Shivam Steel & Tubes Pvt. Ltd. vs. ACIT Income Tax Appellate Tribunal “E” Bench, Mumbai Before Rajendra (A. M.) and C. N. Prasad (J. M) ITA No.: 4691/Mum/2014 A.Y.: 2009-10. Date of order: 5th August, 2016 Counsel for Assessee / Revenue: Sanjeev Kashyap / Jayesh Dadia

FACTS
During the assessment proceedings the AO made two disallowances viz., Rs. 0.17 lakh u/s. 14A and Rs. 10.71 lakh u/s.80IB. Penalty proceedings u/s.27l(1)(c) were also initiated at the time of assessment. In its reply to penalty notice, the assessee submitted that it had furnished all details of expenditure. However, according to the AO, the assessee by not filing any appeal against the additions has admitted its fault and hence, he levied a penalty of Rs. 3.7 lakh. On appeal, the first appellate authority confirmed the order of the AO.

Before the Tribunal the revenue justified the orders of the lower authorities on the ground that the assessee filed the revised computation after the AO made enquiries. Assessee is a corporate entity, that it had made a patently wrong claim. It relied upon the cases of Mak Data (350 ITR 593) and Zoom communications (327 ITR 590).

HELD
According to the Tribunal, penalty cannot be levied just because additions are made during assessment proceedings and the assessee did not agitate the additions before the Appellate Authorities. As per the settled principles of taxation jurisprudence penalty proceeding and assessment proceedings are totally separate and distinct. Addition made during assessment cannot and should not result in automatic levy of penalty. Penalty has to be levied considering the explanation of assessee filed during penalty proceedings. According to the Tribunal, disallowance u/s 14A does not prove filing of inaccurate particulars of income. As regards the claim u/s 80IB, according to the Tribunal, the assessee had reasonable cause in as much as the claims – original as well as revised, both were made as per the advice of the chartered accountant. Further, relying on the Bombay high court decision in the case of CIT vs. Somany Evergreen Knits Ltd. (352 ITR 592) and considering the peculiar facts and circumstances of the case, the Tribunal was of the opinion that the assesse had not furnished inaccurate particulars of income and reversed the order of the lower authorities.