Case Law Details
Riyasat Palaces Limited Vs ACIT (ITAT Delhi)
Introduction: In a recent tax dispute case between Riyasat Palaces Limited and the Assistant Commissioner of Income Tax (ACIT), the Income Tax Appellate Tribunal (ITAT) Delhi has ruled in favour of the appellant. The case revolved around the penalty of Rs.2,91,000 imposed under Section 271(1)(c) of the Income-tax Act, 1961, for allegedly furnishing inaccurate particulars of income.
Analysis: The ITAT observed that the assessee, Riyasat Palaces Limited, had disclosed all material facts pertaining to the claim of the interest expense, which the Assessing Officer (AO) did not find to be incorrect. The AO, based on his perspective, rejected the explanation offered by the assessee. The core argument by Riyasat Palaces was that a difference in the perception of viewing a transaction shouldn’t be construed as furnishing of inaccurate particulars of income, thereby invalidating the imposed penalty. The tribunal agreed with the assessee’s arguments, emphasizing that an incorrect claim cannot tantamount to furnishing inaccurate particulars. The tribunal also referred to a previous ruling by the Supreme Court in the case of CIT vs. Reliance Petro Products.
Conclusion: The ITAT, after considering all the presented facts and legal precedents, concluded that a difference in perception in viewing a transaction does not equate to furnishing inaccurate particulars of income. Therefore, the tribunal directed to delete the penalty of Rs.2,91,000 imposed on the assessee, thereby ruling in favour of Riyasat Palaces Limited. This decision not only brings relief to Riyasat Palaces Limited but also sets a crucial precedent for similar disputes in the future.
FULL TEXT OF THE ORDER OF ITAT DELHI
This appeal filed by the assessee is against the order of learned Commissioner of Income-Tax(Appeals)-27, New Delhi vide Appeal No.69/2018-19 dated 22.10.2019 against the order of ACIT, Circle-19, Delhi u/s. 143(3) of the Income-tax Act, 1961 (hereinafter referred to as the “Act”), dated 19.12.2017 for AY 2015-16.
2. There is a delay of 436 days in filing the present appeal. The impugned order by learned Commissioner of Income-Tax(Appeals) is dated 22.10.2019 which is claimed to have been received on 22.10.2019. Riyasat Palaces Limited, AY: 2015-16 Assessee has placed on record petition for condonation of delay along with an affidavit. From the perusal of the said petition, assessee has explained that it is a subsidiary of Raheja Developer (P) Ltd. (holding company). Both were operating from the same premise. The holding company went into insolvency proceeding before the learned National Company Law Tribunal (NCLT) because of which functioning of the assessee also got effected. It is further stated that substantial part of delay is covered by the period of pandemic of COVID-19 for which Hon’ble Supreme Court in the case of suo moto writ petition (C) No.3 of 2020 dated 10.01.2022 has excluded the period from 15.03.2020 to 28.02.2022 for the purpose of taking into account limitation. Vide this order, a further period of 90 days has been granted for providing the limitation from 01.03.2022. Accordingly considering the said decision and fact of the case, the delay is condoned and the appeal is admitted for adjudication.
2.1 The sole issue raised by the assessee in the present appeal is in respect of penalty of Rs.2,91,000 imposed under Section 271(1)(c) of the Act for furnishing of inaccurate particulars of income. Before us, none represented the assessee and Shri Ram Dhan Meena, Sr. DR represented the department. From the perusal of record, we note that on earlier occasions of hearings also, nobody represented the assessee. Notices issued for hearing fixed for 23.01.2023 and 20.04.2023 were returned Riyasat Palaces Limited, AY: 2015-16 with the remarks “Refused”. On going through the statement of facts and other material placed on record, we are inclined to adjudicate on the matter ex parte qua the assessee with the able assistance of learned Sr. DR since in our view, adjourning the matter will not bear any better result.
3. Brief facts as culled out from statement of facts are that assessee filed its return of income on 30.09.2015 reporting a loss of Rs.7,40,68,156 which was revised on 31.03.2016 with the revised loss of Rs.4,00,07,248. The loss declared was under the head “business and profession”. In the course of assessment, learned Assessing Officer noted that assessee has claimed interest expense of Rs.9,41,951 against loan taken from Raheja Developers Ltd. In this respect, assessee submitted that it had taken unsecured loan for payment of day to day expenses from its holding company at an interest 15% per annum. Learned Assessing Officer held that loan taken by the assessee is not utilized for earning business income and, therefore, disallowed it while completing the assessment. On this addition, he initiated the penalty proceedings for furnishing of inaccurate particulars of income under Section 271(1)(c) of the Act. Assessee did not contest this disallowance in first appeal.
