TaxTMI 
TaxTMI 
2022 (10) TMI 1318
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....sition of penalty under section 271(1)(c). 3. That on the facts and circumstances of the case and in law, the Ld. CIT(A)/AO has failed to appreciate that the issue involved in Appellant's case is purely a legal issue to be decided on interpretation of the provisions of the Act and merely because Ld. AO adopts a view different from the view adopted by the assessee, it does not tantamount to furnishing inaccurate particulars of income. 4. That on the facts and circumstances of the case and in law, the Ld. CIT (A) erred in concluding that there has been a failure on the part of the Appellant to disclose the true and fair picture of the P/L Account (leading to the computation of income) while disregarding the true and full disclosure made by the appellant in its P&L account as well as the computation of income. While doing so, the Ld. CIT (A) has failed to appreciate the fact that the genuineness of donation expense has not been questioned even by the Hon'ble ITAT in its order passed for the subject AY. Each of the above grounds are independent and without prejudice to the other grounds of appeal preferred by the Appellant. The Appellant prays for le....
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....ex-facie bad in law and deserves to be quashed. Further, Ld. Counsel for the assessee submitted that the payment of donation was made towards corporate social responsibility of the assessee company. He further submitted that payment of donation to meet the requirement of CSR would pass the test of commercial expediency. Ld. Counsel for the assessee relied upon the decision of the Tribunal in the case of Surat Electricity Co. Ltd. vs ACIT, Circle-4, Surat [2010] 5 ITR 280 (Ahmedabad-ITAT). Ld. Counsel for the assessee reiterated the submissions as made in the written synopsis. For the sake of clarity, the relevant contents of the synopsis are reproduced as under:- 1. Background 1.1. Max Life Insurance Company Ltd. (Appellant) is an Indian Company under Companies Act, 1956 and was established as a joint venture between Max India Ltd. and New York Life International LLC. The Appellant is an Indian Life Insurance Company and has been granted license to undertake life insurance business by the Insurance Regulatory and Development Authority of India (IRDAI). 1.2. The Appellant, carrying on the business of life insurance, is governed by specific provisions of Se....
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....med the penalty levied by the Assessing Officer. However, the CIT (A) directed the Assessing Officer to compute tax sought to be evaded in accordance with Section 115B of the Act applicable for companies in life insurance business, thereby granting part-relief to the Appellant. 1.10. In the present appeal, the Appellant has challenged aforesaid action of the CIT(A)/ assessing officer in imposing penalty under section 271(1)(c) of the Act. 2. Appellant's contentions before the Hon'ble Tribunal 2.1. It is respectfully submitted that the impugned penalty order passed by the assessing officer is without jurisdiction, bad in law and void ab initio, inter-alia, for the reason that: a) valid notice for assuming jurisdiction to impose penalty not issued; b) proper satisfaction not recorded by the assessing officer in the assessment order for initiation of penalty proceedings; c) Quantum & penalty proceedings independent d) Bonafide claim- No penalty leviable Re (a): Proper notice not issued 2.2. In the present case, it is submitted that the penalty proceedings were initiated by the Assessing Officer vide notic....
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....nitial presumption is serious in nature and he had to pay penalty from 100 per cent, to 300 per cent, of the tax liability. As the said provisions have to be held to be strictly construed, notice issued under section 274 should satisfy the grounds which he has to meet specifically. Otherwise, the principles of natural justice is offended if the show-cause notice is vague. On the basis of such proceedings, no penalty could be imposed on the assessee. 61 Therefore, when the Assessing Officer proposes to invoke the first limb being concealment, then the notice has to be appropriately marked Similar is the case for furnishing inaccurate particulars of income. The standard proforma without striking of the relevant clauses will lead to an inference as to non-application of mind. " (emphasis supplied) 2.6. The aforesaid decision was recently followed by the jurisdictional High Court in the case of PCIT vs. Sahara India Life Insurance Co. Ltd.: [2021] 432 ITR 84, wherein it was reiterated that notice under section 274 r.w.s. 271 (1 )(c) should specifically state the grounds on which penalty was sought to be imposed as the assessee should know the grounds which he has to m....
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....opinion at the time of disallowing the assessee's claim fully or partly or making an addition to the assessee's income. The assessing officer has to apply his mind - whether the assessee had, on the facts of the case and in view of the position in law, by making a claim or not disclosing an amount, sought to conceal/file inaccurate particulars of income. 2.14. It will be kindly appreciated that merely stating mechanically in the assessment order that the Appellant furnished inaccurate particulars is not sufficient and the penalty proceedings cannot be said to be validly initiated under such circumstances. It is respectfully submitted that the aforesaid observations of the Assessing Officer in the assessment order was a routine direction issued which nowhere goes to show any application of mind by the assessing officer to even come to a prima facie satisfaction that the penalty proceedings under section 271(1 )(c) of the Act are required to be initiated in the facts of the present case. 2.15. Reliance in this regard is placed on the following decisions: * Diwan Enterprises vs. CIT: 246 ITR 571 (Del) * CIT v. Super Metal Re- rollers (P) Ltd.: 2....
