ITA No. 4363/Del/2013
Asstt.Year: 2009-10
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH `C' NEW DELHI
BEFORE SHRI R.S. SYAL, ACCOUNTANT MEMBER
AND
SHRI CHANDRAMOHAN GARG, JUDICIAL MEMBER
ITA No.4363/Del/2013
ASSTT.YEAR: 2009-10
ACIT, vs M/s Intell Invofin India Pvt. Ltd.,
Circle 12(1), A-60, Naraina Indl. Area,
New Delhi. Phase-I,
New Delhi.
(PAN: AAACH3144B)
(Appellant) (Respondent)
Appellant by: Shri T. Vasanthan, Sr. DR
Respondent by: Shri Rohit Jain, CA, Ms Debashree, CA
ORDER
PER C.M. GARG, JUDICIAL MEMBER
This appeal of the revenue has been directed against the order of the
CIT(A)-III, New Delhi dated 10.05.2013 in Appeal No. 21/2012-13 for AY
2009-10.
2. The sole ground raised by the revenue reads as under:-
"1. On the facts and in the circumstances of the case, the
ld. CIT(A) has erred in cancelling the penalty of
Rs.15,54,462/- levied by the AO u/s 271(1)(c) of the Income
Tax Act, 1961."
3. We have heard arguments of both the sides and carefully perused the
relevant material placed on record. At the very outset, ld. Counsel of the
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ITA No. 4363/Del/2013
Asstt.Year: 2009-10
assessee has drawn our attention towards paper book filed by the assessee
spread over 83 pages and another paper book of case laws spread over 48 pages
along with the decision of ITAT Delhi `E' Bench in ITA No. 4488/Del/2013
dated 24.4.2015 for AY 2009-10 and submitted that in the similar set of facts
and circumstances, the deletion of penalty by the CIT(A) in the case of
assessee's group company i.e. ACIT vs M/s Mehrotra Invofin India Pvt. Ltd.
has been upheld by the Tribunal dismissing the appeal of the revenue and thus,
the present case of the assessee is squarely covered in favour of the assesee by
this order (supra).
4. Ld. DR supported the penalty order and submitted that the CIT(A)
deleted the penalty without any cogent and justified basis. However, ld. DR
did not seriously object to the fact that in the case of M/s Mehrotra Invofin India
Pvt. Ltd. (supra), the Tribunal has upheld the order of the CIT(A) deleting the
penalty in the similar set of facts and circumstances.
5. On careful consideration of above, from vigilant reading of the order of
the Tribunal in the case of ACIT vs M/s Mehrotra Invofin India Pvt. Ltd., we
note that the Tribunal upheld the order of the CIT(A) approving the deletion of
penalty by the first appellate authority with following observations and
conclusion:-
"8. We have heard both the parties and perused the
relevant records available with us, especially the order passed
by the Revenue Authority. We are of the considered that the Ld.
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ITA No. 4363/Del/2013
Asstt.Year: 2009-10
CIT(A) has deleted the penalty in dispute by thoroughly
examining the written statement filed by the asseessee and the
order of the lower authorities as well as the various decision
rendered by the Hon'ble Supreme Court of India and the
Hon'ble High Court of Delhi.
8.1 After going through the submissions filed by the
assessee alongwith the case law as well as the orders of the
revenue authorities, it is very relevant to go through the
relevant provisions of section 271(1)(c), which provides for
imposition of penalty where the AO has to be satisfied that:- i)
any person had concealed particulars of his income or ii) had
furnished inaccurate particulars of such income. Further, after
insertion of Explanation 1 to Section 271(1)(c), the onus is on
the assessee to show that there was no intention of concealment
and not on the revenue.
8.2 We find that Mens rea was considered to be a
necessary ingredient for levy of penalty as laid down by the
Hon'ble Supreme ITA NO. 4488/Del/2013 4 Court in CIT Vs
Anwar Ali (1970) 76 ITR 696. But after the introduction of
Explanation 1 to Section 271(1)(c), the Hon'ble Supreme Court
has held that the requirement of proof of Mens rea on the part
of the Revenue, would no longer be necessary as held in Addl.
CIT Vs Jeevan Lal Shah (1994) 205 ITR 244 (SC) and B.A.
Balasubramaniam and Bros. Co. Vs CIT (1999) 236 ITR 977
(SC). The role of the Explanation was only to place the burden
of proof squarely on the taxpayer.
8.3 We note that in this context two landmark judgments
were given by Apex Court in Dilip N. Shroff Vs Joint CIT (2007)
2911TR 519 (SC) and T. Ashok Pai Vs CIT (2007) 292 ITR 11
(SC), which spell out mainly the following rules for the purpose
of penalty imposable:
(i) Both the expressions "concealment of income" and
"furnishing of inaccurate particulars" indicate some
deliberation on the part of the assessee, though the word
"deliberately" and the word "willfully"are no longer part of the
statue.
