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Penalty: Concealment of income--Addition to income deleted in quantum appeal
February, 09th 2008

ACIT vs Ahuja Radios
Citation 2007 18 SOT 229 
Penalty: Concealment of income - Addition to income deleted in quantum appeal
The penalty was levied in respect of certain addition to income. Those additions were deleted in quantum appeal. No penalty could be levied since the very basis of penalty no longer existed.

ITAT, Delhi

ACIT vs Ahuja Radios

IT Appeal Nos. 3682 and 3683 (Delhi) of 2006 Assessment years 2000-01 and 2003-04

I.P. Bansal, Judicial Member and R.C. Sharma, Accountant Member

31 August 2007

H.K. Sood for the Appellant
A. Srinivas Rao for the Respondent


I.P. Bansal, Judicial Member - Both these appeals are filed by the revenue. They are directed against two separate orders of CIT(A) dated 6-9-2006 for assessment years 2001-02 and 2003-04 respectively.

2. The grounds of appeal for assessment year 2001-02 and assessment year 2003-04 read as under:

A.Y. 2001-02 :

"1. On the facts and in the circumstances of the case, the ld. CIT(A) has erred in deleting the penalty of Rs. 16,73,250 imposed by the Assessing Officer under section 271(1)(c) of the Income-tax Act, 1961 despite the fact that the assessee has claimed excessive deduction under section 80HHC i.e., deduction claimed at Rs. 5,46,21,266 whereas deduction was allowed at Rs. 5,04,15,932 and considering the fact that the department has not accepted the ITAT's order for the assessment year 2001-02 dated 25-8-2006 on which the ld. CIT(A) has relied upon.

2. Any other ground that the appellant would raise during the course of appeal the amending, deleting, modifying or adding any other ground of appeal."

A.Y. 2002-03 :

"1. On the facts and in the circumstances of the case, the ld. CIT(A) has erred in directing the Assessing Officer to delete the amount of MODVAT/Excise duty from the total turnover in computing the deduction allowable to the assessee under section 80HHC considering the fact that the department has not accepted the ITAT's order in the assessee's own case relating to the earlier assessment years having identical issue.

2. Any other ground that the appellant would raise during the course of appeal the amending, deleting, modifying or adding any other ground of appeal."

3. The assessee claimed deduction under section 80HHC at Rs. 5,46,21,266 which was duly supported by a certificate under section 10(CCAC). The said claim of the assessee was reduced by the Assessing Officer to Rs. 5,04,15,932 by making adjustment of excise duty/modvat and also sale and scrap to the net sales and thus net sales of Rs. 76,72,71,612 were increased to Rs. 84,37,46,867. It is on such reduction of deduction, penalty under section 271(1)(c) was imposed. The ld. CIT(A) has observed that ITAT vide its order dated 25-8-2006 in ITA No. 3049/Delhi/2004 has allowed the claim of the assessee and adjustment of excise duty/modvat shown by Assessing Officer in the net sales was negated by the Tribunal. Thus it is mentioned by the CIT(A) that when addition itself has been deleted, the penalty is not leviable and the same is to be deleted.

4. Similarly the claim of the assessee regarding section 80HHC for assessment year 2003-04 was reduced to Rs. 4,20,44,850 against the claim of the assessee at Rs. 4,51,27,955. The net sales of the assessee of Rs. 101,11,53,037 were increased to Rs. 109,81,54,083 by including excise duty/modvat and sale of scrap to the sales. Thus section 80HHC claim was reduced on which the penalty was imposed and the said penalty has been deleted by the CIT(A) on the ground that addition which was made on account of rejection of section 80HHC claimed was deleted by ITAT according to copy of order filed before him. The department is aggrieved with such deletion and hence in appeal.

5. We have heard both the parties and their contentions have been carefully considered. It was pleaded on behalf of assessee that not only the Tribunal has deleted the additions made by the Assessing Officer with respect to deduction under section 80HHC, the Hon'ble Supreme Court has decided the issue in its recent decision i.e., in the case of CIT v. Laxmi Machine Works [2007] 290 ITR 6671 wherein it has been held that excise duty and sales tax do not form part of the total turnover under section 80HHC(3). It was pleaded on behalf of the assessee that a bona fide view was taken by the assessee for claim of deduction under section 80HHC which was not accepted by the Assessing Officer and mere non-acceptance thereon cannot lead to levy of penalty of concealment. It was pleaded that ultimately the Tribunal has decided the issue in favour of the assessee and this fact has been mentioned in the order of CIT(A) itself. It was pointed out that for earlier years also similar additions were deleted, therefore the department should not have contested the deletion of penalty before the Tribunal on the mere ground that the said deletion was not accepted by the revenue.

6. There is no dispute to the extent that the additions on the basis of which penalty has been imposed were deleted by the Tribunal. Therefore, the very basis upon which the penalty has been imposed does not exist. Thus the CIT(A) was right in deleting the penalty.

7. Moreover, the law regarding to levy of concealment penalty has recently been explained by Hon'ble Supreme Court in the case of Dilip N. Shroff v. Jt. CIT [2007] 291 ITR 5191 wherein it has been observed that by concealment or furnishing of inaccurate particulars alone assessee does not ipso facto become liable for penalty. Imposition of penalty is not automatic. Not only the penalty is discretionary in nature but the discretion is also required to be exercised by the Assessing Officer keeping all relevant factors in mind. Penalty proceedings are not to be initiated merely to harass the assessee. The phrases "concealment of income" and "furnishing of inaccurate particulars" are different. Both referred to deliberate act on the part of the assessee. A mere omission or negligence would not constitute a deliberate act of supperessio veri or suggestion falsi. While considering whether the assessee has been able to discharge his burden the Assessing Officer should not begin with the presumption that he is guilty. The order imposing penalty is quasi-criminal in nature and burden lies on the department to establish that the assessee has concealed his income. Since the burden of proof in penalty proceedings varies from that of any assessment proceedings, a finding in the assessment proceedings that a particular receipt is income cannot automatically be adopted, though a finding in the assessment proceeding constitutes good evidence in the penalty proceeding. In the penalty proceedings, thus, the authorities must consider the matter afresh as the question has to be considered from a different angle.

8. Keeping in view the above observations of Hon'ble Supreme Court, levy of penalty in the present case does not confirm the norms laid down in the aforementioned decision of Hon'ble Supreme Court. A bona fide claim was made by the assessee which was partly reduced by the Assessing Officer by taking a view that excise duty/modvat is part of the turnover. There was a dispute prevailing on the said issue. There were many decisions supporting the case of the assessee. Thus it cannot be said that the claim of the assessee was not bona fide when it filed its return of income. Moreover ultimately the issue has been decided in favour of the assessee, as per law declared by Hon'ble Supreme Court in the case of Laxmi Machine Works (supra) and more particularly the additions were also deleted by the Tribunal in the case of the assessee.

9. In view of the above discussion, we hold that there is no infirmity in the order of CIT(A) vide which the penalty has been deleted, we decline to interfere.

10. The appeals filed by revenue are dismissed.

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