Trans Asia Consultants Pvt. Ltd., New Delhi V. ACIT, New Delhi

ITA 141/DEL/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 77703 (ITAT-DELHI)
• Duration Of Justice: 44 year(s) 4 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-05-2014
• Appeal Filed By: Assessee
• Assessment Year: misc
• Appeal Filed On: 01-01-1970
• Court: TRIBUNAL
• Department Lawyers: GAGAN SOOD
• Keywords: Cost of acquisition; Difference of opinion; Onus to prove
• Section: 143(3); 14A; 27

Judgement Text

ITA NO.141/DEL/2013 ASSTT.YEAR: 2008-09 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH `H NEW DELHI BEFORE SHRI B.C.MEENA, ACCOUNTANT MEMBER AND SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER I.T.A.NO.141/DEL/2013 ASSESSMENT YEAR : 2008-09 TRANS ASIA CONSULTANT PVT. LTD., VS ASSTT.CO MMISSIONER OF INCOME TAX, 202, AKASH DEEP BUILDING, CIRCLE-16(1), NEW DEL HI. 26-A, BARAKHAMBA ROAD, NEW DELHI. (PAN:AAACT0696C) (APPELLANT) (RESPONDENT ) APPELLANT BY: SHRI SAN DEEP SAPRA RESPONDENT BY : SHRI GAGAN SOOD, SR.DR O R D E R PER CHANDRAMOHAN GARG, J.M. THIS APPEAL HAS BEEN PREFERRED BY THE ASSESSEE AGA INST THE ORDER OF COMMISSIONER OF INCOME TAX(A)-XIX, NEW DELHI DATED 12.10.2012 IN APPEAL NO. 28/2011-12 FOR AY 2008-09 BY WHICH PENAL TY ORDER DATED 28.06.2011 PASSED U/S 271(1)(C) OF THE INCOME TAX A CT, 1961 (FOR SHORT THE ACT) HAS BEEN UPHELD BY DISMISSING FIRST APPEAL OF THE ASSESSEE. 2. THE SOLE GROUND RAISED BY THE ASSESSEE IN TH IS APPEAL READS AS UNDER:- THAT PENALTY AS IMPOSED AT RS.2,70,8321- U/S 271 (1)(C) OF 1.T. ACT BY THE LD. AO AND CONFIRMED BY THE LD. CIT(A) IS ARBITRARY, UNJUST AND ILLEGAL ON VARI OUS FACTUAL AND LEGAL GROUNDS INCLUDING THE FOLLOWING: ITA NO.141/DEL/2013 ASSTT.YEAR: 2008-09 2 A) THE APPELLANT HAD NOT FURNISHED INACCURATE PARTICULARS OF ITS INCOME NOR HAD CONCEALED THE PARTICULARS OF ITS INCOME. B) VARIOUS OBSERVATIONS MADE BY THE AUTHORITIES BE LOW IN THEIR RESPECT ORDERS ARE EITHER INCORRECT OR ARE UNTENABLE. C) IT IS NOT A FIT CASE FOR IMPOSING OF PENALTY U/S 271 (1)(C) OF THE I.T. ACT D)THE AUTHORITIES BELOW HAD EITHER IGNORED OR HAD N OT GIVEN DUE WEIGHT TO THE SUBMISSIONS MADE BY THE APPELLANT TO THE EFFECT THAT IT WAS NOT A FIT CASE FOR IMPOSITION OF PENALTY. 3. BRIEF FACTS GIVING RISE TO THIS APPEAL ARE THAT THE ASSESSEE FILED ITS RETURN OF INCOME ON 30.09.2008 DECLARING TOTAL INCO ME OF RS.2,99,79,843/-. SUBSEQUENTLY, THE CASE WAS SELECTED FOR SCRUTINY AN D AS PER ASSESSMENT ORDER DATED 20.12.2010, THE INCOME OF THE ASSESSEE COMPAN Y WAS ENHANCED BY MAKING ADDITION OF RS.7,91,804/- ON ACCOUNT OF DISA LLOWANCE U/S 14A OF THE ACT AND RS.4997/- AS INTEREST ON DELAYED PAYMENT. CONSEQUENTLY, THE ASSESSING OFFICER INITIATED PENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT. THE ASSESSING OFFICER REJECTED THE EXPLANATION OF T HE ASSESSEE AND IMPOSED IMPUGNED PENALTY WITH FOLLOWING OBSERVATIONS AND FI NDINGS:- (III) FROM THE PLAIN READING OF THESE PROVISIONS I T IS CLEAR THAT IF THE FOLLOWING CONDITIONS ARE FULFILL ED, PENALTY U/S 271(1)(C) SHOULD BE IMPOSED:- ITA NO.141/DEL/2013 ASSTT.YEAR: 2008-09 3 A. THE ASSESSEE SHOULD HAVE CONCEALED THE PARTICULARS OF HIS INCOME OR SHOULD HAVE FURNISHED INACCURATE PARTICULARS OF INCOME. B. IF IN RESPECT OF ANY FACTS MATERIAL TO THE COMPUTATION OF THE TOTAL INCOME, THE ASSESSEE OFFER S AN EXPLANATION WHICH IS FOUND BY THE (ASSESSING) OFFIC ER TO BE FALSE, THEN THE AMOUNT ADDED OR DISALLOWED IS DE EMED TO REPRESENT THE INCOME IN RESPECT OF WHICH PARTIC ULARS HAVE BEEN CONCEALED. THEREFORE, THE CASE OF THE ASSESSEE IS SQUARELY COV ERED UNDER EXPLANATION TO SECTION 271(1)(C). 