Referred Sections: Section 36(l)(iii): Section 271(l)(c) Section 274 Section 27 l(l)(c) of the Act, Section I4A. Section 43A,
Referred Cases / Judgments: Hindustan Steel vs. Orissa in 83ITR 26 CIT vs. Reliance Petro Products Ltd ITAT, Mumbai - Deputy Commissioner of Income Tax vs. M/s Parle Pet Pvt A.B. Sugars Ltd, Chandigarh vs. Department of Income Tax in ITA no.ll07/CHD/2014 dtd.16/02/2016for the A. Y.2007-08. ” Hero Cycles (P) Ltd vs. Commissioner of Income-tax (Central) Ludhiana [(2015) 63 taxmann.com 308 (SC)], CIT vs. Abhishek Industries Ltd [(2006) 286 ITR 1] S.A Builders vs. CIT [(2007) 288 ITR 1 (SC)] CIT vs. Reliance Petro Products Pvt Ltd (322 ITR 158) SC Hindustan Steel vs. State of Orissa in 83 ITR 26 ITAT Chandigarh - MDC Pharmaceuticals Pvt Ltd vs. Department of Income Tax, ITA no.697/Chd/2012 for A.Y.2007-08, date of pronouncement 28/02/2013. ITAT, Mumbai - Ami Builders Pvt Ltd vs. ACIT - 5(1) Mumbai, ITA no.803/Mum/2014 for A.Y.2009-10, date of pronouncement 02/03/2016. Deputy Commissioner of Income Tax vs. Eagle Iron and Metal Industries Ltd -ITAT, Mumbai ‘J’ Bench (2011) 11 ITR 384.
ITA-857/Del/2016.
Smt. Suman Lakhani.
IN THE INCOME TAX APPELLATE TRIBUNAL
(DELHI BENCH: `C': NEW DELHI)
BEFORE SHRI AMIT SHUKLA, JUDICIAL MEMBER
AND
SHRI ANADEE NATH MISSHRA, ACCOUNTANT MEMBER
ITA No:- 857/Del/2016
(Assessment Year: 2008-09)
Smt. Suman Lakhani, ACIT,
W-9, G.K.-II, Vs. Circle-II,
New Delhi-110048. Faridabad.
PAN No: AAGPL7939R
APPELLANT RESPONDENT
Assessee by : Shri Gaurav Madan, CA
Revenue by : Shri Janardan Das, Sr. DR
ORDER
Per Anadee Nath Misshra, AM
(A) This appeal by Assessee is filed against the order of Learned Commissioner of Income
Tax (Appeals), Faridabad, ["Ld. CIT(A)", for short], dated 02.12.2015 for Assessment Year
2008-09. The grounds of appeal are as under:
"1. That the order dtd. 02.12.2015 passed by Ld. CIT(A) receivd on
30/12/2015 is bad in law and on facts.
2. That the Ld. CIT(A) has erred in confirming the penalty of Rs. 6,16,688/-
3. That the Appellant craves leave to alter, amend, vary or add any other
grounds of Appeal."
Page 1 of 25
ITA-857/Del/2016.
Smt. Suman Lakhani.
(B) Assessment Order dated 20.12.2010 was passed by the Assessing Officer ("AO",
for short) U/s 143(3) of Income Tax Act, 1961 ("I.T. Act", for short) wherein an amount
of Rs. 18,15,188/- was disallowed out of assessee's claim for deduction on account of
interest expenses. The AO also levied penalty U/s 271(1)(c) of I.T. Act vide order
dated 24.03.2014, amounting to Rs. 6,16,688/- in respect of aforesaid disallowance
amounting to Rs. 18,15,188/-. The assessee's appeal against the aforesaid order dated
24.03.2014 imposing penalty U/s 271(1)(c) of I.T. Act was dismissed by Ld. CIT(A)-
Faridabad, vide appellate order dated 02.12.2015 of Ld. CIT(A). Aggrieved, the
Assessee has filed this appeal in Income Tax Appellate Tribunal ("ITAT", for short)
against the aforesaid impugned appellate order dated 02.12.2015 of Ld. CIT(A). In the
course of appellate proceedings in ITAT, two separate written submissions, dated
10.12.2018 and 04.09.2019 were filed from the Assessee's side which are reproduced
below for ease of reference:
"Assessee's Submissions dated 10/12/2018:
In continuation of grounds of appeals, most respectfully it is submitted that the Ld.
CIT (A) has wrongly confirmed a penalty without considering the fact that the issue
of disallowance of interest u/s 36(l)(iii), is highly debatable issue. Thus, there is
difference of opinion as the matter/ issue is highly debatable issue.
Most respectfully it is submitted that the Ld. Commissioner of Income Tax
(Appeals) reversed his own penalty order in subsequent A.Ys.2010-11 and
2012-13 on same issue in case of appellant.
Copies of CIT (A) orders are enclosed for your reference. The Ld. CIT (A) has deleted
the penalties in both assessment years on same ground and in case of same
assessee by considering the Hon'ble Supreme Court Judgement and various judicial
decisions of ITAT; the relevant extracts of the CIT (A) order is as under:
"9. It is observed that there has been no concealment or furnishing of inaccurate
Page 2 of 25
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Smt. Suman Lakhani.
particulars by the assessee in this case. The disallowance has been made by
computing the sums which were duly disclosed in the return and accounts of the
assessee. I find that sec 271(l)(c) postulates imposition ofpenalty for furnishing of
inaccurate particulars and concealment of income. Hence, in my considered opinion
on the facts and circumstances of this case the assessee's conduct cannot be said to
be contumacious so as to warrant levy of penalty. Hence I hold that no penalty is
leviable on this ground.
10. While coming to the aforesaid conclusion, I place reliance upon the Apex Court
decision rendered by a larger Bench comprising of three of their Lordships in the case
of Hindustan Steel Orissa in 83ITR 26 wherein it was held that:
vs.
`An order imposing penalty for failure to carry out a statutory obligation is the result
of a quasi-criminal proceedings, and penalty will not ordinarily be imposed unless the
party obliged either acted deliberately in defiance of law or was guilty of conduct
contumacious or dishonest, or acted in conscious disregard of its obligation. Penalty
will not also be imposed merely because it is lawful to do so. Whether penalty should
be imposed for failure to perform a statutory obligation is a matter of discretion of
the authority to be exercised judicially and on a consideration of all the relevant
circumstances. Even if a minimum penalty is prescribed, the authority competent to
impose the penalty will be justified in refusing to impose penalty, when there is a
technical or venial breach of the provisions of the Act, or where the breach flows
from a bonafide belief that the offender is not liable to act in the manner prescribed
by the statute. '
11. I further place reliance upon the Hon'ble Apex Court decision in the case of CIT
vs. Reliance Petro Products Ltd (supra). In this case vide order dtd. 17/03/2010 it
has been held that the law laid down in the Dilip Sheroff case 291 ITR 519 (SC) as
to the meaning of word `concealment' and `inaccurate' continues to be a good law
because what was overruled in the Dharmender Textile case was only that part in
Dilip Sheroff case where it was held that mensrea was a essential requirement of
penalty u/s 271(1) (c). The Hon'ble Apex Court also observed that if the contention of
the revenue is accepted then every return where the claim is not accepted by the
Assessing Officer for any reason, the assessee will invite the penalty u/s 271(l)(c).
This is clearly not the intendment of legislature.
12. Reliance is also placed on the decision of the following judicial decisions which
directly cover the issue of levy of penalty u/s 27 l(l)(c) on disallowances:
a) ITAT, Delhi -Asst. Commissioner of Income Tax us. Mr. Manish Jain Prop.
