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Income Tax Appellate Tribunal, DELHI BENCH ‘SMC-1’, NEW DELHI
Before: Sh. N. K. Saini
ORDER This is an appeal by the assessee against the order dated 25.09.2014 of ld. CIT(A)-XXVIII, New Delhi.
The only grievance of the assessee in this appeal relates to the confirmation of penalty of Rs.31,362/- levied by the AO u/s 271(1)(c) r.w.s. 274 of the Income Tax Act, 1961 (hereinafter referred to as the Act).
Facts of the case in brief are that the assessee filed the return of income on 27.09.2010 declaring an income of Rs.22,43,730/-. However, the assessment was framed at an income of Rs.23,45,227/- by making an addition of Rs.1,01,497/-. The assessee filed the revised statement of long term capital gain showing Rs.1,01,497/- as taxable i.e. with 2 Suresh Prasad Aggarwal indexation of Rs.25,353/- + without indexation of Rs.76,144/-. The AO added the said amount to the income of the assessee and also initiated the proceedings u/s 271(1)(c) of the Act.
The assessee submitted to the AO that Rs.1,01,497/- was added to the income of the assessee as long term capital gains (Non-STT paid) on sale of Mutual Funds instead of long term capital gain exempted u/s 10(38) of the Act as claimed by the assessee. It was further submitted that the assessee is a Dental Surgeon and did not have any taxation or accounting background. It was also submitted that the assessee had no intention to conceal any income which was evident from the fact that he had fully disclosed the income on sale of mutual funds in his return of income. However, the accountant of the assessee, due to genuine misinterpretation of tax law could not make difference in paid STT and non-STT, therefore, treated the capital gains exempt u/s 10(38) of the Act. However, during the course of assessment proceedings, as soon as the assessee found out his mistake, he had suo-motu surrendered the same income to tax. Therefore, penalty u/s 271(1)(c) of the Act was not leviable, since the assessee neither concealed the income nor furnished inaccurate particulars of income. The AO however did not find merit in the submissions of the assessee and levied the penalty of Rs.31,362/-.
3 Suresh Prasad Aggarwal 5. Being aggrieved the assessee carried the matter to the ld. CIT(A) and submitted as under: i) Levy of penalty under section 271(1)(c) is not mandatory, which is evident from use of the word 'may' in that section; ii) Penalty proceedings are different from assessment proceedings. An addition made in assessment does not ipso-facto imply levy of penalty; iii) Even if the assessee has not filed an appeal in quantum proceedings, it would not result in automatic levy of penalty; iv) Merely because a claim made by the assessee is held inadmissible, that by itself, would not attract penalty under section 271(1)(c) if the adequate disclosures were made in respect of such claim; v) The assessee had no intention to conceal any income. vi) Further, penalty under section 271(1)(c) is leviable only if the department establishes that there is willful default. vii) The assessee has not concealed the particulars and not filed inaccurate particulars of Income.
The ld. CIT(A) after considering the submissions of the assessee sustained the penalty levied by the AO u/s 271(1)(c) of the Act by observing as under:
4 Suresh Prasad Aggarwal “In the present case, the above basic conditions for levy of penalty u/s 271(1)(c) are fulfilled. As is evident the assessee has deliberately filed wrong particulars of income and has claimed that the income is exempt under section 10(38). The fact is very much in the knowledge of the assessee. In the above facts and circumstances of the case, I am of the considered opinion that the explanation furnished by the assessee before the Assessing Officer was not substantiated by it by bringing any evidence. The evidence on record, on the other hand, would support the Assessing Officer's view that the explanation of the assessee could not be substantiated by it. The Assessing Officer, therefore, was justified in levying the impugned penalty. It was only when the Assessing Officer issued the show cause and asked the assessee to file necessary evidence that the amount was surrendered by the assessee. This shows that the claim of the Appellant was not bona fide. Therefore, the information furnished by the appellant in the return of income was factually incorrect and the appellant cannot escape the rigors of section 271(1)(c) of the I.T. Act, 1961. In view of the above, the penalty levied by the Assessing Officer is required to be confirmed as the necessary ingredients for levy of penalty i.e. inaccurate particulars, malafide intention and mensrea are present. The Hon'ble Delhi High Court in the case of CIT vs. Escort Finance Ltd., 328 ITR 44 has held that even if there is no concealment of income or furnishing of inaccurate particulars, but if a claim which is ex-facie bogus is made, the same will still attract penalty provisions. Similar views have been expressed by the Hon'ble Court in the case of CIT vs. Zoom Communications 5 Suresh Prasad Aggarwal (P) Ltd, holding that very few returns are selected for scrutiny and therefore, non-sustainable claims cannot be said to be bonafide. Prima facie unsustainable claim made in the return of income shall definitely invite penalty u/s 271(1)(c) of the Act. In view of the aforesaid, I hold that the Assessing Officer has rightly charged the appellant company with concealment and furnishing of inaccurate particulars. Accordingly, the penalty u/s 271(1)(c) of the Act is being sustained."
