The Income Tax Appellate Tribunal (ITAT), Jaipur Bench, has recently in an appeal filed before it, while deleting the penalty, held that disallowance of claim does not mean that particulars furnished by the assessee are wrong.
The aforesaid observation was made by the Jaipur ITAT, when an appeal was filed before it by the assessee, The Kekri Cooperative Marketing Society, as directed against order of the CIT(A), dated 18-06-2022, National Faceless Appeal Centre, Delhi (NFAC), for the assessment year 2013-14.
The solitary ground of the assessee’s appeal being that the levy of penalty u/s 271(1) of Rs.1,01,469/- is bad in law, the relevant facts of the case were that the assessee had claimed deduction under various sub-section of 80P of the Income Tax Act.
However, the AO after verification of the Records, restricted the allowance of deduction u/s 80P of the Income Tax, holding the view that the business activities carried out by the assessee were not falling under the category of eligible activities. And his view being that the assessee had concealed particulars of income, he therefore, consequently levied penalty.
Aggrieved by the same, the assessee preferred an appeal before the CIT(A), who dismissed the appeal of the assessee primarily on the count that the appeal filed was late and that the reason put forward to justify the delay in appeal was general, routine and nonchalant as the entire blame for delay has been on C.A. and no affidavit was filed by him. He further added that even on merits, since no compliance was made at the level of the assessing officer also, and hence that the claim of excess deduction u/s 80P, is concealment of facts/income.
With Shri Sunil Porwal, CA, the AR of the assessee having submitted that since the notices were being sent on e-mail/ Id of C.A., whose services were terminated and bank people were not aware of ‘’E-Assessment Proceedings’’, he added that the delay in filing appeal was beyond the control of the assessee.
However, Mrs. Monisha Choudhary, JCIT, the DR, on the other hand, supported the order of the CIT(A).
Hearing the opposing contentions of either sides and thereby perusing the materials available on record, the ITAT Bench commented:
“After hearing both the parties and perusing the materials available on record, the Bench finds that the assessee could not file the reply to the notice issued u/s 271(1 of the Act in time to the AO because the e-notices were served to earlier CA Shri Prince Tak. Subsequently, the said CA was removed from service and all the e-notices were kept on serving on his e-mail/id and the bank staff was not aware of proceedings and ex-parte order of levy of penalty on account of concealment of income.”
“From the available records, it appears that the assessee was prevented by sufficient cause and thus the delay so made is condoned. Be that as it may, it is a settled proposition of law in the case of CIT vs Reliance Petroproducts (P) Ltd. (Civil Appeal No. 2463 of 2010 dated 27-03-2010-SC) that disallowance of expenses will not per se amount to furnishing inaccurate particulars of income, merely because the assessee had claimed expenditure which claim was not accepted or was not acceptable to revenue, that by itself would not attract penalty u/s 271(1) of the Act. In the case of CIT vs Ajaib Singh & Co. (2002) 253 ITR 630 (P & H), it is held that merely because certain expenses claimed by the assessee are disallowed by an authority it cannot mean that the particulars furnished by the assessee are wrong”, the ITAT Panel comprising of Sandeep Gosain, the Judicial Member, noted.
Thus, allowing the assessee’s appeal, the Jaipur ITAT thus, held:
“Disallowance of expenses per se cannot mean that the assessee has furnished incorrect particulars of income.Concealment involves penal action. It has to be proved as a conscious act. Although it is true that direct evidence may not be available in every case yet it must be proved as a necessary corollary from the fact and circumstances established on record. In view of the above deliberation, the appeal of the assessee is allowed.”
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