ACIT, NEW DELHI vs. M/S JOTINDRA STEEL & TUBE LTD., NEW DELHI

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ITA 6881/DEL/2015Status: DisposedITAT Delhi18 September 2017AY 2009-105 pages

In favour of the assessee: the Revenue's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that the CIT(A) had provided a well-reasoned order. Since some additions were set aside by the ITAT for denovo decision and other issues were decided in favor of the assessee, the penalty was not sustainable.

What were the facts?

The Assessing Officer made several additions to the assessee's income, including disallowances under Section 40(a)(ia), unpaid leave encashment, and service tax payable. The AO also initiated penalty proceedings under Section 271(1)(c) for furnishing inaccurate particulars. The CIT(A) deleted the penalty.

What were the issues?

Whether penalty under Section 271(1)(c) can be levied when the underlying additions are set aside or decided in favor of the assessee, and whether a debatable issue regarding expenditure nature can attract penalty.

Which sections of the Income-tax Act were involved?

Section 271(1)(c),Section 40(a)(ia),Section 43B

AI-generated summary — verify with the full judgment below

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Income Tax Appellate Tribunal, DELHI BENCHES: ‘B’, NEW DELHI

Before: SHRI I.C. SUDHIR & SHRI L.P. SAHU

Hearing: 29.08

PER L.P. SAHU, ACCOUNTANT MEMBER

1.

This appeal filed by the Revenue is directed against the order dt. 19.10.2015 of the Ld. CIT(Appeals)-17, New Delhi pertaining to the Assessment Year (A.Y.) 2009-10 on the following grounds of appeal.

“1. The order of Ld. CIT(A) is not correct in law and on facts. 2. On the facts and circumstances of the case, the CIT(A) has erred in law and in facts in deleting the penalty of Rs.18,48,704/- imposed by A.O. u/s 271(1)(CIT(A) ) of the Income Tax Act, 1961 (the Act).

3.

The appellant craves leave to add, amend any/all the grounds of appeal before or during the course of hearing of the appeal.”

2. The brief facts of the case are that the assessee filed return of income declaring income of Rs.2,78,52,373/-. The case was selected for scrutiny and the Assessing Officer (A.O.) completed the assessment at an income of Rs.3,34,19,181/- by making following disallowances. i. Disallowance u/s 40(a)(ia) of the Act 10,32,133/- ii. Addition for fee paid on increase in authorised share capital 1,00,000/- iii. Excess disallowance of depreciation on electrical installation 1,27,844/- iv. Addition on account of unpaid leave encashment u/s 43B 5,83,999/- v. Service tax payable 37,22,832/- ------------------------ Taxable income Rs. 3,34,19,181/- Rounded off : Rs.3,34,19,180/- The A.O. initiated penalty proceedings on the above additions u/s 271(1)(c) of the Act for furnishing inaccurate particulars of income on 11.3.2014.

3. Aggrieved by the additions made by the A.O. the assessee went in appeal before the Ld. First Appellate Authority. But the assessee did not contest the ground in regard to ROC fee of Rs.1,00,000/- paid. The Ld. CIT(A) confirmed the additions made by the A.O. and deleted the penalty imposed.

4. Aggrieved by this order of the Ld. CIT(A) the Revenue filed appeal before us.

5.

Ld. D.R. relied on the order of the A.O.

6.

On the other hand Ld.A.R. relied on the order of the Ld. CIT(A).

7.

We have heard both sides and perused material placed on record and orders of the authorities below. Ld.A.R. drew out attention to para 2 of Ld. CIT(A).’s order and submitted that in assessee’s own case for the A.Y. 2009-10 order dated 21st January, 2015 the addition of Rs.10,32,133/- made by the A.O. u/s 40(a)(ia) of the Act has been set aside to the file of A.O. for deciding denovo, therefore, the penalty cannot survive. He submitted that as regards leave encashment and service tax payable are concerned, both the issues were decided by the Coordinate Bench in favour of the assessee and penalty in this case also cannot survive. He submitted that the A.O. imposed penalty on Rs.1,00,000/- ROC fee paid for increasing the share capital which has been decided in favour of the assessee by Ld. CIT(A) by stating that it is a debatable issue whether it is capital expenditure or revenue expenditure. In this regard Ld. AR placed reliance on the judgement of Hon’ble Supreme Court in the case of Reliance Petroproducts P.Ltd. (2010) 322 ITR 158 (SC) and Hon’ble Delhi High Court judgement in case of CIT, LTU, Delhi vs. Indian Renewable Energy (in ITA 294/2016) dt. 22.8.2017 wherein it was held that a mere claim in the return of income which is not sustainable in law by itself will not amount to furnishing of inaccurate particulars regarding the income of the assessee, such claim in the return cannot amount to inaccurate particulars, hence would not attract penalty u/s 271(1) (c) of the Act.

7.1. Ld. CIT(A) has deleted the penalty by holding as under.

“2. There is only one issue involved in all the grounds of appeal which relates to levy of penalty u/s 271(1)(c) of the Act of Rs.18,48,704/-. The fact of the case is that during the assessment proceedings, the A.O. made additions on various grounds on which penalty u/s 271(1)(c) was initiated and levied. However, the appellant filed a copy of the order of the ITAT as the order passed by the A.O. reached to ITAT and the ITAT Delhi Bench D, New Delhi has set aside the issue with regard to addition of Rs.10,32,133/- made by the A.O. u/s 40a(ia). The matter was restored back to the file of A.O. to be decided denovo. Since, the issue has been set aside by the ITAT, therefore, the penalty levied u/s 271(1)(c) of the Act does not survive. So far as the additions with regard to leave encashment u/s 43B and service tax payable are concerned, both the issues have been decided in favour of the appellant. The only addition of Rs.1 lac made by the A.O. on account of fee paid to ROC on account of increase in authorised share capital was not contested by the appellant. The appellant treated the above expenditure as revenue in nature whereas the A.O. disallowed the same on the ground that the expenditure related to payment made to ROC for increase in share capital was of capital in nature. However, after going through the facts and circumstances of the case, I find that it was a debatable issue on which there was a possibility to have different opinions, therefore, in totality of the fact, I am of the view that the A.O. was justified to disallow the claim of expenditure being capital in nature, however, penalty u/s 271(1)(c) of the Act is not sustainable on such issues. Under these circumstances, the penalty levied by the A.O. is directed to be deleted.

3. In the result, appeal is allowed.”

7.2. We are of the view that the Ld. CIT(A) has given a well reasoned order which do not require any interference.

8.

In the result the appeal by the Revenue is dismissed. Order pronounced in the Open Court on 18 .09.2017.

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