Income Tax Appellate Tribunal - Delhi
Dion Global Solutions Ltd., New Delhi vs Assessee on 12 September, 2012
IN THE INCOME TAX APPELLATE TRIBUNAL
(DELHI BENCH: 'B, DELHI)
Before Shri S. V. Mehrotra, Accountant Member
And
Shri Kul Bharat, Judicial Member
ITA Nos.1/Del / 2012
(Assessment Years-1998-99)
Dion Global Solution Ltd. Vs. DCIT
(Earlier known as Forties Financial Circle-13,
Services Ltd.)
D-3, P3B, District Center, Saket
New Delhi. New Delhi
PAN:A AACF1917E
(APPELLANT) (RESPONDENT)
Cross Objection No.394/Del/2009
In Intt. Tax No. 4/Del/2009
(Assessment Years-1996-97)
Fortis Financial Services Ltd. Vs. ACIT
Now known as Religare Technova Ltd. Circle-11(1)
55-Hanuman Road, Connaught Place,
New Delhi. New Delhi.
Cross Objection No.395/Del/2009
In Intt. Tax No. 5/Del/2009
(Assessment Years-1997-98)
Fortis Financial Services Ltd. Vs. ACIT
Now known as Religare Technova Ltd. Circle-11(1)
55-Hanuman Road, Connaught Place,
New Delhi. New Delhi.
2 ITA No.1, C.O. No.394 & 395/Del/2012
ASSESSEE BY : Shri Tarandeep Singh & Maneesh Upneja, CA
REVENUE BY : Shri Aroop Kr. Sinha, Sr. DR
Date of hearing :12.09.2012
Date of pronouncement :26/10/2012
ORDER
PER S.V. Mehrotra, Accountant Member
These cross objections filed by the assessee in Interest Tax Appeal No. 4/Del/2009 and 5/ Del/ 2009 relates to assessment years 1996-97 & 1997-98 respectively. Tribunal vide its order dated 31st March, 2010, had decided the Interest Tax Appeals and had dismissed the Revenue's appeals against the deletion of penalty imposed by the Assessing Officer u/s 13 by Ld. CIT (A). The cross objections filed by the assessee were allowed for statistical purposes by Tribunal as they were in support of Ld. CIT (A)'s action. The Revenue preferred appeal before Hon'ble Delhi High Court and the Delhi High Court in ITA No.243/2011, 244/2011 allowed the Revenue's appeal on merit. However, the cross objections were set aside to Tribunal observing as under:
" In view of the aforesaid, the question of law is answered in negative and in favour of the appellant Revenue and against the respondent assessee. However, we accept the prayer of the 3 ITA No.1, C.O. No.394 & 395/Del/2012 respondent assessee to remit the matter to the Tribunal as they have not decided and disposed of the cross objections filed by the respo9ndent assessee on merits.
To cut short the delay, the parties are directed to appeal before the Additional Registrar of the Tribunal on 6th August, 2012, when a date of hearing will be fixed."
2. In pursuance to the directions of Hon'ble Delhi High Court, we proceed to decide the cross objections on merit. The assessee has also filed appeal for assessment year 1998-99 against the order of Ld. CIT (A) confirming the penalty u/s 13 of the Interest Tax Act.
3. In the cross objections the assessee has taken identical grounds for A. Ys. 1996-97 and 1997-98 as under:
"1. That on the facts and in law the penalty order u/s 13 of the Interest Tax Act,1974 passed by the Assessing Officer is bad in law and void ab initio.
2. That on facts and in law the Assessing Officer erred in not recording in the assessment order u/s 8(2) satisfaction as warranted by section 13 for initiating the penalty proceedings.
3. That non-recording of the satisfaction till the conclusion of the assessment proceedings that the assessee has concealed the particulars of chargeable interest or has furnished inaccurate particulars of such interest, being a jurisdiction defect, which could not be cured, the initiation of penalty was itself bad rendering the penalty imposed as bad in law and liable to be quashed.
