Income Tax Appellate Tribunal - Delhi
M/S. Anjala Exhibitors Pvt. Ltd., New ... vs Dcit, New Delhi on 23 October, 2018
IN THE INCOME TAX APPELLATE TRIBUNAL
(DELHI BENCH 'A' : NEW DELHI)
BEFORE SHRI R.K. PANDA, ACCOUNTANT MEMBER
and
SHRI KULDIP SINGH, JUDICIAL MEMBER
ITA No.6358/Del./2015
(ASSESSMENT YEAR : 2008-09)
M/s. Anjala Exhibitors Pvt. Ltd., vs. DCIT, Circle 1 (1),
G - 80, Lajpat Nagar 1, New Delhi.
New Delhi - 110 024.
(PAN : AAACA0219J)
(APPELLANT) (RESPONDENT)
ASSESSEE BY : Shri Ranjan Chopra, CA
REVENUE BY : Shri B.P. Singh, Senior DR
Date of Hearing : 15.10.2018
Date of Order : 23.10.2018
ORDER
PER KULDIP SINGH, JUDICIAL MEMBER :
The appellant, M/s. Anjala Exhibitors Pvt. Ltd. (hereinafter referred to as 'the assessee') by filing the present appeal, sought to set aside the impugned order dated 04.09.2015 passed by Ld. CIT (Appeals)-1, New Delhi affirming the penalty order dated 31.03.2014 passed u/s 271(1)(c) of the Income-tax Act, 1961 (for short 'the Act'), qua the assessment year 2008-09 on the grounds inter alia that :-
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"1. The learned Commissioner (Appeals) has erred in confirming the penalty of Rs.1,56,000/- imposed by AO u/s 271(1)(c) of the Income Tax Act, 1961 that the order passed by learned CIT (Appeals) and learned AO are bad in law and on facts of the case.
2. The learned Commissioner (Appeals) was not correct in not appreciating the facts that there was neither any furnishing of inaccurate particulars nor any concealment of income."
2. Briefly stated the facts necessary for adjudication of the controversy at hand are : On the basis of completed assessment under section143 (3) of the Income-tax Act, 1961 (for short 'the Act') at the income of Rs.1,68,12,110/- as against the returned income of Rs.1,30,17,718/- by making addition of Rs.4,56,800/- on account of disallowance of foreign travel expenses, penalty proceedings were initiated by way of issuance of notice u/s 271(1)(c) of the Act read with section 274 of the Act. AO proceeded to form the opinion that since the assessee had failed to file bills, vouchers, the visa, passport of directors, tickets and other documentary evidence to substantiate the claim that these expenses were incurred exclusively for business purpose, it amounts to furnishing of inaccurate particulars of income to the extent of Rs.4,56,800/- and thereby levied the penalty of Rs.1,56,000/- u/s 271(1)(c) of the Act.
3 ITA No.6358/Del./2015
3. Assessee carried the matter by way of appeal before the ld. CIT (A) who has confirmed the penalty levied by the AO. Feeling aggrieved, the assessee has come up before the Tribunal by way of filing the present appeal.
4. We have heard the ld. Authorized Representatives of the parties to the appeal, gone through the documents relied upon and orders passed by the revenue authorities below in the light of the facts and circumstances of the case.
5. Undisputedly, penalty of Rs.1,56,000/- has been imposed u/s 271(1)(c) of the Act primarily on account of addition/disallowance of Rs.4,56,800/- claimed by the assessee as business expenses on account of foreign travel expenses of Directors of the company. It is also not in dispute that quantum has been accepted by the assessee company. It is also not in dispute that the AO has disallowed the foreign travel expenses exclusively on the ground that the assessee could not produce bills, vouchers, the Visa, passport of the Directors, tickets or/and other documentary evidence.
6. In the backdrop of the aforesaid facts and circumstances of the case, order passed by the lower Revenue authorities and arguments addressed by the ld. AR to the parties, the sole question arises for determination in this case is:-
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"as to whether the assessee has concealed particulars of income or has furnished inaccurate particulars of income during assessment proceedings while interpreting the provisions contained u/s 271(1)(c) of the Act?"
