TaxTMI 
TaxTMI 
2016 (2) TMI 194
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....e on facts and in law. 3. The appellant craves leave to add, alter or amend any / all of the grounds of appeal before or during the course of the hearing of the appeal." 3. The brief facts of the case are that the Assessee filed return of income declaring income of Rs. 6,00,53,100/- through e-filing on 25.10.2007, which was processed u/s. 143(1). In scrutiny assessment, the first notice u/s. 143(2) of the I.T. Act was issued on 1.5.2008. In compliance thereto notice u/s. 143(2)/142(1) dated 18.9.2009 issued alongwith questionnaire and A.R., of the Assessee attended the assessment proceedings from time to time, filed necessary details. The assessee is a closely held domestic company incorporated in India on 27.3.1980 with the primary objective of carrying on business of Investment company and to inter alia buy, invest, underwrite, acquire share / other securities. The main source of income of the assessee company are, profit on disposal of current / long term investments, dividend income, interest income on advances, interest income on securities etc. For the relevant assessment year 2007-08, the assessee had earned exempt income of Rs. 328,53,07,960/-. The AO, directed the ass....
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....l before the Tribunal. 6. Ld. DR relied upon the order of the AO and reiterated the contentions raised in the grounds of appeal by the Revenue. 7. On the other hand, Ld. Counsel of the Assessee relied upon the order of the Ld. CIT(A) and stated that Ld. CIT(A) has passed a well reasoned order which does not need any interference and the same may l be upheld. 8. We have heard both the parties and perused the records, especially the orders of the revenue authorities and precedent relied upon by the Ld. CIT(A) in his impugned order. Ld. CIT(A) has given his findings vide para no. 5 at Pages 4 to 6 of the impugned order which are reproduced as under:- "5. I have considered the submissions filed by the appellant and have also gone through the assessment order. On a careful perusal of the record, it is noticed that the disallowance made in the assessment order is based on the formula prescribed in Rule 8D of the IT Rules for making disallowance under section 14A of the I.T. Act. In this connection the legal position with regard to the applicability of Rule 8D of the IT Rules and also the provision of section 14A of the IT Act is now well crystallized by the later decisions of the....
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....arning the exempted income, there could not be any disallowance under section 14A. While we agree that the expression "expenditure incurred" refers to actual expenditure and not to some imagined expenditure we would like to make it clear that the 'actual' expenditure that is in contemplation under section 14A(1) of the said Act is the 'actual' expenditure in relation to or in connection with or pertaining to exempt income. The corollary to this is that if no expenditure is incurred in relation to the exempt income. no disallowance can be made under section 14A of the said Act. " The Bombay High Court and the Delhi High Court in the above mentioned cases have also held that Rule 8D of the I.T. Rules is applicable only from assessment year 2008-09and is not applicable to the earlier assessment years. Now applying the aforesaid legal position to the facts of the appellant's case, it is noticed that the appellant has, as stated above, claimed expenditure of only Rs. 5,32,48,929 out of the total expenditure of more than Rs. 27 crores. The composition of the said administrative expenses of Rs. 5,32,48,929 is found in Schedule 13 of the Audited Accounts. It is no....
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....s. The said amount comprises of various expenses which are normally incurred by a company during the course of it's regular business activities. Further, the assessee has additionally itself disallowed a sum of Rs. 15,66,528 by proportionately disallowing expenses of some of the employees. There is nothing on record to controvert the submissions made on behalf of the assessee. The expenses claimed are also in the nature of day to day administrative expenses and cannot be held to be relatable to the exempt income. It was also find that that more than 80% of the total dividend received has been received from various HCL Group of Companies which the assessee is a promoter investor and has been stated to be holding shares in the said companies for more 15 to 25 years. Dividend income is also stated to be received directly by way of dividend warrant which gets credited to the bank of the assessee. In the background of the aforesaid discussions and precedents, we are in agreement with the finding of the Ld. CIT(A) in directing the AO to delete the disallowance of Rs. 1,99,09,856/- made u/s. 14A of the I.T. Act and by holding that Rule 8D is not applicable in this case. Therefore, we ....
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....hence, the penalty is leviable u/s. 271(1(c) of the Act. 13. Aggrieved with the penalty order, assessee appealed before the Ld. CIT(A), who vide impugned order dated 18.10.2012 deleted the penalty in dispute by allowing the appeal filed by the assessee. 14. Now aggrieved with the impugned order, Revenue filed the present Appeal before the Tribunal. 15. At the time of hearing, Ld. DR relied upon the order of the AO and reiterated the contention raised by the Revenue in the grounds of appeal as well as the citations cited by the AO in the assessment order and the penalty order. 16. On the contrary, Ld. Counsel of the assessee relied upon the order passed by the Ld. First Appellate Authority and documentary evidence filed by him in the shape of Paper Book containing pages 1 to 295 in which he has attached various documentary evidences and copies of case laws to support the impugned order. He also filed a copy of the Tribunal's order dated 24.4.2015 of the Coordinate Bench (in which one of the Judicial Member was the party) in the case of ACIT vs. M/s Mehrotra Invofin India Pvt. Ltd. passed in ITA No. 4488/Del/2013 (AY 2009-10) and stated that the issue of penalty involved in the p....
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....ty. (v) Though penalty proceedings under the income-tax law may not be criminal in nature, they are still quasi-criminal requiring the Department to establish that the asessee has concealed his income. (vi) It has to be understood that the Explanation to section 271(l)(c) is an exception to the general rule raising a legal fiction by which the burden which is ordinarily with the Department is sought to be placed on the assessee. This burden on the assessee is subject to "conditions precedent", which are required to be satisfied before the Explanation could be applied. It was also pointed out as held by Hon'ble Supreme Court in K. C. Builders Vs AC/T {2004} {265 ITR 562} {SC} that "deliberateness" is implied in the concept of concealment. 17.3 However after the decision laid down in Dilip N. Shroff (Supra), T. Ashok Pai (Supra) in a dispute under Central Excise Law the Apex Court in the case of UOI Vs Dharamendra Textile Processors (2008) (306 ITR 277) (SC) held that "default merited penalty without having to consider an intend of the assessee to evade tax. The Mens rea is essential only for matters of prosecutor and not penalty." 17.4 Thus after the decision in the case of Dhar....
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....he assessee has not made any disallowance under section 14A, the assessee admits that the provisions of section 14A are applicable to him, but as per his estimate the disallowance should be to the extent of Rs. 82.15 lacs, whereas in AO's opinion, the disallowance should have been worked as per Rule 8D. It is a trite law when two views are possible, there can be no case for imposition of penalty. 17.12 It is also an established proposition that the assessment proceedings a penalty proceedings are two different proceedings. An issue may call for a addition to income under section 143(3) of the I.T. Act, but in order to invoke a penalty, the AO has to walk little extra mile to prove that there is failure on the part of the assessee to "conceal the particulars of income" or "furnishing of inaccurate particulars." The mere non acceptance of appellant's submissions and without any positive evidence from the AO that assessee has "concealed" or "furnishing of inaccurate particular" didn't ipso facto warrant penalty under Section 271(1)(c). 17.13 Keeping in view of the above facts and circumstances of the case, we find considerable force in the finding of the Ld. CIT(A) that in t....