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Income Tax Appellate Tribunal, DELHI BENCH ‘G’ : NEW DELHI
Before: HON’BLE N.K. BILLAIYA & SHRI KULDIP SINGH
Date of Hearing : 21.06.2021 Date of Order : 30.06.2021 O R D E R PER KULDIP SINGH, JUDICIAL MEMBER :
Appellant, ACIT, Circle 26 (1), New Delhi (hereinafter referred to as ‘the Revenue’) by filing the present appeal sought to set aside the impugned order dated 11.05.2017 passed by the Commissioner of Income-tax (Appeals)-33, New Delhi affirming the penalty order dated 30.05.2012 passed u/s 271(1)(c) of the Income-tax Act, 1961 (for short ‘the Act’), qua the assessment year 2009-10 on the ground that :-
“On the facts and in the circumstances of the case and in law, the ld. CIT (A) has erred in deleting the penalty u/s 271(1)(c) on the grounds that appellant should not penalized merely for showing the receipt of consultancy as other income despite the fact that the AO has verified during the assessment that the assessee did not furnish any documents on record to prove that the assets were put to use.”
Briefly stated the facts necessary for adjudication of the controversy at hand are : On the basis of assessment framed under section 143 (3) of the Income-tax Act, 1961 (for short ‘the Act’), disallowance of depreciation claimed at Rs.1,07,43,586/- by the assessee, penalty proceedings have been initiated under sections 271(1)(c), 271B & 271 of the Income-tax Act, 1961 (for short ‘the Act’). Declining the contentions raised by the assessee that the assessee company had received consultancy income of Rs.4,79,51,780/- during the year under assessment which was reflected under grouping “other income”, Schedule 12 of the balance sheet and also without appreciating the fact that the assessee has been maintaining office of 11,600 sq.ft. and have employed 60 employees approximately, proceeded to levy the penalty for addition of Rs.2,06,38,449/- for concealment of income and furnishing of inaccurate particulars of income.
Assessee carried the matter before the ld. CIT (A) by way of filing the appeal who has deleted the penalty by allowing the appeal. Feeling aggrieved by the order passed by the ld. CIT (A), the Revenue has come up before the Tribunal by way of filing the present appeal.
Assessee has not preferred to put in appearance despite issuance of the notice and consequently, we proceeded to decide the present appeal with the assistance of the ld. DR as well as on the basis of documents available on the file.
We have heard the ld. Departmental Representative for the revenue to the appeal, gone through the documents relied upon and orders passed by the revenue authorities below in the light of the facts and circumstances of the case.
Undisputedly, assessee had filed return of income at a loss of Rs.2,06,38,450/-. It is also not in dispute that the penalty has been levied u/s 271(1)(c) of the Act for alleged incorrect claim of the business loss for the year under assessment. It is also not in dispute that the AO has disallowed the depreciation claimed by the assessee on the ground that similar depreciation was disallowed in AY 2008-09. It is also not in dispute that the assessee had claimed unabsorbed depreciation of the year 2008-09 as brought forward in the AY 2009-10 and had not claimed brought forward business losses for AY 2008-09.
In the backdrop of the aforesaid facts and circumstances of the case and arguments addressed by the ld. DR for the Revenue, the sole question arises for determination in this case is :-
“as to whether the assessee has concealed particulars of income or has furnished inaccurate particulars of income during assessment proceedings?”
8. Ld CIT (A) deleted the penalty levied by the AO under section 271(1)(c) of the Act by returning following findings :-
“6. I have considered the reasoning of the Assessing Officer and the submissions of the appellant. 6.1 All the grounds of appeal relate to imposition of penalty amounting to Rs.70,15,008/- u/s 271(1)( c). From item No.5 of Para 4 above its observed that even though the Assessing Officer acknowledged the submissions made by the appellant in response to notice u/s 271(1)(c) dated 27.12.11, he has rejected the contention raised by the assessee without either reproducing the said contention in his order or commenting upon it. It is also observed that the Assessing Officer made the addition as well as levied the penalty following the disallowance of claim of depreciation in A.Y. 2008-09 on the basis of his conclusion that assets were not put to use. His conclusion that the assets were not put to use are based on his observation that during the year the appellant has reflected the consultancy income of Rs.4,79,51,780/- under the grouping 'other income' and the P&L account of the assessee does not show any receipts from any project. 6.2 The Assessing officer has acknowledged that the depreciation has been charged on opening balance of schedule of fixed assets at prescribed rate as per the Income Tax Act. 6.3 While disallowing the claim of depreciation the Assessing Officer has observed that the assessee has only 'other income' in the nature of consultancy income reportedly received from outside India.
