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Income Tax Appellate Tribunal, DELHI BENCH “D”, NEW DELHI
Before: SHRI H.S. SIDHU & SHRI O.P. KANT
Date of Hearing : 23-05-2016 Date of Order : 03-06-2016
ORDER PER H.S. SIDHU : JM
The Revenue has filed the present appeal against the impugned order dated 30/9/2013 passed by the Ld. Commissioner of Income Tax (Appeals-VII), New Delhi on the following grounds:-
1. “Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) is justified
in deleting the penalty u/s. 271(1)(c) of Rs.
35,10,826/-.?
2. That the order of the Ld. CIT(A) is erroneous
and in not tenable on facts and in law.
3. That the appellant craves leave to add, alter
or amend any / all of the grounds of appeal before or during the course of the hearing of the appeal.”
The facts in brief are that assessment in this case was completed on 24.12.2010 u/s. 143(3) of the Income Tax Act, 1961 (hereinafter referred as Act) at the total income of Rs. 31,44,68,910/- as against the returned income of Rs. 29,64,74,120/-. The penalty proceedings were initiated u/s. 271(1)(c) of the Act in respect of the following additions made in the assessment order:-
i) Addition on account of disallowance of u/s. 14A read with Rule 8D Rs. 87,75,445/- ii) Addition on account of disallowance Rs. 67,31,919/- of prior period expenses 2.1 Against the assessment order, the assessee filed an appeal before the Ld. CIT(A) who vide his order dated 11.5.2011 has restricted the addition u/s 14A of Rs. 87,75,445/- to Rs. 35,97,079/- and deleted the balance addition of Rs. 51,78,366/-. The Ld. CIT(A), however, deleted the entire addition of Rs. 67,31,919/- made by the AO on account of disallowance of prior period expenses. Against the order of the Ld. CIT(A) Revenue went in Appeal before the ITAT. The ITAT vide its order dated 2.3.2012 passed in confirmed the order of the Ld. CIT(A) in respect of relief allowed the assessee on account of addition u/s. 14A but reversed the order of the ld. CIT(A) deleting the addition of Rs. 67,31,919/- made by the AO on account of disallowance of prior period expenses. As a result, the ITAT sustained the addition of Rs. 67,31,919/- made by the AO which was deleted by the Ld. CIT(A).
2.2 On receipt of the order of the ITAT dated 2.3.2012 a show cause notice dated 3.10.2012 u/s. 271(1)(c) of the Act was issued and served on the assessee, requiring the assessee to explain as to why an order imposing penalty u/s. 271(1)(c) may not be passed in the case of the assessee. In response thereto, the Assessee filed its written reply dated 10.10.2012 stating therein that the assessee has neither concealed particulars of income nor furnished inaccurate particulars of income to attract the penalty provisions of section 271(1)(c).
After considering the written submissions of the Ld. Counsel of the assessee, the AO observed that the reply filed by the assessee’s counsel is not acceptable as it is devoid of merit and held that assessee has deliberately furnished inaccurate particulars of its income and imposed the penalty of Rs. 35,10,826/- u/s 271(1)(c) of the Act vide his penalty order dated 30.10.2012.
Being aggrieved with the aforesaid penalty order, assessee appealed before the Ld. CIT(A), who vide impugned order dated 30.9.2013 has deleted the penalty in dispute and allowed the appeal of the Assessee.
Now the Revenue is aggrieved against the impugned order and filed the present appeal before the Tribunal.
At the time of hearing Ld. DR relied upon the order of the AO and reiterated the contentions raised by the Revenue in the grounds and requested that penalty in dispute imposed by the AO may be sustained.
On the contrary, during the hearing, Ld. Authorised Representative of the Assessee stated that ld. CIT(A) had deleted the penalty in dispute by following the various Hon’ble High Court orders and the Hon’ble Supreme Court of India order in the case of Reliance Petro Products (P) Ltd. vs. 322 ITR 158 (SC) and requested that the order of the Ld. CIT(A) may be upheld and Revenue’s Appeal may be dismissed.
