Income Tax Appellate Tribunal - Mumbai
International Fisheries Ltd ( Now ... vs Department Of Income Tax on 7 May, 2014
आयकर अपीलीय अिधकरण, आई' आई खंडपीठ मुंबई अिधकरण 'आई INCOME TAX APPELLATE TRIBUNAL MUMBAI - 'I' BENCH MUMBAI सव[ौी एच.एल एच एल.कारवा एल कारवा, कारवा अÚय¢ / एवं राजेÛि, ि लेखा सदःय Before S/Sh. H.L.Karwa,President & Rajendra,Accountant Member आयकर अपील सं/.ITA No. 117/Mum/2013, िनधा[रण वष[/ Assessment Year 2002-03 DCIT 1(2) International Fisheries Ltd. (Now R.No. 535, 5th Floor, Aayakar Merged with Hindustan Unilever Bhavan, M.K.Road, Vs. Ltd.) Hindustan Lever House, 165-
Mumbai-400020 66, Backbay Reclamation,
Mumbai-400020
PAN: AAACI1219E
(अपीलाथȸ/ Appellant) (ू×यथȸ/ Respondent)
अपीलाथȸ ओर से/ Appellant by : Shri Airiju Jaikaran
ू×यथȸ कȧ ओर से/Respondent by : None
सुनवाई कȧ तारȣख/ Date of Hearing : 07-05-2014
घोषणा कȧ तारȣख / Date of Pronouncement : 28- 05- 2014
आयकर अ िधिनयम,
िधिनयम 1961 कȧ धारा ( 1 ) 254 के अÛतग[ त आ दे श
Order u/s.254(1)of the Income-tax Act,1961(Act)
Per Rajendra,AM:
Challenging the order dated 22.10.2012 of the CIT(A)-2,Mumbai,Assessing Officer(AO) has raised following grounds of appeal:
1."Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in holding that there is no suppression of facts or there is no filing of inaccurate particulars of income and directed the Assessing Officer to delete the penalty levied. However, the facts are otherwise?"
2."The appellant craves leave to make add to, amend or withdraw aforesaid grounds of appeal."
2.Assessee-company,a subsidiary of Hindustan Lever Ltd.,filed its return of income on 28.10.2002,declaring the total loss at Rs.28.71 lakhs.AO finalised the assessment on 17. 01.2005,determining the income of the assessee at Rs.4.77 lakhs.He initiated penalty proceedings u/s.271(1)(c) of the Act for furnishing inaccurate particulars of income.
2.1.During the course of assessment proceeding,AO found that no business activity was carried out by the assessee during the year under appeal, that the only source of income was license fee amounting to Rs.5.40 lakhs received on let out of its plant at Pallaruthy, that the assessee had claimed expenditure of Rs. 46.59 lakhs on account of interest doubtful debt depreciation etc., that license fee received by the assessee was treated by it 2 ITA No. 117/Mum/2013 International Fisheries Ltd.
as business income.AO held that letting out of the factory premises was not a business activity of the assessee,it had already stopped all its business activity in earlier years, that the income was to be assessed under the head 'Income from other sources" u/s. 56 of the Act, that the claim made by the assessee on account of interest expenses, amounting to Rs.31.84 lakhs was not as per the provisions of the Act, that the fund was not borrowed for the purpose of business, it was taken to settle disputed sale tax liability of 1997-98, that assessee had claimed expenses of Rs. 2.09 lakhs under the head operating general expenses that except for the auditor's remuneration of Rs. 63,000/- no other expenses was incurred for business of the assessee.Meanwhile, assessee had filed appeal before the First Appellate Authority(FAA)who dismissed the appeal and his order was upheld by the Tribunal in its order dated 17.07.2009 subsequently AO took up the penalty proceedi
-ngs and asked the assessee to explain as to why the provisions of section 271(1)(c) of the Act should be invoked.After considering the submission of the assessee,AO levied a penalty of Rs. 15 lakhs vide his order dated 30.03.2010.
