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TMI Blog2024 (7) TMI 568X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 271(1)(c) of the Act. Apart from that, we are of the view that as the assessee company could have only revised its claim for deduction of expense by filing a revised return of income, which, it had failed to do; therefore, its letter wherein it had after being confronted by the AO sought to correct its wrong claim would not assist its case. Our aforesaid view is supported by the judgment of Goetze (India) Ltd. [ 2006 (3) TMI 75 - SUPREME COURT ] wherein as observed that an assessee is not vested with any right to raise a claim before the AO otherwise than by filing a revised return of income. In case the assessee company before us intended to seek a further correction of the book profit disclosed by it in its revised return of income by an amount of Rs. 8.84 crore (supra), then, the only remedy available with it was to have further filed a revised return of income, which, we find it had failed to do. As view taken by the CIT(Appeals) that as the information that was sought by the assessee company to be corrected in the assessment proceedings vide its letter dated 06.12.2019 was already available with the AO in Form No. 3CA, Form No. 3CB report, Form 29B and audited financial s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the judgment of Pamwi Tissues Ltd. [ 2008 (2) TMI 400 - BOMBAY HIGH COURT ] favoring the assessee] Also, there were certain Hon ble High Courts that took a view in favor of the assessee s on the aforesaid issue. As the claim of the assessee company for deduction of the delayed deposit of the employees share of contributions towards labour welfare funds, as long as the same was made within the due date prescribed under sub-section (1) of Sec. 139 for filing of the assessee s return of income, was at the stage of filing of the return of income/revised return of income by the assessee company a possible and plausible view, thus, the same in our view would not attract penalty u/s. 271(1)(c) of the Act. Decided in favour of assessee. Penalty proceedings u/s. 270A - misreporting of income - assessee company had not disclosed the true and correct figure of book profit while filing its return of income - claim for deduction of the delayed deposit of employees' share of contributions towards labor welfare funds - HELD THAT:- Admittedly, at the stage of filing the revised return of income by the assessee company on 29.03.2019, the delayed deposit of the employees share of contribution ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , CIT-DR ORDER PER RAVISH SOOD, JM: The captioned appeals filed by the revenue are directed against the respective orders passed by the Commissioner of Income-Tax (Appeals), National Faceless Appeal Center (NFAC), Delhi, dated 15.11.2022, which in turn arises from the orders passed by the A.O under Sec.271(1)(c) AND Sec. 270A of the Income-tax Act, 1961 (in short the Act ) dated 29.01.2022 and 18.01.2022 for the assessment years 2016-17 and 2017-18, respectively. Also, the assessee company is before us as a cross-objector for both the aforementioned years. As the issues involved in the captioned appeals are inextricably interlinked or, in fact, interwoven, the same are being taken up and disposed of by way of a consolidated order. 2. We shall first take up the appeal filed by the revenue in ITA No.02/RPR/2023 for the assessment year 2016-17 wherein the impugned order has been assailed on the following grounds of appeal before us: (1) On the facts and circumstances of the case whether the Id. CIT(A), National Faceless Appeal Centre was justified in deleting the penalty amount of Rs. 2,92,58,402/- made by the A.0 for furnishing inaccurate particulars/concealment of income. (2) The or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f its provisional financial statements, which, thereafter, was revised due to the difference between the returned MAT income based on the final audited financial statements as against that disclosed in the original return of income. For the sake of clarity, the difference between the original returned income and the revised return of income along with the respective assessed incomes as had been filed by the assessee before us is culled out as follows: 5. During the assessment proceedings, the assessee company came up with certain revised expenses that were claimed to have surfaced due to mistakes in feeding expenses and income data in the revised return of income. For the sake of clarity, the bifurcated details of expenses which were revised by the assessee company in the assessment proceedings are culled out as follows: Particulars which are debited in profit and loss account As filed in (revised return of income) ( in Rs.) As disclosed during assessment proceedings ( in Rs.) Difference amount ( In Rs.) Any other rate, tax, duty or cess incl. STT and CTT 14,05,48,123/- 7,98,71,053/- (+) 6,06,77,070/- Electricity Expenses 8,89,71,315/- 8,71,00,455/- (+) 18,71,082/- Other expenses 4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssing officer in form of 3CA, 3CD report, form 29B and audited