TMI Blog2018 (6) TMI 1797X X X X Extracts X X X X X X X X Extracts X X X X ..... disallowance should not be a ground for levy of penalty. Identical ratio was laid down in New Horizon India Pvt. Ltd. vs DCIT [ 2010 (5) TMI 653 - ITAT DELHI] and in Ram Krishna S. Shetty [ 2014 (1) TMI 1072 - ITAT MUMBAI] and the decision from Hon'ble Apex Court in the case of Reliance Petro Products [ 2010 (3) TMI 80 - SUPREME COURT] . - Decided against revenue. - ITA NO.7278/Mum/2016, C.O. No.102/Mum/2018 (Arising out of ITA NO.7278/Mum/2016 ) - - - Dated:- 5-6-2018 - SHRI JOGINDER SINGH, JUDICIAL MEMBER, AND SHRI G. MANJUNATHA, ACCOUNTANT MEMBER Revenue by: Shri Saurabh Deshpandey-DR Assessee by: Shri Vijay Mehta ORDER Per Joginder Singh (Judicial Member) The Revenue is aggrieved by the impugned order dated 27/09/2016 of the Ld. First Appellate Authority, Mumbai and the assessee has preferred cross objection. In the appeal of the Revenue, the ground raised pertains to deleting the penalty of ₹ 57,99,493/- imposed under section 271(1)(c) of the Income Tax Act, 1961 (hereinafter the Act). 2. During hearing, the Ld. DR, Shri Saurbh Deshpande, advanced arguments, which is identical to the ground raised by contending that while deleting t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y of penalty on additions made on account of disallowance of expenses of ₹ 9,83,145/-, non-deduction of TDS of professional fees ₹ 25,05,138/- and preliminary expenses of ₹ 8,905/- It is, therefore, respectfully submitted that penalty confirmed on a sum of ₹ 34,97,188/- is untenable on the facts of the of the case and is unjustifiable in law and, therefore, needs to be deleted. 2. In this case penalty has been levied on following disallowances aggregating to ₹ 34,97,188/-:- (i) Adhoc disallowance of expenses debited in the profit Losss account of ₹ 9,83,145/- (ii) Disallowance u/s 40(a)(ia) on account of non deduction of TDS on professional and technical fees and publicity expenses of ₹ 25,05,138/- (iii) Disallowance of preliminary expenses u/s 35D of ₹ 8,905/- 3. Brief facts qua, the aforesaid disallowances on which penalty has been levied are that, assessee is engaged in the business of Film Making and in profit loss account, the assessee has claimed a sum of ₹ 22,05,138/- as technical and professional expenses and ₹ 3,00,000/- as publicity expenses. The AO noted that on these payme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lty under the Act. Regarding the preliminary expenses also, he submitted that the entire information were furnished with regard to the claim of preliminary expenses, therefore, it cannot be held that inaccurate particulars have been furnished by the assessee. 7. Ld. DR on the other hand strongly relied upon the observation and finding of Ld. CIT(A) and submitted that during the course of assessment proceedings, the assessee could not furnish the relevant details and, therefore, the penalty has rightly been confirmed. 8. We have heard the rival submissions of the parties and also carefully perused the materials placed on record. So far as levy of penalty on disallowance of ₹ 9,83,145/- is concerned, it is seen that the AO has made adhoc disallowance at the rate of 20% of the various expenses without pointing out any specific expenses being in the nature of non business purpose or for personal use. If the accounts have been audited, then the normal presumption is that the expenses are verifiable vis-avis the documents maintained by the assessee. Even though disallowances have been made in the quantum proceedings, due to non verifiability of expenses through corrobor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e furnished inaccurate particulars. If certain claim made by assessee is found not sustainable but has disclosed all the material facts, then it cannot be held that assessee is guilty of furnishing of inaccurate particulars so as to attract the penal provisions of section 271(1)(c). Hence on this disallowance also no penalty is warranted. 11. Accordingly penalty levied u/s 271(1)(c) on aforesaid disallowances are cancelled and the order of Ld. CIT(A) is set aside. The ground no. 2 as raised by the assessee stands allowed. 12. Since we have already deleted the penalty on merits, the legal issue as raised in ground no. 1 is not being adjudicated as the same has become purely academic. 13. In the result appeal filed by the assessee is allowed. 2.2. The Hon'ble Gujarat High Court in Nayan C. Shah (2016) 386 ITR 304 (Guj.), order dated 29/03/2016 on the issue of penalty under section 271(1)(c) r.w.s. 40(a)(ia) of the Act, considering the decision in Reliance Petro Products Pvt. Ltd (2010) 322 ITR 158 (Supreme Court) held as under:- This appeal under section 260A of the Income Tax Act, 1961 (hereinafter referred to as the Act ) is directed against the o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Government account on the amount of ₹ 13,20,588/- on 1.12.2008 and was allowable in assessment year 2007-08, and was accordingly of the view that no penalty is warranted under section 271(1)(c) of the Act for technical breach of law and deleted the penalty imposed by the Assessing Officer. The revenue carried the matter in appeal before the Tribunal, which held that the assessee had suppressed the actual particulars of income by not making disallowance under section 40(a)(ia) of the Act and restored the penalty order passed by the Assessing Officer. Being aggrieved, the appellant-assessee has preferred the present appeal. 