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Income-Tax Officer, Ward-7 (1) , Kolkata Versus M/s. Avadh Rubber Ltd.

2015 (6) TMI 887 - ITAT KOLKATA

Penalty levied by AO u/s. 271(1)(c) - claim of set off of loss relating to Madras Elastomes Ltd. a company under BIFR, which was merged with the assessee company - CIT(A) deleted penalty levy - Held that:- In the instant case the audited profit & loss account, correctly disclosed the profit of the assessee which was set off against the loss incurred by the company under amalgamation. Therefore, the basic element necessary for initiation of proceeding u/sec 271(1)(c) of the Income Tax, 1961 that .....

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f loss of the amalgamated company. However, an error is never tantamount to penalty and accordingly the proceedings under section 271(1)(c) of the Act is misconceived in view of the fact that the mistake committed under an expert advice cannot expose the assessee to a charge of the "furnishing of inaccurate particulars of income". See CIT v. Reliance Petroproducts Pvt. Ltd. [2010 (3) TMI 80 - SUPREME COURT] stating mere disallowance of claim for expenditure by itself would not tantamount to furn .....

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1, 25/CIT(A)-VIII/Kol/09-10 and 52/CIT(A)-VIII/Kol/09-10 all dated 06.09.2011. Assessments were framed by ITO, Ward-7(1), Kolkata u/s. 143(3) of the Income-tax Act, 1961 (hereinafter referred to as "the Act") for Assessment Years 2004-05 to 2006-07 vide his separate orders dated 30.11.2009 (for AY 2004-05 and 2005-06) and 31.12.2008 (for AY 2006-07). Penalty was imposed by ITO, Ward-7(1), Kolkata u/s. 271(1)(c) of the Act vide his separate orders dated 17.05.2010 (for AY 2004-05 and 20 .....

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and adjudicate the issue from the facts of this year, which is as under: "1. Ld. CIT(A) erred on facts and law to delete the penalty of ₹ 6,42,511/- imposed u/s. 271(1)(c). 2. Ld. CIT(A) erred on law by accepting new evidence which was not furnished either before AO passing the order or before the AO passing penalty order. 3. Briefly stated facts are that the assessee filed its return of income for the relevant AY 2004-05 and claimed set off of loss of ₹ 17,90,980/- relates to M .....

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re about the date of MEL and the fact that the last date of FY 2003-04 as on 31.03.2004, there was no merger. According to AO, the BIFR order dated 09.11.2005 granted benefit to MEL and not to the assessee. In view of these facts, the AO concluded that despite fully aware about the fact that it cannot claim adjustment of loss of MEL the assessee claimed the same knowingly. Accordingly, the assessee has furnished inaccurate particulars of income within the meaning of section 271(1)(c) of the Act .....

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pellant. In my opinion, as the appellant disclosed its income in the return on the bonafide belief based on the opinion of a legal expert and claimed the set off of loss of the amalgamated company at the most it can be said that it has committed an error and an error is never tantamount to penalty and accordingly the proceedings under section 271(1)(c) of the Income Tax Act, 1961 is misconceived in view of the fact that the mistake committed based on the bonafide belief of an expert advice canno .....

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the opinion of the A.O. and choose not to dispute the order and paid the tax demanded cannot be the basis for levy of penalty for furnishing of inaccurate particulars of income. In view of the above discussion, considering the entire facts of the case and respectfully following the decision of the Hon'ble Apex Court in the case of CIT Vs. Reliance Petro products Pvt. Ltd.(Supra) and the decision of Hon ble Bench 'C' of the ITAI Mumbai in the case of ITO Vs Pariakh Investment Develop .....

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ted accounts for the year ended 31.03.2004. However, in the return of income the assessee has claimed the set off of the loss of MEL of ₹ 17,90,970/- and there by disclosed income of Rs. Nil in the return of income. It is not in dispute that the assessee was in fact merged and/or amalgamated with MEL and the loss incurred by the MEL at ₹ 17.90,970/- was set off with the profit of the assessee, so that in the computation made, the resultant income was Nil. We find that at that time me .....

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income is being hidden, camouflaged or covered up so as it cannot be seen, found or observed or discovered. In fact the charge of "furnishing of inaccurate particulars of income" is not applicable in the facts and circumstances of the case. The expression "furnishing of inaccurate of income implies furnishing of details or information about income which are not in conformity with the facts or truth. In other words, it means that any inaccuracy made in the books of accounts upon w .....

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charge of "furnishing of inaccurate particulars of income." In the instant case the audited profit & loss account, correctly disclosed the profit of the assessee which was set off against the loss incurred by the company under amalgamation. Therefore, the basic element necessary for initiation of proceeding u/sec 271(1)(c) of the Income Tax, 1961 that the assessee has furnished inaccurate particulars of income is conspicuously absent. The only point, in the instant case as per the .....

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