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Income Tax Appellate Tribunal, DELHI BENCH “G” NEW DELHI
Before: SHRI AMIT SHUKLA & SHRI O.P.MEENA
आदेश /O R D E R
PER O. P. MEENA, AM:
This appeal by the Assessee is directed against the order of learned Commissioner of Income tax (Appeals)-15, New Delhi (in short “the CIT (A)”) dated 30.03.2017, which in turn has arisen from the penalty order under section 271(1)(c) of Income Tax Act,1961 ( in short of the “Act”) passed by the Deputy Commissioner of Income-Tax, Circle-16(1) New Delhi (in short “the AO”) for the Assessment Year 2008-09.
Twenty First Century Wire Rods Ltd. v. DCIT-16(1) New Delhi /I.T.A.No. 3222/Del/2017/A.Y.08-09 2
Ground No. 1 & 2 are relates to sustaining penalty imposed under section 271(1) (c) of the Act in respect of disallowance of Rs.4,14,301 on account of donation, which is bad-in-law and does not amounts to furnishing of inaccurate particulars of income.
Succinct facts are that the assessee has filed return of income declaring total income of Rs.7,92,41,610 which was assessed under section 144 of the Act at Rs. 40,69,40, 309 by making addition of Rs.9,00,00,000 on account of unexplained cash credit under section 68 of the Act, unexplained credit under section 68 of Rs. 3,28,98,617 and ad-hoc disallowance of Rs. 19,30,10,782 being 10% disallowance of expenses claimed. The AO also initiated penalty proceedings under section 271(1)(c) for filing inaccurate particulars of income. In reply to show-cause notice under section 274 read with section 271(1)(c), it was explained by the assessee that ld. CIT (A) has deleted addition made on account of unexplained cash credit under section 68 of the Act and set-aside the matter of unexplained credit for Limited verification. On account of disallowance of expenses, the CIT (A) has confirmed addition to the extent of Rs. 84,14,301 and deleted balance addition. However, the AO was of the view that the assessee could not furnish any evidence in support of expenses of Rs. 84,14,301 claimed , therefore, the AO disallowed 10% of expenses hence, the AO has deliberately concealed the true income Twenty First Century Wire Rods Ltd. v. DCIT-16(1) New Delhi /I.T.A.No. 3222/Del/2017/A.Y.08-09 3 therefore, the penalty under section 271(1)(c) was liable. Accordingly, the AO levied a penalty of Rs. 28, 60,021 being 100% of tax sought to be evaded on Rs. 84, 14,301.
Being, aggrieved, the assessee filed an appeal before the Ld. CIT (A).
The CIT (A) observed that penalty is levied with reference to ad-hoc disallowance of 10% expenses, but in the remand report submitted during appellate proceeding and reproduced in appeal order it was seen that the AO has not pointed out any expenditure which according to him was either not supported by proper voucher or bills or was not meant for the purpose of business. Therefore, penalty in respect of disallowance of Rs. 80,00,000 was not found justified and hence, deleted. However, with regard to disallowance of Rs. 4, 41, 301 being donation expenses, the said claim of the assessee was found not allowable under section 37 of the Act, hence, penalty on said disallowance was sustained.
Being, aggrieved the assessee filed this appeal before the Tribunal.
However, none has appeared on behalf of the assessee.
Per contra, the learned D.R. relied on order of Ld. CIT (A).
We have heard the Ld. D.R. and perused the material available on record. A perusal of the assessment order and penalty order reveals that the AO has made ad-hoc 10% disallowance of expenses claimed by the assessee. However, the said disallowance has been deleted in appeal and Twenty First Century Wire Rods Ltd. v. DCIT-16(1) New Delhi /I.T.A.No. 3222/Del/2017/A.Y.08-09 4 penalty was restricted to in respect of disallowance of Rs. 4, 14,301 being donation, which was not found allowable deduction under section 37 of the Act. We find that the AO has not specifically pinpointed any particular expenses, which claimed to be bogus and not incurred for the purpose of business. The claim of donation was not specifically mentioned in the assessment order. The AO has only disallowed 10% of total expenses claimed in Profit & Loss Account in absence of vouchers and bills. Thus, the perusal of the assessment order reveals that the AO has made addition based on facts as disclosed by the assessee in the return of income and during the course of assessment proceedings. We find that the assessee has furnished all relevant facts; therefore, the penalty cannot be levied merely because that it was not acceptable to the AO. Where the explanation is bonafide and all the facts relating to the same have been disclosed, penalty is not leviable. It is trite law that penalty proceedings are distinct and separate proceedings from assessment proceedings. The finding recorded in the assessment order is not conclusive for deciding the imposition of penalty. It only has a persuasive value. Any finding recorded in the assessment order does not mean that the penalty has to be imposed automatically. Explanation 1 to section 271 (l) (c) provides that the penalty would be deemed to attract where in respect of a fact material to the computation of income either no explanation is offered, or explanation Twenty First Century Wire Rods Ltd. v. DCIT-16(1) New Delhi /I.T.A.No. 3222/Del/2017/A.Y.08-09 5 offered is found to be false. It is seen that this amount has been reflected in Profit & Loss Account for the assessment year under consideration. The assessee had offered explanation and the said explanation offered was not found to be false and accordingly its case is not covered by Clause (A) of Explanation 1 to section 271(1)(c) of the Act. Clause (B) of Explanation 1 to section 271(1)(c) of the Act provides that where the assessee is not able to substantiate its explanation and fails to prove that such explanation is bonafide and all the facts relating to the same have been disclosed, penalty is leviable. Just because, the assessee`s explanation was not found acceptable by the AO, it does not follow that that the Appellant was unable to substantiate his explanation by providing various evidences and judicial opinions. Based on the above facts of the case; it can be held that the Assessee had made all the necessary disclosures on a bonafide belief, which is not agreeable to the AO, it will not automatically lead to a case for penalty under section 271(1)(c) of the IT Act, 1961. We are therefore of the considered view that the penalty is not sustainable in law in the ratio laid down by the Hon’ble Supreme Court in case of CIT v Reliance Petroproducts Pvt. Ltd. [2010] 322 ITR 158 (SC); [2010] 189 Taxman 322(SC) wherein it was held that merely because the assessee has claimed the expenditure, which claim was not accepted or was not acceptable by the revenue, penalty under section 271(1) (c) of the Act cannot be Twenty First Century Wire Rods Ltd. v. DCIT-16(1) New Delhi /I.T.A.No. 3222/Del/2017/A.Y.08-09 6 attracted. The Hon'ble Supreme Court also observed that mere disallowance of claim made by the assessee, cannot amount furnishing of inaccurate particulars of income unless, the information as given in return of income was found to be incorrect or inaccurate. In the light of above discussion, the penalty sustained in respect of disallowance of Rs.4, 14,301 being donation expenses is therefore, deleted. Therefore, ground no. 1 and 2 of appeal are allowed.
In the result, the appeal of the assessee stands allowed.
The order pronounced in the open Court on 05-11-2019.