THE COMMISSIONER OF INCOME TAX - II AMRITSAR V. BAL KISHAN DHAWAN

ITA/183/2013

AI Insights

The case revolves around the penalty imposed on Bal Kishan Dhawan HUF by the Assessing Officer for claiming deductions under section 80IB of the Income Tax Act, which were disallowed. The penalty was contested and eventually deleted by the Commissioner of Income Tax (Appeals) and the Income Tax Appellate Tribunal, leading to the present appeal by the Commissioner of Income-tax-II, Amritsar. The appellant argued that the deletion of the penalty was erroneous and cited a different interpretation of the law compared to the precedents applied by the lower authorities. The court examined the applicability of the Supreme Court's decision in Reliance Petro Products Pvt. Ltd. and the Delhi High Court's decision in Zoom Communication Private Limited, ultimately finding no grounds to overturn the lower authorities' decisions.

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 734171 (HC-CHANDIGARH)
• Appeal Type: Others
• Pronouncement Date: 06-09-2013
• Assessment Year: misc
• Other Referred Cases: Commissioner of Income Tax (Appeals) vs. Reliance Petro Products Private Limited, Commissioner of Income Tax vs. Zoom Communication Private Limited, CIT Vs. Harshvardhan Chemicals & Mineral Ltd., Chanderpal Bagga Vs. ITAT, CIT Vs. Rajiv Udyog
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Assessee Lawyers: DENESH GOYAL
• Keywords: Assessing Officer; Bona Fide Mistake; Commissioner of Income Tax (Appeals); Deduction; Furnishing inaccurate particulars of income; Income tax appellate tribunal; Penalty
• Section: 271(1)(c); 80IB; 18(1)(b)

