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2016 (6) TMI 934 - ITAT DELHI

2016 (6) TMI 934 - ITAT DELHI - TMI - Penalty under section 271(1)(c) - excess deduction claimed under section 80-IB - bonafide mistake - Held that:- We find from the facts of the case that the Auditor computed deduction @ 100% in respect of the two units in reference and the assessee claimed the same deduction in the return of income filed. According to us, it is a very much likelihood that a normal person will claim the deduction in the return of income what has been computed by the Auditor, w .....

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on 80-IB of the Act and accordingly allowed the claim at the rate of 30% and nowhere held that the mistake was pointed out by the Assessing Officer to the assessee. When the assessee itself noticed the mistake and came forward and offered the income for taxation, the assessee cannot be held in default for furnishing inaccurate particulars. - Thus we are of the opinion that the excess claim under section 80-IB of the Act made by the assessee was on the basis of the bonafide mistake of the Aud .....

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rmpal Premchand Ltd (2010 (9) TMI 155 - DELHI HIGH COURT ), thus respectfully following the ratio of the said decision wherein held that 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 (1)(c)- Decided against revenue - Levy of penalty on unexplained cash credit under section 68 - Held that:- In the case in hand, the assessee has failed to .....

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1- 02. - Decided against assessee - ITA No. 5902/Del/2012 - Dated:- 2-6-2016 - SH. I.C. SUDHIR, JUDICIAL MEMBER AND SH. O.P. KANT, ACCOUNTANT MEMBER For The Appellant : S/sh. Ajay Vohra & Gaurav Jain, Advocates; Ms. Bhavita Kumar, Adv. For The Respondent : Smt. Anima Barnwal, Sr. DR ORDER PER O.P. KANT, A.M.: This appeal of the assessee is directed against order dated 17/08/1012 of the learned Commissioner of Income-tax (Appeals)-XI, New Delhi, for assessment year 2004-05 in respect of pen .....

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(Appeals) erred on facts and in law in not holding that the penalty order under section 271(1 )(c) was beyond jurisdiction, bad in law and void ab-initio, in as much as the same was initiated on issues for which no prima facie satisfaction, qua concealment/furnishing of inaccurate particulars of income, was discernible from the assessment order passed under section 143(3) of the Act. Without Prejudice 2. That the Commissioner of Income Tax (Appeals) erred on facts and in law in upholding the ac .....

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ased on the certificate granted by the auditors, was made due to inadvertence and was a bonafide mistake, not warranting imposition of penalty under section 271(1 )(c) of the Act. 2.2 That the Commissioner of Income Tax (Appeals) erred on facts and in law in holding that excess claim of deduction under section 801B was not suo-moto offered for disallowance by the appellant during the course of assessment proceedings. 2.3 That the Commissioner of Income Tax (Appeals) erred on facts and in law in .....

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w of suo-moto surrender of excess claim of deduction under section 80IB before completion of assessment proceedings, there was no concealment of income or furnishing of inaccurate particulars of income, warranting imposition of penalty under section 271(1)(c) of the Act. 2.5 That the Commissioner of Income Tax (Appeals) erred on facts and in law in alleging that the appellant deliberately brought the fact of excessive claim of deduction under section 80IB of the Act forward at the fag end of the .....

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der section 271(l)(c) of the Act was not leviable in respect of the aforesaid disallowance under section 80IB of the Act, as the issue of allocation of common expenses was (i) debatable; (ii) based on bonafide difference of opinion, and (iii) all material facts were properly disclosed by the appellant. 4. That the Commissioner of Income Tax (Appeals) erred on facts and in law in upholding the action of the assessing officer in levying penalty under section 271(1)(c) of the Act in respect of disa .....

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in various places in the country. In the return of income filed the assessee claimed deduction of ₹ 10,32,97,807/- under section 80-IB of the Income-tax Act, 1961 (for short the Act ) at the rate of hundred percent in respect of three units namely Unit-V (Ralholi-Silvasa), Unit-X (Saily- Silvasa), Unit-IX (Pondicherry) and 30% deduction in respect of Unit-IV (Saily- Silvasa). Subsequently, in the course of scrutiny proceedings through letter dated 01/12/2006, the assessee revised its claim .....

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llocated to the respective units. The Assessing Officer after determining common expenses of ₹ 72,13,618/- allocated the expenses in the ratio of the turnover of the respective unit resulting into reduction of deduction under section 80-IB of the Act. The deduction finally allowed after withdrawing the access deduction under claimed under section 80-IB in respect of the two units and in reduction in profit due to allocation of common expenses was of ₹ 4,48,80,415/- as against claim o .....

