Income Tax Appellate Tribunal - Delhi
Dsl Software Ltd., New Delhi vs Department Of Income Tax on 24 November, 2010
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI 'B' BENCH
BEFORE SHRI R.P. TOLANI , JM & SHRI A.N. PAHUJA, AM
ITA nos.861&862/Del/2011
AYs:2003-04 & 2004-05
A.C.I.T.,Central Circle-2, V/s. M/s DSL Software Ltd.,
Room No.323, 3 r d Floor, (Now amalgamated with
ARA Centre, Jhandewalan HCL Technologies Ltd.),
Extension,New Delhi 806, Siddhartha, 96, Nehru
Place, New Delhi
[P AN : AAACHI1645P]
(Appellant) (Respondent)
Assessee by Shri Neeraj Jain &
Ms. Pinky Kapoor,ARs
Revenue by Shri Pradeep Kumar,DR
Date of hearing 23-02-2012
Date of pronouncement 09-03-2012
ORDER
A.N.Pahuja:- These two appeals filed on 11.02.2011 by the Revenue against two separate orders dated 24.11.2010 of the ld. CIT(A)-III, New Delhi for the AYs 2003-04 & 2004-05, raise the following similar grounds:-
1. "On the facts and in the circumstances of the case, the CIT(A) has erred in law and on facts in deleting the penalty of ``10,00,000/- in the AY 2003-04 & `1,05,00,000/- in the AY 2004-05 levied by the AO u/s 271(1)(c) by holding that the quantum additions made by the AO u/s 10A and 80HHE have been deleted by the ITAT.
2. On the facts and in the circumstances of the case, the CIT(A) has erred in law and on facts in deleting the penalty without appreciating the fact the decision of the ITAT deleting the quantum addition has not been accepted by the department and appeal u/s 260A has been filed in the Hon'ble High Court.
2 ITA nos.861&862/Del./2011
3. On the facts and in the circumstances of the case, the CIT(A) has erred in law and on facts in holding that claim u/s 10A and 80HHE are debatable issues and wrong claim of deduction does not amount to furnishing of inaccurate particulars.
4. The order of the learned CIT(A) is erroneous and is not tenable in law and on facts.
5. 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."
.
2. Facts ,in brief, as per, relevant orders for the AY 2003-04 are that return declaring income of ``16,75,00,900/- filed on 01.12.2003 by the assessee, carrying on the business of software development and BPO Services, after being processed on 19.03.2004 u/s 143(1) of the Income-tax Act, 1961 (hereinafter referred to as the 'Act') was selected for scrutiny with the service of a notice u/s 143(2) of the Act ,issued on 11th October, 2004. During the course of assessment proceedings, the Assessing Officer (A.O. in short) noticed that the assessee, inter alia, did not receive or bring in convertible foreign exchange into India within the stipulated time on account of exports made by it to the extent of `13,16,087/- in Leela Unit & ` 25,08,077/- in GNR unit. Accordingly, the AO reduced these amounts from the export turnover while computing deduction u/s 80HHE & 10A of the Act respectively. Inter alia, penalty proceedings u/s 271(1)(c ) of the Act were also initiated. On appeal, the ground relating to non receipt of convertible foreign exchange into India within the stipulated time on account of exports, was not pressed before the ld. CIT(A). Subsequently, in response to a show cause notice before levy of penalty u/s 271(1)(c) of the Act, the assessee replied that they had mentioned the fact of unrealized export proceeds in annexure-A to form 10CCAF & 56F and on their application, seeking extension of time ,amounts were subsequently realized. Accordingly, it was argued that all facts relating to unrealized export proceeds having been disclosed ,no penalty could be imposed. However, the AO did not accept the explanation of the 3 ITA nos.861&862/Del./2011 assessee and imposed a penalty of `10 lacs on the tax sought to be evaded on the income of `12,48,547/- on the ground that the assessee, a well established company having the benefit of best tax advisors and consultants, concealed the particulars of its income . It was further mentioned that the if the case of the assessee was not selected for scrutiny or escaped the eyes of the AO, the assessee would have gained huge undue benefit. Inter alia, the AO referred to decision in Union of India v. Dharmendra Textile Processors [2008] 306 ITR 277 / 174 Taxman 571 (SC).