3.Assessee challenged the penalty order before the FAA.It was argued before him that assessee was engaged in the business of licensing its trademark, that the trademarks were business assets of the assessee,that the AO had consistently taxed the royalty income under the heads profit & gains of business from 1997-98 to 2001-02, that during the previous year relevant to AY-2001-02 it had sold trademark,that after selling it the assessee was getting income of license fees for use of premises of Pallaruthy plant, that it had not stopped its business activity,that the interest paid payable on unsecured loan taken from HLL and the expenses incurred were business expenditure, that assessee had furnished full particulars of income,that there was no material in possession of the AO on the basis of which disallowance was made, that the income from Pallaruthy plant was being assessed as business income by the AO for several years up to AY 2001-02, that AO had changed its opinion in the year under appeal and had taxed it under the head income from other sources, that the quantum appeal had been agitated before the Hon'ble Bombay High Court,that the disallowance made by the AO were solely on account of different view taken on same set of facts,that because of the difference of opinion AO had levied penalty u/s 271(1)(c), that the AO had failed to appreciate that mere disallow - ance of a claim in the assessment proceedings could not be the sole basis for levying concealment penalty,that assessee had disclosed full particulars as it was disclosing in the earlier years.
After considering the submissions of the assessee,assessment order and the penalty order of the AO,FAA held that assessee had returned the lease rental income from Pallaruthy plant under the head business or profession,that the AO had treated the said income as income from other sources,that the interest paid to HLL and the other administrative expenses incurred by the assessee were not allowed to be set of out of the lease rental income,that in earlier years the income from Pallaruthy plant was returned and assessed 3 ITA No. 117/Mum/2013 International Fisheries Ltd.
as business income,that the claim made under bonafide view that the income was assess - able under the head business,that there was no suppression of facts or filing of inaccurate particulars of income. Finally, he deleted the penalty levied by the AO.
4.Before us,Departmental Representative(DR)argued that assessee had concealed the particulars of income, that assessee was not carrying out any business, that claim made by the assessee with regard to the interest payment was not relatable to its business, that it had furnished inaccurate particulars of income.AR argued that penalty was levied because there was a change in the opinion of the AO,that the Hon'ble High Court had admitted the appeal of the assessee with regard to quantum appeal.He relied upon the cases of Reliance Petro products India Ltd.(322ITR158)
5.We have heard the rival submissions and perused the material before us.Undisputed facts are that the income of license fee from plant was offered by the assessee as business income in the earlier years and AO had assessed it under the same head.So, the assessee was under a bona fide belief that in the year under appeal same would be assessed under the same head.But,AO decided that income for license fee should be assessed as income from other sources.In our opinion,change in head of income cannot be termed concealment of income or furnishing of inaccurate particulars of income. Income received by the assessee from a particular source was disclosed by it ,may under another head,but such disclosure cannot be taken concealment.It is also a fact that the Hon'ble High Court had admitted the appeal of the assessee wherein decision of the quantum has been challenged.Thus,it is debatable matter.Courts are of the opinion that concealment penalty should not be levied where the issues are debatable. Similarly, addition of any item to the income of an assessee should not result in automatic levy of penalty u/s.271(1)(c)of the Act.Concealment of income or part of income is the basic requirement for invoking the provisions of the said section.In the case under considera - tion the assessee has not concealed the particulars of income-it had offered the income earned by it.AO and the assessee had difference of opinion about the head under which it should be assessed.In these circumstances, we are of the opinion that the order of the FAA does not suffer from any legal infirmity.So,confirming his order, effective ground of appeal is decided against the AO.
As a result,appeal filed by the AO stands dismissed.
फलतः िनधा[ǐरती अिधकारȣ Ʈारा दाǔखल कȧ गई अपील नामंजूर कȧ जाती है .
Order pronounced in the open court on 28th May,2014.
आदे श कȧ घोषणा खुले Ûयायालय मɅ Ǒदनांक 28 मई ,2014 को कȧ गई ।
Sd/- Sd/-
एच.एल
एच एल.कारवा
(एच एल कारवा / H.L.KARWA) (राजेÛि /RAJENDRA)
अÚय¢ / PRESIDENT लेखा सदःय/ACCOUNTANT
सदःय MEMBER
मुंबई/Mumbai,Ǒदनांक/Date: 28.05.2014
4 ITA No. 117/Mum/2013 International Fisheries Ltd.
SK
आदे श कȧ ूितिलǒप अमेǒषत/Copy
षत of the Order forwarded to :
1. Assessee /अपीलाथȸ 2. Respondent /ू×यथȸ
3. The concerned CIT (A) /संबƨ अपीलीय आयकर आयुƠ, 4.The concerned CIT /संबƨ आयकर आयुƠ
5. DR "I" Bench, ITAT, Mumbai /ǒवभागीय ूितिनिध आई खंडपीठ,आ.अ.Ûयाया.मुंबई
6. Guard File/गाड[ फाईल स×याǒपत ूित //True Copy// आदे शानुसार/ BY ORDER, उप/सहायक पंजीकार Dy./Asst. Registrar आयकर अपीलीय अिधकरण, मुंबई /ITAT, Mumbai