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TMI Blog2013 (12) TMI 63X X X X Extracts X X X X X X X X Extracts X X X X ..... 25.3.2009 on the ground that income chargeable to tax had escaped assessment. Pursuant thereto, the AO made assessment u/s 143(3) read with section 147 of the Act assessing total income at Rs.5,99,16,270/- by making addition of Rs.34,00,000/- towards cost of five re-purchased flats in the closing stock. AO stated in the re-assessment proceedings that the assessee had re-purchased five flats and they remained unsold during the year. Although the assessee had debited the expenditure of Rs.34,00,000/- on account of re-purchase of the five flats it had not included the said amount in the closing stock valuation. Hence, AO added the amount of Rs.34,00,000/- relating to re-purchase price of the said five unsold flats ( Flat No.406 of Deep Apartments and Flat No.203,204,404 and 704 of Deep Towers) to the closing stock, thereby making addition to the total income of the assessee. 3. AO initiated penalty proceedings by issuing notice u/s 271(1)(c) r.w.s. 274 dated 17.6.2010 4. Assessee filed its reply stating interalia that there was no conscious and deliberate concealment on the part of the assessee. There was a mistake in valuation of closing stock to the extent of five flats which wer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... behalf of the assessee, the submissions were made on the lines of the submissions made before the AO. It was contended interalia that assessee when sold the said five flats in subsequent assessment years i.e. assessment years 2005-06 and 2006-07, it calculated profits by considering the cost of flats at 'cost' and not at 'cost + repurchased price'. Thus, the profits arrived at has been offered for tax in the year in which the flats are sold. It was contended that there was a genuine mistake without intention to conceal or suppress the taxable income and therefore, assessee should be treated as bonafide assessee and the penalty should not be levied. That the assessee admitted the mistake that it was not deliberate or willful. It was contended that the word 'false' involves an element of deliberateness and therefore the benefit of doubt is to be given to the assessee that the explanation furnished by the assessee has not been proved to be false. There was no intention of the assessee to conceal the income and only by oversight the re-purchased price was not included while valuing the closing stock as on 31.3.2004. That the mistake was due to lack of accounting expertise. No material ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... can furnish the particulars of his income. The Hon'ble Supreme Court has further held that reading the words "inaccurate" and "particulars" in conjunction, they must mean the details supplied in the return, which are not accurate, not exact or correct, not according to truth or erroneous Adverting to the present case, it is not in dispute that the assessee did not disclose the correct value of the closing stock in its return of income. Hence, in view of the decision in Reliance Petrochemicals Pvt. Ltd., it is without doubt clear that the details supplied in the returns were not accurate, not exact or correct, not according to truth. Once the assessee had debited the expenditure on account of the repurchase of the flats, and the said flats had not been sold, as per the accounting principles and law, the said expenditure was required to be included as part of the closing stock. The assessee cannot claim that the same was omitted to be done by mistake. If the assessee had debited the expenditure, the next logical and simultaneous entry which was required to be made in the books was to give corresponding effect in the closing stock. This action of the assessee of not doing so, thereby ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the deterrent effect which these penalty provisions in the Act have. " At para 23 and 24, it has been further held as follows : "In the absence of the assessee company telling the AO as to who committed the oversight resulting in failure to add this amount while computing the income of the assessee, under what circumstances the oversight occurred and why it was not detected by those who checked the IT return before was filed and later by the auditors of the assessee company, one cannot accept the general view taken by the Tribunal. No such view could have reasonably been taken, on the facts and circumstances prevailing in this case and, therefore, the decision of the Tribunal in this regard suffers from the vice of perversity. One cannot accept the general proposition that no person would ever claim the amount of income-tax as a deduction with a view to a void payment of tax. No hard and fast rule in this regard can be laid down and every case will have to be decided considered the facts and circumstances in which such a deduction is claimed, coupled with as to whether the explanation offered by the assessee for making the claim, is shown to be bonafide or not. The Tribunal