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From the Courts »
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December, 13th 2013
                                                          ITA NO. 3697/Del/2011

                      DELHI BENCH "B", NEW DELHI

                         I.T.A. No. 3697/Del/2011

                              A.Y. : 2004-05

DCIT, CIRCLE 10(1),                 VS.              M/S DELHI
NEW DELHI                                            AUTOMOBILES LTD.,
                                                     14-C, SAGAR
                                                     APARTMENTS, 6,
                                                     TILAK MARG, NEW
                                                     DELHI ­ 110 001
                                                     (PAN: AABCD7933P)
(APPELLANT)                                          (RESPONDENT)

          Assessee by                :    Sh. Aloke Periwal, CA
         Department by               :    Ms. Nidhi Srivastava, Sr. D.R.

     This appeal by the Revenue is directed against the order of the
Ld. Commissioner of Income Tax (Appeals)-XVI, New Delhi                dated
31.3.2011 pertaining to assessment year 2004-05.

2.   The    issue raised is that Ld. CIT(A) erroneously deleted the
penalty u/s. 271(1)(c) of the I.T. Act amounting to Rs. 11,92,044/-.

3.   The brief facts are as under:-

           The original return declaring loss of Rs. 33,22,770/- was
           filed on 1.11.2004.    The said return was processed u/s.
           143(1) and thereafter assessment u/s. 143(3) was
           completed at new income of Rs. NIL vide order dated
           27.9.2006. During the course of assessment proceedings,

                                             ITA NO. 3697/Del/2011

it was observed by the Assessing Officer that no
significant business activity was carried out by the
assessee during the period relevant to the asstt. year
2004-05.       It was also observed that no significant
business activities have actually been carried out by the
assessee company in earlier years. In the           return     of
income, the assessee had shown receipts on account of
sales at Rs. 3,99,232/- only as against stock inventory of
opening and closing stock at Rs. 5,68,30,244.75. The
assessee also wrote back unclaimed         balance amounting
to Rs. 1,44,32,161.49. The assessee also shown sale of its
fixed assets. The profits on sale of fixed assets has been
shown at Rs. 1,72,50,006.65. It has shown miscellaneous
income at Rs. 24,24,373/-.           From the above, the
Assessing Officer inferred that the business had already
been wounded up by the assessee. He opined that the
details furnished by the assessee company also revealed
that the company had not undertaken any effort to
improve its business during the year. Assessing Officer
further referred to Hon'ble Kerala High Court decision in
the case of SPV Bank Ltd. vs. CIT (1980) 126 ITR 773,
wherein the Hon'ble Court has held that in order to
sustain a claim for deduction by way of                business
expenditure, the expenditure must have been laid out or
expended for the purpose of a business which was in
existence in the year of account, the profits of which are
under assessment.        Hence, in view of the judgment of
Kerala   High    Court    (supra),   the   Assessing     Officer
disallowed the claim of the assessee for loss of Rs.

                                                              ITA NO. 3697/Del/2011

4.    On the above addition, penalty u/s. 271(1)(c) of the Act was
also initiated.

5.    Upon assessee's appeal Ld. CIT(A) deleted the levy of penalty
and held as under:-

            "I have considered the facts of the case along with the
            submissions made by the authorized representative of
            the appellant company. It has been laid                   down by
            Hon'ble      Courts   that       assessment       and        penalty
            proceedings are independent and separate and merely
            because addition to            income has been made during
            assessment proceedings, levy of concealment penalty
            does not follow automatically. In the instant case, the
            Assessing Officer himself is admitting in the assessment
            and penalty orders on the one hand that the appellant
            had income from business (albeit not very substantial),
            miscellaneous receipts and profit on sale of fixed assets
            during the year and on the other hand, the Assessing
            Officer has held no business activities were carried out
            during the year and hence the loss worked out due to
            excess of expenditure over income was to be disallowed.
            Thus, as pointed out by the appellant, the Assessing
            Officer is acknowledging the income received by the
            appellant during the year but not allowing the excess of
            expenditure over income, stating that             the business of
            the appellant had closed down. However, the AO has
            failed to specify any item of expenditure claimed by the
            appellant which was not supported by bills/ vouchers.
            Accordingly, in my view, the AO has not been able to
            establish   that   there       was   furnishing    of    inaccurate
            particulars of income or concealment              of income. The

                                                       ITA NO. 3697/Del/2011

            judgement of the Hon'ble Hyderabad Bench of the ITAT in
            the case of Navbhartat Enterprise Pvt. Ltd. relied upon by
            the appellant, in which the        ITAT held that merely
            because there was difference of opinion between the
            assessee and the department regarding allowability of
            depreciation/ losses, concealment of income was not
            established, is squarely applicable to the facts of this
            case. Therefore, the AO is directed to delete the penalty
            levied u/s. 271(1)(c). These two grounds of appeal are

