Ita v. Reliance Petroproducts Pvt. Limited, (2010) 322 Itr 158. Hence The Instant Appeal Bythe Revenue

IN THE HIGH COURT OF PUNJAB AND HARYANA AT|CHANDIGARH ITA No.97 of 2014 (O&M)Date of decision: /7./7.20 Commissioner of Income Tax II, Chandigarh ....-- Appe Vs, M/s National Institute of Technical Teacher Training of Research,Sector 26, Chandigarh ..... Respond CORAM: HON’BLE MR. JUSTICEK AJAY KUMAR MITTAHON’ BLE MR. JUSTICE JASPAL SINGH Present:Ms. Urvashi Dhugga, Advocate for the appellant.Ajay Kumar Mittal,J, 1.This appeal has been preferred by the revenue under Section260A of the Income Tax Act, 1961 (in short, “‘the Act’) against the ordedated 2.8.2013, Annexure A.4, passed by the Income Tax AppellateTribunal, Chandigarh Bench, °*B’ (in short, “the Tribunal’) in ITANo.386/Chd/2013 for the assessment year 2008-09, claiming followingsubstantial questions of law:- “'1) Whether on the facts and in the circumstances of the casand in law, the Hon’ble ITAT is right in deleting the penaltylevied under section 271(1)(c) on a patently wrong claim of theassessee which was in contravention of provisions of section43B of the Income Tax Act, 1961? 11) Whether on the facts and in the circumstances of the caseand in law, the Hon’ble ITAT is right in deleting the penaltylevied under Section 271(1)(c) while under similar circumstances the Hon’ble Delhi Court vide its decision dated12.9.2013 in the case ofCommissioner ofIncome Tax III vs.Arotech Limited (Formerly SKS Limited) i ITA No.71/2013|has upheld the levy of penalty under Section 271(1) (c) onamounts not paid in accordance with provisions of section 43Bot the Act 1961 ? |Briefly, the facts necessary for adjudication of the controversyinvolved as narrated in the appeal may be noticed. The assessee 1s a societyregistered under the Societies Registration Act, 1860 with the Registrar ofSocieties, Delhi. It 1s engaged in imparting training to teachers and alsoundertook systemic research to provide research inputs for development oftechnical education training systems and its management. During the courseof assessment proceedings for the assessment year in question, theAssessing officer observed that the assessee had claimedLV35,72,000/-(leave encashment at,“a12,05,000/- and gratuity at 23,67,000/-) declared as|hability as on 31.3.2008 and was found to be actually unpaid. By notmaking payment for leave encashment and gratuity, the assessee violated theprovisions of section 43B of the Act. Penalty proceedings under section 271(1) (c) of the Act were also initiated. The assessee did not go in appealagainst the assessment framed thereby accepting the fact that wrong claimhad been made by it knowingly. The Assessing Officer imposed a penaltyamounting toLy14,59,398/- vide order dated 27.6.2011 in respect ofaddition made under section 43B on account of unpaid leave encashmentand gratuity. Not satisfied with the order, the assessee filed appeal beforethe Commissioner of Income Tax (Appeals) [CIT(A)]. Vide order dated24.1.2013, Annexure A.3, the CIT(A) deleted the penalty by observing that ITA No.97 of 2014 (O&M) 3 Human Resource development, Government of India and officials werereappointed by the Government of India; the society had incurred a lossduring the year and disallowance was made under Section 43B of the Act;therefore, there was no intention to conceal the income. Aggrieved by theorder, the revenue filed appeal before the Tribunal. Vide order dated2.8.2013, Annexure A.4, the Tribunal dismissed the appeal of the revenue byrelying on the decision of the Apex court inCIT(A) vs. Reliance PetroProducts Pvt. Limited, (2010) 322 ITR 158. Hence the instant appeal bythe revenue. ITA No.97 of 2014 (O&M) 3 Human Resource development, Government of India and officials werereappointed by the Government of India; the society had incurred a lossduring the year and disallowance was made under Section 43B of the Act;therefore, there was no intention to conceal the income. Aggrieved by theorder, the revenue filed appeal before the Tribunal. Vide order dated2.8.2013, Annexure A.4, the Tribunal dismissed the appeal of the revenue byrelying on the decision of the Apex court inCIT(A) vs. Reliance PetroProducts Pvt. Limited, (2010) 322 ITR 158. Hence the instant appeal bythe revenue. 3)Learned counsel for the revenue submitted that the Tribunalhad wrongly relied upon a decision of the Apex court 1n Reliance PetroProducts Private Limited S case (supra) which was not applicable to thefacts of the case and placed reliance on order dated 12.9.2013 passed byDelhi High Court in Arcotech Limited'scase (supra), Annexure A.5 tosubmit that since the expenditure relating to payment on account of leaveencashment and gratuity had actually not been paid before the close of theyear under consideration, therefore, the same was disallowed under section43B of the Act. The assessee had wrongly claimed deduction to which itwas not entitled to and therefore the Assessing officer had rightly imposedpenalty under Section 271(1) (c) of the Act. 4 After hearing learned counsel for the appellant-revenue, we donot find any merit in the appeal. 