TaxTMI 
TaxTMI 
TaxTMI 
2014 (5) TMI 812
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....espect orders are either incorrect or are untenable. c) It is not a fit case for imposing of penalty u/s 271 (1)(c) of the I.T. Act d)The authorities below had either ignored or had not given due weight to the submissions made by the Appellant to the effect that it was not a fit case for imposition of penalty." 3. Brief facts giving rise to this appeal are that the assessee filed its return of income on 30.09.2008 declaring total income of Rs.2,99,79,843/-. Subsequently, the case was selected for scrutiny and as per assessment order dated 20.12.2010, the income of the assessee company was enhanced by making addition of Rs.7,91,804/- on account of disallowance u/s 14A of the Act and Rs.4997/- as interest on delayed payment. Consequently, the Assessing Officer initiated penalty proceedings u/s 271(1)(c) of the Act. The Assessing Officer rejected the explanation of the assessee and imposed impugned penalty with following observations and findings:- "(iii) From the plain reading of these provisions it is clear that if the following conditions are fulfilled, penalty u/s 271(1)(c) should be imposed:- a. The assessee should have concealed the particulars of his income or should have ....
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....ality. In view of these facts the ratio of Reliance Petroproducts is not applicable in this case. 13. The above discussion shows that this is not a case where the explanation given was bona fide and there was full disclosure of facts. The disallowance made has not been challenged in appeal and has therefore attained finality. Under the present system, only a very small percentage of returns is picked up for scrutiny. Had this case not been picked up for scrutiny, and had the A.O. not examined the matter further, the necessary disallowance would not have been made and the appellant's failure to make the mandatory disallowance would not have come to light. The provisions of Explanation 1 to section 271 (1)(c) are clearly applicable. The penalty u/s 271(1)(c) imposed is the minimum imposable in this case. Considering the facts, the penalty u/s 271 (1)(c) is justified and is upheld." 6. We have heard rival arguments of both the parties and carefully perused the record including the paper book filed by the assessee, spread over 53 pages, written synopsis and decisions of ITAT Delhi 'E' Bench in ITA No. 5999/Del/2012 in the case of ACIT vs Mahesh Jain dated 14.6.2013; decision of I....
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....penalty cannot be imposed on the basis of findings in the quantum proceedings. 9. The counsel of the assessee further submitted that the authorities below had either ignored or had not give due weightage to the submissions of the assessee during the penalty proceedings. The counsel submitted that the penalty can be levied on fulfillment of two conditions, first the assessee should have concealed the particulars of his income or should have furnished inaccurate particulars of his income and secondly, in respect of any facts material to the computation of total income, the assessee offers an explanation which is found to be false, then the amount added or disallowed is deemed to represent an income in respect of which particulars have been concealed. The counsel of the assessee has placed his reliance on the decision of Hon'ble Supreme Court in the case of Reliance Petroproducts Pvt. Ltd. reported as (2010)189 Taxman 322 (SC). 10. On careful consideration of above submissions, at the outset, we observe that the assessee placed all details and material before the Assessing Officer with the return of income. During the assessment proceedings, the Assessing Officer observed that the a....
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....ssessing Officer has noted that the assessee company has offered disallowances. The relevant part of assessment order reads as under:- "The assessee has made certain investments in shares/mutual funds/bonds etc. out of the funds either borrowed by the assessee or from company own sources. Since, these investments have yielded an exempted income amounting to Rs. 1,19,033/- and Rs. 3,82,690/- on account of interest on HUIDCO & ARS Bond which does not form part of income of the assessee, the expenditures are required to be disallowed under the provisions of section 14A of the Act. Hence, during the course of assessment proceedings, the assessee was specifically asked to show cause as to why expenses should not be disallowed following the provisions of section 14A of the IT Act read with Rule 8D of IT Rules. In response to this, the assessee filed reply vide letter dated 03/12/2010 and offered the total disallowances u/s 14A amounting to Rs.1,97,188/-. After considering the aforesaid reply of the assessee, it is found that reply filed by the assessee on the issue under consideration fulfil the requirements laid down in section 14A of the Act, r/w Rule 8D of the Rules and further the a....
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.... CIT vs. Reliance Petro Products Ltd, in Civil Appeal No, 2463 of 2010. In this case vide order dated 17.3,2010 it has been held that the law laid down in the Dilip Sheroff case 291 ITR 519 (SC) as to the meaning of word 'concealment' and 'inaccurate' continues to be a good law because what was overruled in the Dharmender Textile case was only that part in Dilip Sheroff case where it was held that mensrea was a essential requirement of penalty u/s 271(1)(c). The Hon'ble Apex Court also observed that if the contention of the revenue is accepted then in case of every return where the claim is not accepted by the Assessing Officer for any reason, the assessee will invite the penalty u/s 271(1)(c). This is clearly not the intendment of legislature." 13. In the case of ACIT vs Global Associate (supra), the penalty was also cancelled pertaining to the addition made u/s 14(a)(ia) and section 14A of the Act by respectfully following the decision of Hon'ble Supreme Court in the case of Commissioner of Income Tax vs Reliance Petroproducts Pvt. Ltd. (supra) and Price Waterhouse Coopers P.Ltd. vs Commissioner of Income Tax (supra). We further observe that the ITAT Amritsar....
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.... of Rs.95,63,346/-, demat charges of Rs. 60/- and proportionate expenses amounting to Rs.11,70941/- were not deductible in computing the total income by dint of the provision contained in section 14A, as such expenses related to earning of tax-free income. The explanation of the assessee was two-fold -(i) the assessee was primarily holding shares in selected companies of Jindal group with the intention to acquire and retain controlling stake in them, and (ii) the computation of disallowance u/s 14A involves considerable debate and two views are always possible. On careful consideration of various cases relied upon by the assessee, it is found that three major propositions arise therefrom -(a) penalty proceedings are quasi-criminal in nature and, therefore, it is for the revenue to establish contumacious conduct on the part of the assessee; (b) if all facts in respect of a claim have been furnished fully and correctly and no falsity is found therein, then, the claim made on the basis of such facts does not lead to inference of concealment of income and (c) the penalty is not leviable when there is honest difference of opinion between the assessee and the authorities in respect of ad....