ITA No.237/Del/2013
Asstt.Year: 2008-09
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCHES `E' NEW DELHI
BEFORE SHRI G.D. AGRAWAL, VICE PRESIDENT
AND
SHRI CHANDRAMOHAN GARG, JUDICIAL MEMBER
ITA NO. 237/DEL/2013
ASSTT. YEAR: 2008-09
ACIT, vs Nuberg Engineering Ltd.,
Circle-13(1), 1223, Gali No.83,
Room No. 406, Shanti Nagar, Tri Nagar,
C.R. Building, New Delhi.
I.P. Estate, (PAN: AAACN3523A)
New Delhi.
(Appellant) (Respondent)
Appellant by: Shri Vinay Jain, CA
Respondent by: Shri Gunjan Prashad, CIT DR
O R D E R
PER CHANDRAMOHAN GARG, J.M.
This appeal has been preferred by the revenue against the order of
the CIT(A)-XVI, New Delhi dated 26.10.2012 in Appeal No. 16/11-12 for AY
2008-09. Although the revenue has raised as many as five grounds in this
appeal but except ground no.1, other grounds are argumentative and
supportive to the main ground no. 1 which reads as under:-
"1. Whether on the facts and in the circumstances of
the case, the ld. CIT(A) has erred in deleting the penalty of
Rs.41,49,854/- imposed u/s 271(1)( c) of the I.T. Act, 1961
for furnishing of inaccurate particulars of income."
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ITA No.237/Del/2013
Asstt.Year: 2008-09
2. Briefly stated, the facts giving rise to this appeal are that the assessee
while filing the return of income claimed deduction u/s 80IB of the Income
Tax Act, 1961 amounting to Rs.1,22,09,044/- . Subsequently, during the
assessment proceedings, assessee filed a letter on 8.9.2010 and withdrew
the claim of deduction. During the assessment proceedings, the issue was
discussed and the assessee's representative submitted that their claim was
valid but they were not in possession of excise certificate indicating the date
of commencement of business. However, in order to buy peace, the AR
submitted before the AO that they had withdrawn the claim of deduction
u/s 80IB of the Act and agreed for addition in this regard. Accordingly, the
said amount of claim was added back to the income of the assessee on
agreed basis. Subsequently, the AO issued a notice for imposition of penalty
u/s 271(1)(c) of the Act on 12.1.2011 fixing the date on 17.1.2011. None
appeared on the said date nor any reply was filed. The AO issued another
show cause notice on 15.2.2011 fixing the date on 28.2.2011. The AO held
that since the assessee has not filed any reply, it is therefore observed that
the assessee has no explanation to offer and penalty is decided on the basis
of material facts as per provisions of the Act. The AO imposed penalty of Rs.
41,49,854/- @100% of tax sought to be evaded.
3. The aggrieved assessee preferred an appeal before the CIT(A) which
was allowed by passing the impugned order and the AO was directed to
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Asstt.Year: 2008-09
delete the penalty. Now, the aggrieved revenue is before this Tribunal in
this second appeal with the main ground as reproduced hereinabove.
4. We have heard arguments of both the sides and carefully perused the
material and documents placed before us. Ld. DR submitted that the ld.
CIT(A) has erred in deleting the penalty of Rs.41,49,854/- imposed u/s
271(1)(c) of the I.T. Act, 1961 for furnishing of inaccurate particulars of
income. Ld. DR further contended that the first appellate authority has
erred in deleting the penalty by holding that the AO had not recorded its
satisfaction regarding furnishing of inaccurate particulars of income
whereas the AO initiated the penalty proceedings u/s 271(1)(c) of the Act
in the assessment order and the assessee accepted that he had furnished
inaccurate particulars of income u/s 80IB of the Act and agreed for addition
of the same. Ld. DR vehemently contended that the CIT(A) ignored the
reason recorded by the AO for imposing penalty that the CIT(A) was aware
of the fact that commencement of business certificate of Excise department
was not available with it, still it did not file its revised return as per time
allowed u/s 139(5) of the Act. The DR also mentioned that the CIT(A) has
also ignored this important fact that the assessee accepted its mistake only
after issuance of notice u/s 143(2)/142(1) of the Act i.e. after initiation of
assessment proceedings.