7. The ld. AR for the assessee company challenging the impugned order contended that show-cause notice issued by the AO u/s 274, available at page 32 of the paper book is not a valid notice to initiate the penalty proceedings as the assessee company has not been made aware if it has concealed the particulars of income or has furnished inaccurate particulars of such income and relied upon the decision rendered by the Hon'ble Karnataka High Court in case of CIT vs. Manjunatha Cotton and Ginning Factory & Ors. 359 ITR 565 (Karn.), affirmed by Hon'ble Supreme Court.
8. However, on the other hand, ld. DR for the Revenue to repel the arguments addressed by the ld. AR for the assessee company contended inter alia that the notice issued u/s 271(1)(c) of the Act is not a standalone document which is otherwise based upon assessment order; that the assessee has not furnished the details of foreign travel of the Directors viz. bills, vouchers, the Visa, passport of the Directors, tickets or/and other documentary evidence despite availing numerous opportunities, and relied upon the order passed by the AO as well as ld. CIT (A).
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9. Undisputedly, addition made against the assessee during quantum proceedings has already been confirmed. It is settled principle of law that the penalty cannot be imposed merely on the ground that additions made in the income of the assessee has been confirmed rather to proceed with imposition of penalty u/s 271(1)(c), the AO has to prove that there was concealment of particulars of income or assessee has furnished inaccurate particulars of such income.
10. To proceed further, we would like to reproduce notice issued u/s 271(1)(c) of the Act for ready perusal :-
"NOTICE UNDER SECTIO 274 READ WITH SECTIO 271 OF THE INCOME TAX ACT, 1961 OFFICE OF THE DY. COMMISSIONER OF INCOME TAX CIR. l(l),ROOM NO 390 C R BUILDING,NEW DELHI.
DATE: 22/12/2010 To The Principal Officer, M/s Anjala Exhibitors Pvt Ltd.
10796, Jhandewalan Road, Nabi Karom, New Delhi - 110055 PAN: AAACA0219J Whereas in the course of proceedings before me for the assessment year 2008-09. it appears to me that you:-
have without reasonable cause to failed to comply with a notice under section 142(1)/143(2) of the Income Tax Act 1961.6 ITA No.6358/Del./2015
*have concealed the particulars of your income or furnished inaccurate particulars of such income You are hereby requested to appear before me at 12.30 AM. On 04/01/2011 and show cause why an order imposing a penalty on you should not be made under section 271 of the Income Tax Act 1961. If you do not wish to avail yourself of this opportunity of being heard in person or through authorized representative you may show cause in writing on or before the said date which will be considered before any such order is made under section 271.
(SHIV SWROOP SINGH) DY. COMMISSIONER OF INCOME TAX CIR. 1(1), NEW DELHI."
11. Bare perusal of the notice issued to the assessee u/s 271(1)(c) of the Act reproduced above goes to prove that assessee has not been called upon to explain if he has concealed the particulars of income or furnished inaccurate particulars of such income rather a tick has been marked against both the charges mentioned in the printed proforma. Hon'ble Karnataka High Court in case of CIT vs. Manjunatha Cotton and Ginning Factory & Ors. (supra) dealt with the identical issue threadbare and came to the following conclusion :-
"63. In the light of what is stated above, what emerges is as under:
a) Penalty under Section 271(1)(c) is a civil liability.
b) Mens rea is not an essential element for imposing penalty for breach of civil obligations or liabilities.7 ITA No.6358/Del./2015
c) Willful concealment is not an essential ingredient for attracting civil liability.
d) Existence of conditions stipulated in Section 271(1)(c) is a sine qua non for initiation of penalty proceedings under Section 271.
e) The existence of such conditions should be discernible from the Assessment Order or order of the Appellate Authority or Revisional Authority.
f) Ever if there is no specific finding regarding the existence of the conditions mentioned in Section 271(1)(c), at least the facts set out in Explanation 1(A) & (B) it should be discernible from the said order which would by a legal fiction constitute concealment because of deeming provision.
g) Even if these conditions do not exist in the assessment order passed, at least, a direction to initiate proceedings under Section 271(l)(c) is a sine qua non for the Assessment Officer to initiate the proceedings because of the deeming provision contained in Section 1(B).
