ACIT CIRC LE 1, TRICHY V. M/S DALMIA CEMENTS (BHARAT) LTD, TIRUCHIRAPALLI

ITA 1295/CHNY/2018

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 9487 (ITAT-CHENNAI)
• Duration Of Justice: 4 year(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-01-2022
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2012-2013
• Appeal Filed On: 18-01-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Earning of tax free income; Rule 8D
• Section: 271(1)(c); 153A; 14A; 205

Judgement Text

आयकर अपील य अ धकरण, ‘सी’’ यायपीठ, चे नई IN THE INCOME TAX APPELLATE TRIBUNAL , ‘C’ BENCH, CHENNAI ी महावीर संह, उपा य एवं ी जी. मंज ु नाथ, लेखा सद%य के सम BEFORE SHRI MAHAVIR SINGH, VICE-PRESIDENT AND SHRI G.MANJUNATHA, ACCOUNTANT MEMBER आयकरअपीलसं./I . T. A. N os . 5 9 6 & 1 2 9 5/ C hn y/ 2 0 1 8 & C . O. N os. 5 5 & 5 7/ Chn y/ 2 0 1 9 [ I n I T A N o s . 5 9 6 & 1 2 9 5 / C h n y / 2 0 1 8 ] ( नधा रणवष / A ss e ss m en t Yea r : 2 01 1 - 12 & 2 01 2- 1 3 ) The Assistant Commissioner of Income Tax, Circle-1, Trichy. V s M/s. Dalmia Cement (Bharat) Ltd., Dalmiapuram-621 651. PA N: A A D CA 9 4 1 4 C (अपीलाथ /Appellant) ( यथ /Respondent/Cross Objector) अपीलाथ क ओरसे/ Appellant by : Mr. M. Rajan, CIT यथ क ओरसे/Respondent by : Mr. Soumen Adak, C.A. स ु नवाईक तार ख/D a t e o f h e a r i n g : 31.01.2022 घोषणाक तार ख /D a t e o f P r o n o u n c e m e n t : 31.01.2022 आदेश / O R D E R PER G. MANJUNATHA, AM: These two appeals filed by the Revenue and two cross objections filed by the assessee are directed against separate, but identical orders passed by the learned Commissioner of Income Tax (Appeals)-29, New Delhi, both dated 26.10.2017 and pertain to assessment years 2011-12 & 2012-13. Since, facts are identical and issues are common, for the sake of convenience, these two appeals and cross objections are heard together and are being disposed off, by this consolidated order. 2 ITA Nos. 596 & 1295/Chny/2018 & C.O. Nos.55 & 57/Chny/2019 2. The Revenue has more or less filed common grounds of appeal for both assessment years, therefore, for the sake of brevity, grounds of appeal filed for the assessment year 2011- 12 are reproduced as under:- “1. The learned Commissioner (Appeals) erred in accepting the assessee’s submissions against the levy of penalty u/s.271(1)(c) of the Income tax Act. 2) The calculation for expenditure to be disallowed for the exempted income is enumerated u/s.14A of the Income tax Act read with rule 8D of the l.T.Rules. Had the assessee calculated the disallowance as per the method/formula in the l.T.Act / Rules the disallowance by the Assessing Officer would not have arisen. Further the assessee failed to furnish the details called for by the Commissioner (A) during the appeal proceedings against the asst.order and the CIT(A) confirmed the disallowance by the Assessing Officer. Since the assessee failed to furnish the details to substantiate the claim before the Commissioner (Appeals) it is evident for the malafied intention of the assessee attracting the explanation 2 of Section 271(1)(c) of the Income tax Act. 3) Further most of the rulings referred by the assessee based on the judgement of the Hon’ble Supreme Court in the case of CIT Vs. Reliance Petro Products(322 ITR 158). The facts of the case are different from this case. In the referred case the assessee claimed deduction u/s.36(1)(iii) for the interest paid on taken for purchase of shares. The AO disallowed the interest u/s.14A and levied penalty. In this case the assessee failed to calculate and disallow the expenditure as framed under Sec.14A r.w.r.8D. Moreover the Rule 8D, the method for determining amount of expenditure in relation to income and not includible in total income, inserted w.e.f. 24/3/2008, much later than the decision of the Apex Court. If the case had not been taken up for scrutiny, the assessee would have continued with the disallowance 3 ITA Nos. 596 & 1295/Chny/2018 & C.O. Nos.55 & 57/Chny/2019 done by him instead of the disallowance to be calculated as per Sec.14A r.w.r.8D. 4) Further, the assesse contended that consequent to giving effect to CIT(A) order the tax liability u/s.115JB was higher than the tax liability under the normal provisions and hence the appellant was assessed under the provisions of Sec.115JB. By citing the Board’s circular in