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2016 (8) TMI 406 - ITAT MUMBAI

2016 (8) TMI 406 - ITAT MUMBAI - TMI - Penalty levied by AO u/s 271(1)(c) on the deemed dividend income - addition made u/s 2(22)(e) - Held that:- In the case before us, the assessee has declared full facts qua the loan raised from a company in which he has substantial shareholding and the explanation offered by the assessee was bonafide and not false and therefore the penalty cannot be levied in such a case. The FAA has confirmed the action of AO just on the basis that quantum was confirmed by .....

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of ld. CIT(A) and direct the AO to delete the addition. - Decided in favour of assessee. - I.T.A. No.7577/Mum/2013 - Dated:- 22-6-2016 - SHRI SHAILENDRA KUMAR YADAV, JM AND SHRI RAJESH KUMAR, AM For The Assessee : Shri Haresh P Shah For The Revenue : Shri Vinod Kumar ORDER PER RAJESH KUMAR, A. M: This is an appeal filed by the assessee against the order dated 13.11.2013 passed by Commissioner of Income Tax(A)-34, Mumbai, for assessment year 2009-10 confirming the penalty levied by AO u/s 271(1)( .....

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the Act and accordingly a notice u/s 148 dated 9.2.2009 was issued to the assessee and served upon him. Thereafter, a statutory notices u/s 143(2) and 142(1) were issued and served upon the assessee. During the course of assessment proceedings, the AO found that the assessee was holding substantial interest in M/s ZAN Engg (India) Pvt Ltd. and also raised unsecured loan from the said company which were outstanding as on 31.3.2006 to the tune of ₹ 21,57,903/- out of which a sum of ₹ .....

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,000/-. 4. The ld.CIT(A) also confirmed the addition made by the AO vide order No.CIT(A)-34/IT 195/2009-10 dated 9.11.2010 and by dismissing the appeal of the assessee and thereafter no appeal was preferred against the order of ld. CIT(A) by the assessee meaning thereby that the assessee accepted the addition made by the AO. Upon dismissal of the appeal by the ld.CIT(A), the AO issued show cause notice to the assessee dated 30.10.2009 as to why the penalty u/s 271(1) (c ) r.w.s.274 of the Act sh .....

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ssed by the AO is reproduced below : "With reference to above and under the instruction from our client; we state that our client received notice u/s 271(1)(c) of the IT Act, 1961. In respect of penalty we are submitting as under: 1) The addition of ₹ 850000/- has been made in the Assessment Order as deemed dividend on account of loan taken from Zan Engineering (I) Pvt. Ltd. out of which ₹ 815000/- was repaid during the year. 2) The assessee had fully disclosed the facts and did .....

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lty proceedings are independent proceedings. 7) The decision in Dharmendra Textiles is not an authority is an automatic consequence of an addition being made to income of taxpayer for the reason that whether it is a Civil Liability or a criminal Liability Penalty can only come into play when the conditions are satisfied. Even explanation 1 to section 271(1)(c) raises rebuttable presumption & shifts the onus on the assessee to establish bonafide of the claim. 8) The assessee has not concealed .....

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to imposition of penalty. There was no mensrea on the part of assessee which is prerequisite for imposing penalty. 11) Explanation to Section 271(119 applies to assessee which is as under: Where in respect of any facts material to the computation of total income of the assessee. a. Fails to offer an explanation or offers an explanation which found to be false or b. Offers an explanation which is to prove that such explanation is bona fide and facts to prove that all the material facts have been .....

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given by the assessee was bonafide, penalty u/s. 271(1)(2) will not be attracted. 14) Further the assessee did not willingly shown deemed dividend in return of income but it was inadvertent. There was no mensrea on the part of the assessee which is prerequisite for imposing penalty. In view of the above you are requested to drop the penalty proceedings u/s 271(1)( c ) of the IT Act, 1961 as penalty will be an additional burden over and above taxes paid on deemed income. Deemed dividend is deemin .....

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271(1)( c) of the Act. Aggrieved by the order of AO, the assessee preferred an appeal before the first appellate authority (FAA) who also confirmed the action of the AO by observing and holding as under : 4. I have considered the submissions made by the appellant and the impugned penalty order on this issue. The Assessing Officer had added income of ₹ 8,50,OOO/-on account of deemed dividend u/s 2(22)(e) in the order passed u/s.143(3) r.w.w 147 of the Act. Since my predecessor vide order in .....

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accurate particulars of income. The ld. Counsel submitted that the assessee has fully disclosed the fact of having borrowed the money from the said concern in the balance sheet and thus, there was no question of filing either inaccurate particulars of income or concealment of particulars of income. In view of this facts, the ld. Counsel prayed that the penalty imposed by the AO u/s 271(1)(c) and confirmed by the ld.CIT(A) without properly appreciating the facts of the assessee and in a mechanica .....

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ring the year. We further find that the assessee has fully disclosed full facts qua raising money and repayment thereof in the return of income filed with the department. We find that the impugned penalty was imposed by the AO for furnishing inaccurate particulars of income and also for concealing the particulars of income which was confirmed by the ld. CIT(A) without passing any speaking order and just confirmed the penalty mentioning that the predecessor CIT(A) vide order in appeal order No.CI .....

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lars of income. In this respect, it would be interesting to point out that not only the assessee had disclosed the receipt of aforesaid amount of ₹ 3 crores from M/s. DMIL, albeit, showing it as a liability at that time (as according to the assessee the same had not been converted into income) the Assessing Officer, in fact, went into this aspect specifically and accepting the stand taken by the assessee, did not treat the said receipt as income. The issue was dealt with by the AO in the q .....

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res as security deposit by the assessee company from M/s Daewoo Motors (I) Ltd flows from the MOU entered into between them. The relevant clasue 8, 9, 10 and 11 of the MOU have been reproduced in our letter dated 06.02.2001. We refer to them again. In terms of clause 9 of the MOU, the fee payable by DMIL to MIL will accrue on the date on which the contract between the DTC and DMIL is signed or on which the DTC places an order on DMIL for the supply of buses. The order or the contract has yet not .....

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that some of the observations of the Tribunal in the impugned order relating to interpretation of the clauses of the MOU may not be correct. This is more so when this Court also, while dismissing the quantum appeal of the assessee, interpreted these very clauses. Therefore, we may not entirely agree with the observations of the ITAT occurring in paras 19 to 22. However, still in view of the position explained by us in the foregoing paras, we are inclined to accept the conclusion of the Tribunal .....

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merits. However, as it was not a case of concealment, the provisions of Section 271(1)(c) attracting levy of penalty would not be applicable more so when all material facts relevant to the said claim were duly furnished by the assessee before the Assessing Officer. 19. We may usefully refer to the judgment of the Apex Court in Commissioner of Income Tax v. Reliance Petroproducts Pvt. Ltd., [2010] 322 ITR 158 (SC). After taking note of various earlier pronouncements on the subject and reiterating .....

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;not accurate, not exact or correct; not according to truth; erroneous; as an inaccurate statement, copy or transcript." We have already seen the meaning of the word "particulars" in the earlier part of this judgment. Reading the words in conjunction, they must mean the details supplied in the Return, which are not accurate, not exact or correct, not according to truth or erroneous. We must hasten to add here that in this case, there is no finding that any details supplied by the .....

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