SADHANA NITRO CHEM LTD.,MUMBAI vs. ITO 7 (2) (2), MUMBAI

This appeal by assessee under section 253 of the Income-Tax Act (“The Act”) is directed against the order ld. CIT(A)-14, Mumbai dated 28.01.2016 for Assessment Year (AY) 2007-08, which in turn arises from the order of penalty levied under section 271(1)(c) by the Assessing Officer dated 26.03.2014. The assessee has raised the following grounds of appeal: 1) On the facts and in the circumstances of the case, Ld. CIT(Appeals) erred in confirming the levy of penalty on the reduction in the claim of deduction under Section 10B of the Act of Rs. 33,54,723/-. 2) On the facts and in the circumstances of the case, Ld. CIT(Appeals) erred in confirming the levy of penalty on the addition made under section 145A of the Act of Rs. 165.27 lakhs. 3) On the facts and in the circumstances of the case, Ld. CIT(Appeals) erred in confirming the penalty order of the Assessing Officer. - M/s Sadhana Nitro Chem Ltd.

Brief facts of the case are that the assessee is a company engaged in the business of manufacturing and treading, filed its return of income for relevant AY on 27.10.2007 declaring Nil income. The assessment was completed on 31.12.2009 under section 143(3) of the Act. In the return of income, the assessee claimed deduction under section 10B of Rs. 1,30,10,206/-. The Assessing Officer (AO) while framing the assessment order restricted the disallowance under section 10B to Rs. 1,11,01,062/-, thereby disallowed the deduction under section 10B to Rs. 33,54,723/-. The AO also made the addition of Rs. 165.27 lakhs on account of non-payment of excise duty in time and disallowed the same as per section 43B(a). On appeal both the addition were confirmed. Thereafter, the AO issued notice under section 271(1)(c) read with Explanation-1 dated 30.12.2009 for initiating penalty for furnishing inaccurate particulars of income. The assessee filed his explanation. The explanation of assessee was not accepted by AO. The AO levied the penalty @ 100% of the tax sought to be evaded. The AO worked out the penalty of Rs. 66,92,188/- in its order dated 26.03.2014. On appeal before the ld. CIT(A), the penalty order was sustained. Thus, further aggrieved by the order of ld. CIT(A), the assessee has filed the present appeal before us.

We have heard the ld. Authorized Representative (AR) of the assessee and ld. Departmental Representative (DR) for the Revenue and perused the material available on record. It was argued by ld. AR of the assessee that the 2 M/s Sadhana Nitro Chem Ltd. AO while passing the assessment order has not initiated the penalty proceeding. There was no satisfaction recorded by AO while passing the assessment order about the concealment of income or for furnishing of inaccurate particulars thereof. Thus, the order of AO in levying the penalty is bad-in-law. The AO issued notice under section 274 r.w.s. 271 dated 31.12.2009. The AO has not specified or strike out the inappropriate portion of notice, specifying, if the penalty is initiated for concealment of particular or furnishing inaccurate particular of income. The copy of notice dated 31.12.2009 is placed on record. The ld. AR of the assessee relied upon the decision of Mumbai Tribunal in Uttam Value Steels Limited vs. ACIT in ITA No. 3622 to 3625/Mum/16 dated 22.05.2017, M/s Orbit Enterprises vs. ITO in ITA Nos. 1596 & 1597/Mum/14 dated 01.09.2017, Meherjee Cassinath Holdings Pvt. Ltd. vs. ACIT in ITA No. 2555/Mum/12 dated 28.04.2017, CIT vs. Manjunatha Cotton & Ginning Factory (359 ITR 565 (HC, Karnataka) and Sesa Resources Ltd. vs. ACIT in Tax Appeal No.42 of 2012 (HC, Bombay). On the other hand, the ld. DR for the Revenue heavily relied on the decision of ld. CIT(A). 4. We have considered the rival submission of the parties and perused the orders of authorities below. In the return of income, the assessee claimed deduction under section 10B at Rs. 1,30,10,206/-. The Assessing Officer (AO) while framing the assessment order restricted the disallowance under section 10B to Rs. 1,11,01,062/-, thereby disallowed the deduction under 3 M/s Sadhana Nitro Chem Ltd. section 10B to Rs. 33,54,723/-. The AO also made the addition of Rs. 165.27 lakhs on account of non-payment of excise duty in time and disallowed the same as per section 43B(a). We have noted that no penalty under section 271(1)(c) was initiated by AO while passing the assessment order. The AO issued notice under section 271(1)(c) dated 30.12.2009. The assessee filed its reply dated 18.02.2014 and contended that the assessee was given partial relief by the ld. CIT(A). We have noted that no such order for giving partial relief to the assessee is placed on record. We have seen that in this case, there is no finding that any details supplied by the assessee in its Return were found to be incorrect or erroneous or false. Such not being the case, there would be no question of inviting the penalty under Section 271(1)(c) of the Act. In our view mere making of the claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee. Such claim made in the Return cannot amount to the inaccurate particulars. In our view the assessee had furnished all the details of income in its Return, which details, for which there is no finding that the details were not found to be inaccurate nor could be viewed as the concealment of income on its part.