BPB Publications - IT A no.5999/Del/2012.
b) ITAT, Mumbai - Deputy Commissioner of Income Tax vs. M/s Parle Pet Pvt
Page 3 of 25
ITA-857/Del/2016.
Smt. Suman Lakhani.
Ltd - ITA no.391/Mum/2010 dtd.20/07/2011.
c) 2013 (12) TMI 922 - ITAT, Amritsar - Deputy Commissioner of Income Tax
vs. M/s Max India Ltd.
13. It is also pertinent to reproduce the judgement of the Hon'ble ITAT Bench
Chandigarh on absolutely similar facts in the case of A.B. Sugars Ltd, Chandigarh
vs. Department of Income Tax in ITA no.ll07/CHD/2014 dtd.16/02/2016for the A.
Y.2007-08. "
Assessee's Submissions in Context of Section 36(l)(iii):
In a recent judgement in case of Hero Cycles (P) Ltd vs. Commissioner of Income-tax
(Central) Ludhiana [(2015) 63 taxmann.com 308 (SC)], the Hon'ble Supreme Court
has again authoritatively upheld the primary right of any businessman/ organization
to plan and conduct his/ its business, thereby effectively negating any attempts on
the part of revenue to step into the shoes of an businessman and sit in judgement
on business decisions, particularly with regard to judging the reasonableness of any
expenditure and the commercial prudence or correctness of any decision. More
specifically rendered in the context of allowability of interest u/s 36(l)(iii) of the
Income-tax Act, 1961 (the "Act"), the observations, interpretation of law and the
conclusions drawn therein, if applied objectively, will have wide reaching
ramifications.
In recent times the judgement of the Punjab and Haryana High Court in the case of
CIT vs. Abhishek Industries Ltd [(2006) 286 ITR 1] had become the benchmark/
basis for the revenue to disallow claims for interest u/s 36(l)(iii) of the Act. Without
in any manner disputing the correctness of the said judgement, the Department had
resorted to rather liberally, unilaterally and unjustifiedly apply it as a basis for
disallowing claims of interest which otherwise seemed tenable. The blanket
application of the said judgement to myriad assessees across the spectrum without
due regard to specific facts and circumstances of any case had led to unnecessary
litigation apart from unmitigated hardships to assessees.
Although, subsequently the Hon'ble Supreme Court itself in the case of S.A Builders
vs. CIT [(2007) 288 ITR 1 (SC)] had amplified the scope of "commercial expediency"
specifically in the context of sec 36(l)(iii) of the Act, there was no let-up in the
litigation on this count. With the latest judgement in the case of Hero Cycles (P) Ltd,
the Hon'ble Supreme Court has again upheld in no uncertain terms that "Once it is
established that there is nexus between expenditure and purpose of business revenue
cannot justifiably claim to put itself in arm-chair of businessman or in position of Board of
Directors and assume role to decide how much is reasonable expenditure having regard to
circumstances of case". Rendered in the context of allowability of interest u/s 36(l)(iii)
of the Act and the fact of interest free loans having been granted to subsidiary
companies and Directors, this judgement should act as a touchstone for interpreting
Page 4 of 25
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Smt. Suman Lakhani.
sec 36(l)(iii) and by again establishing the primacy of a businessman to plan, organize
and conduct his/ its affairs perhaps lead to a more reasonable interpretation and
adoption of sagacious course of action by the Revenue authorities.
Assessee's Submissions on Penalty Order:
1. Most respectfully it is submitted that the Ld. AO has levied and CIT (A) confirmed the
penalty of Rs.6,16,688/- on the basis that Tax sought to be evaded on income of Rs.
18,15,188/- representing disallowance of interest and bank charges u/s 36(l)(iii).
It is submitted that "penalty" and "assessment" are two independent proceedings. It
may be noted that there could be genuine difference of opinion between tax
gatherer and tax payer but penalty proceedings require "furnishing of inaccurate
particulars of income/ concealment of income. Reliance is placed upon the following
Judgments:
a) CIT vs. Reliance Petro Products Pvt Ltd (322 ITR 158) SC: Copy of order is
enclosed.
The Hon'ble Supreme Court in the case of Reliance Petroproducts Pvt Ltd (322 ITR
158) in the order dtd. 17/03/2010 has held that, "a mere making of the claim, which
is not sustainable in law, by itself, will not amount to furnishing inaccurate
particulars regarding the income of the assessee. If this contention is accepted then
in case of every return where the claim made is not accepted by the AO for any
reason, the assessee will invite penalty u/s 271(l)(c). That is clearly not the
intendment of Legislature. In order to expose the assessee to the penalty unless the
case is strictly covered by the provision, the penalty provision cannot be invoked. By
any stretch of imagination, making an incorrect claim in law cannot tantamount to
furnishing inaccurate particulars of income. "
b) Hindustan Steel vs. State of Orissa in 83 ITR 26:
The Apex Court decision rendered by a larger Bench comprising of three of their
Lordships in case of Hindustan Steel vs. State of Orissa in 83 ITR 26 wherein it was
held that, "An order imposing penalty for failure to carry out a statutory obligation is
the result of a quasicriminal proceedings, and penalty will not ordinarily be imposed
unless the party obliged either acted deliberately in defiance of law or was guilty of
conduct contumacious or dishonest, or acted in conscious disregard of its obligation.
Penalty will not also be imposed merely because it is lawful to do so. Whether
penalty should be imposed for failure to perform a statutory obligation is a matter of
discretion of the authority to be exercised judicially and on a consideration of all the
relevant circumstances. Even if a minimum penalty is prescribed, the authority
competent to impose the penalty will be justified in refusing to impose penalty, when
Page 5 of 25
ITA-857/Del/2016.
Smt. Suman Lakhani.
there is a technical or venial breach of the provisions of the Act, or where the breach
flows from a bonafide belief that the offender is not liable to act in the manner
prescribed by the statute. "
2. Further, with regard to penalty on disallowance u/s 36(l)(iii), your kind
attention is drawn towards the following case laws which clearly mention
that No penalty u/s 271(1 )(c) can be imposed on this disallowance:
a) 2013 - ITAT Chandigarh - MDC Pharmaceuticals Pvt Ltd vs. Department of
Income Tax, ITA no.697/Chd/2012 for A.Y.2007-08, date of pronouncement
28/02/2013. Copy of order is enclosed.
The appeal filed by the Revenue is against the order of CIT (Appeals), Chandigarh
relating to assessment year 2007-08 against the penalty levied u/s 271(l)(c) of
Income Tax Act, 1961 (in short `the Act').
"2. The only effective ground of appeal raised by the Revenue reads as under:
"On the facts and circumstances of the case and in law, Ld. CIT (A) has erred in
holding that penalty u/s 271(l)(c) could not be levied on the disallowance of interest
on account of diversion of interest bearing fund to sister concern without charging
any interest. "
3. The only issue raised in present appeal is against the penalty levied u/s 271(l)(c)
of the Act. The Assessing Officer during the course of assessment proceedings had
made addition on account of disallowance of interest u/s 36(l)(iii) on interest free
advances made by the assessee.
Further, addition was made by restricting the deduction u/s 80IC of the Act. The
Assessing Officer levied penalty u/s 271(l)(c) of the Act amounting to Rs. 4,65,544/-
on the above said addition.
4. The CIT (Appeals) deleted the penalty levied on disallowance of proportionate
interest u/s 36(l)(iii) of the Act holding that assessee not to have furnished inaccurate
particulars of income. The CIT (A), however, upheld the levy of penalty on
disallowance of deduction u/s 80IC on the ground of miscellaneous income.
5. The revenue is in appeal against order of CIT (Appeal) in deleting the penalty
levied by Assessing Officer on disallowance of interest on diversion of interest free
funds to sister concern by the assessee.