3.2 IT HAS BEEN HELD IN THE CASE OF CIT VS. ROA DMASTER INDUSTRIES OF INDIA LTD. (2005) 94 TTJ (CHD.) 859/1 48 TAXMAN 18 (MAG.) THAT THE BURDEN TO PROVE THAT THE EXPLANATION OFFERED BY HIM ABOUT A PARTICULAR INCOME/EXPENDITURE OR NAY DEDUCTION CLAIMED IS CORR ECT LIES UPON THE ASSESSEE. IN THE INSTANT CASE, THE A SSESSEE CLAIMED INCORRECT EXPENSES WHICH COULD NOT BE SUBSTANTIATED DURING THE ASSESSMENT PROCEEDINGS. 4. IN FURNISHING ITS RETURN OF INCOME; AS ASSESSE E IS REQUIRED TO FURNISH PARTICULARS ARID ACCOUNTS ON WH ICH SUCH RETURNED INCOME HAS BEEN ARRIVED AT. THESE MAY BE PARTICULARS AS PER ITS BOOKS OF ACCOUNT IF IT HAS MAINTAINED THEM, OR ANY OTHER BASIS UPON WHICH IT H AS ARRIVED AT THE RETURNED FIGURE OF INCOME. ANY INACC URACY MADE IN SUCH BOOKS OF ACCOUNT OR OTHERWISE WHICH RE SULTS IN KEEPING OFF OR HIDING A PORTION OF ITS INCOME IS PUNISHABLE AS FURNISHING INACCURATE PARTICULARS OF ITS INCOME COMMISSIONER OF INCOME TAX V. INDIAN METAL & FERRO ALLOYS LTD. (1994) 117 CTR (ORI.) 378. 5. FURTHER, RELIANCE IS ALSO PLACED ON THE JUDGME NT OF APEX COURT IN THE CASE UNION OF INDIA VS. DHARMENDR A TEXTILES PROCESSORS { 2008} 166 TAXMAN 65 (SC) WHER EIN I1 HAS BEEN HELD THAT PENALTY UNDER SECTION 271 (1 )(C) IS ITA NO.141/DEL/2013 ASSTT.YEAR: 2008-09 4 CIVIL LIABILITY AND FOR ATTRACTING SUCH CIVIL LIABI LITY, WILLFUL CONCEALMENT IS NOT AN ESSENTIAL INGREDIENT. 4. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFO RE THE COMMISSIONER OF INCOME TAX(A) WHICH WAS ALSO DISMISSED BY THE IM PUGNED ORDER. NOW, THE EMPTY HANDED ASSESSEE IS BEFORE THIS TRIBUNAL I N THE SECOND APPEAL WITH THE GROUNDS AS MENTIONED HEREINABOVE. 5. THE COMMISSIONER OF INCOME TAX(A) DISMISSED THE APPEAL OF THE ASSESSEE WITH FOLLOWING FINDINGS:- 12. AS DISCUSSED IN THE ABOVE PARAS, THIS IS NOT A CASE WHERE THE EXPLANATION GIVEN WAS BONA FIDE AND THERE WAS FULL DISCLOSURE OF FACTS. THE APPELLANT HAS STATED THAT THE DISALLOWANCE MADE HAS NOT BEEN CHALLENGED IN APPEAL . THEREFORE, THE DISALLOWANCE HAS ATTAINED FINALITY. IN VIEW OF THESE FACTS THE RATIO OF RELIANCE PETROPRODUCTS IS NOT APPLICABLE IN THIS CASE. 13. THE ABOVE DISCUSSION SHOWS THAT THIS IS NOT A CASE WHERE THE EXPLANATION GIVEN WAS BONA FIDE AND THERE WAS FULL DISCLOSURE OF FACTS. THE DISALLOWANCE MADE HAS NOT BEEN CHALLENGED IN APPEAL AND HAS THEREFORE ATTAINE D FINALITY. UNDER THE PRESENT SYSTEM, ONLY A VERY SMA LL PERCENTAGE OF RETURNS IS PICKED UP FOR SCRUTINY. HA D THIS CASE NOT BEEN PICKED UP FOR SCRUTINY, AND HAD THE A .O. NOT EXAMINED THE MATTER FURTHER, THE NECESSARY DISALLOW ANCE WOULD NOT HAVE BEEN MADE AND THE APPELLANT'S FAILUR E TO MAKE THE MANDATORY DISALLOWANCE WOULD NOT HAVE COME TO LIGHT. THE PROVISIONS OF EXPLANATION 1 TO