TMI Blog2013 (12) TMI 63X X X X Extracts X X X X X X X X Extracts X X X X ..... omitted due to bonafide mistake considering the fact that the assessee had debited the expenditure and the accounts of the assessee are audited by Chartered Accountants - Simultaneous entry has to be made in the books to give corresponding effect in the closing stock to prepare a true and correct balance sheet. On account of whose mistake, the amounts claimed as deductions in this case were not added, while computing the income of the assessee-company. - The assessee is a company which must be having professional assistance in computation of its income, and its accounts are compulsorily subjected to audit - The account of the assessee of not including the re-purchase value of the flats in question in the closing stock is not only incorrect in law but the explanation offered by the assessee is not escaped by Explanation (1) to section 271(1)(c ) of the Act - Decided against assessee. - I.T.A. No. 8782/Mum/2011 - - - Dated:- 20-11-2013 - Shri B. R. Mittal,(JM) And Rajendra (AM),JJ. For the Appellant : Shri Prakash Jotwani For the Respondent : Shri Surendra Kumar ORDER Per B. R. Mittal, JM: Assessee has filed this appeal for assessment year 2004-05 against the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax in the subsequent years viz assessment years 2005-06 and 2006-07. It was contended that assessee has neither concealed income nor has even made an attempt to conceal income. 5. AO after considering the submissions of the assessee, did not agree with the contention of the assessee and stated that assessee was in possession of the said five flats for the year ended 31.3.2004 but the assessee had not shown the cost of these flats at repurchased price in the closing stock which was mandatory on the part of the assessee to reflect in the closing stock and thus undervalued the closing stock. He has stated that the assessee's act of not disclosing the repurchase price of the five flats in the closing stock led to undervaluation of the closing stock and suppression of profit and thus did not show the true picture of the business profits of the assessee. This act of assessee led to reduction in the total income of assessee and thereby reducing his tax liability which amounts to filing of inaccurate particulars of income and thereby concealing the income to the extent of non-inclusion of the repurchase price of the five flats into the closing stock. He has stated that the assessee agre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITR 557 (Mad) ii) H.P.State Forest Corp.Ltd V/s DCIT 94 TTJ 792 iii) CIT V/s Rose Lock Factory (1993) 204 ITR 753 (All) iv) CIT V/s India Sea Foods (1996) 218 ITR 629 (FB) v) ACIT V/s Akash Industries vi) Alidhara Textool Engineers Pvt.Ltd V/s DCIT vii) Godhwani Brothers V/s ACIT (1994) 48 TTJ (Del) 403 8. Ld. CIT(A) after considering the submissions of the assessee has confirmed the action of the AO vide para 2.3.1 and 2.3.2 which are as under : "2.3.1 I have considered the facts of the case and the submissions made by the assessee. It is an undisputed fact that the assessee had repurchased 5 flats which had remained unsold during the year and had debited the expenditure of Rs. 34 lakhs on account of repurchase of the flats in the profit and loss account as expenses. Therefore, as per law, the said amount was required to be included in the closing stock as on 31/03/2004, which the assessee failed to do. As a result, the value of the closing stock was suppressed by the amount of Rs.34 lacs, thereby leading to suppression of income to the extent of the said amount. The assessee has admitted to the non-inclusion of this amount in the closing stock only after the same ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o how this mistake could have been committed when simple principles of accountancy were involved and the assessee had the benefit of Chartered Accountants who have also audited its accounts. Before being detected by the Assessing Officer, neither the assessee filed a revised return nor requested the Assessing Officer to increase the valuation of the closing stock by filing revised computation of income. In the case of Zoom Communication Ltd reported in 327 1TR 510, the Hon'ble Delhi High Court has, after considering the decision of the Hon'ble Supreme Court in the case of Reliance Petroproduct Pvt Ltd (supra) held as follows:- "The Court cannot overlook the fact that only a small percentage of the IT returns are picked up for scrutiny. If the assessee makes a claim which is not only incorrect in law but is also wholly without any basis and the explanation furnished by him for making such a claim is not found to be bonafide, it would be difficult to say that he would still not be liable to penalty u/s 271(1)(c). If one takes the view that a claim which is wholly untenable in law and has absolutely no foundation on which it could be made, the assessee would not be liable to imposit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rchase value of the flats in question in the closing stock is not only completely incorrect in law but is also wholly without any basis for which no bonafide explanation has been offered by the assessee. Hence, in view of the ratio laid down by the Hon'ble Supreme Court in the case of Reliance Petroproducts Pvt. Ltd. (supra) and Hon'ble Delhi High Court in the case of Zoom Communications Ltd. (supra), the penalty u/s.271(1)(c) is required to be levied in the case of the assessee for furnishing inaccurate particulars of income leading to concealment of income of Rs.34,00,000/-. The action of the Assessing Officer of levying penalty u/s.271(1)(c) of the LT.Act 1961 is, therefore, upheld." 