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Income Tax Appellate Tribunal, DELHI BENCH : F : NEW DELHI
Before: SHRI C.M. GARG & SHRI PRADIP KUMAR KEDIA
(Appellant) (Respondent) Assessee by : Shri Alok Mathur, CA Revenue by : Shri Anil Kumar Sharma, Sr. DR Date of Hearing : 24.08.2022 Date of Pronouncement : 31.08.2022 ORDER
PER C.M. GARG, JM:
This appeal filed by the assessee is directed against the order dated 23.04.2019 of the CIT(A)-7, New Delhi, relating to Assessment Year 2009-10.
The grounds of appeal
raised by the assessee read as under:- “1. That the order of the learned A.O, and confirmed by CIT Appeals New Delhi are bad in law and on the facts of the case.
2. That the mere fact that the amount of Rs. 16,45,515 which were appearing in the Balance Sheet of the Assessee for a very long time were written back in the financial year 2010-11 and taken in the income of the Assessee subsequently in the same year confirms that an income/credit cannot be taxed twice and simultaneously no penalty u/s 271(l)(c) should be levied thereon.
The Assessee had not concealed nor has it made any misrepresentation and these facts were disclosed and argued at the time of Assessment proceedings as well as the Appeailate proceedings.
4. That sec.41(l) was invoked by the A.O. who was at the time of Assessement Procedure also informed about the inclusion of these credits but in the subsequent year he did not concur with our views. There was no sham transaction entered into by the company as these were very old outstanding and when the company was taken over by the present Directors these credits were already existing and hence it was decided to write back these credits as the creditors or their whereabouts were not known to the present management. 5. That as per CIT Appeals 7,orders at Para 3.9 that had the case not been picked up for Scrutiny the transaction would not have been noticed, does not really add up to his conformity the penalty orders as the same were never taken into the income subsequently before passing of the A.O. orders u/s 143(3).Reference made in the case CIT Vs. Zoom Communication (P) Ltd. 327ITR 510 and CIT Vs. Escorts Finance LTD. 188 Taxman 87 are apparently not relevant as the facts differ from our facts. 6. That the A.O. in his penalty order quoted the following cases regarding "deliberate" and contending that the onus of burden has shifted from department to the assesse. (a) CIT Vs. Anwar Ali, 76 ITR 696(SC) (b) CIT Vs. Mussadilal Ram Bharose,165-ITR-14(SC) (C)Additional CIT Vs.Jeevan Lai sah,205-ITR-244(SC) It may be noted that these cases have no relevance to the facts and interpretation in our case as our penalty is levied with relation to writing back the credits u/s 41(1). 7, That it may also be noted that the A.O. during penalty Proceedings had never confronted the Assessee with the proposed disallowance and levying Penalty and also the show cause notice issued never mentioned anything about the nature of defaults. It is the basic principles of Natural JUSTICE that the A.O. should inform and confront his conjectures with the Assessee and then proceed to issue the orders.
IN a number of cases cited below it has been laid down that the penalty proceedings u/s 271(l)(c) may be dropped depending on the facts and circumstances of the case:- (a) Amruta Organics Pvt. Ltd. Vs. DCIT (ITAT Pune,ITA NO.1121/PN2011) (b) Suresh Jindal,Karnal Vs.lTQ,Karnal (ITA NO.1664/DEL/2015) (c) PR.CIT Vs.Somtel India Ltd.(Delhi High court) (d) CIT Vs. Mahindra And Mahindra Ltd.(2018) 93 TAXMAN.COM 32 (SC) (e) CIT Vs. Calcutta Export Company (2018) 93 ATXMAN.COM 51(SC) 9. Any other ground of appeal as may be relevant to this case.”
