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Income Tax Appellate Tribunal, “B” BENCH, PUNE
Before: SHRI INTURI RAMA RAO, AM & SHRI S. S. VISWANETHRA RAVI, JM
आदेश / ORDER
PER INTURI RAMA RAO, AM:
This is an appeal filed by the assessee directed against the order of learned Commissioner of Income Tax (Appeals) – 2, (hereinafter called as ‘CIT(A)’ for short) dated 30.11.2015 confirming the levy of penalty under Sec.271(1)(c) of the Income Tax Act, 1961 for the assessment year 2007-08.
The appellant has raised the following grounds of appeal. “1. Hon’ble Commissioner of Income Tax (Appeals) has erred in confirming the penalty u/s 271(1)(c) levied by the Assessing Officer. Appellant prays to delete the same.
2. Penalty Order is bad in law, same may please be cancelled.
3. Appellant prays for just and equitable relief.”
The brief facts of the case are as under :
The appellant is a partnership firm and engaged in the business of Builders and Promoters. The assessee filed his e-return of income for the assessment year 2007-08, on 20.09.2007 disclosing nil income after claiming deduction u/s 80IB(10) of the Income Tax Act.
Against the said return of income, the assessment was completed u/s 143(3) of the Act vide order dated 20.11.2009 denying the claim of deduction u/s 80IB(10) of Act on the ground that the area of the plot on which the housing project was taken up is less than one acre. During the course of assessment proceedings, the Assessing Officer taking into consideration of entries in 7/12 extracts of the land records in respect of which the development rights were obtained by the appellant firm, held that the total area of the land is only 40 ARES or 4000 sq. mtrs which works out to less than one acre. Whereas, it is the contention of the appellant that the actual area available on which the housing project was taken up was 4722 sq.mtrs, the actual area in possession of the appellant, which is more than one acre.
It is a matter of fact that the area of the land was measured in the presence of the Assessing Officer as recorded at Para 6 of the assessment order. The main thrust of the appellant before the Assessing Officer was that the actual area of the plot is much more than the area as per 7/12 extracts and the area earmarked and surrendered to the Municipal Authorities for the purpose of road widening should also be treated as a part of the land of housing project.
These contentions were not accepted by the Assessing Officer and accordingly, he denied the claim for deduction u/s 80IB(10) of the Act and also recorded satisfaction for initiating penalty proceedings u/s 271(1)(c) of the Act for furnishing of inaccurate particulars of income. Accordingly, a show cause notice was issued to the appellant on 26.10.2009 u/s 273B r.w.s 271(1)(c) of the Act. Subsequently, another show cause notice was issued on 11.08.2011. But however, assessee had not filed any explanation to show cause notices and therefore, the AO had proceeded with the matter by holding the appellant was guilty of furnishing of inaccurate particulars by placing reliance on the decision of Hon’ble Delhi High Court in the case CIT Vs. Escorts Finance Limited reported in (2008) 292 ITR 658 levied penalty of Rs.1,63,43,480/- vide order dated 21.12.2012.
Being aggrieved by the levy of penalty, the appellant had preferred appeal before Commissioner of Income Tax (Appeals) contending that mere disallowance of claim for deduction does not tantamount to furnishing of inaccurate particulars of income placing reliance on the decisions of ITAT Pune Bench in the case of M/s. Chandrai Constructions and in the case of Rohan Engg. Constructions. However, the Commissioner of Income Tax (Appeals) held that the claim made by the assessee is a wrong claim placing reliance on the decision of Hon’ble Delhi High Court in the case of CIT Vs. Escorts Finance Pvt. Ltd., (supra) and the decision of Hon’ble Madras High Court in the case of Coromandel Indag Products Pvt. Ltd., reported in 265 ITR 611, had confirmed the levy of penalty.
Being aggrieved by the decision of Commissioner of Income Tax (Appeals), the appellant is before us in the present appeal.
