M/s. Sahara Prime City Ltd, Lucknow v. ACIT, New Delhi

CO 73/DEL/2009 | 1999-2000
Pronouncement Date: 18-02-2010 | Result: Allowed

Appeal Details

RSA Number 7320123 RSA 2009
Bench Delhi
Appeal Number CO 73/DEL/2009
Duration Of Justice 9 month(s) 28 day(s)
Appellant M/s. Sahara Prime City Ltd, Lucknow
Respondent ACIT, New Delhi
Appeal Type Cross Objection
Pronouncement Date 18-02-2010
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted G
Tribunal Order Date 18-02-2010
Date Of Final Hearing 09-12-2009
Next Hearing Date 09-12-2009
Assessment Year 1999-2000
Appeal Filed On 20-04-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH `G : NEW DELHI BEFORE SHRI DEEPAK R. SHAH ACCOUNTANT MEMBER AND SHRI GEORGE MATHAN JUDICIAL MEMBER I.T.A. NO.1651/DEL/2008 ASSESSMENT YEAR : 1999-2000 ASSTT. COMMISSIONER OF INCOME-TAX M/S. SAHARA IN DIA INVESTMENT CORPN. CENTRAL CIRCLE-6 NEW DELHI. VS. LTD. (F ORMERLY KNOWN AS SAHARA INDIA CORP. LTD.) 1 KAPOORTHALA COMPLEX ALIGANJ LUCKNOW. C.O. NO.73/DEL/2009 ASSESSMENT YEAR : 1999-2000 M/S. SAHARA INDIA INVESTMENT CORPN. ASSTT. COMMI SSIONER OF INCOME-TAX LTD. (FORMERLY KNOWN AS SAHARA VS. CENTRAL CI RCLE-6 NEW DELHI. INDIA CORP. LTD.) 1 KAPOORTHALA COMPLEX ALIGANJ LUCKNOW. (APPELLANTS) (RESPONDENTS) DEPARTMENT BY : SHRI KISHORE B. SR. DR. ASSESSEE BY : S/SHRI AJAY VOHRA & ROHIT GARG ADVOCATE. O R D E R PER DEEPAK R. SHAH ACCOUNTANT MEMBER THIS APPEAL BY THE REVENUE AD CROSS OBJECTION BY TH E ASSESSEE ARE DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF I NCOME-TAX (APPEALS)-I NEW DELHI DATED 19 TH FEBRUARY 2008 FOR THE ASSESSMENT YEAR 1999-2000 I N 2 AN APPEAL AGAINST ORDER LEVYING PENALTY UNDER SECTI ON 271(1)(C) OF THE INCOME-TAX ACT 1961 (THE ACT). 2. THE REVENUE CHALLENGES CANCELLATION OF PENALTY L EVIED. IN THE CROSS OBJECTION THE ASSESSEE SUPPORTS THE ORDER OF THE LE ARNED CIT(A). 3. THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF TRADING AND INVESTMENT. THE ASSESSEE FILED RETURN OF INCOME DE CLARING TOTAL INCOME OF RS.49 13 263/-. THE CASE WAS SELECTED FOR SCRUTINY . THE ASSESSEE INTER ALIA CLAIMED DEDUCTION IN RESPECT OF PROVISION MADE FOR NON-PERFORMING ASSET (NPA) AMOUNTING TO RS.27 04 048/- ON THE BASIS OF R BI GUIDELINES AS APPLICABLE TO THE ASSESSEE. DURING THE COURSE OF A SSESSMENT PROCEEDINGS ON 12.11.2001 CERTAIN QUERIES WERE RAISED INTER ALIA R EGARDING PROVISION FOR NPA. THE ASSESSEE VIDE LETTER DATED 15.12.2001 WIT HDREW ITS CLAIM IN RESPECT OF PROVISION MADE ON ACCOUNT OF NPA BY SUBM ITTING THAT THE PROVISION WAS MADE AS PER RBI GUIDELINES BUT ON THE LEGAL ADVICE