Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, “F” BENCH, MUMBAI
This appeals by the assessee is arising out of the order of Commissioner of Income Tax (Appeals)-37, Mumbai [in short CIT(A)], in appeal No. CIT(A)-37/IT-291/ACIT-25(1)/14-15 dated 30-11-2016. The Assessment was framed by the Asst. Commissioner of Income Tax, Central Circle-20(3), Mumbai (in short ‘ACIT’/ AO) for the A.Y. 2011-12 vide order dated 30.07.2014 under section 143(3) of the Income Tax Act, 1961 (hereinafter ‘the Act’).
2. The only issue in this appeal of assessee is against the order of CIT(A) confirming the levy of penalty by the AO under section 271(1)(c) of the Act. For this assessee has raised the following five effective grounds: -
“1. The learned Commissioner of Income-tax (appeals) has erred in confirming the assessing officer’s penalty order under section 271(1)(c) of the Income-tax Act, 1961.
The learned Commissioner of Income-tax (Appeals) -37 has erred in not appreciated the submissions made before the Assessing Officer and also before the learned Commissioner of Income tax (Appeals)-37.
The learned Commissioner of Income-tax (appeals) -37 has erred in stating that the expenditure disallowed by the Assessing Officer amounts to concealment.
The learned Commissioner of Income-tax (Appeals)-37 has erred in not taking the submissions made in proper perspective.
The learned Commissioner of Income-tax (Appeals) 37s order is against the weight of equity, natural justice and evidence on record."
3. Briefly stated facts are that the assessee is an actuarial by profession. The assessee also derived income from pension, income from business or profession as actuarial and income from other sources. During the course of assessment proceedings, the AO, for AY 2011-12 vide his order dated 27-01-2014 under section 143(3) of the Act made disallowance on the amounts of (i) disallowance of administrative expenses under section 14A of the Act read with Rule 8D of the Income Tax Rules 1962 (hereinafter the ‘Rules’) in relation to exempt income at ₹ 52,738/-, (ii) Disallowance of expenses for non-deduction of tax on purchase of software for an amount of ₹ 4,56,700/- by invoking the provisions of section 40(a)(ia) of the Act, (iii) Disallowance of business promotion expenses of ₹ 54,331/-. The AO during the course of assessment proceedings, on all these three disallowance initiated the penalty proceedings under section 271(1)(c) of the Act for furnishing of inaccurate particulars of income. The assessee has not challenged these disallowances and accepted the additions for the reason that the assessee is a 78-year-old cancer patient. The AO started penalty proceedings under section 271(1)(c) of the Act on these three disallowances and assessee explained each of the item. But the AO levied the penalty on these three items as the assessee could not furnish any satisfactory explanation/ details / submissions during the assessment proceedings so as to enable the AO to verify the veracity of the expenses claimed on the exempt income, TDS not deducted on payment made for purchase of software and business promotion expense. Even the AO noted that in penalty hearing the assessee has not presented any satisfactory evidences which can justify that the added income has not been deliberately concealed. For this, the AO recorded the following facts: -
“During penalty hearing too, the assessee has not presented any satisfactory evidence which can justify that the added income had not been deliberately concealed. Mere claims of non-keeping of vouchers and payment for purchase of software of life of one year or less have been quoted, without any supporting evidence proving the same. I am therefore of the opinion that the assessee has knowingly and deliberately made false claim and concealed/furnished accurate particulars of has income as discussed above. I am further of the opinion that the assessee's case squarely falls within the ambit of explanation 1 to section 271(1)(c) and the assessee's case is a fit case, where the assesses has knowingly and deliberately tried to mislead the department and has attempted to conceal income by furnishing inaccurate particulars.”
The assessee preferred the appeal before CIT(A).
4. The CIT(A) also confirmed the action of the AO levy of penalty by observing as under: -
“During penalty under clause c of sub-section 1 of Section 271 of the Income-tax Act,61, if the Assess/ng Officer or the Commissioner of Income- tax (Appeals) the course of the Assessment Proceedings under the Act is satisfied that any person has 'concealed', or 'furnished inaccurate particulars of "income' The words 'concealed' or 'furnished inaccurate particulars of income' has been not defined either in this Section nor anywhere else of the Act. One thing is certain that these two circumstances are not identical in details although they may lead to the same effect, namely, keeping a certain portion of the income. The word 'conceal' is derived from the Latin word ‘concelare' which implies to 'hide’. It signifies a deliberate, act of omission on the part of the Assessee. A mere omission or negligence would not constitute a deliberate act suppression falsi –T.Ashok Pai vs CIT (2007) 161 taxman 340, 292 ITR 11 (SC)."
The assessee is in second appeal before Tribunal.
5. Before us, the learned Counsel for the assessee argued that it is evident from income and expenditure account of the assessee for the year ended 31-03-2011 that the professional receipts are to the tune of ₹ 1,68,58,578/- and as against the same the assessee has incurred the professional expenses but there is no such expenses on administrative side which can be attributed to the dividend income. She argued that the AO neither during the course of penalty proceedings nor during the course of assessment proceedings pointed out which expense is relatable to dividend income. In term of the above, she argued that on these items of disallowances, although no appeal was filed by the assessee against the quantum addition, the penalty under section 271(1)(c) of the Act cannot be levied for furnishing of inaccurate particulars of income.
