ACIT 20(2), MUMBAI V. RAMKRISHNA S SHETTY, MUMBAI

ITA 4735/MUM/2013

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 71897 (ITAT-MUMBAI)
• Duration Of Justice: 5 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-12-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 21-11-2013
• Assessment Year: 2006-2007
• Appeal Filed On: 19-06-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Question of law; Wrong claim
• Section: 143(3); 194C; 2

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI BEFORE S/SHRI B.R.MITTAL,(JM) AND SANJAY ARORA (AM) . . , , ./I.T.A. NO.7142/MUM/2011 ( / ASSESSMENT YEAR : 2007-08) MR.RAMKRISHNA SHETTY C/O SHREE RAGHAVENDRA CONSTRUCTION CO. A WING, 404, HILL VIEW, MILITARY ROAD, ANDHERI (EAST), MUMBAI-400059. / VS. ASSTT. COMMISSIONER OF INCOME TAX , 20(2), PIRAMAL CHAMBERS, LALBAUG, PAREL, MUMBAI-400012 ( ( / APPELLANT) .. ( ) ( / RESPONDENT) ./I.T.A. NO.4735/MUM/2013 ( / ASSESSMENT YEAR : 2006-07) ASSTT. COMMISSIONER OF INCOME TAX, 20(2), ROOM NO.612, PIRAMAL CHAMBERS, LALBAUG, PAREL, MUMBAI-400012 / VS. MR.RAMKRISHNA SHETTY C/O SHREE RAGHAVENDRA CONSTRUCTION CO. A WING, 404, HILL VIEW, MILITARY ROAD, ANDHERI (EAST), MUMBAI-400059. ( ( / APPELLANT) .. ( ) ( / RESPONDENT) ./ ./PAN/GIR NO. : AROPS6602B ( /: APPELLANT BY SHRI J.P.BAIRAGRA ) ( , / RESPONDENT BY SHRI SANJEEV JAIN , / / DATE OF HEARING : 21.11.2013 , / /DATE OF PRONOUNCEMENT : 11.12.2013 / O R D E R PER B.R.MITTAL, JM: THE ASSESSEE HAS FILED THE APPEAL RELATING TO AS SESSMENT YEAR 2007-08 AGAINST THE ORDER OF LD. CIT(A) DATED 5.8.2011 VIDE WHICH T HE LD. CIT(A) HAS CONFIRMED THE LEVY OF PENALTY U/S 271(1)( C ) OF THE ACT AMOUNTING TO RS.13,72,132/- ON ACCOUNT OF DISALLOWANCE OF THE CLAIM OF THE ASSESSEE AS PE R THE PROVISIONS OF SECTION 40(A)(IA) OF THE INCOME TAX ACT, 1961 (THE ACT) FOR NON-DEDU CTION OF TDS AS PER THE PROVISIONS I.T.A. NO.7142/MUM/2011 I.T.A. NO.4735/MUM/2013 2 OF SECTIONS 194C AND 194I OF THE ACT AND ACCORDING LY MADE THE DISALLOWANCE OF RS.40,76,447/- DURING THE COURSE OF ASSESSMENT PROC EEDINGS. 2. THE DEPARTMENT HAS FILED THE APPEAL FOR ASSESSM ENT YEAR 2006-07 AGAINST ORDER OF LD. CIT(A) DATED 28.3.2013 DISPUTING THE DELET ION OF PENALTY LEVIED BY AO U/S 271(1)( C ) OF THE ACT OF RS.32,81,147/- ON ACCOU NT OF NOT DEDUCTING TAX AT SOURCE AS PER THE PROVISIONS OF SECTION 194C OF THE ACT I N RESPECT OF PAYMENTS OF RS.97,47,913/- MADE TO SUB-CONTRACTORS AND WHICH WA S DISALLOWED U/S 40(A)(IA) OF THE ACT. 3. THUS, IN BOTH THE APPEALS, THE ISSUE INVOLVED IS AS TO WHETHER LEVY OF PENALTY BY AO U/S 271(1)( C ) OF THE ACT IS JUSTIFIED ON ACCO UNT OF THE ADDITIONS MADE U/S 40(A)(IA) OF THE ACT FOR NON DEDUCTION OF TDS AS PER THE PROV