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Facts
The assessee claimed a deduction of Rs. 57,17,737/- under section 10B of the Income Tax Act for an export-oriented undertaking for AY 2014-15. During assessment, the assessee surrendered this claim, leading the AO to initiate penalty proceedings under section 271(1)(c). The assessee challenged the penalty, arguing that the notice was defective and the penalty unsustainable on merits as all particulars were disclosed.
Held
The Tribunal held that the penalty notice under section 271(1)(c) read with 274 was defective due to ambiguity, as it mentioned both charges with 'or' while the assessment order indicated 'and'. Furthermore, on merits, the Tribunal ruled that merely claiming a deduction not sustainable in law, when all particulars are disclosed in the return and Tax Audit Report, does not amount to furnishing inaccurate particulars, citing the Supreme Court's decision in Reliance Petro Products P Ltd. Thus, the penalty was unsustainable.
Key Issues
1. Whether the penalty notice issued under section 271(1)(c) was defective due to ambiguity in specifying the charge. 2. Whether penalty under section 271(1)(c) is leviable when the assessee claimed a deduction (u/s 10B) which was later surrendered, despite disclosing all relevant particulars.
Sections Cited
271(1)(c), 274, 10B
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI BENCH “SMC”, DELHI
(A.Y.2014-15) Snigdha Saluja, C-143, Greater Kailash, Delhi 110048 ...... अपीलाथ�/Appellant PAN: ABAPS-1248-P बनाम Vs. Commissioner of Income Tax(Appeasl), National Faceless Appeal Centre, ..... �ितवादी/Respondent Circle 30(1), Delhi अपीलाथ� �ारा/ Appellant by : Ms. Kriti Bindal, Chartered Accountant �ितवादी�ारा/Respondent by : Shri Rajesh Tiwari, Sr. DR सुनवाई क� ितिथ/ Date of hearing : 12/12/2024 घोषणा क� ितिथ/ Date of pronouncement : : 27/12/2024 आदेश/ORDER
PER VIKAS AWASTHY, JM:
This appeal by the assessee is directed against the order of Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi (hereinafter referred to as 'the CIT(A)') dated 11.06.2024, for assessment year 2014-15.
This appeal is time barred by 12 days. The assessee has filed an application citing reasons for delay in filing of appeal. The Revenue has not raised any serious objection on delay in filing of appeal. After perusal of application, I am satisfied that the delay in filing of appeal is not intentional. The reason given in application for (AY 2014-15) delay in filing of appeal appears to be bonafide. Hence, 12 days delay in filing of appeal is condoned and appeal is admitted for adjudication on merits.
Ms. Kriti Bindal, appearing on behalf of the assessee submits that the Assessing Officer (AO) has levied penalty u/s. 271(1)(c) of the Income Tax Act, 1961 (hereinafter referred to as 'the Act') read with Explanation 1. The notice u/s. 271(1) r.w.s 274 of the Act dated 30.12.2016 was served on the assessee. A perusal of notice (at page no. 1 of the paper book) would show that both limbs of section 271(1)(c) of the Act have been mentioned along with Explanation 1, 2, 3, 4 and 5. The notice is defective as the Assessing Officer (AO) has not struck off irrelevant clause of section 271(1)(c) of the Act in the said notice, thus, making the notice ambiguous. In support of her submissions, the ld. AR placed reliance on following decisions: (i) CIT vs SSA’s Emerald Meadows, 73 taxmann.com 241 (Karnataka); and (ii) CIT vs. Manjunath Cotton and Ginning Factory 359 ITR 565 (Karnataka).
The ld. AR further submits that even on merits penalty levied u/s. 271(1)(c) of the Act is unsustainable. The assessee had claimed deduction u/s. 10B of the Act in respect of 100% export oriented undertaking. The assessee had establishment an undertaking on 08.05.2003. The Finance Act 2000 prescribed 10 year tax holiday to 100% export oriented undertaking starting from 1st April 2001. Since, the provisions of section 10B of the Act were made effective w.e.f. 1st 5. April 2001, the deduction was available to undertaking establish after 1st April 2001 i.e. w.e.f assessment year 2001-02 onwards. The assessee was under bonafide belief that the assessee is eligible for deduction u/s. 10B of the Act for 10 years starting from assessment year in which export oriented undertaking had started.