Before us, the Ld.A.R. for the appellant contended that assessee is not guilty of furnishing of inaccurate particulars, in as much as, the AO had not given any finding as to which particulars were found to be inaccurate. He also submitted that mere disallowance of claim does not entail levy of penalty placing reliance on the decision of Hon’ble Supreme Court in the case of CIT Vs. Reliance Petroproducts Limited reported in 322 ITR 158. He further relied on the decision of the Hon’ble Rajasthan High Court in the case of Harshvardhan Chemicals and Minerals Ltd., reported in 259 ITR 212 in support of proposition that when assessee has claimed a deduction though that is debatable, in such cases, it cannot be said that the assessee has concealed any income or furnished inaccurate particulars of income for evasion of tax penalty. He further submitted that on identical facts in the case of Dalmia Dyechem Industries Ltd., reported in 377 ITR 133, Hon’ble Bombay High Court framed a question of law : “in a case involving the initiation of penalty on this fact demonstrates the debatable nature of the issue in the quantum appeal and therefore, no penalty can be levied”. He further submitted that when the quantum appeal is pending for disposal before the Tribunal or Commissioner of Income Tax (Appeals), the order imposing penalty is pre-mature in terms of Sec.275(1)(a) of the Act placing reliance on the decision of Hon’ble Bombay High Court in the case of R B Sreeram Durga Prasad Vs. CIT, Nagpur reported in (2016) 65 Taxmnn.com 293.
On the other hand, the learned Departmental Representative placing reliance on the orders of lower authorities had been vehemently contended that it is a case of wrong claim by the assessee and accordingly, the ratio laid down by the Hon’ble Delhi High Court in the case of CIT Vs. Escorts Finance Limited (supra) is squarely applicable.
We heard the rival submissions and perused the material available on record. The issue in the present appeal relates to the levy of penalty u/s 271(1)(c) of the Act. The AO had levied penalty with reference to the disallowance of the claim made for deduction u/s 80IB(10) of the Act. AO had denied the claim on the ground that the size of the land on which the housing project was taken up is less than one acre, this finding is disputed by the appellant. It appears that the AO had concluded that the size of the land is less than one acre based on the entries in 7/12 extract. It is also a matter of fact that the actual area is more than one acre i.e., 4722 sq.mtrs, which is more than the area mentioned in 7/12 extract. Considering these facts, the Tribunal had allowed the appeal in and had clearly held the entries made in 7/12 extract are not conclusive and what is to be considered is the actual area of the plot and accordingly, allowed the appeal of the assessee in the quantum appeal. Thus, since the addition made in the assessment was deleted in the quantum appeal, no penalty can be levied.
10. Even otherwise, from the perusal of the assessment order, we find that the penalty proceedings u/s 273 r.w.s 271(1)(c) of the Act were initiated by the AO on the allegation that the appellant had furnished inaccurate particulars of income. From the perusal of the assessment order as well as the penalty order passed u/s 271(1)(c) of the Act, there is no finding by the AO as to how and in what manner, the assessee had furnished the inaccurate particulars of income leading to addition, to the returned income of the assessee except making a bald charge against the assessee that assessee has furnished inaccurate particulars of income. In the absence of this finding by the AO, the order of penalty cannot be sustained in the eyes of law and reliance can be placed on the following decisions :
i) CIT Vs. Balbir Singh (2008) 304 ITR 125. ii) National Textiles Vs. CIT (2001) 249 ITR 124 iii) Nainu Mal Het Chand Vs. CIT (2007) 294 ITR 185. iv) CIT Vs. Super Metal Re-Rollers Pvt. Ltd. (2004) 265 ITR 82. v) Diwas Enterprise Vs. CIT (2000) 246 ITR 571 Delhi. vi) CIT Vs. Shivnarayan Jamnalal & Co., (1998) 232 ITR 311 vii) CIT Vs. T. Abdul Majeed (1998) 232 ITR 50.
