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TMI Blog2012 (4) TMI 360X X X X Extracts X X X X X X X X Extracts X X X X ..... en filed in the Hon'ble High Court. 3. On the facts and in the circumstances of the case, the CIT(A) has erred in law and on facts in holding that claim u/s 10A and 80HHE are debatable issues and wrong claim of deduction does not amount to furnishing of inaccurate particulars. 4. The order of the learned CIT(A) is erroneous and is not tenable in law and on facts. 5. The appellant craves leave, to add, alter or amend any/all of the grounds of appeal before or during the course of the hearing of the appeal." 2. Facts, in brief, as per, relevant orders for the AY 2003-04 are that return declaring income of Rs. 16,75,00,900/- filed on 01.12.2003 by the assessee, carrying on the business of software development and BPO Services, after being processed on 19.03.2004 u/s 143(1) of the Income-tax Act, 1961 (hereinafter referred to as the 'Act') was selected for scrutiny with the service of a notice u/s 143(2) of the Act, issued on 11th October, 2004. During the course of assessment proceedings, the Assessing Officer (A.O. in short) noticed that the assessee, inter alia, did not receive or bring in convertible foreign exchange into India within the stipulated time on accou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 56F and on their application, seeking extension of time, amounts were subsequently realized. Accordingly, it was argued that all facts relating to unrealized export proceeds having been disclosed, no penalty could be imposed. As regards disallowance u/s 14A of the Act, the assessee replied that since no expenditure was incurred in relation to exempt income, the assessee was under a bona fide belief that no disallowance was required to be made u/s 14A of the Act. Regarding disallowance of penalty, the assessee did not offer any explanation. However, the AO did not accept the explanation of the assessee and imposed a penalty of Rs. 1,05,00,000/- on the tax sought to be evaded on the income of Rs. 1,46,29,547/- on the ground that the assessee, a well established company having the benefit of best tax advisors and consultants, concealed the particulars of its income. It was further mentioned that the if the case of the assessee was not selected for scrutiny or escaped the eyes of the AO, the assessee would have gained huge undue benefit. Inter alia, the AO referred to decision in Dharamendra Textile Processors (supra). 4. On appeal, the ld. CIT(A) cancelled the penalty in the AY 2003 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e-tax Act. The appellant has challenged the imposition of penalty on two grounds firstly that there was neither any concealment nor any furnishing of inaccurate particulars, therefore, concealment penalty was attracted in his case and secondly the appellant has argued that the additions made by the Assessing Officer in consequence of which penalty has been imposed, have been deleted in entirety by Hon'ble ITAT, Delhi vide order dated 31.03.2009 in I.T. No.1320 & 1446/D/08, hence, penalty does not survive and it should be cancelled. I have examined the facts of the case very carefully. It is seen from the assessment order that the penalty u/s 271(1)(c) has been levied by the Assessing Officer in consequence of disallowance of the claim of the assessee made u/s 10A and 80HHE of the Income-tax Act. It has been held by the Assessing Officer that by making wrong claims of deduction u/s 10A and 80HHE, the assessee has deliberately concealed its income and also furnished inaccurate particulars of income. I am of the view that a disallowance of quantum of a claim of deduction does not necessarily imply concealment or furnishing of inaccurate particulars because the issue regarding al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xmann.com 85 (Kar.); CIT v. Brahmaputra Consortium Ltd. [2011] 12 taxmann.com 486 (Delhi); CIT v. Mahavir Irrigation (P.) Ltd. [2011] 202 Taxman 415/13 taxmann.com 58 (Delhi); CIT v. Mahanagar Telephone Nigam Ltd. [ITA No. 626/2011, dated 10-10-2011] (Delhi); Fortis Financial Services Ltd. [ITA Nos. 4/Del/2009 and 5/Del/2009 (Del.)]; Business Standard Digital Ltd. v. ACIT [ITA No. 1591/Del/2010 (Del.)], were referred to. Regarding penalty in relation to disallowance u/s 14A of the Act in the AY 2004-05, the ld. AR relied upon decisions in Reliance Petroproducts (P.) Ltd. (supra) and Liquid Investment. [ITA 240 of 2009 (Del.)]. In nutshell, the ld. AR supported the findings of the ld. CIT(A). 