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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 ..... in respect of disallowance of expenses under section 14A made by the A.O. for furnishing inaccurate particulars of income. 3. The brief facts in the appeal of the Revenue are that the return of income for the impugned year was filed by the assessee on 31.10.2007 at a loss of Rs. 12.76 crores. During the year , the assessee had also received the dividend income of Rs. 21.36 crores which was exempt under section 10(34) of the Act. The order passed by the A.O. under section 143(3) of the Act on 31.12.2009 where he invoked the provisions of section 14A and computed disallowance of Rs. 1.98 crores in accordance with the provisions of Rule 8D. The assessee did not file any appeal against the said disallowance. 4. The AO, therefore, initiated penalty proceedings u/s 271(1)(c) of the Act and imposed penalty in that section in respect of disallowance made u/s 14A of the Act, on the ground that the assessee has furnished inaccurate particulars of income in relation to the same. 5. The Ld. CIT(A) deleted the penalty imposed by the AO on the ground, that no inaccurate facts in relation to the issue of disallowance under section 14A were furnished by the assessee and the disallowance was mad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rted in 322 ITR 158 relied upon by the Ld. CIT(A) was not applicable to the facts of the present case and it cannot be said that no inaccurate particulars of income were furnished by the assessee. 7. As regards the decision of the Ld. CIT(A) that simply because the assessee did not file further appeal against the order of the A.O., no adverse inference qua furnishing inaccurate particulars of income for imposition of penalty be drawn against the assessee. It was argued by the Ld. DR that the assessee had consciously decided not to file further appeal before the ld. CIT(A) as the assessee wants to avoid enhancement of disallowance by the ld. CIT(A). It was further stated that in order to avoid aforesaid risk, the assessee chose not to file further appeal. It was argued that the aforesaid circumstances establishes hat the assessee had furnished inaccurate particulars of income in the return of income and penalty imposed by the AO was required to be upheld. 8. As regards the decision of Ld. CIT(A) that the penalty u/s 271(1)(c) cannot be imposed on disallowance of expenses made on estimate basis, it was argued by the Ld. DR that the said proposition is not applicable to the disallow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hout any legal basis, since the Hon'ble Mumbai High Court in the case of Godrej & Boyce Mfg. Co. Ltd. vs. Dy.CIT: 328 ITR 81 and the Hon'ble Delhi High Court in the case of Maxopp Investment Ltd. vs. CIT 247 ITR 162 have held that Rule 8D is applicable prospectively from the assessment year 2008-09 and was not applicable to the assessment year under consideration. It was submitted that if the very basis of disallowance u/s 14A was not sustainable in law, the levy of penalty u/s 271(1)(c) of the Act has no legs to stand. It was submitted that in the penalty proceedings, the assessee could challenge the finding as regards to disallowance/deletion made by the AO to contest levy of penalty even if no appeal is filed against AO's order . In support of the above proposition, reference was made to the decision of the ITAT, Delhi Bench, in the case of Tidewater Marine International Inc. vs. DCIT (2005) 96 ITD 406. It was, therefore, submitted that the very disallowance u/s 14A of the Act was not legally valid, penalty for such disallowance cannot be upheld under section 271(1)(c) of the Act. 12. It was also submitted that prior to insertion of Rule 8D, it has been held in several cases th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ings. It was only that, claim of expenses made by the assessee in the return of income was not accepted by the AO and the same were disallowed by applying provisions of section 14A of the Act on bonafide difference of opinion. In such circumstances, the assessee cannot be said to have furnished inaccurate particulars of income, warranting imposition of penalty u/s 271(1)(c) of the Act. The aforesaid issue, it was submitted is squarely covered by the decision of Hon'ble Supreme Court in the case of CIT v. Reliance Petroproducts Pvt. Ltd; 322 ITR 158, wherein it has been held that where all the facts relevant for the issue of computation of disallowance under section 14A are disclosed by an assessee and no incorrect fact has been furnished by the assessee, the assessee cannot be visited with penalty u/s 271(1)(c) on the aforesaid disallowance made in the quantum proceedings, which was simply based on bonafide difference of opinion. 