TMI Blog2018 (3) TMI 215X X X X Extracts X X X X X X X X Extracts X X X X ..... - I.T.A. No. 5757/Del/2015 - - - Dated:- 22-2-2018 - Shri H. S. Sidhu, Judicial Member And Shri L. P. Sahu, Accountant Member Appellant by : Shri S.S. Rana, CIT DR Department by : Smt. Rano Jain, Shri Ashish Goel Ms Devina Sharma ORDER PER L.P. SAHU, AM This is an appeal filed by the Revenue u/s 271(1)(c) of the Income-tax Act, 1961 (hereinafter referred to as the Act) against an order dated 17.7.2015 passed by the Commissioner of Income-tax (A)-6, New Delhi (hereinafter referred to as the CIT(A)} in Appeal No.94/14-15 for the Assessment Year 2009-10. Following grounds of appeal were raised: 1. Whether on the facts and circumstances of the case and in law, the ld. CIT(A) is justified in deleting the penalty of ₹ 4,40,47,933/- imposed by the Assessing Officer u/s 271(1)(c) of the Act without considering the provisions of Explanation 1 to Section 271(1)(c) of the Act? 2. Whether on the facts and circumstances of the case and in law, the ld. CIT(A) is justified in deleting the penalty imposed by the AO u/s 271(1)(c) of the Act without considering that the assessee has made a claim which is incorrect in law and the explanation of the assessee i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ] Where Hon ble Delhi High Court held that If assessee makes a claim which is not only incorrect in law, but is also wholly without any basis and explanation furnished by him for making such a claim is not found to be bona fide, Explanation 1 to section 271(1 )(c) would come into play and assessee will be liable to penalty; 3. CIT Vs Moser Baer India Ltd. (184 Taxman 8 (SC)/r20091 315 ITR 460 (SC)/r20091 222 CTR 213) Where Hon ble Supreme Court confirmed Penalty under section 271(1)(c) for wrong adjustment of unabsorbed depreciation. 4. C1T Vs Gold Coin Health Food (P.) Ltd (172 Taxman 386 (SC)/r20081 304 ITR 308 (SCVr20081 218 CTR 359) : Where Hon ble Delhi Supreme Court held that amendment made in Explanation 4 to section 271 (1 )(c)(iii) with effect from 1-4-2003 is clarificatory and, therefore, will have retrospective effect. Penalty u/s 271(1)(c) could be levied in case of loss return. 5. MAK Data P. Ltd vs. CIT T38 taxmann.com 448 (SC)/r20131 358 ITR 593 Where Hon ble Supreme Court held that Under Explanation 1 to Section 271(1 )(c), voluntary disclosure of concealed income does not absolve assessee of s. 271(1)(c) penalty if the assessee f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. CIT [296 ITR 228] where Hon ble Madhya Pradesh High Court held that in case of concealment of true income chargeable to tax by making bogus claim, levy of penalty u/s 271 (1 )(c) read with Explanation 1 is justified. 9. CIT Vs Escorts Finance Ltd [183 Taxman 453 (Delhi)/[2010] 328 ITR 44 (Delhi)/[2009] 226 CTR 105] Where Hon ble Delhi High Court held that if 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. 5. He further submitted that the entire facts and circumstances leading to the levy of penalty has to be seen and simply because inappropriate word had not been deleted in the notice u/s 271(1)(c) does not mean that penalty proceedings get vitiated. Section 271(1)(c) provides for levy of penalty if the AO is satisfied that assessee has concealed the particulars of his income or furnished inaccurate particulars of income. In other words, Income tax authority may levy penalty, if any one of the conditions is satisfied i.e. (i) Assessee has concealed the particulars of his Income; (ii) Assessee has furnished inaccurate part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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. 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 committed an inadvertent and bona fide error and had not intended to or attempted to either conceal its income or furnish inaccurate particulars. (ii) CIT vs. M/s Bennett Coleman and Co. Ltd 2013 (3) TMI 373 2. So far as question (i) is concerned, the respondent- assessee has claimed deduction of interest on tax free bonds of ₹ 5,60,11,644/-. During the course of the assessment proceedings, the assessee was asked to give details of interest on tax free bonds. While preparing the said details, it was noticed that 6 percent Government of India Capital Index Bonds purchased during the year had inadvertently been categorized as tax free bonds and, therefore, interest of ₹ 75,00,000/- earned on such bonds had also inadvertently escaped tax. The assessing officer levied pen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oceedings would be justified. (iv) CIT vs. Mahanagar Telephone Nigam Ltd. (2011) 63 ITR 87 There is no finding of the AO as regards assessee having furnished inaccurate particulars-Also, there is no discussion that the explanation given by the assessee was not bona fide-Thus, the imposition of penalty under s. 271(1)(c) was a complete non-starter-This finding of fact stands affirmed by the Tribunal-A mere erroneous claim made by an assessee under a bona fide belief that it is maintainable in law, cannot by itself, lead to imposition of penalty-In the instant case, both the claims were made under the belief that they are maintainable in