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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 13.12.2010 passed by the Ld. CIT(A), New Delhi relating to Assessment Year 2004-05 on the following grounds:-
“1. The order is bad in law, as it has been passed in gross violation of principles of natural justice.
The Ld. CIT(A) has erred in confirming the penalty u/s. 271(1)(c) levied by the AO.
The appellant may be permitted to add, alter or amend any of the foregoing grounds of appeal.
2. The brief facts of the case are that the assessment under section 143(3) of the Income Tax Act, 1961 was completed on 8.12.2006, at an income of Rs. 14,96,270/- against the returned income at NIL (by setting off the b/f business losses). Penalty proceedings u/s. 271(1)(c) were initiated by issuing notice dated 8.12.2006 u/s 274 read with section 271 of the Income Tax Act, 1961 and assessee was asked to show cause as to why the penalty initiated may not be imposed. He observed that assessee did not file any reply. He further observed that it is apparent that the assessee has nothing to state in the matter. Therefore, the proceedings are being completed on the basis of the material available on the record. He further observed that the assessee categorized its rental and hiring charges under the head business income and claimed such expenses to which the assessee was not eligible. In the assessment order, the AO regrouped the incomes and disallowed the ineligible expenses. In light of the above, all, AO was satisfied that the assessee furnished inaccurate particulars of its income in its return of income, hence, in view of Explanation 1 to section 271(1), he was satisfied that penalty under section 271(1)(c) of the Income Tax Act, 1961 is imposable in this case and accordingly, imposed the penalty of Rs. 5,06,100/- u/s. 271(1)(c) of the I.T. Act, 1961 vide his order dated 31.3.2009.
3. Against the above Penalty Order dated 31.3.2009 passed by the Assessing Officer, assessee appealed before the Ld. First Appellate Authority, who vide impugned order dated 13.12.2010 dismissed the appeal of the assessee by observing that since the quantum appeal has been dismissed by the ITAT, he has no hesitation in dismissing the present appeal filed by the Appellant u/s. 271(1)(c) of the Act.
4. Against the above order of the Ld. CIT(A) dated 13.12.2010, assessee is in appeal before the Tribunal.
5. Ld. AR stated that Ld. CIT(A) has passed the order in gross violation of principles of natural justice, hence the action of confirming the penalty u/s. 271(1)(c) may be quashed.
6. 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 during the penalty proceedings, the AO vide para no. 3 to 4 has observed as under:-
“3. Vide notice dated 5.3.2009, the assessee did not file any reply. It is apparent that the assessee has nothing to state in the matter. Therefore, the proceedings are being completed on the basis of material available on the record.
The assessee categorized its rental and hiring charges under the head business income and claimed such expenses to which the assessee was not eligible. In the assessment order, the AO regrouped the incomes and disallowed the ineligible expenses.
In light of the above all, I am satisfied that in this case, the assessee furnished inaccurate particulars of income in its return of income. Keeping in view the above facts and hence in view of Explanation 1 to Section 271(1)(c), I am satisfied that penalty under section 27(1)(c) of the Income Tax Act, 1961 is imposable in this case.”
7.1 We further find that Ld. CIT(A) has adjudicated the penalty in dispute vide para no. 5.0 to 6.0 in his impugned order, which read as under:-
“5.0 During the course of appellate proceedings before, the Ld. AR filed a letter stating that the assessee had filed an appeal before the Hon’ble ITAT against the order passed u/s. 143(3) which stood confirmed by the CIT(A). Notice in respect of hearing of appeal from ITAT was not received by the appellant and the appeal was dismissed by the Hon’ble ITAT.
5.1 Since the quantum appeal has been dismissed by the Hon’ble ITAT, I have no hesitation in dismissing the present appeal filed by the appellant u/s. 271(1)(c) of the Act.
In the result, the appeal is dismissed.”
After perusing the finding of the AO made in his penalty order as well as finding in impugned order of the Ld. CIT(A), we are not in agreement with the finding of the Ld. CIT(A), because the mere fact that an addition is confirmed in quantum proceedings cannot be conclusive of the imposition of penalty. The Hon’ble Calcutta High Court in Durga Kamal Rice Mill vs. CIT (2004) 265 ITR 25 (Cal), has held that quantum proceedings are different from penalty proceedings. The Hon’ble Kerala High Court in CIT vs. P.K. Narayanan (1999) 238 ITR 905 (Ker.), has held that despite the addition being confirmed by the Tribunal in quantum proceedings, the penalty can still be deleted by the Tribunal, if the facts justify.
8.1 We further find that AO observed that assessee furnished inaccurate particulars of its income and is liable for penalty u/s 271(1)(c), which did not establish that how the assessee has furnished inaccurate particulars of its income. In our view, as regards the furnishing of inaccurate particulars, no information given in the return was found to be incorrect or inaccurate. We further find that section 271(1)(c) postulates imposition of penalty for furnishing of 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 isno 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".
8.2 In the background of the aforesaid discussions and precedents, 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. 5,06,100/- 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 01/12/2015.