TMI Blog2018 (11) TMI 1326X X X X Extracts X X X X X X X X Extracts X X X X ..... ved any benefit and no loss could have been caused to Revenue owing to higher losses claimed as in any case these losses lapsed being hit by provisions of Section 79 of the 1961 Act. As observed from the audited financial statements filed by the assessee that during the year under consideration, 100% shareholding of the assessee got transferred to Suhani Trading and Investment Consultants Private Limited , which led to triggering of provisions of Section 79 of the 1961 Act leading to lapsing of losses. Thus, this explanation of the assessee is also correct that claiming of the higher losses could not have brought any advantage to the assessee on the face of provisions of Section 79. The ratio of decision in the case of Price Waterhouse Coopers Private Ltd. v. CIT (2012 (9) TMI 775 - SUPREME COURT) is applicable on the factual and circumstantial matrix surrounding this particular case and in our considered view the assessee has furnished bonafide and genuine explanations as to an inadvertent mistake committed by it which was an human error committed while filing its return of income and there cannot be any ulterior motive attached to this error committed by the assessee, whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sary. 3. The brief facts of the case are that assessee is engaged in the business of mall management and consultancy trading in fabric material. The assessee filed return of income for the impugned assessment year 2012-13 on 29.09.2012 declaring total income at Rs. Nil after claiming current year loss of ₹ 81,48,14,420/-. The case of the assessee was selected for scrutiny and accordingly notice u/s 143(2) of the 1961 Act was issued to the assessee by the AO on 06.08.2013 and thereafter notice u/s 142(1) of the 1961 Act was also issued by the AO on 11.09.2014 and again on 17.12.2014. There is no dispute so far as issuance and service of notices u/s 143(2)/142(1) for framing scrutiny assessment u/s 143(3) of the 1961 Act are concerned. The AO observed from computation of income filed by the assessee that the assessee made a claim of ₹ 52,37,86,419/- u/s. 24 of the 1961 Act as interest expenditure against income from house property , however while computing income from business and profession , the assessee added back an amount of ₹ 41,11,25,440/- instead of ₹ 52,37,86,419/- to which the assessee explained that it was due to clerical error committed in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on following judgements:- i) Hon'ble Supreme Court decision in the case of Price Waterhouse Coopers v. CIT-[2012] 348 ITR 306 (SC), ii) CIT v. Bennet Coleman Co. Ltd.-(2013) 259 CTR (Bom) 383 iii) CIT v. Somany Evergreen Knits Ltd.-(2013) 352 ITR 592 (Bom) iv) M/s. Polar Finance Ltd. v. lTO-l.T.A. No. 7366/Mum/2010 The AO rejected the contentions of the assessee and observed that it is only when case of the assessee was selected for scrutiny and the assessee was specifically asked by the AO which was almost after a lapse of two years from the date of filing of return of income, the assessee came forward and revised computation of income by making disallowance of interest expenditure to the tune of ₹ 52.37 crores instead of an amount of ₹ 41.11 crores as was done by the assessee in the return of income filed with the Revenue. Thus, the AO observed that the assessee has concealed the particulars of income by furnishing of inaccurate particulars of its income. It was observed by the AO that all the cases are not selected for framing scrutiny assessments and had the assessee case not being selected for framing scrutiny assessment u/s 143(3) read ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company e-filed its return of income on 29.09.2012 declaring total income at Rs. Nil after claiming current year's loss of Rs,81,48,14,420/-. The case was selected for scrutiny and an order u/s. 143(3) was passed by the A.O. on 30.03.2015 by making disallowance of interest expenses of ₹ 11,26,61,005/- and penalty proceedings were initiated on the appellant for concealment / furnishing inaccurate particulars of income. Subsequently, the A.O. passed an order dated 28.09.2015 u/s,271(1)(c) of the Act levying a penalty of ₹ 3,48,12,251/- on the appellant. 