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Income Tax Appellate Tribunal, DELHI BENCH: ‘B’ NEW DELHI
Before: SHRI SUDHANSHU SRIVASTAVA & SHRI O.P. KANT
ORDER
PER SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER:
The present appeal has been preferred by the assessee against the order dated 26.02.2015 passed by the ld. CIT(A)-XIV, New Delhi for A.Y. 2006-07, wherein he has confirmed the penalty of Rs. 3,30,401/-, imposed under section 271(1)(c) of the Income Tax Act, 1961 (hereinafter called ‘the Act’).
The brief facts of the case are that during the assessment proceedings, the assessee had stated to have received an amount of Rs. 10,55,497/- from five of his co-tenants on account of electricity usage charges to be paid to New Delhi Power Limited (NDPL) and this amount was shown in the books as deposited in form of cash. The AO was of the opinion that the claim of the assessee regarding the nature of cash deposits was not proved and he accordingly made an addition u/s 68 of the Act in the quantum proceedings. Subsequently, penalty proceedings u/s 271(1)(c) were initiated and a penalty of Rs. 3,30,401/-, was imposed which was confirmed by the Ld. CIT(A). Now, the assessee has approached the Tribunal assailing the confirmation of the penalty. The grounds of appeal read as under:
1. “That the CIT (A) was unjustified in confirming the penalty order u/s 271(1)(c) of the I.T. Act, 1961 passed by the Assessing Officer.
2. That the Assessing Officer as well as CIT (A) had not properly appreciated the facts and circumstances of the case both on facts as well as on law. 3. That there are no findings in the assessment as well as penalty order that any details supplied by the assessee in his return are incorrect or erroneous are false thus the imposition of penalty u/s 271(1)(c) is unjustified and arbitrary. 4. That the penalty u/s 271(1)(c) had been wrongly imposed during the pendency of quantum appeal pending before ITAT, New Delhi. 5. That the imposition of penalty u/s 271(1)(c) during the pendency of quantum appeal pending before ITAT, New Delhi is unjustified, un- lawful and illegal. 6. That the penalty order passed by the Assessing Officer is beyond the limitation period as provided u/s 274 of the I.T. Act, 1961 thus illegal and bad in law liable to be quashed.
7. That a penalty u/s 271(1)(c) is not simply as a consequence of an addition being made to the income of the assessee unless it is established that there is concealment of income or furnishing of inaccurate particulars.
8. That in the present case the assessee has neither concealed the particulars of his income nor furnished in accurate particulars of such income thus no penalty u/s 271(1)(c) is leviable. 9. That the appellant craves its plea to add, amend or alter any of the grounds of appeal before the hearing or at the time of hearing. It is prayed that the penalty of Rs. 3,30,401/- imposed u/s 271(1)(c ) may kindly be deleted.”
The Ld. AR submitted that the penalty was imposed during the pendency of the quantum appeal before the ITAT and as such the imposition of penalty was premature in terms of section 275(1)(a) and hence, illegal and without jurisdiction. The Ld. AR relied on the decision of the Hon’ble High Court of Bombay in R.B. Shreeram Durgaprasad vs. CIT Nagpur 237 Taxman 189. On merits, the Ld. AR submitted a copy of order of the ITAT in the quantum appeal in which was pronounced on 29.12.2015 and submitted that out of the total disallowance/addition of Rs. 10,55,497/-, ITAT has deleted an amount of Rs. 6,59,225/- and has confirmed only Rs. 3,96,272/-. The Ld. AR also relied on the following case laws for the preposition that the penalty was otherwise also not leviable – CIT vs. Shahbad Cooperative Sugar Mills Ltd. 322 ITR 73 (P&H), CIT vs. Reliance Petro Products P. Ltd. 322 ITR 158 (SC), Karan Raghav Exports P.
Ltd. vs. CIT 349 ITR 112 (Delhi High Court), CIT vs. J.K. Synthetics Ltd. 219 ITR 267 (Del.), CIT vs. Mata Pd. 278 ITR 354 (All), VIP Industries vs. ACIT 21 DTR 153 (Mum.) and Kanbay Software India P. Ltd. vs. DCIT 31 SOT (Pune). The Ld. AR submitted that the penalty imposed deserves to be cancelled.
