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Income Tax Appellate Tribunal, DELHI BENCH ‘E’ NEW DELHI
Before: SHRI I.C. SUDHIR & SHRI L.P. SAHU
IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI BENCH ‘E’ NEW DELHI BEFORE : SHRI I.C. SUDHIR, JUDICIAL MEMBER & SHRI L.P. SAHU, ACCOUNTANT MEMBER ITA No. 5453/Del./2012 Asstt. Year :2008-09 Machintorg (India) Ltd., vs. Income-tax Officer, B-8/6181, Vasant Kunj, 6(1), New Delhi New Delhi. [PAN : AAACM 6750 C] (Appellant) (Respondent) Appellant by : Sh. K.C. Singhal, Advocate Respondent by : Sh. P. Dam Kanunjna, Sr. DR Date of hearing : 19.08.2015 Date of pronouncement : 07.10.2015 ORDER Per L.P. Sahu, Accountant Member: This appeal is filed by the assessee against the order dated 25.07.2012 passed by the learned CIT(A)-IX, New Delhi for the assessment year 2008-09. The grounds attached with Form No. 36, being argumentative in nature, the assessee has filed following concise ground :
“On the facts and in the circumstances of the case & in law, the levy of penalty of Rs.24,75,000/- is illegal being not in accordance with the provisions of section 271(1)(c) of the Income Tax Act 1961 and contrary to the judicial precedents.”
The assessee filed his return of income on 30.09.2008 declaring nil income. The case was processed u/s. 143(1) and subsequently case was selected for scrutiny
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in CASS and notice u/s. 143(2) dated 07.08.2009 was issued and served upon the assessee. The assessee company is engaged in the manufacturing and sale of steel screws and rivets. From the perusal of computation of income, the AO noticed that the assessee has deducted profit on sale of land and building amounting to Rs.1,17,34,128/- from the profit as per Profit & Loss Account while computing the taxable income. The assessee has neither paid any tax u/s. 115JB on book profit nor this amount was offered as capital gain in the computation of income. In view of this the assessee was asked to furnish the details of assets sold with supporting evidence and to explain as to why no capital gains has been declared from such sale. The AO further observed from the balance sheet and schedule of fixed assets that the assessee has shown new land and building added during the year. The assessee had purchased one built up industrial plot bearing No. A-26, situated at Sector-80, Noida, measuring 1306.5 sq. mt. on 27.07.2007 and on the other hand it had sold its running factory land and building at F-29, Sector-6, Noida measuring 796.05 sq.mt. on 23.10.2007. The AR of the assessee was asked to explain as to why gain, on transfer of factory land and building at sector-6, have not been offered to tax. In reply to this query, the AR of the of the assessee submitted that the assessee was under the belief that capital gains in the case of transfer of land from one urban area to another urban area is exempt from capital gain tax u/s. 54F of the IT Act, 1961.The AR of the assessee admitted the mistake and also filed a letter from Director Shri S.K. Butta to this effect and offered the gain arising on sale of land for tax as long term capital gain. The Assessing Officer on the basis of submissions made by the AR added in his income long term capital gain for Rs.1,10,91,512/- and also initiated penalty proceedings u/s. 271(1)(c) of the Act. Further the AO observed from the computation of income that the assessee had deducted depreciation as per Income Tax Act of Rs.4,26,676/- whereas from Annexure A to Form 3CD, it was noticed that the depreciation allowable as per IT
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Act comes to Rs.2,90,366/-.The AR of the assessee admitted the mistake and submitted that the depreciation as per Annexure A to Form 3CD may please be allowed. With the above comments, the AO determined total taxable income at Rs.1,08,89,618/-. The assessee has shown surplus on sale of asset for Rs.1,17,34,128/- in their Profit & Loss account. He also produced details and computation of income before the AO placed at page 42 and return of income at page 22 & 28 of the paper book. On the basis of these facts, the Assessing Officer imposed penalty of Rs.24,75,000/- vide penalty order dated 28.06.2011 u/s. 271(1)(c) of the Act for concealing the particulars of income and furnishing inaccurate particulars of income. Aggrieved assessee preferred an appeal before the first appellate authority, who confirmed the order of the Assessing Officer. Being aggrieved by the impugned order, the assessee is in appeal before us.