11. On perusal of the assessment order, it would clearly suggests that it is a case of mere disallowance of claim made which does not tantamount to furnishing of inaccurate particulars of income nor is it false claim, as the assessee had made a bonafide claim and contended vehemently the findings of the AO that the size of the land is less than one acre. Therefore, the ratio of the decision of Hon’ble Apex Court in the case of Reliance Petroproducts Ltd., (supra) is squarely applicable to the facts in the present case. The relevant paras of the same are extracted below:
“9. We are not concerned in the present case with the mens rea. However, we have to only see as to whether in this case, as a matter of fact, the assessee has given inaccurate particulars. In Webster's Dictionary, the word "inaccurate" has been defined as :
"not accurate, not exact or correct; not according to truth; erroneous; as an inaccurate statement, copy or transcript."
We have already seen the meaning of the word "particulars" in the earlier part of this judgment. Reading the words in conjunction, they must mean the details supplied in the return, which are not accurate, not exact or correct, not according to truth or erroneous. We must hasten to add here that in this case, there is no finding that any details supplied by the assessee in its return were found to be incorrect or erroneous or false. Such not being the case, there would be no question of inviting the penalty under s. 271(1)(c) of the Act. A mere making of the claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee. Such claim made in the return cannot amount to the inaccurate particulars.
It was tried to be suggested that s. 14A of the Act specifically excluded the deductions in respect of the expenditure incurred by the assessee in relation to income which does not form part of the total income under the Act. It was further pointed out that the dividends from the shares did not form the part of the total income. It was, therefore, reiterated before us that the AO had correctly reached the conclusion that since the assessee had claimed excessive deductions knowing that they are incorrect; it amounted to concealment of income. It was tried to be argued that the falsehood in accounts can take either of the two forms; (i) an item of receipt may be suppressed fraudulently; (ii) an item of expenditure may be falsely (or in an exaggerated amount) claimed, and both types attempt to reduce the taxable income and, therefore, both types amount to concealment of particulars of one's income as well as furnishing of inaccurate particulars of income. We do not agree, as the assessee had furnished all the details of its expenditure as well as income in its return, which details, in themselves, were not found to be inaccurate nor could be viewed as the concealment of income on its part. It was up to the authorities to accept its claim in the return or not. Merely because the assessee had claimed the expenditure, which claim was not accepted or was not acceptable to the Revenue, that by itself would not, in our opinion, attract the penalty under s. 271(1)(c). If we accept the contention of the Revenue then in case of every return where the claim made is not accepted by AO for any reason, the assessee will invite penalty under s. 271(1)(c). That is clearly not the intendment of the legislature.
In this behalf the observations of this Court made in Sree Krishna Electricals vs. State of Tamil Nadu & Anr. (2009) 23 VST 249 (SC) as regards the penalty are apposite. In the aforementioned decision which pertained to the penalty proceedings in Tamil Nadu General Sales-tax Act, the Court had found that the authorities below had found that there were some incorrect statements made in the return. However, the said transactions were reflected in the accounts of the assessee. This Court, therefore, observed : "So far as the question of penalty is concerned the items which were not included in the turnover were found incorporated in the appellant's account books. Where certain items which are not included in the turnover are disclosed in the dealer's own account books and the assessing authorities include these items in the dealer's turnover disallowing the exemption, penalty cannot be imposed. The penalty levied stands set aside." The situation in the present case is still better as no fault has been found with the particulars submitted by the assessee in its return.
12. The Tribunal, as well as, the CIT(A) and the High Court have correctly reached this conclusion and, therefore, the appeal filed by the Revenue has no merits and is dismissed.”
In view of the above discussions, the reliance placed by the lower authorities on the decision of Hon’ble Delhi High Court in the case of CIT Vs. Escorts Finance Limited (supra) is totally misplaced.
In the light of the above discussion, viewed in any angle, it is not a fit case for levy of penalty u/s 271(1)(c) of the Act for furnishing of inaccurate particulars of income. Accordingly, we set aside the order of lower authorities i.e., CIT as well as the AO and direct the AO to delete the penalty of Rs.1,63,43,480/- levied u/s 271(1)(c) of Act.
In the result, the appeal filed by the assessee stands allowed.