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TMI Blog2022 (2) TMI 172X X X X Extracts X X X X X X X X Extracts X X X X ..... duced as under:- "1. The learned Commissioner (Appeals) erred in accepting the assessee's submissions against the levy of penalty u/s.271(1)(c) of the Income tax Act. 2) The calculation for expenditure to be disallowed for the exempted income is enumerated u/s.14A of the Income tax Act read with rule 8D of the l.T.Rules. Had the assessee calculated the disallowance as per the method/formula in the l.T.Act / Rules the disallowance by the Assessing Officer would not have arisen. Further the assessee failed to furnish the details called for by the Commissioner (A) during the appeal proceedings against the asst. order and the CIT(A) confirmed the disallowance by the Assessing Officer. Since the assessee failed to furnish the details to substantiate the claim before the Commissioner (Appeals) it is evident for the malafied intention of the assessee attracting the explanation 2 of Section 271(1)(c) of the Income tax Act. 3) Further most of the rulings referred by the assessee based on the judgement of the Hon'ble Supreme Court in the case of CIT Vs. Reliance Petro Products(322 ITR 158). The facts of the case are different from this case. In the referred case the assessee claimed de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... may please be annulled and the order of the Assessing Officer may be please restored." 3. Brief facts of the case extracted from ITA No.596/Chny/2018 for assessment year 2011-12 are that the assessee has filed original return of income for assessment year 2011-12 on 29.11.2011 declaring loss of Rs. 18,80,36,543/-. A search action u/s.132 of the Income Tax Act, 1961, was conducted in the case of the assessee and consequent to search, the assessee has filed return of income in response to notice issued u/s.153A of the Act declaring loss of Rs. 18,80,36,543/-. The assessment has been subsequently completed u/s.143(3) r.w.s 153A of the Act, and assessed total income at Rs. 2,27,94,20,195/- by making various additions, including additions towards disallowance u/s.14A of the Income Tax Act, 1961 at Rs. 3,40,53,520/-. Thereafter, the Assessing Officer initiated penalty proceedings u/s.271(1)(c) of the Income Tax Act, 1961, for furnishing inaccurate particulars of income. In the meantime, the assessee has challenged additions made by the Assessing Officer towards disallowance of expenditure u/s.14A of the Act before the first appellate authority. The learned CIT(A) for the reasons stated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble Delhi High Court vide its order dated 2405.2010 in the case of CIT Vs. Zoom Communication Pvt. Ltd. in ITA No. 07/2010 has held that. 'The Court cannot overlook the fact that only a small percentage of the Income Tax Returns are poked up for scrutiny. If the assessee makes a claim which is not only incorrect in law but is also wholly without any basis and the explanation furnished by him for making such claim is not found to be bonafide, it would be difficult to say that he would still not be liable to penalty under section 271(1)(c of the Act. If we take the view that a claim which is wholly untenable in law and has absolutely on foundation on which it could be made, the assessee would not be liable to imposition of penalty, even he was not acting bonafide while making a claim of this nature, that would give a license 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 end even if their case is selected for scrutiny, they can getaway merely by paying t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ring relevant submission of the assessee and also by relied upon the decision of the Hon'ble Supreme Court in the case of CIT vs. Reliance Petroproducts Pvt. Ltd. (2010) 322 ITR 158 deleted penalty levied by the Assessing Officer u/s.271(1)(c) of the Act, by holding that mere disallowance of claim does not entail levy of penalty. The learned CIT(A) further observed that the assessee has furnished complete disclosure of facts in its return of income with reference to expenditure and income and thus, disallowance u/s.14A read with Rule 8D itself cannot lead to a conclusion that the assessee has furnished inaccurate particulars of income, which leads levy of penalty u/s.271(1)(c) of the Act, and hence, deleted penalty levied by the Assessing Officer. The relevant findings of learned CIT(A) are as under:- "4.2 have considered the facts and circumstances of the case, submission of the appellant and perused the penalty order. I find that the appellant has mainly submitted that they had disclosed all the primary facts, thereby, they did not furnish any inaccurate particulars of income. Difference of opinion does not lead penalty under section 271(1)(c) of the IT Act. Mere disallowan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h was not substantiated is not a ground for levying penalty u/s.271(1)(c) of the Act. In this regard, he relied upon decision of the ITAT., Chennai Bench in the case of ACIT Vs. S.Martin in ITA No.2382/Chny/2016 dated 05.10.2018. 8. We have heard both the parties, perused material available on record and gone through orders of the authorities below. The facts borne out from records clearly indicate that the assessee has disclosed primary facts in respect of various expenditure and income, including exempt income earned for the year. The facts borne out from records further indicate that the assessee has made suo motu disallowance of expenditure relatable to exempt income. However, the Assessing Officer was not satisfied with suo motu disallowance made by the assessee and has invoked Rule 8D of Income Tax Rules, 1962 to determine disallowance of expenses relatable to exempt income u/s.14A of the Income Tax Act, 1961. Therefore, from the facts borne out from records what is clear is that the assessee has disclosed necessary facts in relation to various expenses including expenditure relatable to exempt income for the year and thus, we are of the considered view that mere disallowanc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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