Income Tax Appellate Tribunal - Mumbai
Epg Wealth Management (I) P.Ltd, Mumbai vs Dcit Cir 4(1), Mumbai on 20 December, 2017
IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH "E", MUMBAI
BEFORE SHRI P.K. BANSAL, VICE-PRESIDENT AND
SHRI PAWAN SINGH, JUDICIAL MEMBER
ITA No.263/Mum/2016 (Assessment Year- 2005-06)
M/s EFG Wealth Management DCIT Circle-4(1),
Pvt. Ltd. (Presently known as Mumbai.
Stratcap Securities Pvt. Ltd.) 44,
Vs.
Strategic House, Mint Road,
Fort, Mumbai - 400 001.
PAN: AABCA3906B
(Appellant) (Respondent)
Assessee by Shri Vimal Punamiya with
:
Shri Darshan Gandhi (AR)
Revenue by : Shri V.Justin (DR)
Date of hearing : 31.10.2017
Date of Pronouncement : 20.12.2017
Order Under Section 254(1) of Income Tax Act
PER PAWAN SINGH, JUDICIAL MEMBER:
1. This appeal by assessee under section 253 of Income Tax Act is directed against the order of ld. Commissioner of Income-Tax (Appeals)-9, [CIT(A)] Mumbai dated 06.11.2015 for Assessment Year 2005-06. The assessee has raised the following grounds of appeal:
1. The Ld. AO was failed to recoded any direction to initiate the penalty in terms of legal fiction under section 271(1B) of the Income Tax Act in its assessment order under section 143(3) dated 27.12.2007 and hence entire penalty proceeding is required to be quashed in absence of satisfaction to initiate the penalty under section 271(1)(c) of the Income Tax Act.
2. The ld. CIT(A) erred in conforming action of the ld. AO levied penalty of Rs.15,00,483/- under section 271(1)(c).
3. The Ld. CIT(A) passed quantum order on 10.11.2008 against which appeal was already preferred by the assessee before the Hon'ble ITAT. During the
2 ITA No.263/M/2016 - M/s EFG Wealth Management Pvt. Ltd. pendency of quantum appeal before the ITAT, the Ld. AO levied the penalty vide order dated 29.03.2010 under section 271(1)(c) of the Income Tax Act. The Ld. CIT(A) erred in appreciating provisions of section 275(1)(a) of the Income Tax Act and erred in applying first proviso after said section after holding that cut-off date to pass penalty order is 31.03.2010, i.e. 1 year after the completion of year in which CIT passes order, instead of 31.05.2009, i.e. 6 months from the date of receipts of CIT(A)'s order in cases where appeal is preferred before the ITAT.
4. The Ld. CIT(A) erred in conforming action of the Ld. AO levied penalty of Rs.15,00,483/- under section 271(l)(c) not appreciating the view that issue was debatable in nature and no penalty can be levied on such issues.
2. Brief facts of the case are that assessee is engaged in the business of equity shares, broker in National Stock Exchange and Bombay Stock Exchange, Mutual Funds distribution and having Merchant Broking Services license from SEBI, filed its return of income for relevant Assessment Year on 30th October 2005. Subsequently, the assessee filed revised return of income on 31st March 2007 declaring total income of Rs.2,39,83,993/-. The assessment was completed on 27th December 2007. The Assessing Officer while passing the assessment order besides the other additions and disallowance made the addition of Rs. 41,00,522/- on account of capitalisation of expenditure. On appeal before the ld. CIT(A), in quantum assessment the addition on account of capitalisation of expenditure was confirmed. The Assessing Officer levied penalty on the addition/ disallowance on account of capitalisation of expenditure. The Assessing Officer levied penalty under section 271(1)(c) of Rs. 15,00,483/- vide order dated 29th March 2010. On appeal before the ld. CIT(A), the penalty order was upheld. On further appeal before the Tribunal, the matter was 3 ITA No.263/M/2016 - M/s EFG Wealth Management Pvt. Ltd. restored back to the file of Assessing Officer vide order dated 06.06.2012 in ITA No. 4144/Mum/2011. The case was restored to examine if the penalty order was passed within stipulated period prescribed under section 275 and to decide the question of penalty afresh. The Assessing Officer in the restoration proceeding again confirmed the penalty order vide order dated 26th February 2014. On further appeal before CIT(A) the order of penalty was further confirmed vide order dated 6th November 2015, impugned before us.