6.4 The appellant's contention that it was maintaining an office of about 11,600 square feet and employed approximately 60 personnel and there was no new addition to the fixed assets or computers and the depreciation has been claimed on assets brought forward from the earlier year vehemently challenge the conclusion drawn by the Assessing officer that the assets were not put to use. 6.5. The assessee's appeal against the quantum addition was dismissed by me vide order dated 18.01.17 because I did not find sufficient reasons to condone a delay of 519 days in filing the appeal. Consequently, in the quantum appeal the addition on account of depreciation was not considered by me on merits. 6.6 However, given that substantial consultancy receipts were earned by the appellant through the work done by a large number of people, it is natural that the assets would have been put to use. I do not intend to penalise the appellant merely for showing the receipts for consultancy as other Income. The penalty has to be deleted.
7. As regards denial of business loss carried forward amounting to Rs.98,94,864/-, again, even though the merits of the addition were not examined during the quantum appeal as yet the return of income was filed late, the business loss was not to be allowed to be carried forward. 7.1 However, in view of appellants explanation that the claim of carry forward of business loss was involuntary due to system consideration in respect of 'E' filed return and there was no intention of the appellant to claim carry forward of business loss, I do not find the penalty sustainable.
Accordingly, I delete the penalty levied by the Assessing Officer.”
Perusal of the impugned order passed by the ld. CIT (A)
goes to prove that it does not suffer from any illegality or infirmity because it is a proved fact on record that carry forward of business loss was not an intentional exercise on the part of the assessee rather it was due to electronic system of e-filing of the return which has given benefit to the assessee. Moreover, when the assessee is undisputedly maintaining office space of 11,600 sq.ft. having 60 employees with no new addition to the fixed assets or computer, the depreciation has been claimed on assets brought forward from earlier years because of electronic system of e-filing of the return.
Even otherwise, there is not an iota of material on the file to prove the fact that there was concealment of income or furnishing of inaccurate particulars of income by the assessee. Merely lodging a wrong claim of depreciation does not ipso facto amount to concealment of particulars of income or furnishing of inaccurate particulars of income.
Hon’ble Supreme Court in a case cited as CIT vs. Reliance Petro Products Pvt. Ltd. 322 ITR 158 (SC) decided the identical issue in favour of the assessee. Operative part of which is reproduced for ready reference as under :-
“A glance at the provisions of section 271(1)(c) of the I.T. Act, 1961 suggests that in order to be covered by it, there has to be concealment of the particulars of the income of the assessee. Secondly, the assessee must have furnished inaccurate particulars of his income. The meaning of the word “particulars” used in section 271(1)(c) would embrace the detail of the claim made. Where no information given in the return is found to be incorrect or inaccurate, the assessee cannot be held guilty of furnishing inaccurate particulars. In order to expose the assessee to penalty, unless the case is strictly covered by the provision, the penalty provision cannot be invoked. By no stretch of imagination can making an incorrect claim tantamount to furnishing inaccurate particulars. There can be no dispute that everything would depend upon the return filed by the assessee, because that is the only document where the assessee can furnish the particulars of his income. When such particulars are found to be inaccurate, the liability would arise. To attract penalty, the details supplied in the return must not be accurate, not exact or correct, not according to the truth or erroneous.
Where there is no finding that any details supplied by the assessee in its return are found to be incorrect or erroneous or false there is no question of inviting the penalty under section 271(1)(c). A mere making of a claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee. Such a claim made in the return cannot amount to furnishing inaccurate particulars.”
Furthermore, assessment order passed in this case shows that the AO has failed to record a valid satisfaction to initiate the penalty proceedings u/s 271(1)(c) of the Act because he has merely recorded that, “penalty proceedings u/s 271(1)(c), u/s 271B and 271F of the Income Tax Act, 1961, have been initiated separately”, without specifying if the assessee has furnished concealment of particulars of income or has furnished inaccurate particulars of income.
Even at the time of passing of penalty order, AO was not clear enough as to whether he is going to levy the penalty for concealment of particulars of income or has furnished inaccurate particulars of income. AO was required to satisfy himself as to under which limb of section 271(1)(c) of the Act he is initiating the penalty proceedings and only thereafter penalty can be levied. In the instant case, AO was neither satisfied/aware at the time of recording a satisfaction in the assessment order nor he was clear enough at the time of penalty proceedings as to under which of the limb of section 271(1)(c) he is going to levy the penalty.
12. In view of what has been discussed above, we find no illegality or perversity in the impugned order passed by the ld. CIT(A) deleting the penalty levied by the AO, hence appeal filed by the Revenue is dismissed. Order pronounced in open court on this 30th day of June, 2021.