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TMI Blog2017 (1) TMI 1142X X X X Extracts X X X X X X X X Extracts X X X X ..... antum of disallowance has varied only due to different interpretations by the AO and learned CIT(A) and not on account of any furnishing of inaccurate particulars of income. In this factual matrix of the case, as discussed above, we are of the considered view that penalty under section 271(1)(c) of the Act is not leviable in the case on hand and therefore uphold the finding of the learned CIT(A) in deleting the penalty levied under section 271(1)(c) of the Act on this issue of disallowance under section 14A r.w. Rule 8D of the Act in the case on hand. - Decided in favour of assessee - ITA No. 2018/Mum/2015 - - - Dated:- 20-1-2017 - Shri Jason P. Boaz, Accountant Member and Shri Sandeep Gosain , Judicial Member For The Appellant : Ms. S. Padmaja Shri S.K. Podar For The Respondent : Shri Vijaya Mehta Shri Govind Javeri ORDER Per Jason P. Boaz, A.M. This appeal by Revenue is directed against the order of the CIT(A)-14, Mumbai dated 23.12.2014 deleting the penalty levied by the Assessing Officer (AO) under section 271(1)(c) of the Income Tax Act, 1961 (in short 'the Act') for A.Y. 2008-09. 2. The facts of the case, briefly stated, are as under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... because existing deeming provisions were attracted in the case on hand, it does not automatically attract the levy of penalty under section 271(1)(c) of the Act, as it is neither a case of furnishing of inaccurate particulars of income or concealment of particulars of income and that the AO could gather that the provisions of section 94(7) of the Act were attracted in the case on hand only due to the details of the same being available on record. In that view of the matter and placing reliance on the decisions of the Tribunal in the case of Mr. Walter Saldhana vs. DCIT Range 8(1), Mumbai in ITA 444/Mum/2010 and M/s. Crown Tradelink Pvt. Ltd. vs. ACIT (OSD), Rg. 1, Ahmedabad in ITA No. 2768/Ahd/2012, the learned CIT(A) deleted the penalty on this issue. (ii) In respect of the disallowance under section 14A r.w. Rule 8D, the learned CIT(A) observed that such disallowances were attracted only due to existing statutory provisions of section 14A of the Act and calculations of disallowance thereof have undergone changes by different interpretation at assessment/appellate stages. The learned CIT(A) deleted the penalty levied on this issue for the reason that section 14A of the Act bei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... securities. Since in this activity there are a large number of such transactions involving thousands of crores and in which the assessee incurred huge loss, the assessee by oversight did not notice that dividend was declared by some of the companies in the interim period which was hit by the provisions of section 94(7) of the Act. It was submitted that the transactions on which dividends were received and which attracted the provisions of section 94(7) of the Act was not noticed at the time of filing of the return of income and the mistake in doing so was bona fide and there was no malafide intention on the part of the assessee to furnish inaccurate particulars of income or to conceal particulars of income. In support of this proposition, the learned A.R. of the assessee placed reliance on the following judicial pronouncements: - (i) City Group Global Markets (P) Ltd. vs. ACIT (ITA No. 5352/Mum/ 2009 dated 30.11.2012) (ii) Four Dimensions Securities (India) Ltd. vs. ACIT (ITA Nos. 1466 1467/Mum/2013 dated 26.02.2015 for A.Y. 2007-08 2009-10) (iii) Four Dimensions Securities (India) Ltd. vs. ACIT (ITA No. 2452/Mum/2012 dated 16.01.2015) 4.2.3 In respect of the dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d any particulars of income nor furnished inaccurate particulars of their income. They were under bonfide belief that provisions of sec.94(7) is not applicable and then for disallowance made u/s. 14A r.w. Rule 8D, they have themselves calculated disallowance at ₹ 21,85,29,427/-, which was calculated by the A.O. at ₹ 40,24,40,614/-. The assessee then pleaded that even this estimate of disallowance u/s.14A has varied at all levels and hence penalty u/s. 271(l)(c) in their case should not be levied. For the same, they relied upon the decision given in the case of 124 ITR 15 - Cement Marketing Co. of India Ltd. (SC), 168 ITR 705 (SC) (Sir Shadilal Sugar Gen, Mills Ltd. v/s. CIT), 211 ITR 35 (Orissa High Court), Hindustan Steel v/s. State of Orissa - 83 ITR 26 (SC), CIT vs. Smt. Bimladevi Sharma - 192 ITR 482 (Parna), CIT vs Bombay Pipe Traders - 213 ITR 282 (Born), ACIT vs. Kalpaka Baxar - 46 ITD 221 - ITAT Cochin Bench, Addl. CIT vs. Delhi Cloth General Mills Co. Ltd. 1986 (157) - ITR 0822 DEL, 181 ITR 410 (MP) (1990) J.K. Jajoo vs. CIT, 190 ITR 402 (All) (1991) CIT vs. Nepani Bin Company Trust, 46 ITD 331- ITAT Bombay Bench D - Yaasmin Properties (P) Ltd. vs ACIT. