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Income Tax Appellate Tribunal, DELHI BENCH : F : NEW DELHI
Before: SHRI R.K. PANDA & MS SUCHITRA KAMBLE
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : F : NEW DELHI BEFORE SHRI R.K. PANDA, ACCOUNTANT MEMBER AND MS SUCHITRA KAMBLE, JUDICIAL MEMBER ITA No.6598/Del/2015 Assessment Year : 2000-01 Yum ! Restaurants Marketing Pvt. Ltd., Vs. ITO, 12th Floor, Tower D, Ward-27(4), Global Business Park, New Delhi. MG Road, Gurgaon. PAN: AAACY1883E (Appellant) (Respondent) Assessee by : Shri Salil Kapoor & Ms Ananya Kapoor, Advocates Revenue by : Shri Surender Pal, Sr. DR Date of Hearing : 12.02.2019 Date of Pronouncement: 15.02.2019 ORDER PER R.K. PANDA, AM: This appeal by the assessee is directed against the order dated 07th September, 2015 of the CIT(A)-9, New Delhi, relating to assessment year 2000-01.
Facts of the case, in brief, are that the assessee is a company in restaurant business. It filed its return of income on 29th December, 2000 declaring total loss of Rs.99,81,920/-. The return was processed u/s 143(1) on 8th May, 2001. Subsequently, on the basis of the report of the Special Auditor, the case of the assessee was reopened
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by issue of notice u/s 148. The Assessing Officer completed the assessment u/s 143(3)/147 on 29th December, 2006 determining the total income of the assessee at
Rs.2,54,61,031/-. However, after allowing carried forward business loss and
depreciation of earlier years, the total income was determined at nil. The assessee
preferred appeal before the CIT(A) against the various additions/disallowances made
by the Assessing Officer. However, there was not much relief and the ld.CIT(A)
upheld the findings of the Assessing Officer. Thereafter, the Assessing Officer
initiated penalty proceedings u/s 271(1)(c) of the IT Act on account of the following
three additions:- a) Excess lease rent for MD - Rs.12,60,000/- b) Disallowance on account of personal expenses - Rs.45,000/- c) Addition on account of capital nature of expenses - Rs.30,880/-
Total - Rs.13,35,880/-
Rejecting various explanations given by the assessee, the Assessing Officer
levied penalty of Rs.5,28,340/- u/s 271(1)(c). In appeal, the ld.CIT(A) confirmed the
penalty so levied by the Assessing Officer u/s 271(1)(c) of the Act.
Aggrieved with such order of the CIT(A), the assessee is in appeal before the
Tribunal by raising the following grounds:-
“The following grounds of appeal are mutually exclusive of and without prejudice to each another- 1. That on the facts and circumstances of the case and in law, the Ld. CIT(A) erred in upholding the order of the Ld. AO levying penalty on the appellant under Section 271(1 )(c) of the Act amounting to Rs. 5,46,098. 2
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That on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in upholding the levy of penalty in respect of the alleged excessive lease rentals paid for obtaining rent free accommodation for the managing director merely because the addition was upheld by the Hon'ble Income Tax Appellate Tribunal (TTAT) in the quantum proceedings. 3. That on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in upholding the levy of penalty in respect of the alleged personal expenditure and capital expenditure merely because the disallowance was upheld by the CIT(A) in the quantum proceedings. 4. That on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in upholding the levy of penalty merely because his predecessor has upheld the penalty on similar issues in other years. 5. That the Ld. CIT(A) has failed to appreciate the settled judicial position that assessment proceedings are separate and distinct from penalty proceedings and the fact that some addition is made in the assessment could not automatically justify the imposition of penalty under Section 271(l)(c) of the Act. 6. That the Ld. CIT(A) has completely failed to appreciate that penalty under Section 271(l)(c) of the Act cannot be levied merely because of rejection of a bona fide claim of the appellant.
