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TMI Blog2018 (10) TMI 2039X X X X Extracts X X X X X X X X Extracts X X X X ..... me, but the same cannot lead to levy of penalty u/s 271(1)(c). We are also not impressed with the observations of the lower authorities that as the assessee had continued to persist with claiming of the unsubstantiated and inadmissible claim of interest expenditure, thus it clearly proved that it had knowingly furnished inaccurate particulars and had raised an untenable claim of expenditure in its return of income. We are of the considered view that as observed by us hereinabove, as the genuineness of the incurring of the interest expenditure under consideration had at no stage been doubted by the lower authorities, thus a mere disallowance of the said expenditure u/s. 40(a)(ia) cannot lead to drawing of an inference that the assessee had furnished inaccurate particulars of its income. Merely because the assessee had claimed deduction of interest expenditure which has not been accepted by the revenue, penalty u/s 271(1)(c) could not have been imposed . Rather, mere making of a claim, which is not sustainable in law, by itself, will not amount to furnishing of inaccurate particulars regarding the income of the assessee. As no part of the particulars filed by the assessee in respect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nse for non-payment of tax deducted at source u/s. 40(a)(ia) of the Act, amounting to Rs. 3,74,28,580/-. b. Disallowance of Interest paid on delayed profession tax amounting to Rs. 2,500/- c. Disallowance of interest paid on delayed payment of Tax Deducted at Source (TDS) amounting to Rs. 37,909/-. 2. The order under appeal is not only bad in law and invalid, but also against the natural law of equity and justice. 3. That the appellant reserves its rights to amend, alter or raise any other additional grounds of appeal before or during the course of appellate proceedings. Additional grounds of appeal by way of fresh claim: 4. That the LAO erred in levying penalty u/s. 271(1)(c) of the Act and Ld. CIT(A) erred in confirming the same without specifying the offence whether concealment of income or of furnishing inaccurate particulars of income. Thus show cause notice is vitiated and penalty is liable to be cancelled simply on this ground as held by Hon'ble SC in the case of CIT Vs. SSA Emerald Meadows 73 taxmann.com 248 and in the case of Dilip shroff 291 ITR 519. 5. That the approval given by Ld. JCIT to LAO for levy of penalty was without application of mind and therefore penalty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nterest on delayed payment of TDS of Rs. 37,909/- as an expenditure in its 'Profit loss a/c'. Being of the view, that the aforesaid expenses were inadmissible the A.O. disallowed the same, and vide his order passed under Sec. 143(3), dated 10.02.2015 made the following additions/disallowance in the hands of the assessee: Sr. No. Particulars Amount 1. Disallowance under Sec. 43B Rs. 3,74,28,480/- 2. Disallowance of interest of delayed payment of profession tax Rs. 2,500/- 3. Disallowance of delayed interest on TDS Rs. 37,909/- On the basis of his aforesaid deliberations the loss of the assessee was assessed by the A.O. at Rs. 1,55,351/-. The A.O. while culminating the assessment also initiated penalty proceedings under Sec. 271(1)(c) of the Act and issued a 'Show cause' notice under Sec. 274 r.w.s. 271, dated 10.02.2015 to the assessee. 4. Subsequently, after culmination of the assessment proceedings the A.O. issued another 'Show cause' notice, dated 10.08.2015, therein calling upon the assessee to explain as to why penalty under Sec. 271(1)(c) may not be imposed in respect of the aforesaid additions/disallowances made in its hands. Not being impressed with t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as the claim of inadvertence of the assessee was a mere hog-wash, and it stood proved beyond doubt that the assessee had claimed such huge expenditure of Rs. 3,74,28,280/- despite being in full knowledge of the inadmissibility of the same, hence its bona fides stood clearly disproved. Being of the view, that the claim of interest expenditure raised by the assessee was wholly untenable in law, the A.O. taking support of certain judicial pronouncements concluded that the assessee by raising such a claim had willfully sought to reduce its incidence of tax. On the basis of his aforesaid observations, the A.O. concluded that the assessee by claiming such inadmissible interest expenditure had furnished inaccurate particulars of its income and thereby sought to avoid incidence of taxation, which did tantamount to concealment of income. In the backdrop of his aforesaid observations, the A.O. imposed penalty under Sec. 271(1)(c) on the disallowance of interest expenditure of Rs. 3,74,28,580/-. 