Case Law Details
Gulab Impex Enterprises Pvt. Ltd. Vs ACIT (ITAT Delhi)
The case of Gulab Impex Enterprises Pvt. Ltd. Vs ACIT (ITAT Delhi) presents a crucial exploration of the penalty provision under section 271(1)(c) of the Income Tax Act, 1961. The crux of the dispute lies in determining whether the mere acceptance of disallowance equates to furnishing inaccurate particulars of income, subsequently justifying the imposition of a penalty.
The assessee, a corporate entity, initially didn’t claim a penalty of Rs.5,00,000 imposed by SEBI as a deduction in their original return. However, in the revised return filed during the assessment proceedings, the assessee claimed this amount as a deduction. The Assessing Officer disallowed this deduction based on the nature of the payment as a penalty, not permissible under section 37(1) of the Act. Despite the assessee’s acceptance of the disallowance, a penalty was imposed under section 271(1)(c) alleging that the assessee had furnished inaccurate particulars of income.
The ITAT Delhi noted that the assessee had provided all relevant particulars related to the SEBI payment in the original return of income and audit report. Therefore, it held that the assessee’s claim of the payment as a deduction in the revised return could not be treated as furnishing inaccurate particulars of income. Additionally, the ITAT highlighted that the classification of the payment made to SEBI as an offence or prohibited by law is a highly debatable issue, and mere acceptance of the disallowance does not necessarily mean that inaccurate particulars of income were furnished.
ITAT Delhi’s decision in this case underscores the nuanced interpretation of section 271(1)(c) of the Income Tax Act. It highlights that the mere acceptance of a disallowance does not automatically lead to the conclusion of furnishing inaccurate particulars of income, thereby warranting a penalty.
FULL TEXT OF THE ORDER OF ITAT DELHI
This is an appeal by the assessee against order dated 08.09.2022 passed by National Faceless Appeal Centre (NFAC) confirming penalty imposed of Rs.1,70,000/- u/s. 271(1)(c) of the Income-tax Act, 1961 for the assessment year 2015-16.
2. Briefly, the facts are, the assessee is a resident corporate entity. On 03.11.2014, Security Appellate Tribunal, Mumbai upheld the decision of Security Exchange Board of India (SEBI) imposing penalty of Rs.5,00,000/- on account of delay in compliance with Regulation 8(3) of SAST Regulations, 1997. In the original return of income filed for the impugned assessment year on 24.11.2015 declaring income of Rs.14,26,88,670/-, the assessee did not claim the above said amount of Rs.5,00,000/- as deduction towards expenses. However, in the revised return of income filed u/s. 139(5) of the Act in course of assessment proceedings, the assessee declared income of Rs.14,21,88,670/- after reducing the amount of Rs.5,00,000/- paid to SEBI. While completing the assessment, Assessing Officer disallowed assessee’s claim of deduction of Rs.5,00,000/- on the ground that payment made, being in nature of penalty, is not allowable u/s. 37(1) of the Act. The assessee accepted the disallowance. Based on the disallowance made of Rs.5,00,000/-, the Assessing Officer initiated proceedings for imposition of penalty u/s. 271(1)(c) of the Act and ultimately passed an order imposing penalty of Rs.1,70,000/-, alleging that the assessee has furnished inaccurate particulars of income. Though, the assessee challenged the imposition of penalty by filing an appeal before ld. Commissioner(Appeals), however, the penalty imposed was confirmed.
3. We have considered rival submissions and perused the materials on record. It is a fact on record that in the original return of income filed for the assessment under dispute, the assessee did not claim the deduction of Rs.5,00,000/- paid to SEBI for violation of certain regulations. It is also a fact that in the audit report, the auditor has duly disclosed the payment made to SEBI. However, in course of assessment proceedings, the assessee had filed a revised return of income claiming deduction of the amount of Rs.5,00,000/- paid to SEBI, since, the assessee entertained a belief that the payment made to SEBI for violation of SEBI Regulations, does not fall within the purview of Explanation-1 to section 37 of the Act, as such payment is not for any offense or is prohibited by any law. From the aforesaid facts, it is very much clear that the assessee did furnish all relevant particulars relating to the payment made to SEBI not only in the audit report, but in the original return of income. In the revised return of income, the assessee has merely claimed the payment as deduction, which was not claimed in the original return of income. Therefore, factually, it cannot be treated as a case of furnishing of inaccurate particulars of income.
4. In any case of the matter, whether the payment made to SEBI for violation of certain SEBI Regulations is on account of any offense or is prohibited by law, as per the language of Explanation 1 to section 37 of the Act, in our view, is a highly debatable issue as there are judicial precedents holding that penalty paid for delay in various obligations to SEBI/Stock Exchange/RBI does not amount to infringement/infraction of any law. In this context, the following decisions cited by ld. Counsel support our view :
(i). Mangal Keshav Securities Limited vs. ACIT, 2015(11) TMI
111.
(ii) IDBI Bank Ltd. vs. DCIT, 2021 (2) TMI 608
(iii) CIT vs. M/s. The Stock and Bond Trading Company, 2011(1) TMI 172.
5. Therefore, merely because assessee accepted the disallowance, it will not lead to the conclusion that the assessee has furnished inaccurate particulars of income. In view of the aforesaid, we hold that the penalty imposed u/s. 271(1)(c) of the Act in the facts of the present appeal is unsustainable. Accordingly, we delete the penalty imposed.
6. In the result, appeal is allowed.
Order pronounced in the open court on 29/05/2023.
