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Ms. Manmeet Nanda, D-201, Defence Colony, New Delhi VS. ACIT, Circle 41(1), New Delhi
December, 18th 2013
                                                               ITA NO. 5398/Del/2012

                        DELHI BENCH "E", NEW DELHI

                            I.T.A. No. 5398/Del/2012

                                  A.Y. : 2006-07

Ms. Manmeet Nanda,                     VS.               ACIT, Circle 41(1),
D-201, Defence Colony,                                   New Delhi
New Delhi
(PAN: ADNPN 1428R)
(APPELLANT)                                              (RESPONDENT)

             Assessee by                  :   Sh. Anil Sharma, ADvocate
            Department by                 :   Sh. B. Srinivas Kumar, Sr. D.R.

      This appeal by the Assessee is directed against the order of the Ld.

Commissioner of Income Tax (Appeals)-XXVII, New Delhi dated 03.8.2012

pertaining to assessment year 2006-07.

2.    The       issue raised in the       appeal is that ld.    CIT(A) erred in
confirming the penalty of Rs. 66,444/- imposed by the Assessing Officer
u/s. 271(1)(c) of the I.T. Act.

3.    In this case return showing an income of Rs. 4,74,031/- was filed on
31.3.2007. In the return of income the assessee had declared Short Term
Capital Gains (STCGs) amounting to Rs. 3,01,482/- on redemption of
mutual funds. On perusal of the details it was noticed that the gross
STCGs earned by the assessee were Rs. 5,18,039/- from which amount of
Short Terms Capital Loss (STCL) of Rs. 2,16,557/- had been reduced and

                                                             ITA NO. 5398/Del/2012

the next taxable STCGs had been declared at Rs. 3,01,482/-. From the
detailed working of the net STCGs, the Assessing Officer noticed that the
assessee had not kept in mind the provisions of section 94(7) and had not
ignored the loss arising on purchase and sale of mutual fund units to the
extent of dividend received. In his letter dated 14.10.2008, the Assessing
Officer   requested   the   assessee   to    furnish   detailed   working    loss
disallowable specifically keeping in view the provisions of section 94(7) of
the Act. The assessee filed a written reply in response to this query by his
letter dated 18.11.2008 filing a chart showing          applicability and non
applicability of Section 94(7) in respect of the mutual fund transactions
undertaken by her. On the basis of this information the amount of loss
disallowable due to applicability to Section 94(7) was shown at Rs.
59,523/- for three mutual fund transactions.

3.1   However, on analysis of the details furnished by the assessee and
information available on record, the Assessing Officer arrived at the
amount of loss disallowable at Rs. 2,17,138/- and the assessee was
specifically given a show cause notice as to why the loss to the extent of
Rs. 2,17,138/- should not be disallowed as per the provisions of section
94(7) of the Act. The assessee in response to this specific show cause
notice stated before the Assessing Officer that working of the disallowable
loss as per show cause letter dated 24.11.2008 was correct. Thereafter,
the assessment was completed by adding the amount of Rs. 2,17,138/- to
the income of the assessee under the head income from capital gain.
Penalty proceedings u/s. 271(1)(c) were also initiated. The Assessing
Officer issued notice to the assessee asking for explanation as to why the
penalty u/s. 271(1)(c) should not be imposed in her case. The assessee in
response to this query submitted           before the Assessing Officer that
information required for calculation of disallowance u/s. 94(7) such as
record dates were not available at the time of filing of return of income
and it was not willful and conscious fault of the assessee. Further, the
assessee had agreed to the addition made by the Assessing Officer for
peace of mind and cooperation with the department and tax including
interest was duly deposited. Further, the provisions of section 94(7) were

                                                         ITA NO. 5398/Del/2012

not popular and were not in frequent use because of which the required
information under section could not be incorporated in the return. After
considering this explanation of the assessee, the Assessing Officer
imposed a penalty u/s. 271(1)(c) amounting to Rs. 66,444/-.

4.    Upon assessee's appeal Ld. CIT(A) confirmed the penalty.

5.    Against the above order the Assessee is in appeal before us.

6.    We have heard both the counsel and perused the records. Ld.
Counsel of the assessee submitted that the addition was imposed due to
mistake of the counsel of the assessee.     Hence, he submitted that the
assessee should not be visited with the rigors of penalty provision u/s.
271(1)(c).   Ld. Departmental Representative relied upon the orders of the
authorities below and submitted that the assessee has been assisted by
the professional Chartered Accountant and hence the plea of mistake on
their part is not tenable.

7.    We have considered the submissions and perused the records. We
find that there is considerable cogency in the assessee's plea that
addition arose due to the mistake of the counsel of the assessee. We find
that the Chartered Accountant Firm has itself acknowledged that there
was a mistake on their part. In this regard, a written reply given to the
Assessing Officer on 03.12.2008 through the Chartered Accountant Firm
which is reproduced as under:-

             "That we have given letter dated 18.11.2008 in which taxable
             portion u/s. 94(7) for A.Y. 2006-07 has already been submitted
             before your honour. As regards S.No. 1 ­ 3 & 5 the record
             dates were not available. In the absence of record date, we
             were unable     to calculate the disallowance u/s. 94(7).
             However, the details you have given in your letter dated
             24.11.2008 seems to be correct. That as the record dates
             were not available, the correct disallowance u/s. 94(7) could
             not be calculated. Please consider the above facts and

                                                             ITA NO. 5398/Del/2012

8.    From the     above, it is apparent that the Chartered Accountant Firm
has failed to get the record dates and accordingly failed to calculate
correct disallowance. Hence, it is apparent that the above addition in this
regard arose neither because of concealment or furnishing of inaccurate
particulars by the assessee, but due to mistake on the part of the
assessee's counsel.

9.    In this regard, we draw support from the Hon'ble Apex Court
decision in the case of Price Waterhouse Coopers Pvt. Ltd. vs. C.I.T. and
Anr. 348 ITR 306 (SC). In this case it was held, allowing the appeal, that
the   facts   of   the    case   were   peculiar   and    somewhat       unique.
Notwithstanding that the assessee was a reputed firm and had great
expertise available with it, it was possible that even the assessee could
make "silly" mistake. The fact that the tax audit report was filed along
with the return       and that it unequivocally stated that the provision for
payment was not allowable under section 40A(7) of the Act indicated that
the assessee made a computation error in its return of income.               The
contents of the tax audit report suggested that there was no question of
the assessee concealing its income or of the assessee furnishing any
inaccurate particulars.       Apart from the fact that the assessee did not
notice the error, it was not even noticed even by the Assessing Officer
who framed the assessment order.            All that had happened was that
through a bona fide and inadvertent error, the assessee while submitting
its return, failed to add the provision for gratuity to its total income.    The
assessee should have been careful but the absence of due care, in a case
such as the present, did not mean that the assessee was guilty of either
furnishing inaccurate particulars or attempting to conceal its income.        On
the peculiar facts of this case, the imposition of penalty on the assessee
was not justified."

10.   In this regard, we also 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

                                                            ITA NO. 5398/Del/2012

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
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

11.   Respectfully following the above precedent and the discussion
hereinabove, we delete the penalty in this case.

      In the result, the appeal filed by the assessee stands allowed.

      Order pronounced in the open court on 11/12/2013, upon conclusion
of hearing.

      Sd/-                                                           Sd/-

 [DIVA SINGH]                                       [SHAMIM YAHYA]
JUDICIAL MEMBER                                 ACCOUNTANT MEMBER

Date 11/12/2013
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. 5398/Del/2012

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