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TMI Blog2015 (5) TMI 927X X X X Extracts X X X X X X X X Extracts X X X X ..... y the Assessing Officer and the addition to the book profit was made because of difference in the opinion in respect of presentation of such capital gain whether such capital gain should have been credited in the profit and loss account or directly to capital reserve in the balance-sheet. The assessee was of the opinion that such capital gain could have been directly credited to capital reserve account in the balance-sheet, whereas as per the Assessing Officer such capital gain should have been credited in the profit and loss account only. The Hon’ble Supreme Court in the case of CIT vs. Reliance Petroproducts Pvt Ltd, reported in [2010 (3) TMI 80 - SUPREME COURT] wherein held a mere making of a claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee. Such a claim made in the return cannot amount to furnishing inaccurate particulars. - Decided in favour of assesse. X X X X Extracts X X X X X X X X Extracts X X X X ..... consolidated order dated 08.03.2011 for Assessment Years 2003-04 and 2004-05 deleted the penalty, by observing as under:- "7.14 The scheme of Section 271(1)(c), as we have noted earlier in this order, visualizes imposition of penalty when the assessee has concealed income or when the assessee has furnished inaccurate particulars of income. In addition to these two situations, penalty can also be imposed, inter alia, when assessee is deemed to have concealed particulars of income under Explanation 1 to Section 271(1)(c). This Explanation provides that the assessee will be deemed to have concealed particulars of income where in respect of any facts material to the computation of the total income of any person under this Act, (i) when the assessee fails to provide an Explanation, (ii) when the assessee provides an Explanation which is found to be false, and (iii) when the assessee provides an Explanation which he fails to substantiate and he fails to prove that the explanation was bonafide and that all the facts necessary for the same and material for computation of income have been duly disclosed by the assessee. As mentioned earlier, the only ground raised by the AO for levy of pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... '. The expression 'particulars' refers to 'facts, details, specifics or information about someone or something'. Therefore, the plain meaning of the expression 'furnishing of inaccurate particulars of income' implies furnishing of details or information about income which are not in conformity with the facts or truth. The details or information about income deal with the factual details of income and this cannot be extended to areas which are subjective such as the status of taxability of an income, admissibility of a deduction and interpretation of law. The furnishing of inaccurate information thus relates to furnishing of factually correct details and information about income. In the present case, however, what has been treated as furnishing of inaccurate particulars, in the opinion of the AO, is the Capital Gains resulting on sale of shares received as gift was credited directly to Capital Reserve and not routing through P&L a/c. thereby not considered for computation of income under MAT. There were variance in the findings of AO in the assessment orders and the findings of the ld. CIT(A) with regards to the sales proceeds on the shares received in gifts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of inaccurate particulars of income. In this view of the matter, the case of the assessee can not be said to be a case of 'furnishing of inaccurate particulars of income', in its natural sense, either. 7.18 In the present case, as pointed above, there is no dispute that all the relevant facts material to the computation of total income are duly furnished by the assessee and no deficiencies in furnishing of such facts are pointed out by the AO. There is thus no cause of action for deeming fiction being triggered by the conduct of the assessee. 7.19 Be that as it may, even assuming that deeming fiction under Explanation 1 to Section 271 (1)(c) can be triggered by a wrong legal claim, it cannot be the case that merely because there is a wrong claim, even if that be so, penalty under section 271(1)(c) can be imposed. This deeming fiction under section 271(1)(c) only shifts the onus of proof on the assessee, as this Explanation itself provides that a penalty can only be imposed (a) when there is no explanation by the assessee, (b) when the explanation given by the assessee is found to be false, and (c) when the assessee provides an Explanation which he fails to substantiate an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... errors and it is quite in tune with the human probabilities. There is no good reason to reject the same as unacceptable for the purpose of making of the claim of deduction being covered by the deeming fiction under Explanation 1 to Section 271(1)(c). 7.23 In view of the reasons set out above, the case of the assessee is not even hit by the mischief of any of the three eventualities envisaged by the deeming fiction under Explanation 1 to Section 271(1)(c). On the facts and in the circumstances of the case, the assessee could not be said to have concealed the particulars of income or furnished inaccurate particulars of income. Under the scheme of Section 271(1)(c), therefore, it was not a fit case for the imposition of penalty. 6. The Departmental Representative has filed written submissions which read as under:- "BEFORE THE HON'BLE 'D' BENCH ITAT-AHMEDABAD NAME OF THE CASE Bilakhia Holding PL ITA NUMBER 1478&1479/ahd-2011 AY 2003-04, 2004-05 Date of hearing 17-03-2015 Hon'ble Members, Subject: Filing of written submissions 1. In the assessment order, a clear cut finding has been given by the AO in the body of assessment order that assessee company has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... P. Ltd. to distribute the profit earned on sale of shares as dividend among the share holders. All the three Yunus, Anjum and Zakir have equal share holding in Bilakhia Holdings P. Ltd. The distribution of dividend out of profit earned on sale of shares does not violate the intention behind the arrangement. The relevant clause of the arrangement deed reads: "6. To avoid any future disputes, differences and disagreements which may affect the peace, harmony, honour and prestige of the family or the parties as also affect the various business and assets and with a view to always remain a joint close knit family, the parties have agreed that each of the three brothers namely Yunus, Anjum and Zakir should have equal rights and ownership in the various business and assets except when specifically provided otherwise." 