A,C.I.T. CIR.- 3, Nagpur V. M/S INDOWORTH INDIA LTD, Nagpur

ITA 516/NAG/2016

AI Insights

The case revolves around an appeal by the Revenue against the order of the CIT(A) which had cancelled a penalty imposed by the Assessing Officer (AO) on M/s. Indoworth India Ltd. for the assessment year 2010-11. The AO had initially imposed the penalty for alleged inaccuracies in the assessee's income tax returns, specifically concerning unsubstantiated provisions in books, unabsorbed depreciation claims, and unproven commission expenses. The CIT(A) found that these issues did not amount to furnishing inaccurate particulars of income, a view supported by the Supreme Court's precedent. The Tribunal agreed with the CIT(A), emphasizing that the mere rejection of claims does not equate to the furnishing of inaccurate particulars.

• Counselvise Citation: [2022] 140 COUNSELVISE.COM (IT) 132785 (ITAT-NAGPUR)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-11-2022
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 10-11-2022
• Assessment Year: misc
• Appeal Filed On: 22-06-2023
• Other Referred Cases: Reliance Petro Products Pvt. Ltd. vs. CIT
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation
• Section: 271(1)(c); 143(3); 274

Judgement Text

आयकर अपीलीय अधिकरण न्यायपीठ नागपूर में । IN THE INCOME TAX APPELLATE TRIBUNAL, NAGPUR (Through Virtual Court) BEFORE SHRI S.S. VISWANETHRA RAVI, JUDICIAL MEMBER AND DR. DIPAK P. RIPOTE, ACCOUNTANT MEMBER आयकर अपील सं. / ITA No.516/NAG/2016 धनिाारण वर्ा / Assessment Year : 2010-11 Asstt. Commissioner of Income Tax, Circle – 3, Nagpur .......अपीलार्थी / Appellant बनाम / V/s. M/s. Indoworth India Ltd., B-130, MIDC, Butibori, Nagpur – 440018 PAN : AABCI0704R ......प्रत्यर्थी / Respondent Assessee by : N O N E Revenue by : Shri Kailash G. Kanojiya सुनवाई की तारीख / Date of Hearing : 11-11-2022 घोषणा की तारीख / Date of Pronouncement : 17-11-2022 आदेश / ORDER PER S.S. VISWANETHRA RAVI, JM : This appeal by the Revenue against the order dated 14-07-2016 passed by the Commissioner of Income Tax (Appeals)-2, Nagpur [‘CIT(A)’] for assessment year 2010-11. 2 ITA No.516/NAG/2016, A.Y. 2010-11 2. The Revenue raised three grounds of appeal amongst which the only issue is to be decided is as to whether the CIT(A) justified in cancelling the penalty imposed by the AO u/s. 271(1)(c) of the Act. 3. We note that the AO recorded issuance of penalty notice u/s. 271(1)(c) of the Act vide its order dated 12-03-2013 passed u/s. 143(3) of the Act. In pursuance of the same, the AO initiated penalty proceedings by issuing a notice u/s. 274 r.w.s. 271(1)(c) of the Act. The AO imposed penalty under the charge of furnishing inaccurate particulars of income by observing that the assessee made provision in its books of accounts without any basis and for claiming the same as expenses, further, for claiming unabsorbed depreciation and for not proving commission expenses. It is noted the AO in the assessment proceedings the provision made was rejected as it is the provision made is contingent liability, claim of unabsorbed depreciation held as not allowable and disallowed commission expenses for non-submission of evidences. 4. We find the Act for making wrong claims and no reference or whatsoever made in the assessment order nor in the penalty order that the assessee furnished inaccurate particulars of income. The CIT(A) by placing reliance on the decision of Hon’ble Supreme Court in the case of Reliance Petro Products Pvt. Ltd. reported in 322 ITR 158 (SC), held penalty imposed u/s. 171(1)(c) of the Act for not furnishing inaccurate particulars of income is not maintainable on the ground that the admission or rejection of a claim is a subjective exercise and does not amount to furnishing of inaccurate particulars of income. Admittedly, the AO made 3 ITA No.516/NAG/2016, A.Y. 2010-11 additions on account of rejection of provision, denial of set off of brought forward unabsorbed depreciation and disallowance of commission expenses. The relevant claims were made before the AO in the return of income and the AO proceeded to initiate penalty proceedings only on the ground that the estimated provision of books of accounts is not crystallized, non-availability of brought forward unabsorbed depreciation and disallowance of commission expenses. We find when the facts and details in support of the above said claims are disclosed in the return of income and only finding the said claims are not allowable does not amount to furnishing of inaccurate particulars of income. We note that there was no deliberate attempt by the assessee in furnishing any inaccurate particulars of income thereof, does not make the assessee guilty of any charge resulting in imposition of penalty u/s. 271(1)(c) of the Act. We find making incorrect claims only by inadvertent mistake, bonafide error without any intention to furnishing inaccurate particulars of income. A mere disallowance on incorrect claim does not amount to furnishing inaccurate particulars of income, therefore, the assessee is not liable to be charged penalty u/s. 271(1)(c) of the Act. Therefore, following the decision of Hon’ble Supreme Court in the case of Reliance Petro Products Pvt. Ltd. (supra) we hold that where complete disclosure of facts and claims were made, was not found acceptable to Revenue, which by itself would not attract the provision u/s. 271(1)(c) of the Act under the charge of furnishing inaccurate particulars of income, no penalty could be imposed. In the present case, admittedly, the assessee disclosed all the details. The AO disallowed the same. When all the details are on the record no penalty can be imposed for making incorrect claim, therefore, we do not find any 4 ITA No.516/NAG/2016, A.Y. 2010-11 infirmity in the order of CIT(A) and it is justified. Thus, ground Nos. 1 to 3 raised by the Revenue are dismissed. 5. In the result, the appeal of Revenue is dismissed. Order pronounced in the open court on 17 th November, 2022. Sd/- Sd/- (Dr. Dipak P. Ripote) (S.S. Viswanethra Ravi) ACCOUNTANT MEMBER JUDICIAL MEMBER पुणे / Pune; दिनाांक / Dated : 17 th November, 2022. रदव आदेश की प्रधिधलधप अग्रेधर्ि / Copy of the Order forwarded to : 1. अपीलार्थी / The Appellant. 2. प्रत्यर्थी / The Respondent. 3. The CIT(A)-2, Nagpur 4. The Pr. CIT-2, Nagpur. 5. दवभागीय प्रदतदनदि, आयकर अपीलीय अदिकरण, नागपूर, / DR, ITAT, Nagpur. 6. गार्ड फ़ाइल / Guard File. //सत्यापित प्रपत// True Copy// आिेशानुसार / BY ORDER, वररष्ठ दनजी सदिव / Sr. Private Secretary आयकर अपीलीय अदिकरण ,पुणे / ITAT, Pune