Income Tax Appellate Tribunal - Mumbai
Fgp Ltd, Mumbai vs Assessee
IN THE INCOME TAX APPELLATE TRIBUNAL
MUMBAI BENCHES "F", MUMBAI
BEFORE SHRI P M JAGTAP, ACCOUNTANT MEMBER
& SHRI SANJAY GARG, JUDICIAL MEMBER
ITA No.:5925/Mum/2009
Assessment Year: 2003-04
The DCIT (OSD) - 1(1), M/s. FGP Ltd.,
Mumbai Commercial Union House,
9, Wallace Street, Fort,
Vs.
Mumbai- 400 001.
PAN. AAACF1671M
(Appellant) (Respondent)
ITA No.:5928/Mum/2009
Assessment Year: 2003-04
M/s. FGP Ltd., The DCIT (OSD) - 1(1),
Mumbai- 400 001. Mumbai
Vs.
PAN. AAACF1671M
(Appellant) (Respondent)
For the assessee : Shri Girish Dave
For the department : Shri O P Meena
Date of hearing : 24.01.13
Date of Pronouncement : 28.02.13
ORDER
Per Sanjay Garg, JM :
With this common order we shall dispose of two appeals - one filed by the revenue and the other by the assessee against the penalty order of the learned CIT(A) for A.Y. 2003-04 passed u/s. 271(1)(c) of the Income Tax Act.
2. The brief facts of the case are that the assessee company filed its return of income for A.Y. 2003-04 declaring total income of Rs.1,04,23,720. In the 2 ITA Nos:5925 & 5928/Mum/2009 AY :2003-04 assessment proceedings made u/s. 143(3) of the Income Tax Act, the AO made certain disallowances and thereby additions to the income of the assessee under various heads, the details of which are discussed in the later portions of this order. The learned CIT(A) confirmed the additions made by the Assessing Officer vide order dated 25.01.2007. Penalty proceedings were also initiated by the AO against the assessee and penalty was imposed vide order dated 31.03.2008. The assessee filed an appeal before the learned CIT(A) against the penalty order dated 31.03.2008 of the Assessing Officer. The learned CIT(A) vide order under appeal confirmed some of the penalties levied by the AO under certain heads and deleted the penalties under other heads. Thus, these two appeals arise, one against the deletion of the penalty preferred by the revenue and the other against the confirmation of the penalty preferred by the assessee, which are taken together for discussion. The heads under which additions were made and penalty imposed by the AO are discussed herein as under:
3(i) Interest: Under this head the assessee offered a sum of Rs.63,90,100 as business income. However, the AO assessed the same under the head "Income from other sources". The order of the AO in this respect was confirmed by the ld. CIT(A) vide order dated 25.01.2007 and further by the Tribunal vide its order dated 15.12.2010. Accordingly, the AO levied penalty which was deleted by the CIT(A) vide order dated 25.08.2009. The ld. CIT(A) while deleting the penalty under this head observed that interest income was being offered by the assessee company as business income for several years in the past and the AO had never disturbed assessee's offer of interest income as business income. The assessee company was thus under a bona fide belief that it was rightly offering interest income as business income. The assessee has given some reasonable explanation in support of his bona fide belief, which has been accepted by the ld. CIT(A) and we do not find any reason to disturb his findings in this respect. Hence, the deletion made by the ld. CIT(A) under this head is hereby confirmed.3
ITA Nos:5925 & 5928/Mum/2009 AY :2003-04 3(ii). Dividend: A sum of Rs.5,21,900 was offered by the assessee company as business income. However, the AO has taxed this under the head "Income from other sources". The findings of the AO has been confirmed by the ld. CIT(A) vide order dated 25.01.2007 and further by the Tribunal vide order dated 15.12.2010. Subsequently, penalty proceedings were initiated and the assessee company was burdened with penalty by the AO and further confirmed by the ld. CIT(A). Aggrieved, the assessee is in appeal before us. In the quantum appeal, the ld. Tribunal has observed that dividend has been specifically defined as income from other sources in section 56(1) of the I.T Act. No case was made out that dividend in the case of the assessee was incidental to any business activity. Therefore the ITAT held the dividend income as "Income from other sources". In the penalty appeal before the ld. CIT(A), the assessee did not give any substantive explanation for offering the dividend income as business income. The ld. AR before us has relied upon judgment of the Hon'ble Delhi High Court in the case of CIT v. Regency Express Builders (P.) Ltd. 166 Taxman 269 (Del) to stress the point that where taxability of income under a particular head is in dispute and that where two views were possible and since there was no clear and definite inference that could be drawn by one way or the other, assessee could not be said to have concealed its income or furnished inaccurate particulars, and that evidence led by the assessee could not be said to be mala fide or false. The ld. AR has further relied on the following decisions:-