No.25/2015 dt.31/12/2015, which stated that prior to 01/4/2016 where the income tax payable on the total income as computed under the regular provisions of the Act was less than the tax payable on the Book Profits u/s.115JB of the Act, then the penalty u/s.271(1)(c) of the Act was not attracted with reference to additions/disallowances made under regular provisions. Since the Board’s Circular is binding on the Department, no penalty could be levied on the disallowances made under the regular provisions of the Act, as the appellant was assessed under the provisions of Sec.115JB of the Act. 5) The learned CIT(A) had not specifically discussed the contention of the assessee regarding the assessee’s claim on the basis of Board’s circular. The assessee interpreted the contents of the Circular for his convenience. The assessee had picked up the first sentence of para (5) of the Circular no.25/2015, dt.31/12/2015 and not considered the following sentence which read “It is further clarified that in case prior to 1/4/2016, if any adjustment is made in the income computed for the purpose of MAT, then the levy of penalty u/s.271(1)(c) of the Act, will depend on the nature of adjustment”. The assesee wrongly interpreted the circular to his convenience. The Circular clearly spelled out the penalty leviable in the case of Book Profit adopted and strengthened the Department’s stand. Among other grounds, that may be adduced at the time of hearing, the order of the CIT(A) may please be annulled and the order of the Assessing Officer may be please restored.” 3. Brief facts of the case extracted from ITA 4 ITA Nos. 596 & 1295/Chny/2018 & C.O. Nos.55 & 57/Chny/2019 No.596/Chny/2018 for assessment year 2011-12 are that the assessee has filed original return of income for assessment year 2011-12 on 29.11.2011 declaring loss of Rs.18,80,36,543/-. A search action u/s.132 of the Income Tax Act, 1961, was conducted in the case of the assessee and consequent to search, the assessee has filed return of income in response to notice issued u/s.153A of the Act declaring loss of Rs.18,80,36,543/-. The assessment has been subsequently completed u/s.143(3) r.w.s 153A of the Act, and assessed total income at Rs.2,27,94,20,195/- by making various additions, including additions towards disallowance u/s.14A of the Income Tax Act, 1961 at Rs.3,40,53,520/-. Thereafter, the Assessing Officer initiated penalty proceedings u/s.271(1)(c) of the Income Tax Act, 1961, for furnishing inaccurate particulars of income. In the meantime, the assessee has challenged additions made by the Assessing Officer towards disallowance of expenditure u/s.14A of the Act before the first appellate authority. The learned CIT(A) for the reasons stated in his appellate order sustained additions made by the Assessing Officer towards disallowances u/s.14A of the 5 ITA Nos. 596 & 1295/Chny/2018 & C.O. Nos.55 & 57/Chny/2019 Income Tax Act, 1961. Subsequently, during penalty proceedings, the Assessing Officer on the basis of findings recorded by the learned CIT(A) in sustaining additions made towards disallowance u/s.14A and also by taking note of various submissions made by the assessee levied penalty u/s.271(1)(c) of the Act, for furnishing inaccurate particulars of income at Rs.1,05,16,056/-, which is equivalent to 100% of tax sought to be evaded. The relevant findings of the Assessing Officer are as under:- 5. On perusal of the assessment order, it is noted that the during the year under consideration, the assessee received dividend income of Rs. 10,32,59,616/- which was claimed exempt. fl this regard, the assessee suo moto disallowed an amount of Rs. 20,00,000/- for earning such income. However, keeping in view of the facts of the case and decisions of various Court, the AO had made a further disallowance of Rs. 3,4053,520/- u/s 14A of the Act read with rule 8D. The said disallowance was also confirmed by Id. CIT(A) as mentioned above. During the appellate proceedings, the assessee was asked to provide the datewise and quantity wise details of various shares sold and purchased during the year and also the position of funds in the bank accounts whether there was a credit balance or debit balance on the date of purchase. Further, it was also asked to explain that if on the date of purchase of particular