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TMI Blog2012 (4) TMI 360X X X X Extracts X X X X X X X X Extracts X X X X ..... inting out that the aforesaid amounts towards exports were not realized within the stipulated period A mere rejection of the claim of the assessee by relying on different interpretations does not amount to concealment of the particulars of income or furnishing inaccurate particulars thereof by the assessee - Held that: the disallowance of claim for deductions u/s 10A & 80HHE in relation to unrealised exports or disallowance of an estimated amount, having recourse to provisions of sec.14A the Act cannot be considered as concealment of income or furnishing inaccurate particulars thereof, especially when all the relevant particulars were disclosed before the AO - Mere erroneous claim in the absence of any concealment or furnishing of inaccurate particulars, is no ground for levying penalty, especially when there is nothing on record to show that the explanation offered by the assessee was not bona fide or any material particulars were concealed or furnished inaccurate - Appeals are dismissed - IT Appeal NOS. 861 & 862 (DELHI) OF 2011 - - - Dated:- 9-3-2012 - R. P. Tolani And A. N. Pahuja, JJ. Pradeep Kumar for the Appellant Neeraj Jain and Pinky Kapoor for the Responden ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lso initiated. On appeal, the ground relating to non receipt of convertible foreign exchange into India within the stipulated time on account of exports, was not pressed before the ld. CIT(A). Subsequently, in response to a show cause notice before levy of penalty u/s 271(1)(c) of the Act, the assessee replied that they had mentioned the fact of unrealized export proceeds in annexure-A to form 10CCAF 56F and on their application, seeking extension of time amounts were subsequently realized. Accordingly, it was argued that all facts relating to unrealized export proceeds having been disclosed, no penalty could be imposed. However, the AO did not accept the explanation of the assessee and imposed a penalty of ₹ 10 lacs on the tax sought to be evaded on the income of ₹ 12,48,547/- on the ground that the assessee, a well established company having the benefit of best tax advisors and consultants, concealed the particulars of its income. It was further mentioned that the if the case of the assessee was not selected for scrutiny or escaped the eyes of the AO, the assessee would have gained huge undue benefit. Inter alia , the AO referred to decision in Union of India v. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er of CIT(A) and ITAT as well as the penalty order made by the Assessing Officer u/s 271(1)(c) of the Income-tax Act. The appellant has challenged the imposition of penalty on two grounds firstly that there was neither any concealment nor any furnishing of inaccurate particulars, therefore, concealment penalty was attracted in his case and secondly the appellant has argued that the additions made by the Assessing Officer in consequence of which penalty has been imposed, have been deleted in entirety by Hon'ble ITAT, Delhi vide order dated 31.03.2009 in I.T. No. 1320 1446/D/08, hence, penalty does not survive and it should be cancelled. I have examined the facts of the case very carefully. It is seen from the assessment order that the penalty u/s 271(1)(c) has been levied by the Assessing Officer in consequence of disallowance of the claim of the assessee made u/s 10A and 80HHE of the Income-tax Act. It has been held by the Assessing Officer that by making wrong claims of deduction u/s 10A and 80HHE, the assessee has deliberately concealed its income and also furnished inaccurate particulars of income. I am of the view that a disallowance of quantum of a claim of deductio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the Hon'ble ITAT, Delhi and, therefore, the penalty levied in consequence of those additions does not survive. Only two additions i.e. the addition of ₹ 6,83,493/- and the disallowance of ₹ 10,000/- on account of penalty have been sustained because the grounds were not pressed by the assessee before the CIT(A), but these additions also do not prove any concealment. In the facts and circumstances of the case, I am inclined to hold that penalty u/s 271(1)(c) of the Income-tax Act is not justified, therefore, the penalty of ₹ 1,05,00,000/- imposed by the Assessing Officer u/s 271(1)(c) of the Income-tax Act is cancelled. 6. The Revenue is now in appeal before us against the aforesaid findings of the ld. CIT(A). The ld. DR supported the orders, levying penalty while the ld. AR on behalf of the assessee submitted that at the time of filing of the return, deduction u/s 10A 80HHE of the Act on the unrealized export proceeds was claimed under the bonafide belief that their applications before the Competent Authority, seeking extension of time for realizing export consideration, would be accepted within the stipulated time. Even otherwise, there was comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of time to the competent authority was made. It was also mentioned that calculation for deduction u/s 10A 80HHE proceeded on the basis that permission of the competent authority would be forthcoming. Similarly in the note 2 in annexure to form 10CCAF 56F dated 30th October, 2004 relevant for the AY 2004-05, it was mentioned that export sales of ₹ 549.76 lacs were not realized before the end of six months from the end of the FY 2003-04 and that company was yet to file an application for extension of time. Inter alia , reference to circular no. 20 dated 28.1.2002 issued by the RBI, was also made. The