The assessee has also filed application dated 4th February, 2019 for admission of 5.
following additional grounds:-
“Ground 7: "That the notice issued under section 271(1)(c)/ 274 of the Act, and the order passed under section 271(l)(c) of the Act are illegal, bad in law and without jurisdiction. ” Ground 8: "That the penalty has been initiated vide notice under section 271(l)(c)/ 274 of the Act without any specific charge, hence, the said notice and the order passed under section 271(l)(c) of the Act are illegal, bad in law and without jurisdiction. ” Ground 9: "That satisfaction recorded/charge levied while completing the assessment, and while levying the penalty are different and hence the notice issued under section 274 of the Act, and the order passed under section 27l(l)(c) of the Act are illegal, bad in law and without jurisdiction.” Ground 10: “That the levy of penalty is illegal, unjust and not in accordance with law as the mandatory requirements of Section 271(l)(c) have not been met in the instant case. ”
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Ground 11: “That the said additions made by the AO are based on difference of opinion on account of allowability of the claim of the assesse, and as such no penalty can be levied in such cases.”
Relying on the decision of Hon'ble Supreme Court in the case of NTPC Ltd.,
229 ITR 383, the ld. counsel for the assessee submitted that this ground being purely
legal in nature and no fresh facts are required to be investigated, the additional grounds
raised by the assessee be admitted for adjudication.
The ld. DR, on the other hand, opposed the admission of the additional ground
raised by the assessee. He submitted that the assessee has neither objected before the
Assessing Officer nor raised any ground before the CIT(A) on the issue of non-striking
of the inappropriate words and, therefore, the assessee should be precluded from
raising these additional grounds. Even otherwise also referring to the copy of the
assessment order, the ld. DR drew the attention of the Bench to the last page of the
assessment order and submitted that the Assessing Officer while initiating the penalty
proceedings u/s 271(1)(c) has categorically mentioned that the same are initiated
separately for furnishing inaccurate particulars of income and thereby concealing
income.
We have considered the rival arguments made by both the sides and perused the
relevant material on record. Since the additional grounds raised by the assessee are
purely legal ones and no fresh facts are required to be investigated, therefore, we admit
the additional grounds raised by the assessee.
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The ld. counsel for the assessee, referring to the notice issued u/s 274 read with section 271 of the IT Act dated 29th December, 2006, drew the attention of the Bench to the said notice and submitted that the inappropriate words in the said notice has been struck off by the Assessing Officer. Therefore, it is not discernible from the penalty notice as to under which limb of the provisions the Assessing Officer has initiated the penalty proceedings and levied penalty u/s 271(1)(c). Referring to the copy of the order of the Tribunal in assessee’s own case for assessment years 2006-07, 2002-03 and 2003-04 vide ITA nos.894, 895, 896/Del/2013, order dated 28th June, 2017, she submitted that under identical circumstances, the Tribunal has cancelled the penalty so levied by the Assessing Officer and upheld by the CIT(A). Therefore, this being a covered matter in favour of the assessee, the penalty so levied by the Assessing Officer and upheld by the CIT(A) should be cancelled.
9.1 So far as the merit of the case is concerned, the ld. counsel for the assessee, referring to the order of the Tribunal, submitted that out of the three additions on which penalty has been levied by the Assessing Officer, the disallowance of alleged personal expenditure has been allowed by the Tribunal at para 7.2 of the order. However, the remaining two additions have been confirmed by the Tribunal. Relying on various decisions including the decision of the Hon'ble Supreme Court in the case of CIT vs. Reliance Petro Products Pvt. Ltd., reported in 322 ITR 158 (SC), she submitted that mere making of a claim which is not sustainable in law by itself will not amount to furnishing inaccurate particulars regarding the income of the assessee. Such
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a claim made in the return cannot amount to furnishing of inaccurate particulars. She accordingly submitted that both legally and factually the penalty levied by the
Assessing Officer and sustained by the CIT(A) is not justified.
The ld. DR, on the other hand, heavily relied on the order of the CIT(A).
Referring to the order of the CIT(A), he submitted that an entity M/s Mezbaan Hoteliers (P) Ltd. (whose directors were the father and wife of the Managing Director of the assessee) had entered into a lease agreement with one Mrs. Surendra Judge for
taking a house property on lease. The annual lease rentals settled with Mrs. Surendra Judge were Rs.2,40,000/- per annum. The assessee company then took this house property on sub-lease from M/s Mezbaan Hoteliers for providing residence to its
managing director Mr. Sandeep Kohli. The annual lease rent has been settled of Rs.15 lacs per annum. The assessee had also paid a security of Rs.50 lacs and also spent huge amount for renovation. The tax auditor had not reported this transaction for the
purpose of section 40(A)(2)(b) of the Act.
