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Income Tax Appellate Tribunal, MUMBAI BENCHES “B”, MUMBAI
Before: SHRI S. RIFAUR RAHMAN (AM) & SHRI RAM LAL NEGI (JM)
O R D E R
PER RAM LAL NEGI, JM
This appeal has been filed by the assessee against the order dated 11.12.2017 passed by the Commissioner of Income Tax (Appeals)-26 (for short ‘the CIT(A), Mumbai, for the assessment year 2009-10, whereby the Ld. CIT(A) has dismissed the appeal filed by the assessee against the penalty order passed u/s 271 (1) (c) of the Income Tax Act, 1961 (for short the ‘Act’).
In the present case, the AO passed assessment order u/s 143 (3) r.w.s. 263 of the Act, as the Commissioner had directed the AO to examine the issue of deduction u/s 80IB of the Act, claimed by the assessee. Accordingly, the AO issued notice u/s 143 (2) and 142 (1) of the Act. In response to the said notices, the authorized representative (AR) filed written reply dated 2nd December, 2013. It was noticed that the assessee had included interest income of Rs. 26,81,763/- while computing deduction u/s 80IB of the Act. Since, the AR of the assessee admitted the mistake, AO made disallowance amounting to Assessment Year: 2009-10 Rs. 6,70,440/-. On the basis of the said addition, AO initiated proceedings u/s 271 (1) (c) of the Act and levied penalty of Rs. 2,07,165 /-. In the first appeal, the Ld. CIT (A) confirmed the penalty levied by the AO. Against the said findings the assessee is in appeal before the Tribunal. 3. The assessee has challenged the impugned order passed by the Ld. CIT (A) on the following effective grounds:- 1. “The learned CIT (A) erred in law and on facts in confirming Penalty U/s 271 (1) (c) amounting to Rs. 2,07,165/-. 2. The CIT (A) erred in law and on facts in not accepting the plea of the appellant that by mistake deduction u/s 800IB claimed on interest income as well. It was just a mistake for which penalty as serious as 271 (1) (c) should not be levied. 3. The CIT (A) erred in law and on facts in not accepting/considering/appreciating the submission of the appellant. 4. The learned CIT (A) erred in law and on facts in confirming penalty without establishing that appellant (a) furnishing inaccurate particulars and /or (b) concealed the particulars. 5. The learned CIT (A) erred in law on facts in upholding the AO contention that” …. The appellant was aware of all the material facts but still claimed higher deduction”, which is pure piece of imagination far away from full facts without any conclusive evidence. 6. The learned CIT (A) erred in law and on facts is not following the decisions/ratio of judicial authorities and therefore violated Article 227 of the Constitution of India 1949.”
Before us, the Ld. counsel for the assessee submitted that the Ld. CIT (A) has wrongly confirmed the penalty levied by the AO rejecting the plea of the appellant that the assessee had inadvertently claimed deduction u/s 80IB on interest income. The Ld. counsel further pointed out that the AR vide letter dated 02.12.2013 had submitted explanation that the assessee asked the AO to exclude interest income in computing deduction u/s 80IB. The bona fide action of assessee is prove from the fact that in earlier years the appellant firm had claimed deduction u/s 80IB excluding the interest income. The Ld. counsel further pointed out that since the mistake was bona fide, the Ld. CIT Assessment Year: 2009-10 (A) ought to have deleted the penalty. In order to levy penalty, the assessee should have concealed the particulars of its income or furnished inaccurate particulars of such income. In the present case neither the assessee concealed the income nor furnished inaccurate particulars of its income. The Ld. counsel further pointed out that the AO has not mentioned either in the assessment order or in the penalty order any of the limbs under which the penalty proceedings under section 271 (1) (c) of the Act were initiated. Placing relying on the decision of the Pune Bench of the Tribunal in the case of Sukanto Roy Developers vs. ITO the Ld. counsel submitted that since the AO was not clear as to whether the penalty is to be levied for concealment of income or for furnishing inaccurate particulars of income, the order passed by the AO is bad in law. Hence, the Ld. CIT (A) has wrongly confirmed the penalty levied by the AO. On merits, the Ld. counsel submitted that as per the settled principles of law, a mere making of the claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee.