SECTION 2 71 (1)(C) ARE CLEARLY APPLICABLE. THE PENALTY U/S 271(1)(C) I MPOSED IS THE MINIMUM IMPOSABLE IN THIS CASE. CONSIDERING THE FACTS, THE PENALTY U/S 271 (1)(C) IS JUSTIFIED AND IS UPHELD. ITA NO.141/DEL/2013 ASSTT.YEAR: 2008-09 5 6. WE HAVE HEARD RIVAL ARGUMENTS OF BOTH THE PARTIE S AND CAREFULLY PERUSED THE RECORD INCLUDING THE PAPER BOOK FILED B Y THE ASSESSEE, SPREAD OVER 53 PAGES, WRITTEN SYNOPSIS AND DECISIONS OF IT AT DELHI E BENCH IN ITA NO. 5999/DEL/2012 IN THE CASE OF ACIT VS MAHESH JAIN DATED 14.6.2013; DECISION OF ITAT C BENCH DELHI IN ITA NO. 4819/DEL/12 DATED 28.6.2013 IN THE CASE OF ACIT VS GLOBAL ASSOCIATES; DECISION OF ITAT AMRITSAR BENCH IN THE CASE OF DCIT VS MAX INDIA LTD . IN ITA NO. 94/(ASR)/2011 DATED 19.3.2013 AND DECISION OF ITAT DELHI F BENCH IN ITA NO. 3805/DEL/2010 IN THE CASE OF DCIT VS NALWA INVESTMENTS LTD. DATED 29.10.2010. 7. LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT THE A SSESSING OFFICER MADE DISALLOWANCE BY INVOKING SECTION 14A OF THE ACT R/W RULE 8D OF THE INCOME TAX RULES 1962 ON THE BASIS OF DETAILS ENCLOSED WIT H THE RETURN OF INCOME AS WELL AS SUBMISSIONS OF THE ASSESSEE DATED 3.12.2010 . THE COUNSEL FURTHER SUBMITTED THAT THE ASSESSEE DID NOT FILE AN APPEAL BEFORE THE COMMISSIONER OF INCOME TAX(A) TO AVOID EXPENDITURE ON LITIGATION AND UNDER A BONA FIDE BELIEF THAT NO PENALTY U/S 271(1)(C) WOULD BE IMPOS ED. LD. COUNSEL FURTHER SUBMITTED THAT THE ASSESSING OFFICER LEVIED PENALTY ON THE WRONG PREMISE BECAUSE THE ASSESSEE HAS NEITHER CONCEALED PARTICUL ARS OF ITS INCOME NOR FURNISHED INACCURATE PARTICULARS OF INCOME. THE CO UNSEL POINTED OUT THAT NO ITA NO.141/DEL/2013 ASSTT.YEAR: 2008-09 6 PENALTY PROCEEDING COULD BE INITIATED ON DISALLOWAN CE OF RS.4997/- WITH REGARD TO INTEREST ON DELAYED PAYMENT IN THE ASSESS MENT ORDER U/S 143(3) OF THE ACT BECAUSE IT WAS AN INADVERTENT AND BONAFIDE ERROR ON THE PART OF THE ASSESSEE IN NOT ADDING BACK MEAGRE AMOUNT KEEPING I N MIND THAT THE ASSESSEE HAD FILED THE RETURN DECLARING INCOME OF A ROUND RS. 3 CRORE. IN THIS CASE, THE ASSESSEE HAS PLACED RELIANCE ON THE DECIS ION OF HONBLE SUPREME COURT IN THE CASE OF PRICE W ATER COOPERS P. LTD. VS C.I.T., KOLKATA (2012) 348 ITR 306 (SC) WHEREIN IT WAS HELD THAT THE IMPOSITION OF PENALTY ON THE ASSESSEE IS NOT JUSTIFIED WHEN THE ASSESSEE HAD COMMITTED INADVERTENT ERROR AND HAD NOT INTENDED TO OR ATTEMPTED TO EITHE R CONCEAL ITS INCOME OR FURNISH INACCURATE PARTICULARS OF ITS INCOME. 8. THE COUNSEL VEHEMENTLY ARGUED THAT IT IS A WELL- SETTLED LAW THAT THE PENALTY PROCEEDINGS ARE INDEPENDENT WHICH ARE DISTI NCT AND DIFFERENT FROM ASSESSMENT PROCEEDINGS AND WHEN ASSESSEE HAS NOT PR EFERRED ANY APPEAL AGAINST THE ASSESSMENT ORDER TO BUY PEACE OF MIND A ND TO AVOID LITIGATION EXPENSES, THEN FINDINGS IN THE ASSESSMENT ORDER FOR THE PURPOSE OF PENALTY PROCEEDINGS ARE NOT CONCLUSIVE. THE COUNSEL FURTHE R SUBMITTED THAT THE ENTIRE MATERIAL, FACTS AND CIRCUMSTANCES SHOULD BE CONSIDERED AFRESH BEFORE IMPOSING PENALTY AND PENALTY CANNOT BE IMPOSED ON T HE BASIS OF FINDINGS IN THE QUANTUM PROCEEDINGS. ITA NO.141/DEL/2013 ASSTT.YEAR: 2008-09 7 9. THE COUNSEL OF THE ASSESSEE FURTHER