(ii) Mere omission or negligence would not constitute a
deliberate act of suppressiio veri or suggestio falsi.
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ITA No. 4363/Del/2013
Asstt.Year: 2009-10
(iii) Primary burden of proof is on the revenue. The
statute requires satisfaction on the part of the Assessing Officer.
He is' required to arrive at a satisfaction so as to show that
there is primary evidence to establish that the assessee had
concealed the amount or furnished inaccurate particulars and
this onus is to be discharged by the department.
(iv) The Assessing officer while considering levy of
penalty should consider whether the assessee has been able to
discharge his part of the burden. He should not begin with the
presumption that the assessee is guilty.
(v) Though penalty proceedings under the income-tax
law may not be criminal in nature, they are still quasi-criminal
requiring the Department to establish that the asessee has
concealed his income.
(vi) It has to be understood that the Explanation to
section 271(l)(c) is an exception to the general rule raising a
legal fiction by which the burden which is ordinarily with the
Department is sought to be placed on the assessee. This burden
on the assessee is subject to "conditions precedent", which are
required to be satisfied before the Explanation could be
applied.
It was also pointed out as held by Hon'ble Supreme
Court in K. C. Builders Vs AC/T {2004} {265 ITR 562} {SC}
that "deliberateness" is implied in the concept of concealment.
8.4 However after the decision laid down in Dilip N.
Shroff (Supra), T. Ashok Pai (Supra) in a dispute under Central
Excise Law the Apex Court in the case of UOI Vs Dharamendra
Textile Processors (2008) (306 ITR 277) (SC) held that "default
merited penalty without having to consider an intend of the
assessee to evade tax. The Mens rea is essential only for matters
of prosecutor and not penalty."
8.5 Thus after the decision in the case of Dharamendra
Textile Processor (Supra) "Mens rea is not necessary to be
proved by revenue for civil penalties."
8.6 However with the decision of the Hon'ble Supreme
Court in the case of CIT Vs. Reliance Petro Products Pvt. Ltd
(2010) (322 ITR 158) (SC), it is clear that the Hon'ble Supreme
Court by giving the ruling in Dharmendra Textile Processor's
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ITA No. 4363/Del/2013
Asstt.Year: 2009-10
Case (Supra) has not overruled their decision in Dilip N.
Shroff's case except for its mention of Mens rea therein. ITA
NO. 4488/Del/2013 6
8.7 It is also pertinent to mention here that after the
ruling of Dharamendra Textile Processor, the Hon'ble Supreme
Court has come out with the ruling in 2 different cases namely
CIT Vs Atul Mohan Bindal (2009) (317 ITR1) and UOI Vs
Rajasthan Spinning & Weaving Mills (2010) (lGSTR66) (SC),
and where they have reiterated again that "that for applicability
of Section 271(l)(c} the condition stated therein must exist."
8.8 Even in the decision in the case of (IT (LTU) Vs.
MTNL, ITA NO.626/2011 dated 10.10.2011, the Hon'ble
Jurisdictional Delhi High Court has upheld the same view.
8.9 We note from the above, it is very clear that for
imposing penalty under Section 271(1)(c), the AO have to be
satisfied that:
(a) assessee has concealed the particulars of income or
(b) assessee has furnished inaccurate particulars of such
income.
8.10 Thus, in view of the Hon'ble Supreme Court's
decision in Reliance Petroproducts (Supra) it is clear that the
legislature did not intend to impose penalty on every assessee
whose claim was rejected by the assessing officer. What is
sought to be covered under Section 271(l)(c) is concealment of
"particulars of income" or furnishing of "inaccurate particulars
of income" and making of an untenable claim.
8.11 From the various judicial precedents it is seen that
the facts and circumstances in each case has to be seen in the
context and then penalty provision should be applied to see
whether there was the concealment of particulars of income or
the appellant has furnished inaccurate particulars so as to call
for the penal action under Section 271(1)(c).
8.12 We find that assessee had earned a dividend income
of Rs.5,14,50,508/-, which is an exempt income. The assessee on
its own disallowed a sum of Rs. 5,14,505, under section 14A.
However, the AO was not satisfied with the appellant's quantum
of disallowance and he accordingly, applied Rule BD and
computed the disallowance.
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ITA No. 4363/Del/2013
Asstt.Year: 2009-10
8.13 It is also an established proposition that the
assessment proceedings a penalty proceedings are two different
proceedings. An issue may call for a addition to income under
section 143(3) of the I.T. Act, but in order to invoke a penalty,
the AO has to walk little extra mile to prove that there is failure
on the part of the assessee to "conceal the particulars of
income" or "furnishing of inaccurate particulars." The mere
non acceptance of appellant's submissions and without any
positive evidence from the AO that assessee has "concealed" or
"furnishing of inaccurate particular" didn't ipso facto warrant
penalty under Section 271(1)(c). It is also seen that in the
present case that the dividend income earned by the appellant is
to the tune of Rs.5,14,50,508 and asessee's believe that no
direct expenditure is incurred in earning the exempt income,
shows that there is a difference of opinion and it is a vexed
question of law.