law-As regards the contributions made to the Staff Welfare Fund, assessee had made the claim for deduction as it genuinely differed with the opinion of its auditor that the claim was disallowable- Similarly, the claim of higher rate of depreciation on vehicles was based on the premise that the vehicles used by the assessee were in the nature of plant and machinery as these vehicles were used to correct faults and to provide other services to its customers-Denial of these claims by the AO does not lead to the conclusion that the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich claim was not accepted or was not acceptable to the Revenue, that by itself would not, in our opinion, attract the penalty under s. 271(1)(c). If we accept the contention of the Revenue then in case of every return where the claim made is not accepted by AO for any reason, the assessee will invite penalty under s. 271(1)(c). That is clearly not the Intendment of the legislature. (ii) Commissioner Of Income Tax Large Taxpayer Unit V Indian Renewable Energy (ITA No. 294/2016 Delhi High Court): 7. On the other hand, learned counsel for the Assessee placed before us a copy of the P L Account of the Assessee for the AY in question where the fact of the said amount being claimed as Administrative Expenses is clearly mentioned in the notes to the accounts. He points out that the Commissioner of Income Tax (Appeals) [ CIT(A) ] noticed this and then proceeded to revise the assessment order under Section 263 of the Act. 8. Having considered the submissions of the learned counsel of the parties, the Court is of the view that the decision of the IT AT was a plausible one in the facts and circumstances of the case. The Court is unable to agree with the Revenue that there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erefore, allegation in the orders of Lower Authorities as to mala fide intention are not justified. In the facts of the present case, the assessee-company has amply demonstrated that actions of assessee were bona fide by referring to various correspondences which are placed in the paper book. The company has made honest estimate of salary income of employees for deduction of tax at source. The ratio as laid down by various authorities referred to in the submissions of the counsel of the assessee fully supports the case of assessee that it was a bona fide estimate by the assessee for the purpose of deduction of tax at source in the case of assessee-company. (iv) Dena Bank. Versus Inspecting Assistant Commissioner [ITD 025, 109, ITAT Bombay] 6. We have carefully considered the rival submissions. We agree with the learned departmental representative, Shri Subramanian, that after the amendment of section 271(1)(c) of the Income-tax Act, 1961 by the Finance Act, 1964 the element of means are is not important and in any case the onus is not on the revenue to establish mensrea before penalty for concealment of income or furnishing of inaccurate particulars thereof can be impose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s had not been completed and, therefore, the assessee-bank could not be sure of the year in which the claim of deduction will ultimately be held to be admissible. In these circumstances, if the assessee-bank made a claim of deduction of the excess in the year to which it related based on the mercantile system of accounting and as a protective measure in the years in which the liability crystallized, i.e., the assessment years under consideration in the present appeals, we fail to see how the assessee- bank can be said to have made a fraudulent claim of deduction. The Hon'ble Supreme Court in the case of Cement Marketing Co. of India Ltd. v. ACST [1980] 124 ITR 15 has laid down that where a claim was made based on a highly arguable contention, which required serious consideration, it cannot be said that the claim was frivolous and on account of such a claim it would not be right to condemn the return as a false return inviting imposition of penalty. It is true that the assessee- bank ought to have withdrawn the claim of deduction made as a protective measure for the assessment years under consideration before us when the assessments for the immediately preceding assessment years ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court In The Case Of Cit V. Manjunatha Cotton And Ginning Factory [2013] 359 ITR 565 (ii) In Commissioner Of Income Tax, Bangalore And The Income Tax Officer, Ward-6 ( 3 ) , Bangalore Versus M/S Ssa s Emerald Meadows, the Hon ble Karnataka High Court held that: 11. The Tribunal has allowed the appeal filed by the assessee holding the notice issued by the Asses sing Officer under Section 274 read with Section 271 (1)( c) of the Income Tax Act, 1961 (for short the Act ) to be bad in law as it did not specify which limb of Section 271(1)(c) of the Act, the penalty proceedings had been initiated i.e., whether for concealment of particulars of income or furnishing of inaccurate particulars of income. The Tribunal, while allowing the appeal of the assessee, has relied on the decision of the Division Bench of this Court rendered in the case of Commissioner of Income-tax vs Manjunatha