The Commissioner Of Income-Tax-Ii, Amritsar v. Bal Kishan Dhawan Huf

Income Tax Appeal No.183 of 2013 1 IN THE HIGH COURT OF PUNJAB AND HARYANA ATCHANDIGARH Income Tax Appeal No.183 of 2013Date 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 theIncome Tax Appellate Tribunal, Amritsar Bench, Amritsar and order dated25.5.2012 passed by the Commissioner of Income Tax (Appeals), deletingthe penalty imposed by the Assessing Officer. Counsel for the appellant submits that as the assessmentorder was upheld by the Income Tax Appellate Tribunal, the order imposingpenalty, under Section 271(1)(c) of the Income Tax Act, 1961 (hereinafterreferred to as the “Act”), has been wrongly set aside by the Commissionerof Income Tax (Appeals) and the Income Tax Appellate Tribunal, by relyingupon a judgment of the Hon'ble Supreme Court in Commissioner of IncomeTax (Appeals) versus Reliance Petro Products Private Limited322 ITR 158(Supreme Court). The judgment is not applicable as it is distinguishable onVarinder Kumarfacts. The controversy, in the present case, is fully covered against the2013.09.18 16:11I attest to the accuracy andintegrity of this documentHigh Court Chandigarh Income Tax Appeal No.183 of 2013 2 assessee by a judgment of the Delhi High Court in Commissioner ofIncome Taxversus Zoom Communication Private Limited,2010 (327) ITR510 (Delhi). The Income Tax Appellate Tribunal as well as theCommissioner of Income Tax (Appeals) have fallen into error while holdingthat mere disallowance of deduction claimed, would not necessarily invitepenalty. It is further submitted that the following questions of law arise forconsideration:- “ (i) Whether the Hon'ble ITAT was correct in upholding thedeletion of penalty imposed u/s 271(1)(c) of the Income TaxAct, 1961 of Rs.10,58,875/- by applying the ratio of ReliancePetro Products Pvt. Ltd., 322 ITR 158 while the facts of thecase and the questions involved in the present case arecompletely different from that case.” (ii) Where the basic conditions of claiming a deduction is notfulfilled, whether the act of claiming a deduction by an assesseein full knowledge of facts would affect penalty U/s 271(1)(c) ofthe Act.” (iii) Whether wrong claim for deduction u/s 80IB could beattributed 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 theimpugned orders and find no reason to entertain the appeal, much less onthe questions of law raised by the appellant. The assessee filed a return of income claiming deductionsunder section 18(1)(b) of the Act. The deductions were disallowed. TheAssessing Officer, also directed initiation of penalty proceedings, underSections 271(1)(c) of the Act. The Assessing Officer's order was affirmedup to the Income Tax Appellate Tribunal. The Assessing Officer, thereafter, Income Tax Appeal No.183 of 2013 3 passed an order imposing penalty. Aggrieved by this order, the assesseefiled an appeal before the Commissioner of Income Tax (Appeals), whichwas allowed by holding as follows:- We have heard counsel for the appellant, perused theimpugned orders and find no reason to entertain the appeal, much less onthe questions of law raised by the appellant. The assessee filed a return of income claiming deductionsunder section 18(1)(b) of the Act. The deductions were disallowed. TheAssessing Officer, also directed initiation of penalty proceedings, underSections 271(1)(c) of the Act. The Assessing Officer's order was affirmedup to the Income Tax Appellate Tribunal. The Assessing Officer, thereafter, Income Tax Appeal No.183 of 2013 3 passed an order imposing penalty. Aggrieved by this order, the assesseefiled an appeal before the Commissioner of Income Tax (Appeals), whichwas allowed by holding as follows:- “ In the case of the appellant the deduction u/s 80IB wasrejected by the AO for late filing of return. The variouscontentions raised by the appellant were rejected. TheHon'ble ITAT, Amritsar has upheld the disallowance fordeduction u/s 80IB, but it is now judicially well settled that afinding in the assessment order may constitute good evidencein the penalty proceedings but such finding cannot beregarded as conclusive for the purpose of penalty and raisinga legal claim, even if it is ultimately found to be legallyunacceptable does amount to furnishing of inaccurateparticulars of income. It is not a case where the claim ofappellant has been found by the AO to be mala fide. TheRajasthan High Court in the case of CIT Vs. HarshvardhanChemicals & Mineral Ltd. Reported in 259 ITR 212(Rajasthan), accepted tribunal's finding deleting the penaltyholding “where an arguable, controversial or debatablededuction is claimed, the claim could not be said to be false,otherwise it would become impossible for any appellant toraise any claims or deductions which might be debatable, andit was not the intention of the legislature to make punishablesuch claims, if they were not accepted.” The High Courtaffirmed the decision of ITAT and held that no penalty wasleviable. The Rajasthan High Court in the case of Chanderpal BaggaVs. ITAT reported at 261 ITR 67, held that if the appellant Income Tax Appeal No.183 of 2013 4 claimed any exemption after disclosing relevant basic factsand under ignorance of the provisions of the Act had notoffered amount of tax, penalty should not be imposed. In suchcases, it is the duty of the Assessing Officer to ask for furtherdetails and tax the income if it is liable to tax. There was noconcealment 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 appellantclaimed the deduction under chapter VIA and the same wasdisallowed by the Assessing Officer, it cannot be said to beconcealment of income as per Explanation 1 to Sec. 271(1)(c)The other judicial decisions relied upon by the appellant'scounsel and reproduced supra are also relevant to concludethat an erroneous claim of deduction made by appellant maybe a good case for making addition since claim was erroneousbut 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 PetroProducts