5. On the other hand, the Ld. Departmental Representative (DR) submitted that since the assessee has committed default within the meaning of section 271 (1) (c) of the Act, the Ld. CIT (A) has rightly confirmed the penalty levied by the AO.
We have heard the rival submissions of the parties and perused the material on record including the decision of the Pune Bench of the Tribunal relied upon by the assessee. As pointed out by the Ld. counsel, the AO has only mentioned that penalty proceedings u/s 271 (1) (c) of the Act are being initiated separately. The AO has not pointed out whether the assessee concealed the particulars of income or furnished inaccurate particulars of income. Even in the penalty order, the AO has only mentioned that the assessee has committed default within the meaning of section 271 (1) (c) of the Act. As per the settled law, the penalty can be imposed either for concealment of income or for furnishing inaccurate particulars of income. The Pune Bench of the Tribunal has dealt with the identical issue arising out of the similar set of facts of the Assessment Year: 2009-10 case and the Tribunal has deleted the penalty on the legal ground that there is no satisfaction of the AO before initiating penalty proceedings as well as on merits relying on the decision of the Hon’ble Supreme Court in the case of CIT vs. Reliance Petroproducts (P) Ltd. 322 ITR 158 (SC) wherein the Hon’ble Supreme Court has held that incorrect claim of law does not tantamount to furnishing inaccurate particulars of income. The findings of the Tribunal are as under:- “4. We have heard the submissions made by representatives of rival sides and have perused the orders of authorities below. The assessee is a builder and developer. The assessee is eligible for claiming deduction u/s. 80IB(10) in respect of its housing project „Surabhi Regency‟. While claiming deduction u/s. 80IB(10) on the profits of aforesaid project the assessee also claimed deduction u/s. 80IB(10) in respect of interest income Rs.8,37,808/-. The Assessing Officer disallowed the deduction claimed on interest income and initiated penalty proceedings u/s. 271(1)(c). A perusal of assessment order dated 27-11-2011 shows that while initiating penalty the Assessing Officer recorded satisfaction as under : “As the assessee has concealed the interest income by furnishing inaccurate particulars, penalty proceedings u/s. 271(1)(c) are initiated.”
The Assessing Officer levied penalty u/s. 271(1)(c) vide order dated 25-06-2012. While levying penalty the Assessing Officer held as under :
6. In view of above facts and circumstances, I am convinced that the assessee has concealed interest income of Rs.8,37,808/- being the amount of interest income from fixed deposit. Hence, it is a fit case for levying penalty U/s. 271(1)(c) of the I.T. Act, 1961. Accordingly provisions of section 271(1)(c) of the I.T. Act, 1961 are attracted in the case of the assessee. xxxxxxxxxx xxxxxxxxxx In view of the fact that the assessee has furnished inaccurate particulars of his income I levy a penalty of Rs.2,56,700/- u/s. 271(1)(c) of the I.T. Act, 1961.
Assessment Year: 2009-10
6. The manner in which satisfaction has been recorded and thereafter, penalty has been levied clearly shows that there was ambiguity and vagueness in the mind of Assessing Officer while recording satisfaction as well as at the time of levy of penalty u/s. 271(1)(c) of the Act. The Assessing Officer was not clear as to whether penalty is to be levied for furnishing inaccurate particulars or for concealment of income. The Assessing Officer has invoked both the charges of section 271(1)(c) by using different expressions at the time of recoding satisfaction and for levy of penalty. Where there is ambiguity of charge while levying penalty u/s. 271(1)(c), the penalty does not survive. Thus, the penalty levied u/s. 271(1)(c) is liable to be quashed on this legal ground itself.
Even on merits, the penalty levied by the Assessing Officer is not sustainable. The assessee while filing return of income had filed computation of income. In computation of income the assessee has separately mentioned interest income on fixed deposits and also the fact that the deduction u/s 80IB (10) has been claimed on the said interest income. The Hon’ble Supreme court of India in the case of Commissioner A.Y. 2009-10 of Income Tax vs. Reliance Petroproducts (P) Ltd. (supra) has held that incorrect claim in law cannot tantamount to furnishing inaccurate particulars. We further observe that since, the issue was debatable no penalty could have been levied on such addition/disallowance. We find merit in the appeal of the assessee. Accordingly, the impugned order is set aside and the appeal of assessee is allowed.”