The Ld. DR submitted that the quantum of penalty imposed should be modified in terms of the order of the ITAT in the quantum appeal. He however, submitted that the penalty should be sustained on the quantum which has been confirmed by the ITAT and he relied on the order of the Ld. CIT (A) as well as the findings of the AO in the penalty order.
We have heard the rival submissions and perused the material on record.
The Hon’ble Supreme Court, in the case of Hindustan Steel Ltd. v. State of Orissa
83 ITR 26, had laid down the position of law by holding that the Assessing Officer is not bound to levy penalty automatically simply because the quantum addition has been sustained. Also in case of CIT v. Khoday Eswara (83 ITR 369) (SC), incidentally reported in same ITR Volume, it is held that penalty cannot be levied solely on basis of reasons given in original order of assessment. The Hon’ble
Supreme Court has recently reiterated the law in case of Dilip N. Shroff v. Jt. CIT
[2007] 291 ITR 519 by holding in Para 62 that finding in assessment proceedings cannot automatically be adopted in penalty proceedings and the authorities have to consider the matter afresh from different angle. The statute requires a satisfaction on the part of the Assessing Officer. He is required to arrive at a satisfaction so as to show that there is primary evidence to establish that the assessee had concealed the amount or furnished inaccurate particulars and this onus is to be discharged by the Department. While considering whether the assessee has been able to discharge his burden the Assessing Officer should not begin with the presumption that he is guilty. Since the burden of proof in penalty proceedings varies from that in the assessment proceedings, a finding in the assessment proceedings that a particular receipt is income cannot automatically be adopted, though a finding in the assessment proceedings constitutes good evidence in the penalty proceedings. In the penalty proceedings the authorities must consider the matter afresh as the question has to be considered from a different angle. It is important to keep in mind the fundamental legal proposition that Assessment proceedings are not conclusive.
Assessment proceedings and penalty proceedings are separate and distinct. Findings in Assessment proceedings don’t operate as res judicata in penalty proceedings. For this proposition reliance is placed on the decision in CIT vs. Dharamchand L. Shah
(1993) 204 ITR 462 (Bom). In Vijay Power Generators Ltd vs. ITO (2008)6 DTR
64 (Del) it was held that “It is well settled that though they constitute good evidence do not constitute conclusive evidence in penalty proceedings.” During penalty proceedings, there has to be reappraisal of the very same material on the basis of which the addition was made and if further material is adduced by the assessee in the course of the penalty proceedings, it is all the more necessary that such further material should also be examined in an attempt to ascertain whether the assessee concealed his income or furnished inaccurate particulars. Thus, under penalty proceedings assessee can discharge his burden by relying on the same material on the basis of which assessment is made by contending that all necessary disclosures were made and that on the basis of material disclosed there cannot be a case of concealment of income or furnishing inaccurate particulars of income. Further if there is any material or additional evidence which was not produced during assessment proceedings same can be produced in penalty proceedings as both assessment and penalty proceedings are distinct and separate. In CIT vs. M/s
Sidhartha Enterprises (2009) 184 Taxman 460 (P & H)(HC) it was held that the judgment in Dharmendra Textile cannot be read as laying down that in every case where particulars of income are inaccurate, penalty must follow. Even so, the concept of penalty has not undergone change by virtue of the said judgment. Penalty is imposed only when there is some element of deliberate default.
