Income Tax Appellate Tribunal - Delhi
National Cooperative Development ... vs Department Of Income Tax on 17 May, 2010
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH : 'E' NEW DELHI
BEFORE SHRI G.E. VEERABHADRAPPA, HON'BLE PRESIDENT
AND
SHRI RAJPAL YADAV, JUDICIAL MEMBER
I.T.A No. 3606/Del/10
Asstt. Year : 2000-01
DCIT, Circle 13(1), Vs. M/s. National Cooperative
Development Corporation,
New Delhi. 4, Siri Institutional Area,
Hauz Khas, New Delhi.
(Appellant) (Respondent)
Appellant by: Shri R.S. Negi, Sr. DR
Respondent by: Shri K.V.S.R. Krishna, CA
ORDER
PER RAJPAL YADAV : JM The revenue is in appeal before us against the order of Ld. CIT(A) dated 17th May, 2010 passed for asstt. year 2000-01. The solitary grievance of the revenue is that Ld. CIT(A) has erred in deleting the penalty of `1,39,42,002/- imposed u/s 271(1)(c) of the Income Tax Act.
2. The brief facts of the case are that assessee is an undertaking of Govt. of India. It came into existence by way of 2 ITA No. 3606/Del/10 Asstt. Year 2000-01 National Cooperative Development Corporation Act 1962 (No. 26 of 62). It is engaged in the business of providing long term finance to the State Govt. and Cooperative Societies in all these States. For Asstt. year 2000-01, it has filed its return of income on 21.11.2000 declaring an income of ` 28,33,52,920/-. It was processed u/s 143(1) on 26th March, 2001. The AO had formed an opinion that while claiming deduction u/s 36 (1)(viii) of the Act, assessee has included certain receipts which are not derived from the business of providing long term finance. Thus, such receipts namely dividend, interest from bank, miscellaneous receipts, etc. do not qualify for the deduction to the extent of 40% u/s 36 (1)(viii). He recorded the reasons and reopened the assessment. In the reassessment order, he observed that section 36(1) (viii) contemplates that if an assessee is engaged in providing long term finance for industrial or agricultural development or development of infrastructure facilities in India and created any special reserve, then an amount not exceeding 40% of the profit derived from such business of providing long term finance specified in this section would be allowed as a deduction. According to the AO, the dividend income, miscellaneous receipts income, interest 3 ITA No. 3606/Del/10 Asstt. Year 2000-01 from bank and interest on advance / deposits do not come from the business of providing long term finance and, therefore, for the purpose of getting any such reserve, these receipts ought not to be included while computing deduction of 40%. He added back the 40% of such receipts as an income of the assessee.
3. The appeal to the Ld. CIT(A) did not bring any relief to the assessee. The assessee took the matter before the Tribunal in ITA No. 1242/D/2009. In principle, exclusion of such receipts from the gross receipts for the purpose of computation of 40% u/s 36(1)(viii) has been upheld but the issue has been remitted back to the file of AO for computing the disallowance after considering overhead expenses relatable to earning such receipts.
4. The AO has initiated proceeding u/s 271(1)(c). He issued a show cause notice u/s 274 read with section 271(1)(c) inviting assessee's explanation as to why penalty be not imposed. In response to the show cause notice, it was contended by the assessee that it has been claiming a similar deduction right from asstt. year 1994-95. It was always allowed by the AO. First 4 ITA No. 3606/Del/10 Asstt. Year 2000-01 time it was disallowed in 1999-2000. The AO has visited the assessee with the penalty in asstt. year 1999-2000. The assessee further contended that it has disclosed all the facts in the return of income as well as in the audited accounts. It has not furnished any inaccurate particulars nor concealed the particulars. In its understanding, such receipts also qualify for deduction u/s 36(1)(viii). There is no deliberate attempt at the end of assessee to evade payment of tax. The Ld. AO was not satisfied with the contention of assessee and he visited the assessee with the penalty.
