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Income Tax Appellate Tribunal, E Bench, Mumbai
Before: Shri P K Bansal & Shri Pawan Singh
Per P.K. Bansal, Vice President
This appeal has been filed by the Revenue against the order of the CIT(A)-18, Mumbai dated 25.04.2014 for A.Y. 2010-11 by which the CIT(A) confirmed the levy of penalty on the assessee in respect of disallowance made by the AO for depreciation of `12,97,132/- on let our property and interest of `577 on account of delayed payment of TDS.
None appeared on behalf of the assessee even though the case was fixed for hearing several times. We, therefore, decided to dispose off the appeal after hearing the learned D.R. and going through the orders of the Tax Authorities below. We noted that in this case the assessment has been completed under Section 143(3) determining total loss of `46,16481/- against the returned loss of `64,90,160/-. The AO made the disallowance under Section 14A amounting to `5,75,970/- on account of interest on late payment of TDS amounting to `577/- and depreciation on let out premises amounting to `12,97,132/- and initiated penalty by observing
2 ITA 4365/Mum/2014 M/s. Sarang Exports P. Ltd. the “penalty proceedings under Section 271(1)(c) of the Income Tax Act, 1961 are initiated separately for the default committed within the meaning of that section” and ultimately after giving show cause notice to the assessee levied penalty on the assessee amounting to `5,78,967/- @100% of the tax sought to be evaded on the addition of `18,73,679/- by observing under para 5 as under: -
“5. Had the case not been selected for scrutiny, income to the extent of these disallowances would have escaped assessment. Also, the saving provisions of sec 273B are not applicable to the penalty initiated u/s. 271(1)(c). Further, the Hon'ble High Court of Delhi has, vide judgement dated 22/01/2013, in the case of CIT Vs. MAK Data Ltd., allowed the Revenue appeal (against the ITAT’s order deleting concealment penalty) holding that the absence of any explanation is statutorily considered as amounting to concealment of income. In that case, the addition had been made on the basis of impounded material and the assessee had subsequently surrendered the same. In the instant case, penalty has been initiated on altogether different issues, vis. Disallowance u/s. 14A, disallowance of interest on TDS and disallowance of depreciation claimed in respect of rented premises. However, the principle laid down by the Hon’ble High Court of Delhi that it is the assessee who has to discharge the onus of offering explanation and disclosing the material facts before the AO, is applicable in the instant case. Again, despite sufficient opportunity, the assessee has not put forth any explanation as to why penalty u/s. 271(1)(c) should not be imposed in respect of the impugned disallowances. By failing to account for expenses attributable to exempt-income yielding investments, claiming inadmissible expenditure of interest on TDS and depreciation on rented premises, the assessee has sought to reduce its incidence of taxation and has thereby concealed its income as well as furnished inaccurate particulars thereof. Here, it may be mentioned that in the assessment for A.Y. 2008-09 made on 08/10/2010, depreciation of Rs.7,58,557/- on let out shop premises was disallowed. Despite this, the assessee made similar claim of depreciation in the instant year in the return filed on 15/10/2010. This is indicative of the intention on the part of the assessee to evade tax. Again, as far as interest on TDS is concerned, there is no ambiguity over the fact that the same cannot be claimed as expenditure. This being so, I'am satisfied that this is a fit case for imposition of penalty u/s. 271(1)(c) on the impugned disallowances aggregating to Rs.18,73,679/-. A minimum penalty of Rs.5,78,967/- u/s. 271(1)(c) of the Income-tax Act, 1961, being 100% of the tax on the concealed income of Rs.18,73,679/- is hereby imposed on the assessee. The same has been worked out as under :-
3 ITA 4365/Mum/2014 M/s. Sarang Exports P. Ltd. Income sought to be evaded (Rs.5,75,970/- + Rs.577/-+ Rs. 12,97,132/-) Rs.18,73,679/- ============
Tax thereon @ 30% Rs.5,62,104/- (+) E. Cess @ 3% Rs.16,863/- Total tax on the income sought to be evaded Rs.5,78,967/- ===========
Minimum penalty being 100% of tax Rs.5,78,967/- ============
Demand Notice for penalty u/s. 271(l)(c) of Rs.5.78,967/- is issued.”
When the matter went before the CIT(A), the CIT(A) deleted the penalty in respect of disallowance made under Section 14A but confirmed the penalty in respect of disallowance of `12,97,132/-.
