M/s. Ratnakar Securities Pvt. Ltd., Ahmedabad V. The ACIT, Circle-1(3), Ahmedabad

ITA 1764/AHD/2018

• Counselvise Citation: [2021] 109 COUNSELVISE.COM (IT) 7530 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 5 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-01-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2012-2013
• Appeal Filed On: 07-08-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R R MAKWANA
• Keywords: Business expenditure; Commercial expediency; Set aside
• Section: 271(1)(c)

Judgement Text

, B IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, AHMEDABAD ( CONVENED THROUGH VIRTUAL COURT ) BEFORE SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER & SHRI MAHAVIR PRASAD, JUDICIAL MEMBER ./ I.T.A. NO. 1764/AHD/2018 ( ASSESSMENT YEAR : 2012-13) M/S. RATNAKAR SECURITIES PVT. LTD. 304, SANKALP SQUARE II, NEAR JALARAM MANDIR CROSSING, ELLISBRIDGE- PALDI, AHMEDABAD 380006 / VS. ACIT CIRCLE-1(3), AHMEDABAD ./ ./ PAN/GIR NO. : AAACR7287D ( APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : NONE / RESPONDENT BY : SHRI R. R. MAKWANA, SR.D.R. DATE OF HEARING 19/01/2021 !'# / DATE OF PRONOUNCEMENT 22/01/2021 / O R D E R PER PRADIP KUMAR KEDIA - AM: THE CAPTIONED APPEAL HAS BEEN FILED AT THE INSTANCE OF THE ASSESSEE AGAINST THE ORDER OF THE COMMISSIONER OF I NCOME TAX (APPEALS)-10, AHMEDABAD (CIT(A) IN SHORT), DATED 23.07.2018 ARISING IN THE PENALTY ORDER DATED 27.03.2017 PASSE D BY THE ASSESSING OFFICER (AO) UNDER S. 271(1)(C) OF THE INCOME TAX A CT, 1961 (THE ACT) CONCERNING AY 2012-13. ITA NO. 1764/AHD/18 [M/S RATNAKAR SECURITIES PVT. LTD. VS. ACIT] A.Y. 2012-13 - 2 - 2. AS PER ITS GROUNDS OF APPEAL, THE ASSESSEE HAS C HALLENGED THE IMPOSITION OF PENALTY OF RS.46,600/- ON DISALLOWANC E OF DONATION AMOUNTING TO RS.1,50,620/-. 3. BRIEFLY STATED, THE ASSESSEE FILED RETURN OF INC OME DECLARING TOTAL INCOME AT RS.45,30,090/-. IN THE SCRUTINY ASSESSME NT, AN ADDITION OF RS.1,50,620/- WAS INTER ALIA MADE ON ACCOUNT OF DISALLOWANCE OF DONATION GIVEN TO JAIN DERASAR. THE AO NOTED THAT THE ASSESSEE HAS WRONGLY CLAIMED DONATION PAID AMOUNTING TO RS.1,50, 620/- AS BUSINESS EXPENDITURE. THE AO DISALLOWED THE AFORESAID CLAIM AND ALSO OBSERVED THAT THE DONATION GIVEN DOES NOT QUALIFY F OR DEDUCTION UNDER S.80G OF THE ACT. CONSEQUENTLY, ADDITION OF RS.1,5 0,620/- WAS INTER ALIA MADE TO THE TOTAL INCOME OF THE ASSESSEE AND PENAL TY UNDER S. 271(1)(C) WAS IMPOSED THEREON BY THE AO VIDE ORDER DATED 27.03.2017 @ 100% THEREON. 4. IN THE FIRST APPEAL, THE CIT(A) ALSO CONFIRMED T HE PENALTY SO IMPOSED. 5. FURTHER AGGRIEVED, THE ASSESSEE PREFERRED APPEAL BEFORE THE TRIBUNAL. 5.1 NONE APPEARED FOR THE ASSESSEE WHEN THE MATTER WAS CALLED FOR HEARING. 5.2 THE LEARNED DR FOR THE REVENUE RELIED UPON THE FINDINGS OF THE CIT(A) AND AO. 6. WE HAVE CONSIDERED THE SUBMISSIONS MADE ON BEHAL F OF THE REVENUE AND PERUSED THE ORDERS OF THE AUTHORITIES B ELOW. THE CONTROVERSY INVOLVES IMPOSITION OF PENALTY U/S.271( 1)(C) OF THE ACT ON DISALLOWANCE OF DONATIONS PAID AS NON-BUSINESS EXPE NSES. WE STRAIGHTWAY NOTE THAT IN ORDER TO ATTRACT PENALTY U /S.271(1)(C) OF THE ITA NO. 1764/AHD/18 [M/S RATNAKAR SECURITIES PVT. LTD. VS. ACIT] A.Y. 2012-13 - 3 - ACT, IT IS NECESSARY