TMI Blog2014 (5) TMI 812X X X X Extracts X X X X X X X X Extracts X X X X ..... ndent : Shri Gagan Sood, Sr.DR ORDER Per Chandramohan Garg, J. M. This appeal has been preferred by the assessee against the order of Commissioner of Income Tax(A)-XIX, New Delhi dated 12.10.2012 in Appeal No. 28/2011-12 for AY 2008-09 by which penalty order dated 28.06.2011 passed u/s 271(1)(c) of the Income Tax Act, 1961 (for short the Act) has been upheld by dismissing first appeal of the assessee. 2. The sole ground raised by the assessee in this appeal reads as under:- That penalty as imposed at Rs.2,70,8321- u/s 271 (1)(c) of 1.T. Act by the Ld. AO and confirmed by the Ld. CIT(A) is arbitrary, unjust and illegal on various factual and legal grounds including the following: a) The Appellant had not furnished inaccurate particulars of its income nor had concealed the particulars of its income. b) Various observations made by the authorities below in their respect orders are either incorrect or are untenable. c) It is not a fit case for imposing of penalty u/s 271 (1)(c) of the I.T. Act d)The authorities below had either ignored or had not given due weight to the submissions made by the Appellant to the effect that it was not a fit case for impos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he judgment of apex court in the case Union of India Vs. Dharmendra Textiles Processors { 2008} 166 Taxman 65 (SC) wherein i1 has been held that penalty under section 271 (1 )(c) is civil liability and for attracting such civil liability, willful concealment is not an essential ingredient. 4. Aggrieved, the assessee preferred an appeal before the Commissioner of Income Tax(A) which was also dismissed by the impugned order. Now, the empty handed assessee is before this Tribunal in the second appeal with the grounds as mentioned hereinabove. 5. The Commissioner of Income Tax(A) dismissed the appeal of the assessee with following findings:- 12. As discussed in the above paras, this is not a case where the explanation given was bona fide and there was full disclosure of facts. The appellant has stated that the disallowance made has not been challenged in appeal. Therefore, the disallowance has attained finality. In view of these facts the ratio of Reliance Petroproducts is not applicable in this case. 13. The above discussion shows that this is not a case where the explanation given was bona fide and there was full disclosure of facts. The disallowance made has not been c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e has placed reliance on the decision of Hon ble Supreme Court in the case of Price Water Coopers P. Ltd. vs C.I.T., Kolkata (2012) 348 ITR 306 (SC) wherein it was held that the imposition of penalty on the assessee is not justified when the assessee had committed inadvertent error and had not intended to or attempted to either conceal its income or furnish inaccurate particulars of its income. 8. The counsel vehemently argued that it is a well-settled law that the penalty proceedings are independent which are distinct and different from assessment proceedings and when assessee has not preferred any appeal against the assessment order to buy peace of mind and to avoid litigation expenses, then findings in the assessment order for the purpose of penalty proceedings are not conclusive. The counsel further submitted that the entire material, facts and circumstances should be considered afresh before imposing penalty and penalty cannot be imposed on the basis of findings in the quantum proceedings. 9. The counsel of the assessee further submitted that the authorities below had either ignored or had not give due weightage to the submissions of the assessee during the penalty proce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d ; iii) Disallowance to be made out of overhead expenses equal to one-half percent of the average value of Investment, as appearing in the Balance Sheet on the first day and the last day of the previous year, as per details below:- Particulars 31.03.2008 31.03.2007 Investment as per Balance Sheet Shares/Mutual Funds/Bonds etc. 4,83,41,474 3,05,33,813 Total of the Two comes to Rs.7,88,75,388/- Average thereof worked out to Rs.3,94,37,694/- 1/2% thereof arrived at Rs. 1,97,188/- which please note and the same to be disallowed u/s 14-A of the Income Tax Act, 1961. 11. From the above, we clearly observe that the disallowances made by the Assessing Officer were based on the same material which was placed before the Assessing Officer with the return of income and from bare reading of the assessment order, we observe that the Assessing Officer made impugned disallowance with the following observations wherein the Assessing Officer has noted t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ger Bench comprising of three of their Lordships in the case of Hindustan Steel vs. State of Orissa in 83 ITR 26 wherein it was held that An order imposing penalty for failure to carry out a statutory obligation is the result of a quasi-criminal proceedings, and penalty will not ordinarily be imposed unless the party obliged either acted deliberately in defiance of law or was guilty of conduct contumacious or dishonest, or acted in conscious disregard of its obligation. Penalty will not also be imposed merely because it is lawful to do so. Whether penalty should be imposed for failure to perform a statutory obligation is a matter of discretion of the authority to be exercised judicially and on a consideration of all the relevant circumstances. Even if a minimum penalty is prescribed, the authority competent to impose the penalty will be justified in refusing to impose penalty, when there is a technical or venial breach of the provisions of the Act, or where the breach flows from a bonafide belief that the offender is not liable to act in the manner prescribed by the statute. 11. We further place reliance upon the Hon'ble Apex Court decision in the case of CIT vs. Reliance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent authority for the proposition to which reference has been made by the ld. counsel for the assessee hereinabove. 23.2 Accordingly, we are of the view that penalty levied under section 271(1)(c) is not sustainable and we find no infirmity in the order of the ld. Commissioner of Income Tax(A), who has rightly cancelled the penalty levied by the A.O. Thus all the grounds of the Revenue are dismissed. 14. The ITAT Delhi F Bench in the case of DCIT vs Nalwa Investments Ltd. (supra) cancelled the penalty imposed on the assessee pertaining to the disallowance u/s 14A of the Act. The relevant observations and findings are as under:- 5. We have considered the facts of the case and submissions made before us. The facts of the case are that the assessee claimed payment of bank interest and charges amounting to Rs.1,10,02,323/-. Certain other expenses were also claimed. Besides interest income of Rs.14,38,977/-, the assessee earned dividend income on investment in shares. Such investment amounted to Rs.1,19,90,011/-. The dividend income was not liable to be taxed in view of the provisions contained in section 10(34) of the Act. The AO was of the view that the net interest of Rs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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. In regard to proposition at (c) above, the finding of the ld. CIT(A) is that the disallowance is disputable. The section, as it existed at the time of filing the return, does contain a provision for disallowance of expenditure which is related to non-taxable income. Therefore, it is expected of any assessee to attempt at segregating expenditure which is related to such a claim. No attempt has been made in this behalf. However, it is also a fact that such segregation is beset with lot of problems as the issue has finally been laid to rest by introduction of Rule 8D in the Income-tax Rules in the year 2008. The assessee did not have benefit of this rule when it filed the return of income. Therefore, even in absence of any attempt on the part of the assessee, it can be said that questions of disallowance and its quantification are quite disputable and can lead to bona fide difference in opinion between the assessee and the authorities. In such a situation, the levy of penalty will not be justified. 15. In vi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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