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TMI Blog2013 (12) TMI 922X X X X Extracts X X X X X X X X Extracts X X X X ..... ere 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 the Return cannot amount to the inaccurate particulars – Decided in favour of Assessee. - I.T.A. No. 94(Asr)/2011 - - - Dated:- 19-3-2013 - H. S. Sidhu And B. P. Jain, JJ. For the Appellant : Tarsem Lal For the Respondent : Rupesh Jain, Dilbagh Singh Narang ORDER Per Bench ; This appeal of the Revenue arises from the order of CIT(A), Jalandhar, dated 13.12.2010 relating to assessment year 2007-08. The Revenue has raised following grounds of appeal: 1. That, on the facts and in the circumstances of the case, the ld. CIT(A) has erred in law in deleting the penalty of ₹ 66,65,451/- imposed by the AO u/s 271(1)(c) of the I.T.Act, 1961. 2. That, it is prayed that the order of the Ld. CIT(A) be set-aside and that of the A.O. restored. 3. That the appellant requests for leave to add or amend or alter the grounds of appeal before the appeal is heard and disposed of. 2. In the ground raised by the Revenue, the Revenue has challenged the order of the ld. CIT(A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted that personnel and administrative expenses were incurred in relation to the investment and did not offer any amount for disallowance u/s 14A of the Act, as it was effectively difficult to determine on an exact basis as to what part there was allocable to investment activity, warranting disallowance u/s 14A of the Act. It was submitted that in the aforesaid circumstances, the AO had no option but to compute disallowance under section 14A as per Rule 8D which are available in the statute at the time of making assessment. Accordingly, it was argued that the AO had rightly applied the provisions of Rule 8D and the Ld. CIT(A) has erred in holding that since disallowance made by the AO was incorrect, the assessee cannot for such disallowance be visited with penalty under section 271(1)(c) of the Act. Further, having regard to the submissions by the assessee during the assessment proceedings vide letter dated 11.12.2009, it was certain that personnel and administrative expenses were having relation with investment activities. It was argued that the assessee had furnished inaccurate particulars of income by not computing disallowance u/s 14A of the Act. On the aforesaid reason itself i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Ld. DR and supported the order of the Ld. CIT(A). It was argued that merely because the AO made disallowance u/s 14A read with rule 8D, which order was not challenged in appeal does not automatically lead to a conclusion that the assessee has filed inaccurate particulars of income and different consideration apply for adjudicating levy of penalty which is separate and independent proceedings than the assessment proceedings. In support of the above proposition, reference was made by the Ld. counsel for the assessee to the following decisions: i) CIT vs. Globle Sales Corporation 145 Taxman 730 (Del.) ii) CIT vs. J.K. Synthetics Limited 219 ITR 267 (Del) ii) Jainarayan Babulal v. CIT 170 ITR 399 (Bom.) iv) CIT vs. Ganesh Mal Nanak Chand 197 CTR 193 (Raj.) v) Sohanlal G. Sanghi V. ACIT 125 ITR 184 (MP) vi) Kalpalatha v. Asstt. CIT 44 TTJ 225 (Hyd) 11. It was further submitted that for the purpose of levy of penalty, the law prevailing at the time of filing the return has to be seen. It was submitted that when the return was filed which on 31.10.2007, rule 8D was not on the statute, as the said rule was introduced in March 2008. The ld. counsel for the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the assessee further submitted that the assessee had disclosed dividend income earned during the year alongwith particulars of exemption claimed in respect thereof u/s 10(34) of the Act in the return of income filed for the relevant assessment year. Similarly, the particulars of all the expenses incurred during the year were disclosed in the audited financial statements for the relevant year and details of such expenses as and when called for during the course of assessment proceedings were also filed. It was further submitted that during the course of assessment proceedings, the assessee was asked to furnish the details of expenses incurred in connection with earning of exempt income and to explain as to why expenses be not disallowed u/s 14A of the Act in accordance with amount computed as per Rule 8D of the I.T. Rules, 1962. In response thereto, the assessee filed various replies dated December 11,2009(I) and December 11,2009 (II), giving explanation regarding non-applicability of section 14A of the Act. Accordingly, all the facts relevant to the issue of disallowance u/s 14A were duly disclosed by the assessee. There is no finding in the assessment order or penalty order t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. Sukhamarit Singh: ITA No.451(Asr)/2011. 