ACIT vs M/S Oil Industry Development Board

This appeal, by the Revenue, is directed against the order of the learned Commissioner of Income-tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi, dated 03.11.2021, pertaining to the assessment year 2008-09. The Revenue has raised following grounds of appeal:

“1. Whether the Ld. CIT(A) is correct in law in deleting the penalty imposed u/s 271(1)(c) of the Income Tax Act, 1961 particularly when the Assessing Officer had levied penalty after feeling satisfied that the assessee has concealed its income and thus furnished inaccurate particulars of its income.”

The Appellant reserves right to add, amend or alter, the grounds of appeal on or, before the date of disposal of appeal.”

The only effective ground in this appeal is against deleting the penalty imposed u/s 271(1)(c) of the Income Tax Act, 1961 (in short “the Act”).

Learned DR submitted that he supports the order of the assessing authority. However, the Ld. DR fairly conceded that the learned CIT(Appeals) deleted the penalty on the basis that the quantum addition has been deleted.

We have heard the learned DR and perused the material available on record. We find that the learned CIT(Appeals0 in paras 8,9 & 10 of the order has deleted the penalty by observing as under:

8 . I have carefully considered the submissions made by the assessee and perused the order of Hon’ble ITAT, dated 09.12.2020 (supra). It is observed that the Hon’ble ITAT has allowed the appeal filed by the assessee wherein the addition of Rs. 13,28,38,502/- made by the AO toward amount lying in the custody of DGH, but not accounted for by the assessee which was confirmed by the CIT(A), has been deleted. The relevant portion of the order of the Hon’ble ITAT dated 09.12.2020 (supra) is reproduced below for ready reference.

"10. We have heard both the parties and perused the material available on record. Firstly we take up assessee’s appeal. It is pertinent to note that the assessee has followed the same method of accounting which is receipt basis for taking remittance on DGH as an income. The change in account in policy in reference to CAG’s observation/report was basically to strengthen the fund management of the Assessee Board. The assessee accounted for Rs. 4657 lacs as an income from the sale of data from DGH. From the perusal of the records it can be seen that from accounting purposes it is taken as outstanding on 31st March, 2008 and a sum of Rs. 13.28 crores was realized in the next assessment year and has been accounted for as income. This fact was no where denied by the Revenue. Thus, the CIT(A) has totally Ignored this aspect and simply on the basis of change of accounting policy which is also changed according to the CAG report which is mandatory for the Assessee Board to follow, confirmed the addition. The same is not justified as the accounting policy principles were thoroughly followed by the Assessee Board and the income was reported for A.Y. 2009-10 which is next assessment year. There is no revenue loss as well. Therefore, the Assessing Officer as well as the CIT(A) was not correct in making addition. Thus, appeal of the assessee being ITA No. 4425/Del/2014 is allowed.

Now, we come to the appeal filed by the Revenue. The CIT(A) has given a categorical finding that the. royalty payable to Arunachal upto December 2008, the assessee has debited such expenses on the mercantile basis and since these royalties have been provided in the relevant year in pursuance of the DGH letters dated. 23.03.2009 and 27.03 2009 having detailed working. Once the royalty expenses of Rs. 43.25 crores have been crystallized in the relevant Assessment Year, these are not the contingent liability when the genuineness of the same is not questioned by the Revenue authorities. Hence, there is no need to interfere the findings of the CIT(A). The appeal filed by the Revenue being ITA No. 3567/Del/2014 is dismissed.

In result, appeal of the assessee is allowed and appeal of the revenue is dismissed.”

(emphasis supplied)

9.0 In view of the above, it is clearly evident that the addition made by the AO of Rs. 13,28,38,502/- towards amount lying in the custody of DGH. but not accounted for by the assessee, vide order u/s. 143(3) of the Act dated 31.12.2010, on the basis of which the AO has levied concealmentjcenaltyu/s. 271(1)(c) of the Act, vide impugned order dated 18.03.2016, has been deleted by the Hon’ble IT AT, New Delhi, E-Bench, vide order dated 19.12.2020 (supra). Accordingly, I am of the considered opinion that the concealment penalty levied by the AO has no legs to stand and cannot be sustained and, therefore, the AO is directed to cancel the impugned penalty order. Thus, the grounds of appeal raised by the assessee are allowed on account of deletion of addition made in the quantum proceedings by the Hon’ble ITAT.

10.0 In the result, the appeal filed against penalty order u/s 271(1)(c) of the Act for AY 2008-09 is allowed.”

The Revenue has not rebutted the finding of the learned CIT(Appeals) that quantum addition on the basis of which penalty proceedings were initiated, has been deleted. Therefore, we do not see any good reason to interfere in the finding of the learned CIT(Appeals) and the same is hereby affirmed.

Revenue’s appeal is dismissed.