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Income Tax Appellate Tribunal, DELHI BENCH: ‘E’ NEW DELHI
Before: SH. H.S. SIDHU & SH. O.P. KANT
ORDER PER O.P. KANT, A.M.: This appeal by the assessee is directed against order dated 21/01/2013 of learned Commissioner of Income-tax (Appeals) for assessment year 2001-02, wherein he has sustained the penalty levied under section 271(1)(c) of the Income-tax Act, 1961 by the Assessing Officer. The grounds of appeal
raised by the assessee are as under: i. The provisions of section 271(1)(C) read with section 275 are not applicable at all. ii. The CIT(Appeal) has erred in confirming the penalty levied by the A.O. iii. The assessee has neither concealed nor filed inaccurate particulars of its income, thus the provisions of Section 271(1)(c) are not applicable at all. iv. Bonafide claim made, disallowed in assessment proceeding does not attract penalty at all. v. The assessee loss being higher than the returned loss there is no concealment of income thus levy of penalty is wrong. vi. The Commissioner of Income Tax (Appeals) has erred in holding that the appellant had inflated the interest liability. vii. The Commissioner of Income Tax Commissioner of Income Tax (Appeals) has erred in holding that appellant sought to evade tax by making wrong claims. viii. The aforesaid grounds of appeal are independent and without prejudice to one another. The appellant craves leave to add, amend, alter, or vary any of the aforesaid grounds of appeal before or at the time of hearing.
2. The facts in brief are that the assessee filed return of income on 29/10/2001 declaring total loss of Rs.1,02,604/-. The case was selected for scrutiny and the assessment was completed under section 143(3) of the Income tax-Act, 1961 (in short “the Act”) on 30/01/2004 at total loss of Rs.23,59,37,001/-. In the assessment, the Assessing Officer made addition/disallowances on account of claim of interest to the bank of Rs.19,71,86,237/-, loss on machinery of Rs.3,29,27,354/-, bad debts of Rs. 6,20,000/- disallowance under section 28 of Rs.1,22,67,221/- and loss of stock and machinery Rs.14,35,85,117/-. Further, the Assessing Officer noted that, at the time of filing of return, the assessee written back interest of Rs.78,17,48,715/- as income under section 41(1) of the Act. The assessee requested that this income should be excluded as remission is taxable only, if the allowance or deduction in respect of such amount was allowed in earlier years. Since the assessee was not allowed deduction of interest, no profit was taxable under section 41(1) of the Act. After considering the facts of the case for the year under consideration, the Assessing Officer held that Rs.60,66,68,263/- cannot be considered as income under section 41(1) of the Act and accordingly to that extent the loss of the assessee was enhanced. In view of the facts, though the Assessing Officer made additions/disallowances, the withdrawal of the income offered under section 41(1) of the Act at the time of filing return, resulted in enhancement of the loss, as compared to the returned loss. The case reached to the Tribunal for adjudication. The Tribunal set aside the orders of the lower authorities and directed the Assessing Officer to re- assess the income. In the re-assessment order, the Assessing Officer retained the addition already made by the earlier Assessing Officer and made further addition of Rs. 1,02,85,876/- and initiated penalty proceedings under section 271(1)(C) of the Act. Before the Assessing Officer, the assessee pleaded that assessed loss was higher than the loss as returned, thus, it was evident that assessee company did not make any attempt to evade tax, which is a prerequisite for levy of penalty under 271(1)(c) of the Act. Further, the assessee submitted that penalty under section 271(1)(c) is leviable only if the assessee has sought to evade tax by filing inaccurate particulars of income or concealed the income and in the facts and circumstances of the assessee, no penalty was leviable. In view of the Assessing Officer, the assessee furnished inaccurate particulars of income as it failed to offer a correct explanation in respect of facts material to the computation of total taxable income and, therefore, he levied penalty under section 271(1)(c) of the Act on 30/06/2010 at an amount slightly higher than the amount of the tax sought to be evaded, which was computed at Rs. 15,69,63,000/-. Before the learned Commissioner of Income-tax (Appeals), the assessee pleaded that all the facts in respect of disallowance/addition were duly disclosed in the return of income or the financial statement appended to the return of income and additions have been made due to difference of opinion or estimate basis. The assessee also pleaded that the tax sought to be evaded as per Explanation (iv) of section 271(1)(c) of the Act would be the difference between the tax due on income assessed and that the tax that would have been chargeable at such total income been reduced by the amount of concealed income and thus the penalty is levied on the basis of tax on the difference between the income assessed and income returned. The learned Commissioner of Income-tax (Appeals), however, did not accept the contention of the assessee and upheld the penalty levied by the Assessing Officer. Aggrieved, the assessee is in appeal before the Tribunal raising the grounds as reproduced above.
