M/s SMC Capitals Ltd.,, New Delhi v. ITO, New Delhi

ITA 1342/DEL/2010 | 2006-2007
Pronouncement Date: 26-05-2010 | Result: Allowed

Appeal Details

RSA Number 134220114 RSA 2010
Assessee PAN AABCS3706R
Bench Delhi
Appeal Number ITA 1342/DEL/2010
Duration Of Justice 2 month(s)
Appellant M/s SMC Capitals Ltd.,, New Delhi
Respondent ITO, New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 26-05-2010
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted G
Tribunal Order Date 26-05-2010
Assessment Year 2006-2007
Appeal Filed On 26-03-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH G : NEW DELHI) BEFORE SHRI R.P. TOLANI JUDICIAL MEMBER AND SHRI K.D. RANJAN ACCOUNTANT MEMBER ITA NO.1342/DEL./2010 (ASSESSMENT YEAR : 2006-07) M/S. SMC CAPITALS LIMITED VS. ITO WARD 13 (2) 11/6B 1 ST FLOOR SHANTI CHAMBERS NEW DELHI. PUSA ROAD NEW DELHI 110 005. (PAN : AABCS3706R) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI VED JAIN & MRS. RANO JAIN CAS REVENUE BY : MRS. NAMITA PANDEY SENIOR DR ORDER PER R.P. TOLANI JUDICIAL MEMBER : THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE OR DER OF CIT (APPEALS) FOR THE ASSESSMENT YEAR 2006-07. VARIOUS ISSUES ARE RAISED WHICH TAKE UP ONLY ONE GROUND I.E. CONFIRMATION OF PENALTY OF RS.90 000/- U/S 271 (1)(C) OF THE INCOME-TAX ACT. 2. BRIEF FACTS ARE THAT DURING THE ASSESSMENT PROCE EDINGS THE ASSESSING OFFICER NOTED THAT THE ASSESSEE COMPANY HAD EARNED A CAPITA L GAIN OF RS.13 10 272/- ON SALE OF INVESTMENT AGAINST WHICH CAPITAL LOSS OF RS.8 56 072/- HAD BEEN ADJUSTED. THE LOSS WAS CLAIMED ON ACCOUNT OF SALE OF A DEPRECIATI ON ASSET BEING A PORTAL SITE (IN THE BLOCK OF ASSETS COMPUTER AND SOFTWARE) AS IT WAS CLAIMED THAT THE PORTAL SITE HAVING A VALUE OF RS.11 31 072/- HAD BEEN SOLD FOR A SUM OF RS.2 75 000/-. WHILE ITA NO.1342/DEL./2010 2 COMPLETING THE ASSESSMENT . THE ASSESSING OFFICER D ISALLOWED THE LOSS OF RS.8 56 072/- BY REFERRING TO THE PROVISIONS OF SEC TION 50(2) OF THE ACT AND ACCORDINGLY INITIATED AND LEVIED PENALTY FOR CONCEA LMENT ON THE SAID DISALLOWED. 3. LEARNED COUNSEL FOR THE ASSESSEE CONTENDS THAT B OOKS OF ACCOUNT ARE AWAITED AND HAVE BEEN ACCEPTED. WHILE COMPUTING THE INCOME BY AN INADVERTENT MISTAKE LOSS ON SALE OF PORTAL SOFTWARE WAS CLAIMED AGAINST LONG-TERM CAPITAL GAINS ON SALE OF TOTAL EQUITY SHARES. THIS REVISED RETURN ACCEPT ING THIS MISTAKE WAS FILED AS SOON AS THIS INADVERTENT MISTAKE WAS REALIZED AND THE AM OUNT WAS OFFERED FOR