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TMI Blog2018 (6) TMI 1797X X X X Extracts X X X X X X X X Extracts X X X X ..... the statutory obligation of deducting tax at source on the payments made to foreign entity and the assessee sought to reduce the incidence of taxation by concealing the income as well as furnishing of inaccurate particulars of income. On the other hand, Shri Vijay Mehta, Ld. Counsel for the assessee, defended the impugned order by contending that issue is highly debatable and there is neither concealment nor furnishing of inaccurate particulars of income. Reliance was placed upon the decision of the Tribunal in the case of Satyajit Movies Pvt. Ltd. vs ACIT (ITA No.6306/Mum/2011), Income Tax Officer vs Vishal Madhusudan Bhai Choksi (ITA NO.62/Ahd/2013), Netambit Value First Service Pvt. Ltd. (ITA NO.1704/Del/2016). Ramkirshna Shetty vs ACIT (ITA NO.7142/Mum/2011) and Hon'ble Gujarat High Court in CIT vs L G. Chaudhary (ITA NO.536 of 2012) 215 taxman 95(Guj.) and Nayan C Shah vs Income Tax Officer 386 ITR 304 (Guj.). 2.1. We have considered the rival submissions and perused the material available on record. In view of the above, we are reproducing hereunder the relevant portion of the order of the Tribunal in the case of Satyajit Movie Pvt. Ltd. vs ACIT (ITA No.6306/M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 20%, aggregating to Rs. 9,83,145/-. Further the AO noted that assessee has claimed preliminary expenses written off of Rs. 9,700/- u/s 35D. As per the provisions of section 35D, total allowability is restricted to 2.5% of the capital employed and in the assessee's case the capital employed was Rs. 1,50,000/- only. Thus he restricted the claim of expenses at Rs. 3,750/- which is allowable for the period of 5 years. Thus excess claim of Rs. 8,950/- was disallowed. 4. In the first appeal, it appears that all these disallowances were not pressed before the Ld. CIT(A) by the assessee. 5. The AO after invoking the provisions of Explanation 1 to section 271(1)(c), levied the penalty on these disallowances. Even the Ld. CIT(A) too has confirmed the levy of penalty on the aforesaid disallowance, firstly on the ground that assessee has failed to discharge its onus during the course of assessment proceedings as well as during the course of penalty proceedings; secondly the assessee has failed to comply with the statutory requirements of deducting TDS on the payments which has been claimed as expenses; and lastly the assessee's claim was not legally sustainable in law. 6. Before us, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no penalty is warranted u/s 271(1)(c) on adhoc disallowance of the expenses claimed by the assessee in the profit & loss account. 9. As regards the disallowance u/s 40(a)(ia), on account of payment of technical and professional fees and publicity expenses, it is seen from the record that the AO has made the disallowance on the ground that TDS has not been deducted on such payments. The genuineness and the quantum of payment have not been disputed at all. The disallwoance has been made merely on account of technical default of non deduction of TDS. Under the Income Tax Act, failure to deduct TDS, entails levy of interest and penalty under different provisions of the Act and certainly not u/s 271(1)(c), which can be levied only if the assessee has concealed particulars of his income or has furnished inaccurate particulars of income. In this case assessee has neither furnished any inaccurate particulars of income nor has concealed any particulars of income because all the details of expenses, genuineness of the payment and quantum has been accepted. Once the payments made to professional and technical persons have not been doubted and on the basis of such payments the assessee has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the facts and in the circumstances of the case as well as in law, the Appellate Tribunal was justified in reversing the order of CIT(A) and restoring the order passed by Assessing Officer levying penalty of Rs. 4,44,510/- under section 271(1)(c) of the Act?" 3. The assessee, a partnership firm is engaged in the business of construction. During the course of assessment proceedings, the Assessing Officer, on verification of details submitted in respect of labour payment, noticed that in some cases, the tax deducted at source from certain parties to whom labour payments were made, were not deposited into Government account as per the provisions of section 200(1) of the Act. He, therefore, held that the assessee had clearly violated provisions of section 40(a)(ia) of the Act and accordingly, made a total addition of Rs. 13,20,588/- to the total income of the assessee. The Assessing Officer, thereafter, initiated penalty proceedings by issuance of notice under section 274 read with section 271 of the Act on 24.10.2008 to the respondent - assessee. The assessee submitted its reply in response to the show cause notice the details whereof are reproduced in paragraph 2 of the impugn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the breach being technical and venial in nature, the Commissioner (Appeals) was wholly justified in deleting the penalty and that the Tribunal was not justified in restoring the penalty imposed by the Assessing Officer. 