3. Similarly, in the AY 2004-05, the AO disallowed the claim for deduction u/s 10A & 80HHE,inter alia, in relation to following unrealized export proceeds within the stipulated time :
u/s 10A in respect of BPO Unit - ``16,30,084/-
u/s 10A in respect of GNR Unit - ``1,09,39,398/- and u/s 80HHE (Leela Unit) - `4,24,06,183/-
Besides, an amount of ` 6,83,493/- was disallowed ,having recourse to provisions of sec. 14A of the Act and claim for deduction of penalty of``10,000/- was also disallowed. Accordingly, penalty proceedings u/s 271(1)(c) of the Act were initiated. Subsequently, after receipt of order of the ITAT, in response to a show cause notice before levy of penalty u/s 271(1)(c) of the Act, the assessee replied that they had mentioned the fact of unrealized export proceeds in annexure-A to form 10CCAF & 56F and on their application, seeking extension of time ,amounts were subsequently realized. Accordingly, it was argued that all facts relating to unrealized export proceeds having been disclosed ,no penalty could be imposed. As regards disallowance u/s 14A of the Act, the assessee replied that since no expenditure was incurred in relation to exempt income, the assessee was under a bonafide belief that no disallowance was required to be made u/s 14A of the Act. Regarding disallowance of penalty, the assessee did not offer any explanation. However, the AO did not accept the explanation of the assessee and imposed a penalty of `1,05,00,000/- on the tax sought to be
4 ITA nos.861&862/Del./2011 evaded on the income of `1,46,,29,547/- on the ground that the assessee,a well established company having the benefit of best tax advisors and consultants, concealed the particulars of its income. It was further mentioned that the if the case of the assessee was not selected for scrutiny or escaped the eyes of the AO, the assessee would have gained huge undue benefit. Inter alia, the AO referred to decision in Union of India v. Dharmendra Textile Processors [2008] 306 ITR 277 / 174 Taxman 571 (SC).
4. On appeal, the ld. CIT(A) cancelled the penalty in the AY2003-04 in the following terms:-
"I have considered the facts of the case, submissions made by the appellant, the assessment order, the case laws cited by him in support of his submissions and also gone through the assessment order, the order of CIT(A) and ITAT as well as the penalty order made by the Assessing Officer u/s 271(1)(c) of the Income-tax Act. The appellant has challenged the imposition of penalty on two grounds firstly that there was neither any concealment nor any furnishing of inaccurate particulars, therefore, concealment penalty was attracted in his case and secondly the appellant has argued that the additions made by the Assessing Officer in consequence of which penalty has been imposed, have been deleted in entirety by Hon'ble ITAT, Delhi vide order dated 31.03.2009 in I.T. No.1320 & 1446/D/08, hence, penalty does not survive and it should be cancelled.
I have examined the facts of the case very carefully. It is seen from the assessment order that the penalty u/s 271(1)(c) has been levied by the Assessing Officer in consequence of disallowance of the claim of the assessee made u/s 10A and 80HHE of the Income-tax Act. It has been held by the Assessing Officer that by making wrong claims of deduction u/s 10A and 80HHE, the assessee has deliberately concealed its income and also furnished inaccurate particulars of income. I am of the view that a disallowance of quantum of a claim of deduction does not necessarily imply concealment or furnishing of inaccurate particulars because the issue regarding allowability of deduction u/s 10A as well as u/s 80HHE were debatable issues because several decisions on the issue on both sides were available. Moreover, the additions made by the Assessing Officer have already been deleted by the Hon'ble ITAT, Delhi and, therefore, the penalty levied in consequence of those additions does not survive. The penalty of
5 ITA nos.861&862/Del./2011 `10,00,000/- imposed by the Assessing Officer u/s 271(1)(c) of the Income-tax Act is cancelled."
