TaxTMI 
TaxTMI 
2018 (3) TMI 215
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....d in deleting the penalty imposed by the AO u/s 271(1)(c) of the Act without considering that the assessee has made a claim which is incorrect in law and the explanation of the assessee is neither substantiated nor shown to be bonafide? 3. Whether on the facts and circumstances of the case and in law, the ld. CIT(A) is justified in deleting the penalty ignoring ratio decidendi as laid down by Hon'ble Delhi High Court in the case of CIT vs. Zoom Communications P. Ltd. (327 ITR 510)?" 2. The brief facts of this case are that the assessee, a public limited company engaged in the business of manufacturing of textile, filed its return of income on 28.7.2009 declaring an income of Rs. 1,16,540/-. Subsequently, on 31.3.2010, assessee revised its return declaring 'nil' income. The return was processed u/s 143(1) of the Act on 22.3.2011. Later on the case was selected for scrutiny. During the course of scrutiny proceedings, AO made the following additions: i) Disallowance of expenses u/s 14A of the Act Rs. 1,17,24,660/- ii) Disallowance of prior period expenses Rs. 16,61,43,509/- iii) Disallowance on account of foreign exchange Fluctuation loss Rs. 14,....
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....SC)/r20131 358 ITR 593 Where Hon'ble Supreme Court held that Under Explanation 1 to Section 271(1 )(c), voluntary disclosure of concealed income does not absolve assessee of s. 271(1)(c) penalty if the assessee fails to offer an explanation which is bona fide and proves that all the material facts have been disclosed" "9. We are of the view that the surrender of income in this case is not voluntary in the sense that the offer of surrender was made in view of detection made by the AO in the search conducted in the sister concern of the assessee. In that situation, it cannot be said that the surrender of income was voluntary. AO during the course of assessment proceedings has noticed that certain documents comprising of share application forms, bank statements, memorandum of association of companies, affidavits, copies of Income Tax Returns and assessment orders and blank share transfer deeds duly signed, have been impounded in the course of survey proceedings under Section 133A conducted on 16.12.2003, in the case of a sister concern of the assessee. The survey was conducted more than 10 months before the assessee filed its return of income. Had it been the intenti....
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....ncome or furnished inaccurate particulars of income. In other words, Income tax authority may levy penalty, if any one of the conditions is satisfied i.e. (i) Assessee has concealed the particulars of his Income; (ii) Assessee has furnished inaccurate particulars of income. If the AO levied the penalty on anyone of the charge, it cannot be held that penalty order is bad in law. He further submitted that the learned AO has properly recorded his satisfaction while passing assessment order as well as penalty order. Therefore, it clearly indicates proper application of mind by the AO 6. On the other hand, learned authorized representative relied on the order of CIT(A) and reiterated the submissions made before the authorities below. It is to be noted that the AO while imposing penalty, has gone on a wrong premises that the CIT(A) has confirmed the disallowance of Rs. 14,25,49,948/- in an appeal filed by the assessee against the order of the AO u/s 143(3). It is to be appreciated that the submission of the assessee has all along been that it had made the claim of this amount on account of a bona fide mistake and therefore it preferred not to file an appeal on this account before the ....
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....at 6 percent Government of India Capital Index Bonds purchased during the year had inadvertently been categorized as tax free bonds and, therefore, interest of Rs. 75,00,000/- earned on such bonds had also inadvertently escaped tax. The assessing officer levied penalty under Section 271(1)(c) of the Income Tax Act, 1961 (the Act). The CIT(A) upheld the order of the Assessing Officer. On further appeal, the Tribunal in the impugned order records a finding of fact that by inadvertent mistake interest at 6 percent on the Government of India Capital Index Bonds was shown as tax free bonds. The Tribunal concluded that there was no desire on the part of the respondent-assessee to hide or conceal the income so as to avoid payment of tax on interest from the bonds. In that view of the matter, the Tribunal deleted the penalty imposed upon the respondent- assessee under Section 271(1)(c) of the Act. In view of the fact that the decision of the Tribunal is based on finding of fact that there was an inadvertent mistake on the part of the assessee in including the interest received of 6 percent on the Government of India Capital Index Bonds as interest received on tax free bonds. It is not cont....