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sallowance u/s. 94(7). Further the year under reference being the first year of operation, the Appellant had no grip over the technical aspect of Income-Tax Act. It is respectfully submitted that 94(7) is more in the nature of deeming provision and loss though actually incurred by the assessee will be ignored in a given set of circumstances. Thus applicability of the same is highly technical in the nature. Various judgements in connection with Penalty Proceedings where penalty was deleted because of bonafide/inadvertent mistake on the part of assessee certain additions were made. 3.4 The appellant filed copies of decisions also in the case of Mr. Walter Saldhana vs. DCIT Range-8(1), Mumbai ITA 444/M/2010, Miss Harron Mahmood v/s. ACIT-12(3), Mumbai - ITA 1636/Mum/2013, M/s. Crown Tradelink Pvt. Ltd. v/s. ACIT (OSD) Rg. I, Ahmedabad - ITA 2768/Ahd/20I2 and M/s. Reliance Industries Ltd. v/s.ACIT, LTU, Mumbai - ITA 75/Mum/2009 3.5 I have gone through the facts and submissions and undisputedly additions were made in the income on account of provisions contained u/s.94(7) and 14A. For the sake of clarity the section 94 is reproduced as under : 94. (1) Where the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es, reflected by them as their investment, however, claiming loss on account of sale price below the purchase Act. To this extent, the assessee has also admitted the same and offered the income accordingly and not even preferred appeal. On these given facts, I am in agreement with the A.O. that provisions of sec.94(7) being attracted in this case, the additions were rightly made in the income of the appellant. However, merely because of existing deeming provisions were attracted in the case of appellant, this does not automatically attract penalty u/s.271(1)(c), as it is neither a case of furnishing inaccurate particulars nor concealing income by furnishing wrong particulars. In fact the A.O. could gather the provisions attracted in the case due to these details being available on record. On the identical facts, it was decided in favour of assessee in case of Mr. Walter Saldhana and M/s. Crown Tradelink Pvt. Ltd., which are relied upon by appellant also. Thus, I am of the considered view that disallowance of loss u/s.94(7) made on the basis of details and particulars already furnished in return by appellant cannot be taken as the basis for concluding that tax was sought to be e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irst year of operations, this is a bona fide mistake on the part of the assessee in computing/compiling of voluminous data. Since there is no malafide intention on the part of the assessee, we are of the opinion that the levy of penalty under section 271(1)(c) of the Act on this issue is not warranted, merely because the provisions of section 94(7) of the Act were attracted; for the reasons that this is not a case of either furnishing of inaccurate particulars of income or concealment of income since the AO could gather that the provisions were attracted in this case only due to the details being available on record. We find that in judicial pronouncements relied on by the assessee, that an identical issue was considered and adjudicated by a Coordinate Bench in the case of Four Dimensions Securities (India) Ltd. in ITA No. 2542/Mum/2012 dated 16.01.2015, wherein the Bench following the decision of another Coordinate Bench in the case of City Group Global Markets India P. Ltd. in ITA No. 5352/Mum/2009 dated 13.12.2011 has held as under at paras 2 to 5 thereof: - 2. Rival contentions have been heard and record perused. Facts in brief are that the assessee company is a corporate m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 5 transactions, the CIT (A) allowed setoff and restricted to net amount of ₹ 12,45,342/-. In our view, this is a bonafide mistake happened at the level of compiling the data. The application of provisions of section 94(7) were not examined nor invoked. Since the assessee has declared large amount of profits in transactions on purchase and sale of shares, this aspect could have genuinely missed the attention of persons concerned. Since no malafide intention can be attributed to assessee in claiming loss in these transactions, we are of the view that penalty under section 271(1)(C) is not warranted. Various case law relied upon by the assessee also supports the contentions made. However, without getting into the legal parameters, on facts of the case we are of the view that there occurred a bonafide mistake in not examining the provisions of section 94(7) on these transactions. Moreover, though there are disallowances in the course of the assessment proceedings, mere disallowance does not attract penalty proceedings under section 271(1)(C). Accordingly the assessee s ground is allowed. The penalty levied on this disallowance of loss is hereby cancelled. 4. We have cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... there was a boanfide mistake on the part of the assessee in not examining the provisions of section 94(7) of the Act in respect of the concerned transactions. We, therefore uphold the learned CIT(A) s order in deleting the penalty levied under section 271(1)(c) of the Act for furnishing of inaccurate particulars of income on this issue, since the disallowance under section 94(7) of the Act was made on the basis of details and particulars already furnished by the assessee. 4.4.1 In respect of the penalty levied under section 271(1)(c) of the Act on the disallowance under section 14A r.w. Rule 8D we find from the details on record that the assessee itself had suo moto made a disallowance thereunder of ₹ 21,85,29,427/-. The said disallowance, we observe, has been increased by the AO to the extent of ₹ 18,39,11,187/- and subsequently on appeal has been reduced by the learned CIT(A) to ₹ 3,68,74,513/-; all this due to different interpretations and formulae adopted by these authorities. In this context, we notice that for making the said disallowance under section 14A r.w. Rule 8D, which is a statutory disallowance, all details have been disclosed by the assessee and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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