During the course of hearing, learned AR of the assessee submitted that penalty u/s. 271(1)(c) can be imposed only when there is concealment of particulars of income or there is inaccurate particulars of income. It is clear from the assessment order itself that neither any information was concealed nor any inaccurate particulars were furnished. The assessment order itself says that the amount was clearly shown in the Profit and Loss Account. The appellant had some capital gain from sale of factory in the course of shifting factory from one place to other. Section 54G of the IT Act provides that if such shifting is from a notified urban area to non-urban area, the capital gain is exempted. The appellant was under the impression that it is shifting from a notified urban area and hence, the capital gain is exempted from the payment of tax. The moment the correct position of law was brought to the notice of appellant, the tax amount along with interest was paid. The claim was found to be unsustainable in law. It is true that the claim of assessee for deduction of capital gain u/s. 54G of the IT Act was not sustainable
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in law. Mere wrong claim cannot be treated as concealment of particulars or furnishing inaccurate particulars of income. The learned AR placed reliance on the following decisions : (i). ITO v. Flora Exports (2010) 40 DTR (Tri-Del.) 70 (ii). Lakhvinder Singh (ITA No. 5169/Del/2004 decided on 28.09.2005) (iii). ACIT vs. Vipin Sardhana (ITA No. 5174/Del/2004 decided on 17.06.2005) (iv). ITO vs. Ess Kay Enterprises (Tribunal Delhi Bench) (v). CIT vs. Budhewal Co-op. Sugar Mills (P & H High Court) (vi). ITO vs. M/s. Energetic Construction Pvt. Ltd.(ITA No. 93/Del/12 (Tri-Delhi). (vii). CIT vs. Reliance Petroproducts Pvt. Ltd., 322 ITR 158(SC) (viii). Chandra Pal Bagga v. ITAT (2003) 128 Taxman 632. (ix). Dilip N. Shroff vs. JCIT (2007) 291 ITR 519 (SC) (x). Hindustan Steel Ltd. vs. State of Orissa (83 ITR 26 SC) (xi). CIT v. Zoom Communications Pvt. Ltd., 327 ITR 510 (Del.).
The learned DR relied upon the orders of the lower authorities and submitted that from the findings recorded by the learned AO, the appellant has furnished no cogent reply as why a penalty be not imposed. The appellant relied on the fact that since this was a bona fide belief that long term capital gain was exempt based upon advice of a qualified chartered accountant, no penalty was leviable. He relied on the Explanation-I to section 271(1)(c) and has submitted that onus was on the appellant to prove with positive material that it had not concealed the particulars of income or had not furnished inaccurate particulars of income. Since the appellant made a claim of deduction which was not sustainable in law and for which it could not give any justification when confronted by the AO, it can be said that the appellant made itself guilty of furnishing inaccurate particulars of income. Hence, the levy of penalty by the Assessing Officer was fully justified. He also submitted that it is also not a case where two opinions about the issue involved were possible. Under these circumstances, it is clear that the appellant deliberately was indulged
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into furnishing of inaccurate particulars of income, hence, levy of penalty was correctly done.
We have considered the rival submissions, advanced by both the parties, perused the material available on record and the case laws cited by both the parties. We are reproducing Explanation I to section 271(1)(c), which reads as under :
“Explanation 1.—Where in respect of any facts material to the computation of the total income of any person under this Act,— (A) such person fails to offer an explanation or offers an explanation which is found by the Assessing Officer or the Commissioner (Appeals) or the [Principal Commissioner or] Commissioner to be false, or (B) such person offers an explanation which he is not able to substantiate and fails to prove that such explanation is bona fide and that all the facts relating to the same and material to the computation of his total income have been disclosed by him, then, the amount added or disallowed in computing the total income of such person as a result thereof shall, for the purposes of clause (c) of this sub- section, be deemed to represent the income in respect of which particulars have been concealed.”
A perusal of record shows that the sale of capital asset was shown in the Profit and Loss Account. The Assessing Officer also admitted that it has been shown in the Profit & Loss Account. A glance on the above provision would suggest that for being covered under explanation-I to section 271(1)(c), there has to be concealment of particulars of income of the assessee. Secondly, the assessee must have furnished inaccurate particulars of his income. The present is not a case of concealment of income. However, the ld. DR submitted that by making incorrect claim of deduction/expenditure, the assessee has furnished inaccurate particulars of income. As per law Lexicon, the meaning of the word “particulars” is a detail or details (in plural sense); the details of a claim, or the separate items of
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an accounts. Therefore, the word “particulars” used in section 271(1)(c) would embrace the meaning of the details of the claim made. It is an admitted position in the present case that no information given in the return was found to be incorrect or inaccurate. It is not as if any statement made or any detail supplied was found to be factually incorrect. Hence, the assessee cannot be held guilty of furnishing inaccurate particulars of income. In order to expose the assesse to the penalty unless the case is strictly covered by the provision, the penalty provision cannot be invoked. By any stretch of imagination, making a incorrect claim in law, cannot tantamount to furnishing of inaccurate particulars. In view of this discussion, and laying our hands on various decisions cited by the ld. AR, we do not find any reason to sustain the impugned order confirming the penalty. We, thus, while setting aside the orders of the authorities below, direct the AO to delete the penalty in question levied under section 271(1)(c) of the Act. The appeal of the assessee is, therefore, allowed. 7. In the result, the appeal filed by the assessee is allowed. Order pronounced in the open court on 07.10.2015.
Sd/- Sd/- (I.C. SUDHIR) (L.P. SAHU) Judicial Member Accountant Member Dated :07.10.2015 *aks/-
Copy of order forwarded to: (1) The appellant (2) The respondent (3) Commissioner (4) CIT(A) (5) Departmental Representative (6) Guard File By order Assistant. Registrar Income Tax Appellate Tribunal Delhi Benches, New Delhi