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Income Tax Appellate Tribunal, DELHI BENCH: ‘B’: NEW DELHI
Before: SH. INTURI RAMA RAO
ORDER PER INTURI RAMA RAO, A.M.: The present appeal filed by the Revenue is directed against the order of CIT(A), dated 06.03.2012 passed for the assessment year 2001-02 deleting the penalty of Rs. 1,13,46,367/- levied under Section 271(1)(c) of the Income-tax Act (for short “the Act”). The Revenue raised the following grounds of appeal: i. On the facts and circumstances of the case and in law, the ld. CIT(A) has erred in deleting the penalty of Rs. 1,13,46,367/- imposed u/s 271(1)(c) of the I.T. Act, 1961 ii. The appellant craves leave to add, alter or amend any ground of appeal raised above at the time of hearing.
2. The brief facts of the case are that the respondent assessee company is a company incorporated under the provisions of Companies Act, 1956. It is 2 engaged in the business of software development. The return for the assessment year 2001-02 was filed on 31.10.2001 disclosing net loss of Rs. 2,89,52,667/-. Against the said return of income, the assessment was completed under Section 143(3) of the Act vide order dated 27.01.2004 at a taxable loss of Rs. 74,323/-. While framing the assessment order, the Assessing Officer disallowed the following items: i. Disallowance of expenses for software development of Rs. 2,42,15,382/- ii. Expenses preoperationalized of Rs. 42,28,474/- iii. Brought forward losses of Rs. 1,26,93,243/- was not allowed to be carry forward. Being aggrieved by this order, an appeal was preferred before the CIT(A) who confirmed the above disallowances. Further, on appeal before the ITAT, the appeal was dismissed in limine for non-prosecution. Thus, the additions made in the assessment attained finality. While the matter stood thus, the Assessing Officer proceeded with levy of penalty by holding that the assessee company was guilty of concealing the particulars of income and in respect of the addition of Rs. 2,86,88,666/- levied the penalty of Rs. 1,13,45,367/-. Being aggrieved by the order of penalty, an appeal was filed before the CIT(A) who vide impugned order dated 6th March, 2012, deleted the penalty placing reliance on the decision of Hon’ble Supreme Court in the case of CIT Vs. Reliance Petro Products Pvt. Ltd., 189 Taxman 322 (SC). Being aggrieved, the Revenue is before us with the present appeal.
3. Learned Sr. DR argued that the CIT(A) is not justified in deleting the penalty as the additions had been confirmed by the CIT(A) as well as by the 3 Tribunal and the respondent company has chosen not to pursue the matter further.
4. On the other hand, the learned counsel for the assessee relied on the order CIT(A) and prayed that the same may be confirmed.
5. We heard the rival submissions and perused the material on record. The only question that arises for consideration in this appeal is whether the CIT(A) was justified in deleting the penalty of Rs. 1,13,46,367/- levied under Section 271(1)(c) of the Act. A perusal of the penalty order shows that the penalty has been levied for alleged offence of concealing the particular of income but we find that the Assessing Officer had not given a finding in the penalty order as to how and in what manner the respondent assessee company had furnished inaccurate particulars of income resulting in addition to the returned income except making the bald charge against the respondent assessee company that it had furnished inaccurate particulars of income. In the absence of such finding, the penalty order is liable to be quashed. In this regard we rely on the following precedents: a) CIT v. Balbir Singh [2008] 304 ITR 125/[2007] 164 Taxman 65 (Punj. & Har.) (b) National Textiles v. CIT [2001] 249 ITR 125/114 Taxman 203 (Guj) (c) Nainu Mal Het Chand v. CIT [2007] 294 ITR 185/160 Tamxan 49 (All) (d) CIT v. Super Metal Re-rollers (P.) Ltd. [2004] 265 ITR 82/135 Taxman 407 (Delhi) (e) Diwan Enterprises v. CIT [2000] 246 ITR 571 (Delhi) (f) CIT v. Shivnarayan Jamnalal & Co. [1998] 232 ITR 311/[1996] 89 Taxman 420 (MP) (g) CIT v. T. Abdul Majeed [1998] 232 ITR 50/[1997] 93 Taxman 491 (Ker)