SUBMITTED TH AT THE AUTHORITIES BELOW HAD EITHER IGNORED OR HAD NOT GIVE DUE WEIGHT AGE TO THE SUBMISSIONS OF THE ASSESSEE DURING THE PENALTY PROCEEDINGS. TH E COUNSEL SUBMITTED THAT THE PENALTY CAN BE LEVIED ON FULFILLMENT OF TWO CON DITIONS, FIRST THE ASSESSEE SHOULD HAVE CONCEALED THE PARTICULARS OF HIS INCOME OR SHOULD HAVE FURNISHED INACCURATE PARTICULARS OF HIS INCOME AND SECONDLY, IN RESPECT OF ANY FACTS MATERIAL TO THE COMPUTATION OF TOTAL INCOME, THE AS SESSEE OFFERS AN EXPLANATION WHICH IS FOUND TO BE FALSE, THEN THE AM OUNT ADDED OR DISALLOWED IS DEEMED TO REPRESENT AN INCOME IN RESPECT OF WHIC H PARTICULARS HAVE BEEN CONCEALED. THE COUNSEL OF THE ASSESSEE HAS PLACED H IS RELIANCE ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF RELIANCE PETROPRODUCTS PVT. LTD. REPORTED AS (2010)189 TAXMA N 322 (SC). 10. ON CAREFUL CONSIDERATION OF ABOVE SUBMISSIONS, AT THE OUTSET, WE OBSERVE THAT THE ASSESSEE PLACED ALL DETAILS AND MA TERIAL BEFORE THE ASSESSING OFFICER WITH THE RETURN OF INCOME. DURING THE ASSE SSMENT PROCEEDINGS, THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAS PA ID INTEREST ON DELAYED PAYMENT OF TDS AMOUNTING TO RS.4997/- AND DISALLOWE D THE SAME. WE FURTHER OBSERVE THAT DURING THE ASSESSMENT PROCEEDI NGS WHEN THE ASSESSING OFFICER ASKED FOR DETAILS ABOUT PROPOSED DISALLOWAN CE U/S 14A OF THE ACT, ITA NO.141/DEL/2013 ASSTT.YEAR: 2008-09 8 R/W 8D OF THE INCOME TAX RULES, THEN ASSESSEE IN IT S REPLY DATED 3.12.2010 SUBMITTED AS UNDER:- 11. WITH REFERENCE TO YOUR GOODSELFS SHOW CAUSE NOTICE FOR DISALLOWANCE OF 'EXPENSES ATTRIBUTABLE F OR EARNING TAX FREE INCOME' AS PER RULE 8-D OF THE INC OME TAX RULES, 1962, AS PROVIDED UNDER SECTION 14-A OF THE INCOME TAX ACT, 1961, WE GIVE BELOW THE DETAILS WOR KING THEREOF FOR YOUR KIND PERUSAL:- I) THAT THE ASSESSEE COMPANY HAD NOT INCURRED ANY DIRECT EXPENDITURE FOR EARNING TAX FREE INCOME OF R S. 1,19,033/- AS DIVIDEND ON SHARES/MUTUAL FUND AND RS . 382,690/-AS INTEREST ON HUDCO & ARS BONDS, AND THUS NO DISALLOWANCE THERETO COULD BE MADE; II. THAT THE ASSESSEE COMPANY HAD NOT MADE ANY INVESTMENT IN SHARES/MUTUAL FUND AND/OR TAX FREE BO NDS OUT OF LOANS BEARING FUNDS AND THUS THE QUESTION OF DISALLOWANCE OF INTEREST, IF ANY, DOES NOT ARISE. W E MAY ADD HERE THAT THE ASSESSEE COMPANY HAD RAISED FUND FOR AN IPO AND PAID INTEREST OF RS. 5.94 LACS AND THE SAME DISALLOWABLE U/S 36(1)(III) AND FORMED PART OF COST OF ACQUISITION OF SHARES ACQUIRED UNDER IPQ WHICH PLEA SE NOTE. APART FROM ABOVE, THE ASSESSEE COMPANY HAD NO T PAID ANY INTEREST AND THUS DISALLOWANCE AS PER RULE 8D DOES NOT ARISE; AND ; III) DISALLOWANCE TO BE MADE OUT OF OVERHEAD EXPEN SES EQUAL TO ONE-HALF PERCENT OF THE AVERAGE VALUE OF INVESTMENT, AS APPEARING IN THE BALANCE SHEET ON TH E FIRST DAY AND THE LAST DAY OF THE PREVIOUS YEAR, AS PER D ETAILS BELOW:- PARTICULARS 3 1.03.2008 31.03.2007 INVESTMENT AS PER BALANCE SHEET - SHARES/MUTUAL FUNDS/BONDS ETC. 4,83,41,474 3,05,33,813 TOTAL OF THE TWO COMES TO RS.7,88 ,75,388/- AVERAGE THEREOF WORKED OUT TO RS.3,94,37,694/- 1/2% THEREOF ARRIVED AT RS. 1,97,188/- ITA NO.141/DEL/2013 ASSTT.YEAR: 2008-09 9 WHICH PLEASE NOTE AND THE SAME TO BE DISALLOWED U/S 14-A OF THE INCOME TAX ACT, 1961. 