IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH : F: NEW DELHI
BEFORE SHRI I. C. SUDHIR, JUDICIAL MEMBER
AND
SHRI N.K. SAINI, ACCOUNTANT MEMBER
ITA No. 4990/Del/2012
Assessment Year: 2008- 2009
M/s. Riffleberg Capital (P) Ltd. Vs. Addl. CIT,
F-217A, Sainik Farms, Circle-15(1)
New Delhi. New Delhi.
(Appellant) (Respondent)
Appellant by : Dr. Rakesh Gupta, Advocate, Rishabh Kapoor, Advocate
Respondent by : Shri Vikram Sahay, Sr. DR
ORDER
PER I.C. SUDHIR, JUDICIAL MEMBER
The assesee has questioned first appellate order whereby the Ld.
CIT(A) has upheld the levy of penalty of Rs. 19,87,283/- u/s 271(1)(c) of
the Income Tax Act, 1961 made by the AO.
2. We have heard and considered the arguments advanced by the parties
in view of orders of the authorities below, material available on record and
the decisions relied upon.
3. The facts in brief are that during the course of assessment proceedings
the AO noticed that assessee company had included Security Transactions
Tax (STT) of Rs. 49,90,683/- in the value of credit shares during the year.
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Sale and purchase value of shares were shown under valued and over
valued by the same amount of Rs. 49,90,683/- on account of STT. The AO
was of the view that as per section 40(a)(ib) of the Income Tax Act, 1961
the STT is not an allowable expenses under the head "Income from
Business and Profession." The AO accordingly made addition of Rs.
49,90,683/- to the income of the assessee. The AO made further addition of
Rs. 54,000/- u/s 94(7), SIT disallowance of Rs. 85,179/- aggregating to Rs.
1,39,719/- and disallowance u/s 14A amounting to Rs. 8,15,040/-. The
penalty in question has been levied on these additions. Regarding the
penalty levied on the ground that the assessee had claimed STT in its profit
and loss account and has thereby reduced its income by concealing the
particulars of income, Ld. AR submitted that assesses had not concealed
particulars of income or furnished inaccurate particulars of income when it
claimed SIT in its profit and loss account as according to the assessee, it
was a case of bonafide error. Without prejudice to this argument the Ld. AR
submitted further that there is no tax sought to be evaded in the present
case even if the allegation of AO is taken as correct. He submitted that
there were two possibilities in the question of law regarding STT. The first
possibility was that upto assessment year 2008-09 no deduction from
income (due to section 40(a)(ib)) was allowable but the reduction from tax
u/s 88E was allowable. The second possibility was that deduction from
income u/s 36(i)(xv) was allowable but no reduction from tax (due to
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specific mention in Section 88E(iii) was allowable. This possibility was
available from asstt. Year 2009-10. The assesee under its bonafide belief
availed the possibility discussed above in the asstt. Year under
consideration which was made available by Finance Act 2008 w.e.f. asstt.
Year 2009-10.
4. Ld. AR submitted that there was no wrong information given, no
wrong particulars of tax payable, no wrong amount of STT was furnished.
He pointed out further that there was no revenue implications as it is
evident from ITNS-150 in which after making the correct assessment , there
was no tax payable due to availability of reduction/rebate of tax u/s 88E
thus it was a case where instead of deduction of STT from the income,
reduction of STT from the tax was to be allowed.
5. Ld. AR submitted that assessee is in the purchase and sale of shares
as its business and had made an aggregate amount of Rs. 318.61 crores as
purchase and Rs. 319.22 crores as sales of shares. STT which is paid at the
time of purchases remained part of purchase price and was actually claimed
in profit and loss account purchases. There was no malafide or in other
words it was a case of bonafide error which is proved by the fact that in its
return of income, its tax liability was nil and the entire rebate on account of
STT u/s 88 E remained to be set off against any tax liability. Even if STT is
disallowed and additional tax is worked out yet there is no tax payable as
rebate on account of STT u/s 88E was still available to the assessee.
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ITA No.4990/Del/2012
Therefore, by claiming STT as an expense, there was no advantage to the
assessee which in turn proves that it was a case of bonafide error and it
was not a case of concealment of particular of income or furnishing
inaccurate particulars of income. In support he placed reliance on the
following decisions :-
1. DCIT vs. Shree Laxmi Investment ITA 895/Ahm/2010
order dated 23.7.2010
2. Pricewater House vs. CIT 348 ITR 306 (SC)
3. CIT vs. BrahmPutra Consortium Ltd. 348 ITR 339 (Delhi)
6. With assistance of charts made available at page No. 4 of the written
submissions, the Ld. AR submitted that there is no tax sought to be evaded
and thus there was no question of levy of penalty u/s 271(1)© of the Act.
