IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH `A', NEW DELHI
Before Sh. N. K. Saini, AM And Sh. A. T Varkey, JM
ITA No. 4479/Del/2013 : Asstt. Year : 2009-10
ACIT, Central Circle-2 Vs M/s A. T. Invofin India Pvt. Ltd.,
New Delhi A-60, Naraina Indl. Area, Phase-I,
New Delhi
(APPELLANT) (RESPONDENT)
PAN No. AAACA8248B
Assessee by : Shri Ajay Vohra & Upvan Gupta
Revenue by : Ms. Y. Kakkar
Date of Hearing : 23.6.2014 Date of Pronouncement : 25.6.2014
ORDER
Per N. K. Saini, AM:
This is an appeal by the department against the order dated
10.5.2013 of CIT(A)-II, New Delhi.
2. The only effective ground raised in this appeal reads as under:
"1. On the facts and in the circumstances of the case, the
CIT(A) has erred in cancelling the penalty of Rs. 13,97,175/-
levied by the A.O under section 271(1)(c) of the Income Tax Act,
1961".
3. The facts of the case in brief are that the assessee filed return of
income declaring an income of Rs.64,98,665/-. However, the
assessment was framed on 30.12.2011 at an income of Rs.
1,06,09,211/- u/s 143(3) of the IT Act, 1961 (here in after referred to
the Act). During the course of assessment proceedings the A.O
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A. T. Invofin India Pvt. Ltd.
noticed that the assessee had earned dividend income of Rs.
81,09,932/- which did not form part of total income and that as per
the assessee, the disallowance u/s 14A of the Act came to Rs.
16,020/-. The A.O asked the assessee to furnish details of expenses
attributable to the earning of exempt income and as to why same
should not be allowed as per the provisions of sec. 14A of the Act r.w
Rule 8D of the Income Tax Rules. The assessee filed the computation
of disallowance u/s 14A but the A.O did not find merit in the
submissions of the assessee had calculated the disallowance u/s 14A
of the Act at Rs. 41,26,566/-. Hence, the addition of Rs. 41,10,546/-
(Rs. 41,26,566/- - Rs. 16,020/-) was made on account of expenses
incurred in relation to exempt income u/s 14A of the Act. The A.O
also initiated penalty proceedings u/s 271(1)(c) of the Act and levied
the penalty of Rs. 13,97,175/-. The A.O referred to the decision of
Hon'ble Supreme Court in the case of Union of India and Others Vs
Dharamendra Textile Processors (2008) 306 ITR 277.
4. Being aggrieved the assessee carried the matter to the ld.
CIT(A) and the submissions made before him had been incorporated
in para 3 of the impugned order, at the cost of repetition the same are
not reproduced herein.
5. The ld. CIT(A) after considering the submissions of the assessee
observed that and for imposing penalty u/s 271(1)(c), the A.O have to
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A. T. Invofin India Pvt. Ltd.
be satisfied that a) assessee has concealed the particulars of income or
b) assessee has furnished inaccurate particulars of such income. He
further observed that the legislature did not intend to impose penalty
on every assessee whose claim was rejected by the Assessing Officer.
He also observed that what is sought to be covered u/s 271(1)(c) is
concealment of particulars of income or furnishing of inaccurate
particulars of income and not making untenable claim. A reference
was made to the following cases:
CIT Vs Reliance Petro Products Pvt. Ltd. (2010) 322 ITR 158 (SC)
CIT Vs Atul Mohan Bindal (2009) 317 ITR 1 (SC)
UOI Vs Rajasthan Spinning & Weaving Mills (2010) 1GSTR66
(SC)
and
Decision in the case of CIT (LTU) Vs MTNL, ITA No. 626/2011,
dated 10.10.2011 by the jurisdictional Delhi High Court
6. The ld. CIT(A) also observed that the assessment proceedings and
penalty proceedings are two different proceedings, and that an issue may
call for an addition to income u/s 143(3) order, but in order to invoke a
penalty, the A.O 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 particulrs and the mere non-acceptance of
assessee's submissions and without any positive evidence from the A.O
that assessee has concealed the income or furnished inaccurate
particulars of income, did not ipso facto warrant penalty u/s 271(1)(c) of
the Act. The ld. CIT(A) observed that the assessee earned dividend
4 ITA No. 4479/Del/2013
A. T. Invofin India Pvt. Ltd.
income of Rs. 81,09,932/- and debited total expenditure in the profit and
loss account to the tune of Rs. 32,06,595/- which included the
expenditure incurred on statutory expenses viz. Auditors fees, legal
expenses etc. but a disallowance of Rs. 41,10,546/- had been made
against the total expenditure of Rs. 32,06,595/-. He also observed that
the assessee on its own disallowed a sum of Rs. 16,020/- u/s 14A of the
Act, thus, there was a difference of opinion. The ld. CIT(A) observed
that in the case of Reliance Petro Products (supra) the Hon'ble Supreme
Court has held that when assessee furnished all the material in the return
which was not found to be incorrect, it was upto the authorities to accept
the claim in the return or not, but the same could not be considered as
concealment or furnishing of inaccurate particulars of income.
