Yogesh Kumar U.S. ORDER
Shamim Yahya, Member (A)
1. This appeal by the Revenue and cross objections by the assessee is directed against the order of the ld. CIT(A)-4, New Delhi dated 21.08.2019 pertaining to assessment year 2015-16.
2. The grounds of appeal raised by the Revenue read as under:-
"Whether on the facts and in the circumstances of the case the Ld. CIT(A) has erred in deleting the penalty of Rs. 94,17,160/- imposed by the AO u/s. 271(1)(c) of the Act when the assessee did not file appeal before the Ld. CIT(A) against the disallowances made by in assessment order passed u/s. 143(3) and willfully accepted the order of the AO."
3. The assessee has taken the following grounds in the cross objections:-
"Under the facts and circumstances of the case, the penalty order was erroneous as the Ld. Assessing Officer has nowhere recorded the satisfaction in penalty notice whether penalty is leviable by virtue of concealment of particulars of income or by virtue of furnishing of inaccurate particulars in relation to such income. The satisfaction of the Ld. Assessing Officer is a prerequisite for issue of valid notice and levy of penalty."
4. Brief facts of the case leading to levy of penalty in this case are as under:-
"Brief facts of the case are that the appellant company is engaged in the real estate development business. During the assessment proceedings u/s. 143(3) the AO made following disallowances:-
Apart from disallowance at S. No. 1, all other disallowances were made on the ground that since the assessee is following project completion method, these expenses cannot be allowed as revenue expenditure and deserve to be capitalized.
The assessee did not file appeal against these disallowances. The AO had initiated penalty proceedings u/s. 271(1)(c) for filing Inaccurate particulars of income in respect of all the above disallowances. However, the AO, during penalty proceeding, imposed penalty on disallowances as mentioned in S. No. 2 above only i.e. on disallowance of advertisement expenses (Rs. 1,66,62,664/-) and disallowance of brokerage & commission expenses (Rs. 1,38,13,592/-).
5. Before the ld. CIT(A), assessee submitted that books of accounts are subject to audit and the appellant has followed Accounting Standard (AS)-2 issued by ICAI according which selling and distribution costs are not to be included as part of cost of inventories. It was also argued that addition made by AO is revenue neutral and doesn't involve any concealment. Treating certain items of expenses as capital, particularly when the same is reflected in audited financial statements and when the guidelines as contained in AS-2 is being followed, it was submitted, at maximum can be viewed as a debatable issue for which no penalty can be imposed.
6. Considering the above, ld. CIT(A) deleted the penalty holding that mere disallowance of a claim will not amount to furnishing of inaccurate particulars of income.
7. We may gainfully refer to the order of ld. CIT(A)'s as under:-
"6.6 Penalty u/s. 271(1)(c) can be imposed if the assessee fails to prove that explanation furnished by him is not only not bonafide but all the facts relating to the same and material to the income were not disclosed by him. Thus, apart from assessee's explanation being not bonafide, it should be found as of fact that all the facts which were material to the computation of income was not disclosed by the assessee. The manner the assessee furnishes the particulars of his income is important.
6.7 In this case, I find that there is force in the appellant's submission that its claim of advertisement and commission/brokerage expenses as revenue was based on AS-2 and that addition made by AO is revenue neutral as only closing work-in-progress would get enhanced by this addition which would become part of cost as and when sales are made. This is not the case of the AO that expenses claimed by the appellant is bogus.
6.8 In any case, it is clear that all the material facts relating to advertisement and commission expenses were on record and mere disallowances of the claim, which is not sustainable in law, by itself, will not amount to furnishing of inaccurate particulars of income as held in a number of judicial decisions.
6.9 The High Court of Bombay in the case of CIT-14, Mumbai Vs. Nalin P. Shah (HUF), MANU/MH/0881/2013 : [2013] 40 taxmann.com 86 (Bombay), following the decision of Apex Court in the case of CIT vs. Reliance Petroproducts Pvt. Ltd. MANU/SC/0182/2010 : [2010] 189 taxmann 322 (SC) has observed that when all details were disclosed in its return and the AO gathered information from such return, it can at the highest be said that the claim of the assessee was not sustainable in law but there is no furnishing of inaccurate particulars or concealment of income. Mere non-acceptance of claim of assessee does not justify imposition of penalty u/s. 271(1)(c).
6.10 Further, imposition of penalty is not automatic and therefore non-filing of appeal against the addition before CIT(A) is not a relevant issue.
6.11 Thus, in view of above discussion, I am of considered view that order levying penalty amounting to Rs. 94,17,160/- in this case deserves to be cancelled. Accordingly, penalty amounting to Rs. 94,17,160/- imposed on the appellant for furnishing inaccurate particulars of income u/s. 271(1)(c) is deleted. The grounds of appeal in this regard are allowed."
8. Against the above order, Revenue has filed appeal before us. We have heard both the parties and perused the records.
9. We find that ld. CIT(A) has taken correct view of the matter. His reliance on the Hon'ble Supreme Court decision in the case of Reliance Petroproducts Pvt. Ltd. (supra) is germane and duly supports the case of the assessee. The assessee's claim cannot be said to ex-facie bogus. Hence, denial of the assessee's claim cannot lead to the rigors of penalty u/s. 271(1)(c) of the Income-tax Act, 1961 (for short 'the Act'). Hence, we do not find any infirmity in the order of ld. CIT(A).
10. In the result, the appeal by the Revenue stands dismissed.
11. Since we have already dismissed the Revenue's appeal, the adjudication of the cross objections is only academic interest. Hence, we are not adjudicating the same.
12. In the result, assessee's cross objection stands dismissed as infructuous.
Order pronounced in the open court on this 20th day of July, 2022.
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