Sh. Shiv Parshad Aggarwal, Ludhiana vs Department Of Income Tax

The A.C.I.T., Vs. Sh.Shiv Parshad Aggarwal,, Circle V, C/o M/s Saligram Shivparshad, Ludhiana. G.T. Road, Miller Ganj, Ludhiana. PAN: ABKPA7653E

(Appellant) (Respondent)

Appellant by : Shri Manjit Singh, DR Respondent by : Shri Subhash Aggarwal

Date of hearing : 01.07.2015 Date of Pronouncement : 03.07.2015

PER BHAVNESH SAINI, J.M. :

This appeal filed by the Revenue is directed

against the order of learned Commissioner of Income Tax

(Appeals)-II, Ludhiana dated 17.7.2014 for assessment

year 2009-10, challenging the cancellation of penalty

under section 271(1)(c) of the Income Tax Act, 1961 (in

short 'the Act').

2

2. Briefly, the facts are that the assessment in this

case was completed at total income of Rs.3.55 crores against

the returned income of Rs.3.15 crores. The only addition

made during the course of assessment was the disallowance of

Rs.39,80,707/- under section 14A read with Rule 8D. The

quantum addition was upheld by the learned CIT (Appeals).

The Assessing Officer vide separate order levied the penalty.

The assessee challenged the penalty order before the learned

CIT (Appeals) and it was submitted that the Assessing Officer

made the following disallowances :

i) Section 14A/Rule 8D(ii) Rs.33,08,071/- ii) Section 14A/Rule 8D(iii) Rs. 6,72,635/-

Total : Rs.39,80,706/-

3. The disallowance was made on the interest payment

of Rs.77,72,910/-. It was submitted before the learned CIT

(Appeals) that the borrowed funds on which interest was paid

were given on loan and higher amount of interest was earned

on the same. Ultimately, the position was that the assessee

declared interest income of Rs.1,18,29,523/- and the interest

expenditure was Rs.77,72,910/- and as such, no addition was

called for. The learned CIT (Appeals), however, did not

accept the contention of the assessee. The assessee

preferred an appeal before the Tribunal, who vide their order

dated 27.3.2014 accepted the contention of the assessee

regarding netting of interest and held that if after setting off

no interest expenditure is remaining to be set off against the

interest income offered under the head "income from other 3

sources", there is no merit in making the disallowance and

thus deleted the addition of Rs.33,08,071/-. However, the

addition of Rs.6,72,635/- was upheld. It was, therefore,

submitted that the assessee has disclosed all the facts

relating to earning of dividend income and expenditure before

the authorities below. The assessee relied upon several

decisions in support of the contention that the penalty is not

leviable in such circumstances including the decision of the

Hon'ble Supreme Court in the case of CIT Vs. Reliance

Petroproducts P. Ltd., 322 ITR 158. The learned CIT

(Appeals) considering the submission of the assessee

cancelled the penalty and allowed the appeal of the assessee.

His findings in paras 3.3 to 3.5 of the appellate order are

reproduced as under :

"3.3 I have carefully considered the appellant's submissions. It is a trite law that the assessment proceedings and penalty proceedings are separate proceedings and are distinct and independent of each other. In the assessment proceedings, the AO has to show that the additions made to the income of the assessee are in fact the income of the assessee. However, in the penalty proceedings, the AO has to bring on record some further material to demonstrate that the assessee had concealed its income or furnished inaccurate particulars of income. Whether there is any concealment or furnishing of inaccurate particulars would depend upon the Return filed because that is the only document, where the assessee can furnish the particulars of his income. The penalty in this case has been imposed on the disallowances made u/s 14A of the IT Act. The expenses which have been disallowed were duly shown in the return of income. This is therefore not a case of concealment of income. Further, in the present case, no information given in the Return was found to be incorrect or inaccurate. It is not as if any statement made or any detail supplied was found to be 4

factually incorrect. The expenses claimed by the appellant have not been found bogus or false by the AO. Thus, the genuineness of the expenses incurred by the appellant has not been doubted by the AO. Hence, the appellant cannot be held guilty of furnishing inaccurate particulars. There is no finding that any details supplied by the appellant in its Return were found to be incorrect or erroneous or false. Such not being the case, there would be no question of inviting the penalty under Section 271(l)(c) of the Act. A mere making of a claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the appellant. Such claim made in the Return cannot amount to 'inaccurate particulars'. The question of disallowance u/s 14A and its quantification is contentious, which leads to the inference that the difference of opinion between the appellant and the A.O. is bona fide. This is also evident from the fact that the Hon'ble ITAT has deleted the disallowance of Rs. 33,08,071/.- out of the total disallowance of Rs. 39,80,706/-. Thus, it cannot be held that the appellant has filed inaccurate particulars of income or had concealed its income and, therefore, the penalty cannot be levied on the appellant. The ratio of judgment of Hon'ble Supreme Court in the case of M/s Reliance Petro Chemicals Ltd. reported in (2010) 322 ITR 158 (SC), is applicable to the "We are not concerned in the present case with the mens rea. However, we have to only see as to whether in this case, as a matter of fact, the assessee has given inaccurate particulars. In Webster's Dictionary, the word "inaccurate" has been defined as:

"not accurate, not exact or correct; not according to truth; erroneous; as an inaccurate statement, copy or transcript."

