Saraogi Mansion Estate Private Limited v. Deputy Commissioner of Income-tax, Circle 2, Jaipur
[Citation -2017-LL-1106-7]

Citation 2017-LL-1106-7
Appellant Name Saraogi Mansion Estate Private Limited
Respondent Name Deputy Commissioner of Income-tax, Circle 2, Jaipur
Court HIGH COURT OF RAJASTHAN
Relevant Act Income-tax
Date of Order 06/11/2017
Judgment View Judgment
Keyword Tags default in payment of advance tax • furnishing inaccurate particulars • disallowance of interest • profit and loss account • imposition of penalty • concealment of income • levy of interest • taxable income • interest paid • finance charge
Bot Summary: Reliance is placed on CIT vs. EDC Electronic Data Systems Pvt. Ltd. 211 Taxman 133, where the High Court has recorded that the Tribunal had accepted the plea of the assessee that the expenditure falling under the head 'current repairs' would be covered under the head 'revenue expenses'. As stated above, the plea and contention raised by the assessee has to be examined before it is decided whether or not the assessee has been able to bring his case within the four corners of the Explanation. Merely making a claim which is held as not sustainable under law should not lead to penalization, when the assessee had furnished full details in the return itself and the claim is a debatable, reasonably plausible or may well have been accepted. How could the assessees then be expected to have paid advance tax on something which had not been received by the assessees and which would not have even been in their contemplation. The Government itself, on the one hand delayed the payment of compensation to the assessees and on the other it expects to levy interest on the assessee for having allegedly defaulted in making payments towards advance tax. In addition to levying tax, the AO decided to impose penalty of Rs. 10,14,582 on the ground that the assessee had furnished inaccurate particulars of her income and concealed her income. We have heard learned counsel for the Revenue and find that there is nothing to suggest that the assessee acted in a manner such as to lead to the conclusion that she had concealed the particulars of her income or had furnished inaccurate particulars of ITA-4/2017 income.


HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR D.B. Income Tax Appeal No. 4 / 2017 Saraogi Mansion Estate Private Limited, Having Its Registered Address At 04, Hathroi Market, Ajmer Road, Jaipur Through Its Director & Authorized Signatory Shri Kishore Kumar Saraogi ----Appellant Versus Deputy Commissioner of Income Tax, Circle 2, Jaipur Having Its Address At New Central Revenue Building, Statue Circle, Jaipur ----Respondent For Appellant(s) : Mr.Siddharth Ranka For Respondent(s) : Mr.Anuroop Singhi HON'BLE MR. JUSTICE K.S. JHAVERI HON'BLE MR. JUSTICE VIJAY KUMAR VYAS Order 06/11/2017 1. By way of this appeal, appellant has challenged judgment and order of Tribunal whereby Tribunal has dismissed appeal preferred by assessee and confirm order of CIT(A) and AO. 2. This Court while admitting appeal on 24.1.2017, framed following substantial questions of law: Whether on facts and material available on record and in law ld. ITAT was justified in confirming penalty u/s. 271(1)(c) of Act? 3. Counsel for appellant contended that in view of guidelines issued on Revised Schedule VI to company under Companies Act, 1956 by Institute of Chartered Accountants of India, New Delhi where in (2 of 10) [ITA-4/2017] Paragraph 9.8.1.3, reads as under: 9.8.1.3 Any interest on shortfall in payment of advance income-tax is in nature of finance cost and hence should not be clubbed with Current tax. same should be classified as Interest expense under finance costs. However, such amount should be separately disclosed. 4. In that view of matter, amount which has been shown by assessee under Schedule F Interest Paid , in schedule annexed to profit and loss account for year ended on March 31, 2010, reads as under: On car loan A/c 32931 On loan/OD from (O.B.C. Bank) 481969 On service Tax 3084 On Income Tax 455219 _________ Total Rupees 973203 5. Learned counsel for appellant relied upon decision of Delhi High Court in Shervani Hospitalities Ltd. Vs. Commissioner of Income-tax, [2013] 35 taxmann.com 271 (Delhi), wherein it has been observed :- 18. Whether or not expenditure incurred on renovation or improvement or repairs on leasehold premises can be allowed and treated as revenue expenditure, has been elucidated in several cases. There are several cases in which said claim has been allowed. It is contention of assessee that Explanation 1 to Section 32 of Act applies to expenditure on property on lease