Accordingly the penalty levied u/s 271(1)(c) of the Act by the A.O was
deleted.
7. Now the department is an appeal. The ld. DR strongly supported
the order of the A.O and reiterated the observations made in the
penalty order dated 27.6.2012 and the assessment order dated
30.12.2011 passed by the A.O. Reliance was also placed on the
following cases:
CIT v. Zoom Communication (P.) Ltd. [2010] 327 ITR 510
(Delhi)
U.O.I Vs Dharamendra Textile Processor 306 ITR 277
(Supreme Court)
5 ITA No. 4479/Del/2013
A. T. Invofin India Pvt. Ltd.
8. In his rival submissions the ld. Counsel for the assessee reiterated
the submissions made before the authorities below and further submitted
that the assessee suo-moto disallowed a sum of Rs. 16,020/- u/s 14A of
the Act while the A.O computed the disallowance of Rs. 41,10,546/-
which was more than the total expenses claimed by the assessee at Rs.
32,06,595/- which included the expenditure incurred on statutory
expenses. Therefore, there was a difference of opinion as regards the
disallowance u/s 14A of the Act in the working of the assessee and the
A.O, but it cannot be said that the assessee either furnished inaccurate
particulars of income or concealed the income. Therefore, only on this
basis that the claim of the assessee was not accepted by the A.O, penalty
u/s 271(1)(c) of the Act cannot be levied. Reliance was placed on the
judgment of the Hon'ble Supreme Court in the case of CIT Vs Reliance
Petro Products Pvt. Ltd. (2010) 322 ITR 158.
9. We have considered the submissions of both the parties and
carefully gone through the material available on the record. In the
present case it is an admitted fact that the assessee earned dividend
income of Rs. 81,09,932/- which was claimed as exempt. The assessee
on its own disallowed a sum of Rs. 16,020/- u/s 14A of the Act.
However, the A.O was not satisfied with the quantum of disallowance
made by the assessee and applied Rule 8D of the Income Tax Rules to
work out the disallowance at Rs. 41,10,546/- as against the total
expenditure of Rs. 32,06,595/-. Thus, there was a difference of opinion
6 ITA No. 4479/Del/2013
A. T. Invofin India Pvt. Ltd.
as regards to the claim of disallowance u/s 14A of the Act r.w Rule 8D
of the IT Rules. However, the assessee furnished all the details relating
to the earning of dividend income and the calculation for the
disallowance to be made u/s 14A of the Act. So it cannot be said that the
assessee had concealed income or furnished inaccurate particulars of
income. The only basis for levying the penalty u/s 271(1)(c) of the Act
was that the claim of the assessee for the disallowance u/s 14A of the
Act was not accepted by the A.O, so it can at the most be a ground for
making the addition but was not sufficient to levy the penalty u/s
271(1)(c) of the Act.
10. On a similar issue the Hon'ble Supreme Court in the case of CIT
Vs Reliance Petro Products Pvt. Ltd. (2010) 322 ITR 158 has held as
under:
"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
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A. T. Invofin India Pvt. Ltd.
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."
11. In the present case also, as we have already pointed out as there
was a difference of opinion as regards to the working of disallowance
u/s 14A of the Act. The assessee disallowed suo-moto a sum of Rs.
16,020/- while the A.O worked out the disallowance at Rs. 41,10,546/-
which was more the total claim of the expenses at Rs. 32,06,595/-.
Therefore, merely on this basis that the claim of the assessee was not
accepted by the A.O it cannot be said that the assessee either concealed
the income or furnished inaccurate particulars of income. Therefore, by
keeping in view the ratio laid down by the Hon'ble Apex Court in the
case of CIT Vs Reliance Petro Products Pvt. Ltd. (supra), we are of the
view that the ld. CIT(A) was fully justified in deleting the penalty levied
by the A.O u/s 271(1)(c) of the Act. We do not see any infirmity in the
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A. T. Invofin India Pvt. Ltd.
impugned order of the ld. CIT(A) and accordingly do not see any merit
in this appeal of the department.
12. In the result, the appeal of the department is dismissed.
(Order pronounced in the open Court on 25/6/2014).
Sd/- Sd/-
(A. T. Varkey) (N. K. Saini)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated: 25/6/2014
*Subodh*
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT(Appeals)
5.DR: ITAT
ASSISTANT REGISTRAR
Date Initial
1. Draft dictated on 23.6.2014 PS
2. Draft placed before author 24.6.2014 PS
3. Draft proposed & placed before the JM/AM
second member
4. Draft discussed/approved by Second JM/AM
Member.
5. Approved Draft comes to the Sr.PS/PS PS/PS
6. Kept for pronouncement on PS
7. File sent to the Bench Clerk PS
8. Date on which file goes to the AR
9. Date on which file goes to the Head Clerk.
10. Date of dispatch of Order.
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