6.2.2 During appellate proceedings, it was submitted that during the year under consideration due to an inadvertent mistake the appellant disallowed an amount of ₹ 41.11 crores instead of ₹ 52.37 crores under the head 'income from business and profession'. The reason for the same was explained by the appellant by stating that during the assessment year 2010-11 i.e. the immediately preceding year, the appellant company had capitalized interest of ₹ 11.26 crores in the cost of building and same had been reduced from the interest debited in the P L A/c. It was further submitted that appel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e following cases in support of its claim. Yasmin Properties (P) Ltd vs. ACIT [(46 ITD 331) (Mumbai ITAT)] In the said case, while the Hon'ble ITAT upheld the addition to income, on the question of levy of penalty under Section 271(1)(c) of the Act, the Hon'ble ITAT observed that all facts relating to the claim and material relevant to the computation had been disclosed by the Assessee and the claim was made by the Assessee under a bona fide belief. The Hon'ble ITAT held that it was not a fit case for levy of penalty for concealment but a case where a bonafide claim made by the Assessee. Accordingly, the Hon'ble ITAT deleted the penalty levied. CIT vs. Sudhirkumar Chottubhai[250 ITR 528 (Bom)] In this case, the Assessee-partner had not disclosed the cash amount received by him in lieu of surrender of distribution rights of two films at the time of his retirement from the firm. This was under bona fide belief that the amount was not taxable. On these facts, it was concluded that there is no case for concealment justifying penalty under Section 271(l)(c) of the Act. EIH Limited vs. CIT [338 ITR 503 (2011) (Kol)] In the instant case, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ror, it was not noticed even by the AO who had framed the original assessment order; that all that had happened was that through a bonafide and inadvertent error the assessee while submitting its return, failed to add the provision for gratuity to its total income; the assessee should have been careful but the absence of due care, in such a case, did not mean that the assessee was guilty of either furnishing inaccurate particulars or attempting to conceal its income. [2012] 348 ITR 306 (SC) PWC Pvt. Ltd. V/s CIT. 6.2.5 As discussed in foregoing paras it was a bonafide human error. Moreover, it is also proved from the fact that huge carried forward losses were lapsed during the year and appellant was not getting any benefit out of the wrong claim. Since the mistake was a bonafide human error, therefore, respectfully following various judgements of the Hon'ble Courts and ITAT as discussed above, the appeal of the appellant is allowed and penalty of ₹ 3,22,14,851/- is deleted. 5. Aggrieved by the appellate order dated 30.12.2016 passed by learned CIT(A), the Revenue has come in an appeal before the tribunal and Ld. DR opened the arguments wherein he relied upon pen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income from house property . Then it was explained that the assessee should have deducted/disallowed similar amount of interest expenditure to the tune of ₹ 52,37,86,419/- by adding it to income from business or profession as interest expenditure were debited to Profit and Loss Account , but instead the assessee added back interest expenditure of ₹ 41,11,25,414/- under the head income from business or profession . It was claimed that this was an mistake inadvertently committed by the assessee while filing return of income with Revenue. Our attention was also drawn to page no. 39 /paper book filed by the assessee which is computation of income for AY 2010-11, wherein exactly the same amount of interest on loan for business centre to the tune of ₹ 41,11,25,414/- was added to the income from business or profession and same amount was deducted from income from house property u/s 24(b) of the 1961 Act, while preparing computation of income for AY 2010-11. It is claimed that this figure of ₹ 41,11,25,414/- which was for AY 2010-11 erroneously got captured in impugned assessment year 2012-13 due to use of an excel sheet of AY 2010-11 containing formula bein ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would have otherwise caused loss to the Revenue but for detection owing to scrutiny assessment. The learned counsel for the assessee also submitted that in the notice dated 30.03.2015(pb/page 48) issued for invoking penalty provisions by the AO u/s 271(1)(c) read with Section 274 of the 1961 Act, the relevant portion as to whether penalty provisions are invoked for furnishing of inaccurate particulars of income or concealment of particulars of income was not struck off by the AO. It was submitted that it is only an inadvertent mistake which was committed by the assessee which was rectified by the assessee during the course of assessment proceedings . It was fairly submitted that the mistake was corrected on being pointed out by the AO but however assessee has not gained anything from this mistake as the current year loses even after excluding this figure of ₹ 11.26 crores were more than ₹ 70 crores. The learned counsel for the assessee submitted that it had huge accumulated losses which lapsed as were being hit by provisions of Section 79 of the Act as there was an 100% change in shareholding of the assessee during the impugned year under consideration before the Bench ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n rejoinder that it was never the case of the assessee before Ld. CIT(A) as to the limb under which the penalty provisions u/s 271(1)(c) were invoked and levied by the Revenue, as no such plea was ever raised before learned CIT(A) and the assessee should not be allowed to raise such plea for the first time before tribunal. 