CIT HISAR V. B.B. SINGHAL

ITA/725/2010

AI Insights

The case revolves around an appeal by the Commissioner of Income-Tax against the decision of the Income Tax Appellate Tribunal, which had upheld the CIT(A)'s decision to set aside the penalty imposed on the respondent, B.B. Singhal. The respondent, an employee of New India Assurance Company Limited who had retired and received an ex-gratia payment, incorrectly claimed an exemption on the entire amount received, rather than the exempted amount of \'5 lacs as per Section 10(10C) of the Income Tax Act, 1961. The Assessing Officer had imposed a penalty for this incorrect claim, which was later set aside by the CIT(A) and the Tribunal, leading to the present appeal by the Commissioner of Income-Tax.

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 732475 (HC-CHANDIGARH)
• Appeal Type: Others
• Pronouncement Date: 05-01-2011
• Assessment Year: misc
• Other Referred Cases: A.R. Enterprises Pvt. Ltd. Vs. CIT, Dilip N. Shroff Vs. JCIT, CIT Vs. Mica Wood Pvt. Ltd., Commissioner of Income-Tax Vs. Zoom Communication P. Ltd., Union of India and others Vs. Dharamendra Textile Processors and others
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Assessee Lawyers: K K MEHTA
• Keywords: Exemption; Gratuity; Income Tax; Legal provisions; Penalty; Voluntary retirement; Hearsay
• Section: 271(1)(c); 260A; 10(10C)

Judgement Text

"Income-tax Appeal No.725 of 2010 -1- **** IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH Income-tax Appeal No.725 of 2010 Date of decision: 5.1.2011 Commissioner of Income-Tax, Hisar ...Appellant Versus B.B.Singhal ...Respondent CORAM: HON'BLE MR.JUSTICE ADARSH KUMAR GOEL HON'BLE MR.JUSTICE AJAY KUMAR MITTAL Present: Mr. K.K.Mehta, Advocate for the appellant. **** ADARSH KUMAR GOEL, J ( Oral) . 1. This Appeal has been preferred by the revenue under Section 260A of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) against order dated 30.6.2009 passed by the Income Tax Appellate Tribunal, Delhi Bench 'B', New Delhi in ITA No.2884/DEL/2008, for the assessment year 2004-05, raising following substantial question of law:- “Whether on the facts and circumstances of the case, the Hon'ble ITAT was right in law in deleting the penalty without appreciating the fact that the assessee furnished inaccurate particulars of income by relying upon hearsay and unreliable interpretation of legal provisions?” Income-tax Appeal No.725 of 2010 -2- **** 2. The assessee was an employee of New India Assurance Company Limited. He voluntarily retired and received ex-gratia benefit as per the scheme. Even though only an amount of ` 5 lacs was exempted from tax under Section 10(10C) of the Act, the assessee claimed exemption on the entire amount of gratuity. The Assessing officer apart from making addition to the declared income, imposed penalty for taking wrong plea for exemption. On appeal, levy of penalty was set aside by the CIT(A) on the ground that claim of the assessee was under a bonafide mistake and the assessee has given all the relevant particulars in the return. This view has been upheld by the Tribunal as under:- “We have considered the rival submissions and perused the material placed on record. Ld. AR of the assessee relied on the decision of the Hon'ble High Court of Rajasthan in the case of A.R.Enterprises Pvt. Ltd. Vs. CIT, reported in (2008) 215 CTR 306 in which referring the judgment of the Hon'ble Supreme Court in the case of Dilip N. Shroff Vs. JCIT, (2007) 210 CTR (SC) 228 deleted the penalty imposed u/s 271 (1)(c) of the Act. Ld. AR of the assessee also cited the decision in the case of CIT Vs. Mica Wood Pvt. Ltd. reported in 170 Taxman 256 (Del.) in support of the claim of the assessee. Keeping in view the findings made by the Commissioner of Income- tax (appeals) in his order and also the aforesaid judgments cited by the ld. AR, we are of the view that the Income-tax Appeal No.725 of 2010 -3- **** penalty levied by the Assessing Officer deserves to be deleted. We, therefore, uphold the order of the Commissioner of Income-tax (appeals) and dismiss the appeal of the revenue.” 3. We have heard learned counsel for the appellant. 4. Learned counsel for the appellant submits that statutory provision being clear seeking claim of deduction on entire amount of gratuity amounts to giving inaccurate particulars of income. Reliance has been placed on Commissioner of Income-Tax Vs. Zoom Communication P. Ltd. [2010] 327 ITR 510 (Delhi). It was also submitted that judgment of the Hon'ble Supreme Court in Dilip N. Shroff Vs. JCIT, (2007) 210 CTR (SC) 228 referred by the Tribunal has been overruled in subsequent judgment in Union of India and others Vs. Dharamendra Textile Processors and others (2008) 13 Supreme Court Cases 369. 5. We are unable to accept the submission. 6. The CIT(A) as well as the Tribunal categorically found that claim of the assessee though inadmissible was put forward under a mistaken bonafide view. This finding is not shown to be perverse. Whether or not the assessee furnished incorrect particulars is normally a question of fact. There may not be bar to levy of penalty where exemption is wrongly claimed if it can be held to have been done with a view to evade tax. The issue has to be gone into from case to case. Judgment in Zoom Communication is on the facts and circumstances of that case. It cannot be applied to the Income-tax Appeal No.725 of 2010 -4- **** present case. The contention on behalf of the revenue that judgment in Dilip N. Shroff was no longer good law has also no relevance. Even after the judgment in Dharminder Textiles, the requirement of Section 271(1)(c) of the Act has to be complied with to levy penalty. If the assessee has furnished valid explanation that its claim was put forward under mistaken bonafide belief and not to evade tax, setting aside of penalty cannot be held to be illegal. No substantial question of law arises. Accordingly, the appeal is dismissed. (Adarsh Kumar Goel) Judge January 05,2011 (Ajay Kumar Mittal) Pka Judge "