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2020 (2) TMI 824 - AT - Income TaxLevy of penalty u/s 271(1)(c) - forex loss was claimed as revenue expenditure - HELD THAT - It is true that the assessee has claimed forex loss as revenue expenditure. It is equally true that once the Assessing Officer has disallowed the same, the assessee did not agitate the matter before the first appellant authority which is evident from the order of the ld. CIT(A) 35, New Delhi dated 04.10.2017 wherein we can find grounds relating to foreign exchange loss of ₹ 21.22 crores was never pressed by the assessee and the same were dismissed. Going deep into the facts of the case, we find that the appellant company is operating with no employees and is under liquidation with no business operations. It is has sold its entire business vide agreement dated 31.07.2012 w.e.f 01.04.2012. All the employees of the assessee got transferred and it is managed by a liquidator. We find that the assessee had disclosed ECB to the tax auditor. However, while preparing the return of income, due to inadvertent unintentional error, forex loss was claimed as revenue expenditure. In our humble opinion, inadvertent claim of expenditure would not, ipso facto, amount to concealment of income or furnishing of inaccurate particulars of income to levy penalty u/ 271(1)(c) - See Reliance Petro Products 2010 (3) TMI 80 - SUPREME COURT and the Hon'ble Supreme Court in the case of Price Waterhouse Coopers Pvt Ltd 2012 (9) TMI 775 - SUPREME COURT - Decided in favour of assessee.
Issues:
Levy of penalty under section 271(1)(c) of the Income Tax Act, 1961 for claiming foreign exchange loss as revenue expenditure. Analysis: The judgment pertains to an appeal filed by the assessee against the order of the Commissioner of Income Tax [Appeals] regarding the levy of penalty under section 271(1)(c) of the Income Tax Act, 1961 for the assessment year 2012-13. The appellant, engaged in manufacturing auto parts, claimed a foreign exchange loss of ?21.22 crores as revenue expenditure during the assessment proceedings. The Assessing Officer disallowed this claim, resulting in a revised loss of ?9.36 crores for the assessee. Subsequently, a penalty of ?6,54,85,242/- was levied under section 271(1)(c) based on a High Court decision. The appellant argued that the foreign exchange loss was inadvertently not added back to the income due to an error by the tax auditor, following accepted accounting principles. The appellant contended that there was no intention to cause revenue leakage, and the error did not result in any actual revenue loss. The appellant relied on the decision of the Hon'ble Supreme Court in the case of Price Waterhouse Coopers [P] Ltd, emphasizing that a bona fide and inadvertent error should not lead to penalty imposition. It was highlighted that the appellant company was in liquidation, with a significant assessed loss, and at the end of its business, there was no benefit in claiming the forex loss as revenue expenditure. The appellant argued that the error was unintentional and did not result in any revenue loss. On the other hand, the Department supported the Assessing Officer's decision and referred to the High Court's decision in a similar case. The tribunal, after considering the arguments and facts, observed that the appellant was in liquidation with no business operations and had disclosed the foreign exchange loss to the tax auditor. The tribunal noted that the inadvertent claim of expenditure should not automatically lead to penalty under section 271(1)(c) of the Act. Citing the decisions of the Hon'ble Supreme Court in the cases of Reliance Petro Products and Price Waterhouse Coopers Pvt Ltd, the tribunal concluded that in this case, the penalty was not justified. Therefore, the tribunal directed the Assessing Officer to delete the penalty imposed under section 271(1)(c) of the Act. As a result, the appeal of the assessee was allowed, and the penalty was revoked.
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