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Income Tax Appellate Tribunal, DELHI BENCH “F”, NEW DELHI
Before: SH. N. K. SAINI & SMT. BEENA A. PILLAI
The present appeal has been filed by assessee against order dated 01.07.2014 passed by Ld. CIT(A)-XVII, New Delhi on the following grounds of appeal:
1. That the learned Commissioner of Income Tax (Appeals) has erred in summarily dismissing the various grounds raised by the appellant in respect of assessee's claim for non levy of penalty u/s 271(l)(c) of the Income Tax Act,1961 and confirming the penalty levied by the Assessing Officer amounting to Rs. 4,71,120/-.
2. That the learned Commissioner of Income Tax (Appeals) has erred in not giving specific finding in respect of assessee's objections that the Assessing Officer was not competent to reinitiate penalty in proceedings u/s 271(l)(c) of the Income Tax Act, 1961 to give effect to the order of the appellate authorities u/s 254/250/143(3) of the Income Tax Act, 1961, even though the penalty has been initiated and imposed in original assessment proceedings and deleted by the appellate authorities on merits without any direction to reinitiate such proceedings in appeal effect order, which has been accepted by the department.
3. That the learned Commissioner of Income Tax (Appeals) has also erred in not appreciating the fact that no penalty can be levied in proceedings u/s 254/250/143(3) of the Income Tax Act, 1961 on an issue, which was not a subject matter of penalty in the original assessment order, but has arisen only on account of certain directions of the appellate authorities, which in view of subsequent judicial pronouncements were not applicable for the year under consideration.
4. That the learned Commissioner of Income Tax (Appeals) has erred in confirming the penalty levied under section 271(l)(c) of the Income Tax Act, 1961 without appreciating the fact that no penalty is exigible in respect of an addition, which is debatable and which has not been added back in the computation of income on a bona fide belief fully supported by the judicial pronouncements.
5. That without prejudice to the aforesaid grounds, the learned Commissioner of Income Tax (Appeals) has erred in not appreciating the fact the quantum of penalty in the present case has to be determined under clause (c) of Explanation 4 of section 271(1) and not under clause (a) of the said Explanation.
That the above Grounds of Appeal
are without prejudice to one another.
7. That the appellant craves permission to add, alter, amend, vary or delete one or more grounds of appeal on or before the date of hearing.
Brief facts of the case are as under: Original assessment in the case was completed on 30.10.2007 at an income of Rs. 3,11,76,157/-. The Ld. AO had made disallowance of Rs. 45,73,144/- in view of the proportionate expenses relating to capital gains and speculative transactions as not allowable along with other additions made by him. In original assessment order assessing officer had accepted the suo moto disallowance made by assessee of Rs. 3,83,580/-, under section 14A of the Act, which was confirmed by Ld.CIT(A). Assessee filed appeal before this Tribunal against order passed by Ld. CIT(A), wherein this Tribunal granted relief in respect of other addition of Rs. 13,17,000/- and Rs. 45,73,144/-. While granting above relief, this Tribunal directed Ld. AO to recompute disallowance under section 14A of the Act, in accordance with Rule 8D of Income Tax Rules in view of Special Bench division, in case of ITO vs. Daga Capital Management Pvt. Ltd, reported in 117 ITD 169, wherein it was held that Rule 8D was retrospective in operation.
During original assessment, proceedings under section 271(1)(c) was initiated and penalty of Rs. 9,13,504/- was levied. 4. On further appeal to said penalty levied on recomputation of 14A disallowance read with Rule 8D of the Act was cancelled on merits by Ld. CIT(A), vide order dated 04.01.2011, which has been placed at page 1 to 11 of paper book. Against this deletion of penalty Revenue did not prefer any appeal before this Tribunal. 5. In the meanwhile order under section 254/250/143 (3) of the Act was passed by Ld. AO on 28.02.2010 as per directions of this Tribunal, wherein Ld. AO made disallowance of Rs. 14,11,915/- under section 14A read with rule 8D of the Act. Since a sum of Rs. 3,83,580/- was already disallowed by assessee itself in its return of income, assessing officer granted relief while computing disallowance under section 14A read with rule 8D. That net disallowance computed under section 14A read with rule 8D was Rs. 10,28,335/-. 6. Aggrieved by this assessee preferred an appeal before Ld. CIT(A) who granted relief of Rs. 1,24,443/-. On an appeal before this Tribunal further amount of Rs. 45,73,144/- was directed to be reduced vide order dated 09.08.2012 in ITA No. 181/del/2012.
