Income Tax Appellate Tribunal - Delhi
Addl. Cit, New Delhi vs M/S. Phi Seeds Pvt. Ltd., Hyderabad on 23 August, 2021
1 ITA Nos. 3083 & 3084/Del/2017
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH: 'F' NEW DELHI
BEFORE SHRI R. K. PANDA ACCOUNTANT MEMBER
AND
MS SUCHITRA KAMBLE, JUDICIAL MEMBER
I.T.A. No. 3083/DEL/2017 (A.Y 2008-09)
I.T.A. No. 3084/DEL/2017 (A.Y 2009-10)
(THROUGH VIDEO CONFERENCING)
Addl. CIT Vs PHI Seeds Pvt. Ltd.
Special Range-7, Room No. 211, 3rd Floor, 6-3-1100,
C. R. Building Babukhans Millennium
I.P. Estate, Centre, Raj Bhawan Road,
New Delhi Somajiguda Hyderabad
AACCP3920F
(APPELLANT) (RESPONDENT)
Appellant by Smt. Sushma Singh, CIT
DR
Respondent by Sh. Sandeep Bansal, CA
Date of Hearing 28.07.2021
Date of Pronouncement 23.08.2021
ORDER
PER SUCHITRA KAMBLE, JM
These two appeals are filed by the Revenue against order dated 23/02/2017 & 27/02/2017 passed by CIT(A)-7, New Delhi for assessment year 2008-09 & 2009-10.
2. The grounds of appeal are as under:-
I.T.A. No. 3083/DEL/2017 (A.Y 2008-09) "1. On the facts and in the circumstance of the case, the Ld.CIT(A) has erred in deleting the penalty levied by the Assessing Officer amounting to Rs 20,33,93,765/- by ignoring the fact that the assessee had made wrong claim for deduction under the provisions of Income Tax Act, 1961.2 ITA Nos. 3083 & 3084/Del/2017
I.T.A. No. 3084/DEL/2017 (A.Y 2009-10) "1. On the facts and in the circumstance of the case, the Ld.CIT(A) has erred in deleting the penalty levied by the Assessing Officer amounting to Rs 32,23,29,904/- by ignoring the fact that the assessee had made wrong claim for deduction under the provisions of Income Tax Act, 1961.
3. Both the appeals are having identical issues, therefore, we are taking up ITA No. 3083/DEL/2017 (A.Y. 2008-09). The assessee was in the business of producing/manufacturing of hybrid seeds and claimed its income as agricultural income thereby claiming exemption u/s 10(1) of the Act. The assessment in the case was made u/s 143(3) of the Income Tax Act, 1961 on 30.12.2011 on total income of Rs. 71,85,27,502/- as against returned income of Rs. 3,26,77,260/- thereby rejecting the claim of exemption u/s 10(1) and treated the same as business income. This was subsequently revised in an order u/s 154/143(3) dated 19.11.2012 at Rs. 67,31,69,480/-. The assessee company filed an appeal against the order of the Assessing Officer with CIT(A). The CIT(A) vide order dated 26.03.2013 confirmed the order of the Assessing Officer following the order of his predecessor in the earlier assessment years. Thereafter, the Assessing Officer passed penalty order u/s 271(1)(c) vide order dated 27.03.2015 levying penalty @ 100% of the Taxes on amount of income concealed at Rs. 20,33,93,765/-.
4. Being aggrieved by the assessment order, the assessee filed appeal before the CIT(A). The CIT(A) allowed the appeal of the assessee.
5. The Ld. DR submitted that in quantum appeal for the present Assessment Year the additions are confirmed vide common order dated 18.12.2017 for A.Ys. 2002-03, 2003-04, 2005-06, 2007-08, 2008-09, 2009-10 and 2010-11 being ITA Nos. 1988/Del/2006, 4383/Del/2006, 443/Del/2010, 5285/Del/2012, 3670/Del/2013, 1903/Del/2014, 4269/Del/2014 all 3 ITA Nos. 3083 & 3084/Del/2017 assessee's appeal and ITA No. 2223/Del/2014 appeal by revenue. The penalty appeals for A.Ys. 2004-05, 2006-07 and 2007-08 being ITA Nos. 6622/Del/2013, 6645/Del/2013 and 4366/Del/2015 were decided against the assessee by the Tribunal vide order dated 29.06.2018.
