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TMI Blog2018 (11) TMI 1326X X X X Extracts X X X X X X X X Extracts X X X X ..... law, the CIT(A) erred in deleting penalty under section 271(1)(c) without appreciating the fact that the assessee had made an incorrect claim of expenditure which was accepted only after it was pointed out during the course of assessment proceedings?" (ii) "Whether on the facts and in the circumstances of the case and in law, the CIT(A) erred in ignoring the decision of Hon'ble Supreme Court in the Case of CIT V/s Reliance Petro Products (P) Ltd. Reported as (2010) 322 TTR 158 wherein the Hon'ble Supreme Court has held in para 8 that "......There can be no dispute that everything would depend upon the return filed, because that is the only document, where the assessee can furnish the particulars of his income. When such particulars are found to be inaccurate, the liability would arise"? The appellant prays that the order of the CIT(A) on the above ground be set aside and that of the DCIT- 9(2)(1) be restored. The appellant craves leave to amend or alter any grounds or add a new ground which may be necessary." 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... naccurate particulars of income/concealment of income by issuing notice dated 30.03.3015 u/s 271(1)(c) of the 1961 Act . The AO , thereafter , issued show cause notice dated 06.08.2015 to the assessee as to why penalty u/s. 271 (1)(c) should not be levied on account of short disallowance of interest expenditure to the tune of Rs. 11,26,61,005/- under the head 'Income from Business or Profession' which led to the claim of increased loss by the assessee in the return of income filed with the Revenue causing prejudice to the Revenue. The assessee in response submitted that the assessee has neither concealed the particulars of income nor furnished inaccurate particulars of income . The assessee submitted that it was only due to inadvertent mistake while filing of return of income that it wrongly disallowed by adding back to the income an amount of Rs. 41.11 crores instead of Rs. 52.37 crores under the head 'income from business and profession. The assessee relied upon 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 E ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which found mentioned in the appellate order passed by learned CIT(A) to contend that no penalty is exigible u/s 271(1)(c) of the 1961 Act on the facts and circumstances of the case mainly on the ground that it was an inadvertent clerical mistake committed by the assessee while filing of its return of income and there was no malafide on the part of the assessee to defraud Revenue and more-so the assessee has huge accumulated losses which lapsed due to change in shareholding of the assessee company as being hit by provisions of Section 79 of the 1961 Act. The Ld. CIT(A) accepted the contentions of the assessee and deleted the penalty as was levied by the AO u/s 271(1)(c) of the 1961 Act by holding as under, vide appellate order dated 30.12.2016:- "6.2 Ground No. 2&3 6.2.1 Vide this ground the appellant has agitated against levying of penalty of Rs. 3,48,12,251/- u/s.271(1)(c) of the I.T. Act. The appellant 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 interes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the I.T.Act and Rs. 57,85,84,778/- u/s.115JB of the I.T. Act were not allowed to be carried forward and therefore, the effective tax position of the appellant does not change with the disallowance of the interest of Rs. 11,26,61,005/-. 6.2.4 The appellant submitted that due to ongoing restructuring of all the companies in 'Biyani family' to which the appellant belongs, the available losses for A.Y.2012-13 & 2013-14 was again lapsed in F.Y.2013-14 as per the stipulations and application of section 79 of the I.T. Act. According to the appellant a person who is fully aware that his carry forward losses would be lapsed due to change in shareholding under restructuring process, would never try to claim excess losses which is going to lapse. 6.2.4 Since the mistake was a bonafide mistake due to human error, therefore, appellant placed reliance on the 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 ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isallowed the same in its computation of taxable income, though-, such disallowance was pointed out in the Tax Audit Report, the Supreme Court considered that an inadvertent error on the part of the assessee indicating absence of due care and had cancelled the penalty. It was held, by the Hon'ble Supreme Court, that the facts of the case were peculiar and somewhat unique; that notwithstanding the fact 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. It was observed that the contents of the Tax Audit Report suggested that there was no question of the assessee concealing its income or of the assessee furnishing any inaccurate particulars; that apart from the fact that the assessee did not notice the error, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 79 of the 1961 Act, but that does not give licence to the assessee to claim more loss in the return of income filed with Revenue which has infact caused prejudice to the Revenue. The learned DR would rely on the penalty order passed by the AO u/s 271(1)(c) of the 1961 Act. 5.2 The Ld. Counsel for the assessee on the other hand drew our attention to page no 2 of the paper book which is computation of income for AY 2012-13 and it was submitted that the assessee is engaged in the business of mall which is house property and rental income were offered to tax under the had 'Income from House Property'. It was submitted that interest expenses to the tune of Rs. 52,37,86,419/- were claimed as deduction u/s 24(b) of the 1961 Act against rental income under the head 'income from house property'. Then it was explained that the assessee should have deducted/disallowed similar amount of interest expenditure to the tune of Rs. 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 Rs. 41,11,25,414/- under the head 'income from business or profession'. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rest was paid by the assessee. Thus it was submitted that it was a clerical mistake inadvertently committed which was rectified by the assessee during the assessment proceedings on being pointed out by the AO. It was claimed that there was no intention to defraud Revenue but it was a genuine and bonafide mistake committed while filing return of income with Revenue. The AO has not disputed this fact but since two years lapsed since the assessee filed its return of income with Revenue, when finally the mistake was rectified by the assessee on being pointed by the AO , the AO was of the view that had the case been not selected for framing scrutiny assessment the mistake would not have come to notice of the Revenue which 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 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... applicable to the furnishing of inaccurate particulars of income while it can be applied only to concealment of particulars of income. However on being confronted by the Bench , the assessee withdrew this plea as not sustainable in the eyes of law owing to catena of decisions of Superior Courts. It was also submitted by learned counsel for the assessee that the AO invoked both the limbs of Section 271(1)(c) of the 1961 Act while levying the penalty of Rs. 3,48,12,251/- without specifying under which limb the penalty provisions u/s 271(1)(c) were invoked, which is not permissible . The learned counsel for the assessee would rely on the appellate order passed by learned CIT(A). 5.3The Ld. DR submitted in 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rores were debited to Profit and Loss Account prepared by the assessee as interest expenditure which can be seen from P&L A/c and Schedule 5 Finance Cost placed in paper book/refer page 9 &17 . The said Interest expenditure of Rs. 52.37 crores was claimed as deduction u/s 24(b) from rental income under the head Income from House Property by the assessee in return of income filed with Revenue , then as a natural corollary to avoid double deduction of same expenditure , the said amount of interest expenditure of Rs. 52.37 crores cannot be allowed as business deduction from business income and hence the expenses claimed as business expenses are required to be reduced by this amount of Rs. 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 Rs. 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 Rs. 52,37,86,419/- from business expenses to be set off against business income, the assessee wrongly deducted Rs. 41,11,25,414/- from business expenses which led to claim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... man error and immediately on being notified by the AO , the assessee rectified the said mistake suo motu during assessment procedings . It is explained that under the circumstances , assessee could not have derived 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. We have observed that two fold explanations offered by the assessee for this erroneously claim of higher losses are correct. On the one hand , the amount added back to business income on account of interest expenses to the tune of Rs. 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 ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee is undoubtedly a reputed firm and has great expertise available with it. Notwithstanding this, it is possible that even the assessee could make a "silly" mistake and, indeed this has been acknowledged both by the Tribunal as well as by the High Court 18. 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 indicates that the assessee made a computation error in its return of income. Apart from the fact that the assessee did not notice the error, it was not 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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