5. Dissatisfied with the imposition of penalty, assessee carried the matter in appeal before Ld. CIT(A). It reiterated its contention. It also pointed out that in asstt. year 1999-2000. Ld. First Appellate Authority has deleted the penalty vide order dated 22nd October, 2009. Ld. CIT(A) deleted the penalty in this asstt. year also and he relied upon his finding recorded in 1999- 2000. Ld. First Appellate Authority did not find any disparity in this asstt. year. He has reproduced his order in asstt. year 1999-2000 on pages 4 - 6 of the impugned order.
5 ITA No. 3606/Del/10
Asstt. Year 2000-01
6. Ld. DR while impugning the order of Ld. CIT(A) submitted that assessee has the benefit of experts for its guidance and it could easily anticipate the dividend income or interest income were not derived from the business of long term finance. In such situation, it should have not included these receipts in the gross receipts while computing deduction admissible u/s 36(1)(viii) of the Act. He relied upon the order of the AO.
7. The Ld. Counsel for the assessee on the other hand drew our attention towards page No. 8 of the paper book wherein assessee has placed on record the details in tabular form exhibiting the details of dividend on investment, miscellaneous receipts, service charges, interest on advance deposits and interest on bank account right from asstt. year 1994-95 upto 1999-2000. He pointed out that all along in the past, deduction u/s 36(1)(viii) has been allowed to the assessee by different AOs in scrutiny assessment passed u/s 143(3). Thus, assessee in the present year has a prime facie belief that deduction u/s 36(1)(viii) would be admissible to it on such income. It has disclosed all the basic facts truly and correctly. It has not concealed any particulars or furnished any inaccurate particulars. It is the AO who has to assess the true income of 6 ITA No. 3606/Del/10 Asstt. Year 2000-01 assessee on the basis of these very details. It is a difference of opinion between the assessee and the AO about inclusion or exclusion of certain receipts in the gross receipts eligible for deduction u/s 36(1)(viii). Therefore, there cannot be any penalty on such bonafide belief of the assessee. For butteracing his contention, he relied upon the decision of Hon'ble Supreme Court in the case of CIT Vs. Reliance Petroproducts Pvt. Ltd. reported in 322 ITR 158. He also relied upon the decision of Hon'ble Delhi High Court in the case of CIT Vs. Mahanagar Telephone Limited rendered in ITA No. 626 /2011. He placed on record copy of the judgment of the Hon'ble Court. Ld. Counsel for the assessee further submitted that in 1999-2000 penalty has been deleted. Ld. CIT(A) has put his reliance on that order. The COD i.e. Committee on Dispute, denied permission to the revenue for agitating the matter in further appeal before the Tribunal. Thus, the order in asstt. year 1999-2000 passed by the Ld. CIT(A) become final. He placed on record copy of the minutes of meeting held on 23.12.2010 and pointed out that permission to challenge the order of the Ld. CIT(A) for deleting penalty in asstt. year 1999-2000 has been denied. The issue is 7 ITA No. 3606/Del/10 Asstt. Year 2000-01 available at Sl. No. 19-20 of the minutes of the meeting. He preyed that appeal of the revenue be dismissed.
8. We have considered the rival contentions and gone through the record carefully.
9. Section 271(1)(c) of the Act has a direct bearing on the controversy and, therefore, it is salutary upon us to take note of the relevant provisions of section 271(1)(c) along with Explanation 1 which read as under:
"271. Failure to furnish returns, comply with notices, concealment of income, etc. (1). If the Assessing Officer or the Commissioner (Appeals) or the CIT in the course of any proceedings under this Act, is satisfied that any person
(a) and (b)********
(c) has concealed the particulars of his income or furnished inaccurate particulars of such income.
He may direct that such person shall pay by way of penalty.
(i) and (Income-tax Officer,)********
(iii) in the cases referred to in Clause (c) or Clause (d), in addition to tax, if any, payable by him, a sum which shall 8 ITA No. 3606/Del/10 Asstt. Year 2000-01 not be less than, but which shall not exceed three times, the amount of tax sought to be evaded by reason of the concealment of particulars of his income or fringe benefit the furnishing of inaccurate particulars of such income or fringe benefits:
Explanation 1.- Where in respect of any facts material to the computation of the total income of any person under this Act, (A) Such person fails to offer an explanation or offers an explanation which is found by the Assessing Officer or the Commissioner(Appeals) or the CIT to be false, or (B) such person offers an explanation which he is not able to substantiate and fails to prove that such explanation is bona fide and that all the facts relating to the same and material to the computation of his total income have been disclosed by him, then, the amount added or disallowed in computing the total income of such person as a result thereof shall, for the purposes of Clause (c) of this sub-
section, be deemed to represent the income in respect of which particulars have been concealed".