6. It is mentioned whether the company distributes the dividend or utilizes the fund for investment or other business but the fact is that the profit on sale of shares is available to the company. Therefore, capital receipt i.e. profit on investment which are available for distribution among the share holders as dividend are required to be passed through profit a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... different than the facts in the case of the assessee-AOP and are not squarely applicable in the case of the assessee-AOP as per discussion made hereunder: Facts in the case of Reliance Petro Facts in the case of assessee. In this decision, the Hon'ble Apex Court found that there was no finding that any details supplied by the assessee in its return were found to be incorrect and erroneous or false and as the assessee had furnished all the details of its expenditure as well as income its return, which details, themselves were not found to be inaccurate nor could be viewed as the concealment of income on its part. In such circumstances, the Hon'ble Court held that merely because the assessee had claimed the expenditure, which claim was not accepted or was not acceptable to the revenue, that by itself would not, in our opinion, attract the penalty under section 271(1)(c) of the Act. In this case, the assessee company has credited a sum of ₹ 2,43,97,23,492/- directly to its capital reserve being profit on sale of shares claimed to be received as gift, however, this sum was not routed through the profit and loss account of the company and this was not considered for c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enue not deleted the inaccurate particulars of income of the assessee, the assessee could have enjoyed the fruits of filing inaccurate particulars of income and would have caused loss to the revenue. Our Arguments 1. CIT(A)'s finding and the rationale - See Para. 7.15 to 7.25 of the CIT(A) Order 2. CIT(A) has relied on meaning of concealment and inaccurate particulars in paragraph no. 7.16 & 7.17 3. Full particulars including the accounting treatment have been disclosed in the accounts statements and return of income. 4. Adopting notes to accounts does not amount to qualification. Reliance is placed on Paragraph 3.9 and in particular 3.12 of the ICAI's guidelines specify the manner-of qualification - adoption of notes of accounts cannot amount to a qualification. 5. The Apex court has clearly held in the case of Apollo Tyres Ltd reported in 255 ITR 273 that the A.O. has no power of scrutinizing or re-computing the net profit of the company adopted by the company in its annual general meeting. The decision of Hon'ble Apex court has been followed by several high courts and Supreme Court itself in several cases. 6. The decision in the case of Veekaylal (Bom)-249 ITR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able even if subsequently the income is held as assessable. For this, he placed reliance on the following decisions:- i) CIT vs. Reliance Petroproducts Pvt Ltd, [2010] 322 ITR 158 (SC), wherein the Hon'ble Apex Court held as under:- Where there is no finding that any details supplied by the assessee in its return are found to be incorrect or erroneous or false there is no question of inviting the penalty under section 271(1)(c) . A mere making of a claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee. Such a claim made in the return cannot amount to furnishing inaccurate particulars. ii) Price Waterhouse Coopers Pvt. Ltd. vs. CIT & another, [2012] 348 ITR 306 (SC), wherein the Hon'ble Apex Court held as under:- Notwithstanding that the assessee was a reputed firm and had great expertise available with it, it was possible that even the assessee could make a "silly" mistake. The fact that the tax audit report was filed along with the return and that it unequivocally stated that the provision for payment was not allowable under section 40A(7) of the Act indicated that the assessee made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as having been prepared in accordance with the requirements of Parts II and III of Sch. VI to the Companies Act cannot be examined by the AO; AO does not have the jurisdiction to go behind the net profit shown in the P&L a/c except to the extent provided in the Explanation to section 115J. iii) Malayala Manorama Co. Ltd. vs. CIT, [2008] 300 ITR 251 (SC), wherein the Hon'ble Apex Court held as under:- ITO has no jurisdiction to rework the book profit under s. 115J by substituting the rates of depreciation prescribed in Sch. XIV of the Companies Act, 1956, for the rates prescribed in the IT Rules which have been consistently applied by the assessee company. iv) CIT vs. Rubamin P. Ltd., [2009] 312 ITR 18 (Guj), wherein the Hon'ble High Court held as under:- Assessee is entitled to change the method of depreciation from straight line method to WDV method and claim extra depreciation for current year as also arrears of past years for purpose of computing book profit under s. 115J. 10. We have heard rival submissions and perused the orders of the lower authorities and material available on record. In the instant case, the Assessing Officer levied penalty u/s 271(1)(c) of ₹ 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tal gain whether such capital gain should have been credited in the profit and loss account or directly to capital reserve in the balance-sheet. 16. The assessee was of the opinion that such capital gain could have been directly credited to capital reserve account in the balance-sheet, whereas as per the Assessing Officer such capital gain should have been credited in the profit and loss account only. The Hon'ble Supreme Court in the case of CIT vs. Reliance Petroproducts Pvt Ltd, reported in [2010] 322 ITR 158 (SC), has held as under :- "Where there is no finding that any details supplied by the assessee in its return are found to be incorrect or erroneous or false there is no question of inviting the penalty under section 271(1)(c) . A mere making of a claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee. Such a claim made in the return cannot amount to furnishing inaccurate particulars." We, therefore, find no reason to interfere with the order of the CIT(A) which is a well reasoned order. Therefore, the ground of appeal of the Revenue in both the years is dismissed. 17. In the result, th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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