5. Likewise, in the AY 2004-05, the ld. CIT(A) cancelled the penalty as under:-
"I have considered the facts of the case, submissions made by the appellant, the assessment order, the case laws cited by him in support of his submissions and also gone through the assessment order, the order of CIT(A) and ITAT as well as the penalty order made by the Assessing Officer u/s 271(1)(c) of the Income-tax Act. The appellant has challenged the imposition of penalty on two grounds firstly that there was neither any concealment nor any furnishing of inaccurate particulars, therefore, concealment penalty was attracted in his case and secondly the appellant has argued that the additions made by the Assessing Officer in consequence of which penalty has been imposed, have been deleted in entirety by Hon'ble ITAT, Delhi vide order dated 31.03.2009 in I.T. No.1320 & 1446/D/08, hence, penalty does not survive and it should be cancelled.
I have examined the facts of the case very carefully. It is seen from the assessment order that the penalty u/s 271(1)(c) has been levied by the Assessing Officer in consequence of disallowance of the claim of the assessee made u/s 10A and 80HHE of the Income-tax Act. It has been held by the Assessing Officer that by making wrong claims of deduction u/s 10A and 80HHE, the assessee has deliberately concealed its income and also furnished inaccurate particulars of income. I am of the view that a disallowance of quantum of a claim of deduction does not necessarily imply concealment or furnishing of inaccurate particulars because the issue regarding allowability of deduction u/s 10A as well as u/s 80HHE were debatable issues because several decisions on the issue on both sides were available. Moreover, major additions made by the Assessing Officer have already been deleted by the Hon'ble ITAT, Delhi and, therefore, the penalty levied in consequence of those additions does not survive. Only two additions i.e. the addition of `6,83,493/- and the disallowance of `10,000/- on account of penalty have been sustained because the grounds were not pressed by the assessee before the CIT(A), but these additions also do not prove any concealment. In the facts and circumstances of the case, I am inclined to hold that penalty u/s 271(1)(c) of the Income-tax Act is not justified, therefore, the penalty of `1,05,00,000/- imposed by the Assessing Officer u/s 271(1)(c) of the Income-tax Act is cancelled."
6 ITA nos.861&862/Del./2011
6. The Revenue is now in appeal before us against the aforesaid findings of the ld. CIT(A). The ld. DR supported the orders, levying penalty while the ld. AR on behalf of the assessee submitted that at the time of filing of the return , deduction u/s 10A & 80HHE of the Act on the unrealized export proceeds was claimed under the bonafide belief that their applications before the Competent Authority, seeking extension of time for realizing export consideration, would be accepted within the stipulated time. Even otherwise, there was complete disclosure of the particulars in this regard, at the time of filing of the return . Inter alia, the ld. AR relied upon decisions in CIT v. Onkar Saran and Sons, 195 ITR 1 (SC);Balwant Rai & co v. CIT, 274 ITR 269 (All.);Rupam Mercantile Limited V. DCIT, 91 ITD 237 (Ahd.) (TM) . It was further pointed out that there was no failure to disclose particulars of income in respect of the unrealized export proceeds at the time of filing of return or even during the course of the assessment proceedings .Merely because certain additions/ adjustments were made in the assessment, it did not necessarily follow that penalty was to be levied. In this connection, decisions in C.I.T. v. Reliance Petroproducts Pvt. Ltd., 322 ITR 158(SC) and CIT Vs. Globe Sales Corporation, 145 Taxman 530(Del.); CIT vs. Rajedev Singh and Co, 202 Taxman 433 (Del.) ; CIT and DCIT vs. S.L.N. Traders, 243 CTR 407 (Del.);CIT v. Brahmaputra Consortium Ltd:, ITA 1582 OF 2010 (Del.); CIT v. Mahavir Irrigation Pvt. Ltd , ITA NO. 1266/2009 (Del. );CIT v. M/s Mahanagar Telephone Nigam Ltd.,ITA No. 626/2011 (Del.);Fortis Financial Services Ltd,ITA Nos. 4/Del/2009 and 5/Del/2009 (Del.);Business Standard Digital Ltd. vs ACIT, ITA No. 1591/Del/2010 (Del.), were referred to. Regarding penalty in relation to disallowance u/s 14A of the Act in the AY 2004-05, the ld. AR relied upon decisions in Reliance Petroproducts Pvt. Ltd(supra)and Liquid Investment, ITA 240 of 2009(Del.). In nutshell, the ld. AR supported the findings of the ld. CIT(A).