6. Despite service of notice none appeared on behalf of assessee and because of
smallness of the issue we proceed to decide the present appeal after hearing learned
D.R for Revenue. On the perusal of the record, it transpires that the penalty u/s
271(l)(c) of the Act has been levied on the disallowance of interest u/s 36(1)(Hi) of
the Act relatable to the interest free advances made by the assessee as against the
Page 6 of 25
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Smt. Suman Lakhani.
interest expenditure on interest bearing funds. In the above said facts and
circumstances the Assessing Officer has failed to establish that assessee had
furnished inaccurate particulars of income in connection with the said disallowance.
The assessee had furnished complete particulars of its income and expenditure and
had also furnished the details of interest bearing funds and also interest free
advances made by it. The case of the Revenue was that in view of the mixed funds
available with the assessee, proportionate disallowance is to be made out of interest
expenditure relatable to the interest free advances made by the assessee. We are in
agreement with the order that the assessee having furnished complete particulars of
income and mere disallowance of interest in the hands of the assessee u/s 36(1)(Hi)
of the Act does not warrant levy of penalty u/s 271(l)(c) of the Act. The ground of
appeal raised by the Revenue is dismissed.
7. In the result, the appeal of the Revenue is dismissed.
Order pronounced in the open Court on 28th day of February, 2013. "
b) ITAT, Mumbai - Ami Builders Pvt Ltd vs. ACIT - 5(1) Mumbai, ITA
no.803/Mum/2014 for A.Y.2009-10, date of pronouncement 02/03/2016. Copy of
order is enclosed.
"16. In the present case the AO in the course of assessment proceedings had not
recorded any satisfaction while initiating penalty the penalty proceedings, therefore,
the penalty u/s 271(1)(c) of the Act was not leviable. In the present case, this
contention of the Id. counsel for the assessee that in the subsequent year similar
claim was although disallowed but penalty proceedings were dropped was not
rebutted. Therefore, on the identical facts in the year under consideration vis-a- vis
the subsequent year penalty u/s 271(l)(c) of the Act was not leviable, particularly
when the department itself dropped the penalty in the subsequent year in similar
facts. In the instant case the assessee claimed the deduction on account of interest
u/s 24 of the Act because it was claimed and allowed in the preceding year therefore,
the claim of the assessee was a bonafide claim based on a similar claim of the earlier
year, the assessee disclosed all the facts relating to the payment of interest and
claim of deduction before the AO. Therefore, only on the basis that the claim in full
was not accepted by the AO, it cannot be said that the assessee concealed the
particulars of his income or furnished inaccurate particulars of his income. As such
penalty u/s 271(l)(c) of the Act was not leviable. We, therefore, by considering the
peculiar facts of this case as discussed hereinabove delete the penalty sustained by
the Ld. CIT (A).
As a result, appeal filed by the assessee is allowed.
Order pronounced in the open court on this 2nd March, 2016. "
Page 7 of 25
ITA-857/Del/2016.
Smt. Suman Lakhani.
c) Deputy Commissioner of Income Tax vs. Eagle Iron and Metal Industries Ltd -
ITAT, Mumbai `J' Bench (2011) 11 ITR 384.
Briefly stated the facts of the case are that the AO in the assessment for the relevant
year had made additions to the total income on account of following disallowances:
(i) Disallowance of Rs.9,76,256/- u/s 43B and 36(1 )(va) of the Act in relation to delay
in depositing employees and employer's contribution to the provident fund and the
ESIC with concerned authorities, (ii) Disallowance of Rs.48,99,360/- on account of
repair and maintenance expenses, (iii) Disallowance of Rs.26,45,967/- out of petty
cash expenses by considering the same to be non genuine, (iv) Disallowance of
Rs.23,37,548/- out of interest paid on the ground that the assessee was not
charging interest on deposits and loans given, (v) Disallowance of Rs. 15,000/- out
of miscellaneous income, (vi) Addition of Rs.4,681/- on account of interest income
from bank not disclosed.
"The additions made by the AO were confirmed by CIT (A) and no further dispute had
been raised by the assessee. The AO had also initiated penalty proceedings for
concealment of income. In response to show-cause notice, the assessee submitted
that no penalty could be imposed as the AO had not recorded satisfaction of
concealment in the penalty proceedings. It was also submitted that disallowances
had been made by the AO purely based on difference of opinion and on estimate and
there was no case made out for concealment of income or furnishing of inaccurate
particulars of income. In such cases it was pointed out no penalty for concealment
could be imposed. The assessee placed reliance on several decisions of Courts. The
AO was however not satisfied.
The assessee disputed the matter in appeal and reiterated the submissions made
before the AO that mere disallowance/ additions to income would not automatically
lead to penalty. Reliance was placed on the judgment of the Supreme Court in the
case of S. A. Builders Ltd vs. CIT (A) (2006) 206 CTR (SC) 631 : (2007) 288 ITR 1 (SC). It
was pointed out that during the assessment proceedings the assessee had given the
details of various purposes for which advances had been given. The CIT (A) was
satisfied by the explanation given by the assessee. It was observed by him that there
was no material to show that there was deliberate act on the part of the assessee to
conceal any income. The CIT (A) further agreed that mere disallowance of certain
expenses would not automatically lead to penalty. Reliance was placed on the
judgment of the Hon 'ble High Court of Punjab & Haryana in case of CIT Ajaib Singh
vs.
and Co (2001) 170 CTR (P&H) 489: (2002) 253 ITR 630 (P&H) and several other
judgments. The CIT (A) accordingly accepted the explanation of the assessee in
relation to various disallowance as bona fide and deleted the penalty imposed by the
AO. Aggrieved by the said decision the Revenue is in appeal.
We have perused the records and considered the rival contentions carefully. The
Page 8 of 25
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Smt. Suman Lakhani.
dispute raised is regarding levy of penalty for concealment of income on account of
various additions made in the assessment as mentioned in para 2 earlier. Penalty u/s
271(1)(c) is a civil liability and the Revenue is not required to prove wilful
concealment as held by the Hon'ble Supreme Court in the case of Union of India vs.
Dharamendra Textile and Processors (supra). However each and every addition made
in the assessment cannot automatically lead to levy of penalty for concealment of
income. A case for imposition of penalty has to be examined in terms of the
provisions of Expln. 1 to sec 271(l)(c). Secondly it is a settled legal decision that
penalty proceedings are different from assessment proceedings. The finding given in
the assessment though is a good evidence but the same is not conclusive in penalty
proceedings as held by the Hon'ble Supreme Court in the case of Anantharam
Veerasinghaiah & Co vs. CIT (1980) 16 CTR (SC) 189: (1980) 123 ITR 457 (SC).
Therefore merely because the additions made in the assessment have been
confirmed in appeal or the assessee did not file any appeal against the addition
cannot be the sole ground for imposing penalty. In case the assessee for want of
proper legal advice or for any other reasons did not appeal against the assessment
order the addition made in the assessment cannot automatically lead to levy of
penalty if on the basis of material available on record no definite inference can be
drawn that the assessee had tried to conceal any income from taxation.
The other major addition is on account of disallowance of interest of Rs.23,37,548/-.
The disallowance has been made by the AO in relation to interest-free advances. The
assessee had explained before the AO that interest-free advances had been given for
the purpose of business details of which had also been given which has been
reproduced in para 2.1 of this order earlier. There is no finding by the AO that
advances were not for the purposes mentioned by the assessee. Obviously therefore
the advances were for commercial expediency. In such cases, disallowance of interest
cannot be upheld as held by the Hon'ble Supreme Court in case of S. A. Builders Ltd.