shares there comes a debit balance, than on product basis calculate the interest till the day the debit balance converts to the credit balance in their said bank account. However, the assessee had failed to explain the same and file any supporting documents. From which it is clear that the assessee had furnished inaccurate 6 ITA Nos. 596 & 1295/Chny/2018 & C.O. Nos.55 & 57/Chny/2019 particulars of its income. This is clear concealment on part of the assessee. The Hon’ble Supreme Court in the case Addl. CIT Vs Jeevan lal Shah (1994) 205 ITR .244 has held that the Department is now not required to prove any mens rea or conscious concealment but it is the assessee on whom the burden lies to prove that his act was not willful, and, in the instant case the assessee could not discharge his burden and continues to be assessee in default. Consequently, the default of the assessee u/s 271(1)(c) is established. 5.1 Further, the Hen’ble Delhi High Court vide its order dated 2405.2010 in the case of CIT Vs. Zoom Communication Pvt. Ltd. in ITA No. 07/2010 has held that. ‘The Court cannot overlook the fact that only a small percentage of the Income Tax Returns are poked up for scrutiny. If the assessee makes a claim which is not only incorrect in law but is also wholly without any basis and the explanation furnished by him for making such claim is not found to be bonafide, it would be difficult to say that he would still not be liable to penalty under section 271(1)(c of the Act. If we take the view that a claim which is wholly untenable in law and has absolutely on foundation on which it could be made, the assessee would not be liable to imposition of penalty, even he was not acting bonafide while making a claim of this nature, that would give a license to unscrupulous assessees to make wholly untenable and unsustainable claims without there being any basis for making them in the hope that their return would not be picked up for scrutiny and they would be assessed on the basis of self assessment under section 143(1) of the Act end even if their case is selected for scrutiny, they can getaway merely by paying the tax, which in any case, was payable by them. The consequence would be that the persons who make claims of this nature, actuated by a malafide intention to evade tax otherwise payable by them would get away without paying the tax legally payable by them, if their cases are not picked up for scrutiny. This would take away the different effect, which these penalty provisions in the Act have....” 7 ITA Nos. 596 & 1295/Chny/2018 & C.O. Nos.55 & 57/Chny/2019 5.2 It is clear from the above that if the case was not selected for scrutiny assessee wouId have continued with the disallowance so done by him and not calculating the disallowance as per he formula. By this way assessee has furnished inaccurate particulars of his income. In view of the facts of the case and discussions made above and also in the light o the findings of the Ld. CIT(A), I am convinced that the assessee has concealed its income by filing inaccurate particulars of its income to the tune of Rs. 340,53520/-, hence liable for penalty u/s 271(1)( c) of the IT. Act, 1961. It was assessee’s duty to disclose complete particulars of its income which in this assessee had failed to do so and I am satisfied that it is a fit case for levying penalty under section 271(1)(c) of the Income Tax Act for concealment of Income of Rs. 3,40,53,520/-. The minimum and maximum penalty is worked out as under: Concealed income - Rs. 3,40,53,520!- Tax sought to he evaded - Rs. 1,02,16,056/- Education Cess @ 3% on Income Tax Rs 3,06,482/- Total Rs. 1,05,22,538/- Minimum penalty @ 100% Rs. 1,05,22,538/- Maximum penalty @ 300% Rs. 3,15,67,614/ I, therefore, levy a penalty of Rs. 105,16,056/- which is equivalent to 100% of tax sought to be evaded on the concealed income of Rs. 3,40,53,520/- as per working given as above.” 