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Income Tax Appellate Tribunal, “G” BENCH, MUMBAI
Before: SHRI RAJESH KUMAR, AM & SHRI AMARJIT SINGH, JM
O R D E R
PER AMARJIT SINGH, JM:
The assessee has filed the present appeal against the order dated 28.04.2016 passed by the Commissioner of Income Tax (Appeals)-24, Mumbai [hereinafter referred to as the “CIT(A)”] relevant to the A.Y. 2009-10 wherein the penalty levied by the AO has been ordered to be confirmed.
2. The assessee has raised the following grounds: - “1 The CIT(A)-24 has erred in law and on facts of the case in confirming the penalty of Rs.665088/-.
ITA. No.7411/M/2017 A.Y. 2009-10
The CIT(A)-24 has erred in law and on facts of the case in inserting the date of order as 28.04.2016, whereas it should be 28.04.2017.
Without prejudice to what is stated in ground no.1 above, the assessing officer has wrongly calculated the amount furnished for inaccurate particulars of Rs,19,95,464/- instead of Rs.56130/- which was the amount in dispute before the Hon’ble ITAT, Mumbai and levied excessive penalty." The brief facts of the case are that the assessee filed its return of 3. income on 25.09.2009 declaring total income to the tune of Rs.83,26,434/- for the A.Y. 2009-10. The assessee was engaged in the business of merchant exporting of engineering electronic & Industrial products. Thereafter, the case was selected for scrutiny. The assessment u/s 143(3) of the Act was completed on 06.12.2011 determining total income to the tune of Rs.110,49,365/- after raising the addition of Rs.154,17,705/- on account of disallowance of professional fees and disallowance u/s 14A of the Act r.w. Rule 8D of the Rules. The penalty proceeding was initiated and after the reply of the assessee, the penalty to the tune of Rs.6,65,088/- was levied. Feeling aggrieved, the assessee filed an appeal before the CIT(A) who confirmed the order of the AO, therefore, the assessee has filed the present appeal before us.
We have heard the argument and advanced by the Ld. Representative of the parties and perused the record. The appeal has been filed 159 days delayed. The reason for filing the appeal delayed was explained by assessee that the order of the CIT(A) was received
ITA. No.7411/M/2017 A.Y. 2009-10 by taxed consultancy who failed to produce the same before the concerned responsible person well-in-time, therefore, the delay is liable to be condoned. Affidavit in this regard has been filed. Since the matter of controversy is required to be decided on merits and therefore, we condone the delay. At the very outset, the Ld. Representative of the assessee has argued that the penalty has been levied by AO on account of disallowance of profession fees in sum of Rs.24,94,330/- and on account of disallowance u/s 14A r.w. Rule 8D of the Rules to the tune of Rs.3,83,517/- which is not justifiable, therefore, the same is liable to be set aside. In support of this contention, the Ld. Representative of the assessee has placed reliance upon the decision of the Hon’ble Supreme Court in the case of CIT Vs. Reliance Petroproducts Pvt. Ltd. (2010) 322 ITR 158 (SC). It is also argued that the assessee approached before the Hon’ble ITAT who directed to disallow the expenses to the extent of 1 ¼ on ad hoc basis which works out to the tune of Rs.19,95,464/-, therefore, no penalty is leviable on ad hoc disallowance. However, on the other hand, the Ld. Representative of the Department has refuted the said contention. We noticed that the claim of the profession fees to the tune of Rs.24,94,330/- was disallowed by the AO while finalizing the assessment. Expenditure earned to exempt income was assessed by AO to the tune of Rs.3,83,517/-. The penalty was initiated on account of both the disallowance. There is no concealment of income nor furnishing the inaccurate particulars of income. All the claim has duly
ITA. No.7411/M/2017 A.Y. 2009-10 been reflected in the return of income. Disallowance of claim nowhere attract the penalty in view of the decision of the Hon’ble Apex Court in the case of CIT Vs. Reliance Petroproducts Pvt. Ltd. (2010) 322 ITR 158 (SC). The relevant finding has been given as under: - “9. We are not concerned in the present case with the mens rea. However, we have to only see as to whether in this case, as a matter of fact, the assessee has given inaccurate particulars. In Webster's Dictionary, the word "inaccurate" has been defined as :— "not accurate, not exact or correct; not according to truth; erroneous; as an inaccurate statement, copy or transcript." We have already seen the meaning of the word "particulars" in the earlier part of this judgment. Reading the words in conjunction, they must mean the details supplied in the Return, which are not accurate, not exact or correct, not according to truth or erroneous. We must hasten to add here that in this case, there is no finding that any details supplied by the assessee in its Return were found to be incorrect or erroneous or false. Such not being the case, there would be no question of inviting the penalty under section 271(1)(c) of the Act. 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. Such claim made in the Return cannot amount to the inaccurate particulars.
