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2015 (5) TMI 547 - AT - Income TaxPenalty u/s 271(1)(c) - disallowance u/s 14A - Held that - The assessee had earned dividend income which is an exempt income and assessee, on its own, disallowed a sum of 1% of dividend income u/s 14A. The Tribunal further held that the AO was not satisfied with the assessee s quantum of disallowance and he accordingly applied Rule 8D of the Income Tax Rules 1962 and computed the disallowance which was accepted by the assessee to avoid further litigation. The Tribunal also held that the issue may call for addition to the income assessed u/s 143(3) of the Act but in order to invoke the penalty u/s 271(1)(c) of the Act, the AO has to walk a little extra mile to prove that there is failure on the part of the assessee to conceal the particulars of income or furnishing of inaccurate particulars . We are in agreement with the conclusion of the Coordinate Bench of the Tribunal that mere non-acceptance of assessee s submissions and without any positive evidence from the AO that the assessee has concealed or has furnished inaccurate particulars of its income, did not ipso facto invite levy of penalty u/s 271(1)(c) of the Act. The present case is squarely covered in favour of the assessee by the decision of ITAT Delhi E Bench in the case of ACIT vs M/s Mehrotra Invofin India Pvt. Ltd. (2015 (5) TMI 535 - ITAT DELHI) and hence, sole ground of the revenue being devoid of merits is dismissed. - Decided in favour of assessee.
Issues Involved:
1. Legitimacy of the penalty levied under Section 271(1)(c) of the Income Tax Act, 1961. Issue-Wise Detailed Analysis: 1. Legitimacy of the penalty levied under Section 271(1)(c) of the Income Tax Act, 1961: The sole ground raised by the revenue was whether the CIT(A) erred in cancelling the penalty of Rs. 15,54,462/- levied by the AO under Section 271(1)(c) of the Income Tax Act, 1961. The Tribunal heard arguments from both sides and reviewed the relevant materials. The counsel for the assessee pointed out that a similar case involving the assessee's group company, M/s Mehrotra Invofin India Pvt. Ltd., had been decided in favor of the assessee by the Tribunal. The Tribunal upheld the CIT(A)'s deletion of the penalty, and the present case was argued to be covered by that decision. The DR supported the penalty order but did not seriously object to the fact that the Tribunal had upheld the CIT(A)'s order in the similar case of M/s Mehrotra Invofin India Pvt. Ltd. Upon careful consideration, the Tribunal noted that in the case of ACIT vs. M/s Mehrotra Invofin India Pvt. Ltd., the CIT(A) had deleted the penalty after thoroughly examining the written statement filed by the assessee, the orders of the lower authorities, and various decisions by the Hon'ble Supreme Court and the Hon'ble High Court of Delhi. The Tribunal discussed the relevant provisions of Section 271(1)(c), which provides for the imposition of a penalty if the AO is satisfied that any person has concealed particulars of his income or furnished inaccurate particulars of such income. After the insertion of Explanation 1 to Section 271(1)(c), the onus is on the assessee to show that there was no intention of concealment. The Tribunal referenced several landmark judgments, including CIT Vs. Anwar Ali, Addl. CIT Vs. Jeevan Lal Shah, B.A. Balasubramaniam and Bros. Co. Vs. CIT, Dilip N. Shroff Vs. Joint CIT, and T. Ashok Pai Vs. CIT, which outline the rules for the imposition of penalties. These judgments emphasize that the primary burden of proof is on the revenue, and the AO must be satisfied that there is evidence of concealment or furnishing inaccurate particulars. The Tribunal noted that in the present case, the assessee had earned dividend income, which is exempt. The assessee had disallowed a sum of 1% of the dividend income under Section 14A. The AO, however, applied Rule 8D and computed the disallowance, which the assessee accepted to avoid further litigation. The Tribunal emphasized that assessment proceedings and penalty proceedings are different. While an issue may call for an addition to income under Section 143(3), for penalty under Section 271(1)(c), the AO must prove that there was a failure to conceal income or furnish inaccurate particulars. The Tribunal agreed with the CIT(A) that in the present case, the conditions laid down in Section 271(1)(c) were not fulfilled. The assessee's belief that no direct expenditure was incurred in earning the exempt income indicated a difference of opinion rather than concealment or furnishing inaccurate particulars. The Tribunal referenced the decision of the Hon'ble Supreme Court in the case of Reliance Petro Products, which held that making a claim that is not sustainable in law does not amount to furnishing inaccurate particulars. In conclusion, the Tribunal found that the penalty under Section 271(1)(c) was not leviable in the present case and upheld the CIT(A)'s deletion of the penalty. The appeal of the revenue was dismissed. Order pronounced in the open court on 01/05/2015.
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