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IB of the Act and disallowance of interest in respect of unexplained cash credits. In view of the confirmation of the additions, the AO levied penalty under section 271(1)(c) of the Act wide order dated 27/03/2009 in respect of both the additions/disallowances. On appeal the learned Commissioner of Income-tax(Appeals) upheld the penalty levied but on further appeal to the Tribunal, it was observed that ground of penalty on account of disallowance of deduction under section 80 IB of the Act for n .....

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y of hearing to the assessee, again confirmed the penalty levied under section 271(1)(C) of the Act allowing a part relief on in the penalty in respect of interest related to unexplained cash credit. Aggrieved with the findings of the learned Commissioner of Income Tax(Appeals), the assessee is in appeal before the Tribunal. 3. The grounds no. 1 and 1.1 are not pressed by the learned Authorized Representative of the assessee and, therefore, we dismiss the same as infructuous. 4. In grounds no. 2 .....

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ng of the earlier Commissioner of Income-tax (Appeals) on the issue in dispute. According to the Commissioner of Income-tax (Appeals) the correct amount of addition on this account would have been ₹ 5,84,17,392/-, which was not objected by the Authorized Representative of the assessee. The learned Commissioner of Income-tax (Appeals) held that mere filing of letter before the Assessing Officer rectifying the claim of deduction under section 80-IB would not absolve the assessee from the cha .....

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was detected by on its own volition and the assessee tried to manage the situation by filing a letter before the AO on 04/12/2006 rectifying the excess claim. The learned Commissioner of Income Tax(Appeals) held that the assessee chose to revise its claim only after notice of scrutiny issued by the Department and, therefore, the assessee had furnished inaccurate particulars of income with a view to concealment of income and accordingly the penalty on the incorrect claim of deduction under secti .....

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espect of two units filed at pages No. 70 to 73 and pages 102 to 105 of the paper book, where by mistake of the Auditor, hundred percent deduction under section 80-IB was computed as against eligibility of deduction at the rate of 30% only. The learned Authorized Representative further submitted that no penalty could be levied in case of a wrong claim made on the basis of the bona fides mistakes of the consultant/auditors. In support of the proposition, he relied on the judgment of the Hon ble S .....

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he case of CIT versus reliance Petroproducts Private Limited 322 ITR 158. The learned AR, relying on the decision of the Delhi High Court in the case of CIT Vs. S.A.S. Pharmaceutical, (2011) 355 ITR 259, submitted that no penalty on suo motu disallowance of inadvertent/wrong claim be levied. 4.2 On the contrary, learned Sr. Departmental Representative relying on the orders of the authorities below submitted that notice under section 143(2) was issued to the assessee for scrutiny of the case and .....

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m the facts of the case that the Auditor computed deduction @ 100% in respect of the two units in reference and the assessee claimed the same deduction in the return of income filed. According to us, it is a very much likelihood that a normal person will claim the deduction in the return of income what has been computed by the Auditor, who has been authorized by the Act to submit a audit report in form No. 10 CCB in respect of the claim of deduction. In the circumstances, it cannot be said that .....

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along with the return and that it unequivocally stated that the provision for payment was not allowable under section 40A(7) of the Act indicates that the assessee made a computation error in its return of income. Apart from the fact that the assessee did not notice the error, it was not even noticed even by the Assessing Officer who framed the assessment order. In that sense, even the Assessing Officer seems to have made a mistake in overlooking the contents of the Tax Audit Report. 19. The co .....

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rtise of the assessee has little or nothing to do with the inadvertent error. That the assessee should have been careful cannot be doubted, but the absence of due care, in a case such as the present does not mean that the assessed is guilty of either furnishing inaccurate particulars or attempting to conceal its income. 20. We are of the opinion, given the peculiar facts of this case, that the imposition of penalty on the assessee is not justified. We are satisfied that the assessee had committe .....

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ansaction in question. The first transaction and full gain was disclosed by the respondent-assssee as short-term capital gains. The assessee had paid tax @ 10% which was applicable to short-terms capital gains. The Assessing Officer had observed that tax at normal rate of 30% was applicable. The assessee accepted the said position and has paid and interest. In Price Waterhouse Coopers Pvt. Ltd. Vs. Commissioner of Income Tax, (2012), the Supreme Court deleted the penalty and has accepted that hu .....

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tuity to its total income. This can only be described as a human error? Which we are all prone to make. The caliber and expertise of the assessee has little or nothing to do with the inadvertent error. That the assessee should have been careful cannot be doubted, but the absence of due care, in a case such as the present, does not mean that the assessee is guilty of either furnishing inaccurate particulars or attempting to conceal its income. Consequently, given the peculiar facts of this case, .....

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ation of income. Full details and particulars had been submitted by the assessee to the Assessing Officer. We do not see any reason to interfere. 4.5 We find that in the case of Price Waterhouse Cooper Pvt. Ltd (supra) cited above the mistake was occurred despite the amount was mentioned to be not allowable in the audit report, whereas in the case in hand there was mistake in the audit report itself and the assessee followed the computation of the audit report, thus there was bonafide mistake on .....