14. Reference was made to the following decisions, where penalty imposed u/s 271(1)(c) on the disallowance made u/s 14A in the quantum proceedings was deleted, on the ground that the issue of disallowance under the latter section is a vexed/debatable issu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7. In the rejoinder, the Ld. DR submitted that in the present case, no disallowance was offered by the assessee,even though disallowance of Rs. 10 lacs sustained by the ld. CIT(A) made in earlier years u/s 14A was accepted. It was also submitted that if any amount would have been offered by the assessee for disallowance u/s 14A on estimate basis, the variation in such estimate by the AO would not have been a ground for levy of penalty but that is not the case here. It was further submitted that in any case filing of the appeal by assessee against the order of the AO and its admission that no amount was offered for disallowance u/s 14A as it was not capable of determination, shows that the assessee had filed inaccurate particulars of income and levy of penalty u/s 271(1)(c) of the Act should be sustained. 18. We have heard the rival contentions and perused the facts of the case. We are of the view that penalty levied u/s 271(1)(c) of the Act was on the facts of the case and the law has rightly been deleted by the Ld. CIT(A). There is no dispute that the information and details in respect of exempt income and expenses incurred during the relevant year were available in the audited a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the return of income. In any case, the above letter only indicates that the assessee was of the view while no disallowance was called for in the absence of proximate nexus between the expenditure incurred and the exempt income, at the best disallowance, if any, because of some involvement of treasury department in the investment activity if at all could be made on estimate basis, which may not be appropriate in the Pre-Rule 8D scenario. In our view, nothing turns on the aforesaid letter of the assessee, since the disallowance has been made by the AO on estimate basis and presumption and if the assessee had offered any amount of disallowance u/s 14A on estimation, variation in such estimation cannot be a ground for levy of penalty u/s 271(1)(c) of the Act. 21. The contention of the Ld. DR that the assessee had accepted the disallowance made u/s 14A of the Act to the extent sustained by the Ld. CIT(A) in the earlier years and therefore, assessee was aware that the disallowance made u/s 14A of the Act was called for but still did not offer any disallowance is not factually correct, since in those years, assessee has challenged the disallowance sustained u/s 14A before the Tribunal. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the mens rea. However, we have to only see as to whether in this case, as a matter of fact, the assessee has given inaccurate particulars. In Webster's Dictionary, the word "inaccurate" has been defined as:- "not accurate, not exact or correct, not according to truth, erroneous, as an inaccurate statement, copy or transcript." We have already seen the meaning of the word "particulars" in the earlier part of this judgment. Reading the words conjunction, they must mean the details supplied in the Return, which are not accurate, no exact of correct, not according to truth or erroneous. We must hasten to add here that 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 u/s 271(1)(c) of the Act. 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 the Return cannot amount to the inaccurate particulars. It was tried to be suggested that section 14A of the Act specifically excluded the deducti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the assessing authorities include these items in the dealer's turnover disallowing the exemption, penalty cannot be imposed. The penalty levied stands set aside." The situation in the present case is still better as no fault has been found with the particulars submitted by the assessee in its Return. The Tribunal as well as the Commissioner of Income-tax (Appeals) and the High Court have correctly reached this conclusion and therefore, the appeal filed by the revenue has no merits and is dismissed." 23. We are of the view that the aforesaid decision squarely applies to the facts of the present case. Even if it is assumed that the assessee made incorrect claim of the expenditure by not offering any amount of disallowance u/s 14A, the fact remains that there was no filing of inaccurate particulars of income since there was not factual inaccuracy in the information or details regarding various expenses filed alongwith the return of income/ or during the assessment proceedings. There is, in fact, no such finding in the assessment order. As held by the Hon'ble Supreme Court that mere making of the claim which is not sustainable in law, will not amount to furnishing of inaccurate ..... X X X X Extracts X X X X X X X X Extracts X X X X
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