11. FROM THE ABOVE, WE CLEARLY OBSERVE THAT THE DIS ALLOWANCES MADE BY THE ASSESSING OFFICER WERE BASED ON THE SAME MATERI AL WHICH WAS PLACED BEFORE THE ASSESSING OFFICER WITH THE RETURN OF INC OME AND FROM BARE READING OF THE ASSESSMENT ORDER, WE OBSERVE THAT TH E ASSESSING OFFICER MADE IMPUGNED DISALLOWANCE WITH THE FOLLOWING OBSERVATIO NS WHEREIN THE ASSESSING OFFICER HAS NOTED THAT THE ASSESSEE COMPA NY HAS OFFERED DISALLOWANCES. THE RELEVANT PART OF ASSESSMENT ORD ER READS AS UNDER:- THE ASSESSEE HAS MADE CERTAIN INVESTMENTS IN SHARES/MUTUAL FUNDS/BONDS ETC. OUT OF THE FUNDS EIT HER BORROWED BY THE ASSESSEE OR FROM COMPANY OWN SOURC ES. SINCE, THESE INVESTMENTS HAVE YIELDED AN EXEMPTED I NCOME AMOUNTING TO RS. 1,19,033/- AND RS. 3,82,690/- ON A CCOUNT OF INTEREST ON HUIDCO & ARS BOND WHICH DOES NOT FOR M PART OF INCOME OF THE ASSESSEE, THE EXPENDITURES AR E REQUIRED TO BE DISALLOWED UNDER THE PROVISIONS OF S ECTION 14A OF THE ACT. HENCE, DURING THE COURSE OF ASSESSM ENT PROCEEDINGS, THE ASSESSEE WAS SPECIFICALLY ASKED TO SHOW CAUSE AS TO WHY EXPENSES SHOULD NOT BE DISALLOWED FOLLOWING THE PROVISIONS OF SECTION 14A OF THE IT A CT READ WITH RULE 8D OF IT RULES. IN RESPONSE TO THIS, THE ASSESSEE FILED REPLY VIDE LETTER DATED 03/12/2010 AND OFFERE D THE TOTAL DISALLOWANCES U/S 14A AMOUNTING TO RS.1,97,18 8/-. AFTER CONSIDERING THE AFORESAID REPLY OF THE ASSESS EE, IT IS FOUND THAT REPLY FILED BY THE ASSESSEE ON THE ISSUE UNDER CONSIDERATION FULFIL THE REQUIREMENTS LAID DO WN IN SECTION 14A OF THE ACT, R/W RULE 8D OF THE RULES AN D ITA NO.141/DEL/2013 ASSTT.YEAR: 2008-09 10 FURTHER THE ASSESSEE COMPANY HAS OFFERED THE DISALLOWANCES. 12 . IN THE CASE OF SHRI MANISH JAIN (SUPRA), ITAT DELHI E BENCH, BY UPHOLDING THE ORDER OF COMMISSIONER OF INCOME TAX(A ) WHICH CANCELLED THE PENALTY, OBSERVED AS UNDER:- 9. EVEN ON MERITS, WE FIND THAT LD. COMMISSIONER O F INCOME TAX (A) HAS PASSED A REASONABLE ORDER. THE PENALTY IN THIS CASE HAS BEEN LEVIED ON ACCOUNT OF DISALLOWANCE MADE IN ACCORDANCE WITH RULE 8D READ W ITH SECTION 14A. THERE HAS BEEN NO CONCEALMENT OR FURNI SHING OF INACCURATE PARTICULARS BY THE ASSESSEE IN THIS C ASE. THE DISALLOWANCE HAS BEEN MADE BY COMPUTING THE SUMS WH ICH WERE DULY DISCLOSED IN THE RETURN AND ACCOUNTS OF T HE ASSESSEE. WE FIND THAT SECTION 271(1)(C) POSTULATES IMPOSITION OF PENALTY FOR FURNISHING OF INACCURATE PARTICULARS AND CONCEALMENT OF INCOME.' HENCE, IN O UR CONSIDERED OPINION ON THE FACTS AND CIRCUMSTANCES O F THIS CASE THE ASSESSEE'S CONDUCT CANNOT BE SAID TO BE CONTUMACIOUS SO AS TO WARRANT LEVY OF PENALTY. HENC E, WE HOLD THAT THERE IS NO INFIRMITY IN THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (A) AND THE SAME DESERVE S TO BE UPHELD. 