After hearing the learned D.R. and going through the orders of the Tax Authorities below we noted that the AO has levied the penalty on the assessee for concealing income as well as furnishing inaccurate particulars of income while the penalty proceedings was initiated without specifying any particular charge. In our view the issue involved is duly covered by the decision of the Hon'ble Jurisdictional High Court in the case of CIT v. Samson Perinchery [2017] 392 ITR 4 (Bom.) wherein it is held as under : -
“3. The impugned order of the Tribunal deleted the penalty imposed upon the Respondent Assessee. This by holding that the initiation of penalty under Section 271 (1)(c) of the Act by Assessing Officer was for furnishing inaccurate particulars of income while the order imposing penalty is for concealment of income. The impugned order holds that the concealment of income and furnishing inaccurate particulars of income carry different connotations. Therefore, the Assessing Officer should be clear as to which of the two limbs under which penalty is imposable, has been contravened or indicate that both have been contravened while initiating penalty proceedings. It cannot be that the initiation would be only on one limb i.e. for furnishing inaccurate particulars of income while imposition of penalty on the other limb i.e. concealment of income. Further, the Tribunal also noted that notice issued under Section 274 of the Act is in a standard proforma, without having striked out irrelevant clauses therein. This
4 ITA 4365/Mum/2014 M/s. Sarang Exports P. Ltd. indicates non-application of mind on the part of the Assessing Officer while issuing the penalty notice. 4. The impugned order relied upon the following extract of Karnataka High Court's decision in CIT v/s. Manjunath Cotton and Ginning Factory 359 ITR 565 to delete the penalty: “The Assessing Officer is empowered under the Act to initiate penalty proceedings once he is satisfied in the course of any proceedings that there is concealment of income or furnishing of inaccurate particulars of total income under clause (c). Concealment, furnishing inaccurate particulars of income are different. Thus, the Assessing Officer while issuing notice has to come to the conclusion that whether is it a case of concealment of income or is it as case of furnishing of inaccurate particulars. The apex court in the case of Ashok Pai reported in [2007] 292 ITR 11 (SC) at page 19 has held that concealment of income and furnishing inaccurate particulars of income carry different connotations. The Gujarat High Court in the case of Manu Engineering reported in 122 ITR 306 and the Delhi High Court in the case of Virgo Marketing P. Ltd., reported in 171 Taxmn 156, has held that levy of penalty has to be clear as to the limb for which it is levied and the position being unclear penalty is not sustainable. Therefore, when the Assessing Officer proposes to invoke the first limb being concealment, then the notice has to be appropriately marked. Similar is the case for furnishing inaccurate particulars of income. The standard proforma without striking of the relevant clauses will lead to an inference as to nonapplication of mind.” 5. The grievance of the Revenue before us is that there is no difference between furnishing of inaccurate particulars of income and concealment of income. Thus, distinction drawn by the impugned order is between Tweedledum and Tweedledee. In the above view, the deletion of the penalty, is unjustified. 6. The above submission on the part of the Revenue is in the face of the decision of the Supreme Court in Ashok Pai v/s. CIT 292 ITR 11 [relied upon in Manjunath Cotton & Ginning Factory (supra)] – wherein it is observed that concealment of income and furnishing of inaccurate particulars of income in Section 271(1)(c) of the Act, carry different meanings/ connotations. Therefore, the satisfaction of the Assessing Officer with regard to only one of the two breaches mentioned under Section 271(1)(c) of the Act, for initiation of penalty proceedings will not warrant/ permit penalty being imposed for the other breach. This is more so, as an Assessee would respond to the ground on which the penalty has been initiated/notice issued. It must, therefore, follow that the order imposing penalty has to be made only on the ground of which the penalty proceedings has been initiated, and it cannot be on a fresh ground of which the Assessee has no notice.
5 ITA 4365/Mum/2014 M/s. Sarang Exports P. Ltd. 7. Therefore, the issue herein stands concluded in favour of the Respondent Assessee by the decision of the Karnataka High Court in the case of Manjunath Cotton and Ginning Factory (supra). Nothing has been shown to us in the present facts which would warrant our taking a view different from the Karnataka High Court in the case of Manjunath Cotton and Ginning Factory (supra).” 5. The charge of concealment of income is different from furnishing inaccurate particulars of income. From the assessment order as well as the penalty order it is apparent that the AO has not levied penalty on the assessee under Section 271(1)(c) in respect of specific charge. We accordingly set aside the order of the CIT(A) and delete the penalty levied under Section 271(1)(c) following the decision of the Hon'ble Jurisdictional High Court Samson Perinchery as produced herein above.
In the result, the appeal filed by the assessee is allowed.
Order pronounced in the open court on 31st October, 2017. Sd/- Sd/- (Pawan Singh) (P.K. Bansal) Judicial Member Vice President
Mumbai, Dated: 31st October, 2017
Copy to: 1. The Appellant 2. The Respondent 3. The CIT(A) -18, Mumbai 4. The CIT - 8, Mumbai 5. The DR, “E” Bench, ITAT, Mumbai By Order
//True Copy// Assistant Registrar ITAT, Mumbai Benches, Mumbai n.p.