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TMI Blog2011 (5) TMI 609X X X X Extracts X X X X X X X X Extracts X X X X ..... s the Managing Director who has signed the verification column, which states that particulars shown in return are true. It does not need any professional qualification to ensure that brought forward losses have not being doubly claimed. (b) The ITAT has accepted that loss on equity shares and shares of UTS are not the business loss and therefore by claiming it as a business loss the assessee had clearly furnished inaccurate particular of income. (c) The assessee could not prove before the Assessing Officer that the donation was given for business consideration. The assessee has wrongly debited the amount of Rs. 94,001 as business expenses under the head Charity and donation and again claimed deduction under section 80G on an amount of Rs. 75,000 which was included in that head. 2. Any other ground raised at the time of hearing." 2. From the above grounds it would be clear that the only grievance of the Department relates to the deletion of penalty imposed by the Assessing Officer under section 271(1)(c) of the IT Act, 1961 (hereinafter, referred to as "Act"). 3. The facts related to this case, in brief, are that the assessee was engag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respectively and that in the assessment year 2003-04 the assessee claimed a business profit of Rs. 40,77,175 and after setting off the brought forward business loss of assessment years 2001-02 and 2002-03, the assessee claimed a business loss of Rs. 1,06,61,865 (Rs. 79,77,560 + Rs. 67,61,480 = Rs. 1,47,39,040 (-) Rs. 40,77,175) and a capital loss of Rs. 2,48,63,399. The Assessing Officer pointed out that in the assessment year 2003-04, the aggregate balance brought forward business losses of assessment year 2001-02 and assessment year 2002-03 were left at Rs. 1,06,49,360 which the assessee ought to have claimed as brought forward business loss in the assessment year 2004-05, however, the assessee claimed a brought forward business loss of Rs. 5,02,64,294 in assessment year 2004-05 and did not claim the capital loss of Rs. 2,48,63,299 of assessment year 2003-04 as brought forward business loss in assessment year 2004-05. According to the Assessing Officer, the aforesaid action of the assessee resulted in double claim amounting to Rs. 1,47,39,030 of the business loss of those two assessment years. The Assessing Officer was of the view that the assessee had furnished inaccurate parti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment year 2001-02 Rs. 79,77,560 Business loss for assessment year 2002-03 Rs. 67,61,480 Loss for assessment year 2003-04 Rs. 1,06,61,955 4.1 It was further stated that during the course of assessment proceedings the assessee revised the Schedule 6 of the Tax Audit Report as under: S. No. A.Y. Nature of loss particulars Amount as returned Amount as assessed (give reference to relevant order) 1 2001-02 Business loss 5,377,707.00 7,977,560.00 Unabsorbed Dep. 2,599,853.00 Assessed u/s 143(1) Order dated: 7,977,560.00 2. 2002-03 Business loss 4,689,370.00 Assessment order awaited Unabsorbed 2,072,105.00 Dep. 6,761,475.00 3. 2003-04 Carried forward Loss & Dep. 14,739,035.00 10,661,860.00 Assessed u/s 143(1) Profit for the year 4,077,175.00 24,363,299.00 Business loss 10,661,860.00 Capital loss 24,863,299.00 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 partic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t based on the claim made by the assessee in its return. On the whole owing to some bona fide mistake in showing set off and carry forward of loss or in showing capital loss on the part of the professional while preparing the return will not amount to concealment liable to penalty under section 271(1)(c) of the Act 1961. (ii) Another important issue to which we wish to invite attention is that it is the intent of legislature that penalty is imposable with reference to the income of a financial year under assessment. The word 'income' has been defined under section 2(24) of the Act, which refers only to the income of year under assessment. The definition of income under section 2(24) do not include carry forward and set-off of loss. The definition does not take into account the determined loss of earlier years. Therefore, on account of capital loss and carry forward loss penalty under section 271(1)(c) is not leviable at all. (iii) The claim of carry 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rofessionals, therefore, the principle of justice and fairness has to be applied and the penalty was liable to be quashed. The reliance was placed on the following case laws: (i) Navinbhai M. Patel v. ITO [1988] 27 ITD 411 (Ahd.) (ii) Asstt. CIT v. Supreme Industries Ltd. [2009] 122 TTJ 56/28 SOT 19 (Mum.) (iii) Madan Gopal Bansal & Sons v. IAC [1984] 19 TTJ (Delhi) 493 4.6 The other submissions of the assessee has been incorporated by the learned CIT(A) in paras 6.4 to 6.11 of the impugned order, which are reproduced verbatim as under: "6.4 It was further submitted that the appellant company has engaged the professionally qualified persons as required under the law or otherwise as under: Professional Purpose (i) M/s Amit Ray & Co. Chartered Accountants Statutory Auditors under the Companies Act, 1956. (ii) M/s Vinay Kumar & Co. Chartered Accountants Auditors under section 44AB of the I.T. Act, 1961 (iii) 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 19,000. From the details it is evident that such sum was incurred for business exigencies Further, there was neither concealment of income nor furnishing of inaccurate particulars as such sum was duly shown in schedule 'R' of the audited statement of accounts for the year ending on 31-3-2004. Hence, penalty under section 271(1)(c) is not leviable. 