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Income Tax Appellate Tribunal, RAJKOT BENCH, RAJKOT
Before: Shri Waseem Ahmad & Ms. Madhumita Roy
आदेश/ORDER PER BENCH:-
This assessee’s appeal for A.Y. 2013-14, arises from order of the CIT(A), Jamnagar dated 21-02-2018, in proceedings under section 271(1)(c) of the Income Tax Act, 1961; in short “the Act”.
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The only issue raised by the assessee is that the learned CIT (A) erred in confirming the penalty amounting to Rs. 18,390/- under the provisions of section 271(1)(c) of the Act.
The facts in brief are that the assessee in the present case is an individual and is a partner in a partnership firm namely M/s Apex logistics. The assessee has filed his return of income dated 23 November 2013 declaring total income at Rs. 41,99,530/-. Subsequently the case of the assessee was selected under scrutiny and the assessment was accordingly framed under section 143(3) of the Act after making the addition of the following items: i. Interest income on the FDR and saving bank account amounting to Rs. 34,912/- which was not disclosed in the income tax return. ii. Disallowance of the expenses for accounting charges and other expenses amounting to Rs. 24,612/- respectively against the interest income received from the partnership firm.
The AO in the assessment order dated 20th November 2015 initiated the 4. penalty proceedings by issuing notice under section 271(1)(c) read with section 274 of the Act on account of concealment/furnishing inaccurate particular of income.
The assessee during the penalty proceedings contended that he failed to disclose the interest income in the income tax return inadvertently.
Similarly the assessee contended that he has actually incurred an expense of Rs. 24,612 on account of salary for the maintenance of the books of accounts and bank charges of Rs. 612 against the interest income received from the partnership firm. As such the assessee has not furnished any inaccurate particular of income as alleged in the show cause notice.
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However the AO disagreed with the contention of the assessee by observing that the assessee has not disclosed the interest income viz a viz claimed expenses which are not allowable for deduction against the interest income from the partnership firm. Therefore the assessee has concealed the particular of income with respect to interest income and furnished the inaccurate particulars with respect to the expenses claimed against the interest income from the partnership firm. Accordingly the AO levied the penalty of Rs. 18,390/- being 100% of the amount of tax sought to be evaded.
Aggrieved assessee preferred an appeal to the learned CIT (A) who has confirmed the order of the AO by observing as under:
The penalty order u/s. 271(l)(c) of the Act of the AO as well as submission dated 08/02/2018 of the AR of the appellant have been considered. The only ground of the appeal of the appellant is that the AO has erred in law as well on facts imposing the penalty u/s. 271(l)(c) of the Act. With regard to this ground of appeal, this submission dated 08/02/2018 of the AR of the appellant is not found to be tenable. The AO in the assessment order u/s. 143(3) has made addition of Rs. 34,912/-because of non disclosure of interest on FOR and addition of Rs. 24,612/- on account of disallowance of wrong claim of expenses. Subsequently, the AO has levied the penalty of Rs. 18,390/- u/s. 271(l)(c) on these two additions of Rs. 59,524/-, As regards, the levy of penalty u/s. 271(l)(c) on addition of Rs. 34,912/-, the submission of the AR of the appellant is not acceptable in view of the reason that fact regarding non disclosure of this interest of Rs.34,912/- was detected by AO only as a result of scrutiny assessment. This is not the case ofthe appellant that it has suo-moto disclosed this amount of interest of Rs. 34,912/- in his return of income. If the scrutiny of the case of the appellant was not done, the non disclosure of above amount of interest of Rs. 34,912/- would have gone undetected. In view of these facts, it is held that the AO has correctly levied the penalty u/s. 271(1)(c) of the Act on this addition of Rs. 34,912/~ and therefore the same is confirmed. 5.1 As regards levy of penalty on disallowance of expenses of Rs. 24,612/~, the submission of AR of the appellant is not found to be acceptable. The facts is that this claim of expenses of Rs. 24,612/- as made against interest income can not be said to be a legitimate and lawful claim. The appellant can not get away from the penal action u/s, 271(l)(c) of the Act merely on the ground that this is a mere claim of expenses. In my opinion the decision of Hon'bie Supreme Court as given in the case of CIT vs. Reliance Petro Products (P.) Ltd. is not applicable to the case of the appellant as such above claim of Rs. 24,612/- is not legally correct and is apparently not allowable. In view of these facts, it is held that the AO has correctly levied the penalty u/s. 271(l)(c) on this addition of Rs. 24,612/~ also and therefore the same is confirmed. Thus the ground of appeal of the appellant is dismissed.”