We have heard the both parties and perused and considered the relevant records available with us especially the impugned order passed by the Ld. CIT(A). We find that Ld. First Appellate Authority has elaborately discussed the issue in dispute by considering the submissions of the assessee and adjudicated the issue in dispute at page nos. 6 to 7 in his impugned order. The relevant portion of the impugned order are reproduced as under:-
"I have perused the penalty Order, written submission, grounds of appeals out of the two additions under Section 14-A of Rs. 35,97,079 and the DDA misuse charges of Rs. 67,31,919/- the appellant company had paid taxes after IT A T order and did not prefer to go to Delhi High Court on further appeal, against the quantum order.
The year under appeal is A.Y: 2008-09. The provisions of section14-A/Rule-8D is applicable from AY: 2008-09 onwards, as interpreted by Mumbai High Court in case of M/s. Godrej Boyce Ltd. (IRT) (BHC) and Delhi High Court order in case of MAXOPP Investment Ltd. (2011-TIO -753-HC-DEL-IT). It is the period of confusion whether, the expenditure incurred in relation to exempt income will be disallowed or not. After the Delhi High Court's order, the matter is settled now. Considering these facts and as appellant had now. Considering these facts and as appellant had paid taxes on 14-A disallowance.
The second addition is on account of DDA misuse charges of Rs. 67,31,919/- which was held by Hon'ble ITAT as the penalty paid for infraction of law cannot be called commercial losses incurred by the assessee ad it is not a normal incident of the business. The appellant company had constructed the basement area under the shop allotted by DDA to it without permission from DDA. Thus the payment of misuse charges is for violation of master plan drawn for the development of area under the control of DDA. The ITAT held that misuse charges and interest on misuse charges paid to DDA are not deductible in computing the total income of assessee under Section 37(1) of I.T. Act.
The AR argued that these facts and figures are shown in the IT return filed by the appellant company at the initial stage. There is no concealment of facts by appellant company nor any inaccurate particulars filed. The AO had made addition out of these information filed in Tax Audit Report. The dispute with DDA lasted for 10 years. It is shown in Annexure-H in the Tax Audit Report in Form No. 3CD Section 44AB of the I.T. Act. The AR relied on the decision of the Hon’ble Supreme Court in the case of Reliance Petro Products (P) Ltd. 322 ITR 158 (SC).
Considering the observation of Hon’ble Supreme Court in above decision, I deemt it fit to conclude that the penalty under section 271(1)(c) is not correct and justified. The appellant had disclosed all facts in TAR and also paid all taxes after ITAT order. Hence, I delete the penalty under section 271(1)© of RS. 35,10,826/-.”
7.1 After going through the aforesaid finding of the Ld. CIT(A) on the issue in dispute as well as the orders of the Hon’ble Delhi High Court in the case of Maxopp Investment Ltd. (2011-TIOL-753-HC-Del-IT) and the Hon’ble Supreme Court of India decision in the case of Reliance Petro Products P Ltd. reported in 322 ITR 158 (SC), relied upon by the Ld. CIT(A) while deleting the penalty in dispute, we are of the view that the Ld. First Appellate Authority has passed a well reasoned order, because the assessee has paid taxes on the issue of disallowance u/s. 14A and assessee has not concealed the facts nor any inaccurate particulars filed. We find that the AO had made addition out of these information filed in the Tax Audit Report and the assessee has disclosed all the facts in the Tax Audit Report in Form No. 3CD under section 44AB of the I.T.
Act. Therefore, Ld. CIT(A) has rightly deleted the penalty in dispute, which does not need any interfere on our part. Hence, respectfully following the precedents of the Hon’ble Delhi High Court and the Hon’ble Supreme Court of India, as aforesaid, we uphold the order of the Ld. CIT(A) wherein the Ld. CIT(A) has deleted the penalty in dispute and accordingly, we dismiss the Appeal filed by the Revenue.
In the result, the appeal of the Revenue is dismissed.
Order pronounced in the Open Court on 03/06/2016.