(supra). Therefore even if the addition is confirmed or no appeal is filed by the
assessee for want of proper advice or any other reasons, the addition made cannot
be basis for imposing penalty when the claim is allowable. Thus, in our view there is
no case for concealment of penalty in respect of any of the additions made by the
AO.
In view of the foregoing discussion and for the reasons given earlier we see no
infirmity in the order of the CIT (A) deleting the penalty and the same is therefore
upheld. In the result the appeal of the Revenue is dismissed. "
Page 9 of 25
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Smt. Suman Lakhani.
d) Shervani Hospitalities Ltd vs. Commissioner of Income Tax - Delhi High Court,
ITA no.804 of 2011, date of decision 28/05/2013.
This appeal by the assessee which relates to the assessment year 2001 - 02, in effect
impugns order dtd.26/03/2010, passed by the Income Tax Appellate Tribunal
confirming imposition of penalty u/s 271(1 )(c) of the Income Tax Act, 1961.
Penalty u/s 271(l)(c) - the additions including addition in respect of capital
expenditure for interior designing amounting to Rs. 1,32,000/- were upheld by the
Tribunal. Penalty u/s 271(1 )(c) of the Act was imposed amounting to Rs. 16,44,330/-
. The real question pertains to the first two claims i.e. loss on closure of south
extension unit of Rs.25,37,521/- and capital expenditure for interior designing of Rs.
1,32,000/-. The assessee is in appeal before us. Held that -
"25. In view of the aforesaid discussion, the question of law is answered in negative
and in favour of the appellant assessee and it is held that penalty u/s 271(l)(c) of the
Act is not justified in respect of Rs.25,37,521/- and Rs. 1,32,000/-. Penalty for
concealment on the said amounts is directed to be deleted. The appeal is disposed of.
No costs. "
e) IT AT, Delhi - Asst. Commissioner of Income Tax vs. Mr. Manish Jain Prop. BPB
Publications - ITA no.5999/Del/2012.
f) ITAT, Mumbai - Deputy Commissioner of Income Tax vs. M/s Parle Pet Pvt Ltd -
ITA no.391/Mum/2010 dtd.20/07/2011.
g) 2013 2013 (12) TMI 922 - ITAT, Amritsar - Deputy Commissioner of Income Tax vs.
M/s Max India Ltd.
h) 2013 - ITAT Mumbai - Vinati Organics Ltd, Mumbai vs. Department of Income Tax.
i) 2012 (7) TMI 12 - ITAT Delhi - DCIT, Circle 9(1) vs. Specialty Food (India) Pvt
Ltd- ITA no.3270(Del)/2011 order dtd.31/05/2012. j) ITAT Mumbai - ACIT, Circle-
4(2) Mumbai vs. Sovereign Securities Pvt Ltd - ITA no.l624(Mum)/2012 order
dtd.05/04/2013.
3. Further, it is submitted that the provisions of section 271(l)(c) reads as under:
"271(1) If the Assessing Officer or the Commissioner (Appeals) or the Commissioner
in the course of any proceedings under this Act, is satisfied that any person -
(c) has concealed the particulars of his income or furnished inaccurate particulars of
such income."
In order to be covered under these provisions, there has to be either concealment of
the particulars of income or furnishing of inaccurate particulars. As per Law Lexicon,
Page 10 of 25
ITA-857/Del/2016.
Smt. Suman Lakhani.
the meaning of the word `particular' is detail or details, the details of a claim, or the
separate items of an account.
Therefore, the word `particulars' used in the section 271(1 )(c) would embrace the
meaning of the details of the claim made. The words `inaccurate particulars' mean
that the details supplied in the return are not accurate, not exact or correct, not
according to truth or erroneous. However, in this case the assessee might not have
proved to the satisfaction for the claim of expenses but assessee nowhere has filed
any inaccurate particulars or concealed the income. In the absence of a finding that
any details supplied by the assessee in its return were found to be incorrect or
erroneous or false, there would be no question of inviting penalty u/s 271(l)(c). It is
to be satisfied that the assessee has concealed income or that the assessee has
furnished inaccurate particulars of income or that the case of the assessee is
covered by the deeming fiction of one of the explanations appended to section
271(l)(c). Therefore, it is obvious that it must be shown that the conditions u/s
271(l)(c) must exist before the penalty is imposed. There can be no dispute that
everything would depend upon the return filed 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. A claim made by the assessee
under bonafide belief and impression but rejected by the AO cannot be subjected to
penalty in case the assessee has been able to prove and establish that the claim was
made bona fide and all particulars relating thereto were furnished before the AO
before penalty is imposed. It has been held by the Hon'ble Supreme Court in the
case of Amit Mohan Bindal (317 ITR 1) that the penalty u/s 271(1 )(c) is a civil liability
albeit a strict liability.
It has been further judicially held that the civil liability of penalty u/s 271(l)(c) cannot
be construed to mean that the penalty is an automatic consequence of an addition
made to the income. The only impact of liability being civil liability is that the
mensrea or the intentions of the assessee need not be proved. There has to be
contravention of a statutory obligation first - willful or not. There is no cause and
effect relationship between penalty and addition. A finding in the assessment order
may constitute good evidence in the penalty proceedings but such finding cannot be
regarded as conclusive for the purpose of penalty proceedings. Raising a legal claim,
even if it is ultimately found to be legally unacceptable cannot amount to furnishing
of inaccurate particulars of income. The deeming fiction in explanation 1 is also not
attracted as it relates only to factual aspects. Different views taken on the same set
of facts, at the most, be termed as difference of opinion but nothing to do with the
concealment of income or furnishing of inaccurate particulars of income. These legal
aspects are required to be seen in the facts and circumstances of each case.
Page 11 of 25
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Smt. Suman Lakhani.
Considering the above factual & Legal matrix it is prayed that penalty imposed may
kindly be quashed as the assessee has neither furnished any inaccurate particulars
nor has concealed any income."
Assessee's submission dated 04/09/2019:
"Sub: Re: Appeal No.857/ Del-2016 for A.Y.2008-09
Respected Sir,
The above-mentioned appeal is fixed before your Honour for 04/09/2019. In
this connection and in continuation of paper book already submitted on
19/12/2018. Most respectfully it is submitted that the Ld. Commissioner of
Income Tax (Appeals) reversed his own penalty order in subsequent
A.Ys.2010-11 and 2012-13 on same issue in case of appellant.
Copies of CIT (A) orders have already submitted. The Td. CIT (A) has deleted the penalties
in both assessment years on same ground and in case of same assessee by considering
the Hon'ble Supreme Court Judgement and various judicial decisions of lTAT.
It is submitted that "penalty'" and "assessment" are two independent proceedings. It
may be noted that there could be genuine difference of opinion between tax gatherer
and tax payer but penalty proceedings require "furnishing of inaccurate particulars of
income/ concealment of income.
Further, it is submitted that while passing the assessment order dtd.2.0/12/2010 passed
u/s 143(3) of the Act, the Ld. AO has stated that "... Assessee has furnished inaccurate
particulars and hence penalty proceedings u/s 271(1 )(c) are initiated separately.", which
is not sufficient and therefore, the penalty proceedings cannot be said to be validly
initiated under such circumstances. The assessee has not furnished any inaccurate
particulars as Bank Interest of Rs. 18,15,188/- has been clearly disclosed in
Profit & loss account. However, nowhere in the assessment order states the specific
charge of alleged concealment and / or furnishing of inaccurate particulars of income.
Therefore, the entire penalty proceedings stand vitiated, because it is not in accordance
with law. in view/ of the law settled in the various case laws of ITAT. We are also pleased
to submit the latest pronouncements:
a) The Honorable Delhi High Court in Pr. CIT vs. Samtel India Ltd (Order
pronounced on 09/07/2018) has held that.