4. That on facts and in law the Assessing Officer erred in relying upon section 271(1B) of the Income Tax Act, 1961 inserted by the Finance Act, 2008 with effect from 01-04-1989 ignoring the fact that:4 ITA No.1, C.O. No.394 & 395/Del/2012
(a) No such amendments were made in Sec.13 of the Interest Tax Act,1974, and
(b) As per provisions of section21 of the Interest Tax Act provisions of Section 271 of the Income Tax Act are not applicable."
ITA No. 1,(A.Y-1998-1999.
In this appeal, the assessee has taken following grounds of appeal:
"1. That on facts and in law the orders passed by both the Assessing Officer { hereinafter referred to as "Assessing Officer"} and the CIT (A) {hereinafter referred to as "the CIT (A)"} are bad in law and void ab initio.
2. That on facts and in law the Assessing Officer erred in not recording in the assessment order passed u/s 8 (2) of the Interest Tax Act,1974{ hereinafter referred to as "the Act"} proper satisfaction as warranted u/s13 of the Act, for initiation of the penalty proceedings.
2.1. That non-recording of the satisfaction till the conclusion of the assessment proceedings that the assessee has concealed the particulars of chargeable interest or has furnished inaccurate particulars of such interest, being as jurisdiction defect, which could not be cured, the initiation of penalty was itself bad rendering the penalty imposed as bad in law and liable to be quashed.
3. That on facts and in law the CIT (A) erred in holding that provisions of Section 13 of the Interest Tax Act, 1974 are pari material with provisions of Section 271 (1) (c) of the Income Tax Act, 1961.
4. That on facts and in law the CIT (A) erred in not accepting that the appellant had made full and complete disclosure and had given bonafide explanation for the claim made, and therefore, there cannot and should not be any 5 ITA No.1, C.O. No.394 & 395/Del/2012 allegation for concealment of particulars of chargeable interest or furnishing of inaccurate particulars of chargeable interest, and consequently, the levy of penalty u/s 13 of the Act is totally unjustified and unwarranted.
5. That on facts and in law the CIT (A) erred in upholding levy of penalty of Rs.86,627/- levied by the Assessing Officer u/s 13 of the Act.
The appellant prays for leave to add, alter or amend any grounds of the cross objections raised above, at or before the time of hearing."
4. At the out set Ld. Counsel for the assessee fairly conceded that in view of the decision of Hon'ble Delhi High Court in the assessee's own case for assessment years 1996-97 and 1997-98. Ground nos. 1, 4 and 5 are to be decided against the assessee. We find that Hon'ble Delhi High Court has observed in para 15 and 16 as under:
"Bare reading of the sub-section makes it clear that for the purpose of the Act, bill discounting charges have to be treated and regarded as "interest". The term "interest" as per the definition clause i.e. section 2(7) amended w.e.f. 1st October, 1991 is absolutely clear and unambiguous. There cannot be any doubt or ambiguity that 'bill discounting charges' have to be computed and included in interest for the purpose of tax payable under the Act. This is not the case of bonafide, honest or even plausible different interpretation. Two divergent views on interpretation of Section 2(7) of the Act are not possible. To state so would be to ignore the obvious. Discount on promissory note and bills of exchange drawn or made in India by express stipulation have been included in the word 'interest'. What is excluded is 'discount on treasury bills'. There is no ambiguity or doubt in the said words. The single sentence observations of the CIT (A) and the Tribunal to the contrary are unsustainable.6 ITA No.1, C.O. No.394 & 395/Del/2012
Reliance placed by the assessee on Circular No. 647 dated 22nd March, 1993(reported in (1993) 200 ITR statute 230) is entirely misconceived. The said circular was issued to explain applicability of provisions of Section 194A of the Income Tax Act,1961 and is not issued under the Act and does not explain Section 2(7) of the Act. The said circular has not application to the facts of the present case which pertains to interpretation of Section 2(7) and applicability of Section 13 of the Act. Thus, it is not possible to accept the contention of the respondent assessee that there was a genuine difference of opinion on the question. " whether or not bill discounting charges, could be treated as interest or not." Mere statement of the assessee that their contention was plausible and question/ issue was debatable, is not sufficient to quash the penalty. The contention has to be examined holistically and objectively keeping in the provision, interpretation put forward and decision, if any, of appellate forum/courts. The only reasoning given by the CIT (A) which has been accepted by the tribunal, is to the effect that the facts indicate that there was a genuine difference of opinion, whether bill discounting charges should be treated as interest or not. There is no discussion or examination of the said aspect with reference to the statutory provision, basis of the interpretation put forward by the respondent assessee etc. The tribunal in respect of appeal for the assessment year 1996-97 has not even gone into and examined the following findings recorded by the Assessing Officer in the penalty order in respect of receipt of Rs.46,63,619/- under the "interest others."
