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Income Tax Appellate Tribunal, DELHI BENCH ‘E’ NEW DELHI
PER SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER The present appeal, filed by the department, has been preferred against the order dated 24.10.2013 passed by the Ld. CIT(A)-XXVI, New Delhi wherein he has deleted the penalty amounting to Rs.17,30,832/- imposed u/s 271(1) (c) of the Income Tax Act, 1961 (hereinafter called ‘the Act’) - for Assessment Year 2009-10.
The brief facts of the case are that the appellant firm is 2. engaged in the sale of stage lighting & stage furnishing equipment. The appellant's assessment was completed u/s Assessment Year 2009-10 143(3) on the returned income of Rs. 61,43,000/-. The appellant claimed credit for TDS of Rs. 24,81,348/- in its Return of Income (ROI). However, the AO found that credit for TDS of Rs.17,30,832/- was wrongly claimed as the income corresponding to this TDS was accounted for by one of the sister concerns of the appellant, namely; M/s Modern Stage Services (P) Ltd. Accordingly, the AO did not allow the claim for credit of TDS observing as under:
It was admitted by assessee that the payment had been made to Modern Stage Services Pvt. Ltd. and the TDS certificate had been incorrectly issued in the name of assessee firm by these parties. The assessee instead of getting the matter sorted out and corrected the form 16A has claimed credit of TDS in its name which was patently wrong and not permissible under the law. If the income had been booked by the M/s Modern Stage Services Pvt. Ltd., then the credit of TDS could only be allowed to them and not to assessee. In view of this, the credit of TDS of Rs. 17,30,832/ is being withdrawn and the assessee is liable to pay tax on account of this withdrawal.
The AO initiated penalty u/s 271(l)(c) for concealment of income and furnishing inaccurate particulars of income within the meaning of explanation 1 to sub-section (1) of the section 271(l)(c). Later on, the AO, placing reliance on the cases Zoom Communications (P) Ltd. 327 ITR 51 (Del), Thakur V. Hari Prasad (1987) 167 ITR 603 (AP), Dharmendra Textile Processors Assessment Year 2009-10 (2008) 166 Taxman 65 (SC), K.P. Madhusudan 251 ITR 99 (SC) and Drapco Electric Corporation 122 ITR 341 (Guj), levied penalty u/s 271(l)(c) holding as under:
"There is no force in this argument of the assessee. The deduction of tax at source by any deductor under various section of chapter XVII of the Income Tax Act. The liability of the assessee is to offer all such credits/receipts as its income irrespective of the section the deductor used. But claiming tax credit of other person is altogether different. Even if any mistake has occurred at the level of deductor, the assessee could have got it corrected by asking such deductor to furnish a simple correction statement. The assessee instead of getting the matter sorted out and correcting the form 16A deliberately & knowingly claimed credit of other person's TDS in its name which was patently wrong and not permissible under the law. If the income had been booked by the M/s Modern Stage Services Pvt. Ltd. , then the credit of TDS could only be allowed to them and not to assessee. In view of this, the credit of TDS of Rs. 17,30,832/- was withdrawn and the assessee was liable to pay tax on account of this withdrawal. The assessee did so advertently to avoid incidence of tax due."
Aggrieved, the assessee preferred an appeal before the Ld. First Appellate Authority who deleted the penalty. Assessment Year 2009-10
Now, the Department is in appeal before us and has raised the following grounds of appeal: -
“i) The CIT(A) has erred in deleting the penalty imposed u/s 271(1)(c) of Rs.17,30,832/-on account of wrong claim of TDS without appreciating the fact that the assessee has furnished inaccurate particulars of income by claiming the credit of same TDS at two places i.e in its return of income and in the return of income filed for its sister concern M/s Modern stage services Private Ltd. ii) The CIT(A)has erred in deleting the penalty imposed u/s 27(1)(c) of Rs.17,30,832/- on account of wrong claim of TDS without appreciating the fact that the assessee has knowingly, willfully & deliberately tried to evade the tax by furnishing inaccurate particulars of income in its return of income by claiming the credit of same TDS for itself and its sister concern. iii) The CIT(A) has erred in deleting the penalty imposed u/s 27(1 )(c) of Rs.17,30,832/- on account of wrong claim of TDS without appreciating the fact that claiming credit of same TDS for two different assessee is patently wrong & illegal and vehemently calls for penalty for furnishing inaccurate particulars of income in its return of income.”
The Ld. DR submitted that the assessee's explanation furnished during the course of assessment proceedings were considered at that time and reasons for satisfaction for initiation of penalty proceedings were mentioned in the body of order itself.