5. Further, it was observed by the A.O. that the assessee while computing its income had debited interest on delayed payment of professional tax amounting to Rs. 2,500/-, and interest on delayed payme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... I further find that the appellant did not contest the said disallowances made by the Assessing Officer vide order dated 10-02-2015. During the penalty proceedings, the Assessing Officer has afforded another opportunity to show cause as to why penalty should not be levied on the said two items of disallowances. Before me also, the appellant has filed written submissions which are not tenable as follows: (i) As regards disallowance of interest on delayed payment of TDS, the only plea advanced by the appellant is that the same is an inadvertent mistake. (ii) This plea of appellant is not acceptable because the appellant has agreed to the addition 'only' after the details were called for and 'enquiries' were made by the Assessing Officer. Had this scrutiny not been conducted, the said disallowance would have remained undetected and not subjected to any other proceedings. I am of the opinion that the appellant has filed inaccurate particulars by not disallowing the said interest on delayed payment of interest. This is a case of agreeing to addition after detection by Assessing Officer, therefore, liable to penalty u/s. 271(1)(c) of the Act. (iii) As regards to disallowa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsideration. The ld. A.R. drawing our attention to the 'Show cause' notice, dated 10.02.2015 issued under Sec. 274 r.w.s. 271 of the Act, submitted that the A.O. while calling upon the assessee to 'Show cause' as to why penalty under Sec. 271(1)(c) may not be imposed on it, had failed to strike off the irrelevant default in the body of the notice. It was the contention of the ld. A.R., that as the assessee company was not put to notice as regards the default for which the penalty was sought to be imposed by the A.O. under Sec. 271(1)(c) of the Act, hence it had remained divested of an opportunity to defend its case and establish that no penalty under Sec. 271(1)(c) was called for in its hands. In support of his aforesaid contention, the ld. A.R. relied on the judgment of the Hon'ble Supreme Court in the case of CIT Vs. SSA's Emerald Meadows (2016) 73 taxamann.com 248 (SC). On merits, the ld. A.R. submitted that as the assessee had not furnished inaccurate particulars, thus the lower authorities merely on the basis of a simpliciter disallowance made under Sec. 40(a)(ia), and disallowance of claim of expense raised by the assessee under a bona fide belief had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us. We have perused the 'Show cause' notice issued by the A.O. under Sec. 274 r.w. Sec. 271, dated 10.02.2015 (Page 4) of the assesses 'Paper book' (for short 'APB'), and are in agreement with the ld. A.R. that the A.O. had in the said notice failed to strike off the irrelevant default. However, a perusal of the order passed by the A.O. under Sec. 271(1)(c) reveals that he had issued another notice dated 10.08.2015, therein calling upon the assessee to show cause as to why penalty under Sec. 271(1)(c) may not be imposed on it. We find that the ld. A.R. had not assailed the validity of the aforementioned 'Show cause' notice, dated 10.08.2015. In the backdrop of the aforesaid facts, it can safely be concluded that the validity of the jurisdiction assumed by the A.O. under Sec. 271(1)(c) on the basis of the aforesaid 'Show cause' notice, dated 10.08.2015 is in order, and for the said reason had not been challenged before us. We thus, in the backdrop of the fact that the impugned 'Show cause' notice, dated 10.02.2015 was followed by another 'Show cause' notice, dated 10.08.2015, the validity of which as observed by us hereinabove ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the claim of the interest expenditure while computing its income. It was observed by the A.O., that the assessee on being confronted with the fact that its claim of interest expenditure was inadmissible, only on finding itself cornered, had claimed that the same was an inadvertent mistake on its part. We find that the A.O. not being persuaded to accept the bona fides of the assessee, thus concluded that the latter had intentionally by raising a claim which was wholly untenable in law furnished inaccurate particulars of its income. Further, the A.O. observing that the assessee had while computing its income debited interest on delayed payment of professional tax amounting to Rs. 2,500/- and interest on delayed payment of TDS amounting to Rs. 37,909/-, which were clearly inadmissible as per the provisions of Sec. 37(1) of the Act, thus imposed penalty under Sec. 271(1)(c) as regards the said respective disallowances too. On appeal, the CIT(A) concurred with the view taken by the A.O. and upheld the penalty imposed by him under Sec. 271(1)(c) as regards the disallowance of the interest expenditure of Rs. 3,74,28,580/- under Sec. 43B [40(a)(ia)]. In so far, the penalty imposed by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ised a bogus claim, which on the said count has been disallowed by the A.O. Rather, as observed by us hereinabove, the disallowance of the interest expenditure which had occasioned for failure on the part of the assessee to deposit the tax deducted at source, as regards the said expenditure, in no way dislodges the veracity of the claim of the assessee as regards incurring of the expenditure under consideration. Thus, to our considered view the failure of the assessee to deposit the amount of tax deducted at source on the aforesaid interest of Rs. 3,74,28,580/- paid to M/s. Citygold Investment Pvt. Ltd., would though justifiably lead to dislodging of the claim of allowability of the said interest expenditure in the hands of the assessee while computing its income, but the same