7. W e have heard both the parties and gone through the facts of the case as well as the aforesaid decisions relied upon on behalf of the assessee. As regards penalty levied in respect of amount 7 ITA nos.861&862/Del./2011 pertaining to deduction u/s 10A & 80HHE of the Act, as is apparent from the aforesaid facts, the assessee claimed deduction on the basis of report dated 27.11.2003 of the CA in form no. 56 F & 10CCAF.In note no.4 in Annexure A to form 10CCAF & 56F, it was clearly mentioned that an amount of `47,52,071/- on account of export proceeds was not realized before the end of six months from the end of the FY 2002-03 and an application for extension of time to the competent authority was made. It was also mentioned that calculation for deduction u/s 10A & 80HHE proceeded on the basis that permission of the competent authority would be forthcoming. Similarly in the note 2 in annexure to form 10CCAF & 56F dated 30 t h October,2004 relevant for the AY 2004-05, it was mentioned that export sales of `549.76 lacs were not realized before the end of six months from the end of the FY 2003-04 and that company was yet to file an application for extension of time. Inter alia, reference to circular no. 20 dated 28.1.2002 issued by the RBI, was also made. The ld. CIT(A) in the impugned orders concluded that a disallowance of quantum of a claim of deduction does not necessarily imply concealment or furnishing of inaccurate particulars because the issue regarding allowability of deduction u/s 10A as well as u/s 80HHE were debatable issues. W e find that it is not a case where the assessee has not disclosed full details at the time of filing of returns or during the course of assessment proceedings. In terms of provisions of sec. 10A(5) and 80HHE(4) of the Act, the deduction under these sections is not admissible unless the assessee furnishes in the prescribed form, along with the return of income, the report of an accountant, as defined in the Explanation below sub-section (2) of section 288, certifying that the deduction has been correctly claimed in accordance with the provisions of these sections. The assessee, in the instant case, merely made a bonafide claim for the deduction in terms of the said certificate while pointing out that the aforesaid amounts towards 8 ITA nos.861&862/Del./2011 exports were not realized within the stipulated period. Not even a whisper has been made in the penalty order as to which specific particulars were furnished inaccurate or were concealed. The expression 'has concealed the particulars of income' and 'has furnished inaccurate particulars of income' have not been defined either in section 271 or elsewhere in the Act. However, notwithstanding the difference in the two circumstances, it is now well established that they lead to the same effect namely, keeping off a certain portion of the income from the return. According to Law Lexicon, the word "conceal" means:
"to hide or keep secret. The word 'conceal' is con+celare which implies to hide. It means to hide or withdraw from observation; to cover or keep from sight; to prevent the discovery of ; to withhold knowledge of. The offence of concealment is, thus, a direct attempt to hide an item of income or a portion thereof from the knowledge of the income- tax authorities."
In W ebster's Dictionary, "inaccurate" has been defined as :
"not accurate, not exact or correct; not according to truth; erroneous ; as an inaccurate statement, copy or transcript.".
