72,500/- on account of unexplained receipt shown as commission and Rs. 93,58,028/- as difference in exchange. During the course of assessment proceedings, the Assessee has failed to justify the nature of duties performed to earn its commission and the difference of exchange relating to earlier years as the assessee has not worked during the year. Penalty proceedings u/s. 271(1)(c) of the Income Tax Act was accordingly initiated on the satisfaction of the AO for furnishing inaccurate particulars of income. The AO sent a show cause notice, which was not replied by the AO. Thus the AO levied a penalty of Rs. 9,18,665/- u/s. 271(1)(c) of the I.T. Act, 1961 vide order 27.6.2008.
3. Against the above Penalty Order dated 27.6.2008 passed by the Assessing Officer, assessee appealed before the Ld. First Appellate Authority, who vide impugned order dated 30.12.2011 dismissed the appeal of the assessee.
4. Against the above order of the Ld. CIT(A) dated 30.12.2011, assessee is in appeal before the Tribunal.
5. Ld. Counsel for the assessee has stated that no satisfaction for concealment is recorded for addition of Rs.9,38,028/- for Foreign Exchange difference in the assessment order. He further stated that in any case where the AO finds any amount as concealment of income it always increases or reduces the total income to that extent as declared by the assessee. However, in this case both the amounts considered as concealed income which have been included by us in our total income, as such, these cannot be legally treated as concealed income. He further stated that merely the change in the head of income also cannot be considered as concealment of income. Therefore, the 2 ITA NO. 1094/DEL/2012 (AY 2005-06) amount of Rs. 9,38,028/- does not attract any penalty. In support of his contention, he filed a Paper Book having pages 1 to 29 containing the Written Submissions; Copy of letter dated 6.1.2010 to the CIT(A); Balance sheet as aon 31.3.2005 and Trading and Profit and Loss account for the year ended 31.3.2005 of Hamdaan Exports alongwith Schedule A of Fixed Assets as on 31.3.2005; Copy of Affidavit of Sh. Karanjit Singh, Managing Director, Koyela International (P) Ltd. Filed in Delhi High Court; Copy of ACIT's letter dated 26.5.2008 alongwith photocopy of envelope; copy of letter dated 17.6.2008 addressed to ACIT, CC-5, New Delhi and reply by ACIT; copy of letter dated 27.6.2008 addressed to ACIT, CC-5, New Delhi; copy of ACIT's letter dated 20.6.2008 under section 148/143(3) made by the Hon'ble Delhi 'C' Bench in ITA No. 3564/Del/2011 for the assessment year 2005-06 and copy of the order dated 22.7.2013 of Hon'ble Delhi High Court in ITA No. 527/2012 for the assessment year 2005-06.
6. On the other hand, Ld. DR relied upon the order of the authorities below and requested that the Appeal of the Assessee may be dismissed. In support of his contention, he relied upon the judgment dated 29.7.2013 of the Hon'ble Delhi High Court in the case of CIT vs. HCIL Kalindee Arrsspl wherein the deletion of penalty by Tribunal was treated to be unjustified and the appeal of the Revenue was allowed.
7. We have heard both the parties and perused the records, especially the orders of the authorities below, the Paper Book filed by the assessee. We find that during the penalty proceedings, the AO held as under:-
"Despite of giving repeated opportunity, the assessee has no explanation to offer as claimed by the assessee has never disclosed his change of address. In view of these facts, I hold that the assessee has furnished inaccurate particulars 3 ITA NO. 1094/DEL/2012 (AY 2005-06) of his income to the extent of Rs. 25,10,530/- within the meaning of Explanation 1(B) to Section 271(1)(c) of the Act. Penalty imposable u/s. 271(1)(c) is calculated as below:-
Amount of income sought to be evaded : Rs. 2510530/-
Tax sought to the evaded : Rs. 918665/-
Minimum Penalty @100% : Rs. 918665/-
Maximum Penalty 2 300% : Rs. 2755995/-
Accordingly, I impose a penalty of Rs. 988665/- which is equal to 100% of the tax sought to be evaded by the assessee. The penalty order u/s. 271(1)(c) is passed after the prior approval of the Addl. CIT, R-3, New Delhi vide letter No. 195 dated 27.6.2008."
7.1 We further find that Ld. CIT(A) has held that "even if there is an income declared which has the effect of reducing loss or converting loss into income is liable to penalty if inaccurate particulars are furnished with respect to that income. Since the assessee did not give true particulars hence liable for penalty".
7.2 We find force in the submissions of the assessee's counsel that assessee has submitted the evidence in respect of Commission of Rs. 15,72,500/- received from Koyela International Private Ltd., New Delhi for assistance of purchase/sale of Iron Ore having been furnished to the AO, the treatment of the aforesaid commission of Rs. 15,72,500 as undisclosed income on the alleged grounds that in the previous year no activity has been carried out and no TDS has been deducted. Moreover, non deduction of Tax by the deductor on any income cannot be considered that income is undisclosed income of the recipient. Certificate dated 5.12.2007 from Koyela International (P) 4 ITA NO. 1094/DEL/2012 (AY 2005-06) Ltd. was filed mentioning its PAN AAACK8190N. We note that the on 16.08.2012 the assessee filed an appeal before the Hon'ble Delhi High Court, against ITAT's order dated 20.01.2012 in ITA 3546/De1/2011. A copy of affidavit of Shri Karanjit Singh, Managing Director of Koyela International (P) Ltd., confirming the payment of commission of Rs.15,72,000, services rendered by them and the contents of certificate dated 5.12.2007. It proves that the explanation given by the asseessee was bonafied and they did business during the previous year relevant to assessment year 2005-06.
