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TMI Blog2012 (9) TMI 967X X X X Extracts X X X X X X X X Extracts X X X X ..... led its return of Income stating net short-term capital gains of Rs. 19,07,63,554 and exempt dividend income of Rs. 14,18,67,409. Assessee worked out the tax payable on short term capital gains of Rs. 19,07,63,554 @ 10% by applying section 111A of the Act, which comes to Rs. 2,16,13,551. However, assessee paid advance tax of Rs. 6,48,40,532. Hence, in the return of income filed, assessee claimed a refund of Rs. 4,32.27,021. During the course of assessment proceedings, assessee stated that the capital gain was liable to tax @ 30% and not at 10% as claimed, as section 111A was not applicable in this case. Therefore, during the course of quantum proceedings, assessee vide letter dated 23.11.2010 stated that it was a bonafide clerical error at the time of filing its tax return and the capital gain chargeable to tax @ 30% was erroneously classified as capital gains chargeable to tax @ 10%. The Assessing Officer completed the assessment vide order dated 30.11.2010 by levying tax @ 30% on short term capital gain and no refund as claimed by the assessee in the return filed was computed. Pursuant thereto, AO initiated penalty proceedings under section 271(1)(c) of the Act on the ground that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on sale of shares of Gujarat Ambuja Cement Ltd. It is stated that though the assessee had paid the advance tax to the extent of Rs. 6.48 crores on 28-12-2007 and further sum of Rs. 1,315/- on 08-02-2008 to take care of the short fall at the end of the financial year. It still made a claim for refund at the time of filing its return of income. The AO's case appears to be that the very fact that such huge amount of advance tax was being claimed as refund should have alerted the assessee to the fact that there was some mistake in the return which requires verification; the fact that the assessee still went ahead and claimed refund of the advance tax paid in its return of income shows that there was every intention to avoid taxes particularly when very few returns are picked up for detailed scrutiny." Being aggrieved, assessee filed appeal before ld CIT(A). 3. On behalf of assessee, it was contended that the claim of 10% of tax was due to a bonafide clerical error committed by it . That, no penalty u/s.271(1)(c) is leviable where a default flows from a clerical error or bonafide belief and when such default is not the result of a deliberate act of defiance of law. It was also contend ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e return filed, assessee disclosed all the facts correctly save and except to charge tax @ 10% on short term capital gains in stead of chargeable to tax @ 30%. Ld A.R. submitted that on receipt of notice u/s.142(1) issued on 20.10.2010, wherein, various details of income and tax liability was asked for and to be filed on 22.11.2010, assessee requested for short adjournment and it was given additional time of one day i.e. upto 23.11.2010. Assessee filed all the details as per notice issued u/s.142(1) i.e. one day after initial hearing date and while preparing the reply noted the mistake and voluntarily admitted that there was a mistake to charge to tax @ 10% on short term capital gains as against chargeable to tax @ 30% because no security transaction tax was paid in respect of shares on which the short term capital gain amounting to Rs. 19,70,14,516 had been earned. Ld A.R. submitted that in the said reply filed on 23.11.2010, assessee suo moto disclosed a bonafide clerical error in working of tax calculation. Therefore, assessee made voluntary disclosure even before hearing took place, at which the matter was discussed for the first time i.e. on 25.11.2010. To substantiate his sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of transaction data in respect of the assessee's tax return. It is for this reason, that in the case of the assessee, one "off market sale" transaction of Ambuja Cement Company shares was inadvertently treated as an "on market sale" transaction at the time of preparation of the annual tax return, resulting in computation of tax at a lower rate of 10% instead of at the rate of 30%. This bonafide inadvertent error resulted in a claim for refund in the tax return for assessment year 2008-09." 6. Ld A.R. submitted that return of income as well as assessed income is same and thus, there is no loss to the revenue and, accordingly, penalty under section 271(1)(c) is not justified. To substantiate his submission, reliance was placed on the decision of Hon'ble Delhi High Court in the case of CIT vs. Nalwa Sons Investments Ltd., 327 ITR 543(Del). Ld A.R. submitted that there was only a wrong calculation in respect of rate of tax and that it was suo moto corrected by the assessee before pointed out by the AO during the course of assessment proceedings. Hence, it cannot be said that assessee furnished wrong particulars or concealed its income within the scope of section of 271(1)(c) of the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee. She submitted that when AO asked details of calculation, assessee came out with a plea of a bonafide mistake. Ld D.R. submitted that it was a conscious decision by the assessee to avoid tax as the assessee admitted its mistake only after the notice u/s.142(1) issued by the AO. Ld D.R. submitted that assessee is a foreign institutional investor and is assisted with professional assistance in computing the income. Hence, it cannot be said that there was an inadvertent