"2. Briefly, the facts of the case are that during the courses of assessment proceedings, it was also observed that the assessee company had shown receipt of Rs.46,63,613/- in the profit and loss account on account of interest others but this receipt was not included in the computation of chargeable interest. On being asked to furnish the reasons for non inclusion of the receipt referred above in the computation of chargeable interest, the counsel for the assessee had not advanced any argument. Hence, Rs.48,63,619/-, on account of interest other, was added to the chargeable interest of the assessee."7 ITA No.1, C.O. No.394 & 395/Del/2012
Respectfully following the decision of Hon'ble Delhi High Court, ground nos.1,4 and 5 in Interest Tax Appeal for A. Y.- 1998-99 are dismissed.
5. Thus, both, in the appeal for assessment year 1998-99 and in cross objections for assessment years 1996-97 and 1997-98, the only issue for consideration is whether Assessing Officer had recorded proper satisfaction as warranted u/s 13 of the Act, for initiation of penalty proceedings or not.
6. Ld. Counsel for the assessee referred to Section 13 of the Interest Tax Act, which reads as under:
" If the Assessing Officer or the Commissioner (Appeals) in the course of any proceeding under this Act, is satisfied that any person has concealed the particulars of chargeable interest or has furnished inaccurate particulars of such interest, he may direct that such person shall pay by way of penalty, in addition to any interest tax payable by him, a sum which shall not be less than, but shall not exceed three times, the amount of interest-tax sought to be evaded by reason of the concealment of particulars of his chargeable interest or the furnishing of inaccurate particulars of such chargeable interest."
Thus, Ld. Counsel submitted that Assessing Officer should have recorded his satisfaction in course of assessment proceedings regarding concealment of the particulars of chargeable interest or regarding furnishing inaccurate particulars of such interest.
7. Ld. Counsel for the assessee referred to section 21 of the Interest Tax Act, which reads as under:
8 ITA No.1, C.O. No.394 & 395/Del/2012
"The provisions of the following sections and Schedules of the Income Tax Act and the Income -Tax (Certificate Proceedings) Rules,1962, as in force from time to time, shall apply with necessary modifications as if the said provisions and the rules referred to interest- tax instead of to income- tax :-
[2(44)[199],129,131,132,132A,132B,133 to 136] (both inclusive), 138, 140, 145, 156,160, 161,162,163,166,167,170,173,175,176,178,179,220 to 227(both inclusive), 228A, 229, 232,237 to 245(both inclusive),245, to 262(both inclusive), 265, 266, 268, 269, 281, 281B, 282, 284, 287, 288, 288A, 288B, 289 to 293 (both inclusive), the Second Schedule and the Third Schedule:] Provided that references in the said provisions and the rules to the "assessee" shall be construed as references to an assessee as defined in this Act."