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....as based on the premise that the vehicles used by the assessee were in the nature of plant and machinery as these vehicles were used to correct faults and to provide other services to its customers-Denial of these claims by the AO does not lead to the conclusion that the assessee had furnished inaccurate particulars- Admittedly, the information pertaining to both the claims was provided in the return filed by the assessee and the documents appended thereto-Findings of the Tribunal upholding the order of the CIT(A) deleting the penalty are pure findings of fact and no substantial question of law arises for consideration. " 8. It is also to be appreciated that there is a full disclosure made by the assessee in its return of income and in fact, all facts and figures are being taken by the AO from the return of income of the assessee only. The amount of foreign exchange fluctuation is being duly reflected in the Balance Sheet of the assessee as noted by the AO at page 5 para 5.1 of the assessment order as well as by CIT(A) at page 13 para 6.3. It is not a case of concealment of particulars of income or furnishing of inaccurate particulars. In these circumstances, no penalty u/s 271 ....
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....ent order under Section 263 of the Act. 8. Having considered the submissions of the learned counsel of the parties, the Court is of the view that the decision of the IT AT was a plausible one in the facts and circumstances of the case. The Court is unable to agree with the Revenue that there is a deliberate concealment by the Assessee warranting the levy of penalty". 9. Otherwise also, the assessee being a Public Sector Undertaking, there cannot be any allegation of malafide in this case. No penalty under such situation can be levied u/s 271 (1 )(c) of the Act. Reliance is placed on the following judgments: (i) Deputy Commissioner of Income-Tax Versus Rural Electrical Cooperative Society Ltd. [2005] 279 ITR 319 (MP) "So far as the applicability of the Explanation to section 271(1)(c) is concerned, the same is not attracted. The issue of explanation was considered on the facts and it was held that the same was properly explained on the facts. Every concealment does not attract the rigour of section 271(1)(c). It must be deliberate and intentional being in the knowledge of the assessee so as to evade payment of income-tax. The assessee being a non-profit....
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.... Subramanian, that after the amendment of section 271(1)(c) of the Income-tax Act, 1961 by the Finance Act, 1964 the element of means are is not important and in any case the onus is not on the revenue to establish mensrea before penalty for concealment of income or furnishing of inaccurate particulars thereof can be imposed. We further agree that a fraudulent claim of deduction in working out the income as such amounts to concealment of income or furnishing inaccurate particulars thereof as suppression of any item of income. It is, however, necessary to bear in mind that we are dealing with the case of a nationalized bank, which is fully owned by the Government of India and administered by its nominees. It would not be an unreasonable presumption that it could not be the Intention of an organization owned and run by the Government of India to conceal Its income or furnish inaccurate particulars thereof with a view to evade payment of proper taxes due to the Government of India. We have the authority of the Hon'ble Supreme Court in the case of Brij Mohan v. CIT [1979] 120 ITR 1 that the concealment of income or furnishing of inaccurate particulars thereof takes place when the r....
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.... would not be right to condemn the return as a false return inviting imposition of penalty. It is true that the assessee- bank ought to have withdrawn the claim of deduction made as a protective measure for the assessment years under consideration before us when the assessments for the immediately preceding assessment years in which the claim was allowed were finalized. This, however, will not affect the default, which had already taken place earlier and which has to be judged, as already described, on the facts and circumstances prevailing on the dates on which the returns were filed. The Hon'ble Supreme Court in the case of Hindustan Steel Ltd. has laid down that penalty for failure to perform a statutory obligation should not be imposed merely because it is lawful to do so and whether penalty should be imposed was a matter of discretion to be exercised judicially and on a consideration of all the facts and circumstances. Their Lordships further laid down that if the default was merely a technical or venial breach of the provisions of the Act, the authority imposing penalty will be justified in refusing to impose a penalty. Considering all this and looking to the totality of ....