or with right to occupy which otherwise is capital expenditure. Reliance is placed on CIT vs. EDC Electronic Data Systems Pvt. Ltd. (2012) 211 Taxman 133 (Del), where High Court has recorded that Tribunal had accepted plea of assessee that expenditure falling under head 'current repairs' would be covered under head 'revenue expenses'. tribunal had observed that Explanation 1 to Section 32 would come into play when expenditure otherwise was capital in nature and depreciation had (3 of 10) [ITA-4/2017] been claimed. We are not required to go into correctness of said view in present case, but only notice that two views on question were possible even after introduction of Explanation 1 to Section 32. We have noticed above that Tribunal in quantum proceedings has observed that earlier ratio expounded in Madras Auto Service (supra) and Installment Supply Co. (supra) was in favour of assessee. We note that in case of EDC Electronic Data Pvt. Ltd. (supra), appeal filed by Revenue was dismissed observing that Tribunal had observed that assessing Officer had partly allowed and permitted deduction to extent of Rs. 70 lacs approximately under Section 37 of Act. Tribunal had remitted matter to lower authorities to extent of Rs. 2.75 crores for re-examination. Similarly in CIT vs. Citi Financial Consumer Finance (2011) 335 ITR 29 (Del.), Division Bench of this Court dismissed appeal of Revenue and treated expenditure of Rs. 1.52 crores on leasehold improvements as revenue in nature and did not accept plea of Revenue that expenditure should be capitalized. expenditure was incurred on civil work, laying cables, flooring, wall finishing etc. Earlier in CIT vs. Hi Line Pens (P) Ltd. [2008] 306 ITR 182 (Del), another Division Bench of this Court made specific reference to Explanation 1 to Section 31(1) and Section 30(a)(i) and word 'current repairs'. It was observed that expenditure under head 'current repairs' should be allowed as revenue deduction as by very nature tenancy right is for limited period and does not create any asset. question was answered in favour of assessee and against Revenue. In CIT vs. Escorts Finance Ltd. (2006) 205 CTR 574 (Del), yet again expenditure incurred on carrying out repairs to make premises workable, to replace glasses etc. was treated as revenue expense. expenditure included polishing of floor, wooden paneling etc. Reference in this regard may also be made to decisions of Madras High Court and Punjab and Haryana High Court in CIT vs. Ayesh Hospitals Pvt. Ltd. 2007 292 ITR 266 (Mad.) and CIT vs. Porrits & Spencer (A) Ltd. (2002) 257 ITR 49 (P & H). 19. We have extensively referred to these judgments, only to show that issue raised by assessee was debatable and capable of two views. assessee had arguable case or had taken bonafide plea. assessee had given his explanation and categorically and clearly stated (4 of 10) [ITA-4/2017] true and full facts in return itself. He did not try to camouflage or cover up expenses claimed. It is not uncommon and unusual for assessee to bonafidely claim particular expenditure as revenue deduction and expense but not succeed. Every addition or disallowance made does not justify and mandate levy of penalty for concealment under Section 271(1)(c) of Act. Levy of penalty is not automatic consequence when addition is made by disallowing expense and by not accepting interpretation given by assessee. As stated above, plea and contention raised by assessee has to be examined before it is decided whether or not assessee has been able to bring his case within four corners of Explanation. 20. Explanation 1 clearly stipulates that penalty can be imposed when details furnished by assessee are found to be incorrect, erroneous and false. Merely making claim which is held as not sustainable under law should not lead to penalization, when assessee had furnished full details in return itself and claim is debatable, reasonably plausible or may well have been accepted. (See CIT vs. Reliance Petro Product Pvt. Ltd. 2010 322 ITR 158 (SC), CIT vs. Dharampal Premchand Ltd. 2011 329 ITR 572 (Del.), CIT vs. Societex ITA No. 1190/2011 decided on 19.07.2012, by this Court). In Karan Raghav Exports Vs. CIT (2012) 349 ITR 112 (Del.), it has been observed as under:- 14. On second aspect, we record that wrong deduction claimed can amount to furnishing of incorrect particulars. However, that is not issue in question. issue in question is whether appellant has been able to discharge onus under Explanation 1 to Section 271 and show that claim made by them or explanation offered with regard to claim made was bona fide and that facts relating to same and material for