(AY 2014-15) Ten years for assessee, thus, would have come to an end in AY 2014-15. The sunset for said deduction was from 1st April 2010 i.e. from assessment year 2010-11. The total assessment years covered by section 10B of the Act were nine years i.e. from AY 2001-02 to 2009-10, if that be the case, the basic structure of law had anomaly as 10 years would never be completed from the start of unit till the date of sunset clause. Later on, deduction u/s. 10B of the Act was extended for AY 2011-12 by the Finance Act 2009. Since, there was ambiguity in the provision of the Act, two views were possible, i.e. any export oriented undertaking would be eligible for benefit u/s. 10B of the Act, if it starts operation between 01.04.2001 to 01.04.2010. Since, assessee’s export oriented undertaking started operation on 08.05.2003, the assessee has taken one of the possible views and claimed deduction. In any case, entire computation has been given along with return of income, hence, no particulars of income were withheld by the assessee. Therefore, no penalty u/s. 271(1)(c) of the Act could have been levied. The ld. AR in support of his submissions placed reliance on decision in the case of CIT vs. Reliance Petro Products P Ltd., 322 ITR 158 (SC).
Per contra, Shri Rajesh Tiwari representing the department vehemently defended the impugned order and prayed for dismissing appeal of the assessee.
Both sides heard, orders of the authorities below examined. The solitary issue raised by the assessee in appeal is against levy of penalty u/s. 271(1)(c) of the Act in respect of disallowance of assessee’s claim of deduction u/s. 10B of the Act. The assessee had claimed deduction of Rs.57,17,737/-. During the course of assessment proceedings, the assessee surrender her claim of deduction. The AO initiated penalty proceedings u/s. 271(1)(c) of the Act. Notice u/s. 271(1)(c) r.w.s (AY 2014-15) 274 dated 30.12.2016 of the Act was served upon the assessee. A perusal of said notice reveals that the AO has mentioned both charges of section 271(1)(c) of the Act with conjunction ‘or’ the relevant extract of notice where charge is mentioned is reproduced herein below:- “have concealed the particulars of your income or furnished inaccurate particulars of such income in terms of explanation 1, 2, 3 ,4 and 5.”
A perusal of assessment order dated 25.11.2016 reveals that AO has initiated penalty proceedings u/s. 271(1)(c) of the Act for concealment of income and furnishing inaccurate particulars within meaning of Explanation 1 to Sub section (1) of section 271(1)(c) of the Act. At the outset it is observed that in assessment order the assessee has mentioned both charges of section 271(1)(c) of the Act with conjunction 'and' i.e. the Assessing Officer intended to levy penalty on both charges, whereas, in notice the AO has mentioned both charges with conjunction 'or' further in notice the Assessing Officer has invoked all explanations to section 271(1)(c) of the Act i.e. 1, 2, 3, 4 and 5. While indicating penalty the Assessing Officer intended to invoke only Explanation 1. The ambiguity in mentioning charge at the time initiation of penalty and while issuing notice u/s. 274 r.w.s 271(1) of the Act is writ large. It is a well settled law that any ambiguity in notice for levy of penalty would vitiate penalty proceedings. Hence, penalty u/s. 271(1)(c) of the Act is liable to be deleted on account of defective notice itself.
Even on merits, I find that the assessee has a case. The assessee had claimed deduction u/s. 10B of the Act. During assessment proceedings the assessee surrender the claim. In computation of income and in Tax Audit Report filed along with return of income, the assessee had disclosed entire particulars. Merely, for the reason that the assessee has claimed deduction which according to the AO was (AY 2014-15) not admissible to the assessee would not make a case for levy of penalty under section 271(1)(c) of the Act. The Hon'ble Apex Court in the case of Reliance Petro Products P Ltd. (supra) has held that mere making of a claim which is not sustainable in law by itself will not amount to furnishing inaccurate particulars regarding the income of assessee. Such claim made in the return cannot amount to inaccurate particulars. Thus, even on merits penalty levied u/s. 271(1)(c) of the Act is unsustainable.