6. The Ld. AR filed written submissions as under:
"I. Quantum Appeals Admitted in High Court
1. Quantum Appeals for the said years - admitted by Delhi High Court vide order dated 25 Sep 2018 and 17th July 2018. (Refer Page 1 to 4 of PB 2).
2. Settled position that once the Question of Law is admitted by High Court, it shows matter is debatable and where the issue is debatable, penalty can't be levied.
3. Judgements : Delhi High Court Judgement - Mehta Charitable Prajanalaya Trust (Page 71 of PB 3 -Refer para 8); Liquid Investment & Trading Co. (Pg 9 of PB 2); and Bombay HC Judgment in the case of Navyug Builders & Developers (Pg 10 of PB 2). The aforesaid principle was duly followed by Delhi ITAT in a. Johnson Mathey India (Pg 51 of PB 5 - Para 11 of the Order) b. Standard Chartered Grindlays (Pg 14 of PB 2 - Para 7 & 11 of the Order) c. Perot Systems TSI India P Ltd. (Pg 19 & 20 of PB 2- Para 10 of the Order) d. Jindal Steel Power Ltd. ( Pg 35 of PB 2 - Para 6.14 of the Order) Also refer Pune ITAT judgement in the case of GKN Sinter Metals (Page 7 of PB 4-Para 15 of the Order) II. Charge in Penalty Notice no clear - Concealment or Inaccurate Particulars
4. Concealment and furnishing inaccurate particulars of income are separate and independent, carry different connotations and it is not possible to substitute one for the other. In the following cases, Courts have similarly held that considering that both charges are independent and carry different connotations, show cause notice issued under section 271(1)(c) of the Act not specifying exact charge for which penalty was proposed to be levied on an assessee was invalid and bad in law, since the assessee was not afforded an opportunity of defending itself qua the specific charge:
- Glory Lifesciences, Delhi ITAT - Pg 88 of PB 5 -Para 8 of the order 4 ITA Nos. 3083 & 3084/Del/2017
- Mohd Farhan A. Shaikh, Bombay HC-Larger Bench - Pg. 53-54 & 84 Of PB 5.
- FCI ASIA PTE LTD. Delhi ITAT - Pg 14 to 19 of PB 4
- SRIKANT SHAH - Delhi ITAT- Pg 10 to 13 of PB 4
- Manjunath Cotton and Ginning Factory: 359 ITR 565 (Kar)
- SSA Emerald Meadows: 73 taxmann.com 241 (Kar) [Revenue's SLP dismissed in 242 Taxman 180]
- New Sorathia Engg Co vs CIT: 282 ITR 642 (Guj)
- PCIT vs Smt. Baisetty Revathi: ITTA. No.684 of 2016 (AP & Telangana)
- CIT vs Shri Samson Perinchery: ITA No.1154 of 2014 dated 05.01.2017 (Bombay HC) Copy of Notices issued u/s 274 read with Section 271 are attached at Pg 20 of PB 4 III. Taxability of Income from Sale of Hybrid Seeds has been Contentious and Arguable
5. Assessment History - Ag. Exemption claim was duly accepted after Scrutiny Assessment for AY 1990-91, AY 1996-97 to AY 1998-99 (Pg 291-296 of PB 1 & Pg 151-152). Notice of Reopening case of past year - AY 2000-01 Page 75 of PB
3.
6. Refer Extract from Annual Report of NSAI (2017) - Pg 42 of PB 2.
7. Study Conducted by Directorate General of Income Tax (Research) in December 2002 - PB 1 [Refer Pg 209 Preface / Pg 216 Methodology / Pg 219 Supply Chain / Chapter 8 Pg 256]
8. IDF Report (PB 3) also talks about same thing as mentioned in Study by DGIR.
Refer Pg 2 and 12 of PB 3. And Pg 27 onwards describing Case Laws- admitting Pro Agro Seeds actually supports Sale of Hybrid Seeds case. Also Annexure 3 (Pg 66 of PB 3) of the Report.
9. Delhi HC in the case of Nalwa Sons held in case of debatable issue, penalty can't be levied. SC dismissed the appeal filed against the said proposition.(Pg 60 & 66 of PB 1) IV. Even if Claim not sustainable in law doesn't mean Penalty 5 ITA Nos. 3083 & 3084/Del/2017
10. Specific Finding by Ld Commissioner of Appeals that company has been able to give bonafide explanation and no inaccurate particulars of Income were furnished. (Pg 67-68 / Pg 83-84 of PB 2).