4. Mr. K. T. Dave, learned advocate for the appellant submitted that the Tribunal has failed to appreciate that the default, if any, was technical and venial in nature inasmuch as, the disallowance to the extent of ₹ 6,18,300/- was allowed in assessment year 2007-08 vide order under section 154 dated 03.02.2009, whereas in respect of the balance amount of ₹ 7,94,590/-, the tax deducted at source was made and deposited with interest on 01.12.2008 so that it was admissible in assessment year 2009-10. It was submitted that the entire exerci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... )(ia) of the Act, are found out by the Assessing Officer only during the course of assessment proceedings. Under the circumstances, the Assessing Officer was justified in holding that the assessee had furnished inaccurate particulars of income as contemplated under section 271(1)(c) of the Act and that the Tribunal was wholly justified in affirming the findings recorded by the Assessing Officer. According to the learned counsel, the question as to whether the assessee has furnished inaccurate particulars is a question of fact, which does not give rise to any question of law. It was, accordingly, urged that the question is required to be answered in favour of the revenue and against the appellant and that the appeal deserves to be dismissed. 6. The facts are not in dispute. The assessee filed return of income declaring total income of ₹ 8,28,646/-, whereas, by an order dated 24.10.2008 under section 143(3) of the Act the assessment was completed by assessing the total income at ₹ 24,84,970/-. While framing assessment under section 143(3) of the Act, the Assessing Officer invoked the provisions of section 40(a)(ia) of the Act and made disallowance of ₹ 14,29,8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... subsequent assessment year. 8. At this juncture it may be apposite to refer to the decision of the Supreme Court in the case of CIT v. Reliance Petroproducts (P.) Ltd. [2010] 322 ITR158/189 Taxman 322, wherein the court while interpreting the provisions of section 271(1)(c) of the Act, has held that a glance at the said provision would suggest that in order to be covered by it, there has to be concealment of the particulars of the income of the assessee. Secondly, the assessee must have furnished inaccurate particulars of his income. In the facts of that case, the court found that it was not a case of concealment of the particulars of the income, nor was it the case of the revenue either. However, the counsel for the revenue suggested that by making an incorrect claim for the expenditure on interest, the assessee had furnished inaccurate particulars of income. The court observed that it had to only see as to whether in that case, as a matter of fact, the assessee had given inaccurate particulars. The court noted that as per Law Lexicon, the meaning of the word particular is a detail or details (in the plural sense); the details of a claim, or the separate items of an accou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e particulars of income in the return filed by the appellant. 10. From the facts as emerging from the record, it appears that the assessee has made a claim of expenditure in relation to the payments made, which he may not have been entitled to claim in view of the provisions of section 40(a)(ia) of the Act, as tax on part of such amount had not been deducted at source and deposited in the Government account before the due date for filing return income. However, as held by the Supreme Court in the above decision, merely submitting an incorrect claim in law for the expenditure would not amount to furnishing inaccurate particulars of income. The impugned order passed by the Tribunal, therefore. cannot be sustained. 11. Another notable aspect of the matter is that while the Assessing Officer has imposed penalty on the ground that the assessee has furnished inaccurate particulars of income, the Tribunal has set aside the order of the Commissioner (Appeals) by holding that the assessee has suppressed the actual particulars of income by not making disallowance under section 40(a)(ia) of the Act. Thus, the Assessing Officer has imposed penalty on the ground of furnishing inaccu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enalty of ₹ 57,99,493/-, under section 271(1)(c) of the Act for concealment of ₹ 1,72,29,629/-. Before us as well as before the Ld. Commissioner of Income Tax (Appeal), the stand of the assessee is that deduction of TDS is a debatable and technical issue; therefore, at least penalty cannot be imposed. Admittedly, the provision of section 40(a)(ia) is a deeming section which creates legal fiction, therefore, the disallowance made simply invoking the provision will not attract penalty for concealment or furnishing of inaccurate particulars of income. The ratio laid down by the Hon'ble Apex Court in Hindustan Steel Ltd. vs State of Orissa 83 ITR 26 (Supreme Court) supports our view, wherein, it was held that the authority competent to impose the penalty will be justify in refusing the penalty where there is a technical or venial breach of provision or where the breach flows from a bon-fide belief that offender is not liable to act in a manner prescribed by a statute . The case of the assessee further find support from the decision from Delhi High Court in the case of CIT vs AT T Communications Services Pvt. Ltd. 342 ITR 257 (Del.), wherein it was held that invoking ..... X X X X Extracts X X X X X X X X Extracts X X X X
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