P.CHHOTALAL MANUFACTURERS & EXPORTE,R,AHMEDABAD vs. THE DY.CIT.,CIRCLE-10,, AHMEDABAD

This appeal filed by the Assessee is directed against the order of the Ld. CIT(A) for confirming the penalty u/s. 271(1)(c) of the Act.

The A.O. initiated penalty proceedings u/s.271(l)(c) of the Act for furnishing inaccurate particulars of income and accordingly, penalty notice u/s 274 r.w.s. 271(l)(c) of the Act was issued on 16/12/2010. Being aggrieved by the order passed by the Assessing Officer, the assessee preferred appeal before the Ld.ClT(A). The Ld.CIT(A)-XVl, Ahmedabad vide his order in appeal No.ClT(A)XVI/JCIT/R.10/619/10-ll dated 01/11/2011 dismissed the appeal of the assessee on disallowance of 80(IB) claim and interest. Accordingly, a show cause notice was issued to the assessee on 30/01/2013 calling for assessee's reply if any for levy of penalty.

Consequent to the order of Ld.ClT(A), a fresh opportunity vide letter dated 02/01/2012 was issued to the assessee granting opportunity of being heard in the matter of levy of penalty on the issue confirmed by the Ld.ClT(A). Subsequently, due to change of incumbent, another letter dated 31/01/2013 was issued and served on the assessee granting one more opportunity for making any further submission in addition to the earlier submission in the matter of levy of penalty. The assessee vide her letter dated 19/02/2013 has submitted reply in compliance to notice dated 31/01/2013 has furnished the following reply- With reference to the above and on behalf of our client the assessee above named, we refer to notice u/s. 2 71 (l)(c) of the I. T. Act for A. Y. 2008-09 and we have to state as under :-

The assessee contention is as follows: 1. That the AO has initiated the penalty u/s. 271(l)[c) of the act without specifying as to whether the assessee has concealed the particulars of his income. It is submitted that the initiation of the penalty proceedings u/s. 271(l)(c) of the Act without specifying as to whether assessee is guilty of concealing the particulars of income or guilty of furnishing inaccurate particulars of income is patently bad and illegal and requires to be quashed and no penalty can be levied on such initiation Reliance is place on CIT v/s. Manu Engineering Works 1221TR 306(Guj). 2. The assessee further submits that AO has not given any independent findings to the demonstrate that the assessee has either concealed or furnished inaccurate particulars of income. 3. The assessee fully and truly disclosed all the facts as well as all the details required by AO were submitted at the time of hearing. The AO has not pointed out any defects in books of account and merely disallowing any expense or income does not attract penalty. 4. The assessee relies on the decision of National Textile V/s. CIT 249 ITR 125 wherein it is held that there must be some material or circumstances leading to the reasonable conclusion that the amount does represent the assessee income. It is not enough for the purpose of penalty that the amount has been assessed as income and circumstances must show that there was animus i.e. conscious concealment or act of furnishing of inaccurate particulars on the part of the assessee. 5. The ratio of above judgment squarely applies to the assessee. That merely because there is addition to income does not make the contention of the assessee false. 6. Penalty u/s. 271(l)(c) Expln - concealment deeming fiction contained in Expl.l will not apply if the explanation given by the assessee which he could not substantiate is otherwise bonafide and if he has disclosed all the facts relating to the same and material to the computation of his total income. In the assessee's case all the facts and details were given for interest free loan and claim under section 801B. But the explanation offered was rejected, there would arisen no

The reply of the assessee carefully considered however the same is not accepted. In view of the following facts of the case :

Before a discussion in respect of the leviability of penalty in the case of the assessee is undertaken a look at the penalty provisions is necessary. Section 271(l)(c) reads as under: [Failure to furnish returns, comply with notices, concealment of income, etc. 271.(1) If the [Assessing] Officer or the [***] [Commissioner (Appeals}] [or the Commissioner] in the course of any proceedings under this Act, is satisfied that any person- …………. (c) has concealed the particulars of his income or [* * *] furnished inaccurate particulars of [such income, or] ……… [(iii) in the cases referred to in clause (c) [or clause (d)], [in addition to tax, if any, payable] by him, a sum which shall not be less than, but which shall not exceed [three times], the amount of tax sought to be evaded by reason of the concealment of particulars of his income [or fringe benefits] or the furnishing of inaccurate particulars of such income.

During the assessment proceedings, the AO vide Para.3 & 4 of the assessment order observed as under.

Against the said order, assessee preferred first statutory appeal before the ld. CIT(A) who confirmed the action of the A.O.

We have gone through the relevant record and impugned order. In this case, A.O. has disallowed the interest of Rs. 3,70,142/- for interest free advances and disallowed deduction under 80IB(10). It is a well settled law that for disallowance of any claim cannot be a ground for penalty. Though, same can be good for the purpose of making addition whereas in such cases, penalty cannot be levied as it has been held in several judgments of the higher forum that if any claim made by the assessee is not acceptable to the department , same cannot be ground for levying the penalty. Though, addition can be made on that basis or such claim can be disallowed by the revenue authority.

As we can see, in this case, assessee has given all statement with regard to his claim but revenue authority has not accepted the claim of the assessee that

In the result, appeal filed by the Assessee is allowed.