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TMI Blog2023 (10) TMI 199X X X X Extracts X X X X X X X X Extracts X X X X ..... to withdraw the excess claim of its deduction u/s 32AC of the Act before any detection by the Income Tax Department. Hence, in our considered opinion, the assessee s case would squarely fall under the exception provided u/s 270A(6)(a) wherein, the assessee had given its bona fide explanation and had disclosed all the material facts that are relevant for the explanation offered. In view of the exception provided in section 270A(6)(a) of the Act, we hold that the present facts does not make the revenue eligible to levy penalty u/s 270A of the Act. AR also made argument on the ground that there was absolutely no mala fide intention on the part of the assessee to claim excess deduction u/s 32AC of the Act in the facts of the instant case as even after the withdrawal of the differential 85% claim of deduction in the sum of Rs. 191 crores, the assessee still has brought forward losses to the tune of Rs. 2698.95 crores as is evident from the schedule CFL (details of loss to be carry forward) in the ITR filed for AY 2017-18. We are in agreement with this argument of the AR which proves the intention and behaviour of the assessee to withdraw the claim of deduction voluntarily by the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by Ld. AO. Refer inter aliaCIT Vs Kohinoor Impex (P.) Ltd [2004] 141 TAXMAN 304 (DELHI HC); CIT -I, Mumbai v. Somany Evergree Knits Ltd (35 taxmann.com 529 (Bombay HC). As such too, the penalty as levied and confirmed, deserves to be deleted in toto. 4. That the Appellant voluntarily included the the said excess allowance under section 32AC of the Act during assessment proceedings before any notice was issued by the department regarding discovery of mistake. 5. That the bona fide mistake has also escaped the attention of the department while passing the intimation order u/s 143(1), wherein the department was also duty bound to correct the investment allowance calculation. 6. That the Ld. CIT(A) has erred on facts and in law involved in sustaining the penalty made by the Ld. AO without considering that the inadvertent error of tax auditor got translated into such inadvertent error in the return which was voluntarily suo-moto rectified by the Appellant by reducing his claim before any query before completion of assessment. The Appellant does not deserve to be penalized for error of third party who is prescribed professional under the tax audit provisions of the Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urmises without any substantive basis or cogent material. As such too the penalty deserves to be deleted in toto. 12. That the penalty as levied is without specific show cause notice and without proper specific lawful opportunity or compliance with Principle of Natural Justice. As such too the penalty deserves to be struck and deleted. 13. That the penalty order as made and as confirmed by the Ld. CIT(A) is against law and facts of the case involved. 14. That the grounds of appeal as herein are without prejudice to each other. 3. Though the assessee has raised several grounds in this appeal, we find only effective issue to be decided in the instant appeal is as to whether the ld CIT(A) was justified in upholding the levy of penalty u/s 270A of the Act in the facts and circumstances of the instant case. 4. We have heard the rival submissions and perused the material available on record. The assessee is engaged in the business of manufacturing and sale of cement, manufacturing and sale of asbestos sheets, heavy engineering workshop and foundry. The assessee filed its return of income electronically for AY 2017-18 on 31.10.2017 declaring loss of Rs. 641,08,95,40 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The assessee also enclosed a certificate from the tax auditor dated 06.03.2019 duly certifying this aspect wherein, it was specifically stated that due to inadvertent mistake, deduction u/s 32AC was claimed at 100% instead of 15%. 7. The first notice u/s 142(1) of the Act was issued by the ld AO seeking clarification regarding claim of deduction u/s 32AC of the Act was only on 13.09.2019. Before this date itself, the assessee vide its letter dated 02.04.2019 had already withdrew the excess claim of deduction u/s 32AC of the Act as stated (supra). In response to the notice u/s 142(1) of the Act dated 13.09.2019, the assessee vide letter dated 18.09.2019 duly submitted the workings for claim of deduction u/s 32AC of the Act together with the revised computation of taxable income and a certificate from the tax auditor dated 06.03.2019 certifying the correct figure of claim of deduction u/s 32AC of the Act. The assessment u/s 143(3) of the Act dated 01.10.2019 was ultimately completed at the same income at the same loss figure of Rs. 449,80,57,749/- as was disclosed by the assessee in the revised computation of total income filed on 18.09.2019. 8. In response to the penalty proce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed under clause (a) of sub-section (1) of section 143; (e) the amount of deemed total income assessed as per the provisions of section 115JB or section 115JC is greater than the maximum amount not chargeable to tax, where no return of income has been filed; (f) the amount of deemed total income reassessed as per the provisions of section 115JB or section 115JC, as the case may be, is greater than the deemed total income assessed or reassessed immediately before such, reassessment; (g) the income assessed or reassessed has the effect of reducing the loss or converting such loss into income. 11. The assessee s case would fall only in clause (g) of Section 270A(2) of the Act as the ultimate assessment had the effect of reducing the loss retuned by the assessee. It was further pointed out that under reporting of income has got certain exceptions as provided in section 270A(6) of the Act as under:- (6) The under-reported income, for the purposes of this section, shall not include the following, namely: (a) the amount of income in respect of which the assessee offers an explanation and the Assessing Officer or the Commissioner (Appeals) or the Commissioner o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of to the tune of Rs. 191,28,37,659/- (being the differential amount of claim of deduction u/s 32AC of the Act) and levied penalty in terms of section 270A(8) and (9) of the Act at @200% of tax of underreported income which worked out to Rs. 132,39,89,710/-. This action of the ld AO was upheld by the ld CIT(A). 13. At the outset, we find that it is bounden duty of the ld AO to bring on record whether: (a) assessee has underreported his income in terms of section 270A(2) of the Act; (b) whether the assessee has misreported his income in terms of section 270A(9) of the Act; (c) whether the explanation given by the assessee falls under any of the exceptions provided in section 270A(6) of the Act ; and (d) whether the assessee has underreported his income in consequence of misreporting of income thereon so as to be invited with higher rate of penalty in terms of section 270A(8) of the Act. In the instant case from the facts narrated and sequence of events narrated hereinabove, it is very clear that the assessee had indeed claimed deduction u/s 32AC of the Act @100% value of investment in new plant and machinery in the return of income based on the figure mentioned thereon in tax aud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l these facts collectively go to prove that the assessee had come forward voluntarily before the ld AO to withdraw the excess claim of its deduction u/s 32AC of the Act before any detection by the Income Tax Department. Hence, in our considered opinion, the assessee s case would squarely fall under the exception provided u/s 270A(6)(a) of the Act wherein, the assessee had given its bona fide explanation and had disclosed all the material facts that are relevant for the explanation offered. In view of the exception provided in section 270A(6)(a) of the Act, we hold that the present facts does not make the revenue eligible to levy penalty u/s 270A of the Act. 14. We find that the ld AR also made argument on the ground that there was absolutely no mala fide intention on the part of the assessee to claim excess deduction u/s 32AC of the Act in the facts of the instant case as even after the withdrawal of the differential 85% claim of deduction in the sum of Rs. 191 crores, the assessee still has brought forward losses to the tune of Rs. 2698.95 crores as is evident from the schedule CFL (details of loss to be carry forward) in the ITR filed for AY 2017-18. We are in agreement with t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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