7.1. The penalty u/s 271(1)(c) of the Act is leviable if the AO is satisfied in the course of any proceedings under this Act that any person has concealed the particulars of his income or furnished inaccurate particulars of such income. It is well settled that assessment proceedings and penalty proceedings are separate and distinct and as held by Hon'ble Supreme Court in the case of Ananthraman Veerasinghaiah & Co. Vs. CIT, 123 ITR 457, the findings in the assessment proceedings cannot be regarded as conclusive for the purposes of the penalty proceedings. It is also well settled that the criterion and yardsticks for the purpose of imposing penalty u/s 271(1)(c) of the Act are different than those applied for making or confirming the additions. It is, therefore, 9 ITA nos.861&862/Del./2011 necessary to reappreciate and reconsider the matter so as to find out as to whether the addition or disallowance made in the quantum proceedings actually represents the concealment on the part of the assessee as envisaged in sec. 271(1 )(c) of the Act and whether it is a fit case to impose the penalty by invoking the said provisions. The provisions of section 271(1)(c) of the Act stipulate that if the Assessing Officer or the CIT(Appeals) or the Commissioner, in the course of proceedings under this Act, is satisfied that any person has concealed the particulars of his income or furnished inaccurate particulars thereof , he may direct that such person shall pay by way of penalty a sum which shall not be less than but which shall not exceed three times the amount of tax sought to be evaded by a reason of the concealment of particulars of his income. Explanation 1 to section 271(1)(c) of the Act mentions that where in respect of any facts material to the computation of the total income of any person under the Act, such person fails to offer an explanation or offers an explanation which is found by the AO or the CIT (Appeals) or the Commissioner to be false, or such person offers an explanation which he is not able to substantiate and f ails to prove that such explanation is bona fide and that all the facts relating to the same and material to the computation of his total income have been disclosed by him, then the amount added or disallowed in computing the total income of such person as a result thereof shall for the purpose of clause (c) of section 271(1), be deemed to represent the income in respect of which particulars have been concealed. In other words, the necessary ingredients for attracting Explanation 1 to section 271(1)(c) are that
(i) the person fails to offer the explanation, or
(ii) he offers the explanation which is found by the AO or the CIT (Appeals) or the Commissioner to be false, or
(iii) the person offers explanation which he is not able to substantiate and 10 ITA nos.861&862/Del./2011 fails to prove that such explanation is bona fide and that all the facts relating to the same have been disclosed by him.
7.2 If the case of any assessee falls in any of these three categories, then the deeming provision provided in Explanation 1 to section 271(1)(c) come into play, and the amount added or disallowed in computing the total income shall be considered as the income in respect of which particulars have been concealed, for the purposes of clause (c) of section 271(1), and the penalty follows. On the other hand, if the assessee is able to offer an explanation, which is not found by the authorities to be false, and assessee has been able to prove that such explanation is bona fide and that all the facts relating to the same have been disclosed by him, the assessee shall be out of the clutches of explanation 1 to section 271(1)(c) of the Act, and in that case, the penalty shall not be imposed. In the instant case, the assessee discharged the onus cast on it in terms of explanation 1 to sec. 271(1)(c) of the Act. Hon'ble Supreme Court in the case of Dilip N. Shroff v. Jt. CIT [2007] 210 CTR (SC) 228 : [2007] 291 ITR 519 (SC) while considering the scope of these provisions u/s 271(1)( c) of the Act observed in the following terms:
"The legal history of section 271(1)(c) of the Act traced from the 1922 Act prima facie shows that the Explanations were applicable to both the parts. However, each case must be considered on its own facts. The role of the Explanation having regard to the principle of statutory interpretation must be borne in mind before interpreting the aforementioned provisions. Clause (c) of sub-section (1) of section 271 categorically states that the penalty would be leviable if the assessee conceals the particulars of his income or furnishes inaccurate particulars thereof. By reason of such concealment or furnishing of inaccurate particulars alone, the assessee does not ipso facto become liable for penalty. Imposition of penalty is not automatic. Levy of penalty is not only discretionary in nature but such discretion is required to be 11 ITA nos.861&862/Del./2011 exercised on the part of the Assessing Officer keeping the relevant factors in mind. Some of those factors apart from being inherent in the nature of penalty proceedings as has been noticed in some of the decisions of this court, inheres on the face of the statutory provisions. Penalty proceedings are not to be initiated, as has been noticed by the Wanchoo Committee, only to harass the assessee. The approach of the Assessing Officer in this behalf must be fair and objective. ....................................................................................... The term "inaccurate particulars" is not defined. Furnishing of an assessment of value of the property may not by itself be furnishing of inaccurate particulars. Even if the Explanations are taken recourse to, a finding has to be arrived at having regard to clause (A) of Explanation 1 that the Assessing Officer is required to arrive at a finding that the explanation offered by an assessee, in the event he offers one, was false. He must be found to have failed to prove that such explanation is not only not bona fide but all the facts relating to the same and material to the income were not disclosed by him. Thus, apart from his explanation being not bona fide, it should have been found as of fact that he has not disclosed all the facts which was material to the computation of his income."
