TMI Blog2011 (5) TMI 609X X X X Extracts X X X X X X X X Extracts X X X X ..... on and charity - Held that:- Since the Assessing Officer, while levying the penalty under section 271(1)(c), wrongly included the amount of Rs. 75,000 i.e. the donation to "Wheeler Sewa Trust" while making the addition of Rs. 94,001 on account of donation and charity it appears that AO has not applied his mind while levying the penalty. Furthermore, the amount of donation and charity amounting to Rs. 19,001 was a negligible amount considering the nature of business activities of the assessee and it cannot be denied that in such type of cases these type of expenses are required to be incurred for smooth functioning of business -in favour of assessee. Disallowance of donation claimed @ 50% of the donation under section 80G - Held that:- The said claim was made by the assessee for the reason that recognition under section 80G was available to "Wheeler Sewa Trust" earlier, therefore, there was a bona fide belief to claim deduction under section 80G of the Act. So it cannot be said that the assessee furnished inaccurate particulars or concealed the income - in favour of assessee. - I.T. APPEAL NO. 272 (ALL.) OF 2010 - - - Dated:- 18-5-2011 - H.L. KARWA, N.K. SAINI, JJ. Jagdish ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her sources 1,258,678 3. Total income 4,428,086 Less: Deductions ( i ) u/s 80G-50% of donation 37,500 ( ii ) u/s 14(34) for dividends 22,225 59,725 Less: Unabsorbed carried forward losses and rebate of earlier years 50,264,294 Balance losses and depreciation of earlier years to be carried forward to subsequent year 45,895,933 Rounded off to nearest ten rupee 45,895,930 3.1 The details of brought forward loss and depreciation allowable were given in para 25 of the Form No. 3CD dated 20-10-2004 in the following manner: S. No. A.Y. Nature of loss allowed (in Rupees) Amount as returned Amount as assessed (give reference to Relevant order) 1. 2001-02 Business loss Depreciation Loss 5,377,707 2,599,853 79,77,560 7,777,560 [assessed under section 143(1)] 2. 2002-03 Business Loss Depreciation L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... turn. He, therefore, initiated the penalty proceedings under section 271(1)(c) of the Act. The Assessing Officer completed the assessment proceedings on an income of the year at Rs. 86,53,080 after allowing brought forward losses of Rs. 1,06,49,360, the carried forward loss of subsequent year was determined at Rs. 19,96,280 and accordingly the assessed income for the year under consideration was computed at NIL. The Assessing Officer also pointed out that when the discrepancies were pointed out to the assessee, the Schedule-6 of the Tax Audit Report was revised on 24-11-2006. According to the Assessing Officer, the assessee had not submitted anything during the penalty proceedings and wilfully not only claimed brought forward capital losses as business loss but had increased the brought forward business loss. The Assessing Officer by considering the above facts, levied the penalty under section 271(1)(c) of the Act on this amount i.e., Rs. 3,96,14,934 (Rs. 5,02,64,294 - Rs. 1,06,49,360). The Assessing Officer, in the penalty order dated 30-3-2010, also pointed out that the then Assessing Officer had added Rs. 3,31,941, which the assessee had debited in his profit loss account und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 35,525,159.00 4.2 It was contended that the penalty under section 271(1)(c) was leviable if the Assessing Officer was satisfied in the course of any proceedings under this Act that any person has concealed the particulars of his income or furnished inaccurate particulars of the income. It was pointed out that the penalty proceedings and the assessment proceedings, both are different and that the Explanation 1 to section 271(1)(c) states that the amount added or disallowed in computing the total income of the assessee shall be deemed to be income in respect of which particulars have been concealed and this deeming provision is not absolute one but is rebuttable one since it only shifted the onus on the assessee. It was further stated that Explanation 1 refers to the two situations in which presumption of concealment of particulars of income is deemed. The first situation is where the assessee in respect of any fact material to the computation of his total income fails to offer an explanation or offers an explanation, which is found by the Assessing Officer or the Commissioner to be false. The second situation is where the assessee in respect of any facts mater ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... forward and set-off of loss is a mistake apparent from record which is rectifiable under section 154/155 of the Act in other words, mistake rectifiable under section 154/155 cannot be treated as concealment of income liable to penalty under section 271(1)(c) of the Act. (iv) In present case, there was neither concealment of the particulars of 'income' nor furnishing of inaccurate particulars of 'income'. Further, without admitting, only for the sake of argument, we submit that by any scratch of imagination if Department reaches to conclusion that inaccurate particulars were furnished, it was on account of the professionals who were engaged by the appellant. Therefore, appellant should not be held responsible for such lapse and in turn for penalty". 