RECEIVED SUBSEQUENTLY THE SAID CLAIM IS WITHDRAWN AND REVIS ED COMPUTATION IS FILED. THE ASSESSEE PAID TAXES WITH INTEREST THEREON. THE ASSESSING OFFICER INITIATED PENALTY PROCEEDINGS AND HELD THAT ACT OF REVISING COMPUTATION ON THE PART OF THE ASSESSEE WAS NOT A VOLUNTARY ACT. THE ASSESSEE IS A PART OF SAHARA GROUP WHO IS ASSISTED BY PROMINENT LEGAL ADV ISORS. SINCE PROVISION FOR NPA WAS CLEARLY AN INADMISSIBLE ITEM AND THE CL AIM OF DEDUCTION WAS 3 REVERSED ONLY AFTER THE ASSESSING OFFICER HAS POINT ED OUT THE SAME THE CONTENTION OF THE ASSESSEE IS WITHOUT MERIT AND HEN CE LIABLE TO PENALTY U/S 271(1)(C) OF THE ACT FOR FURNISHING INACCURATE PART ICULARS OF INCOME. 4. BEFORE THE LEARNED CIT(A) IT WAS CONTENDED THAT THE ASSESSEE IS ENTITLED TO PUT UP ANY CLAIM AT ANY TIME BEFORE COM PLETING OF ASSESSMENT PROCEEDINGS. PROVISION FOR NPA WAS MADE AS PER NON BANKING FINANCE COMPANIES (PRUDENTIAL NORMS) GUIDELINES 1998 ISSUE D BY RESERVE BANK OF INDIA. HOWEVER ON SUBSEQUENT LEGAL ADVICE THE CLA IM WAS WITHDRAWN. THEREFORE IT IS A VOLUNTARY WITHDRAWAL OF CLAIM AN D HENCE NOT LIABLE FOR PENALTY. THE ASSESSEE ALSO RELIED UPON THE FOLLOWI NG JUDGMENTS:- (I) CIT VS. CHOHAL INVESTMENT LTD. (2008) 166 TAXMAN 24 2 (DEL); (II) CIT VS. JAI BHARAT MARUTI LTD. (2007) 165 TAXMAN 24 0 (DEL); (III) CIT VS. BHARAT HOTELS LTD. (2007) 165 TAXMAN 593 (D EL); (IV) T. ASHOK PAI VS. CIT (2007) 292 ITR 11 (SC); (V) DILIP N.SHROFF VS. JCIT & ANOTHER (2007) 291 ITR 51 9 (SC);& (VI) CIT VS. RAM COMMERCIAL ENTERPRISES LTD. (2000) 246 ITR 568. THE LEARNED CIT(A) FOUND THAT FROM THE FACTS OF THE CASE AND RATIO OF THE JUDGMENTS CITED PENALTY IS NOT LEVIABLE. REVENUE IS IN FURTHER APPEAL BEFORE US. 4 5. THE LEARNED DR SHRI KISHORE B. SUBMITTED THAT TH E ORDER BY THE LEARNED CIT(A) IS A NON-SPEAKING ORDER IN THE SENSE THAT NEITHER THE RATIO OF THE DECISIONS CITED HAS BEEN BROUGHT OUT NOR IT IS DEMONSTRATED AS TO HOW THE CLAIM WAS BONA FIDE. HE FURTHER SUBMITTED THAT ONL Y AFTER THE QUERY WAS RAISED THE ASSESSEE CAME FORWARD WITH A PLEA WITHD RAWING THE CLAIM FOR PROVISION FOR NPA. THEREFORE BUT FOR THE QUERY RA ISED THE ASSESSEE WOULD NOT HAVE COME FORWARD. THIS AMOUNTS TO FURNISHING INACCURATE PARTICULARS OF INCOME AND HENCE LIABLE FOR PENALTY U/S 271(1)(C ) OF THE ACT. 6. THE LEARNED COUNSEL FOR THE ASSESSEE SHRI AJAY V OHRA ON THE OTHER HAND SUBMITTED THAT THOUGH THE ORDER MAY APPEAR TO BE NON-SPEAKING ORDER YET IN VIEW OF THE CROSS OBJECTION THE ASSESSEE CA N DEMONSTRATE THAT THE PENALTY IS NOT LEVIABLE ON FACTS. IT WAS SUBMITTED THAT THE QUERY WAS MERELY ASKING FOR