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Being aggrieved by the order of the learned CIT (A), the assessee is in appeal before us.
The learned AR before us submitted that considering the total income of the assessee declared in the return of income for Rs. 41,99,530/- it cannot be said that the assessee has either concealed the particular of income or furnished inaccurate particular of income for the amount of Rs. 34,912/- and 24,612/- which is quite meagre to the income declared by the assessee.
On the other hand the learner DR vehemently supported the order of the authorities below.
In the present case the penalty has been levied with respect to two items, firstly interest income which was not offered to tax and secondly expenses claimed against the interest income which were not eligible for deduction.
Regarding the non-disclosure of interest income by the assessee in the income tax return, we note that the assessee has declared taxable income in the income tax return amounting to Rs. 41,99,530/- whereas interest income stands at Rs 34,912/- which is less than 1% of the income declared by the assessee. Thus, we are of the view that the assessee failed to disclose such interest income in the income tax return without any dishonest intent. Thus in such circumstances, we are of the view that there cannot be any penalty for the addition made to the total income on account of such interest income. In holding so we draw support from the order of ITAT Pune Bench in the case of Kanbay Software India Pvt. Ltd. 122 TTJ 721 wherein it was held as under:
“Whether or not a person has acted bona fide reflects the state of his mind in respect of his conduct, and, therefore, the assessee has his inherent limitations in establishing this aspect of the manner. All that the assessee can do is to explain the circumstances in
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which he has acted in a particular manner and set out the related facts. The explanation for bona fides, at the cost of repetition, needs to be considered in a fair and objective manner and in the light of human probabilities. As long as the explanation given by the assessee is in the light of the human probabilities, there are no factual errors or inconsistencies, and it is supported by reasonable supporting evidences regarding factual elements embedded therein, if any, the bona fides should be taken as proved. The assessee's explanation regarding bona fides of the claim does not suffer from any apparent consistencies or factual errors and it is quite in tune with the human probabilities. There is no good reason to reject the same as unacceptable for the purpose of making of the claim of deduction being covered by the deeming fiction under Explanation 1 to section 271(1)(c).”
Regarding the disallowance of the expenses of Rs 24,612/- we note that none of the deduction claimed by the assessee has been held as false. Thus at the most, the claim made by the assessee can be wrong/inaccurate claims which cannot be treated as concealment/inaccurate particular of income. In holding so we find support and guide from the judgment of Hon’ble Supreme Court in case of Reliance Petro Products Pvt. Ltd. reported in 322 ITR 158 where it was held as under: “The word 'particulars' must mean the details supplied in the return, which are not accurate, not exact or correct, not according to truth or erroneous. In the instant case, there was 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). A mere making of the claim, which is not sustainable in law by itself will not amount to furnishing of inaccurate particulars regarding the income of the assessee. Such claim made in the return cannot amount to the inaccurate particulars.”
In view of the above, we disagree with the finding of the authorities below. Accordingly we set aside the finding of the learned CIT (A) with the direction to the AO to delete the penalty imposed by him. Hence the ground of appeal of the assessee is allowed.
Before we part with the issue/appeal as discussed above, it is pertinent to note that the clause (c) of rule 34 of the Appellate Tribunal Rules 1963 requires the bench to make endeavor to pronounce the order within 60 days from the conclusion of the hearing. However the period of 60 days can be extended under
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exceptional circumstances but the same should not ordinarily be further extended beyond another 30 days. In simple words the total time available to the Bench is of 90 days upon the conclusion of the hearing.