4]The CIT (A) while deleting the penalty noticed in its orderdated 24.1.2013, Annexure A.3 as under:- *“l. have considered the submission of the learned counsel ahave gone through the facts of the case. The appellant society is functioning under overall control of Munistry of HumanResource Development and major decisions are taken under thesupervision of Government of India or officials appointed bythe Government of India. The appellant society had filed areturn declaring loss of more than41.91 crores. The amounts!relating to leave encashment and gratuity had been claimed asdeduction by the appellant whereas these were not paid and sothese were disallowed under section 43B of the Act.Concealment penalty has also been levied. As the appellant wasa Government organization, running into huge losses, theremust not have been certainly any intention to claim higherdeduction. Hence, it cannot be said that appellant haddeliberately claimed wrong deduction and furnished inaccurateparticulars of income. The concealment penalty levied in thiscase 1s accordingly cancelled. All the grounds taken by theappellant are allowed.” 6]The above finding was affirmed on appeal by the Tribunal 1n itsorder dated 2.8.2013, Annexure A.4. It was recorded as under:- ‘The above clearly shows that once particulars have been givenin the return which are not found to be incorrect then it cannotbe said that the assessee has filed inaccurate particulars. In casebefore us, only claim in respect of leave encashment andgratuity was disallowed but all the particulars were disclosed.We also have to keep in our mind that the assessee 1s a societyfunctioning under the overall control of Ministry of HumanResource Development, Government of India and which 1s anon commercial enterprise. Therefore, a lenient view needs tobe taken. Accordingly we are of the opinion that it was nota fitcase for levy of penalty and accordingly confirm the order ofthe learned CIT(A).” 7 The Apex Court inReliagqnce Petro Products Pvt, Limited case (supra) had held as under:- ‘The above clearly shows that once particulars have been givenin the return which are not found to be incorrect then it cannotbe said that the assessee has filed inaccurate particulars. In casebefore us, only claim in respect of leave encashment andgratuity was disallowed but all the particulars were disclosed.We also have to keep in our mind that the assessee 1s a societyfunctioning under the overall control of Ministry of HumanResource Development, Government of India and which 1s anon commercial enterprise. Therefore, a lenient view needs tobe taken. Accordingly we are of the opinion that it was nota fitcase for levy of penalty and accordingly confirm the order ofthe learned CIT(A).” 7 The Apex Court inReliagqnce Petro Products Pvt, Limited case (supra) had held as under:- “A glance at the provisions of section 271(1) (c) of the IncomeTax Act, 1961 suggests that in order to be covered by it, therehas to be concealment of the particulars of the income of theassessee. Secondly the assessee must have furnished inaccurateparticulars of his income. The meaning of the words“particulars’ used in Section 271(1) (c) would embrace thedetails of the claim made. Where no information given in thereturn 1s found to be incorrect or inaccurate, the assesseecannot be held guilty of furnishing inaccurate particulars. Inorder to expose the assessee to penalty, unless the case 1sstrictly covered by the provision, the penalty provision cannotbe invoked. By no stretch of imagination can making anincorrect claim tantamount to furnishing inaccurate particulars,There can be no dispute that everything would depend upon thereturn filed by the assessee because that 1s the only documentwhere the assessee can furnish the particulars of his income.When such particulars are found to be inaccurate, the liabilitywould arise. To attract penalty, the details supplied in the returnmust not be accurate, not exact or correct, not according to thetruth or erroneous.” § A perusal of the findings recorded by the CIT(A) and theTribunal shows that the assessee-society was functioning under the controlof Ministry of Human Resource Development. It had filed a return declaringloss of more than=1.91 crores. The amounts relating to leave encashmentand gratuity being claimed as deduction were not paid before the closing ofthe financial year and therefore, the same were disallowed under Section43B of the Act. The liability to pay, however, was not in dispute. Afterexamining the matter, 1t was noticed by the CIT(A) that the assessee had notdeliberately claimed wrong deduction and furnished inaccurate particularsof income. The Tribunal also observed that once full particulars had been given in the return which were not found to be incorrect, 1t could not be saidthat the assessee had filed inaccurate particulars. The said findings havenot been shown to be illegal or perverse in any manner. Consequently, wedo not find any merit in the appeal. Q |Referring to the judgment of the Delhi High Court inArcotech Limited S case (Supra), 1t may be noticed that therein the finding came to berecorded against the assessee that the deduction claimed was not bonafideand justified. The onus to establish the genuineness of the expenses was onlthe assessee which the assessee had failed to discharge. The Tribunal whiledismissing the appeal had noticed that the assessee cannot claim wrongdeductions without any basis or foundation to justify the claim.Consequently, the position in the present case being different, no advantagecan be derived by the revenue from the said judgment. 10.In view of the above, no substantial question of law arises andconsequently, the appeal stands dismissed. (Ajay Kumar Mittal)Judge July 07, 2014<.&7 (Jaspal Singh)sudge|