ISIONS OF SECTION 194C FOR THE PAYMENTS MADE TO SUB-CONTRACTORS AND U/S 194I ON ACCOUNT OF PAYMENTS MADE FOR MACHINERY RENT (ONLY IN ASSESSMENT YEAR 2007-08) 4. IT IS RELEVANT TO STATE THAT THE AO FOR THE AS SESSMENT YEAR 2007-08 LEVIED PENALTY AT THE RATE OF 100% OF THE TAX SOUGHT TO B E EVADED ON RS.40,76,447/- WHICH WAS DISALLOWED U/S 40(A)(IA) OF THE ACT WHICH COMES TO RS.13,72,132/- ON THE GROUND THAT THE ASSESSEE FURNISHED INACCURATE PARTICULARS OF INCOME BY MAKING THE CLAIM IN THE RETURN FILED ON ACCOUNT OF PAYMENTS MADE TO SUB-CO NTRACTORS/MACHINERY RENT WITHOUT DEDUCTING TDS ON THE SAID PAYMENTS COVERED UNDER THE PROVISIONS OF SECTIONS 194C AND 194I OF THE ACT. THE LD. CIT(A) ALSO CONFIRMED THE ACTION OF THE AO TO LEVY PENALTY BY OBSERVING THAT THE ASSESSEE HAS ADMITTED HIS DEF AULT OF NOT DEDUCTING TAX AS PER RELEVANT PROVISIONS OF ACT AND THEREFORE, THE ASSE SSEE HAS FURNISHED INACCURATE PARTICULARS OR INADMISSIBLE CLAIM OF DEDUCTION. THE LD. CIT(A) WHILE CONFIRMING THE ACTION OF AO HAS STATED THAT AS PER THE DECISION OF HONBLE APEX COURT IN THE CASE OF UNION OF INDIA V/S DHARMENDRA TEXTILES PROCESSOR AND ORS., 306 ITR 277 (SC) THE PENALTY UNDER THE PROVISIONS OF SECTION 271(1)(C) IS A CIVIL LIABILITY AND FOR ATTRACTING SUCH CIVIL LIABILITY WILLFUL CONCEALMENT IS NOT AN ESSENTIAL INGREDIENT. HENCE, MENS-REA IS NOT REQUIRED TO LEVY PENALTY U/S 271(1)( C ) OF THE ACT. FURTHER HE HAS ALSO REFERRED THE CASE OF HONBLE DELHI HIGH COURT OF CIT V/S ZOOM COMMUNICATION (327 ITR 510= 191 TAXMAN 179) AND HAS STATED THAT WHEN THERE ARE DI SALLOWANCE OF EXPENSES AND THERE IS INACCURATE COMPUTATION MADE BY ASSESSEE RESULTI NG INTO AN ACT OF PAYING LESS TAX THAN WHAT WAS DUE FROM IT, THE LEVY OF PENALTY IS JUSTIFIED. HENCE, THE ASSESSEE IS IN APPEAL FOR THE ASSESSMENT YEAR 2007-08 BEFORE THE TRIBUNAL. I.T.A. NO.7142/MUM/2011 I.T.A. NO.4735/MUM/2013 3 5. IN RESPECT OF ASSESSMENT YEAR 2006-07, IT IS REL EVANT TO STATE THAT THE AO WHILE LEVYING PENALTY AT THE RATE OF 100% ON THE DISAL LOWANCE OF RS.97,47,913/- MADE U/S 40(A)(IA) OF THE ACT FOR NON-DEDUCTION OF TDS U/S 194C OF THE ACT FOR THE PAYMENTS MADE TO SUB-CONTRACTOR WHICH COMES TO RS.32,81,147/ - HAS STATED THAT THE ASSESSEE CONCEALED PARTICULARS OF ITS INCOME. IN THE FIRST APPEAL, THE LD. CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE HAS HELD THAT THE ASSESSEE HAS FURNISHED ALL THE MATERIAL FACTS WITH REGARD TO THE DISALLOWANCE MADE U/S 40(A)(IA) OF THE ACT IN THE RETURN FILED. THEREFORE, AO IS NOT JUSTIFIED IN LEVY OF PENALTY U/S 271(1)( C ) OF THE ACT. IN THIS REGARD, THE LD. CIT(A) HAS ALSO PLACED RELIANC E ON THE DECISION OF HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. AJAIB SIN