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Income Tax Appellate Tribunal, “G”BENCH, MUMBAI
Before: SHRI SAKTIJIT DEYAND SHRI N.K. PRADHAN
Date of Hearing – 29.07.2019 Date of Order – 07.08.2019
O R D E R PER SAKTIJIT DEY. J.M.
Captioned appeal by the assessee is against order dated 23rd November 2016, passed by the learned Commissioner of Income Tax (Appeals)–51, Mumbai, confirming penalty imposed of ` 50,13,313, under section 271(1)(c) of the Income Tax Act, 1961 (for short "the Act") pertaining to the assessment year 2010–11.
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Brief facts are, the assessee company is engaged in the business of stock broking, depository participant, portfolio management service, arbitrage in future and cash segment and other related activities. For the assessment year under dispute, the assessee filed its return of 6th income on October 2010, declaring total income of ` 150,44,42,269. In the course of assessment proceedings, the assessee through letter dated 2nd November 2012, claimed deduction of education less paid on income tax amounting to ` 1,48,93,978. In support of such claim of deduction, the assessee also made elaborate submissions. After considering the submissions of the assessee, the Assessing Officer observed that the claim made by the assessee in course of assessment proceedings through a letter cannot be entertained in view of the decision of the Hon'ble Supreme Court in Goetz India Ltd. v/s CIT, [2006] 284 ITR 323 (SC). Further, he observed, education cess being a part of income tax cannot be allowed as deduction. Accordingly, he added back the amount of ` 1,48,93,978, to the income of the assessee. On the basis of such addition, the Assessing Officer initiated proceedings for imposition of penalty under section 271(1)(c) of the Act alleging furnishing of inaccurate particulars of income. Against the aforesaid addition made by the Assessing Officer, the assessee preferred appeal before learned Commissioner (Appeals) and thereafter before the Tribunal. During the 3 Sharekhan Ltd.
pendency of assessee’s appeal before the Tribunal, the Assessing Officer issued show cause notice under section 271(1)(c) r/w section 274 of the Act requiring the assessee to explain why penalty under section 271(1)(c) of the Act should not be imposed. Though, the assessee objected to imposition of penalty, however, the Assessing Officer rejecting the explanation of the assessee imposed penalty of ` 50,13,313, under section 271(1)(c) of the Act. While deciding assessee’s appeal against the aforesaid penalty order, learned Commissioner (Appeals) confirmed the imposition of penalty.
Shri Hiro Rai, learned Counsel for the assessee submitted, the assessee had neither claimed deduction of education cess in the return of income nor it was allowed. He submitted, in course of assessment proceedings, the assessee filed a letter before the Assessing Officer claiming the aforesaid deduction which was not only disallowed by the Assessing Officer but he added back the amount of ` 1,48,93,978, in spite of the fact that the assessee had not claimed it as deduction in the return of income. He submitted, while deciding assessee’s appeal, the Tribunal in ITA no.2729/Mum./2014, dated 24th March 2014, has deleted the addition made by the Assessing Officer. Thus, he submitted, there is no justification for imposing penalty under section 271(1)(c) of the Act alleging furnishing of inaccurate particulars of income. Without prejudice, the learned Counsel for the assessee
4 Sharekhan Ltd. submitted that in the show cause notice issued under section 274 of the Act, the Assessing Officer has not specified whether he intends to impose penalty under section 271(1)(c) of the Act for concealment of income or furnishing of inaccurate particulars of income. Further, he submitted, assessee has a strong case on merits also, as, now it has been held in judicial precedents that education cess is allowable as deduction. Therefore, he submitted, imposition of penalty is invalid.
The learned Departmental Representative filed a written submission strongly relying upon the observations of learned Commissioner (Appeals) and the Assessing Officer. In the said written submission, he has also relied upon various judicial precedents.
We have considered rival submissions and perused the material on record. Undisputedly, in the return of income filed for the impugned assessment year, the assessee had not claimed deduction of ` 1,48,93,978, paid towards education cess. Only, in the course of assessment proceedings, the assessee had furnished a letter claiming the aforesaid deduction which was disallowed by the Assessing Officer. Surprisingly, even though the assessee had not claimed the deduction of education cess in the return of income, the Assessing Officer added back the amount to the income of the assessee which was ultimately deleted by the Tribunal while deciding assessee’s appeal in ITA
5 Sharekhan Ltd. no.3027/Mum./2014, dated 24th March 2017. In the aforesaid facts and circumstances, we fail to understand how a case of furnishing of inaccurate particulars of income, as provided under section 271(1)(c) of the Act, could be made out against the assessee. Even, in the worst case, if assessee’s case would not have been selected for scrutiny, there was no chance of allowing assessee’s claim of deduction of education cess as it was not claimed in the return of income filed for the year under consideration. Further, the addition made on account of education cess was ultimately deleted by the Tribunal while deciding assessee’s appeal in the order cited supra. In view of the aforesaid, there is no case for imposition of penalty under section 271(1)(c) of the Act, as the assessee cannot be accused of furnishing inaccurate particulars of income. In the aforesaid view of the matter, we have no hesitation in deleting the penalty imposed under section 271(1)(c) of the Act. Insofar as the decisions relied upon by the learned Departmental Representative, on a careful consideration, we find them to be factually distinguishable, hence, could not be applied to the facts of the present case. Accordingly, penalty imposed is deleted.
In view of our aforesaid decision, the legal issue raised by the assessee challenging the validity of penalty order has become redundant, hence, there is no need for adjudication.
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In the result, assessee’s appeal is allowed as indicated above. Order pronounced in the open Court on 07.08.2019