At this juncture it may be apposite to refer to the decision of the Hon’ble Supreme Court in the case of CIT v. Reliance Petroproducts (P.) Ltd. [2010] 322 ITR 158/189 Taxman 322, wherein the Hon’ble Apex Court, while interpreting the provisions of section 271(1)(c) of the Act, has held that a glance at the said provision would suggest 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 of his income. In the facts of that case, the court found that it was not a case of concealment of the particulars of the income, nor was it the case of the revenue either. However, the counsel for the revenue suggested that by making an incorrect claim for the expenditure on interest, the assessee had furnished inaccurate particulars of income. The court observed that it had to only see as to whether in that case, as a matter of fact, the assessee had given inaccurate particulars. The court noted that as per Law Lexicon, the meaning of the word "particular" is a detail or details (in the plural sense); the details of a claim, or the separate items of an account. Therefore, the word "particular" used in section 271(1)(c) would embrace the meaning of the details of the claim made. The court further observed that 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." The court observed that reading the words "inaccurate" and "particulars" 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. The court noted that it was an admitted position that no information given in the return was found to be incorrect or inaccurate. It was not as if any statement made or any detail supplied was found to be factually incorrect and accordingly, held that, prima facie, the assessee could not be held guilty of furnishing inaccurate particulars. The court repelled the contention raised by the counsel for the revenue that "submitting an incorrect claim in law for the expenditure on interest would amount to giving inaccurate particulars of such income". The court held that in order to expose the assessee to the penalty unless the case is strictly covered by the provision, the penalty provision cannot be invoked. By any stretch of imagination, making an incorrect claim in law cannot tantamount to furnishing inaccurate particulars. Therefore, it is obvious that it must be shown that the conditions under section 271(1)(c) must exist before the penalty is imposed.
The court further observed that there can be no dispute that everything would depend upon the return filed because that is the only document, where the assessee can furnish the particulars of his income.
Reverting to the facts of the present case, the penalty order is woefully silent on the issue as to how this satisfaction of concealment/furnishing of inaccurate particulars was arrived at. The Ld. CIT (A) has also not examined the issue in detail but has simply confirmed the penalty by relying on the findings of the AO. We are of the considered opinion that this kind of finding might be very relevant in quantum proceedings but will not suffice in penalty proceedings. With regard to the Page 8 of 11 Chander Pal Aggarwal provisions of section 271(1)(c ) of the Act pertaining to penalty, the Hon’ble Apex Court has authoritatively laid down that making of a claim by the assessee which is not sustainable will not tantamount to furnishing inaccurate particulars. In CIT vs. Reliance Petroproducts Pvt. Ltd. 322 ITR 158 (SC), the Hon’ble Apex Court has held as follows:
“A glance at this provision would suggest that in order to be covered, there has to be concealment of particulars of the income of the assessee. Secondly, the assessee must have furnished inaccurate particulars of his income. The present is not a case of concealment of income. That is not the case of the Revenue either. However, the Ld. Counsel for the revenue suggested that by making incorrect claim for the expenditure on interest, the assessee has furnished inaccurate particulars of income. As per Law Lexicon, the meaning of the word "particular" is a detail or details (in plural sense); the details of a claim, or the separate items of an account. Therefore, the word "particulars" used in the section 271 (1) (c) would embrace the meaning of the details of the claim made. It is an admitted position in the present case that no information given in the return was found to be incorrect or inaccurate. It is not as if any statement made or any detail supplied was found to be factually incorrect. Hence, at least, prima facie, the assessee cannot be held guilty of furnishing inaccurate particulars. The learned counsel argued that "submitting an incorrect claim in law for the expenditure on interest would amount to giving inaccurate particulars of such income." We do not think that such can be the interpretation of the concerned words.
The words are plain and simple. In order to expose the assessee to the penalty unless the case is strictly covered by the provision, the penalty provision cannot be invoked. By any stretch of imagination, making an incorrect claim in law cannot tantamount to furnishing inaccurate particulars.”
Although both the lower authorities have held that the assessee has furnished inaccurate particulars/concealed income, on a consideration on the facts, such a view is not tenable in the present appeal. It is also noteworthy that in the quantum proceedings, out of the total addition of Rs. 10,55,497/-, ITAT has deleted an amount of Rs. 6,59,225/- and the balance of Rs. 3,96,272/- was confirmed on the ground that the statements of these tenants were not recorded. Therefore,
respectfully following the judgment of the Hon’ble Apex court in the case of Reliance Petroproducts Pvt. Ltd. (Supra) we set aside the impugned order and direct the AO to delete the entire penalty.
In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 29/07/2016