EXPLANATION AS TO PROVISION FOR NPA AND NOT BY FINDING THAT SUCH PROVISION IS NOT ALLOWABLE. THE ASSESSEE WAS ADVIS ED THAT THE CLAIM MAY NOT BE SUSTAINABLE AND HENCE INSTEAD OF LITIGATING THE CLAIM WAS WITHDRAWN. HOWEVER AT THE TIME WHEN THE RETURN WAS FILED THER E WAS DIFFERENCE OF JUDICIAL OPINION AS TO ALLOWABILITY OF PROVISION FO R NPA ON THE BASIS OF RBI GUIDELINES. THE DISPUTE WAS RESOLVED ONLY AFTER TH E DECISION OF SPECIAL BENCH OF TRIBUNAL WAS RENDERED IN THE CASE OF NEW I NDIA INDUSTRIES LTD. VS. ACIT 112 TTJ 917. THIS DECISION WAS RENDERED ON 2 6 TH OCTOBER 2007. 5 PRIOR TO THIS THERE WERE DIFFERENCE OF OPINION IN T HE TRIBUNALS ORDER. THE CHENNAI BENCH OF TRIBUNAL IN THE CASE OF OVERSEAS S ANMAR FINANCIAL LTD. VS. JT. CIT 86 ITD 602 HELD THAT PROVISION FOR NPA MADE IN CONSONANCE WITH PRUDENTIAL NORMS OF RBI HAS TO BE ALLOWED FOR DEDUCTION IN COMPUTING THE INCOME. SIMILAR VIEWS WERE ALSO HELD BY ITAT DELHI IN THE CASE OF HINDUSTAN COMMERCIAL INVESTMENT TRUST LTD. VS. DCIT IN ITA NO.1912/DEL/2002 AND IN THE CASE OF TEDCO INVESTMEN T & FINANCIAL SERVICES (P) LTD. 87 ITD 298. THEREFORE IT CANNO T BE SAID THAT IN ALL THE CASES THE PROVISION FOR NPA IS NOT ALLOWABLE AT ALL . SINCE THE RETURN WAS FILED ON THE BASIS OF THE THEN PREVAILING VIEW AS APPROVE D BY THE TRIBUNAL IT CAN BE CONSIDERED TO BE A BONA FIDE VIEW. THEREFORE S INCE ON LATER DATE WHEN THE ASSESSEE WAS ADVISED TO WITHDRAW THE CLAIM AND THE CLAIM WAS ACCORDINGLY WITHDRAWN IT DOES NOT AMOUNT TO FURNIS HING INACCURATE PARTICULARS OF INCOME. SIMILAR VIEW HAS BEEN HELD BY ITAT MUMBAI IN THE CASE OF DCIT VS. FORD CREDIT KOTAK MAHINDRA LTD. IN ITA NO.1219/MUM./2007 DATED 4 TH DECEMBER 2008 COPY OF WHICH IS FILED AT PAGES 86 & 87 OF THE PAPER BOOK. HE ACCORDINGLY PL EADED THAT THE PENALTY IS NOT LEVIABLE. 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. THE I SSUE TO BE EXAMINED IS WHETHER THE CLAIM WHEN ORIGINALLY MADE IN THE RE TURN OF INCOME WAS BONA 6 FIDE AND THE SUBSEQUENT WITHDRAWAL OF SUCH CLAIM IS ALSO BONA FIDE. WE FIND THAT AS PER THE ENQUIRY DATED 2.11.2001 THE ASSESS EE WAS MERELY ASKED TO EXPLAIN THE PROVISION FOR NPA. PRIMA FACIE THE AS SESSING OFFICER WAS OF THE OPINION THAT IT IS A PROVISION FOR UNASCERTAINE D EXPENSE. THEREFORE IT CANNOT BE SAID THAT THE ASSESSING OFFICER HAD ALREA DY FORMED CONCLUSIVE OPINION SO AS TO HOLD THAT THE CLAIM IS NOT ALLOWAB LE. WHEN THE PROVISION WAS MADE THE SAME WAS BASED ON THE PRUDENTIAL NORM S ISSUED BY RBI WHICH THE ASSESSEE IS MANDATORILY REQUIRED TO FOLLO W. THE CLAIM IS ALSO FOUND IN ACCORDANCE WITH THE VIEW