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Income Tax Appellate Tribunal, DELHI BENCH ‘D ’, NEW DELHI
Before: SHRI J. S. REDDY & SHRI KULDIP SINGH
The appellant, DCIT, Circle 4(1), New Delhi (hereinafter referred as ‘the revenue’), by filing the present appeal, sought to set aside the impugned order dated 30.09.2013 passed by Ld. CIT(A) VIII, New Delhi qua the assessment year 2009-10 on the ground inter alia that:- “1. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the penalty u/s 271(1)(c) of Rs.33,99,000/-.
2. That the order of the Ld. CIT(A) is erroneous and is not tenable ` on facts and in law.”
Briefly stated, the facts of this case are: during the completion of assessment u/s 143(3) on 12.12.2011, assessee returned loss of Rs.251,12,957/- and the only disallowance on account of interest capitalized of Rs.1,00,00,000/- was made by the A.O. In the assessment order dated 12.12.2011, the A.O. assessed loss of Rs.1,51,12,957/- and initiated penalty proceedings u/s 271(1)(c) of the Act.
During penalty proceedings, it was noted that the interest of Rs.1 crores had been capitalized not actually paid by the assessee and this fact was brought to the notice of A.O. during the assessment proceedings. For concealment of income, notice was issued for filing inaccurate particulars. Finding reply of the assessee company not tenable as it was a case of misrepresentation of facts, penalty of Rs.33,99,000/- has been imposed. 4. The assessee carried the matter before Ld. CIT(A), who has allowed the appeal. Feeling aggrieved, the Revenue has come up before the Tribunal by filing the present appeal. 5. Ld. D.R. challenging the impugned order, contended that when there is no dispute regarding quantum proceedings that the assessee has misrepresented the facts, Ld. CIT(A) has erred in quashing the penalty order. 6. On the other hand, Ld. A.R. repelled the arguments addressed by Ld. D.R. by contending that when the A.O. has himself recorded in the assessment order that ‘the assessee himself has admitted that interest actually paid at Rs.1 crores is not allowable expenditure and as such, the same is disallowed as deduction, there is no concealment of income and relied upon the order passed by ITAT, Delhi Bench ‘G’ in Del/2013 in case of Simran Singh Gambhir Vs DDIT date of order 21.07.2015.
Undisputedly, penalty proceedings as well as assessment proceedings are to be decided independently and the penalty proceedings are not to be influenced by the assessment proceedings.
Hon'ble Supreme Court in a case cited as CIT Vs Reliance Petroproducts Pvt. Ltd., 322 ITR 158 (S.C.) has decided the issue in controversy and operative part of which is reproduced as under: “A glance at the provisions of section 271(1)(c) of the I. T. Act, 1961 suggests that in order to be covered by it, there has to be concealment of the particulars of the income of the assessee. Secondly, the assessee must have furnished inaccurate particulars of his income. The meaning of the word “particulars” used in section 271(1)(c) would embrace the detail of the claim made. Where no information given in the return is found to be incorrect or inaccurate, the assessee cannot be held guilty of furnishing inaccurate particulars. In order to expose the assessee to penalty, unless the case is strictly covered by the provision, the penalty provision cannot be invoked. By no stretch of imagination can making an incorrect claim tantamount to furnishing inaccurate particulars. There can be no dispute that everything would depend upon the return filed by the assessee, because that is the only document where the assessee can furnish the particulars of his income. When such particulars are found to be inaccurate, the liability would arise. To attract penalty, the details supplied in the return must not be accurate, not exact or correct, not according to the truth or erroneous.
Where there is no finding 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 under section 271(1)(c). A mere making of a claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee. Such a claim made in the return cannot amount to furnishing inaccurate particulars.”
Undisputedly, the penalty proceedings have been initiated against the assessee on the basis of assessment order dated 12.12.2011, the operative part of which is reproduced as under:-
“3.1. On perusal of the above notes, it is noticed that the interest of RS.1 crore has been capitalized and not actually paid by the assessee. The above observation was brought to the notice of the assessee during the course of assessment proceedings. The assessee vide letter dated 29.11.2011 has submitted as below: -
"Statement of income has been recomputed on finding an error as per which the amount of interest of Rs.100.00 lac which was permitted for capitalization with the principal amount of SA SF, was treated as the amount paid and claimed as deduction. This error was worked in under the genuine and bona fide belief that this interest amount has been taken the shape of the principal repayable. "
3.2. Thus, the assessee itself has admitted that the interest not actually paid of Rs.1 crore is not an allowable expense. Hence, the amount of interest capitalized of Rs.1,00,00,000/- is disallowed as a deduction.
I am satisfied that the assessee filed inaccurate particulars of its income and thereby concealed its income to the tune of Rs.1,00,00,000/-. Penalty proceedings under section 271 (1)(c) are initiated separately for furnishing inaccurate particulars of income.”
Bare perusal of the aforesaid findings returned by the A.O. in making addition to the tune of R.1,00,00,000/- goes to prove that there is no element of concealment of facts at the end of assessee. Initially, assessee has capitalized the amount of Rs.1,00,00,000/- on account of interest which he has not actually paid, but when he was confronted during assessment proceedings, he himself has admitted his error, recomputed his statement of income and stated that the error is under the genuine and bona fide belief that this interest amount has taken the shape of principal repayable.
Hon’ble Supreme Court in case of Reliance Petro Products Pvt. Ltd. in para 12 held as under: “It was tried to be suggest that section 14A of the Act specifically excluded the deductions in respect of the expenditure incurred by the assessee in relation to income which does not form part of the total
income under the Act. It was further pointed out that the dividends from the shares did not form the part of the total income. It was, therefore, reiterated before us that the Assessing Officer had correctly reached the conclusion that since the assessee had claimed excessive deduction knowing that they are incorrect; it amounted to concealment of income. It w as tried to be argued that the falsehood in accounts can take either of the two forms; (i) an item of receipt may be suppressed fraudulently; (ii) an item of expenditure may be falsely (or in an exaggerated amount) claimed, and both types attempt to reduce the taxable income and, therefore, both types amount to concealment of particulars of one’s income as well as furnishing of inaccurate particulars of income.
“We do not agree, as the assessee had 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 under section 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 under section 271(1)(c) . That is clearly not the intendment of the Legislature.”
The Coordinate bench of ITAT, Delhi Bench ‘G’ in the case cited as Simran Singh Gambhir Vs DDIT (supra) has also decided the identical issue by following the decision of Hon’ble Karnataka High Court in the case of CIT Vs Manjunatha Cotton and Ginning Factory and others reported in 359 ITR 565, in favour of assessee, the ratio of which is existence of condition stipulated in Section 271(1)(c) is a sine qua non for A.O. for initiation of penalty proceedings and the imposition of penalty even if tax liability is admitted, is not automatic. Even otherwise, when the bona fide mistake of the assessee in claiming the non sustainable deduction has been admitted by the fact finding authorities below, the question of concealment of income or misrepresentation of fact does not arise. So, mere rejection of any claim of the assessee that too on the basis of admission of his bona fide mistake, does not amount to concealment of facts of income or furnishing of inaccurate particulars of income by the assessee.
So as a sequel to the above discussion, we are of the considered view that Ld. CIT(A) has rightly concluded that here is no concealment of particulars of income or furnishing of inaccurate particulars of income by the assessee rather it is a case of making a claim of an allowance of benefit under the law under bona fide belief. So, finding no illegality or perversity in the findings returned by Ld. CIT(A) in the impugned order, we hereby dismiss the present appeal. Order pronounced in the open court on 04th Dec., 2015. 14.