TMI Blog2019 (5) TMI 93X X X X Extracts X X X X X X X X Extracts X X X X ..... ) has upheld the penalty only on the ground that assessee has failed to give any bonafide explanation in respect of the claim. We do not agree with the said finding of the CIT(A). The assessee has duly explained before the AO the reasons as why the deduction u/s 35(1) has been claimed, which have been also reiterated by us in the brief facts of the case. Accordingly, we set aside the finding of the CIT(A) on the issue in dispute and direct the AO to delete the penalty in all the three assessment years under consideration. - Decided in favour of assessee. - ITA Nos.4662, 4663 And 4664/Del/2014 - - - Dated:- 4-4-2019 - Shri Bhavnesh Saini, Judicial Member And Shri O.P. Kant, Accountant Member For the Appellant : S/shri Susheel Kumar Gupta D.C. Garg, CAs For the Respondent : Smt. Rinku Singh, Sr. DR ORDER PER O.P. KANT, A.M.: These three appeals by the assessee are directed against common order dated 16/23.06.2014 passed by the Ld. Commissioner of Income-tax (Appeals)-XXVI, New Delhi [in short the Ld. CIT(A)] for assessment years 2005-06, 2006-07 and 2007- 08, in relation to penalty levie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ld. CIT(A) has erred in overriding the covered matter thus devoid of principles of natural justice. It is pertinent to mention here that petition u/s 154 placing reliance on apex court judgment in the case of M/s Honda Siel Power Products Ltd. v. CIT (2007) 295 ITR 466, has already been moved on 14-07-2014 and its disposal by Ld. CIT(A) is awaited however to respect limitations in filling appeal , form 36 alongwith grounds of appeal have been completed and filed before your honours. 7. That with complete disregard to judicial pronouncements holding that penalty proceedings should be an independent fact finding , the Ld. CIT(A) has erred in imposing penalty because appellant had not preferred any appeal on disallowance of ₹ 5,23,00,000.00 u/s 35 in the quantum case. 8. That the Ld. CIT(A) has erred in realizing that Ld. ACIT had summarily disallowed the claim u/s 35 of ₹ 5,23,00,000.00 considering the same as application of income as was for disallowance of ₹ 78,14,68,000.00 and accordingly initiated penalty in quantum order. Then by and expenses of OIDB were no more considered as application of income but allowabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... correct claim and will not tantamount to furnishing of inaccurate particulars. 6. That Ld. CIT(A) has completely overlooked the orders of Ld CIT(A) dt 23.04.2009 and ITAT 'E' Bench dt. 16.09.2009 pertaining to A.Y. 03- 04 in the appellants own case which allowed full relief from this exorbitant penalty on disallowance made u/s 35.Thus Ld. CIT(A) has erred in overriding the covered matter thus devoid of principles of natural justice. It is pertinent to mention here that petition u/s 154 placing reliance on apex court judgment in the case of M/s Honda Siel Power Products Ltd. v. CIT (2007) 295 ITR 466, has already been moved on 14-07-2014 and its disposal by Ld. CIT(A) is awaited however to respect limitations in filling appeal , form 36 alongwith grounds of appeal have been completed and filed before your honours. 7. That with complete disregard to judicial pronouncements holding that penalty proceedings should be an independent fact finding , the Ld. CIT(A) has erred in imposing penalty because appellant had not preferred any appeal on disallowance of ₹ 5,50,00,000.00 u/s 35 in the quantum case. 8. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rticulars of income' implies furnishing of details or information about income which are not in conformity with the facts or truth, it does not extend to subjective areas such as the taxability of income, admissibility of a deduction and interpretation of law. The making of an incorrect claim does not amount to furnishing inaccurate particulars. 6. That Ld. CIT(A) has completely overlooked the orders of Ld CIT(A) dt 23.04.2009 and IT AT 'E' Bench dt. 16.09.2009 pertaining to A.Y. 03-04 in the appellants own case which allowed full relief from this exorbitant penalty on disallowance made u/s 35. Thus Ld. CIT(A) has erred in overriding the covered matter thus devoid of principles of natural justice. It is pertinent to mention here that petition u/s 154 has already been moved on 14-07-2014 and its disposal by Ld. CIT(A) is awaited however to respect limitations in filling appeal , form 36 alongwith grounds of appeal have been completed and fded before your honours. 