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Aditya Malla Versus ITO, Wad 1 (1) , Noida

2016 (9) TMI 14 - ITAT DELHI

Penalty u/s 271(1)(c) - salary that was omitted to be declared in the return of income - Held that:- As observed that the tax has been deducted by the previous employers of the assessee to the extent of ₹ 7,88,334/-. On perusal of the return of income filed by the assessee, it is observed that the assessee has not claimed the TDS so deducted by previous employers and has only claimed the TDS in respect of employer from whom he drew his last salary during the end of the financial year relev .....

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ertently. However, the Assessing Officer did not agree to the explanation of the assessee and he initiated penalty proceedings u/s 271(1)(c) of the Act for filing inaccurate particulars of income. - In our considered opinion, the assessee cannot be made liable for penalty as there is a bona fide mistake of omission in not showing the salary received from the previous employers. An order imposing penalty for failure to carry out a statutory obligation is the result of a quasicriminal proceedi .....

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vious employer cannot be established.Accordingly, we delete the penalty levied by the Assessing Officer in respect of omission to disclose the salary received from the previous employers on which TDS had already been deducted by them. - Interest on housing loan - Held that:- From the Paper Book filed before us, the assessee has referred page 22 which is the certificate of interest issued by HDFC bank. It has been submitted that the housing loan is in the joint name of his wife as the house p .....

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271(1)(c) of the Act. Reliance has been placed on the decision of Hon'ble Supreme Court in the case of Reliance Petro Products Ltd. [2010 (3) TMI 80 - SUPREME COURT] which hold that mere disallowance of any claim will not automatically lead to levy of penalty u/s 271(1)(c) of the Act. Further, there is no material that has been brought on record by the Ld. A.O. to prove that the assessee has consciously concealed any particulars pertaining to his income or has supplied inaccurate particulars de .....

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e. Therefore, explanation advanced by the assessee cannot be accepted as such interest on saving bank accounts is credited to the assessee’s bank account during every financial year. It cannot be a case where assessee has been consistently filing his returns personally was ignorant that interest so earned from saving bank being taxable. The explanation tendered by the assessee is not acceptable for the simple reason that the assessee has been filing his return every year and interest on saving b .....

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xpenses. Ld. A.O. has verified the expense amounting to ₹ 1,50,843/- which appears in the bank statement. As the remaining expense have been ₹ 1,61,294/- for the expenses made through credit card which was not verifiable, the same was added to the income of the assessee. - It has been observed that the addition had been made for want of evidence / explanation. As the assessee has not submitted proper explanation in support of expenses made through credit card. We do not find any .....

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I, JM: The present penalty appeal has been preferred by the assessee against the order dated 29.02.2016 passed by Ld. CIT(A) NOIDA for the Assessment Year 2011-12 on the following grounds of appeal: 1.0 That the penalty order passed by the Ld.AO and upheld by Hon'ble CIT(A) is bad in law. The provisions of See 271 (1)( c) have been wrongly interpreted and applied in this case. 2.0 That the Ld. AO and consequently CIT(A) has erred in law and on the facts of the assessee's case in not appr .....

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it was not concealment of income. 4.0 That the Ld. AO and consequently CIT(A) failed to appreciate that the assessee has voluntarily accepted such income in assessment proceedings and paid the demand in question without going in further appeal although some of the additions were unwarranted. 5.0 That the Ld. AO has erred in law in levying the penalty by treating the credit card expense as income of the assessee which in any way has been paid out of salary income credited in the bank and already .....

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is bad in law. 8.0 That the Ld. AO and consequently CIT(A) failed to appreciate that for levy of penalty the tax sought to be evaded cannot include the portion of tax already deducted and deposited to the credit of central government. 9.0 That Ld. AO/CIT(A) erred in law in levying penalty u/s 271(1)(c) on routine additions made in a grossly illegal manner. 10.0 That without prejudice the penalty levied is highly excessive. 2. The facts of the case as recorded by the authorities below are as und .....