In support he placed reliance on the decision of CIT vs. M/s. Nalwa Sons
Investments Ltd. 327 ITR 543 (Delhi), affirmed by Hon'ble Supreme Court.
7. Ld. AR also referred page Nos. 1 to 54 of the paper book which are
copies of audited balance sheet and profit and loss account showing the
amount of book profit in the purchase of shares which was exclusive of
STT, computation of income and return shown that tax after MAT credit
was nil and that rebate u/s 88 E remained unutilized ; revised computation
of income showing that after MAT receipt u/s 88E, there was nil tax liability
; details of purchase and sale of shares furnished during assessment
proceedings, submissions made during the penalty proceedings that STT
was inadvertently claimed and there was no gain to the assessee and STT
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could not utilized as rebate and submissions made before the Ld. CIT(A)
explaining the error because of amendment in section 40 of the Act.
8. Regarding the penalty levied on the addition of Rs. 54,000/- made
u/s 94(7) of the Act, STT disallowance of Rs. 85,719/- and disallowance u/s
14A amounting to Rs. 815040/-, the Ld. AR submitted that penalty cannot
be imposed in respect of two amounts in as much as the addition u/s 94(7)
itself was not maintainable as the shares of Suraj Diamond were purchased
on 6th and 7th February, 2007 as mentioned in the asstt. Order and also in
grounds before the Ld. CIT(A). Thus these shares were purchased much
before three months prior to the record date and thus section 94(7) is not
applicable. He submitted further that claim of STT is to be allowed as
expenditure incurred in connection with the transfer u/s 48 and hence there
was nothing wrong on the part of the assessee about this claim. The Ld. AR
referred page 17 of the paper book where the details of dividend showing
that dividend of Rs. 54,000/- received on 10.9.2007 has been made
available.
9. Regarding disallowance made us/14A of the Act, the Ld. AR
submitted that the disallowance was made not on account of indirect
expenses attributable to earning such tax exempt income but indirect
expense which is always a matter of subjective opinion. In support he
placed reliance on several decisions with emphasis on the decision of
Hon'ble Supreme Court in the case of Reliance Petro 322 ITR 158 (SC).
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10. Ld. DR on the other hand tried to justify the penalty levied and
upheld by the authorities below with the submission that there was no
bonafide mistake on the part of the assessee in claiming the benefit for
which it was not entitled to resulting in making of disallowance / addition by
the AO. He submitted further that the assesee has also lost in quantum.
11. Considering the above submissions we find that there is no reason
to doubt the bonafide of the assessee in making the claim as there was no
gain to the assesee as STT could not be utilized as rebate and secondly
there was no tax sought to be evaded. In both the situation i.e tax payable
on return income and tax position in the assessed income, the tax liability
was Nil. So far as other addition / disallowance made on account of section
94(7) and u/s 14A of the Act are concerned there is no reason to doubt the
above explanation of the assessee. Besides, the additions/disallowances on
which penalty in question has been levied, have been made undisputedly on
the basis of disclosure made by the assessee available on record. Hence it
can not be said beyond doubt in the present case that there was
concealment of particulars of income or furnishing inaccurate particulars
thereof on the part of the assesee to attract penal action u/s 271(1)(c) of
the Act on the disallowances / additions as discussed above. Nor is it the
case of the revenue that the assessee has failed to disclose fully and truly
all the material facts relating to particulars of income, the only mistake
committed by the assessee was that while computing the payable income
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and an amount which should have been disallowed due to provisions of
section 40(a) (ib) of the Act was not disallowed or added back by the
assessee. The reasons behind the other additions / disallowances has also
been explained by the assesee on which there is no reason to doubt its
bonafide. Having regard to the above stated facts in its totality we find that
the AO was not justified in imposing penalty u/s 271 (1) (c) of the Act on
the disallowances/additions made by the AO which were based on the
disclosure of the related facts by the assesee only. We thus while setting
aside the orders of the authorities below in this regard direct the AO to
delete the penalty levied u/s 271(1)(c) of the Act amounting to Rs.
19,87,283/-. The grounds are thus allowed.
In the result appeal is allowed.
The order is pronounced in the open court on 2nd February, 2015.
sd/- sd/-
(N.K. SAINI) ( I.C. SUDHIR )
ACCOUNTANT MEMEBER JUDICIAL MEMBER
Dated 2nd February, 2015
`Veena'
Copy of order forwarded to:
1. Appellant
2. Respondent
3. CIT(A)
4. CIT
5. DR
By Order
Dy. Registrar, ITAT
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