M/s. Twenty First Century Wire Rods Limited, Mumbai V. DCIT, New Delhi

ITA 3222/DEL/2017

• Counselvise Citation: [2019] 114 COUNSELVISE.COM (IT) 2163 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 5 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-11-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Assessment Year: 2008-2009
• Appeal Filed On: 22-05-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S S RANA
• Keywords: Unexplained cash credit; Bonafide belief
• Section: 271(1)(c); 274; 68; 37; 144

Judgement Text

TWENTY FIRST CENTURY WIRE RODS LTD. V. DCIT-16(1) NE W DELHI /I.T.A.NO. 3222/DEL/2017/A.Y.08-09 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH G NEW DELHI BEFORE SHRI AMIT SHUKLA, JUDICIAL MEMBER AND SHRI O.P.MEENA, ACCOUNTANT MEMBER . . /. I.T.A NO.3222/DEL/2017 / ASSESSMENT YEAR:2008-09 M/S. TWENTY FIRST CENTURY WIRE RODS LIMITED 501, GARDEN VIEW, 5 TH FLOOR, GULMOHAR ROAD, JVPD, JUHU MUMBAI 400049 PAN: AABCT 4442 P VS. DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE 16(1) NEW DELHI APPELLANT / RESPONDENT /ASSESSEE BY NONE /REVENUE BY SHRI S. S. RANA , CIT(D.R.) / DATE OF HEARING: 05.11.2019 /PRONOUNCEMENT ON 05.11.2019 /O R D E R PER O. P. MEENA, AM: 1. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-15, NEW DELHI (IN SHORT THE CIT (A)) DATED 30.03.2017, WHICH IN TURN HAS ARISEN FR OM THE PENALTY ORDER UNDER SECTION 271(1)(C) OF INCOME TAX ACT,1961 ( IN SHORT OF THE ACT) PASSED BY THE DEPUTY COMMISSIONER OF INCOME-TAX, CI RCLE-16(1) NEW DELHI (IN SHORT THE AO) FOR THE ASSESSMENT YEAR 2008-09. TWENTY FIRST CENTURY WIRE RODS LTD. V. DCIT-16(1) NE W DELHI /I.T.A.NO. 3222/DEL/2017/A.Y.08-09 2 2. GROUND NO. 1 & 2 ARE RELATES TO SUSTAINING PENALTY IMPOSED UNDER SECTION 271(1) (C) OF THE ACT IN RESPECT OF DISALLO WANCE OF RS.4,14,301 ON ACCOUNT OF DONATION, WHICH IS BAD-IN-LAW AND DOE S NOT AMOUNTS TO FURNISHING OF INACCURATE PARTICULARS OF INCOME. 3. SUCCINCT FACTS ARE THAT THE ASSESSEE HAS FILED RETU RN OF INCOME DECLARING TOTAL INCOME OF RS.7,92,41,610 WHICH WAS ASSESSED UNDER SECTION 144 OF THE ACT AT RS. 40,69,40, 309 BY MAKING ADDIT ION OF RS.9,00,00,000 ON ACCOUNT OF UNEXPLAINED CASH CREDIT UNDER SECTION 68 OF THE ACT, UNEXPLAINED CREDIT UNDER SECTION 68 OF RS. 3,28,98, 617 AND AD-HOC DISALLOWANCE OF RS. 19,30,10,782 BEING 10% DISALLOW ANCE OF EXPENSES CLAIMED. THE AO ALSO INITIATED PENALTY PROCEEDINGS U NDER SECTION 271(1)(C) FOR FILING INACCURATE PARTICULARS OF INCOME. IN RE PLY TO SHOW-CAUSE NOTICE UNDER SECTION 274 READ WITH SECTION 271(1)(C), IT WAS EXPLAINED BY THE ASSESSEE THAT LD. CIT (A) HAS DELETED ADDITION MADE ON ACCOUNT OF UNEXPLAINED CASH CREDIT UNDER SECTION 68 OF THE AC T AND SET-ASIDE THE MATTER OF UNEXPLAINED CREDIT FOR LIMITED VERIFICATI ON. ON ACCOUNT OF DISALLOWANCE OF EXPENSES, THE CIT (A) HAS CONFIRMED ADDITION TO THE EXTENT OF RS. 84,14,301 AND DELETED BALANCE ADDITION. HOWE VER, THE AO WAS OF THE VIEW THAT THE ASSESSEE COULD NOT FURNISH ANY EV IDENCE IN SUPPORT OF EXPENSES OF RS. 84,14,301 CLAIMED , THEREFORE, THE AO DISALLOWED 10% OF EXPENSES HENCE, THE AO HAS DELIBERATELY CONCEALED TH E TRUE INCOME TWENTY FIRST CENTURY WIRE RODS LTD. V. DCIT-16(1) NE W DELHI /I.T.A.NO. 3222/DEL/2017/A.Y.08-09 3 THEREFORE, THE PENALTY UNDER SECTION 271(1)(C) WAS LIABLE. ACCORDINGLY, THE AO LEVIED A PENALTY OF RS. 28, 60,021 BEING 100% OF TAX SOUGHT TO BE EVADED ON RS. 84, 14,301. 