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....of Income-tax vs Manjunatha Cotton and Ginning Factory (2013) 359 ITR 565. (iii) In CIT V. Manjunatha Cotton And Ginning Factory [2013] 359 ITR 565 (Kar) "9. Aggrieved by the said order, the Assessee preferred an appeal to the Tribunal. The Tribunal held that on perusal of the notice issued under Section 271(1)(c) of the Act, it is clear that it is a standard proforma used by the Assessing Authority. Before issuing the notice the inappropriate words and paragraphs were neither struck off nor deleted. The Assessing Authority was not sure as to whether she had proceeded on the basis that the assessee had either concealed its income or has furnished inaccurate details. The notice is not in compliance with the requirement of the particular section and therefore it is a vague notice, which is attributable to a patent non-application of mind on the part of the Assessing authority. 8. A reading of Section clearly indicates that the assessment order should contain a direction for initiation of penalty proceedings. The meaning of the word direction is of importance. Merely saying that penalty proceedings are being initiated will not satisfy the requirement. The di....
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.... Communication Pvt. Ltd. 327 ITR 510 which is referred in the ground taken by the Department in the present appeal. 14. In view of the above, learned AR prayed that the appeal filed by the Revenue may kindly be dismissed. 15. The learned AR also submitted a case law compilation comprising 80 pages. He further submitted that in the quantum proceedings, by an order dated 9th November 2014 in ITA No.2211/Del/2013, ITAT confirmed the order of CIT(A) and allowed additional depreciation on the increase in value of plant and machinery on account of foreign exchange fluctuations. He further submitted that the assessee although declared the amount in profit and loss account but omitted to add back as per Section 40A(3) read with Section 43(1) of the Act. There was no malafide intention but it was simple omission to apply intricate income-tax provisions. There was true and fair disclosure of expenses. The assessee neither suppressed any income nor claimed any bogus or false expenses. The disallowance has been made by the AO on technical and legal ground which does not tantamount to concealment. He further submitted that the AO has not clearly charged penalty proceedings under any limb ....
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.... Assessment and penalty proceedings are two separate and distinct proceedings. Every addition in assessment order does not automatically qualify for levy of penalty. It is settled position that assessment proceedings and penalty proceedings are separate, and distinct and as held by Hon'ble Supreme Court in the case of Anantharaman Veerasinghaiah & Co. v. CIT {1980] 123 ITR 457, the findings in the assessment proceedings cannot be regarded as conclusive for the penalty proceedings. It is also well settled that the criterion and yardsticks for the purpose of imposing penalty u/s 271 (l)(c) of the act are different than those applied for making or confirming the additions. It has been held by Hon'ble Courts, including Hon'ble Mumbai Tribunal in the case of Yogesh R.Desai Vs. ACIT (8DTR 101), each and every addition made during assessment proceedings does not automatically lead to levy of penalty for concealment of income. If the revenue is not able to establish either concealment of income or furnishing of inaccurate particulars of income, penalty u/s 271(1 )(c) is not leviable. In such circumstances, Hon'ble Delhi High Court in the case of CIT v. Bacardi Martini Ind....
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....income by ignoring the provision contained in section 14A. Therefore, it can be said that the assessee has furnished an explanation which is bona fide." AO's reliance on the decision of Delhi High Court in Zoom Communication (P)Ltd. 327 ITR 510. In this case, the Hon'ble Delhi High Court took the view that, as the Income Tax Department is resorting to scrutiny in limited number of cases, the penalty should be treated as a deterrent effect and no lenient view may be taken. There is merit in the AO's contention. But it won't apply in all the cases on a blanket level. The operational part of this judgment is reproduced as under: " It is true that mere submitting a claim which is incorrect, in law; would not amount to giving inaccurate particulars of the income of the assessee, but it cannot be disputed that the claim made by the assessee needs to be bona fide. If the claim besides being incorrect, in law, is mala fide the Explanation 1 to section 271(1) would come into play and work to the disadvantage of the assessee. [Para 19] The Court cannot overlook the fact that only a small percentage of the income- tax returns are picked up for scru....