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Income Tax Appellate Tribunal, MUMBAI BENCH “A” MUMBAI
Before: SHRI SHAMIM YAHYA ACCOUNTANTMEMBER & SHRI PAVAN KUMAR GADALE
ORDER PER PAVAN KUMAR GADALE, J.M. The assessee has filed the appeal against the order of Commissioner of Income Tax (Appeals)-33, Mumbai passed u/s 271(1)(c) and 250 of the Income Tax Act, 1961. The assessee has raised following grounds of appeal- Ground No. 1 : Non Striking off in Penalty notice u/s. 274 i. The learned CIT(A) erred in not adjudicating on the issue pertaining to Striking off in Penalty notice u/s. 274, although a specific ground and detailed submissions were filed. ii. The learned CIT(A) erred in confirming the penalty u/s 271(1)(c) (to the extent of 100%) although in the Penalty Notice u/s. 274, the charge of concealment or filing of inaccurate particulars was not struck off by the AO & hence the AO and CIT(A) did not apply their minds before levying and confirming the concealment Shri Ashok L. Shah 2 penalty, under what charge the penalty was being initiated wand the same was not ascertained. Ground No. 2 : Concealment of Incomeor 'Inaccurate Particulars ofIncome' (i) The learned CIT(A) failed to take into consideration that penalty levied fails the test of the Section, as the AO has levied a penalty u/s. 271(1)(c), without specifically stating the charge of the penalty (ii) The learned CIT(A) failed totake into consideration that the AO has levied the penalty on 'Concealment of Income' AND 'Inaccurate Particulars of Income', as is stated in Penalty Order u/s. 271(1)[c) on Page 2 Para 2, although the section clearly states that penalty may be levied on 'Concealment of Income' OR Inaccurate Particulars of Income. (iii) The learned CIT(A) erred in confirming the penalty on the allegation of concealment of income, although on perusal of the Statement of accounts and the ITR submitted it was clear that full disclosures relating to the income and expenses were made and therefore it cannot be a case of 'CONCEALMENT OF INCOME', as was alleged by AO in the Penalty Order u/s. 271(1)(c) on Page 2 Para 3. Without prejudice to Ground 1 8s 2 Ground No. 3 : Penalty on Disallowance u/s 14A - Rs.2,75,119/- (i) The Ld. CIT(A) erred in confirming penalty u/s. 271(l)(c) with respect to the addition u/s. 14Aof Rs.1,00,000/-, merely on the ground that the ITAT (in the quantum appeal) had confirmed the addition to the extent of Rs.1,00, GOG/- purely on ad-hoc basis. (ii) The Ld. CIT(A) failed to take into consideration that no penalty can be levied with respect to addition made on estimate basis. Without prejudice to Ground 1& 2 Ground No. 4 : Penalty on Disallowance of Rent, Rates and Taxes of Rs.29,317/- The Ld. CIT(A) erred in confirming penalty u/s.271(1)(c) with respect to the addition of Rs.29,317/-, wrongly claimed due to an inadvertent clericalmistake purely on account of a human error. Without prejudice to Ground I & 2 Ground No. 5 : Penalty on denial of deduction u/s. 80G of Rs.1,84,922/- (i) The Ld. CIT(A) erred in confirming penalty u/s 271(1)(c) with respectto the addition of Rs.1,84,922/-, being deduction u/s 80G denieddue to non- furnishing of Donation receipts and exemption certificates. (ii) The learned CIT(A) erred in not considering the donation receipts andcertificates and admitting the additional evidence, which would provethe bonafide claim of the Appellant. (iii) The learned CIT(A) erred in confirming the penalty merely on theground that no further appeal was filed to the higher authority. The Appellant craves leave to add, alter, amend or vary the grounds before the hearing of the appeal.
2. The brief facts of the case are that, the assessee is an individual and is engaged in the business of money lending & bill discounting. The assessee filed the return of income for the assessment year 2008-09 disclosing a total income of Rs.1,78,24,954/-on 25.09.2008 and the return of income was processed u/s 143(1) of the Act. Subsequently, the case was selected for scrutiny and notice u/s 143(2) and 142(1) of the Act along with the questionnaire was issued. In compliance, the Ld. AR of the assessee appeared from time to time and furnished the details and the case was discussed. The assessing Officer on perusal of the financial statements found that the assessee made investments in shares, three partnership firms and other financial securities. The assessee has not disallowed any expenditure in relation to exempt income earned on investments in shares. Hence, the AO has calculated the disallowance u/s 14A r.w..r 8D(2)(iii) of IT Rules of Rs.2,75,119/-. Further, the Assessing Officer found that the assessee has claimed personal expenses i.e. taxes in respect of residential flat of Rs 29,317/- which is not allowable as business expenditure and was disallowed. Similarly, the assessee has made donations to various institutions and organizations aggregating to Rs.7,75,001/- and claimed deduction u/s 80G of the Act Rs.3,53,422/- in the return of income. The Assessing Officer dealt on donations payments and found that some of the donation receipts and exemption certificates were not filed therefore restricted the deduction to the extent of Rs.1,68,500/- and assessed the total income of Rs.1,83,14,312/- and passed order u/s 143(3) of the Act on 25.10.2010. Subsequently, the Assessing Officer initiated penalty proceedings u/s 271(1)(c) of the Act. In the penalty proceedings, the Assessing Officer considered the findings of the Assessing Officer in the scrutiny assesseement and it was brought to the Shri Ashok L. Shah 4 knowledge the Assessing Officer that on appeal , the CIT(A) has confirmed the additions and dismissed the assessee appeal. The Assessing Officer found that the assessee has wrongly claimed the deductions and levied the penalty @200% which worked out to Rs.3,49,436/- and passed order u/s 271(1)(c) of the Act dated 31.03.2014.