It was tried to be suggested that section 14A of the Act specifically excluded the deductions in respect of the expenditure incurred by the assessee in relation to income which does not form part of the total income under the Act. It was further pointed out that the dividends from the shares did not form the part of the total income. It was, therefore, reiterated before us that the Assessing Officer had correctly reached the conclusion that since the assessee had claimed excessive deductions knowing that they are incorrect; it amounted to concealment of income. It was tried to be argued that the falsehood in accounts can take either of the two forms; (i) an item of receipt may be suppressed fraudulently; (ii) an item of expenditure may be falsely (or in an exaggerated amount) claimed, and both types attempt to reduce the taxable income and, therefore, both types amount to concealment of particulars of one's income as well as furnishing of inaccurate particulars of income. We do not agree, as the assessee had furnished all the details of its expenditure as well as income in its Return, which details, in themselves, were not found to be inaccurate nor could be viewed as the concealment of income on its part. It was up to the authorities to accept its claim in the Return
ITA. No.7411/M/2017 A.Y. 2009-10 or not. Merely because the assessee had claimed the expenditure, which claim was not accepted or was not acceptable to the revenue, that by itself would not, in our opinion, attract the penalty under section 271(1)(c). If we accept the contention of the revenue then in case of every Return where the claim made is not accepted by Assessing Officer for any reason, the assessee will invite penalty under section 271(1)(c). That is clearly not the intendment of the Legislature.
In this behalf the observations of this Court made in Sree Krishna Electricals v. State of Tamil Nadu[2009] 23 VST 249 as regards the penalty are apposite. In the aforementioned decision which pertained to the penalty proceedings in Tamil Nadu General Sales Tax Act, the Court had found that the authorities below had found that there were some incorrect statements made in the Return. However, the said transactions were reflected in the accounts of the assessee. This Court, therefore, observed: "So far as the question of penalty is concerned the items which were not included in the turnover were found incorporated in the appellant's account books. Where certain items which are not included in the turnover are disclosed in the dealer's own account books and the assessing authorities include these items in the dealer's turnover disallowing the exemption, penalty cannot be imposed. The penalty levied stands set aside." The situation in the present case is still better as no fault has been found with the particulars submitted by the assessee in its Return.
The Tribunal, as well as, the Commissioner of Income-tax (Appeals) and the High Court have correctly reached this conclusion and, therefore, the appeal filed by the revenue has no merits and is dismissed.” No doubt, in the said circumstances, no penalty is justifiable in 5. accordance with law. Moreover, we also noticed that the Hon’ble ITAT has restricted the disallowance to the extent of 1 ¼ of the total expenses which works out to the tune of Rs.19,95,464/- on ad hoc basis. Penalty was not leviable in view of the decision in the case of CIT v. Standard Agro Engineers [2013] 218 Taxman 123 (Guj.)
ITA. No.7411/M/2017 A.Y. 2009-10 Accordingly, we set aside the finding of the CIT(A) on this issue and deleted the penalty.