h) The said deeming provisions are not applicable to the orders passed by the Commissioner of Appeals and the Commissioner.
i) The imposition of penalty is not automatic.
j) Imposition of penalty even if the tax liability is admitted is not automatic.
k) Even if the assessee has not challenged the order of assessment levying tax and interest and has paid tax and interest that by itself would not be sufficient for the authorities either to initiate penalty proceedings or impose penalty, unless it is discernible from the assessment order that, it is on account of such unearthing or enquiry concluded by authorities it has resulted in payment of such tax or such tax liability came to be admitted and if not it would have escaped 8 ITA No.6358/Del./2015 from tax net and as opined by the assessing officer in the assessment order.
l) Only when no explanation is offered or the explanation offered is found to be false or when the assessee fails to prove that the explanation offered is not bonafide, an order imposing penalty could be passed.
m) If the explanation offered, even though not substantiated by the assessee, but is found to be bonafide and all facts relating to the same and material to the computation of his total income have been disclosed by him, no penalty could be imposed.
n) The direction referred to in Explanation IB to Section 271 of the Act should be clear and without any ambiguity.
o) If the Assessing Officer has not recorded any satisfaction or has not issued any direction to initiate penalty proceedings, in appeal, if the appellate authority records satisfaction, then the penalty proceedings have to be initiated by the appellate authority and not the Assessing Authority.
p) Notice under Section 274 of the Act should specifically state the grounds mentioned in Section 271(1)(c), i.e., whether it is for concealment of income or for furnishing of incorrect particulars of income
q) Sending printed form where all the ground mentioned in Section 271 are mentioned would not satisfy requirement of law.
r) The assessee should know the grounds which he has to meet specifically. Otherwise, principles of natural justice is offended. On the basis of such proceedings, no penalty could be imposed to the assessee.
s) Taking up of penalty proceedings on one limb and finding the assessee guilty of another limb is bad in law.9 ITA No.6358/Del./2015
t) The penalty proceedings are distinct from the assessment proceedings. The proceedings for imposition of penalty though emanate from proceedings of assessment, it is independent and separate aspect of the proceedings.
u) The findings recorded in the assessment proceedings in so far as "concealment of income" and "furnishing of incorrect particulars" would not operate as res judicata in the penalty proceedings. It is open to the assessee to contest the said proceedings on merits.
However, the validity of the assessment or reassessment in pursuance of which penalty is levied, cannot be the subject matter of penalty proceedings. The assessment or reassessment cannot be declared as invalid in the penalty proceedings."
12. So, following the law laid down by Hon'ble High Court, we are of the considered view that when the assessee has not been specifically made aware of the charges leveled against him as to whether there is a concealment of income or furnishing of inaccurate particulars of income on his part, the penalty u/s 271(1)(c) of the Act is not sustainable. The case law relied upon by the ld. DR are not applicable to the facts and circumstances of this case in the face of the decisions rendered by the Hon'ble High Court in Manjunatha Cotton and Ginning Factory & Ors. (supra).
13. On merit, the next contention raised by the ld. AR for the assessee company that the assessee company has bonafidely claimed an amount of Rs.4,56,800/- as foreign travel expenses incurred by the Directors wholly and exclusively for business 10 ITA No.6358/Del./2015 purposes. Undisputedly, assessee has produced copy of passport of the directors to prove their foreign visits along with copy of Fringe Benefit Tax audit report before ld. CIT (A), who has confirmed the penalty levied by the AO on the ground that since the assessee had failed to produce documentary evidence viz. details of bills, vouchers, the Visa, passport of the Directors, tickets or/and other documentary evidence, it has concealed a part of its income by furnishing inaccurate particulars of income to the extent of Rs.4,56,800/-.
14. It is settled principle of law that when the assessee company had come up with bonafide claim and without actual or conscious concealment on its part, mere disallowance of the expenses claimed by the assessee does not amount to concealment of inaccurate particulars of income or furnishing of inaccurate particulars of income. Assessee company had made a bonafide claim for deduction of business expenses by relying upon copy of passport and bank statement as the entire expenses have been incurred through banking channel and FBT audit report, which does not lead to the conclusion that the assessee has claimed bogus expenses.