4. Being aggrieved by penalty order, the assessee preferred an appeal before the learned CIT(A). Before the learned CIT(A), the assessee has filed detailed written submissions, which has been reproduced at para 4 on pages 2 to 15 of the learned CIT(A) order. The sum and substance of arguments of 8 ITA Nos. 596 & 1295/Chny/2018 & C.O. Nos.55 & 57/Chny/2019 the assessee before the learned CIT(A) are that mere making a claim which was not substantiated cannot lead to an inference that the assessee has furnished inaccurate particulars of income, which attracts penalty provisions u/s.271(1)(c) of the Act. 5. The learned CIT(A), after considering relevant submission of the assessee and also by relied upon the decision of the Hon'ble Supreme Court in the case of CIT vs. Reliance Petroproducts Pvt. Ltd. (2010) 322 ITR 158 deleted penalty levied by the Assessing Officer u/s.271(1)(c) of the Act, by holding that mere disallowance of claim does not entail levy of penalty. The learned CIT(A) further observed that the assessee has furnished complete disclosure of facts in its return of income with reference to expenditure and income and thus, disallowance u/s.14A read with Rule 8D itself cannot lead to a conclusion that the assessee has furnished inaccurate particulars of income, which leads levy of penalty u/s.271(1)(c) of the Act, and hence, deleted penalty levied by the Assessing Officer. The relevant findings of learned CIT(A) are as under:- “4.2 have considered the facts and circumstances of the 9 ITA Nos. 596 & 1295/Chny/2018 & C.O. Nos.55 & 57/Chny/2019 case, submission of the appellant and perused the penalty order. I find that the appellant has mainly submitted that they had disclosed all the primary facts, thereby, they did not furnish any inaccurate particulars of income. Difference of opinion does not lead penalty under section 271(1)(c) of the IT Act. Mere disallowance of claim does not entail levy of penalty. It was further submitted that they had made complete disclosure of the facts in the return of income. Incorrect claim or the debatable claim does not attract penal provision. Disallowance under section 14A read with section 8D itself is a debatable on which divergent views are exist. Merely the claim or calculation of the appellant was not accepted would not attract penalty under section 271(l)(c). Further, merely on the facts that the appellant has not preferred an appeal against the order of the CIT(A) does not follow to the conclusion that the amount was concealed. The appellant themselves disallowed certain amount on account of expenditure incurred on earning exempt income. Thereby, the penalty levied by the AO was not justified. The appellant relied upon various case laws in support of their argument as mentioned in the written submission as discussed on para 4.1(supra). After careful consideration of the facts and circumstances of the case and the case laws retied upon by the appellant, I find merit in their argument that since all the primary facts were disclosed by the appellant, therefore, penalty levied under section 271(1)(c) merely on the disallowance on a debatable issue is not found to be sustainable as the appellant neither concealed the particulars of its income nor furnished inaccurate particulars of such income. Under these circumstances, the AO is directed to delete the penalty levied. 5. In the result, the appeal is allowed.” 6. The learned DR submitted that the learned CIT(A) has erred in deleting penalty levied by the Assessing Officer 10 ITA Nos. 596 & 1295/Chny/2018 & C.O. Nos.55 & 57/Chny/2019 u/s.271(1)(c) of the Act, in respect of disallowance of expenditure u/s.14A of the Act, without appreciating fact that facts of the case relied upon by the learned CIT(A) in the case of CIT vs. Reliance Petroproducts Pvt. Ltd. (supra) are altogether different from present case and thus, the learned CIT(A) ought not to have deleted penalty levied by the Assessing Officer in respect of disallowance of expenditure u/s.14A of the Act. 7. The learned A.R for the assessee, on the other hand, supporting order of the learned CIT(A) submitted that the learned CIT(A) has rightly apprised facts in light of the decision of the Hon'ble Supreme Court in the case of CIT vs. Reliance Petroproducts Pvt. Ltd. (supra), where it was clearly held that mere making claim which was not substantiated is not a ground for levying penalty u/s.271(1)(c) of the Act. In this regard, he relied upon decision of the ITAT., Chennai Bench in the case of ACIT Vs. S.Martin in ITA No.2382/Chny/2016 dated 05.10.2018. 