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Asstt. Director of Income Tax,Circle 25(1) New Delhi. vs M/s Agricultural Produce Marketing Committee, Bahadurgarh Road, Najafgarh, C/o Mrs. Avnish Ahlawat, Adv., A-33, L.G.F., Defence Colony, New Delhi-110024
April, 16th 2013
                                     1                      ITA No.490/Del/2012
                                                              Asstt.Year: 2003-04

            IN THE INCOME TAX APPELLATE TRIBUNAL
                 DELHI BENCH `A' NEW DELHI

      BEFORE SHRI J.S. REDDY, ACCOUNTANT MEMBER
                         AND
      SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER

                           ITA No. 490/Del/2012
                         Assessment Year: 2003-04

Asstt. Director of Income Tax,, vs M/s Agricultural Produce Marketing
Circle 25(1),                      Committee, Bahadurgarh Road,
New Delhi.                          Najafgarh, C/o Mrs. Avnish Ahlawat,
                                    Adv., A-33, L.G.F., Defence Colony,
                                    New Delhi-110024
(Appellant)                         (Respondent)

                             Appellant by: Shri Bhim Singh, Sr.DR
               Respondent by: Smt. Avnish Ahlawat, Sh. Paras Choudhary

                               ORDER

PER CHANDRA MOHAN GARG, JUDICIAL MEMBER

      This appeal has been preferred by the revenue against the order of

Commissioner of Income Tax(A)-XXIV, New Delhi dated 25.2.2011 in

Appeal No.85/10-11 for AY 2003-04 passed u/s 271(1)(c) of the Income

Tax Act, 1961 (for short the Act). The grounds raised by the revenue in this

appeal read as under:-
"(i) On the facts and in the circumstances of the case, the ld. CIT(A) has erred in deleting the penalty of Rs.25,21,228/- imposed by the Assessing Officer. (ii) On the facts and in the circumstances of the case, the ld. CIT(A) has erred in not appreciating the fact that 2 ITA No.490/Del/2012 Asstt.Year: 2003-04 claiming excessive deductions also amount to concealment of income as held in various judicial pronouncements." 2. Briefly stated, the facts giving rise to this appeal are that the assessee filed a return of income declaring loss of Rs.71,32,466 on 17.11.2003. The appellant claimed the status of local authority, however, in view of amendments carried out to section 10(20) of the Act, the status of local authority was denied to the assessee and the assessment was completed taking the status of the assessee as "firm". During the course of assessment proceedings, the Assessing Officer considered the expenses debited under the head of Maintenance of Marketing Yard (Engineering works) and Development as expenses of capital nature and therefore the Assessing Officer disallowed these expenses. Further, a sum of Rs.1,38,000 was also disallowed out of miscellaneous expenses. The aggrieved assessee filed an appeal before the Commissioner of Income Tax(A) and got relief of Rs.1,38,000/- and Rs.6,81,836/- out of above mentioned additions pertaining to miscellaneous and development expenses respectively. The balance Rs.79,01,535/- was considered capital expenditure and was capitalized towards the cost of asset with the assessee for which it was held that the assessee is entitled for depreciation on prescribes rates. Being aggrieved by the above appellate order of Commissioner of Income Tax(A), the assessee 3 ITA No.490/Del/2012 Asstt.Year: 2003-04 filed an appeal before the ITAT and got further relief and the issue of disallowance of the capital expenditure was set aside to the file of Assessing Officer for fresh adjudication at the end of Assessing Officer. Finally the assessment was completed by the Assessing Officer at an income of Rs.71,045/- vide assessment order dated 15.12.2009. 3. The Assessing Officer also initiated penalty proceedings u/s 271(1) (c) of the Act. The assessee appellant replied to the penalty notice and stated that they had neither concealed the particulars of income nor had given any inaccurate particulars of income. However, the Assessing Officer did not accept the explanation of the appellant and imposed a penalty of Rs.25,21,228/- on the appellant with a finding that the assessee has furnished inaccurate particulars of its income. Being aggrieved by the above penalty order, the assessee filed an appeal before the Commissioner of Income Tax(A) on the ground that the ld. Assessing Officer failed to appreciate the fact that the appellant had neither concealed particulars of its income nor had filed inaccurate particulars of its income. It was also contended by the assessee that the Assessing Officer also failed to appreciate that merely because some of the expenses debited to Profit & Loss account as revenue were later treated as capital expenditure by the tax authorities, then by no stretch of imagination it can be construed as concealment of income. The assessee placed his reliance on the judgment of Hon'ble Supreme Court in 4 ITA No.490/Del/2012 Asstt.Year: 2003-04 the case of Commissioner of Income Tax vs Reliance Petroproducts Pvt. 322 ITR 158(SC) wherein the Hon'ble Apex Court while elaborating upon the meaning of the word "particulars" as used in section 271(1)( c) has stated as under:- "A glance at the provisions of section 271(l)(c) of the Income-tax Act, 1961, suggests that in order to be covered by it, there has to be concealment of the particulars of the income of assessee. Secondly, the assessee must have furnished inaccurate particulars of his me. The meaning of the word "particulars" used in section 271(I)(c) would embrace the details of the claim made. Where no information given in the return is found to be correct or inaccurate, the assessee cannot be held guilty of furnishing inaccurate particulars. In order to expose the assessee to penalty, unless the