computation of total income had been disclosed. These are two facets of clause (B) to Explanation 1. As far as disclosure of facts is concerned, this is clear from note, which was attached with return itself. We have quoted relevant portion of note above. Full and correct facts have been stated in said note. other question is (5 of 10) [ITA-4/2017] whether claim made was palpably wrong and legally untenable or debatable and plausible claim on which assessee did not succeed on legal interpretation. We have examined nature of claim made and findings recorded by High Court in their order dated 1st November, 2010. claim made by appellant may have been rejected, but it cannot be said that same was not plausible or legally tenable. This aspect has been discussed above and it has been held that claim made was bona fide. Regarding legal opinion in writing, it is not mandatory for person to obtain legal opinion in writing. Assessees do take legal opinion and in present case return of income was duly audited. Claim for depreciation is technical claim based on interpretation of legal provision. Legal opinion, in such cases, is frequently given by Chartered Accountants to help company to prepare its return of taxable income. In present case, there is no allegation that quantum of depreciation claim was incorrectly computed. note itself indicates that it is written by professional. 6. He also took us through decision of Delhi High Court in IT Appeal Nos. 116 & 118 to 122 of 2007, Commissioner of Income Tax v/s Anand Prakash dated 27.02.2009, wherein Delhi High Court has observed as under: This takes us to second question as to whether Tribunal has erred in law in deleting levy of interest under s. 234B of IT Act. We feel that although conclusion of Tribunal with regard to levy of interest under s. 234B being penal in nature is not correct, ultimate conclusion arrived at by Tribunal cannot be interfered with. We are of this view because interest under s.234B is clearly by way of compensation. What Revenue proposes to do in facts and circumstances of cases is to charge interest for default in payment of advance tax in years in question. It can only justify such levy or charge if it has suffered loss. This follows from conclusion that levy (6 of 10) [ITA-4/2017] of interest under s.234B is compensatory in nature. fact remains that no money belonging to th Government was withheld by assessee in years in questions. In fact, interest payable on account of enhanced compensation was not even known to assessee till much later. How could assessees then be expected to have paid advance tax on something which had not been received by assessees and which would not have even been in their contemplation. In other words assessee could not have included interest received on enhanced compensation in assessment years under consideration while estimating his income for purposes of calculation of advance tax for relevant years. It is well known principle that law cannot compel anyone to do impossible. Government itself, on one hand delayed payment of compensation to assessees and on other it expects to levy interest on assessee for having allegedly defaulted in making payments towards advance tax. We are clear in our minds that Revenue has not suffered any loss and, therefore, there can be no question of levying interest under s. 234B of said Act. Thus, while we decide question 1 in favour of Revenue and against assessees, question 2 is decided in favour of assessees. In view of this, appeals are liable to be dismissed. It is ordered accordingly. parties shall bear their own costs. 7. Learned counsel also relied upon decisions in different High Courts which are as under : 1. In case of Price Waterhouse Coopers (P.) Ltd. Vs. Commissioner of Income-Tax, Kolkata- I, [2012] 25 taxmann.com 400 (SC), wherein it has been observed :- - 19. contents of Tax Audit Report suggest that there is no question of assessee concealing its income. There is also no question of assessee furnishing any inaccurate particulars. It appears to us that all that has happened in present case is that through bona fide and inadvertent error, assessee while submitting its return, failed to add provision for gratuity to its total income. This can only be described as (7 of 10) [ITA-4/2017] human error which we are all prone to make. calibre and expertise of assessee has little or nothing to do with inadvertent error. That assessee should have been careful cannot be doubted, but absence of due care, in cash such as present does not mean that assessed is guilty of either furnishing inaccurate particulars or attempting to conceal its income. 