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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