7. We have heard both the parties and gone through the facts of the case as well as the aforesaid decisions relied upon on behalf of the assessee. As regards penalty levied in respect of amount pertaining to deduction u/s 10A & 80HHE of the Act, as is apparent from the aforesaid facts, the assessee claimed deduction on the basis of report dated 27.11.2003 of the CA in form no. 56 F & 10CCAF. In note no. 4 in Annexure A to form 10CCAF & 56F, it was clearly mentioned that an amount of Rs. 47,52, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceal" means: "to hide or keep secret. The word 'conceal' is con+celare which implies to hide. It means to hide or withdraw from observation; to cover or keep from sight; to prevent the discovery of ; to withhold knowledge of. The offence of concealment is, thus, a direct attempt to hide an item of income or a portion thereof from the knowledge of the income-tax authorities." In Webster's Dictionary, "inaccurate" has been defined as : "not accurate, not exact or correct; not according to truth; erroneous ; as an inaccurate statement, copy or transcript.". 7.1 The penalty u/s 271(1)(c) of the Act is leviable if the AO is satisfied in the course of any proceedings under this Act that any person has concealed the particulars of his income or furnished inaccurate particulars of such income. It is well settled 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 purposes of the penalty proceedings. It is also well settled that the criterion and yar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovided in Explanation 1 to section 271(1)(c) come into play, and the amount added or disallowed in computing the total income shall be considered as the income in respect of which particulars have been concealed, for the purposes of clause (c) of section 271(1), and the penalty follows. On the other hand, if the assessee is able to offer an explanation, which is not found by the authorities to be false, and assessee has been able to prove that such explanation is bona fide and that all the facts relating to the same have been disclosed by him, the assessee shall be out of the clutches of explanation 1 to section 271(1)(c) of the Act, and in that case, the penalty shall not be imposed. In the instant case, the assessee discharged the onus cast on it in terms of Explanation 1 to sec. 271(1)(c) of the Act. Hon'ble Supreme Court in the case of Dilip N. Shroff v. Jt. CIT [2007] 291 ITR 519/161 Taxman 218 (SC) while considering the scope of these provisions u/s 271(1)(c) of the Act observed in the following terms: "The legal history of section 271(1)(c) of the Act traced from the 1922 Act prima facie shows that the Explanations were applicable to both the parts. However, each case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Act. The Assessing Officer has not been able to establish that the claim of the assessee for deduction under sections 10A and 80HHE of the Act was not bona fide or that any specific particulars were concealed or furnished inaccurate. Likewise mere disallowance of Rs. 6,83,493/- in terms of provisions of sec. 14A of the Act or disallowance of Rs. 10,000/- on account of penalty on the basis of tax audit report, does not, in our view, attract levy of penalty. A mere rejection of the claim of the assessee by relying on different interpretations does not amount to concealment of the particulars of income or furnishing inaccurate particulars thereof by the assessee. Hon'ble Apex Court in Reliance Petroproducts (P.) Ltd. (supra), after considering various decisions including Dilip N. Shroff (supra) Dharamendra Textile Processors (supra) concluded that 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. In the case under consideration, there is nothing to suggest that the assessee furnished any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ports or disallowance of an estimated amount, having recourse to provisions of sec.14A the Act cannot be considered as concealment of income or furnishing inaccurate particulars thereof, especially when all the relevant particulars were disclosed before the AO. The following observations made by the Hon'ble Apex Court in the aforesaid case of Reliance Petro Products (supra) are relevant: "10. It was tried to be suggested that Section 14A of the Act specifically excluded the deductions in respect of the expenditure incurred by the assessee in relation to income which does not form part of the total income under the Act. It was further pointed out that the dividends from the shares did not form the part of the total income. It was, therefore, reiterated before us that the Assessing Officer had correctly reached the conclusion that since the assessee had claimed excessive deductions knowing that they are incorrect; it amounted to concealment of income. It was tried to be argued that the falsehood in accounts can take either of the two forms; (i) an item of receipt may be suppressed fraudulently; (ii) an item of expenditure may be falsely (or in an exaggerated amount) claimed, an ..... X X X X Extracts X X X X X X X X Extracts X X X X
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