Case Law Details
Suryshree Blocks Pvt. Ltd. Vs DCIT (ITAT Ahmedabad)
In the case of Suryshree Blocks Pvt. Ltd. vs DCIT before the ITAT Ahmedabad, the issue of penalty under Section 271(1)(c) of the Income Tax Act arose due to alleged inaccurate particulars of income furnished by the assessee. However, the ITAT’s decision sheds light on the necessity of finding specific inaccuracies to levy penalties.
Detailed Analysis: The appeal filed against the penalty order stemming from the assessment year 2015-16 raised crucial questions regarding the nature of inaccuracies alleged by the Assessing Officer. The primary contention was the disallowance under Section 36(1)(iii) related to interest on borrowed funds for acquiring capital assets. The Assessing Officer initiated penalty proceedings under Section 271(1)(c) for furnishing inaccurate particulars of income.
During the proceedings, the assessee argued that the interest expenses were calculated and disclosed, albeit treated as non-capitalized expenses. The assessee maintained that this was a genuine mistake and not a deliberate attempt to conceal income or furnish inaccurate particulars. Furthermore, the penalty notice lacked specificity regarding the exact grounds for penalty imposition, as required by law.
The ITAT, considering the submissions and legal precedents, ruled in favor of the assessee. It emphasized that the term “inaccurate particulars” implies details not accurate or exact, and in the absence of concrete findings by the Assessing Officer, penalty imposition under Section 271(1)(c) was unwarranted. Moreover, the failure to specify the grounds for penalty in the notice further invalidated the penalty imposition.
Drawing from the Supreme Court’s rulings and legal principles, the ITAT concluded that the penalty was not sustainable. The assessee’s actions did not amount to deliberate concealment or furnishing of inaccurate particulars. Therefore, the ITAT upheld the appeal and deleted the penalty.
Conclusion: The decision by ITAT Ahmedabad in Suryshree Blocks Pvt. Ltd. vs DCIT highlights the stringent requirements for imposing penalties under Section 271(1)(c) of the Income Tax Act. By emphasizing the need for concrete evidence of inaccuracies and proper notice specifications, the ITAT ensures fair treatment of taxpayers and upholds the principles of natural justice. This ruling serves as a reminder of the importance of adhering to legal standards and providing sufficient grounds before penalizing taxpayers for alleged discrepancies in income disclosure.
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
This is an appeal filed against the order dated 09-12-2022 passed by National Faceless Appeal Centre (NFAC), Delhi for assessment year 2015-16.
2. The grounds of appeal are as under:-
“1. Honourable Commissioner of Income Tax (Appeal) (CIT (A)) erred in not considering the technical defect in penalty notice issued by AO. AO had not stated in notice of penalty under which limb he has levied penalty under section 271(1)(c). Whether he had levied penalty under concealment of income or inaccurate particulars.
2. CIT(A) erred in not considering the fact that no penalty is levied if there is only change of opinion regarding whether certain expenditure is capital expenditure or revenue expenditure.
3. That the appellant craves, leave to add, alter, amend or vary and/or withdraw any or all of the aforesaid grounds of Appeal or at time of hearing of the above appeal.”
2. Return of income was filed on 03-09-2015 declaring total income at Rs. (-) 4,49,55,766/-. The assessment u/s. 143(3) of the Act was completed on 08-12-2017 determining the total income at Rs. (-) 4,34,04,640/-. The Assessing Officer made disallowance u/s. 36(1)(iii) amounting to Rs. 12,68,946/- where the penalty proceedings were initiated u/s. 271(1)(c) for furnishing inaccurate particulars of income. The Assessing Officer issued show cause notice dated 08-12-2017 for which the assessee replied vide letter dated 28-12-2017. After taking cognizance of the said reply, the Assessing Officer levied penalty of Rs. 3,92,100/- u/s. 271(1)(c) of the Act in respect of furnishing inaccurate particulars of income and concealing its income.
4. Being aggrieved by the penalty order, the assessee filed appeal before the CIT(A). The CIT(A) dismissed the appeal of the assessee.
5. The ld. A.R. submitted that during the course of assessment proceedings, the interest of Rs. 12,68,946/- on borrowed fund from acquiring assets were worked out by the assessee and the same was taken into cognizance by the Assessing Officer and therefore the assessee cannot be stated as furnishing inaccurate particulars of income or concealment of income or both. The ld. A.R. further submitted that the assessee was under bonafide impression that since the assessee has not capitalized interest expenses the same should not be included. Thus, it is a bonafide error and purely a technical issue and whether an expense should be capitalized or not is merely a difference of opinion. Thus, the ld. A.R. submitted that as per the decision of Hon’ble Apex Court in CIT vs. Reliance Petro-Product Ltd. order dated 23-03-2010. The ld. A.R. further submitted that the assessee was under bonafide belief and the same should not be treated as concealment of income and furnishing inaccurate particulars of income. The ld. A.R. further submitted that the penalty notice u/s. 274 r.w.s. 271 of the Income Tax Act, 1961 has not specified under which limb of section 271(1)(c) of the Act the penalty is being levied. The ld. A.R. relied upon the decision of Hon’ble Supreme Court in case of CIT vs. SSA’s Emerald Meadows 242 com 180.
6. The ld. D.R. relied on the decision of Hon’ble Supreme Court in case of Dharmendra Textile 306 ITR 277 (SC) and further submitted that the assessee did not disclose true amount of income voluntarily and therefore the same was rightly coming under the purview of section 271(1)(c) of the Act.
7. Heard both the parties and perused all the relevant materials available on record. There is a delay of 71 days in filing the present appeal for which the assessee has filed condonation of delay application and the reasons stated therein appears to be genuine, hence the delay is condoned. It is pertinent to note that the Hon’ble Supreme Court in case of Reliance Petro-Product Pvt. Ltd. 322 ITR 180 categorically stated that the word inaccurate particulars means that the details supplied in the return are not accurate not exact or correct and not according to truth or erroneous. In the absence of finding by the Assessing Officer that any detail supplied by the assessee in its return were found inaccurate or false cannot attract section 271(1)(c) of the Act. In fact, the assessee at the time of assessment proceedings has given a detailed calculation related to interest of Rs. 12,68,946/- u/s. 36(1)(iii) on borrowed funds for acquiring capital assets and this very same amount was added by the Assessing Officer and thus it cannot be said that the assessee furnished inaccurate particulars of income or concealed particulars of income though the assessee was under bonafide mistake did not state the same in its return of income. The notice also lapses on the part of not specifying the particular of limb of section 271(1)(c) of the Act which was decided by the Hon’ble Apex Court in case of CIT vs. SSA’s Emerald Meadows (supra), hence the appeal of the assessee is allowed and the penalty does not survive.
8. In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 20-12-2023
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