10. WHILE COMING TO THE AFORESAID CONCLUSION, WE PL ACE RELIANCE FROM THE APEX COURT DECISION RENDERED BY A LARGER BENCH COMPRISING OF THREE OF THEIR LORDSHIPS IN THE CASE OF HINDUSTAN STEEL VS. STATE OF ORISSA IN 83 I TR 26 WHEREIN IT WAS HELD THAT AN ORDER IMPOSING PENALTY FOR FAILURE TO CARRY OUT A STATUTORY OBLIGATION IS THE RESULT OF A QUASI-CRIMINAL PROCEEDINGS, AND PENALTY WILL NOT ORDINARILY BE IMPOSED UNLESS THE PARTY OBLIGED EITH ER ACTED DELIBERATELY IN DEFIANCE OF LAW OR WAS GUILTY OF CO NDUCT CONTUMACIOUS OR DISHONEST, OR ACTED IN CONSCIOUS DISREGARD OF ITS OBLIGATION. PENALTY WILL NOT ALSO BE IMPOSED MERELY BECAUSE IT IS LAWFUL TO DO SO. WHETH ER ITA NO.141/DEL/2013 ASSTT.YEAR: 2008-09 11 PENALTY SHOULD BE IMPOSED FOR FAILURE TO PERFORM A STATUTORY OBLIGATION IS A MATTER OF DISCRETION OF T HE AUTHORITY TO BE EXERCISED JUDICIALLY AND ON A CONSI DERATION OF ALL THE RELEVANT CIRCUMSTANCES. EVEN IF A MINIMU M PENALTY IS PRESCRIBED, THE AUTHORITY COMPETENT TO I MPOSE THE PENALTY WILL BE JUSTIFIED IN REFUSING TO IMPOSE PENALTY, WHEN THERE IS A TECHNICAL OR VENIAL BREACH OF THE P ROVISIONS OF THE ACT, OR WHERE THE BREACH FLOWS FROM A BONAFI DE BELIEF THAT THE OFFENDER IS NOT LIABLE TO ACT IN TH E MANNER PRESCRIBED BY THE STATUTE.' 11. WE FURTHER PLACE RELIANCE UPON THE HON'BLE APEX COURT DECISION IN THE CASE OF CIT VS. RELIANCE PETRO PROD UCTS LTD, IN CIVIL APPEAL NO, 2463 OF 2010. IN THIS CASE VIDE ORDER DATED 17.3,2010 IT HAS BEEN HELD THAT THE LAW LAID DOWN IN THE DILIP SHEROFF CASE 291 ITR 519 (SC) AS TO THE MEANING OF WORD 'CONCEALMENT' AND 'INACCURATE' CONT INUES TO BE A GOOD LAW BECAUSE WHAT WAS OVERRULED IN THE DHARMENDER TEXTILE CASE WAS ONLY THAT PART IN DILIP SHEROFF CASE WHERE IT WAS HELD THAT MENSREA WAS A ESSENTIAL REQUIREMENT OF PENALTY U/S 271(1)(C). THE HON'BLE APEX COURT ALSO OBSERVED THAT IF THE CONTENTION OF THE REVENUE IS ACCEPTED THEN IN CASE OF EVERY RETURN WH ERE THE CLAIM IS NOT ACCEPTED BY THE ASSESSING OFFICER FOR ANY REASON, THE ASSESSEE WILL INVITE THE PENALTY U/S 27 1(1)(C). THIS IS CLEARLY NOT THE INTENDMENT OF LEGISLATURE. 13. IN THE CASE OF ACIT VS GLOBAL ASSOCIATE (SUPRA) , THE PENALTY WAS ALSO CANCELLED PERTAINING TO THE ADDITION MADE U/S 14(A) (IA) AND SECTION 14A OF THE ACT BY RESPECTFULLY FOLLOWING THE DECISION OF H ONBLE SUPREME COURT IN THE CASE OF COMMISSIONER OF INCOME TAX VS RELIANCE PETROPRODUCTS PVT. LTD. (SUPRA) AND PRICE WATERHOUSE COOPERS P.LTD. VS COMMISSIONER OF INCOME TAX (SUPRA). WE FURTHER OBSERVE THAT THE IT AT AMRITSAR BENCH IN ITA NO.141/DEL/2013 ASSTT.YEAR: 2008-09 12 THE CASE OF DCIT VS M/S MAX INDIA LIMITED DELETED T HE PENALTY PERTAINING TO THE DISALLOWANCE U/S 14A OF THE ACT WITH FOLLOWING OBSERVATIONS:- 23. WE ARE OF THE VIEW THAT THE AFORESAID DECISIO N SQUARELY APPLIES TO THE FACTS OF THE PRESENT CASE. EVEN IF IT IS ASSUMED THAT THE ASSESSEE MADE INCORRECT CLAIM O F THE EXPENDITURE BY NOT OFFERING ANY AMOUNT OF DISALLOWA NCE U/S 14A, THE FACT REMAINS THAT THERE WAS NO FILING OF I NACCURATE PARTICULARS OF INCOME SINCE THERE WAS NOT FACTUAL INACCURACY IN THE INFORMATION OR DETAILS REGARDING VARIOUS EXPENSES FILED ALONGWITH THE RETURN OF INCOME/OR DU RING THE ASSESSMENT PROCEEDINGS. THERE IS, IN FACT, NO SUCH FINDING IN THE ASSESSMENT ORDER. AS HELD BY THE HON'BLE SUP REME COURT THAT MERE MAKING OF THE CLAIM WHICH IS NOT SUSTAINABLE IN LAW, WILL NOT AMOUNT TO FURNISHING O F INACCURATE PARTICULARS OF INCOME AND SUCH CLAIM MAD E IN THE RETURN CANNOT AMOUNT TO FURNISHING OF INACCURAT E PARTICULARS. 