It was submitted that the liability of the assessee is to offer all credits/receipts as its income and claiming tax credit of other Assessment Year 2009-10 person is legally unacceptable. The Ld. DR further submitted that even if any mistake had occurred at the level of deductors, the assessee could have got it corrected by asking such deductors to furnish a simple correction statement. The assessee instead of getting the matter sorted out & rectfying form 16A, deliberately & knowingly claimed credit of the TDS of other persons in its name which was patently wrong and not permissible under the law. It was submitted that if the income had been booked by M/s Modern Stage Services Pvt. Ltd., then the credit of TDS could only be allowed to them and not to assessee. In view of this, the credit of TDS of Rs.17,30,832/- was withdrawn and the assessee was liable to pay tax on account of this withdrawal. The assessee did so advertently to avoid incidence of tax due. It was further submitted that although no addition to the returned income was made but the fact remains that in order to avoid payment of tax, the assesse had deliberately made a wrong claim of TDS to the tune of Rs. 17,30,832/- and had also furnished inaccurate particulars to this extent. It was submitted that the conduct of the assessee casted a shadow of doubt/ill- intent on the part of the assessee to submit true and correct particulars. It was also argued that I.T.A. NO. 198/D/2014 Assessment Year 2009-10 the assessee could not be absolved from his responsibility of returning correct income & particulars and that if the explanation of assessee was to be accepted, then there will be no deterrence for the assesses.
The Ld. AR relied on the order of the Ld. CIT (A) and submitted that the Ld. CIT (A) has dealt the issue at length and has rightly deleted the penalty imposed.
We have heard the rival submissions and perused the relevant records. It has been held by Hon'ble Supreme Court in the case of K. P. Madhusudhanan Vs. CIT; 251 ITR 99 that notice u/s 271(l)(c) puts the assessee on notice regarding applicability of Explanation 1 of 271(l)(c). Explanation 1 of 271(l)(c) automatically comes into operation when there is failure to offer an explanation or the explanation offered is found to be false by the AO or the explanation offered is not substantiated and bonafide is not proved. Explanation 1 of 271(l)(c) enacts the rule of evidence whereby the onus is on the assessee and if he fails to discharge the burden the presumption of furnishing inaccurate particulars of income can be drawn. Such presumption is to be discharged by “cogent, reliable and relevant Assessment Year 2009-10 materials" as held by the Hon'ble Supreme Court in the case of CIT vs. K. R. Sadayappan 185 ITR 49. It is the assessee’s contention is that it has wrongly claimed credit of TDS of M/s Modern Stage Services (P) Ltd. on the fact that the deductors have issued TDS certificates in its name because of the similarity in the names of the two along with some common shareholders and partners. In our considered view, wrong claim towards credit of tax cannot be termed as 'the amount of tax sought to be evaded' in view of the specific definition provided in Explanation- 4 to section 271(1)(c). Further, explanation 1 to section 271(l)(c) creates a legal fiction and raises a presumption against the assessee. It provides that if in respect of any fact which is material to the computation of total income, assessee (i) does not offer an explanation or offers an explanation which is found to be false by the AO, or (ii) offers an explanation which he is not able to substantiate and fails to prove that such explanation is bona fide and that all material facts have been disclosed then, the amount added or disallowed shall be deemed to be income in respect of which particulars are concealed. It is pertinent to note that this Explanation is restricted to a case where assessee is unable to offer an explanation or is unable to substantiate the I.T.A. NO. 198/D/2014 Assessment Year 2009-10 explanation offered by him in respect of factual detail of the income. Here, in the present appeal before us, there is no difference in the returned and the assessed income. The issue is only whether or not the penalty is imposable u/s 271(1)(c) in case the claim of TDS was found wrong. We are of the considered view that the withdrawal of the credit of TDS in respect of which the income is not offered/assessed in the relevant AY in view of provisions of section 199(3) and Rule 37BA(3) or otherwise being wrong claim as in this case would not be termed as 'the amount of tax sought to be evaded' as defined in Explanation-4 to section 271(1)(c). Therefore, after considering the conspectus of the material on record and the rival submissions, we are of the considered view that the presumption of concealment as contained in explanation (1) of section 271(l)(c) read with the explanation (4) of section 271(l)(c) has been rebutted by the assessee and that all the facts relating to this explanation and material to the computation of total income have been duly disclosed. Under the circumstances, it is held that explanation of the appellant was bona-fide and all the facts relating to the same and material to the computation of total income have been duly disclosed by it. Accordingly, we Assessment Year 2009-10 decline to interfere and uphold the impugned order.
In the result, the appeal of the Department is dismissed.
Order pronounced in the Open Court on 30th of March, 2016.