"13. The intention of the Parliament cannot be taken to have been to penalize everyone
who makes a wrong claim of deduction. The legislature does not intend to penalize every
person whose claim is disallowed. This is not the aim of the legislature. The Tribunal in
the facts of this case, therefore, correctly reached this conclusion. The question of law is
Page 12 of 25
ITA-857/Del/2016.
Smt. Suman Lakhani.
answered in favour of the assessee and against the Revenue; therefore, the appeal has
No merit and is dismissed. " Copy of order is enclosed. (Please refer para 10 to 13 of
the order)
b) ITAT New Delhi - M/s ABR Auto Pvt Ltd vs. ACIT, Circle 1(1) New Delhi
in ITA no.6236/DEL/2015 for A.Y.2009-10, date of pronouncement of
order is 04/12/2017. Copy of order is enclosed. The relevant extract of the
Judgement is as under: (Please refer para 6-7 of the order)
"6. We have carefully considered the rival submissions and perused the relevant
records. We find that assessee had appealed before the Ld. C1T(A) against the quantum
additions i.e. disallowance u/s 14A amounting to Rs. 4,07,158/- and disallowance on
account of long term capital loss treated as business income amounting to Rs.
91,39,000/-. However, the assessee did not press for other disallowances made on
account of Bad Debts of Rs. 1,32,000/- and Disallowance of Expenses on account of
return of investment of Rs.10,84,005/-. We further find that in his appellate order dated
01.2.2013 the Ld. C1T(A) did not allow the appeal of the assessee and aggrieved with the
action of the Ld. C1T(A), the assessee appealed before the Tribunal against disallowance
u/s 14A of Rs. 4,07,158/- and against Long Term Capital Loss treated as Business income
of Rs.91,39,000/- and the ITAT vide its order dated 5.8.2016 in ITA No.2375/Del/2013 had
set aside the finding of the Ld. CIT(A) on the issue u/s 14A and restore the matter to the
file of the AO for fresh adjudication after due verification of the claim of the assessee
regarding no expenditure having been incurred and allowed the issue relating to Long
Term Capital Loss treated as Business income of Rs.91,39,000/- by deleted this addition.
We further note that during the penalty proceedings, the AO vide his order dated
31.3.2014 imposed penalty of Rs. 36,58,000/- u/s 271(l)(c) of the Act, in respect of all the
four additions of Rs.1,07,62,163/- mentioned in the grounds of appeal, as aforesaid, on
the alleged ground that the assessee had furnished inaccurate particulars of income.
6.1 After perusing the assessment order, we find that AO also did not record his
satisfaction for initiation of penalty proceedings, because while passing the assessment
order dated 30.12.2011 passed u/s 143(3)(ii) of the Act, the AO has stated that "
Penaltyproceedingsu/s 271(l)(c) is being initiated separately for furnishing inaccurate
particulars of income / concealment income ", which is not sufficient and therefore, the
penalty proceedings cannot be said to be validly initiated under such circumstances.
However, nowhere in the assessment order states the specific charge of alleged
concealment and / or furnishing of inaccurate particulars of income. Therefore, the
entire penalty proceedings stand vitiated, because it is not in accordance with law, in
view of the law settled in the following case laws.
i) "CIT & Anr. Vs. M/s SSA's Emerald Meadows - 2015 (11) TM1 1620 Karnataka High
Court has held that Tribunal has correctly allowed the appeal filed by the assessee
holding the notice issued by the Assessing Officer under section 274 read with Section
27l(l)(c) to be bad in law as it did not specify which limb of Section 271(1) (c) of the Act,
the penalty proceedings had been initiated i.e., whether for concealment of particulars of
Page 13 of 25
ITA-857/Del/2016.
Smt. Suman Lakhani.
income or furnishing of inaccurate particulars of income. The Tribunal, while allowing the
appeal of the assessee, has relied on the decision of the Division Bench of this Court
rendered in the case of Commissioner of Income Tax vs. Manjunatha Cotton and Ginning
Factory (2013) (7) TMI 620- Karanataka High Court. Thus since the matter is covered by
judgment of the Division Bench of this Court, we are of the opinion no substantial
question of law arises - decided in favour of assessee. "
ii) CIT & Anr. Vs. M/s SSA's Emerald Meadows - Hon 'ble Supreme Court of India -
reported in 2016 (8) TMI 1145 - Supreme Court. The Apex Court held that High Court
order confirmed (2015) (11) TMI 1620 (Supra) - Karnataka High Court. Notice issued by
AO under section 274 read with section 271(l)(c) to be bad in law as it did not specify
which limb of Section 27 l(l)(c) of the Act, the penalty proceedings had been initiated i.e.,
whether for concealment of particulars of income or furnishing of inaccurate particulars
of income - Decided in favour of assessee. "
6.2 In the background of the aforesaid discussions and respectfully following the
precedents, we delete the penalty in dispute and decide the issue in favor of the assessee
and against the Revenue. Since we have deleted the penalty' and did not discuss the
penalty issue on merit, hence, the case laws cited by the Ld. DR are not useful at this
juncture, because these case laws are on the merits of the case, which we have not
discussed.
7. In the result, the appeal filed by the Assessee stands allowed. "
Order pronounced in the Open Court on 04/12/2017.
C) 2019 - IT AT New Delhi - M/s Padmini Infrastructure Developers (India) Ltd vs.
DCIT, Circle 14(1) New Delhi in IT A no.l002/DEL/2014 for A.Y.2006-07, date of
pronouncement of order is 07/02/2019. Relevant pages of order are enclosed. The
relevant extract of the Judgement is as under:
"(4.2) In view of the foregoing discussions, we cancel the penalty levied U/s 271(l)(c) of
I.T. Act by the AO and we set aside the impugned order of Ld. CIT(A), wherein the Ld.
CIT(A) had confirmed the penalty.
(5) As regards the contention of the Ld. Counsel for Assessee, that the AO did not make
specific charge against the assessee - whether the penalty proceedings were for
'concealment of the particulars of income' or for furnishing of inaccurate particulars of
income'; we find from perusal of order dated 28.03.2012 of the AO, passed U/s 27 l(l)(c)
of I. T. Act, that the assessee was issued four notices U/s 271(l)(c) of I.T. Act, dated
26.09.2008, 18.01.2012, 06.02.2012 and 14.02.2012. Although copy of notice dated
26.09.2008 has been filed from assessee's side during the appellate proceedings in IT AT,
the copies of the other three notices are not on our records. We also find that this
contention, that the AO did not make the specific charge against the assessee - whether
the penalty proceedings were for 'concealment of the particulars of income' or for
furnishing of inaccurate particulars of income', has been raised for the first time before
the ITAT and this ground was not taken by the assessee before lower authorities, namely
Page 14 of 25
ITA-857/Del/2016.
Smt. Suman Lakhani.
AO and CIT(A). Therefore, information regarding whether the specific charge against the
assessee - whether the penalty proceedings were for 'concealment of the particulars of
income' or for furnishing of inaccurate particulars of income' was made by the AO in one
or more of the other three notices is not available from either the records of the Tribunal
or from perusal of the orders of the lower authorities as this contention was not raised
by the assessee before the lower authorities. Moreover, we also find that in the present
appeal in ITA T, no specific ground has been taken by the assessee in respect of this
contention which was advances at the time of hearing before us. Be that as it may, since
we have already deleted the penalty U/s 271(1 )(c) of I. T. Act, in the forgoing part of this
order, this contention of the Ld. Counsel for assessee is merely academic presently and
need not be adjudicated. When it is already found that the disputable claim made by the
assessee neither amounts to 'concealment of particulars of income' nor to furnishing of
inaccurate particulars of income'; it is immaterial whether the Assessing Officer made
specific charge against the assessee whether the penalty' proceedings were for
'concealment of the particulars of income' or for furnishing of inaccurate particulars of
income'. Therefore, presently we decline to express an opinion on this contention of the
Ld. Counsel for assessee; because this is merely any academic issue at present.