3. The ld. Counsel of the assessee reiterating the written arguments of the assessee, submitted that the impugned amount of Rs.16,45,515/- which was appearing in the balance sheet of the assessee for a very long time were written back in the financial year 2010-11 and taken as income of the assessee. He further submitted that the income/credit cannot be taxed twice simultaneously, therefore, penalty u/s 271(1)(c) of the Act should not be levied thereon. The ld. Counsel also submitted that section 41(1) of the Act was invoked by the AO who was at the time of assessment proceedings also informed about the inclusion of these credits, but, in the subsequent year he did not concur with their views. He further submitted that there was no sham transaction entered into by the company as these were very old outstandings and when the company was taken over by the present Directors these credits were already existing and, hence, it was decided to write back these credits as the creditors or their whereabouts were not known to the present management. The ld. Counsel submitted that the A.O. during penalty proceedings had never confronted the Assessee with the proposed disallowance and levying penalty and also the show cause notice issued by the AO never mentioned anything about the nature of defaults. Therefore, penalty u/s 271(1)(c) of the Act is not leviable on the assessee and the same may kindly be dropped/deleted in view of the following judgements:-
(a) Amruta Organics Pvt. Ltd. Vs. DCIT (ITAT Pune, (b) Suresh Jindal, Karnal Vs. ITQ, Karnal (ITA NO.1664/DEL/2015) (c) PR.CIT Vs. Somtel India Ltd.(Delhi High court) (d) CIT Vs. Mahindra And Mahindra Ltd.(2018) 93 TAXMAN.COM 32 (SC) (e) CIT Vs. Calcutta Export Company (2018) 93 ATXMAN.COM 51(SC)
The ld. Counsel also submitted that the mere fact that the amount of Rs. 16,45,515/- which were appearing in the Balance Sheet of the Assesse for a very long time were written back in the Financial Year 2010-11 and taken in the Income of the Assesse. It is therefore pleaded that an Income/Credit cannot be taxed twice and simultaneously no Penalty u/s 271 (1) (c) should be levied thereon. Further, he submitted that it may also be appreciated that Penalty Orders u/s 271 (1) (c) were passed on 13.01.2015 whereas the decision to write back the liabilities of Rs. 16,45,515/- was taken on 22.11.2011 as also Orders of ITO u/s 143 (3) were passed on 15.12.2011 and the Credit were duly taken as Income during that Financial Year.
The Assesse had not concealed nor has it made any misrepresentation and these facts which were disclosed and argued at the time of Assessment as well as during Appellate Proceedings. That Section 41(1) was invoked by the AO who was at the time of Assessment Procedure also informed about the inclusion of these Credits but in the subsequent year he did not concur with said contention of assessee. There was no sham transaction entered into by the Company as these were very old outstanding and when the Company was taken over by the present Directors these Credits were already existing and hence it was decided to write back these Credits as the Creditors or their whereabouts were not known to the present management.
That as per CIT (Appeals -7), Orders at Para 3.9 that had the case not been picked up for Scrutiny the transaction would not have been noticed, does not really add up to his conformity the Penalty Orders as the same were never taken into the Income subsequently before passing of the AO Orders u/s 143 (3). Reference made in the case CIT vs M/s. Zoom Communication Pvt Ltd 327 ITR 510 and CIT vs M/s. Escorts Finance Ltd. 188 Taxman 87 are apparently not relevant as the facts differ from our facts.
It was also submitted by the ld AR that the AO in his Penalty Order quoted the following cases regarding "Deliberate" and contending that the onus of burden has shifted from Department to the Assesse and, thus, the AO wrongly shifted the burden on the assessee.
a. CIT v/s Anwar Ali, 76 ITR 696 (SC) b. CIT v/s Mussadilal Ram Bharose, 165 ITR 14 (SC) c. Additional CIT v/s Jeevan Lal Sah, 205 ITR 244 (SC)
8. It may be noted that these cases have no relevance to the facts and interpretation in our case as Penalty is levied with relation to writing back the Credits u/s 41 (1) of the Act.
That it may also be noted that the AO during Penalty Proceedings had never confronted the Assesse with the proposed Disallowance and Levying Penalty and also the Show Cause Notice issued never mentioned anything about the nature of defaults. It is the basic principles of Natural Justice that the AO should inform and confront his conjectures with the Assesse and then proceed to issue the Orders.