GH & COMPANY (2002) 253 ITR 630 (P&H), WHEREIN THEIR LORDSHIPS HAVE HELD THAT MERE DISALLOWANCE OF EXPENDITURE WILL NOT AMOUNT TO FURNISHING INACCURATE PARTICULARS OF ITS INCOME. THE LD. CIT(A) HAS ALSO PLACED RELIANCE ON THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT V/S AT & T COMMUNICATION SERVICES INDIA (P) LTD [2012] 18 TAXMANN.COM 144 (DELHI) =[2012] 342 ITR 257 (DELHI), WHEREIN IT WAS HELD T HAT INVOKING THE PROVISIONS OF SECTION U/S 40(A)(IA) OF THE ACT FOR MAKING DISALLO WANCE SHOULD NOT BE A GROUND TO LEVY PENALTY U/S 271(1)( C) OF THE ACT. HENCE, THE DEPA RTMENT IS IN APPEAL BEFORE THE TRIBUNAL DISPUTING THE AFORESAID ORDER OF LD. CIT( A). 6. AT THE TIME OF HEARING, LD. AR SUPPORTED THE ORD ER OF LD. CIT(A) FOR ASSESSMENT YEAR 2006-07 AND SUBMITTED THAT THE FACTS IN THE A SSESSMENT YEAR 2007-08 AND THE ISSUE INVOLVED IS IDENTICAL AND THEREFORE THE LEVY OF PENALTY U/S 271(1)( C ) OF THE ACT MERELY ON ACCOUNT OF DISALLOWANCE MADE BECAUSE OF TECHNICAL REASONS U/S 40(A)(IA) OF THE ACT ARE NOT JUSTIFIED. HE FURTHER SUBMITTED THAT ASSESSEE IN SUBSEQUENT ASSESSMENT YEARS PAID TDS I.E. ASSESSMENT YEAR 201 0-2011 RELATING TO DISALLOWANCE MADE FOR ASSESSMENT YEAR 2007-08 AND PAID IN ASSES SMENT YEAR 2009-10 RELATING TO DISALLOWANCE MADE FOR ASSESSMENT YEAR 2006-07 AND T HE SAME WAS ALLOWED BY THE DEPARTMENT. LD. AR SUBMITTED THAT SIMILAR ISSUE HAVE ALSO BEEN CONSIDERED BY THE DELHI BENCH OF THE TRIBUNAL IN THE CASE OF NEW H ORIZON INDIA LTD. V/S DCIT (2011) 12 ITR (TRIB) 332(DELHI). HE FURTHER SUBMITTED THAT P ENALTY LEVIED U/S 271(1)( C ) OF THE ACT ON ACCOUNT OF DISALLOWANCE MADE U/S 40(A)(IA) O F THE ACT WAS CANCELLED BY THE TRIBUNAL ON THE GROUND THAT THE ASSESSEE COULD NOT BE HELD GUILTY OF CONCEALMENT OR FURNISHING OF INACCURATE PARTICULARS OF INCOME ON ACCOUNT OF DISALLOWANCE MADE U/S 40(A)(IA) OF THE ACT. HE FURTHER SUBMITTED THAT SIMILAR ISSUE WAS ALSO BEFORE THE AHMEDABAD BENCH OF TRIBUNAL IN THE CASE OF ACIT (OSD) V/S M/S SARASWATI CONSTRUCTION CO. IN ITA NO.2865/AHD/2010 DATED 22.2 .2011 AND THE PENALTY LEVIED BY AO U/S 271(1)( C) OF THE ACT ON ACCOUNT OF DISALLOW ANCE MADE U/S 40(A)(IA) OF THE ACT I.T.A. NO.7142/MUM/2011 I.T.A. NO.4735/MUM/2013 4 FOR NOT DEDUCTING TDS ON THE PAYMENT MADE TO THE C ONTRACTORS WAS DELETED BY LD. CIT(A) AND THE TRIBUNAL IN THE APPEAL FILED BY THE DEPARTMENT CONFIRMED THE ORDER OF LD. CIT(A) AND DISMISSED THE APPEAL OF THE DEPARTMENT B Y OBSERVING THAT LEGAL FICTION CREATED BY S. 40(A)(IA) OF THE ACT WILL NOT APPLY TO THE PROVISIONS OF SECTION 271(1)( C ) OF THE ACT. THAT THE DISALLOWANCE MADE SIMPLY BY INVOKING THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT WILL NOT ATTRACT PENALTY FOR F