Ld. Counsel submitted that Section 271 of the Interest Tax Act does not find place in this Section and, therefore, the same is not applicable to Interest Tax Act. Ld. Counsel referred to page no. 3 to 6 and 7 to 9 of the paper book, wherein the assessment orders for assessment years 1996-97 and 1997-98, are contained. He also referred to the assessment order for assessment year 1998-99 and pointed out that in all these assessment orders, inter-alia, bill discounting charges were treated as interest by Assessing Officer and addition was accordingly made. He submitted that in the assessment order the Assessing Officer has observed as under:
"1996-97 Penalty notice u/s 13 of the Act, have already been issued.
1997-1998 Penalty proceedings u/s 13 of the Income Tax Act are separately initiated.9 ITA No.1, C.O. No.394 & 395/Del/2012
1998-99 Penalty proceedings u/s 13 of the Income Tax Act are separately initiated."
Ld. Counsel submitted that the observations of Assessing Officer noted above do not constitute satisfaction as required u/s 13 of the Income Tax Act. In this regard, Ld. Counsel referred to the decision of Hon'ble Delhi High Court in the case of CIT vs. Rampur Engineering Co. Ltd. & Others, 309 ITR 143 (Delhi) (FB), wherein Hon'ble Delhi High Court observed at page 145 as under:
"We hasten to add that pending the reference, sub-section(1B) has been inserted in section 271 of the Income Tax Act by the Finance Act6, 200. The said provision purports to create a fiction by which satisfaction of the Assessing Officer is deemed to have been recorded in cases where an addition or disallowance is made by the Assessing Officer and a direction for initiation of penalty proceedings is issued. The said provision is made effective retrospectively with effect from April 1, 1989. In some of the cases forming part of this batch, the assessment orders were passed after April 1, 1989. This reference is being answered only in respect of the cases where the assessment orders were made prior to April 1, 1989."
8. Ld. Counsel further referred to the decision of Hon'ble Delhi High Court in the case of CIT Vs. Diwan Enterprises, 246 ITR 571,wherein at page 578 Hon'ble Delhi High Court has observed as under:
" In spite of the abovesaid plea of the petitioner having been rejected. The penalty imposed u/s 271 (1) (c) has still to be set aside though for a different reason and because the very foundation for initiation of the penalty proceedings in 10 ITA No.1, C.O. No.394 & 395/Del/2012 conspicuous by its absence. The opening clause of sub- section(1) of section 271 itself contemplates a finding as regards satisfaction of availability of grounds under clause (c) being recorded during the assessment proceedings. Recently, in CIT vs. Ram Commercial Enterprises Ltd. (I.T. C No. 13 of 1996 decided on October 8, 1998 - Since reported in (2000) 246 ITR 568 (Delhi), following the law laid down by their lordships of the Supreme Court in D. Manasvi V. CIT (1972) 86 ITR 557 and CIT V. S. V. Angidi Chettiar (1962) 44 ITR 739 (SC), we have held that unless requisite satisfaction was recorded in the proceedings under the Act, which would mean the assessment proceedings, the jurisdiction to initiate the penalty proceedings could not have been exercise. Satisfaction has to be before the issue of notice or initiation of any step for imposing penalty. In the case at hand we find the Assessing Officer having nowhere recorded till the conclusion of the assessment proceedings his satisfaction that the assessee had concealed the particulars of his income or furnished inaccurate particulars of such income. This is a jurisdictional defect which can not be cured. The initiation of the penalty pro9ceedings was itself bad and, consequently, all the subsequent proceedings leading up to the passing of the penalty order must fail. C.W.P. No. 3869 of 1997 is, therefore, liable to be allowed."
