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ACIT, Circle 12(1), New Delhi. Vs M/s Intell Invofin India Pvt. Ltd., A-60, Naraina Indl. Area, Phase-I, New Delhi.
May, 04th 2015
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

                                            1
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.
                                         2
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.





                                       3
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

                                         4
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.
                                         5
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:


                                         6
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




                                        7
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'

                                        8
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




                                            9

 
 
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