URNISHING OF INACCURATE PARTICULARS OF INCOME BECAUSE THERE IS NO INACCURATE PARTICULARS O F INCOME IN THE RETURN AS IT IS NOT A NON-GENUINE OR BOGUS CLAIM OF THE ASSESSEE. THAT THE DISALLOWANCE IS SIMPLY MADE EITHER FOR NON-DEDUCTION OF TDS IN VIEW OF PROVIS IONS OF U/S 40(A)(IA) OF THE ACT OR NON-PAYMENT OF TDS DEDUCTED TO THE GOVERNMENT EXC HEQUER. HE SUBMITTED THAT THE DECISION SQUARELY APPLY TO THE CASE OF ASSESSEE AND THEREFORE THE ORDERS OF AUTHORITIES BELOW FOR THE ASSESSMENT YEAR 2007-08 BE REVERSED AND WHEREAS THE ORDER OF LD. CIT(A) FOR THE ASSESSMENT YEAR 2006-07 BE CONFIRME D. 7. ON THE OTHER HAND, LD. DR RELIED ON THE ORDER OF LD. CIT(A) RELATING TO ASSESSMENT YEAR 2007-08 AND WHEREAS RELIED ON THE ORDER OF AO RELATING TO ASSESSMENT YEAR 2006-7. 8. WE HAVE CONSIDERED THE ORDERS OF AUTHORITIES BE LOW AND THE SUBMISSIONS MADE BEFORE US BY LD. REPRESENTATIVES OF THE PARTIES. W E HAVE ALSO CONSIDERED THE CASES CITED BEFORE US (SUPRA). 9. WE FIND THAT THE ASSESSEE IS A CIVIL CONTRACTOR ENGAGED IN TAKING UP PROJECT FOR VARIOUS CONCERNS. FOR THE ASSESSMENT YEAR 2006-07, THE ASSESSEE FILED RETURN OF INCOME ON 30.10.2006 DECLARING INCOME OF RS.10,27, 460/- AND THE ASSESSMENT WAS MADE BY AO U/S 143(3) OF THE ACT ON 28.11.2008. AO MADE DISALLOWANCE OF RS.97,47,913/- U/S 40(A)(IA) OF THE ACT ON THE GROU ND THAT THE ASSESSEE FAILED TO DEDUCT TDS U/S 194C OF THE ACT FOR THE PAYMENT MADE TO THE SUB-CONTRACTOR AND ACCORDINGLY SAID AMOUNT WAS ADDED BACK TO THE TOTAL INCOME OF T HE ASSESSEE. SIMILARLY, FOR THE ASSESSMENT YEAR 2007-08, THE AO MADE ASSESSMENT U/ S 143(3) OF THE ACT ON 24.12.2009 BY MAKING ADDITION OF RS.40,76,447/- U/ S 40(A)(IA) OF THE ACT AS THE ASSESSEE FAILED TO DEDUCT TDS AS PER THE PROVISIO NS OF SECTION 194C AND 194I OF THE ACT. PURSUANT THERETO, THE AO INITIATED PENALTY PR OCEEDINGS U/S 271(1)( C ) OF THE ACT. FOR THE ASSESSMENT YEAR 2006-07, THE AO LEVIED PENA LTY AT THE RATE OF 100% OF THE TAX SOUGHT TO BE EVADED WHICH COMES TO RS.32,81,147/- ON THE GROUND THAT THE ADDITION OF RS.97,47,913/- HAS BEEN MADE BY CONSIDERING IT AS CONCEALMENT OF INCOME ON ACCOUNT OF FURNISHING INCORRECT PARTICULARS OF INCOME BY T HE ASSESSEE. SIMILARLY, IN RESPECT OF I.T.A. NO.7142/MUM/2011 I.T.A. NO.4735/MUM/2013 5 ASSESSMENT YEAR 2007-08, THE AO LEVIED PENALTY U/S 271(1)( C ) OF THE ACT AT THE RATE OF 100% OF THE TAX SOUGHT TO BE EVADED ON RS.40,76,447 /- AS HE CONSIDERED THAT THE SAID ADDITION IS MADE AS THE ASSESSEE HAS CONCEALED ITS INCOME ON ACCOUNT OF FURNISHING INACCURATE PARTICULARS OF INCOME. THEREFORE, IT I S EVIDENT THAT FOR BOTH ASSESSMENT YEARS UNDER CONSIDERATION, THE PENALTY WAS LEVIED B Y AO U/S 271(1)( C ) OF THE ACT ON ACCOUNT OF MAKING