7.2.1 In so far as the income of Rs.9,38,028 from difference in exchange is concerned, it was noted that it has been correctly shown as income for the assessment year 2005-2006 as the difference in exchange is adjusted in the books of account and the accounts are audited for each year. Therefore it also cannot be a cause for imposition of any penalty.
7.2.2 Moreover, as the Assessing Officer considered this income as pertaining to earlier year he should not have assessed it in this year as according to him it does not pertain to this year.
7.2.3 From the abvoe, the Assessee firm has proved the sources of income, therefore the provisions of Explanation 1 (B) to section 271 (1)(c) of the Income-tax Act, 1961 reproduced hereunder do not apply to its case:-
"Explanation 1(B) such person offers an explanation which he is not able to substantiate and fails to prove that such explanation is bonafide and that all the facts relating to the same and material to the computation of his total income have been disclosed by him".
7.2.4 We further note that in this case no satisfaction for concealment was recorded for addition of Rs.9,38,028 for Foreign Exchange difference in the assessment order. In any case where the Assessing 5 ITA NO. 1094/DEL/2012 (AY 2005-06) Officer finds any amount as concealment of income it always increases or reduces the total Income to that extent as declared by the assessee. In this case both the amounts considered as concealed income have been included by them in thier total income, as such, these cannot be legally treated as concealed income. Only the heads of Income have been changed. It is a settled law that merely the change in the head of income also cannot be considered as concealment of income. Therefore, the amount of Rs.9,38,028 doesn't attract any penalty. Merely by changing the head of income of Rs.15,72,500 shown as Commission but assessed as Income from undisclosed sources cannot be considered as concealed income. This view is supported by the various judgments of the Hon'ble Supreme Court, Delhi High Court and Income tax Appellate Tribunal, Delhi Bench in the cases of :
i) Commissioner of Income Tax Delhi-XV vs. Auric Investments & Securities Ltd. (2009) 310 ITR 121 (Delhi)
ii) KC Builders vs. ACIT (2004) 265 ITR 562 (SC)
ii) Commissioner of Income Tax vs. Reliance Petroproducts Pvt.
Ltd. (2010) 322 ITR 158 (SC) 7.2.5 We are of the consdiered view that the case law relied upon by the Ld. DR before us, as aforesaid is distinguished from the facts and circumstances of the present case.
7.3 We further note the AO observed that assessee furnished inaccurate particulars of its income and is liable for penalty u/s 271(1)(c), which did not establish from the above facts and circumstancse that how the assessee has furnished inaccurate particulars of its income. Section 271(1)(c) postulates imposition of 6 ITA NO. 1094/DEL/2012 (AY 2005-06) penalty for furnishing of inaccurate particulars and concealment of income. In this regard, we draw our support from the decision of the Hon'ble CIT vs. Reliance Petroproducts Pvt. Ltd. (2010) 322 ITR-158 (SC) wherein the Hon'ble Supreme Court has held that 'where there is no findings that any details supplied by the assessee in its return are found to be incorrect or erroneous or false, there isno question of inviting the penalty u/sec. 271(1)(c) of the Act. A mere making a claim, which is not sustainable in law, by itself, will not amount of furnishing inaccurate particulars regarding the income of the assessee. Such claim made in the return cannot amount to furnishing a inaccurate particulars of income. As the assessee has furnished all the details of its expenditure as well as income in its return, which details, in themselves, were not found to be inaccurate nor could be viewed as the concealment of income on its part. It was up to the authorities to accept its claim in the return or not. 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, in our opinion, attract the penalty u/sec. 271(1)(c). If we accept the contention of the Revenue then in case of every return where the claim made is not accepted by the Assessing Officer for any reason, the assessee will invite penalty u/sec. 271(1)(c). That is clearly not the intendment of the Legislature". 7.4 In the background of the aforesaid discussions and precedents, we are of the considered view that the assessee has not furnished 7 ITA NO. 1094/DEL/2012 (AY 2005-06) inaccurate particulars of income and there are no findings of the Assessing Officer and the CIT (Appeals) that the details furnished by the assessee in his return are found to be inaccurate or erroneous or false. Under these circumstances, in our view the penalty in dispute is totally unwarranted and deserve to be deleted. Accordingly, we delete the penalty of Rs. 9,18,665/- made u/s. 271(1)(c) of the I.T. Act and cancel the orders of the authorities below on the issue in dispute.
8. In the result, the appeal filed by the Assessee stands allowed.
Order pronounced in the open court on 04/1/2016.
Sd/- Sd/-
[O.P. KANT] [H.S. SIDHU]
ACCOUNTANT MEMBER JUDICIAL MEMBER
Date 04/1/2016
"SRBHATNAGAR"
Copy forwarded to: -
1. Appellant -
2. Respondent -
3. CIT
4. CIT (A)
5. DR, ITAT
TRUE COPY
By Order,
Assistant Registrar, ITAT, Delhi Benches
8