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TMI Blog2023 (5) TMI 826X X X X Extracts X X X X X X X X Extracts X X X X ..... viable on such adhoc addition, as confirmed by the Ld. CIT(A). 3. That the Ld. CIT(A) has failed to appreciate that all the particulars with regard to the investments, expenses etc. has duly been disclosed in the Balance Sheet while filing the return of income and, as such, the assessee has neither concealed the particulars of income or furnished inaccurate particulars of income. 4. That the Ld. CIT(A) has ignored the binding judgments of the Hon'ble Apex Court in case of CIT vs Reliance Petro Products (P) Ltd. reported in 322 ITR 158 and Hon'ble High Courts in similar cases and various other cases of coordinate Benches of the ITAT before confirming the levy of penalty u/s 271 (1 )(c) of the Income Tax Act, 1961. 5. Notwithstanding the above said grounds of appeal, the confirmation of levy of penalty u/s 271(1)(c) is again not proper since no specific charge either of concealment of income or for furnishing inaccurate particulars of income have been framed against the assessee as per binding judgment of full Bench of the Hon'ble Bombay High Court. 6. That the appellant craves leave to add, amend or alter any of the above grounds of appeal before the appeal is fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of its income while filing return of income and during the course of assessment proceedings u/s 143(3). There is no finding recorded by the AO as to how the assessee has furnished inaccurate particulars of income and merely the fact that in the quantum proceedings, the addition has been confirmed, the same cannot be a basis for levy of penalty u/s 271(1)(c) of the Act. It was submitted that even the ld CIT(A) has completely ignored the details submissions as filed before him and has confirmed the levy penalty without assigning any reasons. In support, reliance was placed on the judgment of Hon'ble Supreme Court in the case of Reliance Petro Products (P) Ltd 322 ITR 158. 7. It was further submitted that even no specific charge has been made against the assessee as is apparent from the notice u/s 271(1)(c) and as per judgment of Full Bench of Hon'ble Bombay High Court in the case of Moh. Farhan, 125 Taxman.com 253, the levy of penalty u/s 271(1)( c) is liable to be cancelled. 8. Further, the ld AR placed reliance on the written submission filed before the Ld. CIT(A) and contents thereof read as under: "1. At the outset, it is submitted that two primary conditions for levy of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ents. However, the Ld. AO without taking the cognizance of such explanation and with a presumptive mindset made the additions by applying the provisions of Rule 8D. 4. Further, the matter was taken before the Hon'ble Bench of ITAT, wherein the Hon'ble Bench considered the submissions made by the assessee and held that the additions made by the Ld. AO are incorrect and that the additions have been made without considering the submissions of the assessee and the said para is reproduced below:- "the Assessing Officer was supposed to consider the submissions of the assessee and examine the accounts of the assessee and was required to record his findings/reasoning that he is not satisfied with the plea/submissions of the assessee. However, no such exercise has been done by the Assessing Officer in this case." Further, the Hon'ble ITAT also upheld the contention of the assessee that the investments made by the assessee were strategic investments for the business purpose but also made old investments in other Companies. Thus, the Hon'ble Bench upheld the contention of the assessee and made a lump sum disallowance of Rs.5 Lakhs on account of administrative expenses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case of ACIT, Circle-3 vs Prashant Srivastava in ITA No. 5102/Del/2012 wherein the addition in. the case of the assessee was made for not producing any bills or vouchers, however, the Hon'ble Tribunal deleted the penalty on the same addition by stating that" 9. In the background of the aforesaid discussions and precedents, we find that the levy of penalty in this case is not justified particularly when the assessment was framed on the income determined on estimate basis and without bringing any material on record to substantiate that the assessee willfully and intentionally concealed the income or furnished the inaccurate particulars of the income, hence, we do not see any reason to interfere with the order of the Ld. CIT(A), accordingly, we uphold the same and decide the issue against the Revenue." * Delhi Bench of the Tribunal in the case of Shri Manish Bhargav, vs Income Tax Officer in ITA No. 2157/Del/2014 a 2158/Del/2014 wherein the bench deleted the penalty because the addition was made merely for the non-production of the vouchers by stating that, "Merely because the assessee could not file the supporting vouchers/bills for the expenses claimed by it, it could not. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 10A it would not constitute concealment and hence penalty under s. 271(1)(c) would not be leviable. ❖ DCIT vs. NATIONAL COOPERATIVE DEVELOPMENT CORPORATION as reported in (2012) 136 ITD 1 (Delhi) Formation of different opinion by AO on the basis of details provided by assessee does not amount to concealment of income warranting imposition of penalty. ❖ VEEJAY SERVICE STATION vs. ASSISSTANT COMMISSIONER OF INCOME TAX as reported in (2009) 122 TTJ (Del) 824 Assessee having disclosed complete facts regarding goodwill on introduction of a new partner, it cannot be said that the assessee has furnished inaccurate particulars merely because there was a difference of opinion between the AO and the assessee regarding computation of capital gains and, therefore, levy of penalty under s. 271(1)(c) was not justified. ❖ COMMISSIONER OF INCOME TAX vs. MAHABALESHWAR GAS & CHEMICAL (P) LTD. as reported in (2008) 170 TAXMAN 38 (Del) ❖ ACIT vs. MEDVERSITY ONLINE LIMITED as reported in (2012) 145 TTJ (Hyd) 398 6. Reliance in this regard is placed on the following judgments which are passed on the specific issue that the disallowance under section 14A does n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it has Been held as under: "A glance at the provision of s. 271(l)(c) would suggest that in order to be covered, there has to be concealment of the particulars of the income of the assessee. Secondly, the assessee must have furnished inaccurate particulars of his income. Present is not the case of concealment of the income. That is not the case of the Revenue either. As per Law Lexicon, the meaning of the word "particular" 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 s. 271(1)(c) 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 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 incorre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us, in view of above, it is amply clear that penalty proceedings cannot be initiated on additions made u/s 14A of the Act. 9. Lastly and most importantly, it is to be seen that in the impugned penalty order Ld. AO has not given even a single reason to substantiate his allegation that the assessee has furnished inaccurate particulars of income. The Ld. AO after giving a brief history of the case till page 12 of the penalty has merely written one small paragraph number 5.2 wherein it has been vaguely and without providing any reason has alleged that, "it is evident that assessee has deliberately furnished inaccurate particulars of income". Therefore, it is clear that the impugned penalty levied by the Ld. AO are devoid of any merits and against the facts of the case. The Ld. AO has not even cared to consider the fact that the whole explanation filed by the assessee had been accepted by the Hon'ble ITAT and a minor portion of the whole addition have been sustained and that too on estimated. The Ld. AO has merely presumed that if any addition has been sustained then it would automatically attract penalty and it is a settled law that penalty proceedings and assessment proceedings ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ferred to the order of the Coordinate Bench dt. 13/10/2020 in the context of quantum proceedings and has held that since the disallowance under section 14A r.w. Rule 8D amounting to Rs. 1,42,26,765/- is now restricted to Rs. 5,00,000/-, it is a fit case for levy of penalty under section 271(1)(c) of the Act and penalty for furnishing inaccurate particulars of income has thereafter been levied on the amount of disallowance of Rs 5,00,000/- under section 14A r.w. Rule 8D. We therefore find that the AO has levied the penalty merely basis confirmation of addition of Rs 5,00,000/- in the quantum proceedings and it is a settled legal proposition that the quantum and penalty proceedings are independent proceedings. Though the initiation of penalty proceedings happens during the course of assessment proceedings and has to be evident and emerges from the assessment order, however, before the penalty is fastened on the assessee, the AO has to record independent finding justifying the charge of furnishing of inaccurate particulars of income or for concealment of particulars of income. In the present case, we find that there is no independent and specific finding which has been recorded by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the AO during the course of assessment proceedings has been on the fact that the assessee has incurred significant interest cost and has earned exempt income, and therefore, there should be disallowance of interest cost under Rule 8D(2)(ii) , however, the AO didn't finally made any disallowance under Rule 8D(2)(ii) and has gone ahead and has made disallowance under Rule 8D(2)(iii). As regards