10. A bare perusal of this section would reveal that for visiting any assessee with the penalty, the Assessing Officer or the Learned CIT(Appeals) during the course of any proceedings before them should be satisfied, that the assessee has; (i) concealed his income or furnished inaccurate particulars of income. As far as the quantification of the penalty is concerned, 9 ITA No. 3606/Del/10 Asstt. Year 2000-01 the penalty imposed under this section can range in between 100% to 300% of the tax sought to be evaded by the assessee, as a result of such concealment of income or furnishing inaccurate particulars. The other most important features of this section is deeming provisions regarding concealment of income. The section not only covered the situation in which the assessee has concealed the income or furnished inaccurate particulars, in certain situation, even without there being anything to indicate so, statutory deeming fiction for concealment of income comes into play. This deeming fiction, by way of Explanation I to section 271(1)(c) postulates two situations; (a) first whether in respect of any facts material to the computation of the total income under the provisions of the Act, the assessee fails to offer an explanation or the explanation offered by the assessee is found to be false by the Assessing Officer or Learned CIT(Appeals); and, (b) where in respect of any fact, material to the computation of total income under the provisions of the Act, the assessee is not able to substantiate the explanation and the assessee fails to prove that such explanation is bona fide and that the assessee had disclosed all the facts relating to the same and material to the computation of the total income. Under first situation, the deeming fiction would come to playa if the assessee failed to give any explanation with respect to any fact material to the computation of total income or by action of the Assessing Officer or the Learned CIT(Appeals) by giving a categorical finding to the effect that explanation given by the assessee is false. In the second situation, the deeming fiction would come 10 ITA No. 3606/Del/10 Asstt. Year 2000-01 to play by the failure of the assessee to substantiate his explanation in respect of any fact material to the computation of total income and in addition to this the assessee is not able to prove that such explanation was given bona fide and all the facts relating to the same and material to the computation of the total income have been disclosed by the assessee. These two situations provided in Explanation 1 appended to section 271(1)(c) makes it clear that that when this deeming fiction comes into play in the above two situations then the related addition or disallowance in computing the total income of the assessee, for the purpose of section 271(1)(c) would be deemed to be representing the income in respect of which inaccurate particulars have been furnished.
11. The assessee has disclosed all the facts fully and truly. It is not the case of AO that assessee has furnished inaccurate particulars. From the details submitted by the assessee, AO has formed an opinion in a reassessment proceeding that certain receipts does not qualify for inclusion for the purpose of computation of deduction admissible u/s 36(1)(viii). The AO himself allowed deduction to the assessee from asstt. year 1994-95 upto 1998-99. In 1999-2000, assessment was reopened and thereafter deduction was disallowed to the assessee for the first time. But the penalty imposed on similar circumstance was deleted by the Ld. CIT(A). The revenue was 11 ITA No. 3606/Del/10 Asstt. Year 2000-01 not permitted by the COD to challenge order of the Ld. CIT(A) in asstt. year 1999-2000. Considering the cumulative setting of all these facts, we are of the view that there is no deliberate attempt at the end of assessee to evade the payment of taxes. It does not deserve to be visited with penalty u/s 271(1)(c). Ld. First Appellate Authority has rightly deleted the penalty.
Order pronounced in the open court on 2.12.2011.
Sd/- sd/-
[G.E.VEERABHADRAPPA] [RAJPAL YADAV]
PRESIDENT JUDICIAL MEMBER
Dated: 2.12.2011
Veena
Copy forwarded to: -
1. Appellant 2. Respondent 3. CIT 4. CIT (A)
5. DR, ITAT
TRUE COPY By Order,
Deputy Registrar,
ITAT, Delhi Benches