ld. CIT(A) in the impugned orders concluded that a disallowance of quantum of a claim of deduction does not necessarily imply concealment or furnishing of inaccurate particulars because the issue regarding allowability of deduction u/s 10A as well as u/s 80HHE were debatable issues. We find that it is not a case where the assessee has not disclosed full details at the time of filing of returns or during the course of assessment proceedings. In terms of provisions of sec. 10A(5) and 80HHE(4) of the Act, the deduction under these sections is not admissible unless the assessee fu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ming the additions. It is, therefore, necessary to reappreciate and reconsider the matter so as to find out as to whether the addition or disallowance made in the quantum proceedings actually represents the concealment on the part of the assessee as envisaged in sec. 271(1)(c) of the Act and whether it is a fit case to impose the penalty by invoking the said provisions. The provisions of section 271(1)(c) of the Act stipulate that if the Assessing Officer or the CIT (Appeals) or the Commissioner, in the course of proceedings under this Act, is satisfied that any person has concealed the particulars of his income or furnished inaccurate particulars thereof, he may direct that such person shall pay by way of penalty a sum which shall not be less than but which shall not exceed three times the amount of tax sought to be evaded by a reason of the concealment of particulars of his income. Explanation 1 to section 271(1)(c) of the Act mentions that where in respect of any facts material to the computation of the total income of any person under the Act, such person fails to offer an explanation or offers an explanation which is found by the AO or the CIT (Appeals) or the Commissioner t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le of statutory interpretation must be borne in mind before interpreting the aforementioned provisions. Clause (c) of sub-section (1) of section 271 categorically states that the penalty would be leviable if the assessee conceals the particulars of his income or furnishes inaccurate particulars thereof. By reason of such concealment or furnishing of inaccurate particulars alone, the assessee does not ipso facto become liable for penalty. Imposition of penalty is not automatic. Levy of penalty is not only discretionary in nature but such discretion is required to be exercised on the part of the Assessing Officer keeping the relevant factors in mind. Some of those factors apart from being inherent in the nature of penalty proceedings as has been noticed in some of the decisions of this court, inheres on the face of the statutory provisions. Penalty proceedings are not to be initiated, as has been noticed by the Wanchoo Committee, only to harass the assessee. The approach of the Assessing Officer in this behalf must be fair and objective. ** ** ** The term inaccurate particulars is not defined. Furnishing of an assessment of value of the property may not by itself be furni ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ttedly, the claim for deduction u/s 10A 80HHE was duly supported by the certificate of the chartered accountant in the prescribed form while the factum of unrealized export sale proceeds was mentioned in the said certificate. In this view of the matter, no fault can be found with the claim of the assessee that it had claimed the deduction in a bona fide manner. Moreover, mere fact that the report prepared by the CA was not in accordance with the relevant provisions of the Act, was not enough to hold that the mistake was not bona fide. This view is supported by the decision in the case of CIT v. Deep Tools (P.) Ltd. [2005] 274 ITR 603 (Punj. Har.), where in also levy of penalty was held to be unjustified. 7.4 In the case under consideration, as pointed out by the ld. CIT(A), the assessee had given all the particulars of income and had disclosed all facts to the AO in relation to claim for deduction u/s 10A 80HHE of the Act. The ld. CIT(A), accordingly, concluded that penalty cannot be imposed merely on such disallowances. Mere disallowance of a claim will not amount to filing of inaccurate particulars of income. It can at best be a wrong claim not a false claim . I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he taxable income and, therefore, both types amount to concealment of particulars of one's income as well as furnishing of inaccurate particulars of income. We do not agree, as the assessee had furnished all the details of its expenditure as well as income in its Return, which details, in themselves, were not found to be inaccurate nor could be viewed as the concealment of income on its part. It was up to the authorities to accept its claim in the Return or not. Merely because the assessee had claimed the expenditure, which claim was not accepted or was not acceptable to the Revenue, that by itself would not, in our opinion, attract the penalty under Section 271(1)(c). If we accept the contention of the Revenue then in case of every Return where the claim made is not accepted by Assessing Officer for any reason, the assessee will invite penalty under Section 271(1)(c). That is clearly not the intendment of the Legislature. 11. In this behalf the observations of this Court made in Sree Krishna Electricals v. State of Tamil Nadu Anr. [(2009) 23VST 249 (SC)] as regards the penalty are apposite. In the aforementioned decision which pertained to the penalty proceedings in Tam ..... X X X X Extracts X X X X X X X X Extracts X X X X
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