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Income Tax Appellate Tribunal, DELHI BENCH: ‘G’ NEW DELHI
Before: SHRI H. S. SIDHU & SHRI O.P. KANT
Date of Hearing : 29/06/2016 Date of Order : 08/07/2016
ORDER PER H.S. SIDHU, JM This appeal is filed by the Assessee against the Order dated 05.9.2012 passed by the Ld. CIT(A)-XI, New Delhi relating to Assessment Year 2007-08 on the following grounds:-
1. Learned Commissioner of Income Tax (Appeal) is not justified in law and facts and circumstances of the case in confirming penalty of Rs. 54,615/- without taking into account submissions made with documentary evidence
AO and the copy of the same was also before CIT(A).
Ld. CIT(A) is grossly erred in confirming the addition even without referring the document furnished before her and stating that “The appellant had not complied with directions of the AO and had not submitted the various details called for by the AO even during proceedings before the CIT(A). The averments made by CIT(A) is bad being all information are available on the file of AO as well CIT(A).
3. Appellant has every right to make, add, delete, modify or alter any grounds of appeal at the time of hearing.
2. The brief facts of the case are that the assessee filed the return declaring total income of Rs. 13,17,150/- on 8.11.2007. The assessment was completed u/s. 144 vide order dated 30.10.2009 at an income of Rs. 1,66,58,750/- making addition of Rs. 1,37,92,738/- as unaccounted sale consideration and disallowing Rs. 60,000/- on a/c of rebate and discounts and Rs. 1,02,255/- on account of freight and octroi. Penalty proceedings u/s. 271(1)(c) were also initiated in the assessment order itself. But due to the pending appellate proceedings, the penalty proceedings were kept in abeyance by the AO. The order of ITAT was received and therefore, a show cause notice was issued and served upon the assessee for completing the penalty proceedings. Aggrieved with the order of the AO on quantum addition the assessee had gone in 2
Ld. CIT(A), whereby the disallowance of Rs.
60,000/- on a/c of rebate discounts and Rs. 1,02,255/- on account of freight and octroi were confirmed and addition of Rs. 1,37,92,738/- as unaccounted sale consideration was deleted. The assessee went in further appeal before the ITAT on the above disallowance and the ITAT dismissed the appeal of the assessee. In response to show cause notice u/s. 271(1)(c) dated 4.8.2011, the assessee filed a detailed reply vide letter dated 16.8.2011 through its Counsel. The assessee submitted that “it has not made any concealment or furnished inaccurate particulars”. Only addition has been confirmed by the CIT(A) is not lead to concealment and on this basis no penalty u/s. 271(1)(c) can be attracted. Only on account of rejection made by the AO no penalty can be levied. No penalty can be levied if the claim of the assessee for deduction has been rejected. The AO considered the submissions of the assesee and observed that the same are not found acceptable. AO held that the assessee was in full knowledge of the claims made by him with regard to furnishing inaccurate particulars of income. Therefore, a penalty of Rs. 54,615/- was levied u/s. 271(1)(c) of the Income Tax Act, 1961 vide order dated 29.8.2011.
Against the above Penalty Order dated 29.8.2011 passed by the Assessing Officer, assessee appealed before the Ld. First
Appellate Authority, who vide impugned order dated 05.9.2012 dismissed the appeal of the assessee.
Against the above order of the Ld. CIT(A) dated 5.9.2012, assessee is in appeal before the Tribunal.
At the time of hearing, Ld. Counsel of the assessee has submitted that in response to show cause notice u/s. 271(1)(c) dated 4.8.2011, the assessee filed a detailed reply vide letter dated 16.8.2011 wherein he stated that it has not made any concealment or furnished inaccurate particulars. It was further stated that only addition has been confirmed by the CIT(A) is not lead to concealment and on this basis no penalty u/s. 271(1)(c) can be attracted and further stated that only on account of rejection made by the AO no penalty can be levied. No penalty can be levied if the claim of the assessee for deduction has been rejected. He stated that no satisfaction for concealment was recorded by the AO and the case laws cited by the assessee in the reply has not been discussed at all. Therefore, the amount of Rs. 54,615/- does not attract any penalty. In support of his contention, he relied upon the decision of the Hon’ble Apex Court in the case of CIT vs. Reliance Petro Products 322 ITR 158 (SC) and requested that penalty in dispute may be deleted.
On the other hand, Ld. DR relied upon the order of the authorities below and requested that the Appeal of the Assessee may be dismissed.
We have heard both the parties and perused the records, especially the orders of the authorities below. We find that during the penalty proceedings, the AO held as under:-
“The detailed reply of the assessee has been considered and the submission of the assessee is not found acceptable. During the assessment proceedings. the assessee had stopped attending and submitting details as had been requested. The assessee had failed to substantiate its claims and provide documentary evidence. The assessee only submitted details long after the assessment had been completed. Also the assessee did not contest the findings of the assessment before the Hon'ble ITAT.