Now the assessee is in appeal. The ld. Counsel for the assessee reiterated the submissions made before the authorities below and further submitted that the assessee neither concealed the income nor furnished inaccurate particulars of income. It was stated that simply on this basis that a claim made by the assessee did not find favour with the AO, is not sufficient to levy the penalty u/s 271(1)(c) of the Act. The reliance was place on the following case laws: � Price Water House Coopers (P) Ltd. Vs CIT (2012) 348 ITR 306 (SC) � CIT Vs Reliance Petroproducts (P) Ltd. (2010) 322 ITR 158 (SC) � Dilip Shroff 291 ITR 519 (SC) � CIT Vs Ultimate Fashin Maker Ltd. (HC) � CIT Vs B.R. Sharma (2005) 196 CTR 454 (Del) � CIT Vs Globe Sales Corporation (2005) 196 CTR 187 (Del) � CIT Vs Auto Lamps Ltd. (2005) 196 CTR 459 (Del)
6 Suresh Prasad Aggarwal � State of M.P Vs Bharat Heavy Electricals (1998) 99 ELT 33 (SC) � Hindustan Steel Ltd. Vs State of Orissa AIR 1970 SC 253 8. In his rival submissions the ld. DR strongly supported the order of the authorities below and reiterated the observations made by the ld. CIT(A).
I have considered the submissions of both the parties and perused the material available on the record. In the present case, it is noticed that the assessee earlier had shown long term capital gains earned on the mutual funds as exempted u/s 10(38) of the Act. The said capital gain was non-STT paid. Therefore, it was taxable and when the mistake came to the notice of the assessee. He offered the amount of Rs.1,01,497/- for taxation being the long term capital gain, non-STT paid on sale of mutual funds. The AO levied the penalty u/s 271(1)(c) of the Act on the said income which was confirmed by the ld. CIT(A). In the present case, the assessee neither furnished inaccurate particulars of income nor concealed the income, the only mistake of the assessee was that a wrong claim was made but the said mistake was not malafide. On a similar issue the Hon’ble Supreme Court in the case of CIT Vs Reliance Petroproducts (P.) Ltd. (2010) 322 ITR 158 (supra) has held as under:
7 Suresh Prasad Aggarwal “A glance at the provisions of section 271(1)(c) of the Income-tax Act, 1961, suggests that in order to be covered by it, there has to be concealment of the particulars of the income of the assessee. Secondly, the assessee must have furnished inaccurate particulars of his income. The meaning of the word "particulars" used in section 27l(1)(c) would embrace the details of the claim made. Where no information given in the return is found to be incorrect or inaccurate, the assessee cannot be held guilty of furnishing inaccurate particulars. In order to expose the assessee to penalty, unless the case is strictly covered by the provision, the penalty provision cannot be invoked. By no stretch of imagination can making an incorrect claim tantamount to furnishing inaccurate particulars. There can be no dispute that everything would depend upon the return filed by the assessee, because that is the only document where the assessee can furnish the particulars of his income. When such particulars are found to be inaccurate, the liability would arise. To attract penalty, the details supplied in the return must not be accurate, not exact or correct, not according to the truth or erroneous. Where there is no finding that any details supplied by the assessee in its return are found to be incorrect or erroneous or false there is no question of inviting the penalty under section 271(1)(c). A mere making of a claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee. Such a claim made in the return cannot amount to furnishing inaccurate particulars.”
In the present case also the assessee made a claim of exemption u/s 10(38) of the Act on the capital gain earned by selling the mutual funds which were non-STT. Such claim of 8 Suresh Prasad Aggarwal the assessee was not accepted. The mistake occurred due to negligence of the accountant, however, when it came to the knowledge of the assessee, during the course of assessment proceedings, the amount of Rs.1,01,497/- was offered for taxation.
On a similar issue the Hon’ble Supreme Court in the case of Price Waterhouse Coopers (P.) Ltd. Vs CIT (2012) 348 ITR 306 has held as under: “that the facts of the case were peculiar and somewhat unique. Notwithstanding that the assessee was a reputed firm and had great expertise available with it, it was possible that even the assessee could make a "silly" mistake. The fact that the tax audit report was filed along with the return and that it unequivocally stated that the provision for payment was not allowable under section 40A(7) of the Act indicated that the assessee made a computation error in its return of income. The contents of the tax audit report suggested that there was no question of the assessee concealing its income or of the assessee furnishing any inaccurate particulars. Apart from the fact that the assessee did not notice the error, it was not even noticed by the Assessing Officer who framed the assessment order. All that had happened was that through a bona fide and inadvertent error, the assessee while submitting its return, failed to add the provision for gratuity to its total income. The assessee should have been careful but the absence of due care, in a case such as the present, did not mean that the assessee was guilty of either furnishing inaccurate particulars or attempting to conceal its income. On the peculiar facts of this case, the imposition of penalty on the assessee was not justified.”
9 Suresh Prasad Aggarwal 12. In the present case also it was an inadvertent error that the assessee while filing the return of income, claimed the exemption u/s 10(38) of the Act on the amount on which STT was paid and also on the amount was STT was not paid. So, it does not mean that the assessee was guilty of either furnishing of inaccurate particulars of income or concealing its income because all the information were provided in the return itself and even the amount was added when the mistake of the accountant came to the knowledge of the assessee. Therefore, by keeping in view the ratio laid down by the Hon’ble Supreme Court in the aforesaid referred to case, the penalty levied by the AO and sustained by the ld. CIT(A) u/s 271(1)(c) of the Act was not justified. Accordingly, the same is deleted.
In the result, appeal of the assessee is allowed. (Order Pronounced in the Court on 14/10/2016)