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Income Tax Appellate Tribunal, BENCH “C”, KOLKATA
Before: Hon’ble Shri M.Balaganesh, AM & Shri S.S.Viswanethra Ravi, JM]
This appeal of the revenue arises out of the order of the Learned CIT(A) in Appeal No. 05/CIT(A)-IV/2009-10 dated 27.09.2013 for the Asst Year 2004-05 passed against the order of assessment framed by the Learned AO u/s 143(3) of the Income Tax Act, 1961 (hereinafter referred to as the ‘Act’).
The only issue to be decided in this appeal is as to whether the Learned CITA is justified in upholding the levy of penalty u/s 271(1)( c) of the Act in the facts and circumstances of the case.
The brief facts of the case is that the assessee filed the return of income for the Asst Year 2004-05 on 29.10.2004 showing total taxable income of Rs. 1,09,48,890/-. During the course of assessment proceedings, the assessee filed details of dividend received and details of mutual funds transactions carried out by the assessee. The assessee had declared loss arising on sale of mutual funds and the assessee accepted for disallowance of the same invoking the provisions of section 94(7) of the Act. The taxable income was assessed u/s 143(3) of the Act at Rs. 1,34,70,990/- on 21.12.2006 after making disallowance u/s 94(7) of the Act to the tune of Rs. 25,22,098/-. Later
2 Sukhbir Singh Dhupia A.Yr.2004-05 the assessment was subject to rectification proceedings u/s 154 dated 3.5.2007 wherein the disallowance u/s 94(7) of the Act was reduced to Rs. 6,22,248/-. The Learned AO initiated penalty proceedings u/s 271(1)(c ) of the Act while completing the assessment u/s 143(3) on 21.12.2006 for the original disallowance made u/s 94(7) of the Act. The Penalty u/s 271(1)(c ) of the Act was levied to the extent of Rs. 69,318/- vide order dated 25.3.2009. The said penalty was upheld by the Learned CITA. Aggrieved, the assessee is in appeal before us on the following grounds:-
“1. For that the penalty u/s 271(1)(c) of the Act is not tenable in law and is opposed to requirement of law and bad in law. 2. For that the imposition of penalty of Rs.69,318/- u/s 271(1)(c) of the Act is unjustified, unwarranted and uncalled for. 3. For that appellant craves leave to amend, alter, add, delete or substitute any other grounds of appeal before or at the time of hearing of the appeal.”
The Learned AR argued that the Learned AO had not mentioned the specific charge of offence committed by the assessee in the penalty notice viz ‘concealment of income’ or ‘furnishing of inaccurate particulars of income’. Instead the notice merely mentioned that there is a false claim of Long Term Capital Gain and Short Term Capital Gain. On this ground, he argued that penalty levied deserves to be cancelled. He argued that the Learned AO having reduced the disallowance by Rs. 18,99,850/- in the rectification order u/s 154 dated 3.5.2007 failed to initiate penalty proceedings in the section 154 proceedings. Hence penalty levied deserves to be deleted on this count also. He further argued that mere disallowance of claim would not automatically result in levy of penalty. In response to this, the Learned DR stated that the satisfaction of the Learned AO about the specific charge of offence committed by the assessee is very much discernible from the assessment order. He accordingly argued that penalty has been rightly levied.
We have heard the rival submissions and perused the materials available on record. The Learned AR stated that the assessee had heavily depended on portfolio management service provider who had suggested him to make investment in certain mutual funds which were about to declare huge dividends in the near future and had 3 Sukhbir Singh Dhupia A.Yr.2004-05 also suggested the assessee to exit from the said funds at the right time. The assessee had also faithfully followed the instructions of the said consultant without knowing the intricacies of the provisions of the Income Tax Act. We find that the explanation offered by the assessee is bonafide and only due to ignorance of provisions of the Act. However, the belief of the assessee seems to be bonafide and that cannot be doubted with. It is well settled that ‘Ignorantia juris non excusat’ meaning ‘ignorance of law is of no excuse’. However, this maxim has been duly considered by the Hon’ble Apex Court in the case of Motilal Padampat Sugar Mills Co. Ltd vs State of Uttar Pradesh & Ors reported in (1979) 118 ITR 326 (SC) wherein it was observed that :
there is no presumption that every person knows the law. It is often said that every one is presumed to know the law, but that is not a correct statement ; there is no such maxim known to the law. Over a hundred and thirty years ago , Maula J. pointed out in Martindale v Falkner (1846) 2 CB 706 : “ There is no presumption in this country that every person knows the law : it would be contrary to common sense and reason if it were so.” Scrutton L.J. also once said : “ It is impossible to know all the statutory law, and not very possible to know all the common law. ” But it was Lord Atkin who, as in so many other spheres, put the point in its proper context when he said in Evans vs Bartlam (1937) AC 473 :” …. The fact is that there is not and never has been a presumption that every one knows the law. There is the rule that ignorance of the law does not excuse, a maxim of very different scope and application.” It is, therefore, not possible to presume, in the absence of any material placed before the court , that the appellant had full knowledge of its right to exemption so as to warrant an inference that the appellant waived such right by addressing the letter dt 25th June , 1970 . We, accordingly, reject the plea of waiver raised on behalf of the State Government.
Moreover, we find that mere disallowance of claim made by the assessee cannot lead to automatic levy of penalty. Reliance placed by the Learned AR on the following decisions is well founded:-
CIT vs Binani Investments Ltd reported in 383 ITR 635 (Cal) CIT vs Reliance Petroproducts (P) Ltd reported in 322 ITR 158 (SC)
4 Sukhbir Singh Dhupia A.Yr.2004-05 Respectfully following the ratio laid down in the aforesaid decisions , we have no hesitation in cancelling the levy of penalty in the facts and circumstances of the instant case. Accordingly, the grounds raised by the assessee are allowed.
In the result, the appeal of the assessee is allowed.
Order pronounced in the court on 01.07.2016.