6.     Against the above, the Revenue is in appeal before us.

7.     We have heard both the counsel and perused the records. We
find that in the quantum proceedings, the addition was sustained by
the Ld. CIT(A) as the assessee has not availed the opportunities of
hearing. Ld. Counsel of the assessee has submitted that the said
order of the Ld. CIT(A) has been set aside by the tribunal to the file
of the Ld. CIT(A).      In this view of the matter, Ld. Counsel of the
assessee submitted that the penalty u/s. 271(1)(c) in this case is not
sustainable.    Further, Ld. Counsel of the assessee submitted that in
this   case there is no concealment       or   furnishing of inaccurate
particulars and as such pleaded that the order of the Ld. CIT(A) be
affirmed. Ld. Departmental Representative on the other hand relied
upon the order of the Assessing Officer.

8.     We have carefully     considered the submissions and perused

the records. We find that in this case that there is no concealment

or furnishing of inaccurate particulars by the assessee. We find that

Assessing Officer in this case has himself admitted that assessee

has    income    from    business   (though    not   very   substantial),

                                                     ITA NO. 3697/Del/2011

miscellaneous receipts and profit on sale of fixed assets. Assessing

Officer has thus contradicted himself by saying that no business

activities were carried out by the assessee and hence the loss

worked out due to excess of           expenditure over income was

disallowed. Thus, while Assessing Officer acknowledged the receipt

by the assessee during the year, but he did not allow the excess of

expenditure over income, stating that the business of the appellant

had closed down. We further find that Assessing Officer has failed to

specify any amount of expenditure claimed by the assessee which

is not supported by bills / vouchers.     Hence, no case of bogus

expenditure has been made out. Thus, we agree with the Ld. CIT(A)

that Assessing Officer has not been able to establish that there is

furnishing of inaccurate particulars or concealment of income.

8.1   Furthermore, as stated by the Ld. Counsel of the assessee on

merits of the case the matter has been remitted by the Tribunal to

the file of the Ld. CIT(A).   Hence, since the quantum has not yet

been confirmed, the penalty is also not leviable in this view of the


9. In this regard, we place reliance from the Apex Court decision

rendered by a larger Bench comprising of three of their Lordships in

the case of Hindustan Steel vs. State of Orissa in 83 ITR 26 wherein

it was held that "An order imposing penalty for failure to carry out a

                                                      ITA NO. 3697/Del/2011

statutory obligation is the result of a quasi-criminal proceedings, and

penalty will not ordinarily be imposed unless the party obliged either

acted deliberately in defiance of law or was guilty of conduct

contumacious or dishonest, or acted in conscious disregard of its

obligation. Penalty will not also be imposed merely because it is

lawful to do so. Whether penalty should be imposed for failure to

perform a statutory obligation is a matter of discretion of the

authority to be exercised judicially and on a consideration of all the

relevant circumstances. Even if a minimum penalty is prescribed,

the authority competent to impose the penalty will be justified in

refusing to impose penalty, when there is a technical or venial

breach of the provisions of the Act, or where the breach flows from a

bonafide belief that the offender is not liable to act in the manner

prescribed by the statute."

9.1   We further place reliance upon the        Hon'ble Apex       Court

decision in the case of CIT vs. Reliance Petro Products Ltd. in      Civil

Appeal No. 2463 of 2010. In this case vide order dated 17.3.2010 it

has been held that the law laid down in the Dilip Sheroff case 291

ITR 519 (SC) as to the meaning of word `concealment' and

`inaccurate' continues     to be a good law because what was

overruled in the Dharmender Textile case was only that part in Dilip

Sheroff case where it was held that mensrea was a essential

requirement of penalty u/s 271(1)(c). The Hon'ble Apex Court also

                                                          ITA NO. 3697/Del/2011

observed that if the contention of the revenue is accepted then in

case of every     return where the claim is not accepted by the

Assessing Officer      for any reason, the assessee will invite the

penalty u/s 271(1)(c). This is          clearly not the intendment of


10.   In the background of the aforesaid discussions and precedents,
we do not find any infirmity in the order of the Ld. Commissioner of
Income Tax (A), hence, we uphold the same.

11. In the result, the appeal filed by the Revenue stands

      Order pronounced in the open court on 06/12/2013.

      Sd/-                                                  Sd/-

 [I.C. SUDHIR]                                     [SHAMIM YAHYA]
JUDICIAL MEMBER                                ACCOUNTANT MEMBER

Date 06/12/2013
Copy forwarded to: -
1.    Appellant 2.     Respondent              3.   CIT     4.     CIT     (A)

5.    DR, ITAT

                            TRUE COPY
                                                    By Order,

                                                    Assistant Registrar,
                                                    ITAT, Delhi Benches

    ITA NO. 3697/Del/2011

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