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Income Tax Appellate Tribunal, DELHI BENCH “B+SMC”: NEW DELHI
Before: SHRI SUDHANSHU SRIVASTAVA & SHRI PRASHANT MAHARISHI
O R D E R PER PRASHANT MAHARISHI, A. M. 1. This appeal is filed by the assessee against the order of the ld CIT(A)-24, New Delhi dated 21.01.2019 for the Assessment Year 2009-10, wherein, the penalty levied by the ACIT, Central Circle-27, New Delhi u/s 271(1)(c) of the Act of Rs. 7,05,585/- is confirmed. 2. The assessee has raised the following grounds of appeal:- “1. The order passed by the Ld. CIT(A) is bad in law, wrong on facts and against the principles of natural justice.
2. That on facts and in circumstances of the case and in law the Ld. CIT(A) is not justified in confirming the action of Ld. AO for imposing penalty of Rs. 7,05,585/- u/s 271(1)(c ) of Income Tax Act, 1961. 3(a) That in the absence of recording of valid satisfaction, the initiation of penalty proceedings u/s 271 (1 )(c) of Income Tax Act, 1961 is illegal and without jurisdiction. 3(b) That the Ld. CIT(A) has erred in confirming the penalty u/s 271(1)(c) without appreciating the fact that the Ld. A.O. has failed to specify whether penalty u/s 271(1)(c) has been initiated for concealment of income or furnishing of inaccurate particulars of income as per notice issued u/s 271(1)(c) dated 21/12/2011, 4(a) That the Ld. CIT(A) has failed to appreciate that the penalty levied on claim of deduction u/s 80IB of Rs. 20,75,862/- short allowed by Ld. AO on interest income on FDR duly disclosed in audited books of accounts Page | 1 and thus there is no case of any concealment or furnishing of inaccurate particulars of such income. 4(b) That the claim of deduction of Rs. 2075862/- u/s 80IB was based on the bonafide belief that the term loan has been obtained from Indian Bank for purpose of construction and certain funds received from the flat allotees which were not immediately required and to save the interest cost which was to be incurred on term loan, the assessee has deposited the same in fixed deposits for short period on which interest of Rs. 2075862/- was received and the same was treated as business income and claimed deduction u/s 80IB of the Income Tax Act, 1961. 4(c) That the Ld. CIT(A) has failed to appreciate that the claim of deduction u/s 801B at Rs. 2829995/- was duly supported by certificate in prescribed Form No. 10CCB and Tax Audit Report u/s 44AB duly signed by the auditors and already filed before the AO and thus there is no concealment or furnishing of inaccurate particulars of such income.
5. Without prejudice the Ld. CIT(A) has totally ignored the submissions of the Appellant that the calculations are wrong and 100% penalty u/s 271 (1)(c) works out to Rs.6,41,440/- as against penalty levied Rs.7,05,585/-.”
Brief facts of the case shows that assessee is a company who filed its return of income on 29.09.2009 at income of Rs. 19,39,080/-. The assessee’s claim u/s 80IB of the Act was reduced to the extent of interest income from fixed deposit and allowed to the extent of only Rs. 28,29,995/-. The interest on fixed deposit which was considered by the assessee as business income has been considered as income from other sources and which also resulted into reduction of the above deduction. The total income of the assessee was assessed vide order dated 16.12.2011 of Rs. 40,14,945/-. The ld CIT(A) further initiated penalty proceedings in the assessment year itself for concealment of particulars of income/ furnishing of inaccurate particulars of income. Consequently, the penalty order u/s 271(1)(c) was also passed on 27.09.2017 levying a penalty of Rs. 7,05,585/- holding that assessee has furnished inaccurate particulars of income. The merits of the addition contested before the ld CIT(A) was dismissed. The appeal before ITAT was also dismissed relying on the decision of the Hon'ble Supreme Court in case of Liberty India Vs. CIT 317 ITR 218.
The assessee submitted that assessee did not furnish any inaccurate particulars of income. The interest income earned should have been netted off with the interest income paid of Rs. 5616219/-. The auditor certified the deduction and therefore, it cannot be said that assessee has furnished any Page | 2 inaccurate particulars of income or concealed particulars of income. The penalty order was further challenged before the ld CIT(A), who passed a detailed order dismissing the appeal of the assessee confirming the penalty levied by the ld AO. Therefore, the assessee is in appeal before us. 5. The first ground of appeal
is that absence of proper initiation of penalty proceedings resulted into the penalty order being invalid.
6. The ld AR submitted that the copy of the notice u/s 274 read with Section 271(1)(c) dated 16.12.2011 issued by the AO did not strike off any of twin charges and for these reasons the penalty is invalid. He referred to plethora of judicial precedents to support his case. He also submitted a detailed argument on the merits of the issue.
7. The ld DR vehemently supported the order of the ld AO and submitted that if in any non statutory notice, there is an error by the ld AO, it cannot invalidate the penalty notice.
8. We have carefully considered the rival contentions and also perused the orders of the lower authorities. At page No. 83 of the paper book the assessee has placed notice u/s 274 read with section 271(1)(c) dated 16.12.2011, wherein, the ld AO has not cancelled any of the twin charges. Therefore, the issue is squarely covered by the decision of the Hon'ble Karnataka High Court in case of SSA Emerald Medeows in dated 23.11.2015. The above view has also taken in para No. 21 of the decision of the Hon'ble Delhi High Court in case of Sahara Finance Ltd. As the ld AO has failed to strike off the relevant charges against the assessee, the penalty order, cannot survive. Furthermore, in the assessment order itself the ld AO has not levied any specific charge. Therefore, respectfully following the decision of the Hon'ble Delhi High Court and Karnataka High Court, we reverse the orders of the lower authorities and direct the ld AO to delete the penalty levied u/s 271(1)(c) of the Act.