The learned counsel of the assessee filed paper book containing pages 1 to 127 and submitted that as against the Rs.1,02,604/-, the income was finally assessed at a loss of Rs.22,56,51,125/- in the assessment order under section 254/143(3) of the Act dated 24/12/2009 and thus the assessed loss being higher than the returned loss, there was no tax sought to be evaded by the assessee in terms of Explanation-IV to section 271(1)(c) of the Act and hence no penalty under section 271(1)(c) of the Act was leviable in the case of the assessee. Further, the learned counsel submitted that assessee has disclosed all the material facts in the return of income in respect of the issue on which additions/disallowances have been made by the Assessing Officer and the explanation furnished by the assessee has not been found false. He further submitted that explanation furnished is bonafide. The learned counsel also submitted the circumstances under which return of income was filed. In view of above facts, the learned counsel requested that the penalty levied might be deleted.
The learned Senior Departmental Representative, on the other hand, relied on the findings of the lower authorities.
We have heard the rival submissions and perused the material on record including the order of the lower authorities. From the orders of the lower authorities, we find that the assessee filed return of income declaring loss, however, the Assessing Officer made certain additions/disallowances to the returned loss and simultaneously also withdrawn the income offered by the assessee under section 41(1) of the Act. The Assessing Officer levied penalty in respect of additions/disallowances made in the assessment order. The Assessing Officer has made following additions/disallowances:
1.
Interest due to bank Rs. 19,71,86,237/- 2. interest disallowances on loan from IAFBF Rs. 36,00,000/- 3. loss on machinery Rs. 3,29,27,354/- 4. bad debts Rs. 6,20,000/- 5. loss of a stock and machinery Rs. 14,35,85,117/- 6. expenses disallowed estimates basis Rs. 1,02,85,876/- 6. Penalty in respect of expenses of Rs.1,02,85,876/- disallowed on estimate basis was deleted by the learned Commissioner of Income-tax (Appeals), hence, the assessee is in appeal before us in respect of the penalty levied on balance additions/disallowances.
7. In respect of addition of Rs.19,71,86,237/- towards interest due to banks, we find that the assessee claimed interest expenses of Rs.25,48,90,292/- as the interest claimed by the banks before the Debt Recovery Tribunal, however, the Assessing Officer allowed interest of Rs.5,76,30,452/- calculated on the simple interest basis. The dispute between the authorities and the assessee is whether the quantification of the interest liability took place during the year or not, but the assessee made entire disclosure in respect of its claim of expenditure and no false or incorrect particulars have been filed by the assessee. The assessee has also filed explanation for the claim made by it and which is not a malafide. Similarly, the assessee furnished all particulars in respect of claim of interest of Rs. 36 lacs related to loan of Rs. 2 crores from the Indian Air Force Benevolent Fund (IAFBF), however, the interest was disallowed due to dispute of the quantification of the amount in the year. In respect of the claim of loss on the sale of the factory shade of Rs.3,29,27,354/-, we find that it was duly disclosed and appropriate note was given to the notes to the account to balance sheet [note 16 para (a) to (d)]. Similarly, as regard to the loss of Rs.14,35,85,117/- on account of stock and machinery, the assessee provided complete disclosure in the notes to account to the balance sheet (Schedules 16 - note No. 6) and on the basis of the details/explanations provided during assessment proceeding, the Assessing Officer made disallowance. The Assessing Officer has not unearthed any new fact from his independent sources which could lead to furnishing of inaccurate particulars by the assessee. Similarly, all details of bad debt of Rs.6,20,000/- were available on the record. Further, It is evident from the fact of the case mentioned in the submissions before the Assessing Officer in proceedings under section 254/143 (3) of the Act that during the period the director of the company was under arrest and the company did not have any qualified persons to compile the return as per law and, therefore, even the interest written back credited to the profit and loss account was not withdrawn in spite of the clear mandate of section 41 (1) of the Act that such written back was not taxable. We find that the assessee has disclosed all facts regarding interest and other claims in the audited accounts and complete disclosure was made in notes to accounts and full explanation was furnished during the assessment proceedings and the explanation furnished are found to be bonafide.