In a number of cases cited below it has been laid down that the Penalty proceedings u/s 271 (1) (c) maybe dropped depending on the facts and circumstances of the case; a. M/s. Amruta Organics Pvt Ltd v/s DCIT (ITAT Pune, 2011). b. Suresh Jindal, Karnal v/s ITO - Karnal (ITA No. 1664/DEL/2015) c. Pr CIT v/s M/s. Samtel India Ltd (Delhi High Court) d. CIT v/s M/s. Mahindra & Mahindra Ltd (2018) 93 TAXMAN.COM 32 (SC) e. CIT v/s M/s. Calcutta Export Company (2018) 93 TAXMAN.COM 51 (SC) 6
Replying to the above, the ld. Sr. DR strongly supported the penalty as well as the first appellate order and submitted that the appellant has furnished inaccurate particulars of its income and, therefore, rigors of penalty proceedings of section 271(1)(c) of the Act are clearly applicable in the facts and circumstances of the case and the AO was right and fully justified in levying the penalty on the assessee.
On careful consideration and on careful perusal of the assessment order as well as penalty order, we observe that the AO has imposed penalty on account of addition u/s 41(1) of the Act of Rs.16,45,515/-. The ld. Sr. DR has not controverted this factum position that these amounts were appearing in the balance sheet of the assessee for a very long time and also were written back during FY 2010-11 relevant to AY 2011-12 and taken in the income of the assessee and offered to tax. It is also not in dispute that neither during the assessment proceedings nor during the course of first appellate proceedings, it was not the case of the authorities below that the assessee either concealed particulars of the income or had furnished inaccurate particulars of income. The AO invoked the provisions of section 41(1) of the Act who was also informed about the inclusion of these credits in the subsequent assessment year, but, he did not concur or agree with this explanation of the assessee. We are in agreement with the contention of the ld. Counsel of the assessee that there was no sham transaction entered into by the company and the impugned amount were from old outstanding and when the company was taken over by the present management/directors, these credits were already existing in the balance sheet, hence, new management decided to write back these credits because the details of the creditors or their whereabouts were not known to the present management. In this situation, we decline to agree with the findings arrived at by the ld.CIT(A) that the assessee’s case is covered under Explanation 1(a) to section 271(1)(c) of the Act and the assessee has furnished inaccurate particulars of its income and, thereby has concealed its true and correct income.
This fact has not been controverted neither by the AO nor by the ld.CIT(A) during assessment and first appellate proceedings that the assessee had written back the entire impugned amount during subsequent FY 2010-11. This fact is relevant to evaluate the conduct of assessee in view of two main limbs of section 271(1)(c) of the Act. In view of the foregoing, it is apparent and very clear that the assessee disclosed all the particulars of his income. The AO disallowed the same without holding it to be false or bogus. Hence genuineness of claim of the impugned amount on account of credit written back which were very old outstanding and when the company was taken over by the present management/directors these credits were already existing in the balance sheet and hence it was decided to write back these credits as creditors or their whereabouts were not known to the present management. At this juncture, we take respectful cognizance of the judgement of the Hon’ble Supreme Court in CIT vs. Reliance Petroproducts Ltd., 322 ITR 158 (SC) wherein it was held thus:-
“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 Section 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.”
Likewise, under the present facts and circumstances of the case, the assessee cannot be penalized u/s 271(1)(c) of the Act as neither it concealed the particulars of income nor has furnished inaccurate particulars of its income. Therefore, their Lordships speaking for the Apex Court in the case of Reliance Petroproducts (supra) further held as follows:-
“10………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 Section 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 Assessing Officer for any reason, the assessee will invite penalty 9 under Section 271(1)(c). That is clearly not the intendment of the Legislature.”
In our humble understanding, the intent of the legislature cannot be taken to be to penalize every one who makes a claim for deduction, which was not accepted or not found to be acceptable by the Revenue, by itself would not attract penalty u/s 271(1)(c) of the Act. Therefore, we reach to a logical conclusion that the AO was not correct in levying penalty and the ld.CIT(A) was not also justified in confirming the same. Therefore, the AO is directed to delete the impugned penalty imposed u/s 271(1)(c) of the Act.