7.3 In the light of aforesaid observations of the Hon'ble Apex Court , what is to be seen in the instant case, is whether the claim for deduction u/s 10A and 80HHE of the Act, on the basis of certificate of the accountant, made by the assessee was bona-fide and whether all the material facts relevant thereto have been furnished and once it is so established, the assessee cannot be held liable for concealment penalty u/s 271(l)(c) of the Act. The Assessing Officer has not been able to establish that the claim of the assessee for deduction under sections 10A and 80HHE of the Act was not bona fide or that any specific particulars were concealed or furnished inaccurate. Likewise mere disallowance of ``6,83,493/- in terms of provisions of sec. 14A of the Act or disallowance of ``10,000/- on account of penalty on the basis of tax audit report, does not ,in our view, attract levy of penalty. A mere rejection of the claim of the assessee by relying on different interpretations does not amount to concealment of the particulars of income or furnishing inaccurate 12 ITA nos.861&862/Del./2011 particulars thereof by the assessee. Hon'ble Apex Court in CIT v. Reliance Petroproducts (P.) Ltd. [2010] 322 ITR 158/ 189 Taxman 322, after considering various decisions including Dilip N. Shroff v. Jt. CIT [2007] 291 ITR 519/ 161 Taxman 218 (SC) and Union of India v. Dharmendra Textile Processors [2008] 306 ITR 277 / 174 Taxman 571 (SC) concluded that 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. In the case under consideration, there is nothing to suggest that the assessee furnished any inaccurate particulars or concealed the particulars . Admittedly, the claim for deduction u/s 10A & 80HHE was duly supported by the certificate of the chartered accountant in the prescribed form while the factum of unrealized export sale proceeds was mentioned in the said certificate. In this view of the matter, no fault can be found with the claim of the assessee that it had claimed the deduction in a bona fide manner. Moreover, mere fact that the report prepared by the CA was not in accordance with the relevant provisions of the Act, was not enough to hold that the mistake was not bona fide. This view is supported by the decision in the case of CIT Vs. Deep Tools Pvt. Ltd., 274 ITR 603 (P&H),where in also levy of penalty was held to be unjustified..
7.4. In the case under consideration, as pointed out by the ld. CIT(A), the assessee had given all the particulars of income and had disclosed all facts to the AO in relation to claim for deduction u/s 10A & 80HHE of the Act. The ld. CIT(A) ,accordingly, concluded that penalty cannot be imposed merely on such disallowances. Mere disallowance of a claim will not amount to filing of inaccurate particulars of income. It can at best be a "wrong claim" not "a false claim". In such circumstances, Hon'ble Delhi High Court held in the case of Commissioner Of Income-Tax.vs Bacardi Martini India Limited.,288 ITR 585(Del) that no penalty was leviable. In CIT vs. Harshvardhan Chemicals & Minerals Ltd.