11. It is undisputed that Penalty in the case of the company has been levied on account of furnishing of Inaccurate Particulars. It has been held by SC in the case of Reliance Petroproducts that particulars as per Section 271 means particulars in Return of Income (PB 1 pg 55). Further it has been held by SC that just because claim made by the assesse is not acceptable to AO doesn't mean, penalty can be levied. There is no allegation in the Penalty Order that particulars of Income were not disclosed in Return. Infact that the company is claiming Agricultural Income has been disclosed in abundance in Return of Income as well as Tax Audit Report (Refer Pg 12 to 25 and Pg 37 to 50 of PB 1). The same is also evident from Financial Statement (Pg. 23 to 47 of PB 4). Also refer Delhi HC Order- Mehta Charitable Pg. 74 of PB-3.
12. Further AO has placed reliance on Delhi HC judgement in the case of Zoom Communications (Pg 97 PB 2). Every year company's case is being scrutinized since Year 2003. Just wonder how AO can infer that company made a claim thinking that its Return shall not be picked for scrutiny.
V. Delhi ITAT Order dated 29.06.18 (Pg 43 to 52 of PB 2) on Penalty in assesse's own case should not be followed
13. In para 9 of the Order (Pg 50 PB2), ITAT states that Monsanto Judgment has been distinguished which is incorrect. Attention is invited to ITAT judgment of the said case ( Pg 172 of PB 1- Para 7 of the Order) which lists out the activities and terms of arrangement between Monsanto Company and Gorwers. The facts of the Monsanto case are very much similar to that of assesse company and hence the argument that Monsanto judgement was distinguished is actually wrong.
14. ITAT has extracted findings from AY 2001-02 in penalty order (PB 2 page 50- para 11). Each year is different year and there is no allegations, for the year under review anywhere.
15. Assesse's Agricultural Exemption claim was challenged for the first time in AY 2001-02 relying upon Delhi ITAT judgement in the case of Pro Agro Seeds. In the said case also Penalty was deleted by Delhi HC ( Pg 78-79 of PB 1). This aspect not dealt with by ITAT in its order. Infact in Proagro's Case on Merits, the 6 ITA Nos. 3083 & 3084/Del/2017 issue involved was Sale of Germplasm and not Sale of Hybrid Seeds. (Refer Page 31 and 32 of PB 3).
16. Delhi ITAT while deciding on merits in assesse' s case relied on Namdhari Seeds judgement of Karantaka HC of 2011 but failed to consider judgement dated 18th July 2014 (Pg 255 to 274 of PB 2).
17. Bombay HC in the case of Ajeet Seeds (Pg 233 to 236 of PB 2) and Andhra Pradesh HC in the case of Prabhat Agri Biotech (Pg 225 to 227 of PB 2) delivered favorable judgments on merits wherein facts of the assesse company are very much similar.
18. The earlier ITAT Order is on Concealment whereas in the penalty orders for Current years the AO has alleged furnishing of Inaccurate Particulars."
The Ld. AR further submitted that the A.Y. 2004-05, 2006-07 and 2007-08, the penalty appeals before the Tribunal was allowed in favour of the revenue.
7. We have heard both the parties and perused all the relevant material available on record. It is pertinent to note that the quantum appeal in the present assessment year for which penalty has been imposed for the issue of exemption under Section 10 (1) has been decided by the Tribunal against the assessee. The penalty orders for A.Ys. 2004-05, 2006-07 and 2007-08 which was relied upon by the CIT(A) has been decided by this Tribunal vide order dated 29.06.2018 as under:
"12. On perusal of the above observation of the Assessing Officer, other paragraphs of the assessment order and arguments of the Ld. DR, we are of the opinion that the assessee company has actually purchased seeds from the farmers and claimed the said activity as agriculture income by way of creating a chain of documents or papers of lease agreements etc and thus the explanations furnished by the assessee are not found to be bonafide. The assessee has claimed its activity of purchase of the seeds from the farmers as agriculture income in a fraudulent manner to evade the taxes, which it was liable for carrying its business activity. It is not the simple case of disallowance of expenditure as in the case of reliance Petro products Private Limited(supra). In the instant case the real activity of purchase of the seeds 7 ITA Nos. 3083 & 3084/Del/2017 has been planned and arranged in such a way as it look like the agricultural activity but the assessee has not succeeded in camouflaging its real activity. One of the strange features in the kind of arrangement or documentation of the assessee is that in case of no yield or damage of crop, the expenses on labour or service or fertilizer etc. has to be borne by the farmer because in absence of no crop, there would be no procurement price to the farmer and the farmer will get nothing. In such circumstances, how the assessee could explain that the cultivation has been done by the company. Another strange feature is that how the assessee can claim as cultivator as its name is not appearing in the revenue land records maintained either as lessee of the land or the cultivator.