• CIT v. Nath Bros. Exim International Ltd. [2007] 288 ITR 670 (Delhi) • ITO v. Roborant Investments (P.) Ltd. [2006] 7 SOT 181 (Mumbai) • Harsha H Javeri v. DCIT [2012] 53 SOT 59 (Mumbai) • ACIT v. Grand Organics (P.) Ltd. [2012] 137 ITD 252 (Panaji) • DCIT v. JMD Advisors (P.) Ltd. [2010] 124 ITD 223 (Delhi) There is no doubt about the legal position settled in the authorities relied upon by the ld. AR. However, the pre-requisite condition for the application of the said 4 ITA Nos:5925 & 5928/Mum/2009 AY :2003-04 cases relied upon by the ld. AR is that there must be some explanation offered by the assessee and that explanation must be bona fide in his belief though, the AO or the other IT authorities may or may not agree with the view taken by the assessee under bona fide belief. However, if there is no explanation at all and if the statutory provisions are clear enough, then under such circumstances in the absence of any explanation, the case laws cited by the ld. AR cannot be applied. In the case in hand, no explanation has been given by the assessee as to under what circumstances he was under bona fide belief that dividend income was taxable under the head business income. The assessee is assisted by tax experts/chartered accountants so it cannot be claimed that the assessee was not aware of the express provisions of the statute. It may be further observed that not every return of income is scrutinized by the AO, but a few returns/cases are chosen for scrutiny on computer generated randomized basis. Under such circumstances, the AO is not bound to check/scrutinize or verify the correctness including the particulars relating to the application of income under various heads, of each and every return. Rather the duty is cast upon the assessee to file true and correct particulars in return including application of income under correct heads as per law. In view of the fact that only a few returns are selected for scrutiny on random basis, certain assessee's take a well calculated chance to avoid/reduce tax liability by subjecting the income under wrong heads. If by chance, such an assessee's return is selected for scrutiny, he comes with a pre-planned excuse that the income was subjected to some other head under bona fide belief and that, he has not concealed the fact of income itself. In view of these factual and procedural aspects and circumstances, the burden to prove under what bona fide belief and what were the reasons or explanations for such bona fide belief strongly lies upon the assessee. The assessee has to give cogent and convincing reasoning in support of his bona fide belief theory and the same should not be based on mere assumptions or presumptions. We are in agreement with the contention of the ld. DR that the word "deliberately" has been omitted by the Parliament vide Finance Act 1964 from section 271(1)(c) of the IT Act and as such 5 ITA Nos:5925 & 5928/Mum/2009 AY :2003-04 the burden is on the assessee to prove that he was under bona fide belief in justification of the particulars of income so filed by him. The assessee in the case in hand has miserably failed to offer any convincing explanation hence, the order of the CIT(A) confirming the penalty under this head is hereby upheld.
3(iii). Co-sponsorship fees: In the quantum proceedings the assessee claimed expenditure of Rs.9,00,000/-made in respect of advertisement of its business centre. However, the AO disallowed the same observing that the assessee had already let out his business centre to various parties, who were occupying the same for considerable period of time. There was no rationale brought out by the assessee for making such expenditure for advertisement of business centre, when the said premise was fully occupied and there was no likelihood of its getting vacated by any of the tenants. Further no details or evidence was submitted by the assessee to support his claim. The findings of the AO were further upheld by the ld. CIT(A) and also by the Tribunal. However, the penalty levied by the AO was deleted by the CIT(A) accepting the explanation of the assessee that it was under a bona fide belief that the expenditure relating to advertisement of business centre was allowable as business expenditure. It may be further observed that the Hon'ble ITAT has already allowed the offering of the rental income relating to business centre as business income of the assessee. Since the advertisement expense were also relating to the business centre in question, in our view, the explanation of the assessee is reasonable. Hence, the deletion of penalty of the ld. CIT(A) under the said head is upheld.