TAXATION. NEITHER ANY INACCURATE PARTICULARS WERE FURNISHED N OR ANY FACTS WERE CONCEALED. A.O. HOWEVER IMPOSED THE PENALTY BY HOLDING THAT THE ASSESSEE DID NOT TAKE DUE CARE WHILE FILING THE ORIGINAL RETURN AND IT WAS ON LY AFTER A SPECIFIC QUERY THAT ASSESSEE OFFERED THE INCOME TO TAX AND HELD IT TO B E WILLFUL GROSS NEGLIGENCE AND A DISCLOSURE NOT BEING SUO MOTO PENALTY WAS IMPOSED WHICH WAS CONFIRMED BY THE CIT (A). 4. LEARNED COUNSEL FURTHER CONTENDS THAT THE BOOKS OF ACCOUNT AS AUDITED ARE ACCEPTED BY THE BOARD OF DIRECTORS. THEREAFTER THE MATTER IS HANDED OVER TO INCOME-TAX CONSULTANT WHO PREPARES THE RETURN OF IN COME ON THE BASIS OF DETAILS OF PROFIT & LOSS ACCOUNT BALANCE SHEET ETC. COMPUTAT ION OF INCOME REQUIRES THE SKILL AND EXPERTISE OF INCOME-TAX CONSULTANT ASSESSEE WAS UNDER BONAFIDE IMPRESSION THAT THE RETURN HAS COMPILED MAKING CORRECT CLAIMS. AS SOON AS A MISTAKE IN COMPUTATION WAS POINTED OUT THE SAME WAS CONSIDERED BY THE ASSESSEE AND OFFERED FOR TAXATION. ASSESSEE SUBMITTED ALL THE PRIMARY F ACTS AND DETAILS INCLUDING ITA NO.1342/DEL./2010 3 DEPRECIATION CHART DETAILS OF P&L ACCOUNT SCHEDUL E OF ASSETS AND SALE OF PORTAL. REVENUE AUTHORITIES HAVE INFERRED ADVERSELY ON THE FOLLOWING ISSUES :- (I) ASSESSMENTS ARE FRAMED ON LIMITED SIMPLE SCRUTI NY. THEREFORE THE ASSESSEE WAS TRYING TO TAKE A CHANCE WITH THE DEPAR TMENT THAT THE MISTAKE GOES UNDETECTED; AND (II) THE DETAILS WERE NOT FURNISHED SUO MOTO. IT WAS CONTENDED THAT ASSESSEE HAS HUMBLY STATED TH AT SAMPLE SCRUTINY NORMS CANNOT BE KNOWN AND ANTICIPATED BY THE ASSESSEE AT THE TIM E OF FILING OF RETURN. THE ASSESSEE CANNOT BE ASSUMED TO HAVE HATCHED OUT A SC HEME TO AVOID AN ORDINARY AMOUNT OF TAX OF RS.85 000/-. MISTAKE WAS INADVERT ENTLY COMMITTED BY THE CHARTERED ACCOUNTANT AS SOON AS IT WAS NOTICED DURI NG THE COURSE OF ASSESSMENT ASSESSEE OFFERED THE SAME FOR TAXATION. 4.1 ASSESSEE HAS BEEN ASKED TO PROVE AS TO HOW THE INADVERTENT MISTAKE OCCURRED THERE CANNOT BE A DEMONSTRATIVE PROOF OF ASSESSEES INADVERTENCE WHICH HAS TO BE ASCERTAINED FROM THE SURROUNDING CIRCUMST ANCES. THIS BEING A CASE OF INADVERTENT MISTAKE PENALTY WAS NOT IMPOSABLE. RE LIANCE WAS PLACED ON THE FOLLOWING DECISIONS : (I) CIT VS. SKYLINE AUTO PRODUCTS (P) LIMITED 271 I TRL 335 (MP) IN THIS CASE THE ASSESSEE CLAIMED DEPRECIATION FOR FU LL YEAR AND THOUGH ELIGIBLE FOR FRACTION OF THE YEAR RELYING ON HON'B LE SUPREME COURT JUDGMENT IN THE CASE OF HINDUSTAN STEEL VS. STATE O F ORISSA 83 ITR 24 PENALTY WAS HELD NOT TO BE LIABLE. ITA NO.1342/DEL./2010 4 (II) CIT VS. ASK ENTERPRISES 230 ITR 48 (BOM.) IN THIS CASE IT WAS FOUND THAT THE ASSESSEE HAD NOT INCLUDED AN ITEM IN THE CLOSING STOCK IN RESPECT OF A CHEMICAL TITANIUM DIOXIDE. IT WA S HELD THAT IT WAS AN INADVERTENT MISTAKE AND PENALTY WAS DELETED. 