7. As the penalty imposed on the appellant has been for varied reasoning and which are altogether different from the 'application of income' reasoning g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the disallowance amounting to ₹ 5,23,00,000/-, ₹ 5,50,00,000/-and ₹ 4,14,75,800/-in assessment year 2005- 06, 2006-07 and 2007-08 respectively. 3.2 Before the Assessing Officer, it was claimed on behalf of the assessee that at the time of filing return of income for the years under consideration, the earlier years cases for A.Y. 2003-04 and 2004-05 were pending before the Tribunal and thus the assessee board had no option but to claim both the deduction and in the event section 36(1)(xii) not been allowed, the deduction under section 35 was to be allowed by the Department. But the Assessing Officer disallowed both the claim of deduction under section 36(1)(xii) and 35(1) of the Act. The Tribunal has allowed the benefit of deduction under section 36(1)(xii) of the Act. The assessee submitted that had the benefit of the decision of the Tribunal available to the assessee, it would not have claimed the deduction under section 35(1) of the Act. According to the assessee, at the time of filing of the return of income, the fate of allowability of deduction under section 36(1)(xii) was not known/was not clear and the assessee filed its return of i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that some additional material should always be available for the levy of penalty in addition to the material on which the assessment was based. There is no basis for this assumption. The very same material can form the basis for the assessment and penalty, depending on the facts and circumstances of the case. In the present case we are satisfied that there was abundant evidence justify the levy of penalty . 4.8 By claiming deduction u/s 35 and claiming expenditure in respect of income which does not form part of income, the appellant has tried to defeat the revenue. In the case of Keciar Nath Sanvval Dass v/s CIT, 111 ITR 440, Hon'bie Punjab Haryana High Court has held as under: We do not think that it was necessary for the Tribunal to give any additional reasons where the reasons given in the original order of assessment themselves disclose a scheme aimed at defeating the revenue. Where the finding is that losses were falsely claimed by the assesses to set off the profits made by the assessee, the finding that the losses put forward were false is sufficient to hold that there was a scheme on part of the assessee to defeat the revenue. That ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1.2013 held that even the surrender of income without explanation attracts penalty. In the case of Mak Data Ltd. (supra), a survey u/s 133A was conducted on the assessee s premises in the course of which certain documents belonged to certain entities who had applied for shares in the assessee company were found. The AO called upon the assessee to prove the nature and source of the monies received as share capital, the creditworthiness of the applicants and the genuineness of the transactions. The assessee offered ₹ 40.74 lakhs as income from other sources to avoid litigation and to buy peace . It was made clear that in making the surrender, there was no 3dmission of concealment. The AO completed the assessment by adding the said sum and levied penalty u/s 271(l)(c) for furnishing inaccurate particulars of income u/s 271(l)(c). This was upheld by the CIT(A) though reversed by the Tribunal on the ground that there was no material to show any concealment and even in the penalty order it was not specified as to the particular credit in respect of which the penalty was being imposed. It was also emphasized by the Tribunal that the assessee had made it clear while surrendering tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in assets, under Section 32(l)(iii) of the Act is wholly erroneous. The Tribunal has not recorded a finding that the explanation furnished by the assessee in respect of the deduction due to certain assets being written off was a bonafide explanation; As regards deduction on account of income tax paid by the assessee, the Tribunal felt that since no person would claim the same as deduction, to evade payment of tax, the claim made by the assessee was not malafide. In the absence of the assessee company telling the AO as to who committed the oversight resulting in failure to add this amount while computing the income of the assessee, under what circumstances the oversight occurred and why it was not detected by those who checked the Income Tax Return before it was filed and later by