20. We are of opinion, given that peculiar facts of this case, that imposition of penalty on assessee is not justified. We are satisfied that assessee had committed inadvertent and bona fide error and had not intended to or attempted to either conceal its income of furnish inaccurate particulars. 2. In case of Commissioner of Income-Tax, Ahmedabad Vs. Reliance Petroproducts (P.) Ltd.,[2010] 189 Taxman 322 (SC) wherein it has been observed :- 5. By way of response to Show Cause Notice regarding penalty in its reply dated 22.3.2006, assessee claimed that all details given in Return were correct, there was no concealment of income, nor were any inaccurate particulars of such income furnished. It was pointed out that disallowance made by Assessing Authority in Assessment Order under Section 143(3) of Act were solely on account of different views taken on same set of facts and, therefore, they could, at most, be termed as difference of opinion but nothing to do with concealment of income or furnishing of inaccurate particulars of such income. It was claimed that mere disallowance of claim in assessment proceedings could not be sole basis for levying penalty under Section 271(1)(c) of Act. It was submitted specifically that it was investment company and in its (8 of 10) [ITA-4/2017] own case for Assessment Year 2000-01 Commissioner (Appeals) had deleted disallowance of interest made by Assessment Officer and Tribunal has also confirmed stand of Commissioner (Appeals) for that year and, therefore, it was on basis of this that expenditure was claimed. It was further submitted that making claim which is rejected would not make assessee company liable under Section 271(1)(c) of Act. It was again reiterated that there was absolutely no concealment, nor were any inaccurate particular ever submitted by assessee-company. 3. In case of Commissioner of Income-Tax Vs. Ms.Sania Mirza, [2013] 40 taxmann.com 17 (Andhra Pradesh), wherein it has been observed :--- 4. Later on assessment was reopened by issuing notice to assessee and when assessment was reopened, she voluntarily offered Rs. 30,63,310 for tax. Before AO, her advocate/chartered accountant stated that amount was shown in capital account and was not shown as capital receipt. But since issue had arisen, it was being offered as taxable income. 5. AO accepted amount as taxable income and levied tax accordingly. 6. However, in addition to levying tax, AO decided to impose penalty of Rs. 10,14,582 on ground that assessee had furnished inaccurate particulars of her income and concealed her income. 8. We have heard learned counsel for Revenue and find that there is nothing to suggest that assessee acted in manner such as to lead to conclusion that she had concealed particulars of her income or had furnished inaccurate particulars of (9 of 10) [ITA-4/2017] income. admitted position is that amount of Rs. 30,63,310 was shown by her in return. That being position, it cannot be said that there was any concealment. There is no dispute about fact that amount was correctly mentioned and therefore, there is also nothing inaccurate in particulars furnished by her. only error that seems to have been committed was that it was not shown as capital receipt. But as soon as this was pointed out, error was accepted and amount was surrendered to tax. 4. In case of Rave Entertainment (P) Ltd. V/s Commissioner of Income Tax, [2016] 66 taxmann.com 369 (Allahabad) wherein it has been observed : 16. It is pertinent to mention that order imposing penalty for failure to carry out statutory obligation is result of quasi- criminal proceedings and penalty will not ordinarily be imposed unless party obliged either acted deliberately in defiance of law or was guilty of conduct contumacious or dishonest, or acted in conscious disregard of its obligation. Penalty will not also be imposed merely because it is lawful to do so. 8. Counsel for respondent supports order of Tribunal. 9. We have heard counsels of both parties. 10. In view of well settled legal provisions as much as in matter has specifically stated and referred in balance sheet, in our considered view, view taken by Tribunal is required to be reversed. In view of observations made by Delhi High Court in last para in Shervani (10 of 10) [ITA-4/2017] Hospitalities case mentioned above. Without entering into merit, penalty could not be imposed. 11. Issue is required to be answered in favour of assessee against department. 12. appeal is allowed. (VIJAY KUMAR VYAS),J. (K.S. JHAVERI),J. Chauhan/6 Saraogi Mansion Estate Private Limited v. Deputy Commissioner of Income-tax, Circle 2, Jaipur
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