13. Further, if the logic of the assessee of the claim of agricultural income in the hands of the assessee is accepted as one of the opinion, then every businessman in the India, who buys crops from farmer, would become eligible for earning agriculture income by way of getting same lease agreements signed from the farmers and making accounting entries in their books of account to bifurcate the part of procurement price paid to farmer towards lease rent, fertilizer & chemical, labour & service charges. In our opinion, the assessee has made claim of agricultural income in mala fide manner and in gross abuse of the provisions of the Act.
14. In view of the aforesaid discussion, we hold the assessee liable for concealment of particulars of income. Accordingly, we reverse the finding of the Ld. CIT(A) and uphold the finding of the Assessing Officer on the issue in dispute. The grounds of the appeal of the Revenue are accordingly allowed."
It is pertinent to note that in the present assessment years i.e. 2008-09 and 2009-10 as well, the facts are identical to that of A.Ys. 2004-05, 2006-07 and 2007-08. In these two assessment years, the assessee company has purchased seeds from the farmers and claimed the said activity as agriculture income by way of creating a chain of documents or papers of lease agreements etc. which was not distinguished by the Ld. AR. The assessee has claimed its activity of purchase of the seeds from the farmers as agriculture income in a fraudulent manner to evade the taxes, which it was liable for carrying its business activity. Thus, the present assessment years also are not the simple case of disallowance of expenditure as in the case of Reliance Petro Products Private Limited(supra). The facts remains unchanged that the real activity of purchase 8 ITA Nos. 3083 & 3084/Del/2017 of the seeds has been planned and arranged in such a way as it look like the agricultural activity but the assessee has not succeeded in camouflaging its real activity. One of the strange features in the kind of arrangement or documentation of the assessee is that in case of no yield or damage of crop, the expenses on labour or service or fertilizer etc. has to be borne by the farmer because in absence of no crop, there would be no procurement price to the farmer and the farmer will get nothing. In such circumstances, how the assessee could explain that the cultivation has been done by the company. Another strange feature is that how the assessee can claim as cultivator as its name is not appearing in the revenue land records maintained either as lessee of the land or the cultivator. Since the Tribunal in preceding Assessment Years have already given a finding that the assessee made claim of agricultural income in mala fide manner in gross abuse of the provisions of the Income Tax Act and since the facts of the impugned year are identical, therefore, respectfully following the order of the Tribunal in assessee's own case in preceding year, we uphold the penalty imposed by the Assessing Officer. Thus, the order of the CIT(A) is reversed and we uphold the findings of the Assessing Officer. So far as, various decisions relied by the Ld. AR including the decision to the proposition that once substantial question of law is admitted by the Hon'ble High Court, no penalty is leviable is concerned, we do not find merit in the same particularly in present case as it has been held by us that the assessee claimed the agricultural income in mala fide manner and in gross abuse of provisions of the Act. If penalty cannot be levied in such type of cases, then the penalty provision in statue books will become otiose. Thus, the case laws relied by the Ld. AR does not come to the rescue of the assessee's case in the present assessment years in respect of penalty. Since, the assessee in the instant case has concealed the particulars of income and wrongly claimed the income as agricultural income in a mala fide manner, therefore the Assessing Officer has rightly imposed penalty under Section 271(1)(c) of the Act. The CIT(A) is not justified in deleting the penalty. Both the appeals of the Revenue are allowed.
9 ITA Nos. 3083 & 3084/Del/20178. In result, both the appeals of the Revenue are allowed. Order pronounced in the Open Court on this 23rd Day of August, 2021.
Sd/- Sd/-
(R. K. PANDA) (SUCHITRA KAMBLE)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Dated : 23/08/2021
R. Naheed *
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2. Respondent
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ITAT NEW DELHI