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Income Tax Appellate Tribunal, CHANDIGARH BENCH “B”, CHANDIGARH
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.
In the present appeal Assessee has raised the following grounds of
appeal:
That the order of the Ld. CIT(A) is against the law and facts of the case. 2. That the Ld. CIT(A), has grossly erred in upholding the penalty levied by the AO which itself has been levied on the basis of illegal show cause notice issued under section 274 r.w.s 271(1)(c) as it did not specify on which limb of section 271(1)(c) of the Act, the penalty proceedings had been initiated, i.e., whether the concealment of particulars of income or furnishing of inaccurate particulars of income. 3. The Ld. CIT(A), is not justified in upholding the penalty of Rs. 1,80,600/- which itself, is on issue of capital expenditure, claimed as revenue expenditure and does not tantamount to furnishing of inaccurate particulars of income.
Ground No. 1 is general in nature.
Ground No. 2 is not pressed.
Brief facts of the case are that the assessee company which is engaged
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).
Before us Ld. AR argued that the disallowance u/s 37(1) of the Income Tax
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)
Ld. DR on the other hand argued that when the addition made against
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.).
We have heard Ld. Representatives of both the parties and we find
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.
In the result, appeal of the Assessee is allowed.
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 :
अपीलाथ�/ The Appellant 2. ��यथ�/ The Respondent 3. आयकर आयु�त/ CIT 4. आयकर आयु�त (अपील)/ The CIT(A) 5. �वभागीय ��त�न�ध, आयकर अपील�य आ�धकरण, च�डीगढ़/ DR, ITAT, CHANDIGARH 6. गाड� फाईल/ Guard File