11 ITA Nos. 596 & 1295/Chny/2018 & C.O. Nos.55 & 57/Chny/2019 8. We have heard both the parties, perused material available on record and gone through orders of the authorities below. The facts borne out from records clearly indicate that the assessee has disclosed primary facts in respect of various expenditure and income, including exempt income earned for the year. The facts borne out from records further indicate that the assessee has made suo motu disallowance of expenditure relatable to exempt income. However, the Assessing Officer was not satisfied with suo motu disallowance made by the assessee and has invoked Rule 8D of Income Tax Rules, 1962 to determine disallowance of expenses relatable to exempt income u/s.14A of the Income Tax Act, 1961. Therefore, from the facts borne out from records what is clear is that the assessee has disclosed necessary facts in relation to various expenses including expenditure relatable to exempt income for the year and thus, we are of the considered view that mere disallowance of expenditure u/s.14A by invoking Rule 8D of I.T. Rules, 1962 is not a ground to hold that the assessee has furnished inaccurate particulars of income. When the assessee makes a claim of any expenditure, it is for the authorities to 12 ITA Nos. 596 & 1295/Chny/2018 & C.O. Nos.55 & 57/Chny/2019 accept the claim in the return of income or not, but merely because the assessee had claimed expenditure which was not accepted or was not acceptable to the Revenue, that by itself would not attract penalty u/s.271(1)(c) of the Act. This principle is supported by decision of the Hon'ble Supreme Court in the case of CIT vs. Reliance Petroproducts Pvt. Ltd. (supra), where the Hon'ble Supreme Court under identical set of facts in light of disallowance of expenditure very clearly held that merely because claim of assessee was not accepted that by itself would not attract penalty u/s.271(1)(c) of the Income Tax Act, 1961. The ITAT., Chennai Bench in the case of ACIT Vs. S.Martin in ITA No.2382/Chny/2016 dated 05.10.2018 has considered an identical issue of levy of penalty for disallowance of expenditure u/s.14A of the Act, and by following decision of the Hon'ble Supreme Court in the case of CIT vs. Reliance Petroproducts Pvt. Ltd. (supra) held that when entire facts was available before the Assessing Officer, it cannot be said that there is concealment of income or furnishing of inaccurate particulars of income. The learned CIT(A) after considering relevant facts and also by following decision of the Hon'ble 13 ITA Nos. 596 & 1295/Chny/2018 & C.O. Nos.55 & 57/Chny/2019 Supreme Court in the case of CIT vs. Reliance Petroproducts Pvt. Ltd. (supra) has rightly deleted penalty levied by the Assessing Officer u/s.271(1)(c) of the Income Tax Act, 1961. Hence, we are inclined to uphold findings of the learned CIT(A) and dismiss appeal filed by the Revenue. ITA No. 1295/Chny/2018 (A.Y.2012-13): 9. The facts and issues involved in this appeal are identical to the facts and issues which we have already considered in ITA No.596/Chny/2018 for the assessment year 2011-12. The reasons given by us in the preceding paragraph shall mutatis mutandis apply, to this appeal as well. Therefore, for the similar reasons, we are inclined to uphold findings of the learned CIT(A) and dismiss appeal filed by the Revenue. Cross Objection Nos.55 & 57/Chny/2019:- 10. The assessee has filed cross objections for both assessment years and challenged penalty order passed by the Assessing Officer in light of notice issued u/s.274 r.w.s 271(1)(c) of the Act. 14 ITA Nos. 596 & 1295/Chny/2018 & C.O. Nos.55 & 57/Chny/2019 11. The learned A.R for the assessee, at the time of hearing, submitted that the assessee does not want to press cross objections filed for both assessment years and hence, cross objections filed by the assessee for both assessment years are dismissed as not pressed. 12. In the result, appeals filed by the Revenue and cross objections filed by the assessee are dismissed for both assessment years. Order pronounced in the open court on 31 st January, 2022 Sd/- Sd/- (महावीर संह) (जी. मंज ु नाथ) (Mahavir Singh) (G. Manjunatha ) उपा य / Vice-President लेखा सद%य / Accountant Member चे'नई/Chennai, (दनांक/Dated 31 st January, 2022 DS आदेश क त*ल+प अ,े+षत/Copy to: 1. Appellant 2. Respondent 3. आयकर आय ु -त (अपील)/CIT(A) 4. आयकर आय ु -त/CIT 5. +वभागीय त न1ध/DR 6. गाड फाईल/GF.