Expert Capital Services Ltd.,, ... vs Assessee

This appeal by the assessee has been directed against the order of the

CIT(A), New Delhi dated 22.05.2013 in Appeal No. 11/2012-13 for AY 2006-

07 by which penalty order passed by the AO dated 15.03.2012 u/s 271(1)(c) r/w

section 274 of the Income Tax Act, 1961 (in short the Act) has been upheld

confirming the penalty.

2. The assessee has raised as many as six grounds in this appeal but except

ground no.1, other grounds are argumentative and supportive to the main

ground which reads as under:-

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AY: 2006-07

"1. That having regard to the facts and circumstances of the case, ld. CIT(A) has erred in law and on facts in confirming the action of ld. AO in levying penalty of Rs.50,490/- and that too without assuming jurisdiction as per law and the impugned penalty order being illegal and void ab-initio."

3. Apropos sole ground of the assessee, we have heard arguments of both

the sides and carefully perused the quantum assessment order, penalty order and

impugned order.

4. Ld. Counsel of the assessee pointed out that the assessee furnished proper

and plausible explanation before the AO but the AO imposed the impugned

penalty merely observing that the assessee's reply is silent on the issue of

addition on account of payment of ROC. Ld. counsel further pointed out that

the assessee company has neither concealed particulars of income nor furnished

inaccurate particulars of income. The penalty was levied on the basis of

disallowance of ROC, filing expenses merely because of difference of opinion

taken by ld. AO. Ld. AR also contended that the assessee company has nothing

to do with the concealment of income or furnishing of inaccurate particulars of

his income. Ld. counsel also pointed out that the CIT(A) wrongly relied on the

irrelevant citations to uphold the penalty while the case of the assessee is

squarely covered by the decision of Hon'ble Supreme Court in the case of

CIT vs Reliance Petroproducts Pvt. Ltd. 322 ITR 158 (SC). Ld. Advocate

has further drawn our attention towards decision of ITAT 'A' Bench dated

14.12.2012 in ITA No. 5112/Del/2012 for AY 2008-09 in the case of M/s

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Bakers Circle India (P) Ltd. vs DCIT and submitted that in the similar set of

facts and circumstances, the Tribunal, following the decision of Hon'ble

Supreme Court in the case of Reliance Petroproducts (supra), deleted the

penalty.

5. Replying to the above, ld. DR supported the impugned order and

submitted that when the impugned claim of the assessee was capital in nature,

then furnishing of such claim amounts to making a wrong claim which attracts

penalty u/s 271(1)( c) of the Act.

6. On careful consideration of above submissions of both the sides, we note

that in the similar set of facts and circumstances, ITAT Delhi 'A' Bench,

respectfully following the decision of Hon'ble Apex Court in the case of CIT

vs Reliance Petroproducts deleted the penalty by observing as under:-

"12. We further place reliance upon the Hon'ble Apex Court decision in the case of CIT vs. Reliance Petro Products Ltd. in Civil Appeal No. 2463 of 2010. In this case vide order dated 17.3.2010 it has been held that the law laid down in the Dilip Sheroff case 291 ITR 519 (SC) as to the meaning of word 'concealment' and 'inaccurate' continues to be a good law because what was overruled in the Dharmender Textile case was only that part in Dilip Sheroff case where it was held that mensrea was a essential requirement of penalty u/s 271(1)(c). The Hon'ble Apex Court also observed that if the contention of the revenue is accepted then in case of every return where the claim is not accepted by the Assessing Officer for any reason, the assessee will invite the penalty u/s 271(1)(c). This is clearly not the intendment of legislature. ITA NO. 5112/Del/2012 10 13. In the background of the aforesaid discussions and precedents, we find that the levy of penalty in this case is not justified. Accordingly, we set aside the orders of the authorities below and 3 ITA No. 4610/Del/2013 AY: 2006-07

delete the levy of penalty. 14. In the result, the appeal filed by the Assessee is allowed.

7. In view of above, in the facts and circumstances of the present case, we

hold that the assessee placed claim of ROC fee expenses which was disallowed

by the AO. Subsequently, the AO proceeded to levy penalty u/s 271(1) (c) of

the Act by holding that the assessee placed a wrong claim and his reply is silent

on this issue but from the impugned order, we clearly observe that the assessee

made detailed submissions which have been reproduced by the CIT(A) in para

5.1 of the impugned order. The crux of the explanation of the assessee is that

the AO has imposed penalty due to merely disallowance of expenses of payment

made to ROC for enhancement of capital base without proving it as a conscious

act of concealment of particulars of income by the assessee. In the case of

Reliance Petroproducts, their lordships concluded that merely because the

assessee had claimed the expenditure which was not accepted or was not

acceptable to the revenue, that by itself would not attract penalty u/s 271(1)(c) of

the Act. In view of above, we reach to a conclusion that the AO imposed

penalty on wrong premise merely because the claim of the assessee towards

ROC fees was not found to be acceptable by the revenue. At the same time,

undisputedly, we note that it is not the case of the revenue that either amount of

ROC fees claimed by the assessee was not actually incurred or was not correct

and the same was fully disclosed by the assessee in the statement of accounts

filed along with return of income. The addition made during the course of

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assessment proceedings, by itself, cannot be sufficient to initiate and impose

penalty u/s 271(1)(c) of the Act, merely disallowance of expenses per se cannot

mean that the assessee has furnished inaccurate particulars of its income.

8. It is pertinent to mention that concealment involves penal action and the

onus is on the AO that there was a conscious concealment beyond the ambit of

bonafide by the assessee and the explanation offered by the assessee is not

satisfactory as required by Explanation 1 to section 271(1) (c) of the Act, then

only it can be inferred that the assessee has furnished incorrect or inaccurate

particulars of its income which attracts penalty. Under above noted facts and

circumstances, we reach to a conclusion that the penalty levied by the AO and

upheld by the CIT(A) is not sustainable and in accordance with law. Therefore,

we are inclined to demolish the conclusion of the authorities below. We order

accordingly. Finally, sole ground of the assessee is allowed and the AO is

directed to delete the penalty.

9. In the result, the appeal of the assessee is allowed.

Order pronounced in the open court on 29.5.2015.

Sd/- Sd/- ( N.K. SAINI ) (CHANDRAMOHAN GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER

DATED 29th MAY 2015 'GS'

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Copy forwarded to:- 1. Appellant 2. Respondent 3. CIT(A) 4. CIT 5. DR By Order

Asstt. Registrar

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