3(iv). Cessation of liability: The amount of Rs.80,94,091/- relating to sundry creditors was taken as income by the AO in the assessment proceedings by invoking section 41(1) of the I.T.Act. The addition was confirmed by the ld. CIT(A). However, the learned Tribunal has restored the matter to the AO for passing a fresh order in this respect after necessary examination and after giving opportunity of 6 ITA Nos:5925 & 5928/Mum/2009 AY :2003-04 being heard to the assessee. Since, in the quantum appeal, the matter has already been restored to the file of the AO for a fresh decision and the same is not yet completed, we restore this issue to the file of the AO for taking a decision in accordance with the view finally taken by him in this respect in the quantum appeal.
3(v). Rates and taxes: A sum of Rs.10,90,837/- was claimed by the assessee as business expenditure being non-agricultural taxes paid for Thane land. The AO disallowed the said expenditure as the Thane land was never used by the assessee for any business activity. The disallowance was confirmed by the ld. CIT(A) as also the ld. ITAT. The penalty imposed by the AO has also been confirmed by the ld. CIT(A). The assessee is thus in appeal before us. The ld. AR failed to justify how the local taxes paid on Thane land were related to any business activity. No convincing explanation or justification has been put forward by the assessee in this respect. So it cannot be said that the assessee was under any bona fide belief by wrongly claiming the said expenditure as business expenditure. Even the alternative claim of the assessee to allow him deduction while computing capital gain has also been disallowed by this Tribunal, holding that the said taxes were paid after the acquisition of the land and therefore cannot be treated as part of cost of acquisition. It was further held that the expenditure did not result in any improvement of the land. Hence the order of the ld. CIT(A) confirming the penalty under this head is hereby upheld.
3(vi). Rental income: As observed above, the ld. ITAT has upheld the stand of the assessee offering rental income from business centre as business income in the quantum appeal. Since the addition made under this head, has already been deleted by this Tribunal in the quantum appeal, the very basis on which the penalty was levied has ceased to exist. Hence, the order of the ld. CIT(A) regarding the deletion of penalty under the said head is hereby confirmed.7
ITA Nos:5925 & 5928/Mum/2009 AY :2003-04 3(vii). Professional fees: A sum of Rs.32,56,724 under this head was claimed by the assessee as business expenditure. However, the AO treated the same as non- business expenditure. It may be observed that the Hon'ble Tribunal vide its order dated 15.12.2010 in the quantum appeal has allowed the claim of the assessee treating the said expenditure as business expenditure. Since the addition in the quantum appeal has already been deleted by the Tribunal, the very basis on which the penalty was levied does not exist. Hence, the order of the ld. CIT(A) regarding the deletion of penalty under the said head is hereby confirmed.
3(viii). Employee cost: A sum of Rs. 10,18,000 under this head was claimed by the assessee as business expenses. The AO treated the same as non-business expenditure. However, the ld. CIT(A) vide order dated 25.01.07 in quantum appeal has allowed the claim of the assessee. The appeal filed by the revenue in this respect has been dismissed by the Tribunal vide order dated 15.12.2010. Since the claim of the revenue has been dismissed by the Tribunal the very basis for levy of penalty has ceased to exist, accordingly, we uphold the order of the CIT(A) in this respect.
12. In the result, the appeal filed by the revenue is partly allowed and that by the assessee is hereby dismissed.
Order pronounced in the open court on this 28th day of February 2013.
Sd/- SSd/-
(P M JAGTAP) (SANJAY GARG)
ACCOUNTANT MEMBER JUDICIAL MEMBER
MUMBAI, Dt : 28.02.13 February, 2013
SA
8
ITA Nos:5925 & 5928/Mum/2009
AY :2003-04
Copy forwarded to :
1. The Appellant
2. The Respondent
3. The C.I.T. concerned Mumbai
4. CIT (A) concerned Mumbai
5. The DR, "F" - Bench, ITAT, Mumbai
//True Copy//
BY ORDER
ASSISTANT REGISTRAR
ITAT, Mumbai Benches, Mumbai