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2016 (8) TMI 654 - ITAT DELHI

2016 (8) TMI 654 - ITAT DELHI - TMI - Penalty under section 271(1)(c) - Held that:- There are no two opinions about the settled position of law that regular assessment proceedings and penalty proceedings are two entirely different subjects which operate in distinct and separate spheres so much so that entirely different parameters are applicable for making quantum addition and for levying penalty under section 271(1)(c) of the Act. - There can be no dispute with regard to the position of la .....

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of inaccurate particulars alone, the assessee does not, ipso facto, become liable to a penalty. Imposition of penalty is not at all automatic. Meaning thereby, any addition in quantum would not lead to automatic levy of penalty and this is also true in respect of furnishing of inaccurate particulars of income. Not only is the levy of penalty discretionary in nature but the discretion has to be exercised keeping the relevant factors in mind and the approach of the taxman must be fair and objectiv .....

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ity of being heard to the assessee and passed an order without proper adjudication and she simply upheld the penalty order which is not a proper and justified approach of a first appellate authority. - On merits, as per discussion in the earlier part of this order, we are inclined to hold that the penalty imposed by the AO u/s 271(1)(c) of the Act and upheld by the CIT(A) is not sustainable on all the three counts and thus we demolish the same and the AO is directed to delete the entire pena .....

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mposed by the AO u/s 271(1)(c) of the Income-tax Act, 1961 [hereinafter referred to as 'the Act'] has been upheld. 2. Although the assessee has raised as many as eight grounds of appeal, the main effective grounds challenging the denial of opportunity of being heard to the assessee and upholding the penalty have been stated in Ground Nos. 1 and 4 and other grounds are supportive to these main grounds. Ground Nos. 1 and 4 read as under: 1. That on the facts and circumstances of the case a .....

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h as it is suffering from denial of rules of natural justice. Ld. Commissioner of Income Tax(Appeals) failed to grant fair opportunity of hearing as contemplated by the provisions of Section 271 (1) (c) and the rules of natural justice. GROUND NO. 4 3. We have heard the rival submissions and have perused the relevant material on record. The ld. AR submitted that the order of the CIT(A) is arbitrary and i llegal in as much as it is suffering from denial of natural justice as the assessee company .....

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pugned order on 9.2.2012 i.e. only after two days. 4. Per contra, the ld. DR pointed out that after fi l ing written submissions in the office of the CIT(A) by DAK, the assessee requested that the case may be disposed off as per material available on record and in this situation, the first appel late authority was quite justified in deciding the appeal after considering the material avai lable on record inter alia. The ld. DR final ly submitted that in this situation, the first appel late author .....

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been imposed by the assessee i.e. donation paid but added by the AO in the computation of income, excess depreciation claim and deduction denied as per clause 32(b) of Form 3CD. We further note that the CIT(A) filed written submissions through DAK in the office of the CIT(A) on 6.2.2012 but the CIT(A) did not allow opportunity to explain the stand of the assessee taken in the grounds of appeal. Therefore, we are satisfied that the CIT(A) passed the impugned order violating the principles of nat .....

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y in respect of additions made and he was quite unjustified in levying penalty on the assessee. The ld. AR further submitted that the assessee filed detai led written submissions on 6.2.2012 and the same have been reproduced by the CIT(A) in the impugned order at paras 3 and 4. The ld. AR further pointed out that after reproducing the submissions of the assessee, the CIT(A) simply noted the facts leading to imposition of penalty and thereafter without deal ing with all the three issues independe .....

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inted out that the claim of donation was not al lowed as the recipient done was not enjoying the exemption u/s 80G of the Act and the amount of donation was paid to non el igible institutions in pursuance of business needs of the assessee and merely because the same was not allowed to the assessee, penalty cannot be imposed by al leging that the assessee furnished inaccurate particulars of income or concealed particulars of its income. 8. On the issue of depreciation, the ld. AR pointed out that .....

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itted that provisions of section 43B of the Act make the assessee entitled to claim the said deduction. The auditor of the assessee company in his tax audit report issued u/s 44AB of the Act specifically gives a note on the subject matter, which is avai lable in Form 3CD. The said amount was disallowed by the ld. AO without considering the provisions of law whereas the assessee company placed on record the complete detai ls of statutory payment made to Sales tax department which is also avai lab .....

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f wrong particulars of income on al l three counts and it is not a case of bonafide mistake on the part of the assessee. The ld. DR vehemently pointed out that the assessee has fi led inaccurate particulars of income, therefore, intention of the assessee was to evade tax and mens rea therein are clearly established. Therefore, the AO was correct in imposing penalty which was rightly upheld by the CIT(A). 11. On careful consideration of the above rival submissions, on the issue of donation, we no .....

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tion, we are satisfied that the disallowance of depreciation has been made by the AO on the basis of arithmetical error in the calculation of deprecation which leads to disallowance cannot be said to be concealment of income of fi l ing of inaccurate particulars of income and on this count penalty u/s 271(1)(c) of the Act cannot be imposed. 12. On the issue of deduction of ₹ 1,83,409/-, the claim of the assessee on account of VAT paid to Sales tax department, the ld. DR could not controver .....

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as to whether in the eyes of the provisions of the Act as explained by numerous judicial pronouncements, penalty can be levied in this case or not, we would like to discuss in nut shell the relevant legal position regarding levy of penalty u/s 271(1)(c) of the Act and as to how and when such penalty can be levied under this section. There are no two opinions about the settled position of law that regular assessment proceedings and penalty proceedings are two entirely different subjects which op .....

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fferent omissions or defaults albeit they refer to deliberate act on the part of the assessee. A mere omission or negligence would not constitute a deliberate act of either suppressio veri or suggestio falsy. By the mere reason of such concealment or of furnishing of inaccurate particulars alone, the assessee does not, ipso facto, become liable to a penalty. Imposition of penalty is not at all automatic. Meaning thereby, any addition in quantum would not lead to automatic levy of penalty and thi .....

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well as Union of India vs Rajasthan Spg. & Wvg. Mills [2009] 13 SCC 448, the Hon'ble Supreme Court in the case of CIT vs Reliance Petroproducts Pvt. Ltd, 322 ITR 158, has recently held as under: A glance at the provisions of section 271(1)(c) of the Income-tax Act, 1961, suggests that in order to be covered by it, there has to be concealment of the particulars of the income of the assessee. Secondly, the assessee must have furnished inaccurate particulars of his income. The meaning of t .....

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