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TMI Blog2021 (2) TMI 98X X X X Extracts X X X X X X X X Extracts X X X X ..... s relevant to mention here that the financial statements of the AY 2012-13 were on record which reflect the deferred tax asset written off in the profit loss account and also a Note to that effect in the Schedule of significant accounting policies. The observation made by the AO that there was no independent evidence and the finding that the same has been revealed in the assessment proceedings only is not correct. We find that the carried forward loss has not been set off subsequently and the assessee has huge carry forward assessed losses of earlier years which were otherwise available for set off Deferred tax asset written off was reported in the financials, however, the same was inadvertently left to be added back to the net loss before tax while making the tax computation. This error is only a computation error made in the return of income which occurred due to overlooking the contents of the profit and loss account. The contents of the financial statements do not conceal any particulars. The error committed by the appellant is a bona fide and inadvertent one. The obtaining factual matrix in the instant case is broadly similar to the decision in Price Waterhouse Coopers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itten off in the profit and loss account as exceptional item and also offered its explanation that the said expenditure was mistakenly allowed in the computation of total income, there was no intention of evasion of tax or understating its total income in any manner. In view of the above, Explanation 1 to section 271(1)(c) of the Act is not attracted by the Assessing Officer and is deemed bona fide. However, the AO was not convinced with the above explanation of the assessee and levied a minimum penalty of ₹ 65,64,793/- with the following reasons : 12. Under the new scheme of scrutiny norms, all the cases are not selected for scrutiny assessment. Had the assessee's case not been selected for scrutiny, the assessee could have been benefited by filing inaccurate particulars of income. The assessee took a chance with the Department. Had the revenue not detected the concealment 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. 13. The facts leading to the above mentioned additions have been discussed in detail in the assessment order u/s 143(3) dated 12.0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income of the assessee. Penalty proceedings u/s. 271(1)(c) of the IT Act 1961 are being separately initiated for furnishing inaccurate particulars of income to this extent . The total income was computed as follows: It is clear from the above that no independent evidence was available on the record. It is only when the return was selected for scrutiny and the proper verification was made during the scrutiny assessment and discrepancy was found. Had the return was not selected for scrutiny, the fact would never been revealed before the department and assessee would have been allowed irregular carry forward of loss. It is obvious from the fact the assessee company has wilful and mala fide intention to suppress the profit by showing the aforesaid item to the profit and loss account. (B) It also appears from item 6 of the P L Account that 'debit of ₹ 2,02,33,602/- representing deferred tax assets write off was an 'exceptional item' and was mentioned after profit/loss before exceptional and extraordinary items and tax figure of ₹ 6,29,91,911/- and hence was clearly visible and since such an item was being debited for the first time as compared to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and worked out the revised business loss at ₹ 5,68,60,644/- and initiated penalty proceedings under section 271(1)(c) of the IT Act 1961 for 'furnishing inaccurate particulars of income'. (C) The assessee did not file any appeal against the assessment order dated 12/3/2015 assessing business loss of ₹ 5,68,60,644/- and the AO issued show cause notice for levying penalty under section 271(1)(c) of the IT Act 1961 and the assessee submitted as mentioned earlier in paragraphs. AO's observations are mentioned in earlier paragraph 4.2 and hence are not repeated here-. In nutshell, AO considered and examined assessee's reply in facts of the case and in law and in light of judicial decisions and levied minimum penalty of ₹ 65,64,793/- @100% of tax sought to be evaded of ₹ 65,64,793/- on the same ground and issue of furnishing of inaccurate particulars of income and also by following SC decision in the case of Dharmendra Textile Processors 2008/306/ITR/277/SC and assessee is in appeal and has submitted as per paragraph 4.3 of this appellate order. Notices were issued and Ms. Indra Anand from T P Ostwal CO., CAs attended the office from time to tim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... liberate and intentional error committed by the assesses and its directors to furnish inaccurate particulars of income for AY 2012-13 and evade income to the extent of ₹ 2,02,33,602/- which would qualify for set off in future assessment years. Assessee's CAs contention that the additions of ₹ 2,02,33,602/- have not resulted in payment of any taxes and the current years losses have not been claimed as set off against future income is besides the point and when explanation of section 271(1)(c) of the IT Act 1961 clearly applies to the facts of the case, it becomes a clear case of 'furnishing inaccurate particulars of income and hence provisions of section 271(1)(c) are squarely attracted in the case and hence levy of penalty of ₹ 65,64,793/- is clearly is fully justified in facts of the case and in law. (D) Assessee has cited following decisions in its favour: 1) CIT V/S, J K Industries Ltd-297/ITR/ 176 2) CIT V/S Reliance Petroproducts Ltd. 2010/230/ ITR/320/SC 3) Dilip N Shroff V/S JCIT-2007/291/ITR/519/SC The facts of the above decisions are not similar to the facts of the assessee's case. Therefore, the assessee's r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AY 2012-13 were on record which reflected the deferred tax asset written off in the profit loss account and also a note to that effect in this Schedule of significant accounting policies. Thus it is stated that the observation that there was no independent evidence and the finding that the same had been revealed in the assessment proceeding only is erroneous. It is stated that the carry forward loss has not been set off subsequently and the assessee has huge carry forward assessed losses of earlier years which were otherwise available for set off. On the above, the Ld. counsel relies on the decision in Price Waterhouse Coopers Pvt. Ltd. v. CIT 348 ITR 306 SC, Hotel Sahil Pvt. Ltd. v. ACIT (ITA No. 5857/Mum/2017), Omega Corrugators Pvt. Ltd. v. ITO (ITA No. 5216/Mum/2018) and DCIT v. Israni Investments Pvt. Ltd. (ITA No. 386/Mum/2017). 