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Asstt.Year: 2008-09
5. Replying to the above, at the very outset, ld. AR has drawn our
attention towards para no. 5.5 of the impugned order and submitted that
the impugned deduction was claimed by the assessee under a bona fide
mistake which he immediately rectified before commencement of
assessment proceedings by its letter dated October 8, 2009. The AR has
also drawn our attention towards assessment order para 3.1 at page 2 and
submitted that date of the letter of the assessee filed before the AO during
assessment proceedings was noted as 08.09.2010 which is wrong and
factually the correct date was 8.10.09 by which the assessee withdrew its
claim of deduction u/s 80IB of the Act. From bare reading of para 5.5 of the
impugned order, we note that the CIT(A) has appreciated this fact and
approved the contention of the assessee that the assessee filed letter on
8.10.09 before the commencement of assessment proceedings.
6. Ld. AR supporting the impugned order further submitted that the
Hon'ble Delhi High Court in the case of CIT vs Societex (2012) 24
Taxman.com 309 has held that the mistake being a human bonafide clerical
mistake which occurred while making the statement of income cannot
attract penalty. In that case, the Hon'ble Jurisdictional High Court of Delhi
approved the conclusion of the ITAT that in this situation, the assessee
cannot be held guilty of filing inaccurate particulars of income.
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ITA No.237/Del/2013
Asstt.Year: 2008-09
7. On careful consideration of above submissions and contentions of
both the sides and bare reading of the impugned order, we observe that the
CIT(A) has allowed the appeal of the assessee deleting the penalty imposed
by the AO u/s 271(1)(c) of the Act with following observations and
conclusions:-
"5.6 In fact, before the questionnaires were issued u/s
142(1) by the AO, the assessee offered the income to the
extent it was claimed as deduction u/s 80IB to be considered
as part of income. The assessee surrendered the same to buy
peace with the department before the claim of deduction u/s
80IB was examined by the AO in the assessment proceedings.
Merely because the assessee disclosed additional income suo
motu after issue of a notice u/s 143 (2) of the Act, does not
amount to detection of concealment by the AO. Apparently,
the assessee had given all particulars of his income and had
disclosed all facts to the AO during the assessment
proceedings. It is not the case of the AO that in reply to a
query of the AO, some new facts were discovered or the AO
had dug out some information which was not furnished by
the assessee. In such circumstances, I am of the opinion that
no penalty is leviable. It is well settled that assessment
proceedings and penalty proceedings are separate and
distinct and as held by .Hon'ble Supreme Court in the case of
Ananthraman Veerasinghaiah & Co. vs. CIT, 123 ITR 457, the
finding in the assessment proceedings cannot be regarded as
conclusive for the purposes of the penalty proceedings. When
the assessee himself offered the income and rectified the
bonafide mistake before its detection by the AO, it could not
be held liable for penalty under section 271(1) (c) of the Act.
5.7 In a similar case Hon'ble Delhi High Court in the case of
CIT vs. Societex (2012) 24 Taxman.com 309 upheld the
decision of Tribunal and CIT (Appeal) where the assessee in
this case made provision for taxation under the head current
Liabilities and the provision was not added back to the profit
as per the Profit & Loss Account. The Hon'ble ITA T held the
mistake to be human bonafide clerical mistake which
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Asstt.Year: 2008-09
occurred while making the statement of income and it also
held no satisfaction was recorded by the A.O in the
assessment proceeding that the assessee was guilty of filing
inaccurate particulars of income. It was therefore held that
the penalty cannot be imposed on the assessee u/s 271 (1 )
(c) of the Act.
5.8 In the case of Dy. CIT vs. Tarun Agarwal 2009 (13) MTC
831, the ITAT Lucknow Bench 'A' held that "the assessee had
surrendered the amount before any specific detection of
undisclosed income or even before the issue of notice. Even
though a general enquiry was going on and notices had been
issued to some of his relatives and the amount might have
been surrendered because of compulsion of circumstances, it
was not sufficient to penalize the assessee as the factum of
detection was not there." In the instant case also, nothing is
brought on record that there was any detection at the level
of the AO to suggest that the assessee concealed the income,
which was offered for taxation suo motu.
5.9 In the case of ACIT v. Ashok Raj Nath (ITAT, Delhi) 'A'
Bench in ITA No. 2970/(Del)/2012 it was held by the Hon
'ble ITAT that merely because the assessee disclosed
additional income suo moto after issue of notice u/s 143(2)
of the Act, does not amount to detection of concealment by
the A.O. Apparently the assessee had given all particulars of
his income and had disclosed all facts to the A.O during the
Assessment proceedings; It was held that it was not a case
that on- reply to the query of the AO some new facts were
discovered or the AO had dug out some information which
was not furnished by the assessee. Therefore the Hon'ble
ITAT was of the opinion that no penalty is leviable. In para 9
of the order, Hon'ble ITAT held:
"The assessee voluntary disclosed additional income during
the course of assessment proceedings and paid tax thereon.