annual account. In the circumstances, it is clear that the mismatch between the data incorporated in the audited reports and the return of income; filed were set right during the course of the assessment proceedings on agreed basis. Accordingly, it is inferred that no mala fide intention on the part of the assessee being an entity working under the State Government of Chhattisgarh, in hiding/concealing the income in not properly showing/reflecting the information once incorporated in the audited statements and submitted before the Department for examination. It is worth to note the contention of the appellant that return data was corrected on the basis of information already available with assessing officer in form of 3CA, 3CD report, form 29B and audited annual account . On perusal of the assessment order dated 14.12.2019, page 3, based on the appellant's submission, the AO has made addition of Rs. 8,84,92,885/- for the reason that there is a difference in the MAT profit declared as there was a mistake on the part of the appellant while feeding expenses and income data in ITR. Also, it is seen from records that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y that the A.O. had imposed as regards the addition of Rs.8.84 crore (supra) has carried the matter in appeal before us. 10. We have heard the ld. Authorized Representatives of both the parties, perused the orders of the lower authorities and the material available on record, as well as considered the judicial pronouncements that have been pressed into service by the Ld. AR to drive home his contentions. 11. At the threshold, we may herein refer to the peculiar facts involved in the present case before us. It is the claim of the Ld. Authorized Representative (for short AR ) that as the accounts of the assessee company were not finalized as of the date of filing of the return of income; therefore, the same was filed on the basis of the provisional financial statements on 29.11.2016. As is discernible from the records the accounts of the assessee company were audited on 15.12.2016, Pages 51-104 of APB. Thereafter, the assessee company filed a revised return of income on 26.03.2018, which, as stated by the Ld. AR was prompted by the difference between the book profit under the MAT provisions that was disclosed based on the provisional financial statements in the original return of inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the CIT(Appeals), we find that he was of the view that the mistakes that had crept into the revised return of income were accepted by the assessee company and were offered by it for tax during the assessment proceedings. The CIT(Appeals) further was of the view that as the mistakes regarding the expenses of Rs. 8.84 crores (supra) were discernible from the information that was already available with the A.O in Form 3CA, Form 3CD and 29B, the same, thus, was a mere mismatch between the data incorporated in the audit report and the revised return of income filed which was set right during the assessment proceedings on an agreed basis. Accordingly, the CIT(Appeals) was of the view that there was no malafide intention of the assessee company, an entity working under the State Government of Chhattisgarh, in hiding/concealing its income and not properly disclosing the same. The CIT(Appeals), thus, was of the view that the A.O had made the addition of Rs.8.84 crore (supra) to the book profit disclosed by the assessee company in its revised return of income under the MAT provisions on account of certain bonafide mistakes of the latter that had crept in while feeding the data of income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to the notice of the AO vide its letter dated 06.12.2019. We are unable to persuade ourselves to subscribe to the aforesaid claim of the assessee/ Ld. AR. It is incomprehensible that the assessee company, a State government undertaking, would be so na ve in not bringing its return of income in conformity with its audited financial statements dated 15.12.2016. As the assessee company, in its revised return of income, had based on inflated expenses of Rs. 8.84 crores (supra) suppressed its book profit for computing the tax liability under the MAT provisions; therefore, we find no infirmity in the view taken by the A.O who had rightly saddled it with penalty u/s. 271(1)(c) of the Act. Although it is the claim of the assessee company that it had vide its letter dated 06.12.2019 filed in the course of the assessment proceedings sought for correction of its book profit under the MAT provisions and, thus, had brought to the notice of the AO that by mistake certain expenses aggregating to Rs. 8.84 crores (supra) were wrongly claimed in the revised return of income on the higher side, we are afraid that the said unsubstantiated claim of the assessee would not carry its case any further. W ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pted by the assessee. (emphasis supplied by us) We, thus, based on our aforesaid observations, are of the view that as the assessee company had not only failed to come up with any bonafide explanation for having raised in its revised return of income filed on 