4.2 IT WAS CONTENDED THAT THE COURT HAS ALWAYS TAKE N INTO CONSIDERATION THE NATURE OF MISTAKE THE AMOUNT AND CIRCUMSTANCES. THERE BE ING NO FURNISHING OF INACCURATE PARTICULARS ASSESSEES CLAIM OF INADVERTENT MISTAK E BY TAX CONSULTANT HAVING NOT BEEN NEGATED THE ASSESSEES CASE DOES NOT CALL FOR PENALTY. 5. LEARNED DR ON THE OTHER HAND VEHEMENTLY RELIES ON THE ORDERS OF THE LOWER AUTHORITIES BELOW AND ON THE JUDGMENT OF THE HON'BL E DELHI HIGH COURT IN THE CASE OF CIT VS. ESCORTS FINANCE LIMITED 183 TAXMAN 453 HOLDING THAT IF THE ASSESSEE MAKES A CLAIM WHICH IS EX-FACIE INADMISSIBLE PENALT Y U/S 271(1)(C) IS IMPOSABLE. SINCE IN ASSESSEES CASE AS PER SECTION 50 (2) THE CLAIM OF SET OFF OF LOSS WAS NOT ELIGIBLE THE PENALTY HAS BEEN RIGHTLY IMPOSED BY CI T (A) BY FOLLOWING OBSERVATIONS : 2.4.1 SIMILARLY DURING THE PRESENT PROCEEDINGS THE LD. AR COULD NOT ADDUCE ANY JUSTIFICATION AS TO WHY THE SA ID WRONG CLAIM OF SET OFF OF LOSS WHICH IS NOT PERMISSIBLE AS PER LAW COULD BE MADE AT THE TIME OF FILING OF THE RETURN OF INCOME AND WHIC H IT WAS ABLE TO DETECT QUITE EASILY FOR DURING THE COURSE OF THE AS SESSMENT PROCEEDINGS. THE AR IS NOT RIGHT TO SAY THAT THE S ET OFF OF CLAIM HAS BEEN SURRENDERED VOLUNTARILY AS THE SAME HAS BEEN D ONE ONLY AFTER THE ASSESSING OFFICER ASKED FOR THE JUSTIFICATION O F THE SAME. THIS IS A CASE WHERE THE FACTS OF THE CASE LAW OF CIT VS. E SCORTS FINANCE LTD. (SUPRA) THE JURISDICTIONAL HIGH COURT HELD TH AT IN CASE OF FALSE CLAIM PENALTY FOR CONCEALMENT IS LEVIABLE EVEN THO UGH THE SAID CLAIM IS DECLARED IN THE RETURN OF INCOME. THE ABOVE DEC ISION WAS RENDERED IN VIEW OF THE FACT THAT EACH YEAR THE REVENUE HARDLY TAKES UP TO FIVE PERCENT OF RETURNS UNDER SCRUTINY U/S 14 3(2) OF THE ACT AFTER WHICH ASSESSMENT IS FRAMED UNDER SUB-SECTION (3) OF SECTION ITA NO.1342/DEL./2010 5 143 OF THE ACT. THEREFORE WITH THE HOPE THAT ITS RETURN MAY NOT COME UNDER SCRUTINY AND MAY BE ASSESSED ON THE BASI S OF SELF ASSESSMENT AN ASSESSEE CAN VENTURE TO GIVE WRONG INFORMATION. THE LOSS INCURRED ON SALE OF FIXED ASSETS CAN NEVER BE SET OFF AGAINST THE CAPITA GAINS AND IN FACT IN DOING