TMI Blog2022 (9) TMI 655X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of the ld. Counsel that for invoking clause (B) of Explanation 1 to section 271(1)(c) of the Act and both the conditions must be cumulatively satisfied so as to bring a case within the scope of imposing of penalty u/s 271(1)(c). If only one condition is satisfied and the other is not, the penalty would not follow. In the present case, the assessee was not found able to substantiate the explanation pertaining amount of unsecured loan from M/s Ramfin Fortunes Pvt. Ltd., but, the assessee successfully proved that the explanation is bona fide and all the material facts relating to the same was disclosed by him before the authorities below - In absence of cumulative satisfaction of both the conditions as per the requirement of clause (B) of Explanation 1 to section 271(1)(c) penalty imposed by the AO and confirmed by the ld.CIT(A) cannot be held as sustainable and, thus, the AO is directed to delete the penalty - Decided in favour of assessee. - ITA No. 3802/Del/2019 - - - Dated:- 12-9-2022 - SHRI C. M. GARG , JUDICIAL MEMBER AND SHRI PRADIP KUMAR KEDIA , ACCOUNTANT MEMBER Assessee by : Shri P. C. Yadav , Advocate Revenue by : Shri Ramdhan Meena , Sr. DR ORD ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vs. Baroda Tin Works (supra) and submitted that even though the addition u/s 68 was made on admission of the assessee, the Tribunal, after considering the relevant material and evidence on record, having come to the conclusion that the presumption under the Explanation to section 271(1)(c) stood rebutted, it was justified in deleting the penalty in the absence of any positive evidence brought by the Department. The ld. Counsel of the assessee, relying on the ITAT Mumbai Bench decision in the case of Pfizer Ltd. vs. DCIT (supra) also submitted that in this order, the Tribunal, after taking cognizance of the judgement of the Hon ble Supreme Court in the case of CIT vs. Reliance Petroproducts Pvt. Ltd., 322 ITR 158 (SC) held that mere making of a claim which is not sustainable in law by itself will not amount to levy of penalty. The ld. Counsel, lastly, submitted that the Hon ble jurisdictional High Court of Delhi in the case of CIT vs. Mahanagar Telephone Nigam Ltd. (supra), held that a mere erroneous claim by the assessee under bona fide belief that it is maintainable in law cannot by itself lead to imposition of penalty u/s 271(1)(c) of the Act, especially when there is no finding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the explanation of the assessee pertaining to the unsecured loan from M/s Ramfin Fortunes Pvt. Ltd. was bona fide and that all the material facts relating to the same were disclosed by him before the authorities below during assessment and all subsequent proceedings, therefore, the two essential conditions have not been satisfied cumulatively, therefore, penalty u/s 271(1)(c) of the Act cannot be held as sustainable. 7. In the present case, from the relevant part of assessment as well as penalty order, it is clearly discernible that the AO has made addition of Rs.30 lakh pertaining to unsecured loan from M/s Ramfin Fortunes Pvt. Ltd. and the authorized representative/counsel of the assessee agreed to the addition before the AO, as per the assessee, to terminate litigation in this regard. 8. Now, before this Bench, after relying on various judicial pronouncements/judgements including the judgement of the jurisdictional High Court of Delhi in the case of CIT vs. MTNL and the judgement of the Hon ble High Court of Gujarat in the case of CIT vs. Baroda Tin Works (supra) and the judgement of the coordinate Bench of ITAT Mumbai in the case of Pfizer Ltd. vs. DCIT (supra), it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . A cursory look at the mandate of this Explanation transpires that the following elements must be present in order to bring a case with in the charge of concealment :- (a) the person fails to offer an explanation, or (b) he offers the explanation which is found by the concerned authority to be false, or (c) the person offers an explanation which he is not able to substantiate and further fails to prove that such explanation is valid and that all the facts relating to same have been disclosed by him. Whereas the above (a) and (b) are covered within clause (A) of the Explanation, (c) is enclosed in clause (B). 12. If the case falls in any of these three categories, then the deeming provision is activated and the amount added or disallowed in computing the total income is considered as the income in respect of which particulars have been concealed as per clause (c) of section 271(1). Only in such circumstances the penalty follows. If however the assessee succeeds in proving that none of these three conditions are satisfied in his case, then obviously the addition made by the Assessing Officer shall not constitute income in respect of which particulars ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /s Ramfin Fortunes Pvt. Ltd., which was clearly shown in the balance sheet as well as other audited financial statements of the assessee and this fact has never been controverted by the authorities below at any stage of assessment or penalty proceedings. At this stage, it is also relevant to consider the judgement of the Hon ble Gujarat High Court in the case of CIT vs. Baroda Tin Works (supra), wherein their Lordships held that even though the addition u/s 68 was made on admission of the assessee, the Tribunal, after considering the relevant material and evidence on record drew a conclusion that the presumption under Explanation u/s 271(1)(c) of the Act stood rebutted, it was justified in deleting the penalty in the absence of any positive evidence brought by the Department. 10. Further, when we consider the proposition rendered by the coordinate Bench of ITAT Mumbai in the case of Pfizer Ltd. (supra), then we find ourselves in agreement with the contention of the ld. Counsel that for invoking clause (B) of Explanation 1 to section 271(1)(c) of the Act and both the conditions must be cumulatively satisfied so as to bring a case within the scope of imposing of penalty u/s 271(1) ..... X X X X Extracts X X X X X X X X Extracts X X X X
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