3. We have heard the ld. Authorized Representative (AR) of the assessee and ld. Departmental Representative (DR) for the Revenue and perused the material available on record. The ld. AR of the assessee argued that the Assessing Officer failed to attend the direction of the Tribunal while passing fresh order dated 26th February 2014 in confirming the penalty order passed originally on 29th March 2010. It was argued that the Assessing Officer while passing the assessment order has not recorded satisfaction for initiating penalty whether the assessee has ' concealed the income' or furnished 'inaccurate particular of income'. The satisfaction of the Assessing Officer is must and it should be clear from the assessment order itself. Since, the Assessing Officer failed to record such satisfaction in the Assessment Order, the penalty order is liable to be quashed. In support of his submission the ld. AR of the assessee relied upon the decisions of Hon'ble Andhra Pradesh High Court in CIT vs. Lotus 4 ITA No.263/M/2016 - M/s EFG Wealth Management Pvt. Ltd. Construction reported vide [2015] 370 ITR 475(A P), V.V. Projects and Investment Private Limited Vs DCIT [2008] 300 ITR 40(AP), Chennakeshwar Pharmacautical Vs CIT [2012] 349 ITR 196 (A P ), Hon'ble Delhi High Court in CIT Vs Ram Commercial Enterprises Ltd. [2000] 246 ITR 568(Delhi), CIT Vs. M.K. Sharma[2008] 307 ITR 147(Delhi) and decision of Hon'ble Apex Court in D.M. Manasvi Vs. CIT[1972] 86 ITR 557(SC). In alternative submissions, it was argued that the order of penalty is based merely on difference of opinion between the assessee and the Revenue on account of nature of expenses. According to Revenue the expenses incurred by the assessee gives enduring benefit to the assessee and the same was required to be treated as capital in nature. However, as per the assessee, the expenses are Revenue in nature and claimed the benefit of such expenditure in the year only. The expenditure was disallowed, mere disallowance would not lead to levy of penalty. In support of his submission the ld. AR of the assessee relied upon the decision of Hon'ble Supreme Court in CIT Vs Reliance Petroproducts Pvt. Limited 322 ITR 158(SC). In third alternative submission, the ld. AR argued that assessee has taken the premises on lease and carry out repair work for smooth utilisation premises for the purpose of business. However, the Assessing Officer was a view that certain repair works has given and during benefit to the premises and therefore, it was capital in nature accordingly and addition/ disallowance of Rs. 41,00,522/- was 5 ITA No.263/M/2016 - M/s EFG Wealth Management Pvt. Ltd. made. Since, merely it was difference of opinion regarding nature of expenditure, the assessee has not concealed anything about the income nor furnished inaccurate particular while filing the return of income. The assessee furnished and disclosed all particulars while furnishing the return of income. The Assessing Officer while making disallowance nowhere recorded that the assessee has either concealed the income or furnished inaccurate particular thereof. In other alternative submission the ld. AR of the assessee relied that the order of penalty was time-barred and the same was not passed within the prescribed period of limitation as prescribed under section 275 of the Act. Finally the ld. AR argued that Assessing Officer was bound to follow the order of Tribunal and Assessing Officer has not followed the direction of Tribunal. The lower authorities has no option except either to take the matter on further appeal before High Appellate Forum or ought to follow the direction. In support of his submission the ld. AR relied upon the decision of Tribunal in Income Tax Officer Vs Punj Hospitality Private Limited and Union of India Vs. Kamalakshi Finance Corporation Ltd. AIR (1972) (SC) 711.
4. On the other hand the ld. DR for the revenue supported the order of the authorities below. It was argued that in the restoration proceedings the assessee failed to substantiate his contention that the order of the penalty was passed beyond the prescribed period of limitation as provided under 6 ITA No.263/M/2016 - M/s EFG Wealth Management Pvt. Ltd. section 275 of the Act. On merit it was argued that the disallowance made in the quantum assessment has been confirmed by the appellate authorities.
5. We have considered the rival submissions of the ld. Representatives of the parties and have gone through the orders of the authorities below. The perusal of the assessment order reveals that while making the disallowance or passing final the assessment order on 27.12.2007 the assessing officer has not recorded his satisfaction, if the assessee concealed the income or furnished inaccurate particular of income. The assessing officer at the end of assessment order noted; "Notice u/s 271(1)(c) of the Act, 1961 is issued separately". We have noted that while framing assessment order the assessing officer made four addition by way of disallowances, consisting of (i) disallowance of Computer Software Charges, (ii) disallowance on account of penalty levied by SEBI, (iii) disallowance on account of Capitalization of expenditure on leased premises and (iv) disallowance on account of non-deduction of TDS on payment to related party. While making disallowances the assessing officer has not recorded his satisfaction about the initiation of penalty on such disallwances. At the end of assessment order the assessing officers just mentioned 'notice u/s 271(1)(c) of the Act issued separately. Admittedly there is no satisfaction of the assessing officer regarding the initiation of penalty in assessment order. Coming back to the order of penalty, initially the penalty order was passed on 29.03.2010. The penalty levied vide order dated 29.03.2010 has 7 ITA No.263/M/2016 - M/s EFG Wealth Management Pvt. Ltd. already been set aside by the Tribunal in its order 06.06.2012 in ITA No. 4144/Mum/2011.