mistake in applying the rate of tax. She by placing reliance on the decision of Hon'ble Delhi High Court in the case of CIT vs. Zoom communication (P) Ltd., 327 ITR 510(Del) submitted that assessee had concealed its income and as such levy of penalty under section 271(1)(c) is justified. Ld D.R. also submitted that onus is on the assessee for making a claim and to prove that it committed inadvertent mistake which assessee fails to discharge and hence, levy of penalty is justified. Ld D.R. further submitted that the cases cited by ld A.R.are not relevant to the facts of the case as assessee paid advance tax at the rate as applicable but while filing the return, it claimed refund to evade tax. Hence, levy of p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wherein, short term capital gains on shares tendered under an open offer has been categorized as transactions not chargeable to STT and computed the total tax liability accordingly: Particulars Amount(Rs.) Amount(Rs.) Short term capital gains From transactions chargeable to STT Nil From transactions not chargeable to STT 197,708,543 197,708,543 Less: short term capital loss - (6,944,989) Net short term capital gains chargeable to tax at the rate of 30 percent - 190,763,554 Total tax liability @ 33.99 per cent - 64,840,532 Advance taxes paid - (64,840,532) Balance tax payable/refundable - Nil We request you to take the above on record and provide us an opportunity of being heard and making additional submission, if required, before concluding on the matter." 11. Assessing Officer completed the assessment vide order dated 30.11.2010 and the computation of income and tax liability were determined for the assessment year under consideration as under: (Page 3 of AO) Particulars Amount(Rs.) Amount(Rs.) Short term capital gains From transactions chargeable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me in the return filed and also furnished requisite information in the return in respect of its income. AO has initiated penalty proceedings for the reason that while calculating liability of tax, assessee applied rate of tax @ 10% in stead of rate of tax @ 30% as applicable, as assessee had not, admittedly, paid STT on the share transactions. AO has not disputed that total capital gain as disclosed by the assessee was found to be correct and assessed. We are of the considered view that such a mistake to state lower rate of tax applicable in the return of income cannot constitute furnishing inaccurate particulars of income particularly when assessee has furnished all the relevant materials in the return filed. The Hon'ble Kolkata High Court in the case of Udayan Mukherjee(supra) held that if a mistake is committed in working out indexation, the mistaken indexation would not amount to furnishing of wrong particulars within the purview of section 271(1)(c) of the Act as the same can be corrected by the AO on the basis of particulars furnished. In the case before us also, AO could apply the chargeable rate of tax as applicable to the transaction on the basis of information furnished b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ducts Ltd. (supra) the Hon'ble Supreme Court held that where there is no finding that any details supplied by the assessee in its return are found to be incorrect or erroneous or false there is no question of inviting the penalty under section 271(1)(c). A mere making of a claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee. Such a claim made in the return cannot amount to furnishing inaccurate particulars. The case of the assessec under consideration is squarely covered by the above judgment of the Apex Court The assessee demonstrated that their claim was bona fide claim. In the light of above discussion, we don't find that the case under consideration is a fit case for levy penalty under section 271(1)(c) of the Act we therefore cancelled the penalty levied." 13. The Hon'ble Apex Court in the case of Reliance Petroproducts Pvt Ltd. (supra) held that there can be no dispute that everything would depend upon the return filed because that is the only document, where assessee can furnish the particulars of his income. When such particulars are found to be inaccurate, the liability would arise. B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax on short term capital gains disclosed by the assessee. Therefore, we are of the considered view that applying wrong rate of tax at which short term capital gains disclosed by the assessee does not amount to furnishing inaccurate particulars of income and that too when assessee rectified the said mistake suo moto before assessment proceedings were completed and stated that said mistake had occurred inadvertently while computing the income. Not only this, the Hon'ble Apex Court by its order dated 25.9.2012 in Civil Appeal No.6924/2012(arising out of S.L.P.(C) No.10700 of 2009) in the case of Price Waterhouse Coopers Pvt Ltd. vs. CIT, has held that when there is a bonafide and inadvertent error to add the provision for gratuity to its total income while submitting its return, this can only be described as a human error which we are all prone to make. In the said case, the regular assessment was completed under section 143(3) of the Act. Subsequently, reassessment proceedings were initiated on the ground that assessee made provision of Rs. 23,70,306 for payment of gratuity. AO stated that in the reasons recorded that the provisions is not allowable under section 40A(7) of the Act an ..... X X X X Extracts X X X X X X X X Extracts X X X X
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