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Income Tax Appellate Tribunal, DELHI BENCH “D”, NEW DELHI
Before: SHRI S.V. MEHROTRA & SMT. BEENA A. PILLAI
O R D E R PER S.V. MEHROTRA, V.P. :
This is an appeal filed by the assessee against the order dated 12.03.2014 passed by the Commissioner of Income Tax (Appeals)-19, New Delhi, u/s 271(1)(c) of the Income Tax Act, 1961 (in short “the Act”), relating to assessment year 2008-09. 2. Brief facts of the case are that the assessee had filed return of income of Rs.1,52,08,500/-. The Assessing Officer noticed that the assessee had shown exempt income u/s 10(34) in respect of dividend income amounting to Rs.2,12,335/- and Rs.11,21,277/- as LTCG (under security transaction tax) exempt u/s 10(38). He noticed that no expenses attributable to earning of such income had been taken into consideration by the assessee as required u/s 14A.
The assessee in its reply dated 04.10.2010 stated as under :-
“In clause 17(i) of Tax Audit Report, it has been specified as under : The company is having composite books of accounts with respect of taxable income and exempted income and as such, it is not possible to quantify the amount of deduction inadmissible in terms of section 14A in respect of the expenditure incurred in relation to income which does not form part of the total income. Without prejudice as stated hereinabove, we are enclosing herewith a computation of disallowance amounting to Rs.1,13,505/- as annexure ‘D’ computed as per Rule 8D of the I.T. Rules.”
Accordingly, a sum of Rs.1,13,505/- was added by the Assessing Officer and penalty proceedings u/s 271(1)(c) were initiated. Since the assessee did not file any reply, penalty of Rs.34,050/- was levied. Ld. CIT(A) dismissed the assessee’s appeal. Being aggrieved, the assessee is in appeal before us and has taken following ground of appeal :-
“On facts and in circumstances of the case, learned C.I.T.(A) has erred in law and on facts in confirming the penalty of Rs.34050/- under Section 271(1)(c) of the Act on addition of Rs.113505/- under Section 14A of the Act.”
In the written submissions, the assessee has, inter-alia, relied on the decision of the Hon’ble Supreme Court in the case of CIT vs. Reliance Petroproducts (P) Ltd. (2010) 189 Taxman 322, wherein, the Hon’ble Supreme Court has held that in order to expose the assessee to the penalty unless the case is strictly covered by the provisions, the penalty provision cannot be invoked. It was further held that by any stretch of imagination, making an incorrect claim in law cannot tantamount of furnishing inaccurate particulars.
We have considered the written submissions of assessee and heard ld. DR. We have perused the record of the case. Admittedly, in the tax audit report in clause 17(1) it had been stated that since the company was having composite books of account with respect to the taxable and exempted income, therefore, it was not possible to quantify the amount of deduction, inadmissible in terms of section 14A in respect of the expenditure incurred in relation to income which does not form part of the total income. However, without prejudice to these observations of tax auditor, the assessee had offered disallowance of Rs.1,13,505/- as per Rule 8D of the Income Tax Rules, 1962. Therefore, it cannot be said that there was any conscious attempt for concealment of income on the part of the assessee, which could expose it to penalty proceedings u/s 271(1)(c). Following the ratio laid down by Hon’ble Supreme Court in the case of Reliance Petroproducts (P) Ltd. (supra), the assessee’s appeal is allowed.
In the result, the appeal of the assessee is allowed. Order pronounced in the open court on this 12th day of April, 2017.