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the Act and accordingly allowed the claim at the rate of 30% and nowhere held that the mistake was pointed out by the Assessing Officer to the assessee. When the assessee itself noticed the mistake and came forward and offered the income for taxation, the assessee cannot be held in default for furnishing inaccurate particulars. 4.7 In view of above discussion, we are of the opinion that the excess claim under section 80-IB of the Act made by the assessee was on the basis of the bonafide mistake .....

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ffice/common expenses. The facts in respect of the disallowance are that the Assessing Officer in the details furnished during the course of assessment observed that the assessee had not allocated the head office expenses with the unit eligible for deduction under section 80-IB of the Act. It was submitted by the assessee that books of account of each unit were independent and there was no common expenses which were relatable and allocable to those units. The Assessing Officer did not accept the .....

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y and the deduction under section 80-IB was computed as under: Unit Eligible profit before allocation expense (in rupees) Allocable expenses (in rupees) Eligible profit after allocation expenses (in Rupees) Eligible deduction (in rupees) Unit IV @ 30% 1,88,16,554/- 2,28,678 1,85,87,876 55,76,363 Unit V @ 100% 1,51,92,527 2,79,139 1,49,13,388 1,49,13,388 Unit X @ 30% 6,40,61,035 9,17,762 6,31,43,273 1,89,42,982 Unit IX @ 30% 1,83,99,279 2,40,340 1,81,58,939 54,47,682 5.1 The Assessing Officer lev .....

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on the facts disclosed by the assessee and the assessee has filed all the particulars of income in this respect and addition was merely on the difference of opinion. The learned Authorized Representative in support of his contention relied on the judgment of the Hon ble Delhi High Court in the case of CIT Vs. Dharmpal Premchand reported in 329 ITR 572, wherein the finding of the Tribunal that allocation of expenses between the head office and the unit would always be a debatable issue, was affir .....

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the assessee was denied and penalty under section 271(1)(c) of the Act was levied. The learned Commissioner of Income Tax(Appeals) deleted the penalty accepting the assessee s contention that it had disclosed all material facts pertaining to the computation of deduction admissible under section 80-IA and 80-IB that the directors remuneration had been duly debited in the head office and no amount was allocated towards a unit and the interest earned on banks and interest paid to the others had a d .....

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d 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 tr .....

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ell as income in its return, which details, in themselves, were not found to be inaccurate nor could be viewed as the concealment of income on its part. It was up to the authorities to accept its claim in the return or not. 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(1)(c). If we accept the contention of the revenue then in case of every .....

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furnishing inaccurate particulars of income on the issue in dispute, and accordingly the grounds of the appeal from 3 to 3.1 are allowed. 6. In ground No. 4 the assessee has challenged levy of penalty of in respect of disallowance of interest of ₹ 19,200/- paid in respect of the loan taken from Mr. Ravi Kapoor, which was treated as unexplained cash credit under section 68 of the Act in the preceding assessment year. 6.1 The facts in respect of the issue in dispute are that in the assessme .....

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unted to furnishing of inaccurate particulars of income. 6.2 Before us learned Authorized Representative of the assessee submitted that all documents in respect of the cash creditors were submitted before the Assessing Officer and relied on the judgment of the Punjab and Haryana High Court in the case of CIT Vs. Sunila Sharma in ITA No. 57/2013 (P&H H.C.) wherein it is held that no penalty can be imposed if the confirmations from the parties could not furnished due to the extraneous reasons. .....

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e case of Mr. Ravi Kapoor as under: 7. We have considered the rival submissions. As rightly submitted by the learned DR the primary onus to prove genuineness of the cash credit lieson the assessee. However, in the present case the assessee never filed any confirmation letter from the creditor. Thus except stating that the amount was borrowed from Ravi Kapoor, his identity is not proved. By filing bank particulars of the creditor, the creditworthiness of the creditor is also not proved. The asses .....

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the decision of Hon ble Gauhati in the case of Nerni Chand Kothari vs. CIT, 264 ITR 254 and on the decision of Hon ble Supreme Court held that the cash credit was genuine. However, in the present case the assessee failed to prove not only the identity' of the creditor but also failed to prove creditworthiness of the creditor. Therefore, the addition was rightly made by the Assessing Officer. 6.4 From the findings of the Tribunal in respect of unexplained cash credit from Mr. Ravi Kapoor, we .....

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egarding the bank accounts from where she got the gifts, the dates, the details of the bank accounts and the demand drafts of Toronto Dominion Bank, Canada were furnished to substantiate that the gift was from her brother who was residing at Canada. The concealment, as such, in the facts and circumstances, was missing, as admittedly, it was not that the amount was detected subsequently but the factum of the gifts from the brother and sister had been mentioned in the note in the income tax return .....

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