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Income Tax Appellate Tribunal, “A” BENCH, MUMBAI
Before: HON’BLE S/SHRI JOGINDER SINGH (JM), & RAJESH KUMAR,(AM)
Per RAJESH KUMAR, Accountant Member:
This is an appeal by the assessee and is directed against the order of the Ld. CIT(A)-23, Mumbai dated 28.10.2014 pertaining to A.Y.2009-10.
The issue raised in grounds of appeal no.1 and 2 is against the confirmation of penalty levied under section 271(1) (c) of the Income Tax Act, 1961 (hereinafter referred to as the Act ) by the ld. CIT(A) as levied by the AO on the disallowance of Rs.8,83,883/- made under deeming provisions of section 94(7) of the Act.
Facts of the case are that the assessee filed his return of income on 30.9.2009 declaring total loss of Rs.1,71,87,067/-. The case of the assessee was selected for scrutiny and the assessment was framed vide order dated 12.12.2011 passed under section 143(3) of the Act at a total loss of Rs.1,60,54,886/- by making two disallowances. One of Rs.8,83,883/- being dividend on mutual funds which was claimed as exempt u/s 10(35) of the Act by the assessee treating the same as deemed interest under deeming provisions of section 94(7) of the Act and second Rs.1,78,227/- which relates to cost of acquisition of Birla Sunlife Income Plus. The penalty proceedings under section 271(1)(c) of the Act were initiated and show cause notice dated 12.11.2011 issued. The assessee replied that since the assessee has fully and truly made disclosure of all particulars qua the said items in the return of income and were so treated under the bonafide belief and also that during the course of assessment proceedings on his own offered the same for addition and accordingly the loss was reduced by the AO. The AO not finding any substance in the submissions of the assessee imposed a penalty of Rs.3,28,192/- u/s 271(1)( c) of the Act vide order dated 27.6.2012 on the ground that the assessee did not disclose full particulars of income. Aggrieved by the order of the AO, the assessee preferred an appeal before the First Appellate Authority (FAA) who deleted the penalty on the disallowance of Rs.1,78,227/- while upholding the penalty on second item of disallowance of Rs.8,83,883/-and thus partly allowed the appeal of the assessee by relying on the decision of the Hon’ble Supreme Court in the case of Reliance Petroproduct Pvt Ltd reported in 322 ITR 158 (SC) on the ground that the explanation of the assessee was found to be true and bonafide.
We have carefully considered the rival submissions and perused the material placed before us including the orders of authorities below. We find that penalty was imposed on two items, one of which was deleted by the ld. CIT(A) and second item of disallowance on which the penalty was upheld is in respect of short term capital loss of Rs.8,83,883/- in respect of Reliance Mutual Funds which was rejected by the AO during the course of assessment proceedings under the provisions of section 94(8) of the Act and correspondingly the income of the assessee went up. Perusal of these facts clearly reveals that the assessee has fully disclosed all the particulars of loss qua the said short term capital loss of Rs.8,83,883/- from mutual fund in the return of income and thus has not furnished inaccurate particulars qua the said Short term loss. The ld. AR vehemently submitted that the penalty u/s 271(1)9c) of the Act was not imposable in respect of Rs.8,83,883/- being short term capital loss on mutual funds, the full particulars of which stands disclosed in the return of income filed by the assessee. Ld AR submitted that this has happened due to bonafide and inadvertent mistake committed by the accountant of the appellant. The ld. AR strongly relied on the decision of the co-ordinate bench of the Tribunal in the case of Janus Investment Fund V/s Dy. Director of Income Tax (International Taxation) in Assessment Year: 2007 -08, dated 4.7.2012, which as per the ld.AR directly covers the case of the assessee. We also note that the Short term capital loss on the mutual funds was disallowed by applying deeming provisions of section 94(8) of the Act. The ld. AR submitted that in view of the bonafide error committed by the accountant and the facts being fully disclosed, the penalty was wrongly upheld by the ld. CIT(A) and deserved to be deleted. On the contrary, the ld. DR relied on the orders of authorities below.
We find that in the case of Reliance Petro product Pvt Ltd reported (supra), in which it has been held that in order to expose to the vigour of penal provision, the case is required to be strictly covered by the provisions of section 271(1)(c) of the Act. It was further held that wrong claim made by the assessee which is not accepted to the revenue cannot be subjected to the provisions of section 271(21)( c ) of the Act merely on the ground that the claim of the assessee was wrong. In this case, the assessee had made genuine claim which was found to be wrong by applying deeming provisions of section 94(8) of the Act and thus the penalty was imposed by the AO and also sustained by the ld. CIT(A). In the case of Zoom Communications P Ltd (2010) 191 Taxmann 179, relied upon by the ld CIT(A), the Hon’ble High Court has held that where the assessee makes a claim which is not only incorrect in law but also wholly without any basis and explanations furnished by him are not bonafide for making such claim. In that case, the penalty would be levied under section 271(1)(c) of the Act. In our opinion the case of the assessee is squarely covered by the ratio laid down in the case of Reliance Petro Products Ltd (supra). The facts of the case in Zoom Communications P Ltd (supra) are distinguishable from that of the assessee’s case, as in the case of assessee wrong claim was under bonafide belief of the accountant which was disallowed under the deeming provisions of section 94(8) of the Act and therefore, the ld.CIT(A) has wrongly relied on the decision in order to uphold the order of the AO. In view of the above discussion and legal position, we set aside the order of the ld. CIT(A) and direct the AO to delete the penalty.
In the result, the appeal of the assessee is allowed. The above order was pronounced in the open court on 6th Oct, 2016. घोषणध खुरे न्मधमधरम भें ददनधंकः 6th Oct,2016 को की गई । Sd sd (JOGINDER SINGH) ( RAJESH KUMAR) Judicial Member Accountant Member भुंफई Mumbai: 6th Oct, 2016. व.नन.स./ SRL , Sr. PS आदेश की प्रतिलऱपप अग्रेपिि/Copy of the Order forwarded to : अऩीरधथी / The Appellant 1. प्रत्मथी / The Respondent. 2. आमकय आमुक्त(अऩीर) / The CIT(A)- concerned 3. आमकय आमुक्त / CIT concerned 4.