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Income Tax Appellate Tribunal, ‘C’ BENCH, CHENNAI
Before: SHRI N.R.S. GANESAN & SHRI A. MOHAN ALANKAMONY
आदेश /O R D E R
PER N.R.S. GANESAN, JUDICIAL MEMBER:
This appeal of the assessee is directed against the order of
the Commissioner of Income Tax (Appeals) -1, Coimbatore, dated
28.06.2018, confirming the penalty levied by the Assessing Officer
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under Section 271(1)(c) of the Income-tax Act, 1961 (in short 'the Act') for assessment year 2009-10.
Sh. R. Vijayaraghavan, the Ld.counsel for the assessee, submitted that the assessee disclosed a loss of ₹232,11,10,127/- under the normal provisions of Income-tax Act. However, according to the Ld. counsel, the book loss under Section 115JB of the Act was ₹86,01,42,036/-. The Assessing Officer completed the assessment under Section 143(3) of the Act by an order dated 30.12.2011 disallowing the payment pertaining to goodwill, the claim of depreciation on Sivaganga unit, interest on discounted bills, rent receipts besides disallowance under Section 14A of the Act. The Ld.counsel submitted that with regard to disallowance pertaining to goodwill, an amount of ₹50.18 crores from and out of total ₹1,55,55,46,433/-, disallowance of was confirmed by the CIT(Appeals), which was also confirmed by this Tribunal. Moreover, according to the Ld. counsel, the CIT(Appeals) has also confirmed the disallowance made under Section 14A of the Act.
Sh. R. Vijayaraghavan, the Ld.counsel for the assessee, referring to the disallowance with regard to goodwill, submitted that the CIT(Appeals) called for remand report from the Assessing
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Officer. The Assessing Officer filed the remand report before the CIT(Appeals) on 11.06.2014, a copy of which is available at page 12 of the paper-book. On the basis of the remand report, according to the Ld. counsel, the CIT(Appeals) allowed the claim of the assessee to the extent of ₹105.51 Crores. The balance amount of ₹50.18 Crores was confirmed by the CIT(Appeals). On further appeal, according to the Ld. counsel, this Tribunal also confirmed ₹50.18 Crores, the addition made by the Assessing Officer. According to the Ld. counsel, the payment was made to M/s Shakthi Sugar Cane Growers Rural Development and Water users’ Society for the purpose of payment to the cane growers. Since the payment was not substantiated, according to the Ld. counsel, this Tribunal confirmed the addition made by the Assessing Officer to the extent of ₹50.18 Crores. According to the Ld. counsel, mere disallowance or inability of the assessee to substantiate the claim would not automatically result in levy of penalty. According to the Ld. counsel, the claim made in the return of income with regard to payment made to cane growers does not amount to furnishing inaccurate particulars of income or concealing any part of income. Therefore, according to the Ld. counsel, levy of penalty is not called for. According to the Ld. counsel, the penalty levied only in respect of
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disallowance of ₹50,20,41,708/- towards disallowance of goodwill and ₹1,48,320/- under Section 14A of the Act. According to the Ld. counsel, a mere claim cannot be a reason for levying penalty in view of judgment of Apex Court in CIT Vs. Reliance Petroproducts (P) Ltd. (2010) 322 ITR 158.
On the contrary, Shri SailendraMamidi, the Ld. Departmental Representative, submitted that even though the Assessing Officer disallowed the payment made towards goodwill, depreciation, interest on discounted bills, rent receipts and disallowance under Section 14A of the Act, ultimately the addition made by the Assessing Officerwas confirmed only to the extent of ₹50,20,41,708/- towards disallowance of goodwill and ₹1,48,320/- under Section 14A of the Act. In respect of other additions, according to the Ld. D.R., it was deleted either by the CIT(Appeals) or by the Tribunal. Therefore, the Assessing Officer found that the assessee has furnished inaccurate particulars of income with regard to goodwill and expenditure relating to earning of exempted income. Therefore, according to the Ld. D.R., the Assessing Officer levied the penalty at 100% of the tax and the CIT(Appeals) has rightly confirmed the penalty levied by the Assessing Officer.
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We have considered the rival submissions on either side and perused the relevant material available on record. Even though there are several disallowances made by the Assessing Officer, the penalty is confined to goodwill and disallowance under Section 14A of the Act. With regard to goodwill, the total disallowance was ₹155,55,46,433/-. However, after calling for remand report, the CIT(Appeals) sustained the disallowance only to the extent of ₹50,20,41,708/-, which was also confirmed by this Tribunal. The disallowance of ₹1,48,320/- under Section 14A was also confirmed by this Tribunal. With regard to goodwill, the assessee claimed before the Assessing Officer and before this Tribunal that the sum was paid to M/s Shakthi Sugar Cane Growers Rural Development and Water users’ Society for distribution to the cane growers. Since the amount was distributed to that Society, the assessee could not produce the material to substantiate the actual payment made to the farmers.
The question arises for consideration is when the assessee claims that the amounts were paid to the goodwill to the cane growers and the same was not substantiated, whether it amounts to concealment of income or furnishing inaccurate particulars of
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income? This Tribunal is of the considered opinion that a mere
claim in the return of income with regard to payment made by the
assessee to M/s Shakthi Sugar Cane Growers Rural Development
and Water users’ Society cannot be construed as concealment of
income or furnishing inaccurate particulars of income. Merely
because the assessee failed to substantiate the claim of payment, it
cannot be construed that the assessee has furnished inaccurate
particulars of income. The Apex Court in the case of Reliance
Petroproducts (P) Ltd. (supra) examined this issue and found that
merely because the assessee failed to substantiate the expenditure
said to be incurred and claimed as such, that will not amount to
concealment of income or furnishing of inaccurate particulars of
income. In view of this judgment of Apex Court, this Tribunal is of
the considered opinion that there cannot be any penalty either for
concealing income or furnishing inaccurate particulars of income.
Now coming to disallowance made under Section 14A of the
Act, this Tribunal is of the considered opinion that the Assessing
Officer has to compute disallowance as per the provisions of Rule
8D of Income-tax Rules, 1962. Therefore, when the assessee
made computation and the Assessing Officer made counter
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computation, it cannot be construed that there was concealment of income or furnishing inaccurate particulars of income. Therefore, there cannot be any levy of penalty even in respect of disallowance made under Section 14A of the Act. In view of the above discussion, this Tribunal is unable to uphold the orders of the lower authorities. The orders of both the authorities below are set aside and the penalty levied by the Assessing Officer, as confirmed by the CIT(Appeals), is deleted.
In the result, the appeal filed by the assessee is allowed.
Order pronounced in the court on 15th November, 2018 at Chennai.
sd/- sd/- (ए. मोहन अलंकामणी) (एन.आर.एस. गणेशन) (A. Mohan Alankamony) (N.R.S. Ganesan) लेखा सद�य/Accountant Member �या�यक सद�य/Judicial Member चे�नई/Chennai, �दनांक/Dated, the 15th November, 2018. Kri.
आदेश क� ��त�ल�प अ�े�षत/Copy to: 1. अपीलाथ�/Appellant 2. ��यथ�/Respondent 3. आयकर आयु�त (अपील)/CIT(A)-1, Coimbatore 5. �वभागीय ��त�न�ध/DR 6. गाड� फाईल/GF. 4. Principal CIT-1, Coimbatore