4.1 In support of his submissions, the learned advocate placed reliance upon an unreported decision of this court in the case of CIT v. L. G. Chaudhary [2013] 215 Taxman 95 (Mag.)/33 taxmann.com 156 (Guj.) wherein, the court observed that the disallowance was due to non-payment of TDS, which was at the most a technical default and that, there was nothing to indicate any concealment of the income or furnishing of inaccurate particulars of income by the assessee and that the Assessing Officer was not justified in levying the penalty. The court, accordingly, did not find any reason to interfere in the appeal and held that both the authorities, namely, CIT (Appeals) and the Tribunal have rightly deleted the penalty. 5. Opposing the appeal, Mr. Varun Patel, learned standing counsel for the respondent, reiterated the findings recorded by the Assessing Officer and the Tribunal. It was submitted that in the present case, while the appellant-assessee had deposite ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Assessing Officer, for the reason that the discrepancy in not deducting the tax at source and paying the same into the Government account had not been disclosed by the assessee and that the same was revealed only during the course of the assessment proceedings, formed the opinion that the assessee had furnished inaccurate particulars of income and levied penalty under section 271(1)(c) of the Act. The Tribunal, while upholding the finding recorded by the Assessing Officer, has found that this was not a case wherein the claim made by the assessee was allowable under the provisions of the Act and that the assessee was required to deduct tax in accordance with the statutory provisions and deposit the same within the stipulated time limit as prescribed, which has not been done by the assessee. The Tribunal has, accordingly, come to the conclusion that the assessee had suppressed accurate particulars of income by not making disallowance under section 40(a)(ia) of the Act. 7. As noticed hereinabove, the Commissioner (Appeals) had deleted the penalty on the ground that the default being technical and venial in nature inasmuch as the entire amount of tax which was required to be ded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n, they must mean the details supplied in the return, which are not accurate, not exact or correct, not according to truth or erroneous. The court noted that it was an admitted position that no information given in the return was found to be incorrect or inaccurate. It was not as if any statement made or any detail supplied was found to be factually incorrect and accordingly, held that, prima facie, the assessee could not be held guilty of furnishing inaccurate particulars. The court repelled the contention raised by the counsel for the revenue that "submitting an incorrect claim in law for the expenditure on interest would amount to giving inaccurate particulars of such income". The court held that 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. Therefore, it is obvious that it must be shown that the conditions under section 271(1)(c) must exist before the penalty is imposed. The court further observed that there can be no dispute that everything would depend upon t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or both. In the facts of the present case, the Assessing Officer has proceeded on the footing that inaccurate particulars were filed by the assessee, whereas the Tribunal has held that the assessee had suppressed particulars for the year under consideration. Under the circumstances, the Tribunal, having confirmed the penalty imposed by the Assessing Officer on the ground of suppression of actual particulars in respect of which the assessee was not put to notice, the order of the Tribunal is rendered unsustainable on this ground also. 12. In the light of the aforesaid discussion, the court is of the view that the view expressed by the Commissioner (Appeals) to the effect that the breach in question was technical and venial in nature, requires to be upheld and the impugned order passed by the Tribunal upholding the levy of penalty on the ground of suppression of particulars, deserves to be set aside. 13. For the foregoing reasons, the appeal succeeds and is accordingly allowed. The question is answered in the negative, that is, in favour of the assessee and against the revenue. It is accordingly held that the Appellate Tribunal was not justified in reversing the order of C ..... X X X X Extracts X X X X X X X X Extracts X X X X
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