4.3 It was further submitted that the assessee acted under bona fide belief based on advice of consultant. It cannot be held that there was any concealment of income and/or furnishing of inaccurate particulars of income. The reliance was placed on the following case laws: (i) Yogesh R. Desai v. Asstt. CIT [2010] 2 ITR 267 (Mum. - Trib.) (ii) ITO v. Ram Das Deokinandan Prasad [1985] 14 ITD 155 (All.) 4.4 It was further ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i ) M/s Vinay Kumar Co. Chartered Accountants Preparing and submitting return of income 6.5 The Counsel submitted issue wise explanation on the points considered by Assessing Officer for the purpose of levy of penalty in the following paragraphs. 6.6 So far as amount mentioned at para 3.2(1) is concerned, the counsel has submitted as under: (i) Capital loss for assessment year 2003-04 at Rs. 2,48,62,399 was not assessed as such in the Order passed under section 143(1)(a) of the Act as is evident from the Order dated 25-2-2004. (ii) In the Tax Audit Report dated 20-10-2004 a sum of Rs. 2,48,62,399 was included in the amount at Rs. 3,37,95,979 as Business loss (iii) Professionally qualified persons were engaged to work out the total income and fill up the ITR in the prescribed form. (iv) The mistake is rectifiable under section 154/155 of the Act. 6.7 So far as amount mentioned at paras 3.2(2) and 3.2(3) are concerned, it has been submitted as under: (i) Business Loss determined for assessment year 2001-02 and assessment year 2002-03 was shown in the Tax Audit Report dated 20-10-2004 as carried forward. (ii) Professionally qualifi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... learned CIT(A), after considering the submissions of the assessee, made the observations, which are mentioned in para 7 of the impugned order and read as under: "(i) The appellant is Private Limited Company within the meaning of the Companies Act, 1956. Accordingly, it was subject to audit under the Act. (ii) The appellant company was subject to audit under the Income-tax Act, 1961 also. (iii) The appellant filed its return of income along with documents and Reports required under the provisions of the Income-tax Act, 1961 as were prepared by the professionally qualified persons. (iv) The company acted under bona fide belief that the income for assessment year 2004-05 has correctly been worked out and ITR is filed correctly. (v) During the course of assessment proceedings, schedule 6 of carry forward of losses and depreciation was revised by the Auditors and placed on record. (vi) The Assessing Officer keeping in view the quantum and the nature of excess claim held that under the circumstances, it cannot be considered as any type of bona fide mistake/error on the part of the assessee. Hence, for furnishing inaccurate particulars of income/concealment of income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7.3 of the impugned order as under: "7.1 It is seen that Hon'ble Supreme Court in the case of T. Ashok Pai v. CIT [2007] 292 ITR 11 has held as under: "Supreme Court explained the word "Inaccurate" and held that penalty under section 271(1)(c) cannot be levied - Difference between assessment proceeding and penalty proceedings - Furnishing inaccurate particulars of income - Acting on wrong legal advice - Assessee claiming that tax affairs being looked after by professional group working with assessee's banker -Appellate Tribunal holding that assessee's bona fides were established" The present appeal is squarely covered by the above decision, hence, respectfully following the above decision, penalty is liable to be deleted. 7.2 it is also seen that Hon'ble Madras High Court in the case of CIT v Sri Shardha Textile Processors (P.) Ltd. [2006] 286 ITR 499 has held that when mistake is pointed out to the assessees and assessee withdrew the claim, there is no concealment of income and penalty is not be imposed. In the present case when the mistake was pointed out, the tax auditors revised the Schedule-6 of the Tax Audit Report which resulted in withdrawal of the claim. 