case is strictly covered by the provision, the penalty provision cannot be invoked. By no stretch of imagination can making an incorrect claim tantamount to furnishing inaccurate particulars. There can be no dispute that everything would depend upon the return filed by the assessee, because that is the only document where the assessee can furnish the particulars of his income. When such particulars are found to be inaccurate, the liability would arise. To attract penalty, the details supplied in the return must not be accurate, not exact or correct, not according to the truth or erroneous. Where there is no finding that any details supplied by the assessee in its return are found to be incorrect or erroneous or false there is no question of inviting the penalty under section 271(1)(c). A mere making of a claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee. Such a claim made in the return cannot amount to furnishing inaccurate particulars." 5 ITA No.490/Del/2012 Asstt.Year: 2003-04 4. We have heard rival contentions of both the parties and carefully perused the record and all relevant citations placed before us. Ld. DR submitted that the Commissioner of Income Tax(A) has erred in not appreciating the fact that the claim of excessive deduction by the assessee also amounts to concealment of income as per various judicial pronouncements. The DR further submitted that during the second round of quantum proceedings, the Assessing Officer held that out of expenditure of Rs.79,01,535/-, only Rs.6,98,028/- was allowed as revenue expenditure and balance expenditure of Rs.72,03,511 was disallowed because it was to be held as capital expenditure on which depreciation was allowed. The DR further submitted that as per the facts and circumstances of the case, the Assessing Officer rightly inferred that claiming excessive deduction also amounts to concealment as well as furnishing of inaccurate particulars of income. The ld. DR placed his reliance on the judgment of Hon'ble Kerala High Court in the case of Commissioner of Income Tax vs Sea Foods(1961) 105 ITR 708 (Kerala) and Commissioner of Income Tax vs Gates Foam & Rubber Company (1973) 91 ITR 467 (Kerala). Replying to the above contentions, the counsel of the assessee submitted that the case was neither related to the concealment of particulars of income nor furnishing of inaccurate particulars of income. The counsel further 6 ITA No.490/Del/2012 Asstt.Year: 2003-04 submitted that the assessee claimed certain expenditure as revenue which was finalized as capital in nature by the Assessing Officer and at the best this was a case of wrong claim and the act of concealment of particulars of income or furnishing of inaccurate particulars of income cannot be attributed to the assessee. Therefore, the Commissioner of Income Tax(A) rightly followed the judgment of Reliance Petroproducts (supra) and granted relief to the assessee. The counsel for the assessee supported the impugned order and submitted that this appeal of the revenue is devoid of merits. 5. On careful consideration of the peculiar facts and circumstances of the case, we observe that on the second round of quantum proceedings before the Assessing Officer, the Assessing Officer held that the claim of the assessee pertaining to the development expenditure was not revenue in nature and the Assessing Officer made a disallowance of Rs.72,03,511 by holding the same as capital expenditure on which the Assessing Officer also allowed depreciation. In these circumstances, it is a case of wrong claim which was disallowed by the Assessing Officer. The counsel of the assessee contended that a part of the claim of development expenses has been allowed by the Assessing Officer. Therefore, if the assessee misunderstood his claim and a part of his claim is not sustainable as per statutory provisions 7 ITA No.490/Del/2012 Asstt.Year: 2003-04 of the Act, then it cannot be attributed that the assessee furnished inaccurate particulars of income or has concealed particulars of his income. 6. On careful consideration of the peculiar facts and circumstances of this case, we hold that it is a case of wrong claim because a part of the development expenditure has been allowed by the Assessing Officer as revenue and remaining major part of the claim has been held as capital expenditure on which depreciation has been allowed to the assessee. Accordingly, the Commissioner of Income Tax(A) rightly held that the assessee has neither concealed its particulars of income nor provided inaccurate particulars of income as far as the claiming of these expenses is concerned. We are also in agreement with the findings of the Commissioner of Income Tax(A) that it is clearly a case of claiming certain expenses in a bona fide manner which had been disallowed by the Assessing Officer and the Assessing Officer has not been able to make out a case for imposition of penalty u/s 271(1)(c) of the Act. Respectfully relying on the judgment of Reliance Petroproducts Pvt. Ltd. (supra), we hold that the findings and observations of the Commissioner of Income Tax(A) in deleting the penalty order are based on sound principles and legal propositions and we are unable to see any perversity or any other valid reason to interfere with the same. 8 ITA No.490/Del/2012 Asstt.Year: 2003-04 Accordingly, we hold that this appeal of the revenue is devoid of merits and deserves to be dismissed and we dismiss the same. 7. In the result, the appeal of the revenue is dismissed. Order pronounced in the open court on 12.4.2013. Sd/- Sd/- ( J.SUDHAKAR REDDY ) (CHANDRA MOHAN GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER DT. 12th APRIL 2013 `GS' Copy forwarded to:- 1. Appellant 2. Respondent 3. CIT(A) 4. CIT 5. DR True copy By Order Asstt. Registrar
 
 
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