Judgement Text

"Income Tax Appeal No.183 of 2013 1 IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH Income Tax Appeal No.183 of 2013 Date of Decision:06.09.2013 The Commissioner of Income-tax-II, Amritsar ..Appellant Versus Bal Kishan Dhawan HUF, Prop. M/s B.K.D.Enterprises,Amritsar. ..Respondent CORAM: HON'BLE MR. JUSTICE RAJIVE BHALLA HON'BLE MR. JUSTICE DR. BHARAT BHUSHAN PARSOON Present; Mr. Denesh Goyal, Advocate, for the appellant. RAJIVE BHALLA, J. The revenue impugns order dated 8.3.2013 passed by the Income Tax Appellate Tribunal, Amritsar Bench, Amritsar and order dated 25.5.2012 passed by the Commissioner of Income Tax (Appeals), deleting the penalty imposed by the Assessing Officer. Counsel for the appellant submits that as the assessment order was upheld by the Income Tax Appellate Tribunal, the order imposing penalty, under Section 271(1)(c) of the Income Tax Act, 1961 (hereinafter referred to as the “Act”), has been wrongly set aside by the Commissioner of Income Tax (Appeals) and the Income Tax Appellate Tribunal, by relying upon a judgment of the Hon'ble Supreme Court in Commissioner of Income Tax (Appeals) versus Reliance Petro Products Private Limited 322 ITR 158 (Supreme Court). The judgment is not applicable as it is distinguishable on facts. The controversy, in the present case, is fully covered against the Varinder Kumar 2013.09.18 16:11 I attest to the accuracy and integrity of this document High Court Chandigarh Income Tax Appeal No.183 of 2013 2 assessee by a judgment of the Delhi High Court in Commissioner of Income Tax versus Zoom Communication Private Limited, 2010 (327) ITR 510 (Delhi). The Income Tax Appellate Tribunal as well as the Commissioner of Income Tax (Appeals) have fallen into error while holding that mere disallowance of deduction claimed, would not necessarily invite penalty. It is further submitted that the following questions of law arise for consideration:- “ (i) Whether the Hon'ble ITAT was correct in upholding the deletion of penalty imposed u/s 271(1)(c) of the Income Tax Act, 1961 of Rs.10,58,875/- by applying the ratio of Reliance Petro Products Pvt. Ltd., 322 ITR 158 while the facts of the case and the questions involved in the present case are completely different from that case.” (ii) Where the basic conditions of claiming a deduction is not fulfilled, whether the act of claiming a deduction by an assessee in full knowledge of facts would affect penalty U/s 271(1)(c) of the Act.” (iii) Whether wrong claim for deduction u/s 80IB could be attributed to a bona fide mistake and therefore penalty u/s 271 (1)(c) is not attracted against the assessee.” We have heard counsel for the appellant, perused the impugned orders and find no reason to entertain the appeal, much less on the questions of law raised by the appellant. The assessee filed a return of income claiming deductions under section 18(1)(b) of the Act. The deductions were disallowed. The Assessing Officer, also directed initiation of penalty proceedings, under Sections 271(1)(c) of the Act. The Assessing Officer's order was affirmed up to the Income Tax Appellate Tribunal. The Assessing Officer, thereafter, Varinder Kumar 2013.09.18 16:11 I attest to the accuracy and integrity of this document High Court Chandigarh Income Tax Appeal No.183 of 2013 3 passed an order imposing penalty. Aggrieved by this order, the assessee filed an appeal before the Commissioner of Income Tax (Appeals), which was allowed by holding as follows:- “ In the case of the appellant the deduction u/s 80IB was rejected by the AO for late filing of return. The various contentions raised by the appellant were rejected. The Hon'ble ITAT, Amritsar has upheld the disallowance for deduction u/s 80IB, but it is now judicially well settled that a finding in the assessment order may constitute good evidence in the penalty proceedings but such finding cannot be regarded as conclusive for the purpose of penalty and raising a legal claim, even if it is ultimately found to be legally unacceptable does amount to furnishing of inaccurate particulars of income. It is not a case where the claim of appellant has been found by the AO to be mala fide. The Rajasthan High Court in the case of CIT Vs. Harshvardhan Chemicals & Mineral Ltd. Reported in 259 ITR 212 (Rajasthan), accepted tribunal's finding deleting the penalty holding “where an arguable, controversial or debatable deduction is claimed, the claim could not be said to be false, otherwise it would become impossible for any appellant to raise any claims or deductions which might be debatable, and it was not the intention of the legislature to make punishable such claims, if they were not accepted.” The High Court affirmed the decision of ITAT and held that no penalty was leviable. The Rajasthan High Court in the case of Chanderpal Bagga Vs. ITAT reported at 261 ITR 67, held that if the appellant Varinder Kumar 2013.09.18 16:11 I attest to the accuracy and integrity of this document High Court Chandigarh Income Tax Appeal No.183 of 2013 4 claimed any exemption after disclosing relevant basic facts and under ignorance of the provisions of the Act had not offered amount of tax, penalty should not be imposed. In such cases, it is the duty of the Assessing Officer to ask for further details and tax the income if it is liable to tax. There was no concealment of income and penalty could not be imposed. Again the Madhya Pradesh High Court in the case of CIT Vs. Rajiv Udyog 227 ITR 209 (MP) held that