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Income Tax Appellate Tribunal, MUMBAI BENCH “D”, MUMBAI
Before: SHRI VIKAS AWASTHY & SHRI RAJESH KUMAR
आदेश/ ORDER
PER VIKAS AWASTHY, JM:
ITA No. 961 Mum 2019-AY-2010-11
This appeal by the assessee is directed against the order of Commissioner of Income-Tax (Appeals)-3, Thane [in short ‘the CIT(A)’] dated 01.11.2018 for the Assessment Year 2010-11, confirming levy of penalty under section 271(1)(c) of the Income Tax Act, 1961 [hereinafter referred to as ‘the Act’].
The brief facts of the case as emanating from records are: The assessee is an Insurance Commission Agent. The assessee filed its return of income for the impugned Assessment Year on 22.09.2011 declaring total income of Rs. 3,42,810/-. In scrutiny assessment proceedings, the Assessing Officer (AO) observed that the assessee has claimed fictitious expenditure of Rs. 1,74,710/- on salary payment and Rs. 2,20,294/- on account of incentive payments. The AO made addition of the aforesaid amounts. The AO made further addition of Rs. 19,215/- in respect of unsubstantiated staff welfare expenses. In respect of additions made, the AO initiated penalty proceeding under section 271(1)(c). The AO vide order dated 27.09.2013 levied penalty of Rs. 1,11,800/- under section 271(1)(c) of the Act for concealing the particulars of income.
Aggrieved against penalty order, the assessee filed appeal before the CIT(A). The CIT(A) vide impugned order dismissed the appeal of assessee and confirmed levy of penalty. Hence, the present appeal by the assessee.
Shri Vijay Jaiswal representing the department vehemently defended the impugned order and prayed for dismissing the appeal of assessee. The ld. Departmental Representative (DR) submitted that AO in his return of income has claimed fictitious expenditure, therefore, penalty under section 271(1)(c) was initiated by the AO.
We have heard the submission made by ld. DR and have examined the order of authorities below. A perusal of the assessment order reveals that an addition of Rs. 3,95,004/- was made by the AO on account of fictitious 2
ITA No. 961 Mum 2019-AY-2010-11 expenditure and addition of Rs. 19,215/- was made on account of unproved staff welfare expenses. The AO while initiating penalty under section 271(1)(c) in respect of fictitious claim of expenditure recorded his satisfaction by observing as under:
“4.2 Subject to the discussion in foregone paras, the undersigned is satisfied that the assessee has concealed the income as it has furnished inaccurate particulars and is therefore, liable for initiation of penalty proceedings u/s 271(1)(c) read with Section 274 of the Act. Penalty proceedings u/s 271(1)(c) are initiated on this point.”
Similarly, in respect of addition for unsubstantiated claim of staff welfare expenses, the AO recorded satisfaction for initiating penalty u/s 271(1)(c) of the Act by observing as under:
5.1 Subject to the discussion in foregone paras, the undersigned is satisfied that the assessee has concealed the income as it has furnished inaccurate particulars and is therefore liable for initiation of penalty proceedings u/s 271(1)(c) read with Section 274 of the Act. Penalty proceedings u/s 271(1)(c) are initiated on this point.”
While levying penalty, the AO observed that the penalty is levied for concealing particulars of income. The relevant extract of the order levying penalty reads as under:
“3...... I proceed to levy penalty u/s 271(1)(c) of the Act, 1961 on Rs. 4,14,219/- for concealing the particulars of income”
The Hon’ble Supreme Court of India in the case of Dilip N. Shroff vs. JCIT reported at 291 ITR 519 has held that ‘concealment of income’ and ‘furnishing inaccurate particulars’ are two different expressions having different
ITA No. 961 Mum 2019-AY-2010-11 connotations. The relevant extract of the order of the Hon’ble Apex Court is reproduced herein below: 53. The expression "conceal" is of great importance. According to Law Lexicon, the word "conceal" means : "to hide or keep secret. The word 'conceal' is con+celare which implies to hide. It means to hide or withdraw from observation; to cover or keep from sight ; to prevent the discovery of ; to withhold knowledge of. The offence of concealment is, thus, a direct attempt to hide an item of income or a portion thereof from the knowledge of the Income-tax authorities."
In Webster's Dictionary, "inaccurate" has been defined as : "not accurate, not exact or correct ; not according to truth ; erroneous ; as an inaccurate statement, copy or transcript."
It signifies a deliberate act or omission on the part of the assessee. Such deliberate act must be either for the purpose of concealment of income or furnishing of inaccurate particulars.”
The Hon’ble Rajasthan High Court in the case of CIT vs. Raj Trading Company reported as 217 ITR 208 has also explained the difference between the two expressions i.e. “furnishing inaccurate particulars of income” and “concealment of income”. The relevant extract of the observations of the Hon’ble Rajasthan High Court are reproduced herein below: “5. .............. Furnishing incorrect particulars and concealing the particulars of income are different things. The words 'furnishing inaccurate particulars of income' refer to the particulars which have been furnished by an assessee of his income and the requirement of concealment of income is that income has not been declared at all or is not even recorded in the books of account or in a particular case the concealment of the particulars of income may be from the books of account as well as from the return furnished and thus, after the initial burden was discharged by the assessee the question of application of the provisions of section 271(1)(c) could have been in that light.”
From the reading of above judgments it is unambiguously clear that the expression ‘furnish inaccurate particulars’ and ‘concealment of income’ are two 4
ITA No. 961 Mum 2019-AY-2010-11 different offences. These expressions cannot be used interchangeably while recording satisfaction for initiation of penalty u/s 271(1)(c) of the Act, the AO has to invoke the correct limb of section 271(1)(c), depending upon the facts of each case.
In the instant case, we observe that the manner in which the AO has recorded satisfaction itself shows that the AO was not able to decipher whether it is a case of concealment of income or furnishing inaccurate particulars of income. There appears to be ambiguity in the mind of AO as to which limb of section 271(1)(c) is to be invoked for levying penalty. The assessee has claimed certain expenditure which is disallowed being fictitious/ unsubstantiated expenditure. It is a case where the assessee has made erroneous/inaccurate claim. It is not a case of concealment or an attempt to hide income by not disclosing the income/source of income. We are of considered view that the AO has invoked wrong limb of section 271(1)(c) for levy of penalty, therefore, the penalty is liable to be deleted. We hold and direct accordingly.
In the result, the impugned order is quashed and the appeal of assessee is allowed. Order pronounced in open Court on Monday the 26th day of October, 2020.