16. As regards the contention of the Ld. DR that the assessee itself in the assessment proceedings in letter dated December 11,2009 admitted that time of Treasury division would have spent in the investments activities but it is difficult to determine the exact costs allocable to such activities and therefore, the assessee filed inaccurate particulars of its income by not disallowing any amount u/s 14A of the Act, it was submitted that what is required to be considered is the return of income. In the return of income, no disallowance was offered u/s 14A which clearly demonstrates that the assessee was of the view that no expenditure incurred by the assessee is relatable to earning of exempt income. It was further argued that in any case, there is nothing in the aforesaid letter of the assessee, which would demonstrate any proximate nexus between exempt income and expenses incurred which involve quantification. It was further submitted that even the assessee has offered the same disallowance on estimate basis and any upward variation of the disallowance by the AO on estimate basis could not form basis of levy of penalty u/s 271(1)(c) as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... refore, penalty cannot survive The decision of the ITAT, Delhi Bench in the case of in Tidewater Marine International Inc. vs. DCIT (supra) supports the case of the assesse. 20. It is trite law that no penalty can be levied in the case of estimated additions/disallowances . Reference is made in this regard to the decision of this Bench in the case of ITO vs. Sukhamrit Singh: ITA No.451(Asr)/2011. In the present case, since Rule 8D was not applicable, the AO has considered as having made disallowance u/s 14A on estimate basis. The return filed by the assessee offering no disallowance u/s 14A is demonstrative of the assessee s stand that no expenditure incurred u/s 14A of the Act is disallowable under that section. The Hon ble Supreme Court in the case of Reliance Petroproducts (P) Ltd (supra) observed that in so far as levy of penalty u/s 271(1)(c) is concerned, furnishing of inaccurate particulars would depend upon the return filed because that is the only document where the assessee can furnish particulars of his income and when such particulars are found to be inaccurate, the liability would arise. Therefore, what is relevant is whether in the return there was furnishing of in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the income. As per Law Lexicon, the meaning of the word particulars is a detail or details (in plural sense); the details of a claim, or the separate items of an account. Therefore, the word particulars used in the section 271(1)(c) of the Act would embrace the meaning of the details of the claim made. It is an admitted position in the present case that no information given in the Return was found to be incorrect or inaccurate. It is not as if any statement made or any detail supplied was found to be factually incorrect. Hence, at least, prima facie the assessee cannot be held guilty of furnishing inaccurate particulars. The ld. counsel argued that submitting an incorrect claim in law for the expenditure on interest would amount to giving inaccurate particulars of such income. We do not think that such can be the interpretation of the concerned words. The words are plain and simple in order to expose the assessee to the penalty. Unless the case is strictly covered by the provision, the penalty provision cannot be invoked. By any stretch of imagination, making an incorrect claim in law cannot tantamount to furnishing inaccurate particulars. In CIT vs. Atul Mohan Bindal [200 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ture 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 clai 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 u/s 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 A.O. for any reason, the assessee will invite penalty u/s 271(1)(c). That is clearly not the intendment of the Legislature. In this behalf the observations of this Court made in Sree Krishna Electricals v. State of Tamil Nadu [2009] 23 VST 249 as regards the penalty are, apposite. In the aforementioned decision which pertained to the penalty proceedings in Tamil Nadu General Sales Tax Act, the Court had found that the authorities below had found that there were some incorrect statements made in the Return. However, the said transactions were reflected in the accounts of the assessee. This Court, therefore, observed: So far as the question ..... X X X X Extracts X X X X X X X X Extracts X X X X
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