ASST CIT 19(1), MUMBAI vs. GHANSHAM SEWAK RAMANI, MUMBAI

This present appeal is filed by the Revenue against the order of ld. Commissioner of Income-tax (Appeals)-27, Mumbai [for Short ‘CIT(A)’] dated 04.09.2014 for Assessment Year (AY)-2005-06, wherein the penalty levied u/s. 271(1)(c) of the Act was deleted.

Brief facts of the case are that the assessee an individual, filed return his return of income on 29.03.2006 for relevant assessment year declaring total income of Rs. 10,67,957/-. The Assessing Officer (AO) while framing the assessment noticed that assessee was a shareholder of more than 10% in 10 companies. And after verifying the loan advances received by assessee from the closely held companies disallowed Rs. 48,18,241/- u/s. 2(22)(e) of the Act. The assessee filed appeal against the quantum assessment before the ld. CIT(A) which was dismissed vide order dated 11.08.2009. Thereafter, the AO issued penalty notice on 09.03.2012, in the reply of the said notice, the assessee accepted that he was holding more than 10% beneficial interest in few of the companies and availed loan from such companies for his business purpose. It was further contended that the assessee was not convergent with the provision of I.T. Act. Thus, on the basis of admission, the AO levied the penalty u/s 271(1)(c) of Rs. 16,21,819/- @ 100% of the tax sought to be evaded. Aggrieved by the order of AO, the assessee filed the appeal before the ld. CIT(A), wherein the appeal of the assessee was allowed, resultantly penalty was deleted. Thus, being aggrieved of the order of ld. CIT(A), the Revenue has filed the present appeal before us 3. We have heard the ld. Departmental Representative (DR) for the Revenue and ld. Authorised Representative (AR) for assessee and gone through the order of authorities below. The Ld. DR for Revenue argued that ld. CIT(A) deleted the penalty on wrong premises and prayed that the order of ld. CIT(A) may be set-aside and that of the AO be restored. On the other hand, ld. AR for assessee argued that the case is squarely covered in his favour in assessee’s own case for AY 2007-08. It was further argued that a similar penalty was levied for Ay 2007-08 and the matter travelled up to this Tribunal and the Tribunal deleted the penalty vide order dated 30.10.2015.

We have considered the contention of the parties and seen that similar issues arose for AY 2007-08 and the AO levied the penalty u/s. 271(1)(c) which was deleted by the Tribunal holding as under: “6. After hearing both the parties and on perusal of impugned order and material on record, we find that at the assessment stage, the addition on account of deemed divided was made at Rs. 491,27,257/-. Such an addition was reduced to Rs. 71,54,961/- by the CIT(A) vide order dated 08.11.2010. Subsequntly, the assessee filed a rectification application u/s 154 pointing out certain mistakes, in response to which, the Ld. CIT(A) vide order dated 4th August, 2004 passed u/s 154, restricted the addition on account of deemed dividend at Rs. 23,36,720/- since balance dividend income has already been taxed in the hands of the assessee in the AY 2005-06. The assessee's explanation had been that, it has disclosed all the facts of the loans taken from various companies, however material fact relating to percentage of holding in certain companies, which has changed frequently from time to time could not be properly reported. Since assessee had disclosed all the loans and advances, then even if the addition has been confirmed by invoking the deeming provision, that too which has verified from assessment stage to appellate stage, we are of the opinion that it does not amount to furnishing of inaccurate particulars so as to attract penalty u/s 271(1)(c). Further, when the addition itself has been made under the deeming provisions and there is no failure on the part of the assessee to furnish all the particulars of income, then in our opinion, penalty cannot be levied Shri Ghansham J Shewakramani u/s 271(1)(c). Accordingly, penalty on account of deemed dividend stands deleted.” 2