26.03.2018 a wrong claim for deduction of inflated expenses, which was contrary to its audited financial statements, dated 15.12.2016; thus, are of the view that the disallowance by the AO of the said inflated expenses clearly falls within the realm of the Explanation 1 r.w. Explanation 4 (for quantification) of Section 271(1)(c) of the Act. Apart from that, we are of the view that as the assessee company could have only revised its claim for deduction of expense by filing a revised return of income, which, it had failed to do; therefore, its letter dated 06.12.2019 (supra) wherein it had after being confronted by the AO sought to correct its wrong claim would not assist its case. Our aforesaid view is supported by the judgment of the Hon ble Supreme Court in the case of Goetze (India) Ltd. Vs. CIT (2006) 284 ITR 323 (SC). The Hon ble Apex Court, in its aforesaid order, had observed that an assessee is not vested with any righ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AO had rightly saddled the assessee company with penalty u/s 271(1)(c) of the Act w.r.t the inflated/false claim of expenses raised by it in the revised return of income. 16. Apropos the judgment of the Hon ble Supreme Court in the case of Price Waterhouse Coopers Pvt. Ltd. Vs. CIT (2012) 348 ITR 306 (SC) as had been pressed into service by the Ld. AR, the same being distinguishable on facts, would not carry the case of the assessee company any further. We say so for the reason that the Hon ble Apex Court had observed that where the assessee had committed an inadvertent and bonafide error and not intended to or attempted to conceal its income or furnished inaccurate particulars of income, penalty u/s. 271(1)(c) could not be imposed. As in the present case before us, it is not a case of bonafide mistake in raising a wrong claim of inflated expenses, i.e., not in conformity with those disclosed by the assessee company in its audited financial statements; therefore, the aforesaid judicial pronouncement would not assist the case of the assessee company. 17. Apropos the order of the ITAT, Mumbai, in the case of DCIT Vs. Reliance General Insurance Company Ltd. (2018) 52 CCH 375 (Mum) as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t with penalty u/s 271(1)(c) of the Act. We, thus, set aside the order of the CIT(Appeals) and uphold the penalty imposed by the AO u/s 271(1)(c) to the extent it pertains to the variance in the book profit under the MAT provisions arising on account of claim of deduction of false/inflated expenses of Rs. 8.84 crore (supra) in the revised return of income by the assessee company. 19. In the result, the appeal of the revenue in ITA No.02/RPR/2023 for A.Y.2016- 17 is allowed in terms of our aforesaid observations. CO No.19/RPR/2023 A.Y.2016-17 20. We shall now deal with the captioned cross-objection filed by the assessee before us. As regards the addition/disallowance of Rs.49,01,692/- made by the A.O u/s. 36(1)(va)(sic) of the delayed deposit of employees' share of contribution towards labor welfare funds; we find substance in the claim of the Ld. AR that the assessee company was not liable to be visited with penalty u/s. 271(1)(c) of the Act as regards the aforesaid addition/disallowance. 21. Admittedly, as on the relevant point of time, i.e., at the stage of filing return of income/revised return of income by the assessee company, the allowability of the assessee s claim for d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Appeals) on the following grounds of cross-objection (CO No.20/RPR/2023): 1. On facts and in the circumstances of the case, CIT(A) has erred in confirming penalty of Rs. 55,39,257/- levied by the AO u/s. 270A on disallowance of Rs. 83,76,816/- made u/s 36(1)(va). 2. That in any case and in any view of the matter, the action of CIT(A) in confirming the action of AO in imposing penalty of Rs. 55,39,257/- u/s.270A is bad in law and against the facts and circumstances of the case and the same is not sustainable on various legal and factual grounds. 3. That CIT(A) was justified in cancelling penalty of Rs. 2,17,52.860/- levied by the AO u/s. 270A on account of addition of Rs. 3,28,96,087/-. 26. Succinctly stated, the assessee company had e-filed its return of income for A.Y.2017-18 on 30.10.2017 declaring an income of Rs. Nil. Subsequently, the return of income was revised by the assessee company on 09.01.2018 at Rs. Nil. Once again, the assessee company filed a revised return of income on 31.03.2018 declaring an income of Rs. Nil. Thereafter, the case of the assessee company was selected for scrutiny assessment under CASS. 27. During the assessment proceedings, the A.O observed that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e company was again issued a Show Cause Notice (SCN) dated 16.10.2020 u/s. 274 r.w.s. 270A of the Act, wherein it was called upon to explain why penalty u/s. 270A of the Act may not be imposed on it for underreporting/misreporting income, Page 130 of APB. After that, the assessee company received a SCN u/s. 270A of the Act dated 27.07.2021, wherein the A.O. referred to the penalty proceedings which were earlier initiated u/s. 270A of the Act vide his notice dated 24.12.2019 and, thus, called upon it to show cause as to why penalty may not be imposed u/s. 270A of the Act as was initiated in the SCN dated 24.12.2019. 