BOMBAY HIGH COURT
SAMSON MARITIME LTD VS CIT
SAMSON MARITIME LTD VS CIT
ITA NO. 1718 OF 2014, DATED: 09-03-2017
Summarised
Judgement (Scroll for Complete Judgement)
Introduction:
This
Appeal under Section 260A of the Income Tax Act, 1961 (the Act), challenges
the order dated 18th June, 2014 passed by the Income Tax Appellate Tribunal
(the Tribunal). The impugned order dated 18th June, 2014 is in respect of
Assessment Year 200708.
Facts of the Case:
The
appellantassessee is engaged in shipping business. The appellantassessee is
assessed to tax under Chapter XIIG of the Act to the extent its income is
earned from vessels, satisfying/ qualifying the requirements thereof (tonnage
income). So far as the income from other vessels i.e. nonqualifying vessels
(nontonnage income) is concerned, the same is subjected to tax under the head
“Profit & Gain from its Business or Profession”. Thus, classifying its
income as tonnage business and nontonnage business. During the subject
Assessment Year, the appellant assessee had suffered foreign exchange loss in respect
of its tonnage business which is taxable under Chapter XIIG of the Act.
However, the above foreign exchange loss of Rs.9.37 lakhs was debited to
compute its nontonnage income while bringing it to tax under Profit & Gain
from business or profession.
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Complete Judgement
SAMSON MARITIME LTD VS CIT (BOMBAY HIGH COURT)
I T A NO. 1718 OF 2014, DATED: 09-03-2017
IN
THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
INCOME TAX APPEAL NO. 1718 OF 2014
Samson Maritime Ltd., .. Appellant.
v/s.
Commissioner
of Income Tax, City7 .. Respondent.
Mr.
S. Sriram i/b. Mr. B. V. Jhaveri, for the Appellant.
Mr. N. C. Mohanty, for the Respondent.
CORAM: M.S.SANKLECHA, &
A.K.MENON, JJ.
DATE : 9th MARCH, 2017.
P.C:
This
Appeal under Section 260A of the Income Tax Act, 1961 (the Act), challenges
the order dated 18th June, 2014 passed by the Income Tax Appellate Tribunal
(the Tribunal). The impugned order dated 18th June, 2014 is in respect of
Assessment Year 200708.
The Revenue urges the following question of law, for our consideration:
“
Whether on the facts and in the circumstance of the case and in law, the
Tribunal was right in upholding imposition of penalty under Section 271(1)(c)
of the Act on a finding that the appellant had concealed its income and/or
furnished inaccurate particulars of its income in respect of the apportionment
of foreign exchange fluctuation loss between the Tonnage Income and NonTonnage
Income while filing the return of income for A. Y. 200708.?”
The
appellantassessee is engaged in shipping business. The appellantassessee is
assessed to tax under Chapter XIIG of the Act to the extent its income is earned
from vessels, satisfying/ qualifying the requirements thereof (tonnage income).
So far as the income from other vessels i.e. nonqualifying vessels
(nontonnage income) is concerned, the same is subjected to tax under the head
“Profit & Gain from its Business or Profession”. Thus, classifying its
income as tonnage business and nontonnage business. During the subject
Assessment Year, the appellant assessee had suffered foreign exchange loss in respect
of its tonnage business which is taxable under Chapter XIIG of the Act.
However, the above foreign exchange loss of Rs.9.37 lakhs was debited to
compute its nontonnage income while bringing it to tax under Profit & Gain
from business or profession.
Being
aggrieved, the appellant assessee filed a second appeal to the Tribunal against
imposition of penalty. By the impugned order dated 18th June, 2014, the
Tribunal upheld the imposition of penalty under Section 271(1)(c) of the Act.
This by negativing the assessee's contention before it that allocating/
debiting the foreign exchange loss to determine its nontonnage income, was a
mistake and the mistake had been voluntarily disclosed by the appellant during the
assessment proceedings. The contention of the appellant was not accepted as the
socalled disclosure was made by the appellant only after it received notices under
Section 142(1) & 143(2) of the Act, calling for various details. Moreover,
the Explanation offered by the appellant for having debited foreign exchange
loss to determine nontonnage loss, was not found to be satisfactory by the Assessing
Officer as well as by the CIT(A). The impugned order of the Tribunal also
placed reliance upon the decision of the Apex Court in MAK Data P. Ltd., v/s.
Commissioner of Income Tax 358 ITR 593, that voluntary disclosure itself does
not release the assessee from penal consequences.
