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PER PAWAN SINGH, JUDICIAL MEMBER; 1. This appeal by assessee is directed against the order of ld. Commissioner of Income Tax (Appeals)-17 [the ld. CIT(A)], Mumbai dated 02.08.2017 for Assessment Year 2010-11. The assessee has raised the following grounds of appeal:
Penalty u/s.271(1)(c) confirmed of Rs.3,10,926/- may be deleted 1. The Ld. CIT(A) erred in confirming the levy of penalty u/s.271(1)(c) of the Act to the extent of Rs.3,10,926/- by upholding the levy of penalty in respect of disallowance of expenses of Rs.10,36,420/- incurred for appellant's own education at Harward business School without appreciating that there was no inaccurate particulars of income furnished and hence, the penalty restricted on this disallowance is unjustified and liable to be deleted.
The learned CIT(A) failed to appreciate that merely because the disallowance of expenses is confirmed by the Ld. CIT(A) in quantum order and no further appeal is filed in respect of the same, the penalty could not be automatically 1 Mum 2017-Gautam Ahuja
confirmed and hence, the penalty restricted to Rs.3,10,926/- is without any justification and liable to be deleted. 2. Brief facts of the case are that the assessee is Director of M/s Keepsade Properties Private Limited, filed his return of income for Assessment Year 2010-11 on 06.10.2010 declaring total income at Rs. 69,84,169/-. The Assessing Officer while passing the assessment order under section 143(3) on 30.11.2012, besides the other addition and disallowances disallowed education expenses paid to Harward Business School of Rs. 12,86,675/-. The expenses were disallowed holding that there is no nexus with the income against which expenditure is claimed. The Assessing Officer initiated penalty under section 271(1)(c) for furnishing inaccurate particulars. On appeal before the ld. CIT(A), the addition/disallowance was restricted to Rs. 10,36,420/- vide order dated 17.01.2013 . On respect of order of ld. CIT(A) in quantum assessment, the Assessing Officer issued show-cause notice dated 19.02.2015. The assessee filed its reply dated 15.03.2015. In the reply, the assessee stated that penalty proceeding is time barred. The reply of assessee was not accepted by Assessing Officer holding that as per the provision of section 275, the penalty is imposable within one year from the end of Financial Year during which the appellate order is received. Therefore, the penalty order has to be passed on or before 31.03.2015. The Assessing Officer passed the penalty order on 31.03.2015 and levied the penalty @ 100% of the tax sought to be evaded. The Assessing Officer levied the Mum 2017-Gautam Ahuja penalty of Rs. 3,86,003/- under section 271(1)(c). On further appeal before the ld. CIT(A), the action of Assessing Officer in levying the penalty was confirmed. The ld. CIT(A) while confirming the penalty order concluded that assessee himself has gone for higher studies to Harward Business School for Real Estate and Finance. The assessee has not proved that in fact the expenditure was incurred for the purpose of business of the assessee and that the expenditure remained unexplained and that the provision of Explanation (1) to section 271(c) is clearly attracted. Thus, further aggrieved by the order of ld. CIT(A), the assessee has filed the present appeal before us.
We have heard the submission of ld. Authorized Representative (AR) of the assessee and ld. Departmental Representative (DR) for the revenue and perused the material available on record. The ld. AR of the assessee submits that the assessee has neither concealed the particulars of income nor furnished inaccurate particular thereof. The assessee has claimed certain expenses including of expenses incurred on his education. The expenses incurred by the assessee were not allowed by Assessing Officer. Mere disallowance of claim which is not acceptable by Assessing Officer will automatically lead to levy of penalty. In support of his submission, the ld. AR of the assessee relied upon the decision of Reliance Petrochemicals products [322 ITR 158 (SC)].
On the other hand, the ld. Departmental Representative (DR) for the revenue supported the order of lower authorities. The ld. DR further submits that the 3 Mum 2017-Gautam Ahuja addition/disallowance made by Assessing Officer was confirmed by ld. CIT(A). The assessee has accepted the addition/disallowance and no further appeal is filed before the Tribunal. The disallowance made by Assessing Officer attains finality. Therefore, the penalty is leviable on the disallowance.
The assessee has not shown any reasonable cause while filing reply to the show-cause issued by Assessing Officer. 5. We have considered the submission of both the parties and have gone through the orders of authorities below. There is no dispute that the assessee debited the expenditure of Rs. 12,86,675/- incurred on account of education.
The Assessing Officer disallowed the entire expenses. However, on appeal before the ld. CIT(A), the disallowance was restricted to Rs. 10,36,420/-.
The assessing officer while making disallowance concluded that the expenses claimed by the assessee are personal in nature and cannot be linked to the income earned. There is no finding of the assessing officer that the particulars of expenses claimed by the assessee are inaccurate. The ld. AR for the assessee vehemently argued that mere disallowance of the expenses would not automatically lead to levy of penalty.
The Hon’ble Supreme Court in the case of CIT v. Reliance Petroproducts (P.) Ltd. (supra) held that a glance at the said provision would suggest that in order to be covered by it, there has to be concealment of the particulars of the income of the assessee. Secondly, the assessee must have furnished inaccurate particulars of his income. The court observed that it had to only 4 Mum 2017-Gautam Ahuja see as to whether in that case, as a matter of fact, the assessee had given inaccurate particulars. The court noted that as per Law Lexicon, the meaning of the word "particular" is a detail or details (in the plural sense); the details of a claim, or the separate items of an account. Therefore, the word "particular" used in section 271(1)(c) would embrace the meaning of the details of the claim made. The court further observed that 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." The court observed that reading the words "inaccurate" and "particulars" 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. The court noted that it was an admitted position that no information given in the return was found to be incorrect or inaccurate. It was not as if any statement made or any detail supplied was found to be factually incorrect and accordingly, held that, prima facie, the assessee could not be held guilty of furnishing inaccurate particulars. The court repelled the contention raised by the counsel for the revenue that "submitting an incorrect claim in law for the expenditure on interest would amount to giving inaccurate particulars of such income". The court held that in order to expose the assessee to the penalty unless the case is strictly covered by the provision, the penalty provision cannot be invoked. By any stretch of imagination, making an incorrect claim in law cannot tantamount to furnishing inaccurate 5 ITA No. 6622 Mum 2017-Gautam Ahuja particulars. Therefore, it is obvious that it must be shown that the conditions under section 271(1)(c) must exist before the penalty is imposed. The court further observed that there can be no dispute that everything would depend upon the return filed because that is the only document, where the assessee can furnish the particulars of income.
In view of the above factual and legal discussion, we are of the view that mere disallowance of the expenses claimed by the assessee would not lead to levy of the penalty. In the result the grounds of appeal
raised by the assessee are allowed. 8. In the result, appeal of the assessee is allowed. Order pronounced in the open court on 11 /06/2019.