3.1 Subsequently, penalty proceedings were taken up wherein assessee submitted that mere claim of assessee cannot be considered as Riyasat Palaces Limited, AY: 2015-16 furnishing of inaccurate particulars of income. It was submitted that mere interpretation of nature of expenses cannot lead to treating it as furnishing of inaccurate particulars of income to impose penalty under Section 271(1)(c) of the Act. Learned did not find favour with the submission made by the assessee and imposed a penalty of Rs.2,91,000. Aggrieved by the same, assessee went in appeal before the learned CIT(Appeals) who confirmed the penalty so imposed. Aggrieved, assessee is in appeal before the Tribunal.
4. We have gone through the submissions made by the assessee before the learned CIT(Appeals) as well as the statement of facts and grounds taken before us. From the perusal of the same, we note that the main contention of the assessee is that it has duly disclosed all the material facts pertaining to the claim of the interest expense shown in the profit and loss account which has not been found to be incorrect. Further, assessee had furnished all the details and explanation in respect of its claim in the course of assessment proceeding. According to the assessee, learned Assessing Officer on the basis of his own perfection and taking his own view point, rejected the explanation offered by the assessee. Assessee claimed that difference in perception of viewing a transaction cannot be branded as furnishing of inaccurate particulars of income for the purpose of imposing penalty under Section 271(1)(c) of the Act. Further, assessee has placed reliance on the decision of Hon’ble Supreme Court in the case of CIT vs. Reliance Petro Products (P) Ltd. (2010) 322 ITR 158 (SC) wherein it was held that an incorrect claim cannot tantamount to furnishing of inaccurate particulars. The relevant extracts of the said decision are as under:
“a glace at the provisions of section 271(1)(c) of the Income Tax Act, 1961, suggests that in order to be covered by it, there has to be concealment of the particulars of income of the assessee. Subsequently, the assessee must have furnished inaccurate particulars of his income. The meaning of the word “particulars” used in section 271(1)(c) would embrace the details of the claim made. Where no information given in the return is found to be incorrect or inaccurate, the assessee cannot be held guilty of furnishing inaccurate particulars. In order to expose the assessee to penalty, unless the case is strictly covered by the provision cannot be invoked. By no stretch of imagination can making an incorrect claim tantamount to furnishing of inaccurate particulars. There is no dispute that everything would depend upon the return filed by the assessee, because that is the only document where the assessee can furnish the particulars of income. When such particulars are found to be inaccurate, the liability would arise. To attract penalty, the details supplied in the return must not be accurate, not exact or correct, not according to the truth or erroneous.
Where there is no finding that any details supplied by the assessee in its return are found to be incorrect or erroneous or false there is no question of inviting the penalty u/s. 271(1)(c). 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 a claim made in the return of income cannot amount to furnishing of inaccurate particulars of income.”
5. Assessee also contended that penalty proceedings are separate proceedings and acceptance of an addition made in the quantum proceedings with no indicator that assessee is exigible to levying of penalty. Assessee had not challenged the disallowance made in quantum assessment having regard to the smallness of the addition and to avoid undue cost of litigation.
6. Considering the above stated facts and contentions of the assessee raised in the first appeal, we find that claim of interest expense is not found to be incorrect. Assessee had furnished all the details and explanation in respect of interest expense claimed by it. The loan in respect of which interest expense has been claimed is from the holding company of the assessee and is not in dispute. Learned Assessing Officer had taken a different view to disallow the claim of the assessee. Assessee has submitted its justification for not challenging the quantum addition. Considering these facts and the decision of the Hon’ble Supreme Court in the case of CIT vs. Reliance Petro Products (supra), we are of the considered view that difference in perception of viewing a transaction cannot tantamount to furnishing of inaccurate particulars . Accordingly, we direct to delete the penalty of Rs.2,91,000 imposed on the assessee. Grounds taken by the assessee in this respect are allowed.
7. In the result, appeal of the assessee is allowed.
Order pronounced in the open court on 07 .07.2023.
