M/S COLOUR COTTEX PVT. LTD.,LUDHIANA vs. ITO, W-5(2), LUDHIANA

आदेश/Order

PER DR. B.R.R. KUMAR, A.M

The present appeal has been filed by the Assessee against the order of

the Ld. CIT(A)-2, Ludhiana dt. 13/10/2017.

appeal:

in the business of manufacturing & Export of Readymade Garments has filed return of income for the year under consideration on 01.12.2014 declaring an

income of Rs.28,08,270/-. The assessment was completed by the Assessing Officer vide order under section 143(3) of the Act dated 08.11.2016 at an assessed income of Rs. 36,77,200/- as against returned income of Rs.28,08,270/-.

While completing the assessment in this case, the Assessing Officer has made

addition on account of disallowance of ROC Expenses of Rs.6,02,000/-the to the returned income of the assessee company. Penalty proceedings under section 271(1)(c) of the Act for furnishing inaccurate particulars of income to the extent

of income of Rs. 6,02,000/- represented by above mentioned addition were also

initiated by the Assessing Officer against the assessee company and levied

penalty of Rs. 1,80,600/-upon the assessee u/s 271(1)(c) for furnishing inaccurate

particulars of income to the extent of Rs.6,02,000/- vide order dated 25.05.2017.

The levy of penalty of Rs. 1,80,600/- was upheld by the Ld. CIT(A).

Act has been made by invoking Hon’ble Apex Court judgment in the case of M/S Punjab State Industrial Corn Ltd vs CIT 225 ITR 772. In order to attract penalty

provisions of 271(1)(c), there has to be concealment of income or furnishing of

inaccurate particular of income by the assessee. In the instant assessee claimed

deduction on account of expenditure incurred to increase in authorized share

capital of the company for the purpose of infusion of more capital for business

expansion. No information pertaining to this expenditure was found to be

incorrect or inaccurate particulars, merely because the assessee claimed

deduction which has not been accepted by the revenue, penalty provisions u/s

271(1)( c) of income tax act,1961 cannot be initiated. He also relied on the

Supreme Court judgment in the case of CIT vs Reliance petro products ltd

(2010)230 CTR (SC) 320 wherein it has been held that merely because assessee

claimed deduction of expenditure which has not been accepted by the

revenue, penalty under section 271 (1) ( c) is not attracted, mere making of the

claim, which is not sustainable in the law, by itself will not amount to furnishing of

inaccurate particulars regarding the income of the assessee. If the contention of

the revenue is accepted then in case of every return where the claim made is

not accepted by AO for any reason, the assessee would attract penalty u/s 271

(1) ( c) .That is clearly not the intention of legislature it is further submitted that

the assessee is a honest tax payer and has been cooperating in assessment

proceeding for the last several years. He further relied on the judgment of

Hon'ble Punjab & Haryana high court in the case of CIT vs Ajaib Singh & co. (2002) 253 ITR 630 wherein it was observed that merely because of certain

expenses claimed by the assessee are disallowed by an authority. It cannot

mean that particulars furnished by the assessee were wrong. It was held that

mere disallowance of expenses per se cannot mean that assessee has furnished

in accurate particulars of its income. He relied on the submissions made before

the Ld. CIT(A). The assessee has relied on the decisions of the ITAT in the case of

IREDA in ITA No. 1183/Del/ 2010 dt. 29/05/2015, Jotindra Steel & Tube Ltd. in ITA

No. 6881/Del/2015 dt. 18/09/2017. The Tribunal deleted the addition on the

grounds that the assessee cannot be held to have furnished either wrong

particulars of income or has concealed particulars of income. It was held in the

case of Jotindra Steel & Tube Ltd. that the claim was a debatable issue. The

case of Brahmputra Consortium Ltd. the penalty was deleted on the grounds

that it was a bonafide mistake of claiming wrong depreciation and ROC fee.

And also in the case of Bhatia Corporation Pvt. Ltd. The Hon’ble High Court of

Delhi in the case of SAMTEL India Ltd. 96 Taxman 162 held that merely because

assessee has claimed expenditure which claim was not accepted that by itself

would not attract penalty under section 271(1)(c)

the assessee stands undisputed, the factum of furnishing of inaccurate

particulars stands proved and that penalty has been rightly imposed and relied

upon the judgment of Hon'ble Delhi High Court in case of CIT vs. Zoom

Communication Pvt. Ltd. 327 ITR 510 (Del.).

strength in the arguments of the Ld. AR that the claim of the assessee was a

bonafide claim and there was no malafide on the part of the assessee. The

various Courts have held that penalty under section 271(1(c) on the grounds of

furnishing of inaccurate particulars of income can be levied only when the item

has been suppressed or a bogus claim had been made. However when there is

no deliberate concealment or inaccurate fact was filed and penalty of

concealment by way of furnishing inaccurate particulars of income cannot be

levied. The explanation offered by the assessee is in consonance with the

provisions of the Income Tax Act, 1961 as per Explanation 1 of Section 271(1)(c),

hence the penalty is liable to be deleted.

Sd/- Sd/- संजय गग� डा. बी.आर.आर, कुमार, (SANJAY GARG ) ( DR. B.R.R. KUMAR, AM) �याय�क सद�य/ Judicial Member लेखा सद�य/ Accountant Member

आदेश क� ��त�ल�प अ�े�षत/ Copy of the order forwarded to :