SO THE APPEL LANT HAS CLEARLY FILED INACCURATE PARTICULARS OF ITS INCOME FOR THE PURPOS E OF EVADING TAX. THE CLAIM OF SET OFF OF LOSS AGAINST THE CAPITAL GA INS BY THE APPELLANT COMPANY ARE EX-FACIE INADMISSIBLE AND THUS IS A CLE AR CASE OF FALSE CLAIM MADE BY IT. APART FROM ESCORTS FINANCE LTD. (SUPRA) GUJARAT HIGH COURT ALSO IN THE CASE OF CIT VS. VIDYAGAURI N ATWARLAL AND ORS. (1999) 238 ITR 91 (GUJ.) HAD HELD THAT IN CASE OF FALSE CLAIM PENALTY FOR CONCEALMENT IS ATTRACTED. IN VIEW OF A BOVE REASONING I REJECT THE GROUNDS OF APPEAL AND SUSTAIN THE LEVY O F PENALTY FOR CONCEALMENT OF THE ASSESSING OFFICER. 6. LEARNED COUNSEL FOR THE ASSESSEE IN REJOINDER CONTENDS THAT HON'BLE DELHI HIGH COURT IN ESCORTS FINANCE LIMITED HAS HELD THAT IF THERE IS A FINDING OF FACT THAT THERE WAS AN INADVERTENT ERROR THE PENALTY U/S 271 (1)(C) SHOULD NOT BE IMPOSED. IN ESCORTS FINANCE THE ASSESSEE CLAIMED IN THE PROSPE CTUS ISSUED BY IT THAT THE CLAIM OF THE ASSESSEE WAS ALLOWABLE AS ADVISED BY CHARTERED ACCOUNTANT. IT WAS NOT THE EXPLANATION THAT THE CLAIM WAS MADE ON THE BASIS OF PERSON WHO PREPARED THE COMPUTATION AND FILED THE RETURN. HON'BLE DELHI HI GH COURT IN THIS CASE OBSERVED AS UNDER : 16. INSOFAR AS CLAIM OF CAPITAL LOSS IS CONCERNED THE ASSESSEE IS ABSOLVED BY THE AUTHORITIES BELOW ON THE GROUND THA T IT WAS AN INADVERTENT ERROR WHICH WAS CORRECTED BY THE ASSESS EE ITSELF BY FILLING REVISED RETURN AND OFFERING THE SAME DURING THE ASS ESSMENT PROCEEDINGS. ADMITTEDLY IT HAPPENED WHILE THE ASS ESSMENT PROCEEDINGS WERE GOING ON AND THE EXPLANATION FURNI SHED BY THE ASSESSEE BEFORE THE A.O. IN THOSE ASSESSMENT PROCEE DINGS WAS THAT THERE WAS AN INADVERTENT ERROR WHILE COMPUTING SUCH LOSS AND AS THE INDEXED COST OF INVESTMENT HAD BEEN REDUCED FROM PR OFIT ON SALES INSTATED OF SALE CONSIDERATION. THOUGH THERE MAY B E AN ELEMENT OF DOUBT AS TO WHETHER IT WAS AN INADVERTENT ERROR ON THE PART OF THE ASSESSEE OR HE FILED THE REVISED RETURN ONLY AFTER HE WAS CONFRONTED WITH THE SAME BY THE A.O. HOWEVER WHEN WE FIND TH AT A FINDING OF FACT REGARDING INADVERTENT ERROR IS RECORDED BY T HE TWO AUTHORITIES ITA NO.1342/DEL./2010 6 BELOW WE ARE NOT INTERFERING IN THE MATTER ON THIS ASPECT. IT IS MORE SO WHEN WE FIND THAT WHILE IMPOSING THE PENALTY THE A.O. HAS NOWHERE CONTRADICTED THAT AFORESAID ERROR WAS NOT I NADVERTENT. 