THAT THERE MUST BE CONCEALMENT BY THE ASSESSEE OF THE PARTICULARS OF HIS INCOME OR FURNISHING OF INAC CURATE PARTICULARS. THE DISALLOWANCE OF CERTAIN EXPENDITURE ACTUALLY IN CURRED ON THE GROUNDS OF LACK OF COMMERCIAL EXPEDIENCY IS NEITHER CONCEALMENT OF ANY PARTICULARS OF INCOME PER SE NOR CAN BE REGARDED AS FURNISHING OF INACCURATE PARTICULARS AS SUCH. NEEDLESS TO SAY, B EFORE PENALTY CAN BE IMPOSED, THE ENTIRETY OF CIRCUMSTANCES MUST REASONA BLY POINT TO THE CONCLUSION THAT THE DISPUTED AMOUNT REPRESENTS INCO ME AND THE ASSESSEE HAS CONCEALED THE PARTICULARS THEREOF OR F URNISHED INACCURATE PARTICULARS. IT IS NOT THE CASE OF THE AO THAT ASS ESSEE HAS IN FACT NOT INCURRED ANY DONATION EXPENSE AS CLAIMED. THE AO I N THE ASSESSMENT ORDER HIMSELF HAS NOTED IN PARA 5 THAT PAYMENT OF D ONATION HAS BEEN SHOWN DISTINCTLY IN THE FINANCIAL STATEMENT BUT HOW EVER THE EXPENSES HAVE NOT BEEN EXCLUDED WHILE DETERMINING THE TAXABL E INCOME. A CONSPECTUS OF THE EXPLANATION 1 TO SECTION 271(1) (C) OF THE ACT MAKES IT CLEAR THAT THE STATUTE VISUALIZED THE ASSE SSMENT PROCEEDINGS AND PENALTY PROCEEDINGS TO BE WHOLLY DISTINCT AND I NDEPENDENT OF EACH OTHER. WHILE THE AO MAY BE JUSTIFIED IN MAKING DIS ALLOWANCE OF DONATION EXPENSES AS NON-BUSINESS EXPENDITURE IN QU ANTUM PROCEEDINGS, SUCH DISALLOWANCE CANNOT AUTOMATICALLY INVITE IMPOSITION BY WAY OF PENALTY. WHEN ALL MATERIAL FACTS RELEVAN T TO THE SAID CLAIM WERE PLACED ON RECORD, THE PRESENCE OR ABSENCE OF C OMMERCIAL INSTINCT IN A GIVEN CASE IS A MATTER OF INFERENCE. SUCH ADV ERSE INFERENCE AGAINST ASSESSEE WOULD NOT ATTRACT IMPOSITION OF PE NALTY. THE CLAIM OF EXPENDITURE TOWARDS DONATION MADE, AT BEST, BE TAKE N AS ERRONEOUS CLAIM BY THE ASSESSEE. SUCH CLAIM MADE IN A BONAFI DE MANNER CANNOT LEAD TO IMPOSITION OF PENALTY. ALTHOUGH SUCH CLAIM MAY NOT BE MAINTAINABLE FOR THE PURPOSES OF QUANTUM PROCEEDING S HOWEVER, IN THE ABSENCE OF ANY FALSITY PER SE IN SUCH CLAIM, MAKING AN INCORRECT CLAIM FOR DEDUCTION IS NOT AT PAR WITH CONCEALMENT OR INA CCURATE PARTICULARS OF INCOME. ITA NO. 1764/AHD/18 [M/S RATNAKAR SECURITIES PVT. LTD. VS. ACIT] A.Y. 2012-13 - 4 - 7. WE ALSO TAKE NOTE OF THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. DALMIA DYECHEM INDUSTRIES LTD. INCOME TAX APPEAL NO. 1396 OF 2013 JUDGMENT DATED 06.07.2015 TO OBSERVE THAT THE PENALTY CANNOT BE IMPOSED UNLESS THE ACTIO N OF THE ASSESSEE PER SE IS DISHONEST, MALAFIDE AND AMOUNTING TO CONC EALMENT OF FACTS. THERE, BEING NO CONCEALMENT OF FACT PER SE IMPOSITION OF PENALTY IS NOT JUSTIFIED. THE PENALTY, IN OUR VIEW, IS CLEARL Y NOT MAINTAINABLE IN THE ABSENCE OF ANY CONTUMACIOUS OR DISHONEST CONDUC T. CONSEQUENTLY, WE SET ASIDE THE ORDER OF THE CIT(A) AND DIRECT THE AO TO DELETE THE PENALTY ON DISALLOWANCE OF ESTIMATED INTEREST EXPEN DITURE. 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED EX PARTE . SD/- SD/- (MAHAVIR PRASAD) (PRADIP KUMAR K EDIA) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD: DATED 22/01/2021 TRUE COPY S. K. SINHA !'#' / COPY OF ORDER FORWARDED TO:- &. / REVENUE 2. / ASSESSEE (. )*+ , / CONCERNED CIT 4. ,- / CIT (A) /. 012 33*+4 *+#4 56) / DR, ITAT, AHMEDABAD 7. 289 : / GUARD FILE. BY ORDER / 4 /5 *+#4 56) THIS ORDER PRONOUNCED ON 22/01/2021