23.1 FURTHER, MERELY BECAUSE NO APPEAL WAS FILED BY THE ASSESSEE AGAINST AO'S ORDER DOES NOT LEAD TO ANY AD VERSE INFERENCE THAT THE ASSESSEE HAS FILED INACCURATE PA RTICULARS OF INCOME RELATION TO ADDITION/DISALLOWANCE MADE BY THE A.O. THERE IS SUFFICIENT AUTHORITY FOR THE PROPOSIT ION TO WHICH REFERENCE HAS BEEN MADE BY THE LD. COUNSEL FO R THE ASSESSEE HEREINABOVE. 23.2 ACCORDINGLY, WE ARE OF THE VIEW THAT PENALTY L EVIED UNDER SECTION 271(1)(C) IS NOT SUSTAINABLE AND WE F IND NO INFIRMITY IN THE ORDER OF THE LD. COMMISSIONER OF I NCOME TAX(A), WHO HAS RIGHTLY CANCELLED THE PENALTY LEVIE D BY THE A.O. THUS ALL THE GROUNDS OF THE REVENUE ARE DISMI SSED. 14. THE ITAT DELHI F BENCH IN THE CASE OF DCIT VS NALWA INVESTMENTS LTD. (SUPRA) CANCELLED THE PENALTY IMPOSED ON THE A SSESSEE PERTAINING TO THE ITA NO.141/DEL/2013 ASSTT.YEAR: 2008-09 13 DISALLOWANCE U/S 14A OF THE ACT. THE RELEVANT OBSE RVATIONS AND FINDINGS ARE AS UNDER:- 5. WE HAVE CONSIDERED THE FACTS OF THE CASE AND SUBMISSIONS MADE BEFORE US. THE FACTS OF THE CASE A RE THAT THE ASSESSEE CLAIMED PAYMENT OF BANK INTEREST AND CHARGES AMOUNTING TO RS.1,10,02,323/-. CERTAIN OTHE R EXPENSES WERE ALSO CLAIMED. BESIDES INTEREST INCOME OF RS.14,38,977/-, THE ASSESSEE EARNED DIVIDEND INCOME ON INVESTMENT IN SHARES. SUCH INVESTMENT AMOUNTED TO RS.1,19,90,011/-. THE DIVIDEND INCOME WAS NOT LIABL E TO BE TAXED IN VIEW OF THE PROVISIONS CONTAINED IN SEC TION 10(34) OF THE ACT. THE AO WAS OF THE VIEW THAT THE NET INTEREST OF RS.95,63,346/-, DEMAT CHARGES OF RS. 60 /- AND PROPORTIONATE EXPENSES AMOUNTING TO RS.11,70941/- W ERE NOT DEDUCTIBLE IN COMPUTING THE TOTAL INCOME BY DIN T OF THE PROVISION CONTAINED IN SECTION 14A, AS SUCH EXP ENSES RELATED TO EARNING OF TAX-FREE INCOME. THE EXPLANAT ION OF THE ASSESSEE WAS TWO-FOLD (I) THE ASSESSEE WAS PRI MARILY HOLDING SHARES IN SELECTED COMPANIES OF JINDAL GROU P WITH THE INTENTION TO ACQUIRE AND RETAIN CONTROLLIN G STAKE IN THEM, AND (II) THE COMPUTATION OF DISALLOWANCE U /S 14A INVOLVES CONSIDERABLE DEBATE AND TWO VIEWS ARE ALWA YS POSSIBLE. ON CAREFUL CONSIDERATION OF VARIOUS CASES RELIED UPON BY THE ASSESSEE, IT IS FOUND THAT THREE MAJOR PROPOSITIONS ARISE THEREFROM (A) PENALTY PROCEEDIN GS ARE QUASI-CRIMINAL IN NATURE AND, THEREFORE, IT IS FOR THE REVENUE TO ESTABLISH CONTUMACIOUS CONDUCT ON THE PA RT OF THE ASSESSEE; (B) IF ALL FACTS IN RESPECT OF A CLAI M HAVE BEEN FURNISHED FULLY AND CORRECTLY AND NO FALSITY I S FOUND THEREIN, THEN, THE CLAIM MADE ON THE BASIS OF SUCH FACTS DOES NOT LEAD TO INFERENCE OF CONCEALMENT OF INCOME AND (C) THE PENALTY IS NOT LEVIABLE WHEN THERE IS HONES T DIFFERENCE OF OPINION BETWEEN THE ASSESSEE AND THE AUTHORITIES IN RESPECT OF ADMISSIBILITY OF A CLAIM. 