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....erely because certain additions/ adjustments are made in the assessment, it does not necessarily follow that penalty is to be levied. 2.21. Penalty under section 271 (1 )(c) of the Act can be imposed only if the Appellant either, (a) concealed the particulars of his income; or (b) furnished inaccurate particulars of his income. Even mere existence of such concealment or furnishing of inaccurate particulars alone, it is submitted, also does not lead to automatic initiation of penalty proceedings under section 271(1 )(c) of the Act. 2.22. Kind attention in this regard is invited to the decision of the Delhi High Court in the case of CIT Vs. Globe Sales Corporation: 196 CTR 187, wherein it was held that the use of expression "may" clearly show that penalty is not an automatic consequence of concealment of income or furnishing inaccurate particulars thereof. The Court observed as under: "6. A bare reading of the provisions of section 271(1), which vests the authorities concerned with the power to impose penalty, clearly postulates that an officer has to record his satisfaction in terms of the section that it was a fit case for initiation of a penalty proceedi....
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....ully submitted that in the present proceedings the submissions made by the appellant merits independent and judicious consideration without being prejudiced by the fact that the disallowance of donations made has been confirmed by the Hon'ble Tribunal. 2.27. In the present case, however, the Assessing Officer proceeded to impose penalty simply on the ground that the addition made, was affirmed by the Hon'ble Tribunal, which is contrary to the legal position elaborately discussed supra. 2.28. For this reason, too, the penalty imposed in the impugned penalty order is vitiated and bad in law. Re (d): Bona-fide legal claim - no penalty 2.29. Without prejudice to the aforesaid submissions, it is submitted that complete disclosures were made with regard to the claim of donation and the claim was a bona fide legal claim on which two views are clearly possible, therefore, penalty under section 271(1)(c) of the Act is not leviable. 2.30. It is submitted that issue of taxability of life insurance companies has been subjected matter of dispute and litigation since way back. The various issues associated with it (including whether claim of donation ....
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....sent case neither the appellant has (a) failed to offer any explanation; nor (b) offered any explanation which has been found to be false. 2.37. The assessing officer has, however, failed to record any finding/reasoning to come to any conclusion and levied the penalty in a very mechanical and routine manner by merely relying upon the order of the Hon'ble Tribunal in quantum proceedings. In these circumstances, it is respectfully prayed that penalty imposed by the assessing officer is liable to be deleted in toto. 2.38. Reliance, in this regard, is placed on the decision of Supreme Court in the case of CIT vs. Reliance Petroproducts Pvt. Ltd.: 322 ITR 158. In that case, for the relevant assessment year, the assessee filed return of income, while claiming interest expenditure incurred in respect of loan borrowed for purchasing shares by way of its business policies. The assessing officer disallowed the said expenditure by applying provisions of section 14A of the Act and simultaneously levied penalty under section 271(1 )(c) of the Act for alleged furnishing of inaccurate particulars of income. The Supreme Court held that, since the assessee had not furnished inaccu....
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.... suggested that Section 14A of the Act specifically excluded the deductions in respect of the expenditure incurred by the assessee in relation to income which does not form part of the total income under the Act. It was further pointed out that the dividends from the shares did not form the part of the total income. It was, therefore, reiterated before us that the Assessing Officer had correctly reached the conclusion that since the assessee had claimed excessive deductions knowing that they are incorrect; it amounted to concealment of income. It was tried to be argued that the falsehood in accounts can take either of the two forms; (i) an item of receipt may be suppressed fraudulently; (ii) an item of expenditure may be falsely (or in an exaggerated 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 o....
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....nnot be alleged for furnishing of inaccurate particulars of income, warranting imposition of penalty under section 271(1 )(c) of the Act." 6. On the contrary, Ld. Sr. DR opposed these submissions and supported the orders of the authorities below. 7. We have heard both authorized representatives of the parties and perused the material available on record and gone through the orders of the authorities below. The challenge of the assessee against the levy of the penalty are two folds, firstly, the notice issued by the AO does not meet the requirement of law; and secondly, claim of the assessee was bonafide. For the sake of clarity, the relevant content of the notices issued by the AO are reproduced as under:- F.No. DCIT/LTU/2013-14/ 627 Date:22.03.2014 To The Principal Officer, M/ s. Max New York Life Insurance Co. Ltd., 3rd Floor, Max House, Okhla 1, Dr. Jha Marg, New Delhi. Sir, Sub:- Penalty Proceedings u/s 271(l)(c) r.w.s 274 of the Act for the A.Y. 2010-11 -reg.- During the assessment proceedings penalty proceedings u/s 271(l)(c) was initiated in the case of M/ s. Max New York Life Insurance Co. Ltd. fo....
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....on'ble Supreme Court whereby the SLP in the case of CIT vs SSA's Emerald Meadows was dismissed in 242 Taxman 180. Reliance was placed upon the Co-ordinate Bench of the Tribunal in the case of ACIL Ltd. Vs ACIT [2022] 194 ITD 708 (Del.Trib.) and Ishita Technologies Pvt. Ltd. vs DICT in ITA No. 2789 of 2017 (Del.Trib.). Further, reliance was placed upon the judgement of the Hon'ble Supreme Court rendered in the case of Diwan Enterprises vs CIT 246 ITR 571 (Del.); CIT vs Rampur Engineering CO. Ltd. 309 ITR 143(Del.) (FB) and the decision of the Co-ordinate Bench of this Tribunal in the case of ITO vs Budge Budge Co. Ltd. 100 ITD 387 in support of the contention that there was no proper satisfaction recorded by the AO. Further, reliance was placed on the judgement of Hon'ble Delhi High Court in the case of CIT vs Globe Sales Corporation 196 CTR 187 and the judgement of Hon'ble Delhi High Court in the case of CIT vs Arctic Investment (P) Ltd. 190 Taxman 157 (Del.). To buttress the contention that the assessment and penalty proceedings are independent and distinct proceedings. It was further argued that the claim made in bonafide would not attract penalty. In support of this, relian....