31. The assessee company in compliance to the SCNs that were issued u/s. 274 r.w.s. 270A of the Act, filed its reply vide letter dated 03.01.2021 and 14.08.2021, wherein it tried to impress upon the A.O that no penalty under the aforesaid statutory provision was called for in its case with respect to both the issues, viz., (i) increase in the book profit for MAT purpose: Rs. 3,28,96,087/-; and (ii) disallowance of its claim for deduction of belated deposit of employees share of contribution towards labor welfare funds: Rs. 83,76,816/-. For the sake of clarity, the reply ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 115JB or section 115JC, as the case may be, is greater than the deemed total income determined in the return processed 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 furnished or where return has been furnished for the first time under section 148]; (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. (9) The cases of misreporting of income referred to in sub-section (8) shall be the following, namely: (a) misrepresentation or suppression of facts; (b) failure to record investments in the books of account; (c) claim of expenditure not substantiated by any evidence; (d) recording of any false entry in the books of account; (e) failure to record any receipt in books of account having a bearing on total i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee has not preferred an appeal against the assessment order u/s 143(3) dated 30.12.2019 i.e. the assessee has accepted its misreporting of income. iv. Mens rea bad intention is not prerequisite for levy of penalty and ignorance of provisions of law is not an excuse. 8. In view of the above discussion, it is justified that the assessee has misreported its income for the year under consideration, i.e., A.Y. 2017-18. Therefore, as per provisions of section 270A(9) of the Act, the penalty for misreporting of income shall be a sum equal to 200% of the amount of tax payable on mis-reported income of Rs. 4,12,72,903/-. In this case such amount of tax payable is Rs. 1,36,46,058/-. The amount of penalty has been computed as under:- 9. Accordingly, a penalty of Rs. 2,72,92,117/- of the tax sought to be evaded is, therefore, hereby imposed u/s. 270A of the Income Tax Act, 1961 for A.Y.2017-18. 32. The assessee company being aggrieved with the penalty imposed u/s. 270A of the Act carried the matter in appeal before the CIT(Appeals). The CIT(Appeals) was of the view that as the assessee company had revised and modified its return of income before completion of the assessment and had, after ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of information already available with assessing officer in form of 3CA, 3CD report, form 29B and audited annual account. In the circumstances, it is clear that the mismatch between the data incorporated in the audited reports and the return of income filed were set right during the course of the assessment proceedings on agreed basis. Accordingly, it is inferred that no mala fide intention on the part of the assessee being an entity working under the State Government of Chhattisgarh, in hiding/concealing the income in not properly showing/reflecting the information once incorporated in the audited statements and submitted before the Department for examination. It is worth to note the contention of the appellant that return data was corrected on the basis of information already available with assessing officer in form of 3CA, 3CD report, form 29B and audited annual account. On perusal of the assessment order dated 24.12.2019, page 2, the AO has made addition of Rs. 3,28,96,087/- for the reason that the assessee had not disclosed the true and correct figure during filing of ROI. However, it is seen from records that the appellant has filed Form No. 29B on 31.12.2018 vide which in R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee company at the threshold of hearing of the appeal has assailed the validity of the jurisdiction assumed by the A.O. based on which penalty u/s. 270A of the Act was imposed on the assessee company. Elaborating on his aforesaid contention, the Ld. AR submitted that as the A.O. had failed to spell out in the body of the SCNs as to whether the penalty u/s. 270A of the Act was being initiated for underreporting or misreporting of income; therefore, he had wrongly assumed jurisdiction and imposed the same. The Ld. AR, to fortify his aforesaid contention, took us through the respective SCNs that were issued by the A.O u/w. 274 r.w.s. 270A of the Act, viz. (i) SCN dated 24.12.2019, Page 129 of APB; (ii) SCN dated 16.10.2020, Page 130 of APB; and (iii) SCN/reminder letter dated 27.07.2021, Page 131 of APB. The Ld. AR, referring to the aforesaid SCNs (supra), submitted that in the aforesaid notices, the A.O. had failed to specify the limb for which penalty u/s. 270A of the Act was sought to be imposed on the assessee company, viz., under-reporting or misreporting of income. The Ld. AR submitted that as