DCIT CORPORATE CIRCLE -3(2), CHENNAI vs. RAJESHS CORPORATION, CHENNAI

Shri R.Clement Ramesh Kumar, Addl.CIT, represented on behalf of the Revenue and Shri D.Anand, Adv., represented on behalf of the assessee.

It was submitted by the Ld.DR that the assessee had originally filed its return of income admitting income of Rs.4,00,89,300/-. The assessee had claimed deduction u/s.35(1)(ii) of the Act at 175% in respect of the donations of Rs.20.00 lakhs given to M/s.Herbicure Healthcare Bio Herbal Research Foundation (in short “M/s.HHBHRF”). It was a submission that in the course of assessment proceedings, the assessee withdrew the claim of deduction u/s.35(1)(ii) of the Act. The assessment was accordingly completed and penalty proceedings had been initiated u/s.271(1)(c) of the Act. A show cause notice was issued on the assessee on 17.02.2016 and the assessee had explained that the assessee had fully cooperated in the assessment proceedings and the taxes have already been paid. It was a submission that the AO did not accept the contention of the assessee and proceeded to levy the penalty u/s.271(1)(c) of the Act to the extent of 300% of the tax sought to be evaded. On appeal, the Ld.CIT(A) had deleted the penalty by following the principles laid down by the Hon’ble Supreme Court in the case of Dilip N. Shroff reported in 291 ITR 519, wherein, the Hon’ble Supreme Court had held that the inappropriate words and paragraphs were not deleted in the notice issued showed the non-application of mind by the AO. The Ld.CIT(A) also followed the decision of the Hon’ble Karnataka High Court in the case of Manjunatha Cotton and Ginning Factory & Others, reported in 359 ITR 565, wherein, the same principles had been followed. It was a submission that the assessee’s claim of deduction u/s.35(1)(ii) of the Act was a false claim and the penalty was liable to be confirmed. It was a prayer that the order of the Ld.CIT(A) is liable to be reversed.

In reply, the Ld.AR vehemently supported the order of the Ld.CIT(A). It was a further submission that no evidence had been found in the course of the assessment proceedings to show that the assessee had made a bogus claim. It was a further submission that the assessee had been shown the sworn statement recorded from one of the Directors of M/s.HHBHRF that one Mr.Kishan Bhawasingka, a broker, had been doing bogus transactions in the name of M/s.HHBHRF. It was a submission that there was no evidence linking the assessee’s donation nor was the assessee’s transactions identified as a bogus transaction. It was a submission that in any case, even on merits, penalty u/s.271(1)(c) of the Act was not leviable on the assessee.

We have considered the rival submissions.

A perusal of the facts in the case of the assessee clearly shows that the Ld.CIT(A) has followed the judicial discipline by following the principles laid down in the decision of the Hon’ble Karnataka High Court in the case of Manjunatha Cotton and Ginning Factory & Others as also the decision of the Hon’ble Supreme Court in the case of Shri Dilip N. Shroff. Even on merits, the Revenue has not been able to show that the assessee has with mala fide intention concealed any particulars of its income or furnished inaccurate particulars of its income. Thus, even on merits, following the principles laid down by the Hon’ble Supreme Court in the case of M/s.Reliance Petroproducts Pvt. Ltd., reported in 322 ITR 158 (SC), as it is noticed that it is only a claim of the assessee which has been withdrawn, no penalty u/s.271(1)(c) of the Act is leviable. In these circumstances, even on merits, it is held that no penalty is leviable on the facts of the assessee’s case. In these circumstances, the order of the Ld.CIT(A) is upheld and the penalty levied u/s.271(1)(c) of the Act stands cancelled.

In the result, the appeal filed by the Revenue is dismissed.