8.14 Keeping in view of the above facts and
circumstances of the case, we find considerable force in the
finding of the Ld. CIT(A) that in the present case the conditions
laid down in Section 271(1)(c) are not being fulfilled, because
"inaccurate particulars" means the details filed in the return of
income are "not accurate or exact or correct according to truth
or erroneous."
8.15 In this regard, Ld. CIT(A) has rightly placed
reliance upon the decision of the of the Hon'ble Supreme Court
of India in the case of Reliance Petro Products (Supra) wherein
it was held that when assessee furnished all the material in the
return which was not found to be incorrect, it is upto the
authorities to accept the claim in the return or not, but the same
couldn't be considered as concealment or furnishing of
inaccurate particulars.
8.16 Keeping in view of the facts and circumstances as
explained above, we are of the view that Ld. CIT(A) has rightly
held that there is no concealment or inaccurate particulars of
income where the addition and/or disallowance is based on
bona-fide claims, debatable claims and difference of opinion as
held inter-alia by the Hon'ble Supreme Court in a recent
judgment in the case of Commissioner of Income tax Vs.
Reliance Petroproducts Pvt. Ltd. reported in 322 ITR 158 (SC)
the head notes of the said case reads as under:
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ITA No. 4363/Del/2013
Asstt.Year: 2009-10
"A glance at the provisions of Section 271(1)(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
the assessee. Secondly, the assessee must have furnished
inaccurate particulars of his income. The meaning of the word
"particulars" used in Section 271(1)(c) would embrace the
details of the claim made. Where no information given in the
return is found to be incorrect 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 (l)(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."
8.17 We find that the above view of the Apex court in the
case of Reliance Petroproduct has been followed by
jurisdictional Delhi High Court and also Delhi Tribunal in
numerous subsequent cases.
8.18 We are of the view that addition has been made by
the AO on the basis of difference of opinion, as accordingly to
him Rule 8D is applicable and whereas as per the appellant
Rule 8D is not applicable.
8.19 Accordingly, in view of the above facts and
circumstances, we are of the considered opinion that in the
present case, the penalty under section 271(l)(c) is not leviable
and it deserves to be deleted, hence, Ld. CIT(A) has rightly
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ITA No. 4363/Del/2013
Asstt.Year: 2009-10
deleted the penalty made by the Assessing Officer. Our view is
supported by the decision of the Hon'ble High Court in the case
of ACB India Limited vs. ACIT in ITA No. 615/2014 and the
decision of the ITAT, Delhi Bench in the case of EspireInfolabs
(P) Ltd. vs. ITO in ITA No. 4190 and 4091/Del/2013 dated
6.6.2014. Therefore, we do not see any reason to interfere ITA
NO. 4488/Del/2013 10 with the order of the Ld. CIT(A),
accordingly, we uphold the same and decide the issue against
the Revenue by dismissing the Appeal filed by the Revenue."
6. In view of above, we are inclined to hold that in similar set of facts and
circumstances, the Tribunal held that the assessee had earned dividend income
which is an exempt income and assessee, on its own, disallowed a sum of 1% of
dividend income u/s 14A of the Income Tax Act, 1961. The Tribunal further
held that the AO was not satisfied with the assessee's quantum of disallowance
and he accordingly applied Rule 8D of the Income Tax Rules 1962 and
computed the disallowance which was accepted by the assessee to avoid further
litigation. The Tribunal also held that the issue may call for addition to the
income assessed u/s 143(3) of the Act but in order to invoke the penalty u/s
271(1)(c) of the Act, the AO has to walk a little extra mile to prove that there is
failure on the part of the assessee to "conceal the particulars of income" or
"furnishing of inaccurate particulars". We are in agreement with the conclusion
of the Coordinate Bench of the Tribunal that mere non-acceptance of assessee's
submissions and without any positive evidence from the AO that the assessee
has concealed or has furnished inaccurate particulars of its income, did not ipso
facto invite levy of penalty u/s 271(1)(c) of the Act. The present case is
squarely covered in favour of the assessee by the decision of ITAT Delhi `E'
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ITA No. 4363/Del/2013
Asstt.Year: 2009-10
Bench in the case of ACIT vs M/s Mehrotra Invofin India Pvt. Ltd. (supra) and
hence, sole ground of the revenue being devoid of merits is dismissed.
7. In the result, the appeal of the revenue is dismissed.
Order pronounced in the open court on 01/05/2015.
Sd/- Sd/-
(R.S. SYAL) (CHANDRAMOHAN GARG)
ACCOUNTANT MEMBER JUDICIAL MEMBER
DT. 1st May, 2015
`GS'
Copy forwarded to:-
1. Appellant
2. Respondent
3. CIT(A)
4. C.I.T. 5. DR
By Order
Asstt. Registrar
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