there was no whisper in the aforesaid SCNs as to on which limb Section 270A of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny had in its revised return of income dated 29.03.2019 revised its gross receipts at Rs. 994.09 crore (approx.), drawn our attention to the Profit and loss account (revised) of the assessee company that was filed along with the aforesaid return of income, Page 70 of APB. Carrying out a conjoint reading of the Profit and loss account (revised), Page 70 of APB, r.w. computation of income (revised), Page 39 of APB, the Ld. AR submitted that it stood established beyond doubt that the net profit of Rs.67.38 crore (approx.) disclosed by the assessee company in its revised return of income (supra) was, in turn, based on the gross receipts (revised) of Rs. 994.09 crore (approx.). Based on the aforesaid facts, the Ld. AR submitted that even as per the general provisions of the Act the assessee company could not be visited with penalty as per the mandate of clause (a) of sub-section (2) to Section 270A of the Act. 37. Apropos the disallowance of the assessee s claim for deduction of delayed deposit of the employee share of contribution towards labor welfare funds of Rs. 83,76,816/-, the Ld. AR submitted that as of the date of filing of revised return of income dated 29.03.2019, the issue wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... os the contention of the Ld. AR that no penalty u/s. 270A of the Act was called for in the hands of the assessee as regards its claim for deduction of the delayed deposit of employees' share of contributions towards labor welfare funds; we find substance in the same. Admittedly, at the stage of filing the revised return of income by the assessee company on 29.03.2019, the delayed deposit of the employees share of contribution towards labor welfare funds as per the judgment of the Hon ble Apex Court in the case of Commissioner Of Income Tax Vs. Alom Extrusions Limited (supra) and other judicial pronouncements were not liable for disallowance u/s. 36(1)(VA) of the Act, and were allowable as a deduction as long as the same was deposited by the assessee before the due date of filing of its return of income as prescribed in sub-section (1) of Section 139 of the Act. As the aforesaid position of law was dislodged only pursuant to the judgment of the Hon ble Supreme Court in the case of Checkmate Servies Pvt. Ltd. Vs. CIT-1 (supra)dated 12.10.2022, as per which the delayed deposit by an assessee of the employee's share of contribution towards labor welfare funds was liable for dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... age 70 of APB. Also, the assessee company, vide its revised return of income filed on 29.03.2019, Page 38-39 of APB, had revised its book profit at Rs. 67.38 crores (supra) as against thatas was earlier disclosed in its return of income filed on 31.03.2018 at Rs. 64.09 crores (supra), Page 36-37 of APB. Accordingly, the difference of Rs. 3,28,96,087/-[Rs. 67,38,09,917/- (-) Rs. 64,09,13,830/-] was duly considered by the assessee company and offered for tax in its revised return of income filed on 29.03.2019. As observed hereinabove, a conjoint reading of the Profit and loss account (revised), Page 70 of APB and the return of income (revised) on 29.03.2019, reveals that the book profit of Rs. 67.38 crore (approx.) disclosed by the assessee company in its return of income (revised on 29.03.2019) included the additional gross receipt of Rs. 3,28,96,087/- (supra). As is discernible from the order u/s. 144 of the Act, dated 24.12.2019, the A.O had failed to take cognizance of the return of income that the assessee company had revised on 29.03.2019, wherein the gross receipts were already raised to an amount of Rs. 994.09 Crore (supra). The aforesaid factual position can also be gathered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2.2019; therefore, no penalty u/s 270A of the Act for the aforesaid amount of Rs. 3.28 crore (supra),i.e., increase in the amount of book profit which inadvertently had remained omitted to be considered by the A.O in his order passed u/s.144 of the Act, dated 24.12.2019 could have been imposed on the assessee company. 45. We, thus, in terms of our aforesaid observation, approve the view taken by the CIT(Appeals), who had rightly vacated the penalty imposed by the A.O u/s. 270A of the Act as regards the addition of Rs. 3,28,96,087/- (supra) made by the A.O. Thus, the Grounds of appeal No.1 raised by the revenue is dismissed in terms of our aforesaid observations. 46. Ground of appeal Nos. 2 and 3, being general in nature, are dismissed as not pressed. 47. As we have dismissed the appeal of the revenue and allowed the cross- objection of the assessee company; therefore, we refrain from dealing with the contentions advanced by the Ld. AR as regards the validity of the jurisdiction assumed by the AO for imposing penalty u/s 270A of the Act, which, thus, are left open. 48. In the result, the appeal of the revenue in ITA No.03/RPR/2023 for A.Y.2017- 18 is dismissed in terms of our afores ..... X X X X Extracts X X X X X X X X Extracts X X X X
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