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Before: Shri Mahavir Singh & Shri G Manjunatha
Date of hearing 24-10-2017 Date of pronouncement 27-10-2017 O R D E R Per G Manjunatha, AM : These two appeals filed by the assessee are directed against separate but identical orders of CIT(A)-51, Mumbai dated 07-01-2016 for the assessment years 2009-10 and 2010-11. Since, common facts are involved and issues are identical, these appeals were heard together and are disposed of by this common order, for the sake of convenience.
The revenue has raised common grounds of appeal for both the years.
For the sake of brevity, grounds of appeal raised for the assessment year 2009-
"On the facts and in the circumstances of the case and in law, (i) the CIT(A) has erred in deleting the penalty levied u/s 271(1)(c) of the IT Act without appreciating the fact that the issue of quantum disallowances u/s 801A has not been attained finality and the Department has filed further appeal before the Hon'ble Bombay High Court. On the facts and in the circumstances of the case and in law, (ii) the CIT(A) erred in deleting the penalty levied u/s 271(1)(c) of the IT Act without appreciating the fact that the assessee is not eligible for deduction u/s 801A and claim of deduction u/s 35 o Act based on the seized material unearthed during the course of search action"
The brief facts of the case are that the assessee is a domestic company engaged in the business of developing, operating, maintaining and constructing various infrastructure facilities such as roads, bridges, airport, etc. The assessee has filed its return of income for the assessment years 2009-10 and 2010-11 declaring total income at Rs.24,50,14,680 and Rs.28,30,92,548 respectively. A search and seizure action u/s 132 of the Income-tax Act, 1961 was conducted on 24-09-2009 and thereafter, the AO passed assessment orders u/s 143(3) r.w.s. 153A of the Income-tax Act, 1961 on 29-12-2011 determining the total income at Rs.67,07,20,910 and Rs. 53,82,90,820, for the assessment years 2009- 10 & 2010-11, respectively. The assessee preferred appeals before the first appellate authority against the assessment orders. The CIT(A) granted relief on the issue of capitalization of expenses whereas the assessee did not contest additions made u/s 35D of the Income-tax Act, 1961. The CIT(A) also confirmed disallowance of deduction claimed u/s 80IA for both the assessment years. The penalty proceedings u/s 271(1)(c) initiated during assessment proceedings were finalised after giving effect to order of CIT(A) by levying penalty of Rs.1,38,13,480 and Rs.5,06,06,826 for the assessment years 2009-10 & 2010-11, respectively. Thereafter, the assessee has preferred further appeal before ITAT, against order of the CIT(A) confirming disallowance of deduction claimed u/s 80IA of the Income-tax Act, 1961. The ITAT, deleted the additions made by the AO towards disallowance u/s 80IA for both the assessment years vide order dated 09-04-2014 in & 4997/Mum/2012.
The assessee preferred appeal against the AO’s order levying penalty u/s 271(1)(c) of the Act. The CIT(A) deleted penalty levied by the AO on the ground that once addition made on account of deduction claimed u/s 80IA stands deleted by the ITAT, the penalty levied on this issue no more survives. As regards penalty levied on disallowance of IPO expenses u/s 35D, the CIT(A) observed that the AO made disallowance on account of wrong claim made by the assessee. The assessee has disclosed all relevant facts relating to the claim of deduction u/s 35D. There is neither concealment nor furnishing of inaccurate particulars of its income on account of wrong claim made u/s 35D of the Act. Therefore, the CIT(A) directed the AO to cancel penalty levied on the issue of disallowance u/s “5. With regards to addition u/s 80-IA, Hon'ble ITAT deleted the addition vide order in dated 09.04.2014. Thus, the penalty levied on this issue no more survives. Coming to the issue of disallowance u/s 35D, the facts are that the assessee raised capital by IPO for which total expenses of Rs 4,15,71,500/- were incurred. As per the provisions of Section 35D, 20% of total expenses i.e. Rs 83,14,300/- are allowable during the year as against the claim of Rs 1,10,85,733/-. The difference of Rs 27,71,455/- was thus disallowed and it is on this amount the penalty u/s 271(1)(c) was levied. During the course of penalty proceedings the assessee submitted that it had accepted the disallowance u/s 35D and that this was only a bonafide calculation error and hence, no penalty is leviable. However, the contention of the assessee was not accepted by the AO and penalty was levied. During the course of appellate proceedings also the assessee reiterated its contention and submitted that all the material facts had been disclosed before the AO. Therefore, it is claimed that there is neither furnishing of inaccurate particulars nor concealment of income. Assessee in support of its argument relied on various judicial pronouncements as under: (a) Price Waterhouse Coopers (P) Ltd 348 ITR 306, V/s Rural Electrical Co-op Society Ltd [2006) 152 Taxrnan 237 Pandit Gouind Prasad Mishra v/s CIT [1999] 238 (c) ITR 338 Bharat Rice Mill V/s CIT [2005] 278 ITR 599 (d) CIT v/s JKA Subramanian Chettiar [56012009] (e) (f) CIT V/s Harshavardhan Chemicals & Minerals Ltd [2003] 259 ITR 212 CIT V/s Reliance Petroproducts P LTd [2010] 322 (g) ITR 158 KC Builders v/sACIT [2004] 135 Taxman 461 (h) Cement Marketing Co of India V/s ACIT [1980] 124 (i)
5 & 2853/Mum/2016 ITR 15 6. I have considered the submissions of the assessee and have gone through the penalty order. As contended by the assessee there is only a wrong claim made. Assessee disclosed all relevant facts relating to the claim u/s 35D. Assessee's explanation that it is only a calculation mistake which resulted in excess claim is bonafide. Therefore, I hold that there is neither concealment nor furnishing of inaccurate particulars of its income on the part of the assessee. In view of the same, the AO is directed to cancel the penalty levied on the issue of disallowance u/s 35D. In view of the above, AO is directed to delete the penalty levied of Rs 1,38,13,480/-.” Aggrieved by the order of CIT(A), the revenue is in appeal before us.
We have heard both the parties, perused materials available on record and gone through the orders of authorities below. The AO levied penalty u/s 271(1)(c) on two issues, viz. (i) disallowance of deduction claimed u/s 80IA and disallowance of claim made u/s 35D of the Income-tax Act, 1961. The disallowance of deduction claimed u/s 80IA of the Act, has been deleted by the ITAT, in quantum appellate proceedings in & 4997/Mum/2012 dated 09-04-2014. Therefore, we are of the view that once the addition on which penalty has been levied is deleted by the ITAT, penalty levied u/s 271(1)(c) cannot survive in the eyes of law. As regards penalty levied on disallowance of expenses u/s 35D, the CIT(A) gave a categorical finding that the assessee has disclosed all relevant facts relating to the claim, but the AO has disallowed expenditure because of wrong calculations made by the assessee. be considered for concealment of particulars of income or furnishing of inaccurate particulars of income. The CIT(A), after considering relevant facts has rightly deleted penalty levied by the AO u/s 271(1)(c) on both the issues.
We do not find any error or infirmity in the orders of CIT(A). Hence, we are inclined to uphold the orders of the CITA) and dismiss the appeals filed by the revenue for assessment years 2009-10 and 2010-11.
In the result, appeals filed by the revenue are dismissed. Order pronounced in the open court on 27th October, 2017.