disallowance under Rule 8D(2)(iii), there is however no discussion in the body of the assessment order disputing the assessee's claim that it has not incurred any administrative expenditure for managing the investments and at the same time, we find that towards the end, while working out the disallowance, the AO has applied the standard formulae of 0.5% of average value of investment as prescribed in the rules and has made the disallowance under Rule 8D(2)(iii). The same also raises a question mark on the recording of satisfaction before initiation of penalty proceedings vis-à-vis disallowance under Rule 8D(2)(iii) of the Act as also evident from the wording so employed by the AO while recording the satisfaction where he says that "The undersigned is satisfied (that) the assessee has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and circumstances of the given case, as can be seen from the order of the Co-ordinate Bench, therefore the same cannot lead to a scenario where it can be held that there is any inaccurate furnishing of particulars of income in the return so filed by the assessee. 16. Further, we find that the mere fact that the provision of Section 14A r.w. Rule 8D(2)(iii) are held applicable and the claim of the assessee that it has not incurred any expenditure in relation to exempt income not being accepted cannot lead to a situation where the charge of furnishing of inaccurate particulars of income can be fastened on the assessee without leading any positive evidence to the effect that there is wrong furnishing of information vis-à15 vis the investments which has yielded or can yield exempt income in future and secondly, there is actual incurrence of certain administrative expenditure for managing these investments during the year under consideration. In the present case, as we have noted above, there is no finding recorded by the AO either during the assessment proceedings or even during the penalty proceedings to this effect and no positive evidence has been led in this regard and in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot 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 Learned 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 Commissioner of Income Tax, Delhi Vs. Atul Mohan Bindal [2009(9) SCC 589], where this Court was considering the same provision, the Court observed that the Assessing Officer has to be satisfied that a person has concealed the particulars of his income or furnished inaccurate particulars of such income. This Court referred to another decision of this Court in Union of India Vs. Dharamendra Textile Processors [2008(13) SCC 369], as also, the decision in Union of India ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e element of strict liability on the assessee for the concealment or for giving inaccurate particulars while filing Return, there was no necessity of mens rea. The Court went on to hold that the objective behind enactment of Section 271(1)(c) read with Explanations indicated with the said Section was for providing remedy for loss of revenue and such a penalty was a civil liability and, therefore, willful concealment is not an essential ingredient for attracting civil liability as was the case in the matter of prosecution under Section 276-C of the Act. The basic reason why decision in Dilip N. Shroff Vs. Joint Commissioner of Income Tax, Mumbai & Anr. (cited supra) was overruled by this Court in Union of India Vs. Dharamendra Textile Processors (cited supra), was that according to this Court the effect and difference between Section 271(1)(c) and Section 276-C of the Act was lost sight of in case of Dilip N. Shroff Vs. Joint Commissioner of Income Tax, Mumbai & Anr. (cited supra). However, it must be pointed out that in Union of India Vs. Dharamendra Textile Processors (cited supra), no fault was found with the reasoning in the decision in Dilip N. Shroff Vs. Joint Commissioner of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ggerated amount) claimed, and both types attempt to reduce the taxable income and, therefore, both types amount to concealment of particulars of one's income as well as furnishing of inaccurate particulars of income. We do not agree, as the assessee had furnished all the details of its expenditure 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 claim 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 under Section 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 Assessing Officer for any reason, the assessee will invite penalty under Section 271(1)(c). That is clearly not the intendment of the Legislature." (Emphasis supplied] 18. In light of aforesaid discussions and in the entirety of facts and circumstances of the case and respectfully following the decision supra, the levy of penalty u/s 271(1)(c) ..... X X X X Extracts X X X X X X X X Extracts X X X X
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