7. On the other hand, the Ld. Departmental Representative (DR) submits that the Ld. CIT(A) has rightly confirmed the order of the AO in levying a minimum penalty of ₹ 65,64,793/- u/s 271(1)(c) as the assessee had debited an amount of ₹ 2,02,33,602/- as deferred tax asset written off in the P L account as exceptional item, where ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er, the same has not been added by the assessee in its computation, thereby leading to underassessment of income by ₹ 23,70,306/. Soon after, the assessee was communicated the reasons for reopening the assessment, it realized that a mistake had been committed and accordingly by a letter dated 20.01.2005, the Assessing Officer was informed that there was no wilful suppression of facts by the assessee but that a genuine mistake or omission had been committed which also appears to have been overlooked by the Assessing Officer before whom the tax audit report was placed. Accordingly, the assessee filed a revised return on the same day. A re-assessment was passed on the same day and the assessee then paid the tax due as well as the interest thereon. Thereafter, the AO levied a penalty @ 300% on the tax sought to be evaded by the assessee by furnishing inaccurate particulars and determined the quantum of penalty at ₹ 27,37,689/-. In appeal filed by the assessee, the CIT(A) upheld the penalty levied by the AO. In appeal by the assessee, the Tribunal reduced the penalty to 100%. In appeal by the assessee, the Hon ble Calcutta High Court upheld the order of the Tribunal. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... um limits. Before the Division Bench, stand of the revenue was that said section should be read as penalty for statutory offence and the authority imposing penalty has no discretion in the matter of imposition of penalty and the adjudicating authority is duty bound to impose penalty equal to the duties so determined in such cases. The assessee, on the other hand, referred to section 271(1)(c) of the Income-tax Act, 1961 taking the stand that section 11AC is identically worded and in a given case it is open to the Assessing Officer not to impose any penalty. The Division Bench made reference to rule 96ZQ and rule 96ZO of the Central Excise Rules, 1944 and to a decision in Chairman, SEBI v. Shriram Mutual Fund [2006] 5 SCC 361 and was of the view that the basic scheme for imposition of penalty under section 271(1)(c) and section 11AC and rule 96ZQ(5) is common. According to the Division Bench, the correct position, in law, has been laid down in Chairman, SEBI's case (supra). Therefore the Division Bench referred the controversy involved to a Larger Bench, doubting the correctness of the view expressed in Dilip N. Shroff v. Joint CIT [2007] 161 Taxman 218 (SC). The Hon ble Supreme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed the legal position in the correct perspectives. The matter shall now be placed before the Division Bench to deal with the matter in the light of what has been stated above, only so far as the cases where challenge to vires of rule 96ZQ(5) are concerned. In all other cases, the orders of the High Court or the Tribunal, as the case may be, are to be quashed and the matter was to be remitted back to it for disposal in the light of the instant judgments. [Para 27] 8.2 It is well settled that in the scheme of the Act, the proceedings for imposition of penalty, though emanating from proceedings of assessment, are essentially independent and a separate aspect of the proceedings which closely follow the assessment proceedings. It is also well settled that findings given in assessment proceedings are certainly relevant and have probative value, but such findings are material alone and may not justify the imposition of penalty in a given case, because the considerations that arise in penalty proceedings are different from those that arising assessment proceedings as held in Banaras Textorium v. CIT (1988) 169 ITR 782, 790, 791 (All) ; CIT v. Govindankutty Menon (1989) 178 ITR 509, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... correct. We find that the carried forward loss has not been set off subsequently and the assessee has huge carry forward assessed losses of earlier years which were otherwise available for set off. As mentioned earlier, the financial statements of the assessee were placed before the AO during the course of assessment proceedings which clearly stated the deferred tax asset written off as a separate line item on the face of the profit and loss account. Also in Note 19 (Significant Accounting Policies) forming part of financial statements, it is stated at 19.6b that : Deferred Tax for timing differences between book profit and tax profit is accounted for using the tax rates and laws that have enacted as of the Balance Sheet date. Deferred tax assets are recognized to the extent there is reasonable certainty that these assets can be realized in future. However, the company does not anticipate to make profits in the near future in view of the same, deferred tax asset to the tune of ₹ 2,02,33,602/- has been written off in December, 2012. An examination of the above clearly indicates that deferred tax asset written off was reported in the financials, however, the same ..... X X X X Extracts X X X X X X X X Extracts X X X X
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