6. The assessing order while passing fresh penalty order held that despite giving opportunity the assessee failed to explain as to how the order dated 29.03.2010 was beyond the stipulated time and held that the order was passed within time. The assessing officer again confirmed the penalty order without specifying, under which limb of section 271(1)(c) the penalty is levied. The ld CIT (A) confirmed the order of penalty without specifying the specific limb of section 271(1)(c). The ld CIT(A) concluded as under:
" I have further gone through the present as well as previous assessment order and penalty order of the AO as well as CIT(A)'s order on quantum as well as penalty . Keeping in view the entire facts and circumstances of the case, it has been clearly established by the AO that the claim of the assessee being capital in nature could not be established and the contention of the appellant was not supported by the relevant facts. Therefore, the penalty imposed by the AO is upheld."
In our view the assessing officer as well as by ld CIT(A) failed in recording the satisfaction regarding initiating, imposing and confirming the penalty order, if it was for concealment of income or for furnishing inaccurate particulars. The order of penalty was passed and confirmed in mechanical way. We have seen that in this case, there is no finding that any details supplied by the assessee in its Return were found to be incorrect or erroneous or false. Such not being the case, there would be no 8 ITA No.263/M/2016 - M/s EFG Wealth Management Pvt. Ltd. question of inviting the penalty under Section 271(1)(c) of the Act. In our view mere making of the claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee. Such claim made in the Return cannot amount to the inaccurate particulars. In our view the assessee had furnished all the details of its expenditure as well as income in its Return, which details, for which there is no finding that the details were not found to be inaccurate nor could be viewed as the concealment of income on its part. It was up to the AO 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 under Section 271(1)(c).
The Hon'ble Supreme Court in Dilip N. Shorff Vs CIT (291 ITR 519 SC) held that when the assessee has furnished all the particulars of income the imposition of penalty is not automatic. Further, Hon'ble Apex Court in Reliance Petroproducts Ltd Vs CIT (322 ITR 158 SC) held that mere making a claim which is not sustainable in law does not attract the penalty under section 271(1)(c). The Hon'ble Andhra Pradesh High Court in CIT vs. Lotus Construction, V.V. Projects and Investment Private Limited Vs DCIT, and in Chennakeshwar Pharmaceutical Vs CIT (supra) and Hon'ble Delhi High Court in CIT Vs Ram Commercial Enterprises Ltd. (supra) held that recording of the satisfaction in the assessment order about the 9 ITA No.263/M/2016 - M/s EFG Wealth Management Pvt. Ltd. initiation of penalty is must. In absence of proper satisfaction about the initiation of penalty order the penalty is liable to be deleted. Thus, the submissions of the ld. AR for the assessee are convincible that the penalty was levied by assessing officer without proper satisfaction. In our view the ratio of decision in Reliance Petroproducts Ltd (supra) is directly applicable on the facts of the present case. Thus, the ld AR of assessee is succeeded in convincing us on his first two preposition that neither the AO recorded his satisfaction about initiating and in imposing the penalty on particular limb of section 271(1)(c) and there was difference of opinion on the disallowance of expenditure. Hence, the grounds of appeal raised by the assessee are allowed. As we have allowed the appeal of the assessee on first two prepositions of submissions of ld. AR for the assessee hence, the discussion on other submission has become academic.
7. In the result, appeal filed by assessee is allowed. .
Order pronounced in the open court on this 20th day of December, 2017.
Sd/- Sd/-
(P.K. BANSAL) (PAWAN SINGH)
VICE-PRESIDENT JUDICIAL MEMBER
Mumbai; Dated 20/12/2017
S.K.PS
Copy of the Order forwarded to :
1. The Appellant
2. The Respondent.
3. The CIT(A), Mumbai.
4. CIT BY ORDER,
5. DR, ITAT, Mumbai
6. Guard file.
(Asstt.Registrar)
स या पत त //True Copy/
ITAT, Mumbai