3. Aggrieved by the penalty order, the assessee has filed an appeal with the CIT(A). In the appellate proceedings , the CIT(A) has considered the facts and the basis of levy of penalty and has restricted the penalty u/s 271(1)(c) to 100% as against 200% levied by Assessing Officer and partly allowed the appeal of the assessee. Aggrieved by the order of the CIT(A), the assessee has filed an appeal before the Honble Tribunal.
4. At the time of hearing, none appeared on behalf of the assessee . The Ld. DR submitted that the assessee was granted relief by the CIT(A),as the AO has levied the penalty @ 200% and whereas the CIT(A) has restricted to 100% and supported the order of the CIT(A).
We have heard the Ld. DR submissions and perused the material on record. The sole crux of the disputed issue is in respect of levy of penalty u/s 271(1)(c) of the Act on the additions made by the Assessing Officer in the assesseement order U/sec143(3) of the Act .The assessee has raised the grounds of appeal on the validity of notice U/sec 274 of the Act on the technicalities of striking off the charging limbs and also on the merits . We find the assessee case be considered on merits. The assessee has claimed the deductions in the return of income based on the financial statements. But the assessing officer has made additions in respect of (i) disallowance U/sec14A r.w.r 8D2(iii) of IT rules (ii) taxes paid on residential flat and (iii) Restricting Shri Ashok L. Shah 5 the deduction U/sec80 G of the Act . We on perusal of the assesseement order find that the assessing officer has not doubted the genuineness of the claims. The A.O. has made addition U/sec14A of the Act based on the financial statements which are not disputed. Further the taxes paid in respect of residential flat is disallowed as it is of personal nature and in respect of deduction u/sec80G of the Act the A.O. has restricted the claim of deduction as the assessee could not file donation and exemption certificates in some cases. We are of the opinion that, the addition made in the assessment order cannot be the basis for levying the penalty and every addition made in the assessment proceedings cannot be gateway for initiation of penalty. We rely on the decision of Honble Supreme court in CIT v. Reliance Petro products (P.) Ltd. (2010) 189 Taxman 322 (SC). The mere making of claim, which is not sustainable in law, by itself, will not amount to furnishing of inaccurate particulars of income. The assessee has made a claim under the bonafide belief that it is allowable under the law. The observations in the case of CIT Vs. Reliance Petroleum Products Ltd.(Supra) are read as under:
“271(1) If the A.O or the commissioner (Appeals) or the commissioner in the course of any proceedings under the Act, is satisfied that any person (c) has concealed the particular of his income or furnished inaccurate particulars of such income. A glance at his provision would suggest that in order to be covered there has to be concealment of the particular of the income of the assessee. Secondly, the assessee must have furnished inaccurate particular of his income. The present is not a case of concealment of the income. That is not the case of the revenue either. However, the Ld. Counsel for revenue suggested that by making incorrect claim for the expenditure on interest, the assessee has furnished Shri Ashok L. Shah 6 inaccurate particular of the income. As per law lexicon, the meaning of the word “particulars” is a details or details (in plural sence); the details of the claim, or the separate item of an account. Therefore, the word “particular used in the section 271(1)(c) would embrace the meaning of the details of the claim made. It is an admitted position in the present case that no information given in the return was found to be incorrect on inaccurate. It is not as if any statement made or any detail supplied was found to be factually incorrect. Hence, at least, prima facie, the assessee cannot be held guilty of furnishing inaccurate particulars. The ld. counsel argued that submitting an incorrect claim in law for the expenditure on interest would amount to giving inaccurate particulars of such income”. We do not think that such can be the interpretation of the concerned words. The words are plain and simple. In order to expose the assessee to the penalty unless the case is strictly covered by the provisions, the penalty provisions cannot be invoked. By an stretch of imagination, making in incorrect claim in law cannot be tantamount to furnishing in accurate particulars”.
Accordingly, we considering the facts, circumstances and the ratio of the judicial decision set aside the order of the CIT(A) and direct the Assessing officer to delete the penalty and allow the grounds of appeal in favour of the assessee.
In the result, the appeal filed by the assessee’ is allowed.
Order pronounced in the open Court on 27/07/2021.