DISALLOWANCE IN VIEW OF PROVISI ONS OF SECTION 40(A)(IA) OF THE ACT AS THE ASSESSEE FAILED TO DEDUCT TDS. IT IS NOT IN DI SPUTE THAT THE AO HAS NOT STATED THAT THE CLAIM OF THE ASSESSEE FOR MAKING THE ABOVE DEDU CTION IN THE RETURN(S) FILED WAS BOGUS OR NOT GENUINE. SINCE THE ASSESSEE FAILED T O DEDUCT TDS AS PER THE PROVISIONS OF SECTION 194C/194I OF THE ACT FOR THE PAYMENTS MADE , THE DISALLOWANCE HAS BEEN MADE ON ACCOUNT OF TECHNICAL FAULT AND PARTICULARLY LEGA L FICTION CREATED BY SECTION 40(A)(IA) OF THE ACT. WE OBSERVE THAT ALL THE DETAILS OF TH E PAYMENTS MADE BY ASSESSEE TO ITS SUB-CONTRACTORS HAVE BEEN DISCLOSED IN THE RETURN(S ) FILED BUT THE DISALLOWANCE HAS BEEN MADE ON THE BASIS OF PARTICULARS FILED BY ASSESSEE AS THE ASSESSEE FAILED TO DEDUCT TDS AND THEREFORE, THE DISALLOWANCE HAS BEEN MADE IN TH E ASSESSMENT YEARS UNDER CONSIDERATION OF THE AMOUNT CLAIMED BY ASSESSEE BU T IT IS NOT DISPUTED BY DEPARTMENT THAT THE ASSESSEE PAID TDS IN SUBSEQUENT ASSESSMEN T YEARS AND THE DEDUCTION WAS ALLOWED TO THE ASSESSEE. IT IS NOT THE CASE OF THE DEPARTMENT THAT THE ASSESSEE HAS CLAIMED DOUBLE DEDUCTION I.E. RELEVANT TO THE ASSES SMENT YEARS UNDER CONSIDERATION WHEN THE PAYMENTS WERE ACTUALLY MADE AND ALSO IN TH E SUBSEQUENT ASSESSMENT YEARS WHEN THE TDS WAS PAID. WE OBSERVE THAT THE ASSES SEE STATED BEFORE THE LD. CIT(A) THAT IN THE ASSESSMENT YEAR 2005-06 AN ADDITION WAS ALSO MADE OF RS.32,68,774/- ON ACCOUNT OF NON DEDUCTION OF TDS VIDE ASSESSMENT OR DER DATED 20.12.2007. SIMILAR ADDITIONS HAVE BEEN MADE IN BOTH THE ASSESSMENT YE ARS UNDER CONSIDERATION. WE OBSERVE THAT THE FIRST SUCH ASSESSMENT WAS MADE FOR ASSESSMENT YEAR 2005-06 ON 20.12.2007 BY MAKING THE DISALLOWANCE U/S 40(A)(IA ) OF THE ACT ON ACCOUNT OF NON- DEDUCTION OF TDS AND THEREAFTER I.E. FROM ASSESSMEN T YEAR 2008-09 ONWARDS THE ASSESSEE COMPLIED WITH THE PROVISIONS OF TDS FOR THE PAYMENTS MADE BY IT. WE OBSERVE THAT FOR BOTH THE ASSESSMENT YEARS UNDER CO NSIDERATION, THE ASSESSEE FILED RETURN(S) BEFORE THE ASSESSMENT FOR THE ASSESSMENT YEAR 2005-06 WAS MADE I.E. ON 20.12.2007. THEREFORE THE CONTENTION RAISED BY ASSE SSEE BEFORE THE AUTHORITIES BELOW THAT THE SAID DEFAULT WAS COMMITTED BY ASSESSEE BON AFIDE AND ON ACCOUNT OF NON AWARE OF PROVISIONS OF ACT HAS MERITS. 10. HOWEVER, PENALTY U/S 271(1)( C) OF THE ACT IS LEVIABLE ONLY IF THE PERSON HAS CONCEALED THE PARTICULARS OF HIS INCOME OR HAS FURN ISHED INACCURATE PARTICULARS OF SUCH I.T.A. NO.7142/MUM/2011 I.T.A. NO.4735/MUM/2013 6 INCOME AS THE EXPRESSION USED IN CLAUSE ( C ) OF SUB-CLAUSE (III) OF SECTION 271(1) OF THE ACT HAS CONCEALED PARTICULARS OF INCOME OR FURNISHED INACCURATE PARTICULARS OF SUCH INCOME. THEREFORE, IN