Cotton and Ginning Factory (2013) 359 ITR 565. (iii) In CIT V. Manjunatha Cotton And Ginning Factory [2013] 359 ITR 565 (Kar) 9. Aggrieved by the said order, the Assessee preferred an appeal to the Tribunal. The Tribunal held that on perusal of the notice issued under Section 271(1)(c) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be appreciated that total disallowance of ₹ 14,25,49,948/- was made by the AO on account of foreign exchange fluctuation while the CIT(A) had allowed him the depreciation on the said increase in the value of its assets amounting to ₹ 3,45,93,316/-. This has also been confirmed by the ITAT. Resultantly, even if the penalty is levied, the same has to be computed on the amount of difference between these two figures. The AO has erred in computing the penalty on the total amount of disallowance of ₹ 14,25,49,948/- made by him. 13. It is further submitted that the CIT(A) in appeal against penalty u/s 271 (1)(c) has correctly deleted the penalty levied by the AO. The finding of the CIT(A) are at page 8 onwards. The CIT(A) has given a detailed reasoning in this regard and also dealt with the judgment of the Delhi High Court in the case of Zoom Communication Pvt. Ltd. 327 ITR 510 which is referred in the ground taken by the Department in the present appeal. 14. In view of the above, learned AR prayed that the appeal filed by the Revenue may kindly be dismissed. 15. The learned AR also submitted a case law compilation comprising 80 pages. He further submitted that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... did not further carry the matter to higher appellate forum. Once on the factual front the issue is decided, now comes the issue of penalty. Mens rea After the amendment to Sec.271(l)(c) w.e.f 1.4.1964, mens rea need not be established. Hence on this ground assessee s contention fails. Support for this rational is taken from the following judgments . Hon ble Apex Court in Union of India vs. Dharmendra Textile processors (SC) 306 ITR 277, Guljag Industries Ltd. vs. CTO (SC) 293 ITR 584 and CIT vs. Atul Mohan Bindal (SC) 317 ITR 1 have held that mens rea not essential for civil liability of penalty - Penalties under fiscal statutes are for breach of civil liabilities - Willful concealment is not an essential ingredient for attracting civil liability as is the case in the matter of prosecution u/s 276C. Assessment and penalty proceedings are two separate and distinct proceedings. Every addition in assessment order does not automatically qualify for levy of penalty. It is settled position 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. C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th. This rational is supported by Delhi ITAT s decision in the case of Nalwa Investments (this decision relates to 14A deduction but can be applied to the facts of the case. The operational part of this judgment is reproduced as under: However, the accounts have been audited and the return was accompanied by the tax audit report. The latter did not suggest any disallowance u/s 14A. Therefore, it can be inferred that all expenses were claimed in full as the auditors did not suggest disallowance of any part of the expenditure relating it to the dividend income. Thus, it can be concluded that the claim was made on the basis of tax audit report. There is no allegation by the AO that there was any collusion between the auditor and the assessee to enhance the loss in the return of income by ignoring the provision contained in section 14A. Therefore, it can be said that the assessee has furnished an explanation which is bona fide. AO s reliance on the decision of Delhi High Court in Zoom Communication (P)Ltd. 327 ITR 510. In this case, the Hon ble Delhi High Court took the view that, as the Income Tax Department is resorting to scrutiny in limited number of cases, the pen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessee is incurring heavy losses - No personal benefit accrues to anybody because of wrong claim of deduction - Assessee has also not concealed any income or furnished any inaccurate particulars - It is only an issue of wrong claim of deduction Hence as AO failed to prove that the claim was made with malafide intention, the above cited judgment won t apply. Based on the above fact and circumstances, the penalty u/s 271(1)(c) levied for AY 2009-10 is hereby cancelled. 17. From the perusal of above, it is clear that the assessee s intention was not to conceal the income. The assessee had rightly disclosed it in the Profit and Loss account and not included while computing the taxable income. The revised return of income filed by the assessee has also been accepted by the AO. In view of the judgment of Hon ble Supreme in the case of CIT vs. Reliance Petro products P. Ltd. (2010) 322 ITR 158, we are of the view that it is not a fit case for levy of penalty as AO had not given any finding separately as to whether there was concealment of income or whether assessee had furnished inaccurate particulars of income. The AO has imposed the penalty on the ground ..... X X X X Extracts X X X X X X X X Extracts X X X X
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