As per Explanation 1 to section 271(1)(c) of IT Act; where in respect of any facts material to the computation of the total income of any person under this Act,-
(A)such person falls to offer; an explanation or offers an explanation which is found by the Assessing Officer or the Commissioner (Appeals) or the Commissioner to be false, or (B)such person offers explanation which he is not able to substantiate and fails to prove that such explanation is bonafide and that all the facts relating to the same and material to the computation of his total inc e have been disclosed by him, then, the amount added or disallowed in computing the total-income of ch person as a result thereof shall for the purposes of clause
(C) of this sub-section, be deemed to represent the income in respect of which particulars have been concealed.
Thus in re case of the assessee since the assessee failed to offer an explanation it is held that the Explanation 1 to section 271(l)(c) of the Act is squarely attracted and the additions made during the course of assessment in c,pll1puting the income of the assessee shall be deemed to represent the income in respect of which particulars have been concealed.
It has been held by the courts that the revenue is not required to establish that the assessee had deliberately or with mala fide intentions furnished inaccurate particulars for the purpose of imposition of penalty u/s 271(1) of the Act Reliance in this regard is placed on the decision of Delhi High Court in the case of Gurbachan Lal (250 ITR 157) where the court held that this change bad been brought about by the insertion of Explanation 1 to section 271(1)(c) of IT Act and drew support from the Supreme Court decisions in this issue in the cases of CIT (Addl.) vs. Jeevan Lal Sab (1994) 205 ITR 244 and CIT vs. KR Sadayappan (1990) 185 ITR 49, 54. In a recent case, the Supreme Court, in the case of Union of India vs. Dharmendra Textile Processors (306 ITR 277), held that the object behind enactment of 6
271(1)(c) read with Explanations indicate that the said section has been enacted to provide for a remedy for loss of revenue and they create the element of strict liability on the assessee for concealment or for giving inaccurate particulars while filing return. The penalty under that provision is a civil liability. Wilful concealment is not a civil liability unlike the matter of prosecution under section 276C.
In view of the above, it is seen that the assessee was in full knowledge of the claims made by him with regard to furnishing inaccurate particulars of income. Further, the case laws cited by the assessee do not apply in this case as the facts of this case are different from the case laws. Therefore, it is clear that the Assessee has furnished inaccurate particulars of his income with a view to wilfully evade taxes. A penalty of Rs. 54,615/- is therefore imposed u/s. 271(1)(c) of the I.T.”
After perusing the finding of the AO made in his penalty order as well as finding in impugned order of the Ld. CIT(A), we are not in agreement with the finding of the Ld. CIT(A), because the mere fact that an addition is confirmed in quantum proceedings cannot be conclusive of the imposition of penalty. In this regard, we refer the decision of the Hon’ble Calcutta High Court in Durga Kamal Rice Mill vs. CIT (2004) 265 ITR 25 (Cal), wherein, it has been held that quantum proceedings are different from penalty proceedings. We further note that the Hon’ble Kerala High Court in CIT vs. P.K.
Narayanan (1999) 238 ITR 905 (Ker.), has held that despite the addition being confirmed by the Tribunal in quantum proceedings, the penalty can still be deleted by the Tribunal, if the facts justify.
We further find that AO observed that assessee furnished inaccurate particulars of its income and is liable for penalty u/s 271(1)(c), which did not establish that how the assessee has furnished inaccurate particulars of its income. In our view, as regards the furnishing of inaccurate particulars, no information given in the return was found to be incorrect or inaccurate. We further find that section 271(1)(c) postulates imposition of penalty for furnishing of inaccurate particulars and concealment of income.
In this regard, we draw our support from the decision of the Hon'ble CIT vs. Reliance Petroproducts Pvt. Ltd. (2010) 322 ITR-158 (SC) wherein, the Hon'ble Supreme Court has held that 'where there is no findings 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 u/sec. 271(1)(c) of the Act. A mere making a claim, which is not sustainable in law, by itself, will not amount of furnishing inaccurate particulars regarding the income of the assessee. Such claim made in the return cannot amount to furnishing a inaccurate particulars of income. As the assessee has 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 u/sec. 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 the Assessing Officer for any reason, the assessee will invite penalty u/sec. 271(1)(c). That is clearly not the intendment of the Legislature".
In the background of the aforesaid discussions and respectfully follow the precedent of the Hon’ble Supreme Court of India in the case of CIT vs. Reliance Petroproducts Pvt. Ltd. (2010)
322 ITR-158 (SC) (Supra), we are of the considered view that the assessee has not furnished inaccurate particulars of income and there are no findings of the Assessing Officer and the CIT (Appeals) that the details furnished by the assessee in his return are found to be inaccurate or erroneous or false. Under these circumstances, in our view the penalty in dispute is totally unwarranted and deserve to be deleted. Accordingly, we delete the penalty in dispute made u/s. 271(1)(c) of the I.T. Act and quashed the orders of the authorities below on the issue in dispute and allow the appeal filed by the assessee.
In the result, the appeal filed by the Assessee stands allowed.
Order pronounced in the open court on 08/07/2016.