BOTH CASES OF CONCEALM ENT INACCURATE , PHRASE PARTICULARS OF INCOME IS USED. THE EXPRESSION H AS CONCEALED PARTICULARS OF INCOME AND HAS FURNISHED INACCURATE PARTICULARS OF INCO ME ARE NOT DEFINED EITHER IN SECTION 271(1) ( C ) OR ELSEWHERE IN THE ACT. BUT THE WORD CONCEALED IS DERIVED FROM THE LATIN WORD CONCELARE WHICH IMPLIES TO HIDE. THE WE BSTERS NEW INTERNATIONAL DICTIONARY, EXPLAINS THE WORD CONCEAL AS TO HIDE OR WITHDR AW FROM OBSERVATION; TO COVER OR KEEP FROM SIGHT; TO PROVE DISCOVERY OF; TO WITHHOL D KNOWLEDGE OF. THUS, THE OFFENCE OF CONCEALMENT IS DIRECT ATTEMPT TO HIDE AN ITEM OF IN COME OR DERIVE THEREOF FROM THE DEPARTMENT TO AVOID PAYMENT OF TAX LIABILITY AS PER THE PROVISIONS OF ACT. THUS, THERE SHOULD BE AN ATTEMPT ON THE PART OF THE ASSESSEE TO CONCEAL THE FACTS RELATING TO ITS INCOME OR FURNISHING INACCURATE PARTICULARS OF INCO ME TO AVOID PAYMENT OF TAX. IN THE CASE BEFORE US NOTHING HAS BEEN STATED OR BROUGHT ON RECORD BY THE DEPARTMENT THAT THE ASSESSEE HAD HIDDEN THE FACTS FROM THE REVENUE AUTHORITY OR THE DETAILS OF PAYMENT RECEIVED FROM THE CONTRACTOR OR OF PAYMENT MADE TO SUB-CONTRACTOR. NOR THERE IS ANY FACTS BROUGHT ON RECORD BY THE DEPARTMENT THAT THE PAYMENTS CLAIM TO HAVE BEEN MADE BY THE ASSESSEE TO SUB-CONTRACTOR AND /OR PAYMENTS OF RENT WERE IN ANY WAY BOGUS OR INFLATED. WE OBSERVE THAT THE PENALTY HAS BEEN L EVIED BY AO ONLY BECAUSE SOME DISALLOWANCE HAS BEEN MADE ON ACCOUNT OF NON-COMP LIANCE OF PROVISIONS OF ACT. THE HONBLE APEX COURT HAS HELD IN THE CASE OF CIT V/S RELIANCE PETROPRODUCTS (P.) LTD.(322 ITR 158)(SC) THAT SO LONG AS THE ASSESSEE HAS NOT CONCEALED ANY MATERIAL FACT OR THE FACTUAL INFORMATION GIVEN BY HIM IS NOT FOU ND TO BE INCORRECT , HE WILL NOT BE LIABLE FOR IMPOSITION OF PENALTY U/S 271(1)(C) OF T HE ACT, EVEN IF THE CLAIM MADE BY HIM IS UNSUSTAINABLE IN LAW PROVIDED HE SUBSTANTIATED T HE EXPLANATION OFFERED BY HIM OR EXPLANATION EVEN IF NOT SUBSTANTIATED, IS FOUND TO BE BONAFIDE. THEIR LORDSHIPS HAS HELD THAT MERE MAKING OF A CLAIM WHICH IS NOT SUST AINABLE IN LAW BY ITSELF WILL NOT AMOUNT TO FURNISHING INACCURATE PARTICULARS REGARD ING INCOME OF THE ASSESSEE AND SUCH CLAIM MADE IN THE RETURN CANNOT AMOUNT TO FURNISHI NG INACCURATE PARTICULARS OF INCOME. WE ALSO OBSERVE THAT THE HONBLE JURISDICTIONAL HIG H COURT IN THE CASE OF CIT V/S M/S. ADITYA BIRLA NOVA LIMITED (SUCCESSOR), IN INCOME TA X APPEAL NO.3899 OF 2010, ORDER DATED 14.8.2012 AFTER CONSIDERING THE DECISION OF HONBLE APEX COURT IN THE CASE OF DHARMENDRA TEXTILE PROCESSORS & ORS. (SUPRA) AND AL SO THE DECISION OF RELIANCE PETROPRODUCT PVT.LTD. (SUPRA) HAS HELD THAT MERE M AKING OF CLAIM, WHICH WAS NOT SUSTAINABLE IN LAW BY ITSELF WOULD