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Income Tax Appellate Tribunal, DELHI BENCH: ‘E’ NEW DELHI
Before: SHRI H. S. SIDHU & SHRI PRASHANT MAHARISHI
PER H.S. SIDHU, JM ORDER This appeal is filed by Assessee against the order dated 24.2.2015 passed by the Ld. CIT(A), Meerut relating to Assessment Year 2003-04 on the following grounds:-
“1. That Ld. ITO has not justified in imposing penalty u/s. 271(1)(c) without considering the facts that the penalty order passed by AO without approval from Addl. CIT- Range-I, Meerut. The approval was given by Addl. CIT,
Range-I, Meerut on 29.3.2010 u/s. 271A and AO has not mentioned the approval because it was defective.
That Ld. AO and Ld. CIT(A) has not considered that unexplained deposit in respect of cash credit of various persons and disallowance of salary to partners which was debatable and AO has imposed penalty on deemed income, which is not permitted u/s. 271(1)(c) of I.T. Act. Hence, order passed by AO is bad in law.
That the assessee has right to add, delete or modify and grounds during the appeal proceedings.”
The brief facts of the case are that the assessee filed her return of income on 26.3.2004 declaring share of profit in the alleged firm M/s Madhu & Others at Rs. 2,521/- and claimed to be exempt. The assessee also declared Rs. 24,000/- as salary from M/s Madhu & Others. During the course of inquiry, it was gathered that the assessee was allotted country liquor shop by the District Excise Officer, Meerut in her individual name in financial year 2002-03. In financial year 2003-04, the license for purchase and sale of country liquor for the shop at phatak Rohta was renewed. In AY 2003-04, the assessee carried on business of purchase and sale of country liquor. In the course of inquiry for AY 2002-03, the assessee submitted that the business was done in the status of Firm and the investment in business was declared in the return of the Firm. The assessee further submitted that a Partnership Deed was executed on 26.3.2002. the return of income of the Firm M/s Madhu & Others for AY 2003-04 shows that TCS certificates were issued by the Distilleries in the name of assessee (Individual). Inquiries from the DEO reveals that after the issue of country liquor license, no name was added. Therefore, the income which has been disclosed in the hands of the firm really
belongs to assessee Smt. Madhu (Individual). Accordingly protective assessment in the case of M/s Madhu & Others was completed vide order dated 13.3.2006 at Rs. 27,92,190/- by making various additions. Penalty proceedings u/s. 271(1)(c) were initiated by issuing notice dated 20.3.2006 and served upon the assessee. In response assessee filed its reply, which was not accepted by the AO and therefore, the AO levied the penalty of Rs. 3,00,930/- u/s. 271(1)(c) of the I.T. Act vide his order dated 29.3.2010.
Against the above Penalty Order dated 29.3.2010 passed by the Assessing Officer, assessee appealed before the Ld. First Appellate Authority, who vide impugned order dated 24.2.2015 dismissed the appeal of the assessee.
Against the above order of the Ld. CIT(A) dated 24.2.2015, assessee is in appeal before the Tribunal.
Ld. Counsel for the assessee stated the AO was not justified in imposing penalty u/s. 271(1)(c). He further submitted that the revenue authorities have not considered the unexplained deposit in respect of cash credit of various persons and disallowance of salary to partners which was debatable and AO has imposed penalty on deemed income, which is not permitted u/s. 271(1)(c) of the I.T. Act. Hence, order passed by AO is bad in law and similarly Ld. CIT(A) has also wrongly upheld the order of the AO which deserve to be cancelled.
On the other hand, Ld. DR relied upon the order of the authorities below and requested that the Appeal of the Assessee may be dismissed.