9. Ld. Counsel further referred to the decision of Hon'ble Delhi High Court in the case of CIT vs. Ram Commercial Enterprises Ltd. 246 ITR 568, wherein, it was observed as under:
"The satisfaction as to the assessee having concealed of such income is to be arrived at income or furnished inaccurate particulars of such income is to be arrived at by the Assessing Officer during the course of any proceedings under the Act, which would mean the assessment proceedings, without which, the very jurisdiction to initiate the penalty proceedings is not conferred on the assessing authority by reference to clause (c) of sub- section (1) of section 271 of the Income Tax Act, 1961.11 ITA No.1, C.O. No.394 & 395/Del/2012
A bare reading of the provisions of Section 271 and the law laid down by the Supreme court makes it clear that, it is the assessing authority who has to from his own opinion and record his satisfaction before initiating the penalty proceedings. Merely because the penalty proceedings have been initiated it cannot be assumed that such a satisfaction was arrived at:
Held, dismissing the application to direct reference, that the Tribunal had found that the assessment order did not record the satisfaction as warranted by section 271 for initiating proceedings. The Tribunal was justified in cancelling the penalty. No questing of law arose from its order."
With reference to aforementioned decisions, Ld. Counsel submitted that mere initiation of penalty proceedings, without recording satisfaction, is not sufficient for imposing penalty.
10. Ld. Counsel further referred to section 271 (1)(B) inserted by Finance Act, 2008 with retrospective effect from 01.04.1989, Which reads as under:
"Where any amount is added or disallowed in computing the total income or loss of an assessee in any order of assessment or reassessment and the said order contains a direction for initiation of penalty proceedings under clause (c) of sub- section (1), such an order of assessment or reassessment shall be deemed to constitute satisfaction of the Assessing Officer for initiation of the penalty proceedings under the said clause (c)."
11. Ld. Counsel pointed out that no such amendment has been made in section 13 of Interest Tax Act and as noted earlier, section 271 has not been made applicable by section 21 of the Interest Tax Act. He, therefore, submitted that in view of various decisions of Hon'ble Delhi High Court noted earlier, the penalty deserves to be set aside. 12 ITA No.1, C.O. No.394 & 395/Del/2012
12. Ld. DR submitted that there is no dispute that additions made by Assessing Officer in regard to bill discounting charges as interest income were confirmed by Hon'ble High Court and it also been held that penalty is exigible in such case.
13. We have considered the submissions of both the parties and have perused the record of the case. As far as legal position is concerned, the same has succinctly been explained by Ld. AR and there cannot be any quarrel with the proposition that the Assessing Officer is required to record his satisfaction in course of assessment proceedings as warranted u/s 13 of the Interest Tax Act, regarding concealment of income or for furnishing of inaccurate particulars of income. Further no provision analogous to section 271(1)(B) has been inserted in the Interest Tax Act, which could warrant levy of penalty merely on the ground of additions being made without recording satisfaction regarding concealment of income or furnishing of inaccurate particulars of income. In the backdrop of this legal position when we examine the facts of the present case, we find that Assessing Officer has not recorded satisfaction in course of assessment proceedings and simply initiated penalty. Hon'ble Delhi High Court in the case of CIT vs. Ram Commercial Enterprises Ltd. 246 ITR 568 (Supra) has observed that merely because penalty proceedings had been initiated it cannot be concluded that 13 ITA No.1, C.O. No.394 & 395/Del/2012 satisfaction as warranted u/s 13 was arrived at. In the case of Diwan Enterprises (Supra), Hon'ble Delhi High Court held that unless requisite satisfaction was recorded in the proceedings under the Act, the jurisdiction to initiate the penalty proceedings could not have been exercised. Thus, the entire penalty proceedings were without jurisdiction.
14. We, therefore, allow both the cross objections viz C.O. Nos. 394 & 395 for assessment years 1996-97 and 1997-98 respectively and allow ground no.2, 2.1 and 3 of ITA No.1 for assessment year 1998-99.
In the result ITA No. 1 for assessment year 1998-99 is partly allowed and C.O. Nos. 394 and 395 are allowed.
Order pronounced in open court on 26th /10/ 2012.
Sd/- Sd/-
(Kul Bharat) (S.V.Mehrotra)
Judicial Member Accountant Member
Dated the 26th day of October, 2012
S.Sinha
Copy forwarded to
1. APPELLANT
2. RESPONDENT
3. CIT
4. CIT (A)
5. CIT(ITAT), New Delhi.
AR,ITAT
NEW DELHI.