(5) In the result, appeal of the Assessee is allowed for statistical purposes."
Order Pronounced in the open court on 07 day of February, 2019
Sd/- Sd/-
(K.N. CHARY) (ANADEE NATH MISSHRA)
JUDICIAL MEMBER ACCOUNTANT MEMBER
d) Mumbai in ITA no.3195/Mum/2018 for A.Y.2014-15. date of
pronouncement of order is 23/08/2018. Copy of order is enclosed. The relevant
extract of the Judgement is as under: (Please refer para 15-19 of the order)
"19. Upon careful consideration, we note that it will be apposite to refer to the merits of
the penalty in this case. To recapitulate as mentioned in earlier part of this order, the
addition was made by the A.O by disallowing interest expenditure of an amount of
Rs.12,26,80,137/- u/s 36(l)(iii) of the Act.This was done on the ground that no income has
been earned by the assessee. so the expenditure cannot be held to be incurred
exclusively for the purpose of business of the assessee. The A.O then contradicted
himself that the assessee was not doing any business by holding that the assessee has
made huge investments. That in this view of the matter, the assessee has diverted
interest bearing funds to earn exempt income. Hence, this amount was also disallowed
u/s 14A of the Act. In this regard, we note that the penalty has been levied only with
respect to that limb of the disallowance in which the A.O has held that amount was
disallowed u/s 36(1) (Hi) of the Act.
20. In this connection, we note that all the particulars of interest were duly disclosed.
The veracity of the expenditure claimed has not been doubted by the authorities below.
The assessee has explained that it has claimed the expenditure as in the opinion of the
assessee it has set up the business which mandates the allowance of claim of
expenditure. It was the assessee's opinion that it was not necessary to carry on the
business. This explanation has not been accepted by the authorities below. In our
Page 15 of 25
ITA-857/Del/2016.
Smt. Suman Lakhani.
considered opinion, the explanation by the assessee is a plausible one. The assessee's
admission that it was not carrying on business was admittedly with respect to the
transport business in as much as A.O had himself admitted that the assessee was making
huge investment by diverting interest bearing funds. In this view of the matter, the very
premise that the assessee was not carrying on 'any' business fails. By no stretch of
imagination, that assessee's explanation can be said to be spurious, vexatious, mere
bluster or frivolous. In similar situation, the Hon'ble Apex Court in the case of Reliance
Petroproducts (P) Ltd. (supra) has held that disallowance of a claim made by the assessee
or a wrong claim by the assessee cannot by itself lead to levy ofpenalty u/s 27 l(l)(c) of
the Act.
21. Hence, on the anvil of the aforesaid discussion and precedent, this penalty is not
liable to be sustained.
22. Another reason for the Id. CIT (A) upholding the penalty is that the assessee has not
appealed against the addition. We find that this cannot at all lead to a conclusion that the
levy of penalty is automatic when addition is not appealed against or for that matter it is
sustained. It is settled law that the assessment proceedings and penalty proceedings are
different.
23. We further find that another limb which is important in this respect is that the A.O
in his order himself has given a finding that the assessee has diverted interest bearing
funds to make huge investments from which no income has been earned. Hence, the
disallowance has also been sustained on account of invoking of the provision of section
I4A. When the A.O has himself said that the assessee had borrowed huge amounts and it
has made huge investments in shares and securities which did not yield any income and
the interest so incurred is liable to disallowance u/s!4A where the question of
disallowance on the premise that the assessee has not conducted "any business" arises.
Conspicuously, the A.O himself has not mentioned that the penalty> is being initiated for
this aspect of the disallowance. We find that disallowance u/s 14A in this regard is itself
not sustainable on the touch stone of the Hon'ble jurisdictional High Court decision in the
case of Ballarpur Industries Ltd. (supra). In this view of the matter also in the facts and
circumstances of the case, the penalty in this case is not at all leviable.
24. Hence, in our considered opinion, the penalty' levied u/s 271(I)(c) in this case is liable
to be deleted. We set aside the orders of the authorities below and delete the levy of
penalty. We note that the assessee has also raised that the penalty is not leviable in as
much as penalty notice did not specif' the charge on which the penalty was being levied.
We note that various case laws in this regard have also been mentioned in their
respective favours by the Id. Counsel of the assessee and the Id. DR also.
25. Be as it may, we find that since we have already deleted the penalty' as mentioned
above, the adjudication on the levy of penalty on the defect in the mentioning of the
charge is only of academic interest. Hence, we are not engaging into the same.
26. In the result, this appeal by the assessee stands allowed. "
Page 16 of 25
ITA-857/Del/2016.
Smt. Suman Lakhani.
Order pronounced in the open court on 23.08.2018
e) 2018 - ITAT New Delhi - DC1T vs. M/s National Textiles, New Delhi in
ITA no. 5757/Del/2015 for A.Y.2009-10, date of pronouncement of order
is 22/02/2018. Copy of order is enclosed. The relevant extract of the Judgement
is as under: (Please refer para 16-18 of the order)
"16. We have carefully gone through the orders of the authorities below and the material
placed before us. We have also deliberated on the judicial pronouncements referred to
by the lower authorities in their respective orders as w>ell as cited by the learned DR and
AR during the course of hearing. The learned CIT(A) while deleting the penalty has passed
a well reasoned order which does not require any interference. The findings of the
learned CIT(A) are as under:
" Ground No. 1, 3 &5 related to imposition of penalty u/s 271(1 )(c) which are dealt with
as under On the factual front, there is loss in foreign exchange fluctuation. Whether it is
capital in nature or revenue in nature is the issue of contention. During the year under
consideration the assessee suffered loss due to foreign exchange rate fluctuations. This
was in relation to import of machinery from other countries. As per section 43A, when
the assessee was supposed to add this amount to the cost of plant and machinery and
claim depreciation against it, instead it claimed it wrongly as revenue expenditure. It is a
fact that the assessee accepted the addition at CIT(A)'s level and did not further carry the
matter to higher appellate forum. Once on the factual front the issue is decided, now
comes the issue of penalty'. Mens rea After the amendment to Sec.27l(l)(c) w.e.f
1.4.1964, mens rea need not be established. Hence on this ground assessee's contention
fails. Support for this rational is taken from the following judgments . Hon'ble Apex Court
in Union of India vs. Dharmendra Textile processors (SC) 306 ITR 277, Gidjag Industries
Ltd. vs. CTO (SC) 293 ITR 584 and CIT vs. Atul Mohan Bindal (SC) 317 ITR 1 have held that
'mens rea' not essential for civil liability' of penalty - Penalties under fiscal statutes are
for breach of civil liabilities - Willful concealment is not an essential ingredient for
attracting civil liability as is the case in the matter of prosecution u/s 276C.
Assessment and penalty proceedings are two separate and distinct proceedings.
Every' addition in assessment order does not automatically qualify for levy of penalty.
It is settled position that assessment proceedings and penalty proceedings are separate,
and distinct and as held by Hon'ble Supreme Court in the case of Anantharaman
Veerasinghaiah & Co. v. CIT {1980] 123 ITR 457, the findings in the assessment
proceedings cannot be regarded as conclusive for the penalty proceedings. It is also well
settled that the criterion and yardsticks for the purpose of imposing penalty u/s 271 (l)(c)
of the act are different than those applied for making or confirming the additions. It has
been held by Hon'ble Courts, including Hon'ble Mumbai Tribunal in the case of Yogesh
R.Desai Vs. ACIT (8DTR101), each and every addition made during assessment
Page 17 of 25
ITA-857/Del/2016.