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ion, found that the assessee had not disclosed salary income of ₹ 30,47,245/ received from two other institutions against which TDS amounting to ₹ 7,88,334/-had been deducted. Accordingly, assessee was asked to explain the reasons why the salary of ₹ 30,.47,245/- was not shown in the return of income. The Assessing Officer observed that the assessee had claimed interest on housing loan which was in the joint name of Shri Aditya Malla and his wife. He held that the assessee is e .....

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Officer thus, added the difference to the income of the assessee and computed the tax assessable in the hands of assessee as under: Total income as per return Rs.7,39,680/- Add: 1. Undisclosed salary income Rs.30,47,245/- 2. House property loss disallowed ₹ 31,756/- 3. Credit card expenses disallowed ₹ 1,61,294/- 4. Concealment of savings bank interest. ₹ 12,863/- Rs.32,53,158/- Rs.39,92,838/- Assessed income Rs.39,92,830/- Rounded off Rs.39,92,830/- 2.3 The Ld. A.O. initiated .....

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d already been deducted. The assessee submitted that he was not aware about the interest on S/B account being taxable in nature. 3.1 Ld. CIT(A) did not appreciate the facts that the assessee had not included the salary received from the previous employers during the financial due to bona fide mistake and the interest on saving bank account was missed out as the assessee was not aware that the same being taxable. Ld. CIT(A) did not accept the bona fide mistake on behalf of the assessee as the ass .....

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,863/-/- iv) credit card expenses of ₹ 1,61,294/-. 5.1 Ld. A.R. submitted that the assessee is working in hotel industry. During the financial year, relevant to the Assessment Year under consideration, the assessee had shifted his employment thrice. He submitted that such quick change in the employment by the assessee has happened for the first time. The assessee at the time of filing the return, omitted the salary received from the previous employers due to ignorance and he only considere .....

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alary due to ignorance, cannot be the reason for levy of penalty as sufficient cause, as the tax has been deducted at source from such salary. Ld. A.R. also submitted that the bona fide mistake on behalf of the assessee is established in respect of omission of such salary in the return of income as the assessee had not claimed the TDS deducted from such omitted salary amounting to ₹ 7,8,334/-. He placed reliance upon the decision of Hon'ble Supreme Court in the case of Price Waterhouse .....

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mitted that it is a legal issue regarding eligibility of claim of interest. He submitted that the Assessing Officer disallowed 50% of interests as the housing loan as the loan was in the joint name of the assessee and his wife. Ld. A.R. further submitted that he Assessing Officer while making addition in respect of interest on housing loan has not recorded his satisfaction and thus has not initiated penalty proceedings on the disallowance made in the assessment order as per law. 5.3 In respect o .....

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ced as under: WRITTEN SUBMISSION ON BEHALF OF REVENUE Regarding Penalty u/s 271(1)(c): The case of the assessee is squarely covered under general provisions of the section 271(1)(c) as well as mischief of explanation 1 to the section 271(1). 1.1 The assessee had concealed salary income from two employers, claimed excess deduction on account of housing loan, unexplained credit card expenses and had not declared the interest income. Therefore, the assessee has concealed income and the particulars .....

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ned the meaning of 'inaccurate particulars'. Hon'ble HC has stated as under:- "10. The word "concealment" would refer to somewhat malicious and mala fide conduct on the part of the assessee. The expression "inaccurate particulars" is copiously wider and broader and would include cases where particulars furnished are not accurate and which results in avoidance or evasion of tax. In Webster's Dictionary, the word "inaccurate" has been defined as & .....

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of account, etc. See CIT v. Raj Trading Co. [1996] 217 ITR 208/86 Taxman 282 (Raj). Inaccuracy or wrong furnishing of income would be covered by the said expression. II In the light of what has been stated by the Hon'ble jurisdictional High Court, it can be seen that the furnished particulars in the present case are certainly 'inaccurate'. 2.1 This case is also covered under the provisions of Explanation 1 to Section 271(1)(c) which reads as under. "Explanation 1. - Where in res .....