cannot lead to levy of penalty under Sec. 271(1)(c). We are also not impressed with the observations of the lower authorities that as the assessee had continued to persist with claiming of the unsubstantiated and inadmissible claim of interest expenditure, thus it clearly proved that it had knowingly furnished inaccurate particulars and had raised an untenable claim of expenditure in its return of income. We ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of law with regard to disallowance under the provision had been admitted by Hon'ble Punjab and Haryana High Court. The Hon'ble Punjab and Haryana High Court in the case of CIT vs. Haryana Warehousing Corporation 314 ITR 215 held as under:- Held. Dismissing the appeal that the deduction claimed by the assessee was legitimate and bona fide in terms of the conflicting determination of law on the proposition in question. The categorical finding at the hands of the Tribunal in its order was that the assessee had disclosed the entire facts without having concealed any income. There was no allegation against the assessee that it had furnished inaccurate particulars of its income. The determination of the Tribunal had not been controverted even in the grounds raised in the appeal. The assessee was guilty of neither of the two conditions. Therefore, in the absence of two pre-requisites postulated under section 271(1)(c) it was not open to the revenue to inflict any penalty on the assessee. 9. The learned CIT (Appeals) considering the material on record correctly followed the decision of the Delhi Bench in the case of AT T Communications Services (India) Pvt. Limited (supra) for canc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h it had not deducted the tax at source. It is the case of the assessee before the Assessing Officer as well as the authorities concerned that each and every particular of income was accurately furnished and there was a true disclosure of all particulars by it and that the disallowance was only on a technical ground, inasmuch as, though the disallowance was made in the assessment year 2006-07, the amount was allowed as a deduction in the subsequent assessment year. 8. At this juncture it may be apposite to refer to the decision of the Supreme Court in the case of Commissioner of Income Tax v. Reliance Petroproducts Pvt. Ltd., (2010) 322 ITR 158, wherein the court while interpreting the provisions of section 271(1)(c) of the Act, has held that a glance at the said provision would suggest that in order to be covered by it, 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. In the facts of that case, the court found that it was not a case of concealment of the particulars of the income, nor was it the case of the revenue either. However, the counsel for the revenue suggested tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cted at source into the Government account within the stipulated time as per the provisions of section 40(a)(ia) of the Act, are totally found out by the Assessing Officer only during the course of assessment proceedings and had not been disclosed by the assessee. He, accordingly, has formed the opinion that the assessee has furnished inaccurate particulars of income. However, he has not stated as to what are the inaccurate particulars of income in the return filed by the appellant. 10. From the facts as emerging from the record, it appears that the assessee has made a claim of expenditure in relation to the payments made, which he may not have been entitled to claim in view of the provisions of section 40(a)(ia) of the Act, as tax on part of such amount had not been deducted at source and deposited in the Government account before the due date for filing return income. However, as held by the Supreme Court in the above decision, merely submitting an incorrect claim in law for the expenditure would not amount to furnishing inaccurate particulars of income. The impugned order passed by the Tribunal, therefore cannot be sustained. 15. We further find that coordinate benches of the Tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o Rs. 37,909/-. We have deliberated at length on the issue under consideration, and are persuaded to subscribe to the view of the lower authorities that as the aforementioned interest expenditure was incurred by the assessee on account of not adhering to the prescribed time limit for the deposit of the respective amounts, the same was thus inadmissible as per the provision of Sec. 37(1)of the Act. However, we are of the considered view, that as no part of the claim of the assessee of having incurred the aforesaid interest expenditure is found to be incorrect, therefore, merely on the count that the view of the assessee that the said amounts were allowable as an expenditure did not find favour with the A.O., penalty under Sec. 271(1)(c) could not have been validly imposed on the assessee. In this regard, we find that the judgment of the Hon'ble Supreme Court in the case of CIT Vs. Reliance Petroproducts (P) Limited (2010) 322 ITR 158 (SC) clearly comes to the rescue of the assessee. We thus, in terms of our aforesaid observations set aside the order of the CIT(A) and delete the penalty imposed by the A.O. as regards the disallowance of the delayed payment of professional tax amo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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