4. BEING, AGGRIEVED, THE ASSESSEE FILED AN APPEAL BEFO RE THE LD. CIT (A). THE CIT (A) OBSERVED THAT PENALTY IS LEVIED WITH RE FERENCE TO AD-HOC DISALLOWANCE OF 10% EXPENSES, BUT IN THE REMAND REP ORT SUBMITTED DURING APPELLATE PROCEEDING AND REPRODUCED IN APPEAL ORDER IT WAS SEEN THAT THE AO HAS NOT POINTED OUT ANY EXPENDITURE WHICH ACCORDI NG TO HIM WAS EITHER NOT SUPPORTED BY PROPER VOUCHER OR BILLS OR WAS NOT MEANT FOR THE PURPOSE OF BUSINESS. THEREFORE, PENALTY IN RESPECT OF DISAL LOWANCE OF RS. 80,00,000 WAS NOT FOUND JUSTIFIED AND HENCE, DELETED. HOWEVER , WITH REGARD TO DISALLOWANCE OF RS. 4, 41, 301 BEING DONATION EXPEN SES, THE SAID CLAIM OF THE ASSESSEE WAS FOUND NOT ALLOWABLE UNDER SECTION 37 OF THE ACT, HENCE, PENALTY ON SAID DISALLOWANCE WAS SUSTAINED. 5. BEING, AGGRIEVED THE ASSESSEE FILED THIS APPEAL BEF ORE THE TRIBUNAL. HOWEVER, NONE HAS APPEARED ON BEHALF OF THE ASSESSE E. 6. PER CONTRA, THE LEARNED D.R. RELIED ON ORDER OF LD. CIT (A). 7. WE HAVE HEARD THE LD. D.R. AND PERUSED THE MATERIAL AVAILABLE ON RECORD. A PERUSAL OF THE ASSESSMENT ORDER AND PENAL TY ORDER REVEALS THAT THE AO HAS MADE AD-HOC 10% DISALLOWANCE OF EXPENSES CLAIMED BY THE ASSESSEE. HOWEVER, THE SAID DISALLOWANCE HAS BEEN D ELETED IN APPEAL AND TWENTY FIRST CENTURY WIRE RODS LTD. V. DCIT-16(1) NE W DELHI /I.T.A.NO. 3222/DEL/2017/A.Y.08-09 4 PENALTY WAS RESTRICTED TO IN RESPECT OF DISALLOWANC E OF RS. 4, 14,301 BEING DONATION, WHICH WAS NOT FOUND ALLOWABLE DEDUCTION U NDER SECTION 37 OF THE ACT. WE FIND THAT THE AO HAS NOT SPECIFICALLY PI NPOINTED ANY PARTICULAR EXPENSES, WHICH CLAIMED TO BE BOGUS AND NOT INCURRE D FOR THE PURPOSE OF BUSINESS. THE CLAIM OF DONATION WAS NOT SPECIFICALL Y MENTIONED IN THE ASSESSMENT ORDER. THE AO HAS ONLY DISALLOWED 10% OF TOTAL EXPENSES CLAIMED IN PROFIT & LOSS ACCOUNT IN ABSENCE OF VOUC HERS AND BILLS. THUS, THE PERUSAL OF THE ASSESSMENT ORDER REVEALS THAT TH E AO HAS MADE ADDITION BASED ON FACTS AS DISCLOSED BY THE ASSESSEE IN THE RETURN OF INCOME AND DURING THE COURSE OF ASSESSMENT PROCEEDINGS. WE FIN D THAT THE ASSESSEE HAS FURNISHED ALL RELEVANT FACTS; THEREFORE, THE PE NALTY CANNOT BE LEVIED MERELY BECAUSE THAT IT WAS NOT ACCEPTABLE TO THE AO. WHERE THE EXPLANATION IS BONAFIDE AND ALL THE FACTS RELATING TO THE SAME HAVE BEEN DISCLOSED, PENALTY IS NOT LEVIABLE. IT IS TRITE LAW THAT PENALTY PROCEEDINGS ARE DISTINCT AND SEPARATE PROCEEDINGS FROM ASSESSME NT PROCEEDINGS. THE FINDING RECORDED IN THE ASSESSMENT ORDER IS NOT CON CLUSIVE FOR DECIDING THE IMPOSITION