6.10 Regarding amount mentioned at para 3.2(6), the counsel submitted that the recognition under section 80G was available to 'Wheeler Sewa Trust' earlier. Accordingly, there was bona fide belief to claim deduction under section 80G of the Act. While preparing computation of income, it seems that Original Donation Receipt was not verified by the professionals in view of this company should not be liable for levy of penalty under section 271(1)(c) of the Act. 6.11 In view of the submissions made on legal and factual aspects as well as case laws cited above, counsel for the appellant prayed that the penalty imposed under section 271(1)(c) of the Act is liable to be deleted." 4.7 The 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 u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er on disproved the preposition as is evident from the following Order Sheet entry; "11-3-2010 - As addition made by the Assessing Officer is deleted by the Hon'ble ITAT, All. vide ITA No. 45(All.)/2009, dated 24-4-2009, the penalty proceedings under section 271(1)(c) is hereby dropped." (xiii)On the matter of loss on account of sale of Units, Hon'ble ITAT has already held that it is capital loss and not simply disallowable business loss. (xiv) From the details of Donation & Charity, it is evident these were incurred for business consideration. (xv) Since the appellant could not get any effective hearing hence could not submit proper reply before Assessing Officer. (xvi) The Assessing Officer has not been able to prove how the appellant would have succeeded in carrying forward incorrect loss to subsequent years. (xvii) The Assessing Officer has not been able to prove how the appellant has wilfully not only claimed brought forward capital loss but has increased the brought forward business loss." 4.8 The learned CIT(A) deleted the penalty by observing in paras 7.1 to 7.3 of the impugned order as under: "7.1 It is seen that Hon'ble Supreme Court in the case of T. Ashok ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iable under section 154 of the Act but no penalty was leviable. He accordingly supported the impugned order passed by the learned CIT(A). The learned counsel for the assessee placed his reliance on the case laws cited before the learned CIT(A) and also relied on the following case laws: (i) CIT v. Manmohan Das [1966] 59 ITR 699 (SC) (ii) T. Ashok Pai v. CIT [2007] 292 ITR 11/161 Taxman 340 (SC) (iii) CIT v. Sri Saradha Textile Processors (P.) Ltd. [2006] 286 ITR 499 (Mad.) (iv) CIT v. Reliance Petroproducts (P.) Ltd. [2010] 322 ITR 158/189 Taxman 322 (SC) (v) CIT v. Mahalaxmi Sugar Mills Co. Ltd. [1986] 160 ITR 920/27 Taxman 267 (SC) 7. We have considered the rival submissions and carefully gone through the material available on the record. In the present case, the Assessing Officer worked out the penalty under section 271(1)(c) with reference to the following sums, which were considered as concealed income of the assessee: (i) Capital loss for assessment year 2003-04 as business loss 2,48,62,399 (ii) Set-off of business loss for assessment year 2001-02 but it was already adjusted in assessmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nst the profits and gains of the subsequent year under section 24(2) has to be determined by the Income-tax Officer who deals with the assessment of the subsequent year. A decision recorded by the Income-tax Officer who computes the loss in the previous year that the loss cannot be set off against the income of the subsequent year is not binding on the assessees." 7.2 In the present case also the loss was allowed to be carried forward to the following year and set off against the profits and gains of the year under consideration and the Assessing Officer determined the figures, which were already available on the record with the Department, so it cannot be said that the assessee furnished inaccurate particulars of income or concealed any income. 7.3 Similarly the Hon'ble Apex Court in the case of Mahalaxmi Sugar Mills Co. Ltd. (supra) has held as under: "There is a duty cast on the Income-tax Officer to apply the relevant provisions of the Indian Income-tax Act for the purpose 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 d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ficer could not have rejected the claim and consequentially levied the penalty under section 271(1)(c) of the Act considering the wrong claim as concealment of income. In the present case, as regards to the loss carried forward to be set off, there was neither concealment of the income nor inaccurate particulars of income were furnished because the correct figures were already available on record with the Assessing Officer in the form of Income-tax returns of earlier years wherein loss to be set off and carried forward in the succeeding year was determined, so he should have considered only those figures, which were correct. Furthermore, the Assessing Officer himself admitted that the mistake in question was rectified by the Counsel of the assessee during the course of the assessment proceedings. The aforesaid fact has been mentioned at Page No. 3 of the assessment order dated 26-12-2006 wherein the Assessing Officer categorically mentioned that "when the above facts were 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made by the Assessing Officer on paragraph 7 of his order, in which it was mentioned that the units of the UTI were capital assets and exchange thereof with bonds amounted to transfer, as held by Hon'ble Andhra Pradesh High Court in the case of CIT v. Trustees of HEH The Nizam's Second Supplementary Family Trust [1976] 102 ITR 248. The units were held as investments and, therefore, the loss could not be said to be business loss. Therefore, the loss could not be debited to profit and loss account for setting it off against the business income. These findings were upheld by the learned CIT(Appeals). The limited case made by the learned counsel was that the loss should have been assessed under the head "capital gains", if it was not a business loss. Therefore, it was argued that a direction may be given to the Assessing Officer to assess the loss under the head "capital gains" for set off in future years against similar incomes. As the prayer of the assessee was prima 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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