13 ITA nos.861&862/Del./2011 (259 ITR 212) (Raj),Hon'ble Rajasthan High Court upheld the finding of the Tribunal that when the assessee has claimed some amount though that is debatable, in such cases, it cannot be said that the assessee has concealed any income or furnished inaccurate particulars for evasion of the tax. Recently, Hon'ble Apex Court in Reliance Petro Products(supra) held that a mere making of the claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee. Thus, merely because the assessee had claimed the expenditure in relation to exempt income, which claim was not accepted or was not acceptable to the Revenue, that by itself would not, attract the penalty u/s 271(1)(c) of the Act. In the present case, we are of the opinion that the disallowance of claim for deductions u/s 10A & 80HHE in relation to unrealised exports or disallowance of an estimated amount, having recourse to provisions of sec.14A the Act cannot be considered as concealment of income or furnishing inaccurate particulars thereof, especially when all the relevant particulars were disclosed before the AO. The following observations made by the Hon'ble Apex Court in the aforesaid case of M/s Reliance Petro Products(supra) are relevant:
" 10. It was tried to be 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 on its part. It was up to the authorities to accept its claim in the Return or not. Merely because the assessee had claimed the expenditure, which claim was not accepted or was not acceptable to the Revenue, that by itself would not, in our opinion, attract the penalty under Section 271(1)(c). If we accept the contention of the Revenue then in case of
14 ITA nos.861&862/Del./2011 every Return where the claim made is not accepted by Assessing Officer for any reason, the assessee will invite penalty under Section 271(1)(c). That is clearly not the intendment of the Legislature.
11. In this behalf the observations of this Court made in Sree Krishna Electricals v. State of Tamil Nadu & Anr. [(2009) 23VST 249 (SC)] as regards the penalty are apposite. In the aforementioned decision which pertained to the penalty proceedings in Tamil Nadu General Sales Tax Act, the Court had found that the authorities below had found that there were some incorrect statements made in the Return. However, the said transactions were reflected in the accounts of the assessee. This Court, therefore, observed:
"So far as the question of penalty is concerned the items which were not included in the turnover were found incorporated in the appellant's account books. Where certain items which are not included in the turnover are disclosed in the dealer's own account books and the assessing authorities include these items in the dealer's turnover disallowing the exemption, penalty cannot be imposed. The penalty levied stands set aside."
The situation in the present case is still better as no fault has been found with the particulars submitted by the assessee in its Return. "
5.3. In view of the foregoing, we are of the opinion that mere erroneous claim in the absence of any concealment or furnishing of inaccurate particulars, is no ground for levying penalty, especially when there is nothing on record to show that the explanation offered by the assessee was not bona fide or any material particulars were concealed or furnished inaccurate . In these circumstances, we have no hesitation in upholding the conclusion of the ld. CIT(A) in respect of levy of penalty in relation to claim for deduction u/s 10A and 80HHE of the Act and even in relation to estimated disallowance having recourse to provisions of sec. 14A of the Act or disallowance of amount disclosed in tax audit report. Consequently, ground nos. 1 to 3 in these two appeals are dismissed.
8. Ground no. 4 in these appeals , being general in nature nor any submissions having been made before us on the said ground, does not require any separate adjudication while no additional ground having been raised before us in terms of residuary ground 15 ITA nos.861&862/Del./2011 no.5 in these two appeals, accordingly, both these grounds are dismissed.
9. In the result, both these appeals are dismissed.
Order pronounced in open Court
Sd/- Sd/-
(R.P. TOLANI) (A.N. PAHUJA)
(Judicial Member) (Accountant Member)
NS
Copy of the Order forwarded to:-
1. A.C.I.T.,Central Circle-2,Room No.323, 3 r d Floor,ARA Centre, Jhandewalan Extn.,New Delhi
2. M/s DSL Software Ltd.,(Now amalgamated HCL Technologies Ltd.), 806, Siddhartha, 96, Nehru Place, New Delhi
3. CIT concerned.
4. CIT(A)-III,New Delhi.
5. DR, ITAT,'B' Bench, New Delhi
6. Guard File.
BY ORDER, Deputy/Asstt.Registrar ITAT, Delhi