OF PENALTY. IT ONLY HAS A PERSUASIVE VAL UE. ANY FINDING RECORDED IN THE ASSESSMENT ORDER DOES NOT MEAN THAT THE PENA LTY HAS TO BE IMPOSED AUTOMATICALLY. EXPLANATION 1 TO SECTION 271 (L) (C) PROVIDES THAT THE PENALTY WOULD BE DEEMED TO ATTRACT WHERE IN RESPECT OF A FA CT MATERIAL TO THE COMPUTATION OF INCOME EITHER NO EXPLANATION IS OFFE RED, OR EXPLANATION TWENTY FIRST CENTURY WIRE RODS LTD. V. DCIT-16(1) NE W DELHI /I.T.A.NO. 3222/DEL/2017/A.Y.08-09 5 OFFERED IS FOUND TO BE FALSE. IT IS SEEN THAT THIS AMOUNT HAS BEEN REFLECTED IN PROFIT & LOSS ACCOUNT FOR THE ASSESSMENT YEAR UN DER CONSIDERATION. THE ASSESSEE HAD OFFERED EXPLANATION AND THE SAID EXPLA NATION OFFERED WAS NOT FOUND TO BE FALSE AND ACCORDINGLY ITS CASE IS NOT C OVERED BY CLAUSE (A) OF EXPLANATION 1 TO SECTION 271(1)(C) OF THE ACT. CLAU SE (B) OF EXPLANATION 1 TO SECTION 271(1)(C) OF THE ACT PROVIDES THAT WHER E THE ASSESSEE IS NOT ABLE TO SUBSTANTIATE ITS EXPLANATION AND FAILS TO PROVE THAT SUCH EXPLANATION IS BONAFIDE AND ALL THE FACTS RELATING TO THE SAME HAV E BEEN DISCLOSED, PENALTY IS LEVIABLE. JUST BECAUSE, THE ASSESSEE`S E XPLANATION WAS NOT FOUND ACCEPTABLE BY THE AO, IT DOES NOT FOLLOW THAT THAT T HE APPELLANT WAS UNABLE TO SUBSTANTIATE HIS EXPLANATION BY PROVIDING VARIOU S EVIDENCES AND JUDICIAL OPINIONS. BASED ON THE ABOVE FACTS OF THE CASE; IT CAN BE HELD THAT THE ASSESSEE HAD MADE ALL THE NECESSARY DISCLOSURES ON A BONAFIDE BELIEF, WHICH IS NOT AGREEABLE TO THE AO, IT WILL NOT AUTOMA TICALLY LEAD TO A CASE FOR PENALTY UNDER SECTION 271(1)(C) OF THE IT ACT, 1961. WE ARE THEREFORE OF THE CONSIDERED VIEW THAT THE PENALTY IS NOT SUST AINABLE IN LAW IN THE RATIO LAID DOWN BY THE HONBLE SUPREME COURT IN CAS E OF CIT V RELIANCE PETROPRODUCTS PVT. LTD. [2010] 322 ITR 158 (SC); [2 010] 189 TAXMAN 322(SC) WHEREIN IT WAS HELD THAT MERELY BECAUSE THE ASSESSEE HAS CLAIMED THE EXPENDITURE, WHICH CLAIM WAS NOT ACCEPTED OR WA S NOT ACCEPTABLE BY THE REVENUE, PENALTY UNDER SECTION 271(1) (C) OF TH E ACT CANNOT BE TWENTY FIRST CENTURY WIRE RODS LTD. V. DCIT-16(1) NE W DELHI /I.T.A.NO. 3222/DEL/2017/A.Y.08-09 6 ATTRACTED. THE HON'BLE SUPREME COURT ALSO OBSERVED THAT MERE DISALLOWANCE OF CLAIM MADE BY THE ASSESSEE, CANNOT AMOUNT FURNISHING OF INACCURATE PARTICULARS OF INCOME UNLESS, THE INFORM ATION AS GIVEN IN RETURN OF INCOME WAS FOUND TO BE INCORRECT OR INACCURATE. IN THE LIGHT OF ABOVE DISCUSSION, THE PENALTY SUSTAINED IN RESPECT OF DIS ALLOWANCE OF RS.4, 14,301 BEING DONATION EXPENSES IS THEREFORE, DELETED. THER EFORE, GROUND NO. 1 AND 2 OF APPEAL ARE ALLOWED. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE STANDS A LLOWED. 9. THE ORDER PRONOUNCED IN THE OPEN COURT ON 05-11-201 9. SD/- SD/- (AMIT SHUKLA) (O. P.MEENA) JUDICIAL MEMBER A CCOUNTANT MEMBER DATED: 5 TH NOVEMBER, 2019/OPM COPY OF ORDER SENT TO- ASSESSEE/AO/PR. CIT/ CIT (A)/ ITAT (DR)/GUARD FILE OF ITAT. BY ORDER / / TRUE COPY / / ASSISTANT REGISTRAR, ITAT: DELHI BENCHES- DELHI