Smt. Suman Lakhani.
proceedings does not automatically lead to levy of penalty for concealment of income. If
the revenue is not able to establish either concealment of income or furnishing of
inaccurate particulars of income, penalty u/s 271(1 )(c) is not leviable. In such
circumstances, Hon'ble Delhi High Court in the case of CIT v. Bacardi Martini India Ltd.
[2007] 288 ITR 585/158 TAXMAN 348 held that no penalty is imposable.
In the present case, in the penalty proceedings no concealment of income or inaccurate
particulars of its income has been established by the department. They simply relied on
the findings in the assessment order, which will not suffice for levy of penalty.
Making a wrong claim of deduction-will it qualify for levy of penalty u/s 271 (I)(c) ?
The Hon'ble Apex Court in its judgment in the case of Reliance Petro Products Ltd. 189
Taxman 322/SC) said no to this proposition. "Merely because the assessee had claimed
the expenditure, which claim was not accepted or was not acceptable to the Revenue,
that by itself would not, in our opinion, attract the penalty under Section 271(l)(c).
If we accept the contention of the Revenue then in case of every Return where the claim
made is not accepted by Assessing Officer for any reason, the assessee will invite penalty
under Section 27l(l)(c).
That is clearly not the intendment of the Legislature".
........................
......................
17. From the perusal of above, it is clear that the assessee's intention was not to
conceal the income. The assessee had rightly disclosed it in the Profit and Loss account
and not included while computing the taxable income. The revised return of income filed
by the assessee has also been accepted by the AO. In view of the judgment of Hon'ble
Supreme in the case of CIT vs. Reliance Petro products P. Ltd. (2010) 322 ITR 158, we are
of the view that it is not a fit case for levy of penalty as AO had not given any finding
separately as to whether there was concealment of income or whether assessee had
furnished inaccurate particulars of income. The AO has imposed the penalty on the
ground of disallowance of foreign exchange fluctuation. The assessee cannot be fastened
with the law of penalty without there being a clear specific charge. Fixing a charge should
not be in a casual manner and it has not been permitted under the law. After considering
the judgments relied on by both the sides and orders of the lower authorities, we, while
upholding the order of CIT (A), are of the considered opinion that learned CIT(A) is
justified in deleting the penalty.
18. In the result, appeal of the revenue is dismissed. "
Order pronounced in the Open Court on ...22nd. February, 2018.
f) 2018 - ITAT New Delhi - Vipul Goel vs. ACIT, Central Circle Meerut in ITA
no. 10 & 11/Del/2015 for A.Y. 2005-06 and 2006-07, date of pronouncement of order is
22/05/2018. Copy of relevant pages of order is enclosed. The relevant extract of
the Judgement is as under:
Page 18 of 25
ITA-857/Del/2016.
Smt. Suman Lakhani.
"ITA No. 10 & 170/Del/2015
[Assessment Year : 2005-06]
37. Both the cross-appeals are directed against the order of Ld. CIT(A), Meerut dated
20.10.2014 for AY 2005-06, challenging the levy of penalty' and cancellation of penalty
u/s 271(l)(c) of the Act. The AO vide separate order- levied the penalty u/s 271(l)(c) of the
Act on the addition made in the assessment order. Ld. CIT(A) partly confirmed the
additions/ sustained in appeal. Ld. CIT(A), therefore, partly allowed the appeal of the
assessee and cancelled the part penalty. The assessee is in appeal challenging the penalty
order. The Revenue is in appeal challenging the deletion of penalty because the
Departmental appeal on merits is pending before the Tribunal. Ld. Counsel for the
assessee submitted that quantum order of the Tribunal may be followed in deciding the
penalty appeals and also filed copy of the show cause notice dated 29.12.2009 issued for
assessment year under appeal before levy of penalty u/s 274 r.w.s 27l(l)(c) in which the
AO has mentioned
"(c) Have concealed the particulars of your income or
......................................................................................................................... furnish
ed inaccurate particulars of such income. " Ld. Counsel for the assessee, therefore,
submitted notice is bad in law and that penalty is not leviable in the matter.
38. On the other hand, Ld. Sr. DR relied upon the orders of the authorities below relied
upon the order of ITAT Mumbai Bench in the case of Sh.Mahesh M Gandhi vs ACIT in
ITA No.2976/Mum/2016 vide order dated 27.02.2017. In this case in notice, reasons for
penalty' were not mentioned. The Tribunal held that the AO has recorded satisfaction in
the assessment order in relation to invoking penalty proceedings. Ld. Counsel for the
assessee stated the decision cited by Ld. Sr. DR is not applicable to the facts of this case.
39. After considering the rival contentions, we are of the view that penalty is not leviable
in the matter. On quantum appeal, we have deleted all the additions in ITA
No.l018/Del/2014 & C.O.No.-297/Del/2014, therefore, penalty cannot be levied against
the assessee.
40. Further, the AO has issued a show cause notice which is bad in law because it did not
specify under which limb of section 271(l)(c), penalty proceedings have been initiated i.e.
whether for concealment of particulars of income or furnishing of inaccurate particulars
of income. The issue is covered in favour of the assessee by the judgement of Karnataka
High Court in the case of CIT vs SSA Emarald Meadows 73 taxmann.com 241 in which
similar view was taken and departmental appeal is dismissed. The judgement of Hon'ble
High Court is confirmed by the Hon 'ble Supreme Court by dismissing the SLP of the
Department reported in 73 taxmann.com 248. In view of the above, we set aside the
orders of authorities below and cancel the penalty.
41. In the result, the appeal of the assessee is allowed and departmental appeal is
dismissed.
Page 19 of 25
ITA-857/Del/2016.
Smt. Suman Lakhani.
ITA No. 11/Del/2015
[Assessment Year: 2006-07]
42. This appeal by the assessee has been directed against the order of Ld. CIT(A), Meerut
dated 20.10.2014 for AY 2006-07, challenging the levy of penalty u/s 271(1) (c) of the Act.
In this case, we have deleted all the additions on merit and allowed cross-objection i.e.
C.O.No.-298/Del/2014 (In ITA No.l019/Del/2014) [Assessment Year: 2006-07]. The AO
issued similar show cause notice before levy of the penalty as was issued in A Y 2005-06
above. The issue is identical as has been considered in AY 2005-06 above in ITA No. 11 &
170/Del/2015. Following the reasons for decision for A Y 2005-06, we setaside the orders
of the authorities below and cancel the penalty.
43. In the result, the appeal of the assessee is allowed.
44. In the final result, the appeals of the assessee and cross objections are allowed
whereas departmental appeals are dismissed. "
Order pronounced in the open court.
Considering the above factual & Legal matrix it is prayed that penalty imposed may kindly
be quashed as the assessee has neither furnished any inaccurate particulars nor has
concealed any income."
(B.1) The copies of the following orders / precedents were also filed from assessee's
side:
1. Covering letter containing Reply/ submissions
2. CIT(A) penalty Order in case of Assessee for the A.Y. 2012-13 vides
Appeal no. 10027/2017-18 order dtd. 23/08/2018.
3. CIT(A) penalty Order in case of Assessee for the A.Y. 2010-11 vides
Appeal no. 10406/2017-18 order dtd. 23/08/2018.
4. Hon'ble Supreme Court order in case of Reliance Petroproducts Pvt.
Ltd. arising out of SLP (C) no. 27161 of 2008
5. Hon'ble ITAT, Chandigarh Order in case of MDC Pharmaceuticals Pvt.
Ltd. in ITA no. 697/Chd/2012
6. Hon'ble ITAT, MumbaiOrder in case of Ami Builders Pvt Ltd. in ITA
no. 803/Mum/2014
7. Covering letter containing Reply/ Submission
8. Hon'ble High Court of Delhi in case of Pr. CIT-8 vs. Samtel India Ltd.
Page 20 of 25
ITA-857/Del/2016.