there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t year 2006-07 and the assessee filed return of income on 31.10.2006 and again had shown 'cost' price of the flats instead of taking 'cost + re-purchase price' while computing profit. He submitted that the assessee filed return for both the assessment years 2005-06 and 2006-07 before issuance of notice u/s 148 of the Act. He submitted that there was no intention of the assessee to hide any profit in the assessment year under consideration and the assessee had also not taken double benefit while considering the original 'cost' price of the flats in the assessment year under consideration instead of considering 'cost +re- purchase price'. He submitted that no excessive deduction was claimed by assessee as the assessee paid the taxes in the subsequent assessment years as and when sale of flats finally took place. The ld. AR submitted that all the relevant details were disclosed by assessee in respect of the flats re-purchased and thus there is no concealment of income. Ld. AR referred the decision of the Hon'ble Himachal Pradesh High Court in the case of CIT V/s H.P.State Forest Corporation Ltd (2012)340 ITR 204(HP) and also the decision of ITAT, Mumbai Bench dated 30.7.2010 in the ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ur flats were canceled and they remained unsold during the year and the assessee paid Rs.24,00,000/- compensation. Similarly, in respect of "Deep Apartments" one flat remained unsold out of the cancelled flats and the assessee paid compensation of Rs.10,00,000/-. Thus, the assessee paid towards compensation for the said five flats which remained unsold during the previous year relevant to the assessment year under consideration of Rs.34,00,000/-. There is no dispute to the fact that the said amount of Rs.34,00,000/- were debited in the profit and loss account but while filing closing stock as on 31.3.2004, the assessee did not reflect the said amount of Rs.34,00,000/- in the valuation of closing stock and showed only original cost price of the said flats. AO, when initiated re-assessment proceedings by issuing notice u/s 148 of the Act, the assessee admitted his mistake and stated that it was a bonafide mistake made by him. It was contended that there was no willful, deliberate intention to undervalue the closing stock of the unsold flats. The assessee also contended that when the said five flats were sold in subsequent assessment years i.e. three flats in assessment year 2005-06 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lment is not an essential ingredient for attracting civil liability as is the case in the matter of prosecution u/s 276C of the Act. Further, the Hon'ble Apex Court has held in the case of Reliance Petro Product Pvt. Ltd. (supra) that the words "inaccurate" and "particulars" must mean the details supplied in the return, which are not accurate, not exact or correct, not according to truth or erroneous. If we consider the said observation of the Hon'ble Apex Court in the facts of the case before us, the assessee has admittedly did not disclose the correct value of closing stock in the return filed for the assessment year under consideration and therefore, the assessee has not furnished the accurate, or correct particulars of his income particularly when the assessee debited the expenditure of Rs.34,00,000/- on account of purchase of the flats and when the said flats had not been sold at the end of accounting year relevant to the assessment year, the cost of flats was required to be included as part of the closing stock. We agree with ld. CIT(A) that the assessee cannot claim that the same was omitted due to bonafide mistake considering the fact that the assessee had debited the expen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ulous assessees to make wholly untenable and unsustainable claims without there being any basis for making them, in the hope that their return would not be picked up for scrutiny and they would be assessed on the basis of self-assessment under section 143(1) of the Act and even if their case is selected for scrutiny, they can get away merely by paying the tax, which, in any case, was payable by them. The consequence would be that the persons, who make claims of this nature, actuated by a mala fide intention to evade tax otherwise payable by them, would get away without paying the tax legally payable by them, if their cases are not picked up for scrutiny. This would take away the deterrent effect, which these penalty provisions in the Act have. We find that the assessee before us did not explain either to the Income-tax authorities or to the Income-tax Appellate Tribunal as to in what circumstances and on account of whose mistake, the amounts claimed as deductions in this case were not added, while computing the income of the assessee-company. We cannot lose sight of the fact that the assessee is a company which must be having professional assistance in computation of its income, a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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