7. WE HAVE HEARD THE RIVAL CONTENTIONS PERUSED THE MATERIAL ON RECORD AND GONE THROUGH THE CASE LAWS CITED BY BOTH THE PARTIES. A SSESSEES PLEA THAT THE MISTAKE WAS INADVERTENT HAS NOT BEEN CONTROVERTED THIS IS AN OBJECTIVE ISSUE AND INADVERTENCE HAS TO BE GATHERED FROM THE FACTS AND CIRCUMSTANCES. HON'BLE SUPREME COURT IN THE CASE OF HINDUSTAN STEEL LIMITED (SUPRA ) HAS HELD THAT THE PENALTY SHOULD NOT BE LEVIED MERELY BECAUSE IT IS LAWFUL TO DO SO. THE AMOUNT OF TAX INVOLVED IS ONLY RS.85 607/-. IT HAS NOT BEEN CLAI MED THAT THE BOOKS OF ACCOUNT AND STATEMENTS THEREFROM FILED BY THE ASSESSEE WERE ER RONEOUS INCOMPLETE OR PARTICULARS WERE INACCURATE OR CONCEALED. ASSESSEE MADE A CLAIM OF SET OFF OF LOSS AND HAS RIGHT FROM BEGINNING EXPLAINING THAT THE SA ME WAS DUE TO THE INADVERTENT MISTAKE OF TAX CONSULTANT. HON'BLE DELHI HIGH COUR T IN ESCORTS FINANCE LTD (SUPRA) ALSO HAS HELD THAT WHERE THERE IS AN INADVERTENT MI STAKE PENALTY U/S 271(1)(C) SHOULD NOT BE IMPOSED. IN THAT CASE ASSESSEES EXPLANATI ON THAT MISTAKE WAS DUE TO ADVICE OF CHARTERED ACCOUNTANT PUBLISHED IN PROSPECTUS ABO UT THE ALLOWABILITY OF CLAIM WAS FOUND TO BE NOT INADVERTENT. 7.1 THE PLEA OF THE REVENUE THAT THERE IS LIMITED S CRUTINY IN ASSESSMENT AND ASSESSEE TOOK A CHANCE CANNOT BE ACCEPTED AS THE AS SESSEE CANNOT BEFORE HAND AT THE TIME OF FILING RETURN ANTICIPATE THAT HIS CASE WILL NOT BE TAKEN UP IN SCRUTINY AND THE AMOUNT OF TAX INVOLVED IS LOW. ITA NO.1342/DEL./2010 7 8. IN BOTH THE ASSESSMENT AND PENALTY PROCEEDINGS ASSESSEES TAX CONSULTANT APPEARED AND FURNISHED THE ABOVE EXPLANATION WHICH INDICATES THAT THE MISTAKE ORIGINATED FROM THE SIDE OF TAX CONSULTANT. IN THE GIVEN FACTS AND CIRCUMSTANCES THE ASSESSEES CLAIM OF INADVERTENT ERROR CANNOT BE RUL ED OUT. RELYING ON HON'BLE SUPREME COURT JUDGMENT IN THE CASE OF HINDUSTAN STE EL LIMITED (SUPRA) AND HON'BLE DELHI HIGH COURT JUDGMENT IN THE CASE OF ES CORTS FINANCE LIMITED WE HOLD THAT THE ASSESSEES CLAIM OF INADVERTENT ERROR ON T HE PART OF INCOME-TAX RETURN CONSULTANT CANNOT BE FOUND TO BE IMPLAUSIBLE LOOKIN G AT THE LOW AMOUNT OF TAX INVOLVED AND FACTS AND CIRCUMSTANCES OF THE CASE. IN VIEW OF THE ABOVE WE DELETE THE PENALTY. 8. IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED IN OPEN COURT ON THIS 26 TH DAY OF MAY 2010 AFTER THE CONCLUSION OF THE HEARING. SD/- SD/- (K.D. RANJAN) (R.P. TOLANI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED THE 26 TH DAY OF MAY 2010 TS COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A)-XVI NEW DELHI. 5.CIT(ITAT) NEW DELHI. AR ITAT NEW DELHI.