Smt. Suman Lakhani.
9. Hon'ble ITAT, New Delhi in case of M/s ABR Auto Pvt Ltd. vs. ACIT,
Circle-1(1) New Delhi in ITA no. 6236/DEL/2015
10. Hon'ble ITA, New Delhi in case of M/s Padmini Infrastructure
Developers (India) Ltd vs. DCIT, Circle-14(1), New Delhi in ITA no.
1002/Del/2014
11. Hon'ble ITAT, Mumbai in case of Robust Transportation Pvt Ltd vs.
DCIT-3(3)(1) Mumbai in ITA no. 3195/Mum/2018
12. Hon'ble ITAT, New Delhi in case of DCIT, Circle-17(2) New Delhi in
case of DCIT, Circle-17(2) New Delhi vs. M/s National Textile
Corporation Ltd. in ITA no. 5757/Del/2015
13. Hon'ble ITAT, New Delhi in case of Vipul Goel vs. ACIT, Central Circle
Meerut in different ITA nos. 10 & 11/Del/2015 and Cross Objections.
(C) When the appeal came up for hearing before us, the Ld. Authorized
Representative ("Ld. AR", for short) of the Assessee vehemently contended that the
disallowance made by the AO amounting to Rs. 18,15,188/- out of assessee's claim for
interest expenses was highly disputable in nature having regard to specific facts and
circumstances in the case of the assessee, and no penalty U/s 271(1)(c) of I.T. Act can
be levied in respect of issues of such highly disputable nature. The Ld. AR for the
assessee placed strong reliance on the order of the Hon'ble Supreme Court in the case
of CIT vs. Reliance Petro Product Pvt. Ltd. (322 ITR 158) SC, for the proposition that
penalty cannot be imposed merely on the basis of disallowance of a claim of deduction.
The Ld. AR drew our further attention to the ratio laid down by the Hon'ble Supreme
Court in the case of CIT vs. Reliance Petro Product Pvt. Ltd. (Supra), that the
expression "inaccurate particulars of income" means that details filed in the assessment
proceedings must be found to be wrong or inaccurate; and further, that mere making of
Page 21 of 25
ITA-857/Del/2016.
Smt. Suman Lakhani.
a claim which is not sustainable in law, will not amount to inaccurate particulars of
income. The Ld. AR further drew our attention to the separate appellate orders, each
dated 23.08.2018 in assessee's own case, wherein the Ld. CIT(A) [the same incumbent,
namely Shri Manu Malik Commission of Income Tax (Appeals), Faridabad] on identical
facts and circumstances, deleted penalty levied by the AO for Assessment Years 2010-
11 and 2012-13 respectively. The Ld. AR assailed the aforesaid impugned appellate
order dated 02.12.2015 of Ld. CIT(A) strongly on the further ground that the Ld. CIT(A)
has, by necessary implication, himself admitted that view taken against the assessee in
Assessment Year 2008-09 was erroneous when, for subsequent years; the view taken
by the same incumbent CIT(A) in assessee's own case for Assessment Years 2010-11
and 2012-13 was in favour of the assessee in identical facts and circumstances. The
Ld. AR placed further reliance on the aforesaid two written submissions dated
10.12.2018 and 04.09.2019, and on the orders / precedents already mentioned in
foregoing paragraph No. (B). The Ld. Departmental Representative ("Ld. DR", for
short) did not dispute any facts claimed in the aforesaid written submissions filed from
the assessee's side or the facts contended before us at the time of hearing. He also
failed to bring out any distinguishing facts and circumstances for this year as compared
with Assessment Year 2010-11 and 2012-13. However, he relied on the orders of the
Ld. CIT(A) and the Assessing Officer.
(D) We have heard both sides. We have perused the materials available on records
carefully. We have also considered the judicial precedents brought to our attention, at
the time of hearing or referred to in the records. We find that in assessee's own case
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ITA-857/Del/2016.
Smt. Suman Lakhani.
for Assessment Years 2010-11 and 2012-13, the same incumbent in the Office of Ld.
CIT(A) deleted the penalty levied by the Assessing Officer U/s 271(1)(c) of I.T. Act, on
the identical issue in identical facts and circumstances. However, for the year under
consideration, in appeal before us, the same incumbent in the Office of Ld.CIT(A) has
confirmed the penalty levied by the Assessing Officer U/s 271(1)(c) of I.T. Act, on
identical issue in identical facts and circumstances. The reason for this inconsistency in
the order of the Ld. CIT(A) in Assessment Year 2008-09 as compared with the decision
of the Ld. CIT(A) in Assessment Years 2010-11 and 2012-13 is not far to seek. When
we perused the orders of the Ld. CIT(A) for Assessment Years 2010-11 and 2012-13, it
was found that Assessment Years 2010-11 and 2012-13, the Ld. CIT(A) based his
decision on the binding precedents of the Hon'ble Supreme Court in the cases of CIT vs.
Reliance Petro Product Ltd. (supra) and Hindustan Steel vs. State of Orissa 83 ITR 26
(SC). However, these binding precedents were not considered by the Ld. CIT(A) in his
aforesaid impugned appellate order dated 02.12.2015 for Assessment Year 2008-09.
Thus, we find that the aforesaid impugned appellate order dated 02.12.2015 for
Assessment Year 2008-09 was passed by the Ld. CIT(A) in ignorance of the aforesaid
binding precedents. An order passed in ignorance of binding precedents is
erroneous. Now, it is left to us in the present appeal before us for Assessment Year
2008-09 to redress the error of the Ld. CIT(A) in passing the aforesaid impugned
appellate order dated 02.12.2015, without the Ld. CIT(A) considering CIT vs. Reliance
Petro Product Ltd. (Supra). Respectfully following the aforesaid binding precedent in
the case of CIT vs. Reliance Petro Product Ltd. (supra); which was also followed by the
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ITA-857/Del/2016.
Smt. Suman Lakhani.
Ld. CIT(A) in his orders for Assessment Years 2010-11 and 2012-13; penalty levied U/s
271(1)(c) of I.T. Act for this year is hereby cancelled, having regard to the specific facts
and circumstances of the case before us.
(E) In the result, the penalty amounting to Rs. 6,16,688/- U/s 271(1)(c) levied by
the AO vide aforesaid order dated 20.12.2010 and confirmed by the Ld. CIT(A) vide his
aforesaid impugned appellate order dated 02.12.2015 is hereby cancelled and the
appeal of the assessee is allowed.
Order pronounced in the Open Court on 13/9/2019
Sd/- Sd/-
(AMIT SHUKLA) (ANADEE NATH MISSHRA)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated: 13/9/2019
(Pooja)
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT(Appeals)
5. DR: ITAT
ASSISTANT REGISTRAR
ITAT NEW DELHI
Page 24 of 25
ITA-857/Del/2016.
Smt. Suman Lakhani.
Date of dictation
Date on which the typed draft is placed before the
dictating Member
Date on which the typed draft is placed before the
Other Member
Date on which the approved draft comes to the Sr.
PS/PS
Date on which the fair order is placed before the
Dictating Member for pronouncement
Date on which the fair order comes back to the Sr.
PS/PS
Date on which the final order is uploaded on the
website of ITAT
Date on which the file goes to the Bench Clerk
Date on which the file goes to the Head Clerk
The date on which the file goes to the Assistant
Registrar for signature on the order
Date of dispatch of the Order
Page 25 of 25
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