15. Hon'ble Delhi High Court in case cited as CIT vs. IFCI Limited - (2010) 328 ITR 611 (Delhi) held that in case, any claim 11 ITA No.6358/Del./2015 made by the assessee has not been accepted it would not per se tantamount to furnishing any account of inaccurate particulars to attract the penalty proceedings u/s 271(1)(c). Operative part of the aforesaid judgment is extracted as under :-
"Held; dismissing the appeal, that the assessee had filed the return and furnished all particulars. The assessee had explained during the penalty proceedings that the investments were written off in the books of account and were claimed as deduction on account of loss which occurred to the assessee in the computation of total income. The Tribunal analysing the facts had expressed the view that there had been no furnishing of inaccurate particulars of such income and the assessee had declared the entire material. It was a case where a claim put forth by the assessee as regards the loss was not accepted but that would not per se tantamount to furnishing any kind of inaccurate particulars. Thus, there had been no concealment of income or furnishing of inaccurate particulars. Hence, the cancellation of penalty was valid."
16. Similarly, Hon'ble High Court of Delhi in case cited as CIT vs. DCM Limited - 359 ITR 102 held as under :-
"Law does not bar or prohibit an assessee for making a claim, which he believes may be accepted or is plausible. When such a claim is made during the course of regular or scrutiny assessment, liberal view is required to be taken as necessarily the claim is bound to be carefully scrutinized both on facts and in law. Full probe and appraisal is natural and normal. Threat of penalty cannot become a gag and/ or haunt an assessee for making a claim which may be erroneous or wrong, when it is made during the course of the assessment proceedings. Normally, penalty proceedings in such cases should not be initiated unless there are valid or good grounds to show that factual were provided in the computation. Law does not bar or prohibit a person 12 ITA No.6358/Del./2015 from making a claim, when he knows the matter is going to be examined by the Assessing Officer."
17. Hon'ble Supreme Court in a case cited as CIT vs. Reliance Petro Products Pvt. Ltd. - 322 ITR 158 (SC). decided the identical issue in favour of the assessee. Operative part of which is reproduced for ready reference as under :-
"A glance at the provisions of section 271(1)(c) of the I.T. Act, 1961 suggests 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. The meaning of the word "particulars" used in section 271(1)(c) would embrace the detail of the claim made. Where no information given in the return is found to be incorrect or inaccurate, the assessee cannot be held guilty of furnishing inaccurate particulars. In order to expose the assessee to penalty, unless the case is strictly covered by the provision, the penalty provision cannot be invoked. By no stretch of imagination can making an incorrect claim tantamount to furnishing inaccurate particulars. There can be no dispute that everything would depend upon the return filed by the assessee, because that is the only document where the assessee can furnish the particulars of his income. When such particulars are found to be inaccurate, the liability would arise. To attract penalty, the details supplied in the return must not be accurate, not exact or correct, not according to the truth or erroneous.
Where there is no finding that any details supplied by the assessee in its return are found to be incorrect or erroneous or false there is no question of inviting the penalty under section 271(1)(c). A mere making of a claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee. Such a claim made in the return cannot amount to furnishing inaccurate particulars."13 ITA No.6358/Del./2015
18. In view of what has been discussed above, we are of the considered view that AO/CIT (A) have erred in levying/confirming the penalty of Rs.1,56,000/- which is not sustainable in the eyes of law as mere disallowance of bonafidely claimed expenses by the assessee does not amount to furnishing of inaccurate particulars of income sufficient to attract the provisions contained u/s 271(1)(c) of the Act, hence penalty of Rs.1,56,000/- is ordered to be deleted. Consequently, the appeal filed by the assessee is hereby allowed. Order pronounced in open court on this 23rd day of October, 2018.
Sd/- sd/-
(R.K. PANDA) (KULDIP SINGH)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Dated the 23rd day of October, 2018
TS
Copy forwarded to:
1.Appellant
2.Respondent
3.CIT
4.CIT(A)-1, New Delhi
5.CIT(ITAT), New Delhi.
AR, ITAT
NEW DELHI.