We have already seen the meaning of the word "particulars" in the earlier part of this judgment. Reading the words in conjunction, they must mean the details supplied in the return, which are not accurate, not exact or correct, not according to truth or erroneous. We must hasten to add here that in this case, there is no finding that any details supplied by the assessee in its return were found to 5

be incorrect or erroneous or false. Such not being the case, there would be no question of inviting the penalty under section 271(l)(c) of the Act. 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 assessee. Such claim made in the return cannot amount to the inaccurate particulars.

It was tried to be suggested that section 14A of the Act specifically excluded the deductions in respect of the expenditure incurred by the assessee in relation to income which does not form part of the total income under the Act. It was further pointed out that the dividends from the shares did not form the part of the total income. It was, therefore, reiterated before us that the Assessing Officer had correctly reached the conclusion that since the assessee had claimed excessive deductions knowing that they are incorrect; it amounted to concealment of income. It was tried to be argued that the falsehood in accounts can take either of the two forms; (i) an item of receipt may be suppressed fraudulently; (ii) an item of expenditure may be falsely (or in an exaggerated amount) claimed, and both types attempt to reduce the taxable income and, therefore, both types amount to concealment of particulars of one's income as well as furnishing of inaccurate particulars of income. We do not agree, as the assessee had furnished all the details of its expenditure as well as income in its return, which details, in themselves, were not found to be inaccurate nor could be viewed as the concealment of income on its part. It was up to the authorities to accept its claim in the return or not. Merely because the assessee had claimed the expenditure, which claim was not accepted or was not acceptable to the Revenue, that by itself would not, in our opinion, attract the penalty tinder section 271(l)(c). If we accept the contention of the Revenue then in case of every return where the claim made is not accepted by the Assessing Officer for any reason, the assessee will invite penalty under section 271(l)(c). That is clearly not the intendment of the Legislature.

In this behalf the observations of this court made in Sree Krishna Electricals v. State of Tamil Nadu [2009] 23 VST 249 as regards 6

the penalty are apposite. In the aforementioned decision which pertained to the penalty proceedings under the Tamil Nadu General Sales Tax Act, the-court had found that the authorities below had found that there were some incorrect statements made in the return. However, the said transactions were reflected in the accounts of the assessee. This court, therefore, observed:

"So far as the question of penalty is concerned the items which were not included in the turnover were found incorporated in the appellant's account books. Where certain items which are not included in the turnover are disclosed in the dealer's own account books and the assessing authorities includes these items in the dealer's turnover disallowing the exemption, penalty cannot be imposed. The penalty levied stands set aside."

The situation in the present case is still better as no fault has been found with the particulars submitted by the assessee in its return.

The Tribunal, as well as, the Commissioner of Income-tax (Appeals) and the High Court have correctly reached this conclusion and, therefore, the appeal filed by the Revenue has no merits and is dismissed. "

3.4 Similarly, the Hon'ble Punjab and Haryana High Court in CIT Vs Shahabad Co-op sugar Mills Ltd.[322 ITR 73(P & H)] held that making of wrong claim is not at par with concealment or giving of inaccurate information, which may call for levy of penalty under section 271(l)(c) of the Act.

3.5 In view of the above discussed position, the penalty levied on this disallowance is hereby cancelled. These grounds of appeal are accordingly allowed.

4. Ground No. 4:- This ground of appeal is general in nature and does not require any specific comments."

7 4. We have heard the learned representatives of both

the parties and perused the findings of the authorities below.

It is not in dispute that the substantial addition of

Rs.33,08,071/- had already been deleted by the Tribunal vide

order dated 27.3.2014 while allowing the appeal of the

assessee partly in ITA No.927/Chd/2012. The copy of the

order is filed on record. It is also not in dispute that the

assessee disclosed all the facts relating to the earning of

dividend income and incurring of expenditure. It was a case

of difference of opinion for making estimated addition against

the assessee under section 14A of the Act, which was

ultimately reduced to very nominal addition. The learned CIT

(Appeals) was, therefore, justified in holding that all the facts

have been disclosed in the return of income. Therefore, it is

not a case of concealment of income or filing of inaccurate

particulars of income. The information supplied by the

assessee in the return of income was not found to be

incorrect, inaccurate or false. Merely because the assessee

made a claim of deduction, which was not sustained partly in

law by itself, will not amount to filing of inaccurate

particulars of income or to prove that the assessee has

concealed the particulars of income. The learned CIT

(Appeals) correctly followed the decision of the Hon'ble

Supreme Court in the case of Reliance Petroproducts P. Ltd.

(supra) in deleting the penalty. Considering the totality of

the facts and circumstances in the light of the findings of

learned CIT (Appeals), we do not find any justification to

interfere with the order of the learned CIT (Appeals) in 8

canceling the penalty. We confirm the findings of the learned

CIT (Appeals) and dismiss the departmental appeal.

5. In the result, departmental appeal is dismissed.

Order pronounced in the open court on this 3rd

day of July, 2015.

Sd/- Sd/-

(T.R.SOOD) (BHAVNESH SAINI) ACCOUNTANT MEMBER JUDICIAL MEMBER

Dated : 3 r d July, 2015

*Rati*

Copy to: The Appellant/The Respondent/The CIT(A)/The CIT/The DR.

Assistant Registrar, ITAT, Chandigarh