In the light of view taken in the aforesaid decisions, it cannot
be said in the case before us, additional income disclosed
during the course of assessment proceedings was not
voluntarily or that the assessee wanted to conceal the
income. Even though the revised return was found to be
invalid, the AO accepted the income as declared in the
revised return and computation. The AO did not bring any
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Asstt.Year: 2008-09
material on record that the declaration of income made by
the assessee in his revised return or his explanation was not
bonafide. In these circumstances, there appears to be no
basis for imposition of penalty on the ground that the
assessee furnished inaccurate particulars of income."
5.l0 In view of the above facts and decisions cited, it is held
that as no satisfaction is recorded for initiation of penalty
proceedings u/s 271(1)(c) of the IT Act, 1961 in respect of
additions made for disallowance u/s 80IB of the Act.,
therefore, the penalty order suffers from lack of jurisdiction
to impose penalty. Further as the assessee himself offered the
income and rectified the bonafide mistake before its
detection by the AO, it could not be held liable for penalty
under section 271(1) (c) of the Act."
8. Under aforementioned conclusion of the CIT(A) and facts and
circumstances of the present case, from the assessment order dated
01.09.2010, we note that the AO made four additions and first addition was
related to disallowance of deduction u/s 80IB of the Act on agreed basis and
the AO did not record any satisfaction for imposing penalty u/s 271(1)(c) of
the Act but at the same time, we clearly observe that the AO specifically and
separately recorded satisfaction for imposing penalty in regard to other
three additions which clarify the mind and object of the AO during
assessment proceedings that he did not intend to impose penalty on the
agreed addition of disallowance of deduction u/s 80IB of the Act. At this
stage, we also note that the ld. DR has not disputed this fact that the
assessee withdrew its claim on 9.10.2009 prior to issuance of notice u/s
142(1) of the Act i.e. prior to commencement of assessment proceedings. In
this situation, we can safely presume that at the time of making addition on
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Asstt.Year: 2008-09
agreed basis, the AO, in fact, was not intended to initiate penalty
proceedings on the count of first addition which was made on the basis of
written letter of the assessee withdrawing the claim u/s 80IB of the Act
dated 9.10.2009 which was filed prior to issuance of notice u/s 142(1) of
the Act. Hence, we are of the opinion that the assumption of jurisdiction for
initiation of penalty proceedings u/s 271(1)(c) of the Act was not valid. We
may also point out that in the original assessment order, the AO recorded
satisfaction about three additions at the end of relevant operative para but
neither at the end of impugned addition in regard to agreed disallowance
nor at the end of the assessment order, the AO bothered to record required
satisfaction as per provisions of the Act for initiation of penalty proceedings
u/s 271(1)( c) of the Act.
9. However, in the totality of the facts and circumstances of the case, we
clearly note that the assessee has withdrawn its claim of deduction filed u/s
80IB of the Act at the very outset of assessment proceedings prior to
issuance of notice u/s 142(1) of the Act and the reason as explained by the
assessee was that their claim was valid but as they are not in possession of
excise certificate indicating date of commencement of business, therefore,
they agreed for addition in this regard. At this juncture, we respectfully
take cognizance of decision of Hon'ble Apex Court in the case of CIT vs
Reliance Petroproducts Ltd. 322 ITR 158 (SC) wherein their Lordships
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Asstt.Year: 2008-09
held that merely because the claim of the assessee was not accepted or not
found to be acceptable by the revenue authorities, that by itself would not
attract penalty u/s 271(1)(c) of the Act. In the present case, we disagree
with the conclusion of the AO that the assessee had furnished either
inaccurate particulars of income or submitted wrong statement of its
income during assessment proceedings and as we have noted above the
assessee withdrew its claim of deduction us/ 80IB of the Act before
initiation of assessment proceedings. Therefore, we approve the conclusion
of the CIT(A) deleting the penalty and we reach to a logical conclusion that
we are unable to see any ambiguity or perversity or any other valid reason
to interfere in the impugned order of the CIT(A) and we uphold the same.
Accordingly, main ground of the revenue being devoid of merits is
dismissed.
9. In the result, the appeal of the revenue is dismissed.
Order pronounced in the open court on 27.1.2015.
Sd/- Sd/-
(G.D. AGRAWAL) (CHANDRAMOHAN GARG)
VICE PRESIDENT JUDICIAL MEMBER
DT. 27th January, 2015
`GS'
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ITA No.237/Del/2013
Asstt.Year: 2008-09
Copy forwarded to:-
1. Appellant
2. Respondent
3. C.I.T.(A)
4. C.I.T. 5. DR
By Order
Asstt. Registrar
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