As regards to the second item of disallowance due to non- compliance of TDS provisions for non-deduction of TDS. She stated that the assessee has made payment for purchase of software which has been treated as having a life of one year or less and has been written off and claimed the same as an expense. According to her, there is no provision that purchase of software attracts TDS. Hence, the disallowance itself is bad and the penalty at all cannot be levied on these disallowances. As regards to the disallowance of business promotion expenses, she stated that assessee incurred expenses on tea, coffee, etc. on clients and in proportion to total receipts of ₹ 1,68,58,578/-, the expenses of ₹ 54,334 which is minuscule percentage of the total receipts and this is bare minimum expense on tea, coffee, etc. According to her, these are business expenses necessary for business expediency and these are to be incurred in regular course of business. However, she admitted that due to petty amounts on tea, coffee paid to tea boys, vouchers could not be maintained. But as regards to the genuineness of expense she claimed that this is necessary expenditure. In term of the above, she argued that no penalty under section 271(1)(c) of the Act can be levied for furnishing of inaccurate particulars of income.
On the other hand, the learned Departmental Representative argued that once the assessee has admitted these disallowances are not challenged in quantum, penalty automatically is to be levied. She also argued that even the assessee could not prove by any evidence to establish that the income added by the AO has not been deliberately concealed. According to her, no proper explanation filed by the assessee to rebut the charge. She argued that once no explanation is file by the assessee, the AO has rightly levied the penalty and CIT(A) further rightly confirmed the penalty. She supported the orders of the lower authorities.
We have heard the rival contentions and gone through the facts and circumstances of the case. We find from the facts of the case that in relation to disallowance under section 14A read with rule 8D(2)(iii) of the Rules i.e. the half percentage of average value of investment being administrative expenses the assessee has filed the income and expenditure account for the year ended 31-03-2011 which clearly proves that none of the expenses are co-related to the exempt income by the lower authorities neither during assessment proceedings nor during penalty proceedings that the same relates to exempt income. We have also gone through the income and expenditure account and even now before us there is no averment that the particular expenditure is relatable to exempt income. In regard to disallowance made by AO for non- deduction of TDS under the TDS provisions on purchase of software amounting to ₹ 4,56,700/-, the Revenue could not pointed out under which provision the TDS has to be deducted. The assessee made these expenses for purchase of software Programme, which has been treated by the assessee as having life of one year and hence, written off and claim the same as expenses. We are of the view that the purchase of software does not attract any TDS provision. As regards to the disallowance of business promotion expenses for non-presentation of vouchers is for the reason that the amount paid on tea, coffee etc. on clients is due to smallness of denomination of payments and bills and vouchers could not be preserved. Accordingly, in our view this has not a case of furnishing of inaccurate particulars of income because the assessee has filed all the particulars of income before the AO during the assessment proceedings or in the return of income. This may be a case of disallowance of expenses but it is not a case of furnishing of inaccurate particulars of income. In view of the decision of Hon’ble Supreme Court in the case of T. Ashok Pai vs CIT (2007) 292 ITR 11 (SC), wherein Hon’ble supreme Court has made a distinction between furnishing of inaccurate particulars of income. Hon’ble Supreme Court observed as under: -
“16. The term 'inaccurate particulars' is not defined. Furnishing of an assessment of value of the property may not by itself be furnishing of inaccurate particulars. Even if the explanations are taken recourse to, a finding has to be arrived at having regard clause (a) of Explanation 1 that the Assessing Officer is required to arrive at a finding that the explanation offered by an assessee, in the event, he offers one was false. He must be found to have failed to prove that such explanation is not only not bona fide but all the facts relating to the same and material to the income were not disclosed by him. Thus, apart from his explanation being not bona fide, it should be found as of fact that he has not disclosed all the facts which was material to the computation of his income.
The explanation having regard to the decision of this Court must be preceded by a finding as to how and as to in what manner he furnished the particulars of his income. It is beyond any doubt or dispute that for the said purpose the Income Tax Officer must arrive at its satisfaction in this behalf. [See Commissioner of Income Tax v. Ram Commercial Enterprises Ltd., 246 ITR 568 and Diwan Enterprises v. Commissioner of Income Tax, 246 ITR 571].
The order imposing penalty is quasi-criminal in nature and, thus, burden lies on the department to establish that the assessee had concealed his income. Since burden of proof in penalty proceedings varies from that in the assessment proceeding, a finding in an assessment proceeding that a particular receipt is income cannot automatically be adopted, though a finding in the assessment proceeding constitute good evidence in the penalty proceeding. In the penalty proceedings, thus, the authorities must consider the matter afresh as the question has to be considered from a different angle."
Further, Hon’ble Supreme Court in the case of CIT Vs. Reliance Petroproducts (P) Ltd. 322 ITR 158 (SC) has made distinction between wrong claim / disallowance of claim and concealment for furnishing of inaccurate particulars of income. Hon’ble Supreme Court in observed that merely because the assessee has claimed expenditure, which claimed was acceptable or not acceptable to Revenue, that itself would not attract the penalty under section 271(1)(c) of the Act. In the present case before us also the facts are very clear that the claim is merely disallowed as the assessee is unable to prove. As regards to the disallowance under section 14A of the Act read with Rule 8D(2)(iii) and disallowance by invoking the provisions of section 40(a)(ia) of the Act being expense relatable to exempt income and expense of purchase of software, this does not attract the penalty. As regards to the business promotion expenses, this is merely a disallowance of expenses in the absence of vouchers. It cannot be said that the assessee has concealed the income by furnishing of inaccurate particulars of income. Accordingly, we delete the penalty and allow the appeal of the assessee.
In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 29-06-2018. AadoSa kI GaaoYaNaa Kulao mao idnaMk 29-06-2018 kao kI ga[- .