NOT AMOUNT TO F URNISHING INACCURATE PARTICULARS REGARDING THE INCOME OF THE ASSESSEE. SUCH A CLAIM MADE IN THE RETURN OF INCOME I.T.A. NO.7142/MUM/2011 I.T.A. NO.4735/MUM/2013 7 CANNOT AMOUNT TO FURNISHING INACCURATE PARTICULARS, THEREFORE, THEIR LORDSHIPS DID NOT UPHELD THE LEVY OF PENALTY WHEN ASSESSEE HAD DISCL OSED ALL THE MATERIAL FACTS AND HAS NOT SUPPRESSED ANY MATERIAL FACTS. IN THE SAID CAS E, THE ASSESSEE CLAIMED DEDUCTION OF RS.9,94,399/- ON ACCOUNT OF DIMINUTION IN THE VALU E OF SHARES HELD BY IT, THE SAME WERE DISALLOWED ON THE GROUND THAT THE SHARES WERE HELD AS INVESTMENT AND PROFIT ON THE SALE THEREOF WERE TO BE CONSIDERED UNDER THE HEAD CAPITA L GAINS. THEREFORE, QUANTUM PROCEEDINGS WERE CONCLUDED AGAINST THE ASSESSEE. AO LEVIED PENALTY U/S 271(1)( C ) OF THE ACT. THE HONBLE JURISDICTIONAL HIGH COURT H ELD THAT IT WAS NOT A CASE OF DEPARTMENT THAT THE ASSESSEE WITHHELD ANY INFORMATI ON OR FURNISHED ANY FALSE INFORMATION. THAT THE FACTS NECESSARY FOR CARRYING OUT THE ASSESSMENT PROCEEDINGS WERE ADMITTEDLY DISCLOSED IN THE RETURN FILED BY ASSESSE E. IT WAS HELD THAT THE ASSESSEE HAD WRONGLY CLAIMED DEDUCTION AND IT WAS NOT ENTITLED TO SAME AS IT IS A PURE QUESTION OF LAW. IN THAT CONTEXT, THE HONBLE JURISDICTIONAL HIGH COURT HAS HELD THAT BY MAKING INCORRECT CLAIM IN LAW CANNOT TANTAMOUNT TO FURNISH ING INACCURATE PARTICULARS OF INCOME SINCE THE ASSESSEE HAS FURNISHED ALL THE REQUISITE DETAILS IN THE RETURN SAVE AND EXCEPT WRONGLY APPLIED CHARGING RATE OF TAX ON SHORT TERM CAPITAL GAINS DISCLOSED BY ASSESSEE. THEIR LORDSHIPS HELD THAT APPLYING THE WRONG RATE OF TAX ON WHICH SHORT TERM CAPITAL GAINS DISCLOSED BY ASSESSEE DOES NOT AMOUNT TO FURN ISHING INACCURATE PARTICULARS OF INCOME. WE ARE OF THE CONSIDERED VIEW THAT THE AB OVE CASE SQUARELY APPLY TO THE FACTS OF THE CASE BEFORE US. 11. THE DELHI BENCH OF THE TRIBUNAL IN THE CASE OF NEW HORIZON INDIA LTD (SUPRA) ALSO CONSIDERED SIMILAR FACTS AND PENALTY LEVIED O N ACCOUNT OF DISALLOWANCE MADE FOR NON DEDUCTION OF TDS AND THE ADDITION MADE AS PER SECTION 40(A)(IA) OF THE ACT, THE TRIBUNAL DELETED THE PENALTY. ON SIMILAR FACTS, P ENALTY LEVIED U/S 271(1)( C ) OF THE ACT IN RESPECT OF DISALLOWANCE MADE AS PER SECTION 40(A )(IA) OF THE ACT FOR NON PAYMENT OF TDS OF CONTRACT PAYMENT, THE ITAT, AHMEDABAD BENCH IN THE CASE OF M/S SARASWATI CONSTRUCTION CO (SUPRA) HAS HELD THAT THE PROVISION OF SECTION 40(A)(IA) ARE DEEMING PROVISION WHICH CREATES LEGAL FICTION AND THAT LEGA L FICTION CANNOT BE EXTENDED BEYOND THE DISALLOWANCE OF EXPENDITURE. THUS, IT CANNOT B E APPLIED FOR INVOKING THE PROVISIONS OF SECTION 271(1)( C ) OF THE ACT FOR LEVYING PENA LTY FOR CONCEALMENT OF INCOME OR FURNISHING