9. The ld. CIT(A) has also considered the case law in subsequent paras which were relied upon on behalf of the assessee before him and has stated that the said cases are not relevant to the facts of the case of assessee. We do not consider it necessary to deal with those cases and the distinction made by ld. CIT(A) in paras 2.3.4 to 2.3.11 save and except reproducing the relevant portion from the order of ld. CIT(A) (page 16) which is a under : "Since the facts in the cases relied upon by the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee was to conceal his profit by undervaluing his closing stock with malafide intention. The ld. DR further relied on the decision of the Hon'ble Apex Court in the case of Dharmendra Processors (supra) and submitted that intention is not relevant. Ld. DR also submitted that before AO detected the undervaluation of closing stock by issuing notice u/s 148 of the Act, neither assessee filed a revised return nor requested the AO to increase valuation of the closing stock by filing revised computation of income. He submitted that ld. CIT(A) vide para 2.3.2 considered the decision of Hon'ble Apex Court in the case of Reliance Petro Product Pvt. Ltd. reported in 322 ITR 158 and submitted that words "inaccurate" and "particulars" have been considered and stated that they must mean the details supplied in the return, which are not accurate, not exact or correct, not according to truth or erroneous. Ld. DR submitted that the ld. CIT(A) has stated categorically that the assessee did not disclose correct value of closing stock in his return of income. Hence, assessee filed inaccurate particulars of income. Ld. DR also referred the decision of Hon'ble Delhi High Court in the case of Zoom Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment year under consideration, the assessee has not disclosed the correct value of closing stock and it has resulted into escapement of income which was liable to tax to the extent of non-inclusion of re-purchase price of the five flats i.e. Rs.34,00,000/-. The assessee has admittedly debited in the profit and loss account the expenditure of Rs.34,00,000/- on account of re-purchase price of the said five flats , therefore, the assessee should have included in the closing stock as on 31.3.2004 the corresponding amount of Rs.34,00,000/-. The original assessment was also made. There is no dispute to the fact that tax on the said amount of Rs.34,00,000/- could be brought to tax only in the re-assessment proceedings. Prior to that, the assessee filed return for assessment years 2005-06 and 2006-07, the years in which the said five flats were sold and the assessee computed profit on sale of those flats . We agree with the ld. AR that the assessee has considered the original cost price while computing the profit but the said facts do not establish that the assessee could not reveal even at that stage that it had valued less cost of closing stock on 31.3.2004 particularly when the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the said case, the Tribunal cancelled the penalty levied by AO and confirmed by the First Appellate Authority by accepting the contention of the assessee that due to oversight bonafide mistake an error was committed by the assessee. That the same could not be the basis to levy penalty u/s 271(1)( c ) of the Act, specially when all the relevant material relating to that issue were disclosed by the assessee in the course of assessment proceedings. In the appeal filed by the department, the Hon'ble Delhi High Court held as under : "So long as the assessee has not concealed any material fact or the factual information given by him has not been found to be incorrect, he will not be liable to imposition of penalty under section 271(1)(c) of the Income Tax Act, 1961, even if the claim made by him is unsustainable in law, provided either he substantiates the explanation offered by him or the explanation, even if not substantiated, is found to be bona fide. If the explanation is neither substantiated nor shown to be bona fide, the Explanation 1 to section 271(1)(c ) would come into play and the assessee will be liable for the prescribed penalty. In that matter it was claimed by the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us, we are of the considered view that the ld. CIT(A) has rightly held that the assessee furnished inaccurate particulars of income and the account of the assessee of not including the re-purchase value of the flats in question in the closing stock is not only incorrect in law but the explanation offered by the assessee is not escaped by Explanation (1) to section 271(1)(c ) of the Act. Thus, the assessee has furnished inaccurate particulars of income leading the concealment of income of Rs.34,00,000/- We may state that the case cited by ld. AR viz. H.P.State Forest Corp.Ltd(supra) is not relevant to the fact of the case before us because in that case the assessee had claimed depreciation which was not accepted by Revenue and it was held that the it would not attract penalty u/s 271(1)( c ) of the Act. Similarly, in respect of the case of ITAT in the case of Spark Development P.Ltd (supra), the Tribunal was satisfied that there was a bonafide mistake on the fact of the case and there was no revenue loss to the exchequer but the case before us, for the reasons mentioned hereinabove, it cannot be said that the mistake was bonafide. Hence the said cases are not applicable to the facts ..... X X X X Extracts X X X X X X X X Extracts X X X X
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