the auditors of the assessee company, the Bench cannot accept the general view taken by the Tribunal. No such view couid have reasonably been taken, on the facts and circumstances prevailing in this case and, therefore, the decision of the Tribunal in this regard suffers from the vice of perversity. The bench cannot also accept the general proposition that no person would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l income for the AY 2005-06 to 2007-08 are held to have not been disclosed by the appellant. Therefore, the Explanation-1 of section 271(l)(c) is clearly attracted in these cases for the AY 2005- 06 to 2007-08. Accordingly, the income of the AY 2005-06, 2006-07 and 2007-08 have been rightly treated deemed to have been concealed within the meaning of section 271(l)(c) by the AO. Having considered the facts of the cases and submission of the appellants in this regard, I am of the considered view that the presumption of concealment as contained in Explanation-1 to section 271(l)(c) is cieariy attracted in these cases in all the three years. I am fortified in this view by the ratios cited above by the AO me and ratio decidendi laid down in the cases reported as Western Automobiles (India) vs. CIT (1978) 112 ITR 1048 (Bom); Durga Timber Works vs. CIT (1971) 79 ITR 63 (Del); Addl, CIT vs. Smt. Chandrakanta Anr (1992) 205 ITR 607 (MR); S S Ratanchand Bholanath vs. CIT (1994) 201 ITR 682 (MR); CIT vs. Sree Krishna Trading Co. (2002) 253 ITR 645 (Ker); Electrical Agencies Corporation vs. CIT (2002) 253 ITR 619 (Del); K.P. Madhusudanan vs. CIT (2001) 251 ITR 99(SC) and Escort Finance v/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessment order that the assessee has concealed any income or furnished any inaccurate particulars of income which are prerequisite for levy of penalty under section 271(1)(c) of the Act. In support of the submission, he relied on the decision of the Hon ble Karnataka High Court in the case of CIT Vs Manjunatha Cotton Ginning Gactory ( 359 ITL 565). 7. The Ld. DR, on the other hand, relied on the order of the lower authorities and filed a written submission relying on following cases: 1. Union of India v. Dharamendra Textile Processors [(2007) 295 ITR 244] where Hon ble Supreme Court held that Penalty under section 271(1)(c) is a civil liability for which willful concealment is not an essential ingredient for attracting the civil liability as is the case in the matter of proceedings under section 276C 2. CIT Vs Zoom Communication (P.) Ltd. T191 Taxman 179 (Delhi)/[2010] 327 ITR 510 (Delhi)/[2010] 233 CTR 465] 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 makin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 271 read with Section 274 of the Income Tax Act, 1961. 5. 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. 8. We have heard the rival submissions and perused the relevant material on record. The grants and contribution made by the assessee to various institution and deduction claimed thereon under section 36(1)(xii) was disallowed by the Assessing Officer, however, same was allowed by the Ld. CIT(A) and appeal filed by the Revenue against the said order has been dismissed by the Tribunal. The year wise claim under section 36(1)(xii) made by the Assessing Officer is reproduced as under: Amount (in Rs.) Particulars AY: 2005-06 AY: 2006-07 AY: 2007-08 Contributions to Notified I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the hundred percent claim of the grant to notified institution was allowed under section 36(1)(xii) but the balance 25% claimed under section 35(1) of the Act has not been allowed to the assessee. 12. In our opinion, it is settled position of the law that mere making of a claim, which is not sustainable in the law by itself will not amount to furnishing inaccurate particulars of income. The Hon ble Supreme Court in the case of CIT Vs. Reliance Petro products Ltd 322 ITR 158 it is held that: Reading the words inaccurate and particulars in conjunction, the Apex Court opined that they must mean the details supplied in the return, which are not accurate, not exact or correct, not according to truth or erroneous. In this case, there is no finding that any details supplied by the assessee in its return were found to be incorrect or erroneous or false. Such not being the case, there would be no question of inviting the penalty under s. 271(l)(c). A mere making of the claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee. Such claim made in t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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