However, during the prevailing circumstances where the entire world is facing the unprecedented challenge of Covid 2019 outbreak, resulting the lockdown in the country, the orders though substantially prepared but could not be pronounced for the unavoidable reasons within the maximum period of 90 days. In such circumstances we find that the Hon’ble Mumbai Tribunal in the case of JSW Limited Vs Deputy Commissioner of Income Tax in ITA No. 6103/MUM/2018 vide order dated 14-5-2020 extended the time for pronouncing the order within 90 days of time by observing as under:
Let us in this light revert to the prevailing situation in the country. On 24th March, 2020, Hon’ble Prime Minister of India took the bold step of imposing a nationwide lockdown, for 21 days, to prevent the spread of Covid 19 epidemic, and this lockdown was extended from time to time. As a matter of fact, even before this formal nationwide lockdown, the functioning of the Income Tax Appellate Tribunal at Mumbai was severely restricted on account of lockdown by the Maharashtra Government, and on account of strict enforcement of health advisories with a view of checking spread of Covid 19. The epidemic situation in Mumbai being grave, there was not much of a relaxation in subsequent lockdowns also. In any case, there was unprecedented disruption of judicial wok all over the country. As a matter of fact, it has been such an unprecedented situation, causing disruption in the functioning of judicial machinery, that Hon’ble Supreme Court of India, in an unprecedented order in the history of India and vide order dated 6.5.2020 read with order dated 23.3.2020, extended the limitation to exclude not only this lockdown period but also a few more days prior to, and after, the lockdown by observing that “In case the limitation has expired after 15.03.2020 then the period from 15.03.2020 till the date on which the lockdown is lifted in the jurisdictional area where the dispute lies or where the cause of action arises shall be extended for a period of 15 days after the lifting of lockdown”. Hon’ble Bombay High Court, in an order dated 15th April 2020, has, besides extending the validity of all interim orders, has also observed that, “It is also clarified that while calculating time for disposal of matters made time-bound by this Court, the period for which the order dated 26th March 2020 continues to operate shall be added and time shall stand extended accordingly”, and also observed that “arrangement continued by an order dated 26th March 2020 till 30th April 2020 shall continue further till 15th June 2020”. It has been an unprecedented situation not only in India but all over the world. Government of India has, vide notification dated 19th February 2020, taken the stand that, the coronavirus “should be considered a case of natural calamity and FMC (i.e. force majeure clause) maybe invoked, wherever considered appropriate, following the due procedure…”. The term
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‘force majeure’ has been defined in Black’s Law Dictionary, as ‘an event or effect that can be neither anticipated nor controlled’ When such is the position, and it is officially so notified by the Government of India and the Covid-19 epidemic has been notified as a disaster under the National Disaster Management Act, 2005, and also in the light of the discussions above, the period during which lockdown was in force can be anything but an “ordinary” period. 10. In the light of the above discussions, we are of the considered view that rather than taking a pedantic view of the rule requiring pronouncement of orders within 90 days, disregarding the important fact that the entire country was in lockdown, we should compute the period of 90 days by excluding at least the period during which the lockdown was in force. We must factor ground realities in mind while interpreting the time limit for the pronouncement of the order. Law is not brooding omnipotence in the sky. It is a pragmatic tool of the social order. The tenets of law being enacted on the basis of pragmatism, and that is how the law is required to interpreted. The interpretation so assigned by us is not only in consonance with the letter and spirit of rule 34(5) but is also a pragmatic approach at a time when a disaster, notified under the Disaster Management Act 2005, is causing unprecedented disruption in the functioning of our justice delivery system. Undoubtedly, in the case of Otters Club Vs DIT [(2017) 392 ITR 244 (Bom)], Hon’ble Bombay High Court did not approve an order being passed by the Tribunal beyond a period of 90 days, but then in the present situation Hon’ble Bombay High Court itself has, vide judgment dated 15th April 2020, held that directed “while calculating the time for disposal of matters made time-bound by this Court, the period for which the order dated 26th March 2020 continues to operate shall be added and time shall stand extended accordingly”. The extraordinary steps taken suo motu by Hon’ble jurisdictional High Court and Hon’ble Supreme Court also indicate that this period of lockdown cannot be treated as an ordinary period during which the normal time limits are to remain in force. In our considered view, even without the words “ordinarily”, in the light of the above analysis of the legal position, the period during which lockout was in force is to excluded for the purpose of time limits set out in rule 34(5) of the Appellate Tribunal Rules, 1963. Viewed thus, the exception, to 90-day time-limit for pronouncement of orders, inherent in rule 34(5)(c), with respect to the pronouncement of orders within ninety days, clearly comes into play in the present case. Of course, there is no, and there cannot be any, bar on the discretion of the benches to refix the matters for clarifications because of considerable time lag between the point of time when the hearing is concluded and the point of time when the order thereon is being finalized, but then, in our considered view, no such exercise was required to be carried out on the facts of this case. 11. To sum up, the appeal of the assessee is allowed, and appeal of the Assessing Officer is dismissed. Order pronounced under rule 34(4) of the Income Tax (Appellate Tribunal) Rules, 1962, by placing the details on the notice board.
Considering the above, we express to pronounce the order beyond the period of 90 days. Accordingly, we proceed to pronounce the order as on date.
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In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 02-06-2020
Sd/- Sd/- (MADHUMITA ROY) (WASEEM AHMAD) JUDICIAL MEMBER ACCOUNTANT MEMBER Ahmedabad : Dated 02/06/2020 आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order, Assistant Registrar, Income Tax Appellate Tribunal, Rajkot