7.3 Thus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ff of business loss for assessment year 2001-02 but it was already adjusted in assessment year 2003-04 79,77,560 ( iii ) Set-off of business loss for assessment year 2002-03 but it was already adjusted in assessment year 2003-04 67,61,475 Sub-Total (Rs.) 3,96,14,934 ( iv ) Loss on sale of equity shares units claimed by debiting the profit loss account 3,34,941 ( v ) Donation charity since it could not be proved that it was given for business consideration 94,001 ( vi ) Donation to Wheeler Sewa Trust for Rs. 75,000 @50 per cent under section 80G since proof could not be furnished 37,500 Total (Rs.) 4,00,78,376 7.1 As regards to the item mentioned at Sl. Nos. (i) to (iii) above are concerned, the Assessing Officer pointed out this fact to the assessee during the course of assessment proceedings and the learned counsel for the assessee revised the Schedule-6 of the Audit Report wherein these figures were wrongly mentioned. This fact has been mentioned by the Assessing Officer at page No. 2 of the penalty order dated 30-3-2010. Now the q ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rpose of determining the true figure of the assessee's taxable income and the consequential tax liability. That the assessee fails to claim the benefit of a set off cannot relieve the Income-tax Officer to his duty to apply section 24 in an appropriate case." 7.4 Recently the Hon'ble Supreme Court in the case of Reliance Petroproducts (P.) Ltd. (supra) has held as under: "A glance at the provisions of section 271(1)(c) of the Income-tax Act, 1961, suggests that in order to be covered by it, there has to be concealment of the particulars of the income of the assessee. Secondly, the assessee must have furnished inaccurate particulars of his income. The meaning of the word "particulars" used in section 271(1)(c) would embrace the details of the claim made. Where no information given in the return is found to be incorrect or inaccurate, the assessee cannot be held guilty of furnishing inaccurate particulars, in order to expose the assessee to penalty, unless the case is strictly covered by the provision, the penalty provision cannot be invoked. By no stretch of imagination can making an incorrect claim tantamount to furnishing inaccurate particulars. There can be no dispute that ev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e brought to the notice of the Counsel of the assessee, the Schedule-6 of the Tax Audit Report was revised on 24-11-2006.'' From the above noting of the Assessing Officer, it is crystal clear that the mistake, which was inadvertent, was rectified before finalization of the assessment, therefore, the penalty was not leviable under section 271(1)(c) of the Act on the basis that the assessee had mentioned wrong figures of the loss carried forward to be set off against the income of the year under consideration particularly when the mistake occurred due to negligence of the Tax Consultant. 7.6 On a similar issue, the Hon'ble Madras High Court in the case of Sri Saradha Textile Processors (P.) Ltd. (supra) has held as under: "That the authorities below had concurrently held that when the mistake, was pointed out, the assessee had withdrawn its claim for depreciation and investment allowance on the machinery and filed a revised return and this action of the assessee showed its bona fides. It was also not the case of the revenue that the assessee had the mala fide intention of furnishing inaccurate particulars with a view to falsely claiming depreciation and allowances to evade taxes. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a facie admissible on the face of it, the learned DR did not make any argument in this matter. Thus, it is held that the loss is not a business loss, but a loss under the head "capital gains". The Assessing Officer shall pass a consequential order assessing the loss under the head "capital gains" Thus, ground Nos. 1 and 2 are decided accordingly." Therefore, the penalty was also not leviable on the aforesaid amount of Rs. 3,34,941. 7.10 As regards to the items No. (v) relating to addition of Rs. 94,001 on account of donation and charity is concerned, the Assessing Officer disallowed the claim of the assessee. The explanation of the assessee was that the said sum also included a sum of Rs. 75,000, which has been mentioned at Sl. No. (vi) i.e. the donation to "Wheeler Sewa Trust" for Rs. 75,000. So the only amount on account of donations and charities was Rs. 19,001 and those were necessary for business exigencies. Since the Assessing Officer, while levying the penalty under section 271(1)(c), wrongly included the amount of Rs. 75,000 while making the addition of Rs. 94,001, therefore, it appears that the Assessing Officer has not applied his mind while levying the penalty under ..... X X X X Extracts X X X X X X X X Extracts X X X X
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