He submitted that how a property which fetched Rs.20,000/- in the hands of the original land owner can fetch a rent of Rs.1,25,000/- per month by way of an agreement. Thus, the conduct of the assessee shows in volumes. He accordingly
submitted that at least penalty levied by the Assessing Officer and confirmed by the CIT(A) on this issue be confirmed.
We have considered the rival arguments made by both the sides and perused the orders of the authorities below. We have also considered various decisions cited
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before us. A perusal of the notice issued u/s 274 read with section 271 of the IT Act dated 29th December, 2006 shows that the Assessing Officer has not struck off the
inappropriate words in the notice. While imposing the penalty, the Assessing Officer
did not mention under which limb the penalty has been imposed. It is also observed
from the penalty order that the Assessing Officer while levying penalty has also
referred to the orders of his predecessor for assessment years 2006-07, 2002-03 and
2003-04. We find identical issue had come up before the Tribunal in assessee’s own case and the Tribunal, vide ITA Nos. 894, 895, 896/Del/2013, order dated 28th June,
2017, for assessment years 2006-07, 2002-03 and 2003-04 respectively has cancelled
the penalty so levied by observing as under:-
“10. We have heard both the parties and perused the orders passed by the Revenue Authorities along with the relevant records available with us. Firstly, we have perused the assessment order dated 11.10.2010 passed u/s. 143(3) of the Act and found that AO while completing the assessment has not recorded the satisfaction and has not initiated the penalty proceedings. Similarly, at the time of imposing the penalty u/s. 271(1)© of the Act, the AO has levied the penalty, but did not mention under which limb the penalty has been imposed whether it is on account of inaccurate particulars of income or concealment of income. Therefore, the entire penalty proceedings stand vitiated. In view of above, the penalty is not sustainable in the eyes of law. Our aforesaid view is fortified by the following decisions:- i) “CIT & Anr. Vs. M/s SSA’s Emerald Meadows – 2015 (11) TMI 1620 – Karnataka High Court has held that Tribunal has correctly allowed the appeal filed by the assessee holding the notice issued by the Assessing Officer under section 274 read with Section 271(1)(c) to be bad in law as it did not specify which limb of Section 271(1)© of the Act, the penalty proceedings had been initiated i.e., whether for concealment of particulars of income or furnishing of inaccurate particulars of income. The Tribunal, while allowing the appeal of the assessee, has relied on the decision of the Division Bench of this Court rendered in the case of Commissioner of Income Tax vs. Manjunatha Cotton and Ginning Factory (2013) (7) TMI 620- Karanataka High Court. Thus since the matter is covered by judgment of the Division Bench of this Court, we are of the opinion 7
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no substantial question of law arises – decided in favour of assessee.” ii) CIT & Anr. Vs. M/s SSA’s Emerald Meadows – Hon’ble Supreme Court of India – reported in 2016 (8) TMI 1145 – Supreme Court. The Apex Court held that High Court order confirmed (2015) (11) TMI 1620 (Supra) – Karnataka High Court. Notice issued by AO under section 274 read with section 271(1)(c) to be bad in law as it did not specify which limb of Section 271(1)© of the Act, the penalty proceedings had been initiated i.e., whether for concealment of particulars of income or furnishing of inaccurate particulars of income – Decided in favour of assessee.” 10.1 In the background of the aforesaid discussions and respectfully following the precedents, we delete the penalty in dispute and decide the issue in favor of the assessee and against the Revenue.”
Since the facts of the impugned appeal are identical to the facts of the case
decided by the Tribunal in assessee’s own case for preceding years, therefore,
respectfully following the same, we cancel the penalty so levied by the Assessing
Officer and upheld by the CIT(A) due to non-striking off the inappropriate words in
the notice. The additional grounds raised by the assessee are accordingly allowed.
Since, the assessee succeeds on the additional grounds, the grounds on merit are not
being adjudicated being academic in nature.
In the result, the appeal filed by the assessee is allowed.
The decision was pronounced in the open court on15.02.2019.
Sd/- Sd/-
(SUCHITRA KAMBLE) (R.K. PANDA) JUDICIAL MEMBER ACCOUNTANT MEMFBER Dated: 15th February, 2019
dk 8
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