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Income Tax Appellate Tribunal, DELHI BENCH ‘H’, NEW DLEHI
Before: SHRI G.S. PANNU & SHRI SAKTIJIT DEY
This is an appeal by the assessee against order dated 08.09.2022 passed by National Faceless Appeal Centre (NFAC) confirming penalty imposed of Rs.1,70,000/- u/s. 271(1)(c) of the Income-tax Act, 1961 for the assessment year 2015-16.
Briefly, the facts are, the assessee is a resident corporate entity.
On 03.11.2014, Security Appellate Tribunal, Mumbai upheld the decision of Security Exchange Board of India (SEBI) imposing penalty of Rs.5,00,000/- on account of delay in compliance with Regulation 8(3) of SAST Regulations, 1997. In the original return of income filed for the impugned assessment year on 24.11.2015 declaring income of Rs.14,26,88,670/-, the assessee did not claim the above said amount of Rs.5,00,000/- as deduction towards expenses. However, in the revised return of income filed u/s. 139(5) of the Act in course of assessment proceedings, the assessee declared income of Rs.14,21,88,670/- after reducing the amount of Rs.5,00,000/- paid to SEBI. While completing the assessment, Assessing Officer disallowed assessee’s claim of deduction of Rs.5,00,000/- on the ground that payment made, being in nature of penalty, is not allowable u/s. 37(1) of the Act. The assessee accepted the disallowance. Based on the disallowance made of Rs.5,00,000/-, the Assessing Officer initiated proceedings for imposition of penalty u/s. 271(1)(c) of the Act and ultimately passed an order imposing penalty of Rs.1,70,000/-, alleging that the assessee has furnished inaccurate particulars of income. Though, the assessee challenged the imposition of penalty by filing an appeal before ld. Commissioner(Appeals), however, the penalty imposed was confirmed.
We have considered rival submissions and perused the materials on record. It is a fact on record that in the original return of income filed for the assessment under dispute, the assessee did not claim the deduction of Rs.5,00,000/- paid to SEBI for violation of certain regulations. It is also a fact that in the audit report, the auditor has duly disclosed the payment made to SEBI. However, in course of assessment proceedings, the assessee had filed a revised return of income claiming deduction of the amount of Rs.5,00,000/- paid to SEBI, since, the assessee entertained a belief that the payment made to SEBI for violation of SEBI Regulations, does not fall within the purview of Explanation-1 to section 37 of the Act, as such payment is not for any offense or is prohibited by any law. From the aforesaid facts, it is very much clear that the assessee did furnish all relevant particulars relating to the payment made to SEBI not only in the audit report, but in the original return of income. In the revised return of income, the assessee has merely claimed the payment as deduction, which was not claimed in the original return of income. Therefore, factually, it cannot be treated as a case of furnishing of inaccurate particulars of income.
In any case of the matter, whether the payment made to SEBI for violation of certain SEBI Regulations is on account of any offense or is prohibited by law, as per the language of Explanation 1 to section 37 of the Act, in our view, is a highly debatable issue as there are judicial precedents holding that penalty paid for delay in various obligations to SEBI/Stock Exchange/RBI does not amount to infringement/infraction of any law. In this context, the following decisions cited by ld. Counsel support our view :
(i). Mangal Keshav ecurities Limited vs. ACIT, 2015(11) TMI 111. (ii). IDBI Bank Ltd. vs. DCIT, 2021 (2) TMI 608 (iii). CIT vs. M/s. The Stock and Bond Trading Company, 2011(1) TMI 172.
Therefore, merely because assessee accepted the disallowance, it will not lead to the conclusion that the assessee has furnished inaccurate particulars of income. In view of the aforesaid, we hold that the penalty imposed u/s. 271(1)(c) of the Act in the facts of the present appeal is unsustainable. Accordingly, we delete the penalty imposed.
In the result, appeal is allowed.
Order pronounced in the open court on 29/05/2023.