Pvt. Ltd., reported in 352 ITR 158 (SC) has held” thata mere making of the claim, which is not sustainable in law, byitself, will not amount to furnishing inaccurate particularsregarding the income of the appellant. If this contention isaccepted then in case of every return where the claim made isnot accepted by the AO for any reason, the appellant will invitepenalty u/s 271(1)(c). That is clearly not the intendment of theLegislature. In order to expose the appellant to the penaltyunless the case is strictly covered by the provision, the penaltyprovision cannot be invoked. By any stretch of imagination, Income Tax Appeal No.183 of 2013 5 “The Hon'ble Supreme Court in the case of Reliance PetroProducts Pvt. Ltd., reported in 352 ITR 158 (SC) has held” thata mere making of the claim, which is not sustainable in law, byitself, will not amount to furnishing inaccurate particularsregarding the income of the appellant. If this contention isaccepted then in case of every return where the claim made isnot accepted by the AO for any reason, the appellant will invitepenalty u/s 271(1)(c). That is clearly not the intendment of theLegislature. In order to expose the appellant to the penaltyunless the case is strictly covered by the provision, the penaltyprovision cannot be invoked. By any stretch of imagination, Income Tax Appeal No.183 of 2013 5 making an incorrect claim in law cannot tantamount tofurnishing inaccurate particulars.” In the light of rationale laiddown in the above judgment by the Hon'ble Supreme Court,the appellant cannot be held to have furnished inaccurateparticulars of income as the relevant facts for the claim weredisclosed by the appellant in his return & the mere making ofclaim by appellant which is not sustainable in law will notamount to furnishing inaccurate particulars of income. Hencethe appellant is not liable to penalty u/s 271(1)(c) of the Act forfurnishing inaccurate particulars of income.” The revenue, thereafter, filed an appeal before the Income TaxAppellate Authority, which was dismissed by holding as follows:- “ We are of the view that the facts and circumstances of thecase reported in 322 ITR 158 (Supreme Court) in the case ofCIT Vs. Reliance Petro Products Pvt. Ltd. are totally identicalto the facts of the present case and the learned First AppellateAuthority has rightly deleted the penalty in dispute in thepresent appeals. By respectfully following the variousdecisions mentioned in the impugned orders, the argumentsadvanced by learned D.R. are not relevant to the facts of thepresent case, therefore, the same are rejected and on thecontrary the argument advanced by learned counsel for theassessee before us as well as advanced before learned firstAppellate Authority are very much relevant on the facts andcircumstances of the present case. Keeping in view of the facts and circumstances of thepresent case and the impugned order passed by learned firstAppellate Authority on the basis of decision of Hon'ble Income Tax Appeal No.183 of 2013 6 Supreme Court of India in CIT Vs. Reliance Petro ProductsPvt. Ltd reported in 322 IIP 158 (Supreme Court), we are of theview that no interference is required in the well reasoned orderpassed by the learned First Appellate Authority, therefore, weuphold the same by dismissing the appeals filed by theRevenue.” Counsel for the revenue's contention that as claim fordeduction was not bona fide, penalty was rightly imposed. The controversy,herein, is covered against the assessee by a judgment of the Delhi HighCourt in Zoom Communication Private Limited's case (supra) and not byjudgment of the Hon'ble Supreme Court in Reliance Petro Products' case(supra) as the latter judgment is distinguishable on facts. We are notinclined to accept the submissions made by counsel for the revenue. Supreme Court of India in CIT Vs. Reliance Petro ProductsPvt. Ltd reported in 322 IIP 158 (Supreme Court), we are of theview that no interference is required in the well reasoned orderpassed by the learned First Appellate Authority, therefore, weuphold the same by dismissing the appeals filed by theRevenue.” Counsel for the revenue's contention that as claim fordeduction was not bona fide, penalty was rightly imposed. The controversy,herein, is covered against the assessee by a judgment of the Delhi HighCourt in Zoom Communication Private Limited's case (supra) and not byjudgment of the Hon'ble Supreme Court in Reliance Petro Products' case(supra) as the latter judgment is distinguishable on facts. We are notinclined to accept the submissions made by counsel for the revenue. While considering the scope and ambit of penalty leviedunder Section 271(1)(c) of the Act, the Hon'ble Supreme Court has held inReliance Petro Products' case (supra) that mere raising of a claim, even ifnot sustainable in law, is not by itself, sufficient to hold that it denotesfurnishing of inaccurate particulars with an intent as would invite a penalty.The Hon'ble Delhi High Court has held in Zoom Communication PrivateLimited's case (supra), that if an assessee is unable to explain as to inwhat circumstances and on account of whose mistake, deductions wereclaimed, it would amount to raising a mala fide claim that would invitepenalty. We cannot, but agree with the observations by the Delhi HighCourt, but, as the situation, on facts, in the present case, is entirelydifferent, find no reason to depart from the ratio laid down by the Hon'bleSupreme court in Reliance Petro Products' case(supra). The deductionswere claimed in a bona fide exercise of the right of an assessee to claimdeduction. The fact that this claim was rejected, does not raise inference Income Tax Appeal No.183 of 2013 7 of a mala fide attempt to evade tax. A penalty is imposed only if the claimis mala fide or raised with intent to evade tax. In this view of the matter, wefind no merit in the appeal or the substantial questions of law and dismissthe appeal. ( RAJIVE BHALLA )JUDGE 06.09.2013VK ( DR. BHARAT BHUSHAN PARSOON)JUDGE