where the appellant claimed the deduction under chapter VIA and the same was disallowed by the Assessing Officer, it cannot be said to be concealment of income as per Explanation 1 to Sec. 271(1)(c) The other judicial decisions relied upon by the appellant's counsel and reproduced supra are also relevant to conclude that an erroneous claim of deduction made by appellant may be a good case for making addition since claim was erroneous but that by itself is not sufficient for levy of penalty u/s 271(1) (c). “The Hon'ble Supreme Court in the case of Reliance Petro Products Pvt. Ltd., reported in 352 ITR 158 (SC) has held” that a mere making of the claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the appellant. If this contention is accepted then in case of every return where the claim made is not accepted by the AO for any reason, the appellant will invite penalty u/s 271(1)(c). That is clearly not the intendment of the Legislature. In order to expose the appellant to the penalty unless the case is strictly covered by the provision, the penalty provision cannot be invoked. By any stretch of imagination, Varinder Kumar 2013.09.18 16:11 I attest to the accuracy and integrity of this document High Court Chandigarh Income Tax Appeal No.183 of 2013 5 making an incorrect claim in law cannot tantamount to furnishing inaccurate particulars.” In the light of rationale laid down in the above judgment by the Hon'ble Supreme Court, the appellant cannot be held to have furnished inaccurate particulars of income as the relevant facts for the claim were disclosed by the appellant in his return & the mere making of claim by appellant which is not sustainable in law will not amount to furnishing inaccurate particulars of income. Hence the appellant is not liable to penalty u/s 271(1)(c) of the Act for furnishing inaccurate particulars of income.” The revenue, thereafter, filed an appeal before the Income Tax Appellate Authority, which was dismissed by holding as follows:- “ We are of the view that the facts and circumstances of the case reported in 322 ITR 158 (Supreme Court) in the case of CIT Vs. Reliance Petro Products Pvt. Ltd. are totally identical to the facts of the present case and the learned First Appellate Authority has rightly deleted the penalty in dispute in the present appeals. By respectfully following the various decisions mentioned in the impugned orders, the arguments advanced by learned D.R. are not relevant to the facts of the present case, therefore, the same are rejected and on the contrary the argument advanced by learned counsel for the assessee before us as well as advanced before learned first Appellate Authority are very much relevant on the facts and circumstances of the present case. Keeping in view of the facts and circumstances of the present case and the impugned order passed by learned first Appellate Authority on the basis of decision of Hon'ble Varinder Kumar 2013.09.18 16:11 I attest to the accuracy and integrity of this document High Court Chandigarh Income Tax Appeal No.183 of 2013 6 Supreme Court of India in CIT Vs. Reliance Petro Products Pvt. Ltd reported in 322 IIP 158 (Supreme Court), we are of the view that no interference is required in the well reasoned order passed by the learned First Appellate Authority, therefore, we uphold the same by dismissing the appeals filed by the Revenue.” Counsel for the revenue's contention that as claim for deduction was not bona fide, penalty was rightly imposed. The controversy, herein, is covered against the assessee by a judgment of the Delhi High Court in Zoom Communication Private Limited's case (supra) and not by judgment of the Hon'ble Supreme Court in Reliance Petro Products' case (supra) as the latter judgment is distinguishable on facts. We are not inclined to accept the submissions made by counsel for the revenue. While considering the scope and ambit of penalty levied under Section 271(1)(c) of the Act, the Hon'ble Supreme Court has held in Reliance Petro Products' case (supra) that mere raising of a claim, even if not sustainable in law, is not by itself, sufficient to hold that it denotes furnishing of inaccurate particulars with an intent as would invite a penalty. The Hon'ble Delhi High Court has held in Zoom Communication Private Limited's case (supra), that if an assessee is unable to explain as to in what circumstances and on account of whose mistake, deductions were claimed, it would amount to raising a mala fide claim that would invite penalty. We cannot, but agree with the observations by the Delhi High Court, but, as the situation, on facts, in the present case, is entirely different, find no reason to depart from the ratio laid down by the Hon'ble Supreme court in Reliance Petro Products' case (supra). The deductions were claimed in a bona fide exercise of the right of an assessee to claim deduction. The fact that this claim was rejected, does not raise inference Varinder Kumar 2013.09.18 16:11 I attest to the accuracy and integrity of this document High Court Chandigarh Income Tax Appeal No.183 of 2013 7 of a mala fide attempt to evade tax. A penalty is imposed only if the claim is mala fide or raised with intent to evade tax. In this view of the matter, we find no merit in the appeal or the substantial questions of law and dismiss the appeal. ( RAJIVE BHALLA ) JUDGE ( DR. BHARAT BHUSHAN PARSOON) 06.09.2013 JUDGE VK Varinder Kumar 2013.09.18 16:11 I attest to the accuracy and integrity of this document High Court Chandigarh "