ADOPTED BY TRIBUN AL IN THE CASES CITED BY THE LEARNED AR. THEREFORE IT CAN BE SAID THAT WHE N THE CLAIM WAS MADE THE SAME WAS BONA FIDE CLAIM SUPPORTED BY JUDICIAL OPIN ION OF THE TRIBUNAL. THE DECISION OF THE SPECIAL BENCH WAS RENDERED MUCH AFTER THE ASSESSMENT WAS COMPLETED. SINCE THE ASSESSEE WANTED TO AVOID LITIGATION THE CLAIM WAS WITHDRAWN WITHOUT ADMITTING THAT THE SAME WAS A BOG US CLAIM. WE THEREFORE HOLD THAT THE CLAIM WAS A BONA FIDE CLAI M AND EVEN THE WITHDRAWAL OF SUCH CLAIM WAS ALSO BASED ON SOUND LEGAL OPINION . THIS ACTION CAN ALSO BE CONSIDERED TO BE A BONA FIDE ACTION SO AS TO EXO NERATE THE ASSESSEE FROM THE CLUTCHES OF PENALTY UNDER SEC. 271(1)(C) OF THE ACT. THE PENALTY IS LEVIED FOR FURNISHING INACCURATE PARTICULARS OF INCOME. H OWEVER THE PARTICULARS WERE CORRECTLY FILED. IT WAS ONLY A DIFFERENCE OF O PINION BETWEEN THE ASSESSEE 7 AND THE ASSESSING OFFICER THAT THE CLAIM IS NOT ALL OWABLE. HOWEVER THE CLAIM IS NOT PRIMA FACIE INADMISSIBLE. THEREFORE WHEN THE CLAIM WAS MADE IN THE RETURN OF INCOME FILED ORIGINALLY THE SAME BEING BONA FIDE DO NOT AMOUNT TO FURNISHING INACCURATE PARTICULARS OF INCO ME. SIMILAR VIEW HAS BEEN HELD BY ITAT MUMBAI IN THE CASE OF FORD CREDIT KOTAK MAHINDRA LTD. (SUPRA) WHEREIN IT HAS BEEN OBSERVED AS UNDER:- 7. HEARD SHRI ANKUR GARG THE LEARNED DEPARTMENTA L REPRESENTATIVE. ON THE FACTS THAT HAVE BEEN ALREAD Y NARRATED ABOVE WE ARE OF THE CONSIDERED OPINION THAT THE FI RST APPELLATE AUTHORITY WAS RIGHT IN CANCELLING THE PENALTY FOR M ORE THAN ONE REASON. THE LEVY OF PENALTY ON BOTH THE ISSUES IN OUR CONSIDERED OPINION IS NOT WARRANTED FOR THE REASO N THAT THEY ARE HIGHLY DEBATABLE ISSUES ON WHICH MORE THAN ONE LEGAL INTERPRETATION COULD BE POSSIBLE. THE ASSESSEE HAD ORIGINALLY MADE CERTAIN CLAIMS SUCH AS DEPRECIATION @ 25% INST EAD OF 20% AND DEDUCTION ON PROVISION FOR DOUBTFUL DEBTS M ADE AS PER THE MANDATORY PRUDENTIAL NORMS ISSUED BY THE RBI B ASED ON JUDICIAL PRONOUNCEMENTS CITED IN BOTH THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A). ONCE A CLAIM IS MADE BASED ON CERTAIN JUDICIAL PRONOUNCEMENTS IT CANNOT BE SA ID THAT THE ASSESSEE HAS CONCEALED PARTICULARS OF INCOME NOR FU RNISHED INACCURATE PARTICULARS OF INCOME. IN THE CASE OF C LAIM OF DEPRECIATION THE ASSESSEE HAS SUO MOTU WITHDRAWN T HE ADDITIONAL CLAIM OF 5% CONSEQUENT TO THE DECSION O F THE JURISDICTIONAL HIGH COURT IN THE CASE OF M/S. KOTAK MAHINDRA FINANCE LTD. (SUPRA). SIMILARLY IN VIEW OF THE RET ROSPECTIVE AMENDMENT TO SECTION 36(1)(VII) THE ASSESSEE REVERS ED ITS CLAIM OF PROVISION FOR DOUBTFUL DEBTS. THIS