5.1 IN SO FAR AS PROPOSITION AT (A) ABOVE IS CONCER NED, THE SAME STANDS DISPLACED BY THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF UNION OF INDIA VS. ITA NO.141/DEL/2013 ASSTT.YEAR: 2008-09 14 DHARMENDRA TEXTILE PROCESSORS (2008) 306 ITR 277. I T HAS BEEN HELD IN THIS CASE THAT THE PENALTY IS LEVI ED FOR COMPENSATING THE REVENUE ON ACCOUNT OF A WRONG CLAI M MADE BY THE ASSESSEE AND IT IS CIVIL IN NATURE. CO MING TO THE PROPOSITION AT (B) ABOVE, CLAIM OF INTEREST AND EXPENDITURE FINDS A MENTION IN THE PROFIT AND LOSS ACCOUNT. AS SUCH NO FURTHER FACTS HAVE BEEN FURNISH ED. NO COMPUTATION OF DISALLOWANCE WAS MADE U/S 14A AS NO DISALLOWANCE WAS MADE IN THE RETURN OF INCOME. HOWEVER, THE ACCOUNTS HAVE BEEN AUDITED AND THE RET URN WAS ACCOMPANIED BY THE TAX AUDIT REPORT. THE LATTER DID NOT SUGGEST ANY DISALLOWANCE U/S 14A. THEREFORE, IT CAN BE INFERRED THAT ALL EXPENSES WERE CLAIMED IN FULL AS THE AUDITORS DID NOT SUGGEST DISALLOWANCE OF ANY PART O F THE EXPENDITURE RELATING IT TO THE DIVIDEND INCOME. THU S, IT CAN BE CONCLUDED THAT THE CLAIM WAS MADE ON THE BAS IS OF TAX AUDIT REPORT. THERE IS NO ALLEGATION BY THE ASS ESSING OFFICER THAT THERE WAS ANY COLLUSION BETWEEN THE AU DITOR AND THE ASSESSEE TO ENHANCE THE LOSS IN THE RETURN OF INCOME BY IGNORING THE PROVISION CONTAINED IN SECTI ON 14A. THEREFORE, IT CAN BE SAID THAT THE ASSESSEE HA S FURNISHED AN EXPLANATION WHICH IS BONA FIDE. IN REG ARD TO PROPOSITION AT (C) ABOVE, THE FINDING OF THE LD. CI T(A) IS THAT THE DISALLOWANCE IS DISPUTABLE. THE SECTION, A S IT EXISTED AT THE TIME OF FILING THE RETURN, DOES CONT AIN A PROVISION FOR DISALLOWANCE OF EXPENDITURE WHICH IS RELATED TO NON-TAXABLE INCOME. THEREFORE, IT IS EXP ECTED OF ANY ASSESSEE TO ATTEMPT AT SEGREGATING EXPENDITU RE WHICH IS RELATED TO SUCH A CLAIM. NO ATTEMPT HAS BE EN MADE IN THIS BEHALF. HOWEVER, IT IS ALSO A FACT THA T SUCH SEGREGATION IS BESET WITH LOT OF PROBLEMS AS THE IS SUE HAS FINALLY BEEN LAID TO REST BY INTRODUCTION OF RULE 8 D IN THE INCOME-TAX RULES IN THE YEAR 2008. THE ASSESSEE DID NOT HAVE BENEFIT OF THIS RULE WHEN IT FILED THE RETURN OF INCOME. THEREFORE, EVEN IN ABSENCE OF ANY ATTEMPT O N THE PART OF THE ASSESSEE, IT CAN BE SAID THAT QUESTIONS OF DISALLOWANCE AND ITS QUANTIFICATION ARE QUITE DISPU TABLE AND CAN LEAD TO BONA FIDE DIFFERENCE IN OPINION BET WEEN THE ASSESSEE AND THE AUTHORITIES. IN SUCH A SITUATI ON, THE LEVY OF PENALTY WILL NOT BE JUSTIFIED. ITA NO.141/DEL/2013 ASSTT.YEAR: 2008-09 15 15. IN VIEW OF ABOVE, WE OBSERVE THAT THE AUTHORITI ES BELOW HAVE NOT RECORDED ANY FINDING THAT THE EXPLANATION OFFERED B Y THE ASSESSEE BEFORE THE ASSESSING OFFICER WAS FOUND TO BE FALSE AND IN THIS SITUATION, THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF RELIANCE PETRO PRODUCTS PVT. LTD. (SURPA) COMES INTO PLAY TO RESCUE THE ASSESSEE FROM PENALTY. RESPECTFULLY FOLLOWING THE ABOVE DECISION, WE HOLD THAT IF THE C ONTENTION OF THE REVENUE IS ACCEPTED, THEN IN THE CASE OF SHRI MANISH JAIN WHER E THE CLAIM IS NOT ACCEPTED BY THE ASSESSING OFFICER FOR ANY REASON, T HE ASSESSEE WILL INVITE THE PENALTY U/S 271(1)(C) OF THE ACT WHICH IS NOT THE I NTENTION OF THE LEGISLATURE. ACCORDINGLY, SOLE GROUND OF THE ASSESSEE IS ALLOWED AND PENALTY ORDER AS WELL AS IMPUGNED ORDER IS SET ASIDE BY DELETING THE PENALTY. 16. IN THE RESULT, THE APPEAL OF THE ASSESSE IS ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT ON 06.05.2014. SD/- SD/- (B.C. MEENA) (CHANDRA MOHAN GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER DT. 6TH MAY 2014 GS COPY FORWARDED TO:- 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR BY ORDER ASSTT. REGISTRAR