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TMI Blog2018 (11) TMI 691X X X X Extracts X X X X X X X X Extracts X X X X ..... mber For the Assessee : Sh. T. R. Talwar, Adv. For the Revenue : Ms. Ashima Neb, Sr. DR ORDER This is an appeal by the assessee against the order dated 02.08.2017 of ld. CIT(A)-40, Delhi. 2. The only grievance of the assessee in this appeal relates to the sustenance of penalty of ₹ 68,598/- levied by the AO u/s 271(1)(c) of the Income Tax Act, 1961 (hereinafter referred to as the Act). 3. Facts of the case in brief are that the assessee filed the return of income on 15.10.2010 declaring Nil income. However, the assessment was completed u/s 143(3) of the Act on 25.03.2013 at an income of ₹ 6,04,934/-. During the course of assessment proceedings, the AO noticed that the assessee had provided interest free loan and advances of ₹ 18.50 lacs to the persons specified u/s 13(3) of the Act. He added notional interest of ₹ 2,22,000/- being 12% of ₹ 18,50,000/- and also initiated the penalty proceedings u/s 271(1)(c) of the Act. The assessee submitted before the AO that it had neither furnished inaccurate particulars nor concealed particulars of its income as the advances given to the specified persons were duly mentioned in the Audit Report. Therefore, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee and its Auditors in the return of income and Audit report filed by the assessee trust." 5. The reliance was placed on the following case laws: * CIT Vs Pricewater House Coopers Pvt. Ltd. (2012) 348 ITR 306 (SC) * Dilip N. Shroff Vs JCIT (2007) ITR 519, 546 (SC) * K. C. Builders Vs ACIT (2004) 265 ITR 562 (SC) * CIT Vs Reliance Petroproducts Pvt. Ltd. 322 ITR 158 (SC) * T. Ashok Pai Vs CIT (2007) 292 ITR 11 (SC) * CIT Vs Brahma Purta Construction Ltd. (2012) 348 ITR 349 (Del.) * CIT Vs Escort Finance Ltd. (2010) 328 ITR 44 (Del.) * CIT Vs Sidhartha Enterprises (2009) 184 Taxman 460 (P&H) * CIT Vs Sania Mirza (2013-ITRV-HC-AP-002) * CIT Vs Balaji Distilleries Ltd. (2003) 126 Taxman 264 (Mad.) * CIT Vs Bennett Coleman & Co. Ltd. (2013-ITRV-HCMum- 030) 6. It was further submitted that the explanation given by the assessee in the penalty proceedings was that it neither furnished incorrect particulars nor concealed particulars of income and that the advances given to the specified persons were duly mentioned in its Audit Report and that the details of loans and advances given to specified persons had been mentioned in Annexure II of the Audit Report. It was a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nverted into a loan with 12% interest. Therefore, even though the assessee provided an explanation for the failure to disclose the correct income in the return of income which had been attributed to the mistake on the part of the Auditor, the assessee had failed to substantiate the same and also failed to prove that the explanation was bona fide and that all the facts necessary for the same and material for computation of income had been disclosed by it in the return of income filed. Therefore, Explanation (1) to Section 271(1)(c) of the Act was applicable to the facts of the present case and that the assessee was deemed to have concealed particulars of income which was liable for the penalty u/s 271(1)(c) of the Act. The ld. CIT(A) also observed that the decisions relied by the assessee were distinguishable on facts. Accordingly, the penalty levied by the AO was sustained. 7. Now the assessee is in appeal. The ld. Counsel for the assessee reiterated the submissions made before the authorities below and submitted that the addition was made by invoking the deeming provisions only but nothing was concealed. It was further submitted that the assessee was disclosing the advances give ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gs are two different and distinct proceedings. In the present case, the assessee disclosed the particulars of loans and advances given to the persons referred in the Section 13(3) of the Act which is evident from page no. 15 of the assessee's paper book which is the copy of Audit Report u/s 12A(b) of the Act wherein the assessee has disclosed that a sum of ₹ 16,50,000/- had been advanced to the relatives of one of the Managing Trustees and another sum of ₹ 2,00,000/- was paid to M/s Albega Biological Pvt. Ltd., a company wherein Managing Trustee held substantial interest, so it cannot be said that particulars were not disclosed to the department, the assessee also had shown the advances to the aforesaid persons in its balance sheet which was furnished alongwith the return of income. The Explanation of the assessee was that a computation error was made in the return of income by the counsel, therefore, the penalty u/s 271(1)(c) of the Act was not levaible. 10. On a similar issue, the Hon'ble Apex Court in the case of CIT Vs Pricewaterhouse Coopers Pvt. Ltd. (supra) held as under: "18. The fact that the Tax Audit Report was filed along with the return and that it unequ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ona fide and inadvertent error, particularly when the assessee was regularly showing the income in the preceding years which is evident from the observations of the ld. CIT(A) in paras 5.5 & 5.6 of the impugned order wherein it has been mentioned that "the notice in the documents inter alia stated that interest @ 12% per annum is being charged since inception and credited in the income and expenditure account, this shows that the assessee had been in continuous practice of applying funds for the benefit of specified persons in all the earlier years and once the case was selected for scrutiny and the query with regard to violation of Section 13(1)(d) r.w.s. 13(3) and 11(5) of the Act was raised, the interest free loan was converted into a loan with 12% interest." It has also been mentioned by the ld. CIT(A) that "in the present case, even though the assessee provided an explanation for the failure to disclose the correct income in the return of income which had been attributed to the mistake on the part of the Auditor but the same was not supported by the facts as mentioned in the assessment order." However, it is an admitted fact that the Auditor duly mentioned in the Audit R ..... X X X X Extracts X X X X X X X X Extracts X X X X
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