We have heard both the parties and perused the records, especially the orders of the authorities below. We find that Ld. CIT(A) has adjudicated the penalty in dispute vide para no. 4.3 & 5.2 in his impugned order, which read as under:-
“4.3 I have considered "the rival submissions as above. One of the main contentions of the AR is that the AO had passed penalty order even before the issue was decided by the CIT(A). However, this argument can no longer be raised because as discussed above the appeal against the assessment order passed in the case of Smt. Madhu has been decided by the undersigned vide order dated 30.01.2015 . In the appeal order against the quantum addition all the additions except that of Rs.24,000/-- as salary from MIs Madhu & Others was sustained. It is also seen that in the penalty order the AO had not considered Rs.24,000/-- while computing the tax sought to be evaded. It is further seen that the AO had also not considered the addition of Rs. 16,99,550/- which was made on account of disallowance u/s 40A(3) while computing the tax sought to be evaded because this addition does not establish concealment rather it is because of a deeming provision of the I.T. Act. Thus the AO has passed the penalty order after proper application of mind and after considering the relevant facts of the case. Further the case law cited by the AR are not of any help because the fact of each case which has been cited is unique to itself. The question of suitability of imposition of penalty is a matter of fact which is tp be decided on the facts and circumstances unique to this case. After careful study of the assessment order and the penalty order, I have come to a conclusion that the AO had rightly imposed penalty of Rs. 3,00,9201- u/s 271(l)(c) of the IT Act. The grounds of appeal number 1 and 2 are accordingly dismissed.”
5.2 During the course of appeal proceedings a letter was written to the AO to ascertain whether prior approval of the Additional Commissioner was obtained before passing the penalty order. The AO has informed vide his letter dated 5th February, 2015 that approval for imposition of penalty was obtained by the AO from the Addl. CIT, Range-1, Meerut before passing order under uls 271(1)(c). I have perused the approval given by the Addl. CIT Range-l Meerut vide his letter dated 29.03.2010. The AR of the appellant in his letter dated 23.02.2015 has further raised an issue that in the letter of the Addl.CIT approval is given to impose penalty uls 271A and therefore there is no proper approval. However, in the subject of the letter of Addl.CIT the words " approval of Penalty u/s 271 (1)( c)" is clearly mentioned. Further, the approval is given to impose penalty 'of Rs. 3,00,930/- which happens to be the same amount which has been imposed as penalty by the AO. Thus, it is clear that mention of section 271A is a typographical mistake. In view of section 292B of the IT Act, 1961 the letter of approval of the Addl.CIT, Range-L, Meerut is held to be proper approval to impose penalty uls 271(1)(c). The ground of appeal number 3 is accordingly dismissed.”
7.1 We further find that section 271(1)(c) postulates imposition of
penalty for furnishing of inaccurate particulars and concealment of
income. But, neither the AO in the penalty order nor the Ld. CIT(A)
has discussed the above provisions at all, which establish that
assessee has furnished inaccurate particulars and concealment of
income. In this regard, we draw our support from the decision of the
Hon'ble CIT vs. Reliance Petroproducts Pvt. Ltd. (2010) 322 ITR-158
(SC) wherein the Hon'ble Supreme Court has held that 'where there is
no findings that any details supplied by the assessee in its return are
found to be incorrect or erroneous or false, there is no question of
inviting the penalty u/sec. 271(1)(c) of the Act. A mere making a claim,
which is not sustainable in law, by itself, will not amount of furnishing
inaccurate particulars regarding the income of the assessee. Such claim
made in the return cannot amount to furnishing a inaccurate particulars
of income. As the assessee has furnished all the details of its
expenditure as well as income in its return, which details, in
themselves, were not found to be inaccurate nor could be viewed as the
concealment of income on its part. It was up to the authorities to accept
its claim in the return or not. Merely, because the assessee had claimed
the expenditure, which claim was not accepted or was not acceptable to
the Revenue, that by itself would not, in our opinion, attract the penalty
u/sec. 271(1)(c). If we accept the contention of the Revenue then in case
of every return where the claim made is not accepted by the Assessing
Officer for any reason, the assessee will invite penalty u/sec. 271(1)(c).
That is clearly not the intendment of the Legislature".
In the background of the aforesaid discussions and precedent,
we are of the considered view that the assessee has not furnished
inaccurate particulars of income and there are no findings of the
Assessing Officer and the CIT (Appeals) that the details furnished by
the assessee in his return are found to be inaccurate or erroneous or
false. Under these circumstances, in our view the penalty in dispute is
totally unwarranted and deserve to be deleted. Accordingly, we delete
the penalty of Rs. 3,00,930/- made u/s. 271(1)(c) of the I.T. Act and
quashed the orders of the authorities below on the issue in dispute.
In the result, the appeal filed by the Assessee stands allowed.
Order pronounced in the open court on 04/12/2015. Sd/- Sd/-
[PRASHANT MAHARISHI] [H.S. SIDHU] ACCOUNTANT MEMBER JUDICIAL MEMBER
Date 04/12/2015 “SRB”