INACCURATE PARTICULARS OF INCOME. THE LEGAL FICTION CANNOT BE EXTENDED ANY FURTHER AND HAS TO BE LIMITED TO THE AREA FOR WHIC H IT IS CREATED AND RELIANCE WAS PLACED ON THE DECISIONS OF CIT V/S KAR VALVES LIMITED (19 87) 168 ITR 416 (KER) AND ADDL. CIT V/S DURGAMMA P. (1987) 167 1TR 776 (AP). FINALLY P ENALTY LEVIED UNDER SECTION 271(1)(C) OF THE ACT ON ACCOUNT OF DISALLOWANCE M ADE BY INVOKING THE PROVISIONS OF I.T.A. NO.7142/MUM/2011 I.T.A. NO.4735/MUM/2013 8 SECTION 40(A)(IA) WAS CANCELLED BY ITAT, AHMEDABAD . ON SIMILAR ISSUE, THE HONBLE DELHI HIGH COURT IN THE CASE OF AT & T COMMUNICATI ON SERVICES INDIA (P) LTD(SUPRA) DISMISSED THE APPEAL OF THE DEPARTMENT WHICH WAS FI LED AGAINST THE ORDER OF THE TRIBUNAL WHEN THE PENALTY U/S 271(1)(C) OF THE ACT WAS LEVIED ON ACCOUNT OF DISALLOWANCE BY INVOKING THE PROVISION OF SECTION 40(A)(I) OF THE ACT. THE HONBLE PUNJAB AND HARYANA HIGH COURT IN THE CASE OF AJAIB SINGH & COMPANY (SUPRA) HAS HELD THAT MERE DISALLOWANCE OF EXPENDITURE WILL NOT AMO UNT TO FURNISHING INACCURATE PECULIARS OF INCOME IN ITSELF. 12. IN VIEW OF ABOVE AND CONSIDERING THE FACTS THAT THE ASSESSEE DISCLOSED ALL MATERIAL FACTS WITH REGARD TO THE CLAIM OF PAYMENT( S) MADE TO THE SUB- CONTRACTOR(S)/RENT PAID WITHOUT DEDUCTING TDS AND CONSEQUENTLY DISALLOWANCE WAS MADE IN BOTH THE ASSESSMENT YEARS UNDER CONSIDERAT ION AS PER THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT, WHEN THE GENUINENESS OF THE PAYMENTS ARE NOT DISPUTED BY THE DEPARTMENT, WE HOLD THAT THE LEVY OF PENALTY B Y APPLICATION OF PROVISIONS OF SECTION 271(1)( C ) OF THE ACT IS NEITHER JUSTIFIED NOR TH E PROVISIONS OF SECTION 271(1)( C ) OF THE ACT ARE APPLICABLE. HENCE, WE UPHOLD THE ORDER OF LD. CIT(A) FOR THE ASSESSMENT YEAR 2006-07 IN CANCELLING THE PENALTY LEVIED BY AO BY DISMISSING THE GROUND OF APPEAL TAKEN BY DEPARTMENT AND WHEREAS THE ORDER OF LD. C IT(A) FOR ASSESSMENT YEAR 2007-08 IS REVERSED BY ALLOWING THE GROUND OF APPEAL TAKEN BY ASSESSEE. 13. IN THE RESULT, THE APPEAL OF THE DEPARTMENT FOR ASSESSMENT YEAR 2006-07 IS DISMISSED AND WHEREAS THE APPEAL OF THE ASSESSEE FO R ASSESSMENT YEAR 2007-08 IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THE 11TH DECEMBER, 2013 , 2 3 11 TH DECEMBER, 2013 , SD SD ( / SANJAY ARORA) ( . . /B.R.MITTAL) / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI: ON THIS 11TH DAY OF DECEMBER, 2013 . . ./ SRL , SR. PS I.T.A. NO.7142/MUM/2011 I.T.A. NO.4735/MUM/2013 9 / COPY OF THE ORDER FORWARDED TO : 1. ( / THE APPELLANT 2. ) ( / THE RESPONDENT. 3. 7 ( ) / THE CIT(A)- CONCERNED 4. 7 / CIT CONCERNED 5. 8 ): , / : , / DR, ITAT, MUMBAI CONCERNED 6. / GUARD FILE. / BY ORDER, TRUE COPY (ASSTT. REGISTRAR) / : , /ITAT, MUMBAI