ALSO WAS A SUO MOTU ACTION. THE ALLOWABILITY OR OTHERWISE OF A PROVISI ON FOR NON PERFORMING ASSETS DEBITED TO THE PROFIT AND LOSS AC COUNT WERE THE SUBJECT MATTER OF DEBATE AND THE SPECIAL BENCH IN THE CASE OF NEW INDIA INDUSTRIES LTD. VS. ACIT 16(1) NEW DE LHI 18 SOT (DEL)(SB) AND IN VIEW OF THE RETROSPECTIVE AMEN DMENT IT WAS HELD THAT THE CLAIM CANNOT BE ALLOWED. THIS VE RY REFERENCE 8 TO THE DELHI SPECIAL BENCH DECISION ABUNDANTLY PROV ES THAT THE ISSUES UNDER CONSIDERATION WERE HIGHLY DEBATABLE ON ES. THE EXPLANATION OFFERED BY THE ASSESSEE WAS A BONA FIDE EXPLANATION. IN THIS BACK DROP WE FIND THE DECISIO N OF THE FIRST APPELLATE AUTHORITY IS IN CONFORMITY WITH THE FOLLO WING CASE LAWS. 7.1 THE HONBLE SUPREME COURT IN THE CASE OF CIT VS . SURESH CHANDRA MITTAL 251 ITR 9 (SC) HELD THAT PENA LTY NEED NOT BE LEVIED WHEN AN EXPLANATION HAS BEEN OFFERED BY THE ASSESSEE AND WHERE THE EXPLANATION IS FOUND NOT TO BE FALSE AND IS BONAFIDE. 7.2 THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. FREEMENTLE INDIA TELEVISION PRODUCTION P LTD. (2007 ) 294 ITR 88 (DEL) WAS CONSIDERING A SIMILAR CASE WHEREIN THE ASSESSEE WITHDREW ITS CLAIM OF DEDUCTION OF FORMAL FEE TO FO REIGN COLLABORATORS BY ACCEPTING THE ASSESSING OFFICERS INTERPRETATION THAT THE ACCRUAL WAS IN THE LATER YE AR. THE HONBLE COURT HELD THAT MERELY BECAUSE IT WAS ADMIT TED PENALTY DOES NOT BECOME EXIGIBLE. MERELY BECAUSE T HE DEPARTMENT HAS A DIFFERENT PERCEPTION FROM THAT OF THE ASSESSEE AS REGARDS COMPUTATION OF INCOME FOR TAX PURPOSES PENALTY CANNOT BE LEVIED. 7.3 SIMILARLY IN THE CASE OF CIT VS. SPAN HOLDINGS LTD. 294 ITR 83 (DEL) THE ASSESSEES CLAIM FOR DEPRECIATION ON THE BASIS OF SALE AND LEASE BACK OF A BIO-GAS PLANT ITS GENU INENESS COULD NOT BE QUESTIONED MERELY BECAUSE THE ASSESSEE WAS N OT ABLE TO PRODUCE THE MANAGING DIRECTOR OF THE LESSEE COMPANY PENALTY WAS FOUND TO BE NOT LEVIABLE. ON THE BASIS OF FACTS OF THE PRESENT CASE AND THE O RDER OF THE TRIBUNAL EXTRACTED HEREINABOVE IT IS NOT A FIT CASE FOR CON FIRMING LEVY OF PENALTY U/S 271(1)(C) OF THE ACT FOR FURNISHING INACCURATE PART ICULARS OF THE INCOME. WE 9 ARE THEREFORE UNABLE TO CONFIRM THE PENALTY LEVIE D UNDER SECTION 271(1)(C) OF THE ACT. 8. IN THE RESULT THE APPEAL IS DISMISSED AND CROSS OBJECTION IS ALLOWED. PRONOUNCED IN THE OPEN COURT ON 18 TH FEBRUARY 2010. SD/- SD/- (GEORGE MATHAN) (DEEPAK R. SHAH) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 18 TH FEBRUARY 2010. COPY OF THE ORDER FORWARDED TO:- 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR BY ORDER *MG DEPUTY REGISTRAR ITAT.