Thus, after giving effect to order of this Tribunal dated 09.08.2012 and Ld. CIT(A) order, assessed income stood reduced to Rs. 2,61,36, 804/-. Assessing officer thereafter initiated penalty proceedings and levied a penalty and issued a show cause notice on 07.03.2013 wherein assessee was required to show cause as to why penalty under section 271(1)(c) should not be levied on amount of disallowance made by Ld. AO under section 14A read with Rule 8D. By this time decision of Hon’ble Bombay High Court in the case of Godrej and Boyce Manufacturing Co. Ltd. vs DCIT reported in 328 ITR 81 was available, wherein it was held that Rule 8D could not be construed to be retrospective in operation, but is prospective and is applicable from assessment year 2008-09 onwards.
Assessee has been consistently submitting before authorities below and had placed reliance upon decision of Hon’ble Bombay High Court however Ld. AO found submissions to be not tenable and levied 100% penalty.
Aggrieved by penalty order passed by Ld. AO, assessee preferred appeal before Ld. CIT(A) who also failed to consider issue as per the ratio laid down by Hon’ble Bombay High Court in the case of Hon’ble Bombay High Court in the case of Godrej and Boyce Manufacturing Co Ltd vs DCIT (supra).
Aggrieved by order of Ld. CIT (A) assessee is in appeal before us now.
The Ld. AR submitted on two grounds that; • the issue on which penalty has been levied was a debatable issue and assessing officer has failed to appreciate the decision of Hon’ble double Bombay High Court in the case of Hon’ble Bombay High Court in the case of Godrej and Boyce Manufacturing Co Ltd vs DCIT that was very much available
on the public domain at the time when the recent penalty proceedings were initiated, and was placed. On read by assessee. • Further it was submitted that while the original assessment was conducted the disallowance made by assessee was accepted by Ld. AO which was confirmed by Ld. CIT(A) and it was computed upon the direction issued by this Tribunal, following the special bench’s decision in the case of Daga capital (supra). He submitted that when the penalty was initiated and levied upon the recomputation of disallowance under section 14A pursuant to directions of this Tribunal against which appeal against before Ld. CIT (A) to deleted the penalty on merits and Department did not pursue an appeal before this Tribunal on the penalty being deleted.
Ld. AR submitted that at this juncture on both these grounds penalty deserves to be deleted as the issue involved on which penalty has been levied has now further attained finality by virtue of decision of Hon’ble Supreme Court upholding the ratio laid down by Hon’ble Bombay High Court in Goderaj & Boyce.
On the contrary Ld. Sr. DR placed reliance upon decisions of the authorities below. 13. We have perused submissions advanced by both sides in the light of records placed before us. It is observed that assessment year involved is 2005-06. This Tribunal in the 1st round of appeal directed Ld. AO to recompute disallowance under section 14A read with Rule 8D, based upon Special Bench decision in the case of Daga Capital (supra). Thereafter, ratio laid down by Hon’ble Bombay High Court held applicability of Rule 8D to be prospective, from assessment year 2008-09. 14. We are therefore, inclined to delete penalty respectfully following decision of Hon’ble Bombay High Court in the case of Hon’ble Bombay High Court in the case of Godrej and Boyce Manufacturing Co Ltd vs DCIT which has been approved by Hon’ble Supreme Court as the issue has attained finality. On the basis of the above discussion all the grounds raised by assessee stands allowed. In the result appeal filed by the assessee stands allowed. Order pronounced in the open court on 28th June, 2017.