The
grievance of the appellantassessee before us is that it had itself brought its
mistake of debiting the loss on account of foreign exchange fluctuation to
determine its NonTonnage income to the notice of the Assessing Officer. This,
according to him, is stated in its Affidavit dated 23rd June, 2010 filed during
the penalty proceedings before the Assessing Officer. However, the above
affidavit as filed by the appellant during penal proceedings, has been ignored by
all the authorities including the Tribunal while passing the impugned order. It
is submitted that the above fact itself would justify dropping of any penal
proceedings against appellantassessee. It was also submitted before us that
debiting of the foreign exchange loss to arrive its nontonnage income, was a
mistake and no penalty be imposed for the mistake committed. Reliance was placed
upon the Apex Court's decision in Price Waterhouse Coopers (P) Ltd., v/s. CIT
348 ITR 306 to contend that mistakes made by an assessee cannot be the basis
for imposition of penalty. In the above view, it is submitted that the appeal
be admitted.
From
the record it is clear that the notice under Sections 142(1) and 143(2) of the Act
were issued to the appellant on 14th January, 2009. The notice also contains
an annexure, seeking details of expenses debited to Profit and Loss Account,
along with details of foreign exchange expenses. Even according to the
appellant, the alleged mistake on its part was pointed out by a letter dated
23rd September, 2009 during assessment proceedings where it stated that it had
committed a mistake in debiting foreign exchange loss to its determine nontonnage
income, when in fact, no foreign exchange loss was involved in respect of its
nontonnage business. Thus, it is clear that socalled mistake as claimed by the
appellantassesssee, was only after notices dated 14th January, 2009 were
issued under Sections 142 and 143 of the Act. It was only an attempt to preempt
the Revenue finding out the the appellant had furnished inaccurate particulars.
Therefore, it cannot be said that it was voluntary disclosure. In fact, the
Apex Court in MAK Data (P) Ltd., (supra) has observed that “The Assessing
Officer, in our view, shall not be carried away by the plea of the Assessee
like “voluntary disclosure”, “buy peace”, “avoid litigation” “amicable
settlement” etc. to explain its conduct.” The Apex Court has also further
observed that “ It is trite law that the voluntary disclosure does not release
appellantassessee from the mischief of penal proceedings. The law does not provide
that when an assessee makes a voluntary disclosure of his concealed income, he
had to be absolved from penalty.” In the peculiar fact of the present case, the
socalled voluntary disclosure was only after the Assessing Officer initiated
proceedings under Section 142 of the Act. Thus, it was not a voluntary
disclosure. In fact, the Assessment Order dated 24th December, 2009 under
Section 143(3) of the Act also records the fact of verification by the
Assessing Officer, leading to a finding that the appellantassessee had debited
foreign exchange loss to arrive its nontonnage income. This order was accepted
and no grievance in respect of the same being found by the Assessing Officer,
was made by the appellantassessee. It is only in penalty proceedings that this
issue is raised for the first time. Further, the appellantassessee besides
stating it is a mistake, has not offered any explanation. Therefore, the
explanation under Section 271(1)(c) of the Act was not found to be satisfactory
by the authorities under the Act and penalty imposed and sustained.
Reliance
placed by the appellantassessee upon the decision of the Apex Court in Price Waterhouse
Coopers (P) Ltd., (supra), is inappropriate in the facts of the present case.
In the above case, the Apex Court noted the fact that Tribunal had itself come
to a finding that there was a silly mistake on the part of the assesssee in not
having added the provision for gratuity to its total income even when the documents
accompanying the return of income, did show that provision for gratuity is not
allowable as deduction under Section 40(7) of the Act. Thus, it was only a
computation error in the return of income. In the present facts, none of the
authorities including the Tribunal have found the debit of foreign exchange
loss to its nontonnage business was made on account of a mistake. Nor can it
be classified as an computation error after complete disclosure. Thus, the aforesaid
decision does not assist the appellant assessee.
We
note that all the three authorities have come to a finding of fact, adverse to
the appellant, that the socalled voluntary disclosure was not voluntary, but
made only in response to notices under Sections 142 and 143 of the Act. This finding
of fact is not shown to be perverse and/or arbitrary, warranting interference. In
view of the above, the question as framed does not give rise to any substantial
question of law.
Accordingly,
Appeal dismissed. No order as to costs.
(A.K.MENON,J.)
(M.S.SANKLECHA,J.)
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