We find that in the case of Commissioner of Income Tax, Ahmedabad Vs. Reliance Petroproducts (P) Ltd, 322 ITR 158 (SC), Apex Court has held that when the detail supplied by assessee are not found to be incorrect or erroneous or false there were no question of inviting penalty under section 271(1)(c) of the Act. The relevant findings of the Hon’ble Supreme Court are reproduced as under:
“9. We are not concerned in the present case with the mens rea. However, we have to only see as to whether in this case, as a matter of fact, the assessee has given inaccurate particulars. In Webster's Dictionary, the word "inaccurate" has been defined as:- "not accurate, not exact or correct; not according to truth; erroneous; as an inaccurate statement, copy or transcript". We have already seen the meaning of the word "particulars" in the earlier part of this judgment. Reading the words in conjunction, they must mean the details supplied in the Return, which are not accurate, not exact or correct, not according to truth or erroneous. We must hasten to add here 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. A 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.
It was tried to be suggested that Section 14A of the Act specifically excluded the deductions in respect of the expenditure incurred by the assessee in relation to income which does not form part of the total income under the Act.
It was further pointed out that the dividends from the shares did not form the part of the total income. It was, therefore, reiterated before us that the Assessing Officer had correctly reached the conclusion that since the assessee had claimed excessive deductions knowing that they are incorrect; it amounted to concealment of income. It was tried to be argued that the falsehood in accounts can take either of the two forms; (i) an item of receipt may be suppressed fraudulently; (ii) an item of expenditure may be falsely (or in an exaggerated amount) claimed, and both types attempt to reduce the taxable income and, therefore, both types amount to concealment of particulars of one's income as well as furnishing of inaccurate particulars of income. We do not agree, as the assessee had furnished all the details of its expenditure as well as income in its Return, which details, in themselves, were not found to be inaccurate nor could be viewed as the concealment of income on its part. It was up to the authorities to accept its claim in the Return or not. Merely because the assessee had claimed the expenditure, which claim was not accepted or was not acceptable to the Revenue, that by itself would not, in our opinion, attract the penalty under Section 271(1)(c). If we accept the contention of the Revenue then in case of every Return where the claim made is not accepted by Assessing Officer for any reason, the assessee will invite penalty under Section 271(1)(c). That is clearly not the intendment of the Legislature.”
Thus, the Hon’ble Supreme Court has held that where the assessee has furnished all the details of its expenditure as well as income in its return, which in themselves were not found to be inaccurate, nor could be viewed as concealment of income on its part and merely because the assessee had claimed the expenditure, which has not been accepted by the Revenue cannot lead to levy of penalty under section 271(1)(c) of the Act.
10. In view of our discussion above, respectfully following the decision in the case of Reliance Petroproducts Private Limited (supra), we hold that no penalty under section 271(1)(c) of the Act is leviable in respect of additions/disallowances made in the case of the assessee, accordingly, we delete the penalty levied under section 271(1)(C) of the Act.
Since we have already held that there was no concealment of income or furnishing of inaccurate particulars of income in the case of the assessee, the other ground whether the tax sought to be evaded was nil in the case of the assessee is rendered only academic and, therefore, the same is not required to be adjudicated upon. 12. In the result, the appeal of the assessee is allowed. The decision is pronounced in the open court on 20th September, 2016.