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ave been disclosed by him, Then, the amount added or disallowed in computing the total income of such person as a result thereof shall, for the purposes of clause (c) of this sub-section, be deemed to represent the income in respect of which particulars have been concealed." 2.2 During assessment proceedings, the assessee has admitted for the addition after detection by the Department. It can be seen that the reply has not offered any valid explanation. Therefore, case of assessee is covere .....

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is burden can only be discharged by producing cogent material. Hon'ble HC has stated as under:- "8 The assessee had made a wrong claim for deduction under Section 80lA and, therefore, had furnished inaccurate particulars as the claim was not admissible. Sub-clause (B) of the explanation is, therefore, applicable and we have to examine the two conditions whether: (1) The assessee has been able to show that the explanation was bona fide; and (2) Facts and material relating to computation .....

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" 3. The case is squarely covered by the binding ratio of jurisdictional High Court in case of Commissioner of Income-tax, Delhi-IV vs. Escorts Finance Ltd. [2009] 183 TAXMAN 453 (DEL). In this case, the Hon'ble HC Delhi has held that if the claim made in return of income appears to be ex facie bogus, it would be treated as a case of concealment or furnishing of inaccurate particulars and penalty proceeding would be justified. In that case, deduction under section 35D was claimed relati .....

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case is squarely covered by the ratio of co- ordinate bench of ITAT Mumbai in case of S H R Trading Pvt. Ltd. Vs. Deputy Commissioner of Income- tax [2014]-TIOL-1348- ITAT-MUM. (ii) In para 7, the Hon'ble ITAT has held that there is a basic and fundamental difference between a debatable claim and an inadmissible claim i.e. a patently wrong or false claim. In the case of first kind of claim, there can be two opinion as to whether or not the assessee could make such a claim on the basis of ce .....

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stand, because such claims are tenable neither legally nor factually. Courts are of the view that disputable claims and inadmissible claims are to be treated differently. (iii) In para 12, the Hon'ble ITAT has taken a note of the settled law position that Courts have held that the object behind enactment of section 271(1)(c) read with the Explanations indicate that the section has been enacted to provide for a remedy for loss of revenue, that the penalty under that provision is a civil liab .....

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y ltd.(Del) (328 ITR 53), Escorts Finance Ltd.(Del)(328 ITR 44) = 2009-TIOL- 483-HC-DEL-IT and ClT vs. Zoom Communication Pvt. Ltd.(2010-TIOL-361-HC-DEL-IT). (v) In para 17, the Hon ble ITAT reproduced the relevant portion of judgment of Hon'ble Delhi HC in the case of Zoom Communication Pvt. Ltd.(supra) including the following: "The court cannot overlook the fact that only a small percentage of the income- tax returns are picked up for scrutiny. If the assessee makes a c/.aim which is .....

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claim of this nature, that would give a licence to unscrupulous assessees to make wholly untenable and unsustainable claims without there being any basis for making them, in the hope that their return would not be picked up for scrutiny and they would be assessed on the basis of self-assessment under section 143(1) of the Act and even if their case is selected for scrutiny, they can get away merely by paying the tax, which in any case, was payable by them. The consequence would be that the perso .....

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ng/inadmissible claims. They(courts) are of the firm view that if an assessee claims any deduction, he has to substantiate the claim by producing positive evidence- otherwise it cannot escape the rigor of the penal provisions. In other words, penalty u/s 271(1)(c) cannot be imposed because an assessee takes a particular legal stand. But, this does not mean that it can claim wrong deductions or claim without any basis or foundation, because, false, spurious and mendacious claims do not fall under .....

