Ansal Properties & Infrastructure Ltd Vs ACIT (ITAT Delhi)
Penalty not sustainable if penalty notice is omnibus and the charge has not been specified
Assessee has stated that there is no striking off of irrelevant part in the notice u/s 274 rws 271(1) (c). Copy of the notice 274 is attached in paper book at page It is evident that the same is an omnibus notice without identifying the charge by striking off of the limb which is not applicable. In such circumstances, the penalty levied cannot be sustained. For this proposition, we rely upon the full bench decision of Hon’ble Bombay High Court in the case of Md. Farhan A. Shaikh vs DCIT 125 taxmann.com 253 (Bom). Similar proposition was laid down in Pr. CIT vs Sahara India Life Insurance Co. Ltd. [2021] 432 ITR 84 (Del.) Thus, since the penalty notice is omnibus and the charge has not been specified, the penalty is not sustainable.
No penalty for disallowance due to dispute with respect to nature of expenses
It is noted that the issue on which penalty has been finally levied is disallowance of expenditure in connection with QIP and disallowance of claim of deduction u/s 80-IB on the ground of allocation of interest expenses. It cannot be said that there is concealment of income or furnishing of inaccurate particulars of income on the issue on which the penalty has been levied. All due disclosures are there. Primary dispute is with respect of nature of expenses i.e. revenue vs capital. These particulars have been completely disclosed in Income Tax Return. Hence if the claim is not accepted merely on the ground of the same being classified capital by Revenue authorities, in such as a situation the case of Reliance Petro products (2010) 322 ITR 158 (SC) comes to the rescue of the In this case it was held that mere disallowance of a claim which is not ex-facie bogus cannot lead to levy of penalty. In these circumstances, in our considered opinion, the assessee deserves to succeed and the penalty levied is hereby deleted.
FULL TEXT OF THE ORDER OF ITAT DELHI
This appeal by the assessee is directed against the order of ld. CIT (Appeals)-I, New Delhi, dated 16.07.2019 and pertains to Assessment Year 2007-08.
2. The grounds of appeal reads as under:-
1. That on facts and circumstances of the case and in law, Commissioner of Income Tax (Appeals)-I, New Delhi [‘the CIT(A)] has erred in upholding levy of penalty of Rs.2,30,58,990/- under section 271(1)(c) of Income tax Act, 1961 (‘the Act’).
2. That on facts and circumstances of the case and in law, the CIT(A) has erred in upholding the levy of penalty u/s 271(1)(c), even though the show cause notice us 274 of the Act did not specify whether the penalty is sought to be levied on the charge of “concealment of income” or “furnishing of inaccurate particulars of income”.
3.That on facts and circumstances of the case and in law, the CIT(A) has erred in holding that the Appellant has furnished inaccurate particulars of income to the extent of Rs.6,78,40,520/ – (6,75,20,806 + 3,91,714) and as such, it is liable to penalty us 271(1)(c) of the Act.
4. That on facts and circumstances of the case and in law, the CIT(A) did not appreciate that deduction of expenditure on Qualified Institutional Placement (QIP) was claimed in the statement / computation of income as line item with detailed note giving complete details of the claim. Merely because QIF expenses to the extent of Rs.6, 75,20,806/ – were disallowed, it cannot be sai that the Appellant has furnished inaccurate particulars of income within t meaning of section 271(1)(c) of the Act.
4.1 That on facts and circumstances of the case and in law, the CIT(A upholding penalty u/s 271(1)(c) in respect of QIP expenses did not appreciate the distinction between a “false” and a “wrong” claim.
5. That on facts and circumstances of the case and in law, the CIT(A) has erred in holding that even in respect of deduction claimed u/s 80-IB(1 0) of the Act of Rs. 68,29,057/-, the Appellant has furnished inaccurate particulars of income to the extent of 3,91, 714/-.
5.1 That on facts and circumstances of the case and in law, the CIT(A) did not appreciate that on account of smallness of amount, the Appellant did not dispute the disallowance made u/s 80- IB(1 0), inasmuch as, out of disallowance of Rs. 68,29,057 / – relief of Rs. 65,09,343/- was allowed by the CIT(A). In the circumstances, it cannot be said that the Appellant has furnished inaccurate particulars of income to the extent of Rs. 3,91,714/- (68,29,057 – 65,09,343).
6. That on facts and circumstances of the case and in law, the CIT(A) did not appreciate that the Appellant has discharged the onus that lay upon it in terms of Explanation 1 to section 271(1)(c) of the Act”.
3. Brief facts of the case leading to levy of penalty in this case are as under:-
“In the present case, the AO has passed the penalty order under section 271(1)(c) imposing penalty of Rs.2,30,58,990/- for AY 2007-08. In the assessment order the total income was computed at Rs. 189,91,98,857/-, against the declared income of Rs.170,55,22,175/-, In the assessment order, the AO has made the following additions: (I) addition of prior period expenses of Rs. 18,76,873/-, (ii) disallowance of deduction of QIP expenses of Rs. 14,79,69,000/-, (il) deduction U/s 80IB(10) was disallowed to the extent of Rs.68,29,057/-, (iv) addition of notional ALV of Rs.2,21,21,466/- u/s 22 & (v) disallowance of completed project expenses of Rs. 1,48,80,286/-. In the first appeal, the Ld. CIT(A) vide order dated 30.09.20 10, deleted the addition of notional ALV and disallowance of completed project expenses. Out of disallowance of deduction of Rs.68,29,057/- under section 80IB(10) of the Act, relief of Rs.65,09,343/- was allowed. Thus the disallowance of deduction us 801B(10) was restricted to Rs.3, 19,714/-. Similarly, out of disallowance of Rs. 14,79,69,000/-, being the expenditure on Qualified Institutional Placement (QIP), relief of Rs.2,03,69,000/- was allowed. by the Ld. CIT(A) and disallowance was restricted to Rs. 12.76 Cr. In second appeal, Hon’ble ITAT vide order dated 17.8.20 17 reduced the disallowance on account of QIP expenses to Rs.6,75,20,806/-. Insofar as disallowance of completed project expenses of Rs. 1,48,80,286/- and deduction under section 80IB(10) is concerned, the relief allowed by Ld. CIT(A) has been upheld. Addition of notional ALV of Rs.2,2 1,21,466/- was set-aside to the CIT(A) to decide the issue on factual matrix of respective properties. The position of disallowances / additions after disposal of appeal by Hon’ble ITAT is as under: (i) disallowance of QIP expenses was reduced to Rs.6,75,20,806/- & (i) deduction under section 801B(10) was restricted toRs.3, 19,714/-.”
4. On the aforesaid addition, penalty of Rs.2,30,58,990/- was imposed, which was confirmed by the Ld. CIT(A).
5. Against this order, the assessee is in appeal before us.
6. We have heard both the parties and perused the records. The Ld. Counsel for the assessee summarized in brief his pleadings, which reads as under:-
“Dispute – Penalty imposed u/s 271(1)© amounting to Rs.2,30,58,990/- in respect of following disallowance.