4 The hon'ble apex court in the case of Dilip N. Shroff v. Jt. CIT [2007] 291 ITR 519/161 Taxman 218 had held vide paras 56 and 57 as follows (page 546) : "The term 'inaccurate particulars' is not defined. Furnishing of all assessment of value of the property may not by itself be furnishing of inaccurate particulars. Even if the Explanations are taken recourse to, a finding has to be arrived at having regard to clause (a) of Explanation 1 that the Assessing Officer is required to arrive at a finding that the explanation offered by an assessee in the event he offers one, was false. He must be found to have failed to prove that such explanation is not only not bona fide but all the facts relating to the same and material to the income were not disclosed by him. Thus, apart from his explanation being not bona fide, it should have been found as of fact that he has not disclosed all the facts which was material to the computation of his income. The explanation, having regard to the decisions of the court, must be preceded by a finding as to how and in what manner he furnished the particulars of his income. It is beyond any doubt or dispute that for the said purpose the Income-tax Officer must arrive at a satisfaction in this behalf. (See CIT v. Ram Commercial Enterprises Ltd. [2000] 246 ITR 568 (Delhi) and Diwan Enterprises v. CIT [2000] 246 ITR 571 (Delhi).”
Mere additions to the returned income would not per se tantamount to furnishing of inaccurate particulars of income so as to attract the penalty under Section 271(1)(c) of the Act. There are plethora of decisions in support of this proposition of law. The Hon’ble Apex Court in the case of CIT Vs. Reliance Petroproducts Pvt. Ltd (supra) held that “a mere making of 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”.
The Delhi High Court in the case of Karan Raghav Exports (P.) Ltd. v. CIT [2012] 349 ITR 112/21 taxmann.com 8/[2013] 212 Taxman 55 (Mag.) has held that claim made by the assessee might have been rejected, but it would not be said that claim was not plausible or legally tenable and therefore it cannot be said that the assessee has furnished inaccurate particulars of income.
5 8. In the case of CIT v. Balaji Distilleries Ltd. [2013] 31 taxmann.com 55/214 Taxman 96 (Mad.) (Mag.) it has been held that when additions were confirmed not for lack of bona fides but for rejecting the explanation of the assessee the penalty cannot be levied under section 271(1)(c).
In the case of CIT v. International Audio Visual Co. [2007] 288 ITR 570 (Delhi) it has been held that when all facts relating to claim were disclosed, but claim was not allowed, it does not suggest that particulars of income of the assessee or concealment of his true income has been made.
The Delhi High Court in the case of CIT v. DCM Ltd. [2013] 359 ITR 101/37 taxmann.com 447 held that (page 105) : "law does not bar or prohibit an assessee for making a claim, which he believes may be accepted or is plausible. When such a claim is made during the course of regular or scrutiny assessment, liberal view is required to be taken as necessarily the claim is bound to be carefully scrutinised both on facts and in law ... Threat of penalty cannot become a gag and/or haunt on assessee for making a claim which may be erroneous or wrong when it is made during the course of the assessment proceedings. Normally penalty proceedings in such cases should not be initiated unless there are valid or good grounds to show that factual concealment has been made or inaccurate particulars on facts were provided in the computation".
Having regard to the ratio laid down in the above cases, the reasoning adopted by the learned CIT(A) while deleting the penalty cannot be found fault 6 with. Hence, we sustain the order of CIT(A) deleting the penalty and the grounds of appeal
filed by the Revenue are dismissed.
12. In the result, the appeal filed by the Revenue is dismissed. The decision is pronounced in the open court on 4th November, 2015.