6. We have considered rival contentions and perused the material on record including cited case laws. We have observed that the assessee is engaged in the business of mall management and consultancy trading in fabric material. The assessee filed return of income with Revenue on 29.0.2012 declaring Nil income wherein it claimed losses to the tune of ₹ 81,48,14,420/- to be carried forward. The assessee has filed factual paper book containing 48 pages, which is placed in file.The assessee has also relied on large number of judicial decisions which are placed in case law paper book filed with the tribunal, which are all placed in file. The assessee had accumulated carried forward unabsorbed losses under the 1961 Act which were carried forward from earlier years. The assessee has filed copies of acknowledgement of income-tax returns for AY 2010-11, 2011-1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be reduced by this amount of ₹ 52.37 crores to arrive at income from business to avoid double deduction of same expenditure . But the assessee infact claimed deduction of interest expenditure of ₹ 52,37,86,419/- u/s 24(b) from Rental Income under the head Income from House Property which was correctly done, but while reducing the said interest expenditure of ₹ 52,37,86,419/- from business expenses to be set off against business income, the assessee wrongly deducted ₹ 41,11,25,414/- from business expenses which led to claim of higher business expenses by ₹ 11,26,61,005/- leading to claim of total current year losses to the tune of ₹ 81,48,14,420/- while the correct figure of loss to be shown for current year in return of income filed by the assessee with Revenue ought to have been ₹ 70,21,53,415/- but for this mistake. This was claimed by assessee to be an mistake which on being confronted by the AO during assessment proceedings, the assessee explained that it is due to inadvertent mistake in the computation of income at the time of filing of return of income which has led to claiming of higher loses to the tune of ₹ 11,26,61,005/-. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... penses to the tune of ₹ 41,11,25,414/- for AY 2012-13 is exactly matching with interest expenditure added back for AY 2010-11 which under the preponderance of probabilities give credence to the theory of use of old excel sheet for AY 2010-11 containing formulas as base sheet for computing income for AY 2012-13,, which led to this mistake while preparing return of income. The assessee has accepted in quantum assessment that assessee has to claim correct lower losses after correcting this mistake which assessee did by correcting its computation of income during assessment proceedings. We are seized of an appeal against penalty levied by the AO which was deleted by learned CIT(A). It is also not in doubt although it might be an human error but assessee has to be vigilant while filing its return of income as every mistake cannot be excused even in penalty proceedings. Thus, it is beyond doubt that lapse has occurred on part of the assessee but the moot question is whether every mistake committed by the assessee while filing return of income will be visited with penal provisions. It depends upon facts and circumstances of each case which differ from case to case as every mistake c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot even noticed even by the Assessing Officer who framed the assessment order. In that sense, even the Assessing Officer seems to have made a mistake in overlooking the contents of the Tax Audit Report. 19. The contents of the Tax Audit Report suggest that there is no question of the assessee concealing its income. There is also no question of the assessee furnishing any inaccurate particulars. It appears to us that all that has happened in the present case is that through a bona fide and inadvertent error, the assessee while submitting its return, failed to add the provision for gratuity to its total income. This can only be described as a human error which we are all prone to make. The calibre and expertise of the assessee has little or nothing to do with the inadvertent error. That the assessee should have been careful cannot be doubted, but the absence of due care, in a case such as the present does not mean that the assessed is guilty of either furnishing inaccurate particulars or attempting to conceal its income. 20. We are of the opinion, given the peculiar facts of this case, that the imposition of penalty on the assessee is not justified. We are satisfied that th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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