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to be interpreted as facts leading to correct computation of income and held that whenever any material fact is not filed for correct computation of income or if filed is inaccurate, then penalty has to be imposed. (viii) Hon'ble ITAT in the para 27 stated that bonafide belief of an assessee in making a claim has limited role for deciding the issue of penalty to be imposed u/s.271(1)(c). Fact of the case decide whether such a belief could be treated as bonafide or not. In other words, it can .....

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#39;ble ITAT has noted that the assessee is not an ordinary person or a lay man who may not have the proper knowledge of law and changes in the law. The assessee was a well known company carrying on the business in India for the last many years and, further, the assessee's business was dealing in the financial matters and the business decision as taken by the assessee keeping in view the provisions of the Income Tax Act. The assessee was managed by the body of experts. Apart from this, the a .....

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cision are taken by the assessee keeping in view the provisions of the Income Tax Act. The assessee is managed by the body of experts. The assessee was also availing the services of the professionals and tax experts in day to day affairs and particularly for tax matters. Hence, it has to presumed that the assessee was aware of the correct position of law settled by the judgment of Hon'ble SC in case of Madras Industrial Investment Corporation Limited (supra). B. The case of Reliance Petro pr .....

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while the ITAT had restored the issue back to the file of the AD. Deciding the appeal, Tribunal held that the assessee had duly filed an explanation giving the reasons for making a claim, that once the assessee offered an explanation the onus would shift on the Revenue to prove that the explanation offered by the assessee was false, that bonafides of the explanation were clearly proved, that no material or evidence was brought on record or pointed out by the DR proving that the Revenue had disc .....

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)(c} of the Act. However, in the present case, assessee has not only tried to disregard correct position of law settled by Hon'ble SC but also refrained from mentioning the said judgment of the Hon'ble SC in the note furnished along with computation of Income. 7. We have perused the orders passed by authorities below and the judgments relied upon by the parties. In respect of penalty levied on salary that was omitted to be declared in the return of income, we observed that the tax has be .....

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sing Officer has also not made any case against the assessee in respect of TDS not being deducted against the salary drawn during the year under consideration being insufficient. It is also observed that the assessee had fully cooperated during the assessment proceedings and had submitted sufficient details to establish the bona fide mistake that was committed inadvertently. However, the Assessing Officer did not agree to the explanation of the assessee and he initiated penalty proceedings u/s 2 .....

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conduct contumacious or dishonest, or acted in conscious disregard of its obligation. From the ROI filed by the assessee, it has been demonstrated that the assessee has failed to claim the TDS deducted by the earlier employers. The conduct of the assessee supports the explanation tendered and therefore, a deliberate omission to include the salary received from previous employer cannot be established. 7.2 We, therefore, respectfully following the decision relied upon by the assessee in the case o .....

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interest on housing loan which has been claimed in excess by the assessee. Ld. Assessing Officer / CIT(A) are of the view that the assessee is eligible for 50% of the interest component of Rs,2,36,488/- u/s 24(b), as the housing loan stands in the joint name of the assessee and his wife. As the assessee had claimed ₹ 1.50 lacs in its return of income, and eligible for claiming interest at ₹ 1,18,244/-. The Assessing Officer disallowed the difference of balance of ₹ 31,756/-. L .....

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ued by HDFC bank. It has been submitted that the housing loan is in the joint name of his wife as the house property was purchased in the joint name. However Ld. A.R. submitted that the interest was paid by the assessee from his account; therefore the assessee has claimed deduction of total amount in his return of income. Ld. A.R. submitted that the assessee was under the bona fide belief that as he was paying the interest, the deduction should also be claimed by him alone. 9. We find that expla .....

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ciously concealed any particulars pertaining to his income or has supplied inaccurate particulars deliberately. We are therefore, inclined to delete the penalty levied by the A.O. in respect of interest on housing loan. 9.1 In respect of interest earned by the assessee on saving bank account, the disallowance that has been made by the Assessing Officer is to the extent of ₹ 12,863/-. Ld. A.R. has submitted that the assessee has been filing his return without any professional assistance and .....

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