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Compucom Software Ltd. Versus Deputy Commissioner of Income-Tax

Penalty under section 271(1)(c) - taxes were paid u/s 115JB on book profit - Details of capital loss to be disallowed u/s 94(7) - for the assessment year 2005-06 the form meant for filing the return of income did not contain column required for giving the particulars in respect of dividend stripping under section 94(7) or 94(8). - Held that:- In the present case the assessee has given the full and complete details of the short-term loss accrued to it and also dividend earned by him. The assessee .....

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the payment of tax to be paid, therefore no penalty can be imposed on the basis of tax sought to be evaded, as there is no evasion of any tax liability - Decided in favour of assessee - I. T. A. No. 941/JP/2013 - Dated:- 30-9-2015 - T. R. Meena (Accountant Member) And Laliet Kumar (Judicial Member) For the Petitioner : Rajeev Sogani For the Respondent : O. P. Bhateja ORDER Laliet Kumar (Judicial Member) 1. This appeal is by the assessee arising out of the order passed by the learned Commissione .....

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eals) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by quashing the penalty of ₹ 8,50,287 imposed under section 271(1)(c)." 2. The assessee is a public limited listed company. During the year under consideration 2005-06 the assessee has shown business income from export of computer software, selling learning solutions and power generation. The assessee has filed its original return of income on October 30, 2005 declaring income at n .....

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her the provisions of section 94(7) pertaining to dividend stripping were applicable in its case or not. In reply to the notice dated June 25, 2007, the learned authorised representative of the assessee vide letter dated November 27, 2007 submitted the details of capital loss to be disallowed under section 94(7), We would like to reproduce the relevant para of the reply dated November 27, 2007 hereinbelow : "Details of capital loss to be disallowed under section 94(7) is enclosed at annexur .....

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i.e., ₹ 23,23,664 is disallowed and added to the total income. The assessee should not have claimed this loss in the computation of income, but this was not done. Thus, the assessee has furnished inaccurate particulars of income and penalty proceedings under section 271(1)(c) are also initiated on this issue." 4. However, after disallowing loss to the extent of ₹ 23,23,664 as mentioned in the assessment order in the normal assessment proceedings, the Assessing Officer concluded .....

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dividing ratio of 20 : 80 applied by the company and arbitrarily applied the ratio of 37.5 : 62.5, while dividing the common expenses of ₹ 1,03,53,632 between tax exempt income (software exports) and tax payable income (learning solutions). The action of the learned Assessing Officer is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by quashing the order being illegal and without the authority of law. (b) The learned Assessing Officer has er .....

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nds the order of the Assessing Officer, no other grounds was urged before the Commissioner of Income-tax. However, the learned authorised representative had not pressed both grounds and, therefore, the order passed by the Assessing Officer had attained finality. 6. Thereafter the Assessing Officer had issued show-cause notice on March 10, 2011 asking the assessee as to why the penalty under section 271(1)(c) be not levied in its case, in term of assessment order. In response thereto, the learned .....

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c) is imposed as under : (Rs.) 1. Concealed income 23,23,664 2. Amount of tax sought to be evaded 8,50,287 3. Minimum penalty leviable at the rate of 100 per cent. of tax sought to be evaded 8,50,287 4. The maximum penalty leviable at the rate of 300 per cent. of the tax sought to be evaded 25,50,861 7. Against the order of penalty dated March 29, 2011, the assessee filed appeal before the learned Commissioner of Income-tax (Appeals). The learned Commissioner of Income-tax (Appeals) vide order p .....

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nd therefore by making such claim ; the appellant has reduced its taxable income and in effect furnished inac curate particulars of income. Such capital loss can never be claimed as per the provisions of section 94(7) and therefore by making such claim in the return of income, the appellant has definitely concealed the income and furnished inaccurate particulars of income. The appellant relied upon certain decisions including decision of Supreme Court in the case of CIT v. Reliance Petroproducts .....

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CIT v. Zoom Communication P. Ltd. reported in [2010] 327 ITR 510 (Delhi), the Delhi High Court held that if any assessee makes patently not allowable claim, this will attract penalty for concealment. The logic given by the court was that it is only after scrutiny such patently wrong claim could be detected. If no penalties are levied on such frivolous claims, it will encourage unscrupulous taxpayers to make wrong claims knowing that it will not be allowed in scrutiny which is done only in 2 per .....

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Before us, learned counsel for the assessee has raised multiple defences. 9. That for the assessment year 2005-06 the form meant for filing the return of income did not contain column required for giving the particulars in respect of dividend stripping under section 94(7) or 94(8). 10. The assessee also contended that the particular column under capital gain was introduced for the first time in Form ITR-6 for the assessment year 2007-08 and that the column meant for the disclosure was as under : .....

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loss as ₹ 21,19,265 and has also mentioned the dividend earned. Thus on the basis of this, it was submitted by the learned authorised representative of the assessee, though the assessee has not applied the provisions of section 94(7) but has made the full and true disclosure in the computation of income. 13. Lastly, it was submitted that the assessee was to be taxed under section 115 JB of the Act on the book profit, therefore, the assessee cannot be subjected to penalty under section 271( .....

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setting off the dividend earned against the short-term capital loss within the provisions of section 94(7) was not bona fide. It was also submitted by the learned Departmental representative that the assessee is a public limited listed company and is advised by the professionals for the purpose of filing the return of income. It was further submitted that whenever any amendment or new provision is introduced in the Income-tax Act, lot of discussion took place among the professionals and corporat .....

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column in ITR 6 Form and Forms 3C and 3D, the assessee will not comply the provisions of section 94(7). 15. The learned Departmental representative for the Revenue has submitted that the bona fides are to be shown by the assessee and it cannot be assumed. The learned Departmental representative relied upon the judgment in the matter of CIT v. Zoom Communication P. Ltd. reported in [2010] 327 ITR 510 (Delhi) ; [2010] 191 Taxman 179 (Delhi), CIT v. HCIL Kalindee Arsspl [2013] 37 taxmann.com 347 ( .....

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he assessee was taxed under section 115JB of the Income-tax Act, on the basis of book profit and was not taxed under normal computation procedure. Had the normal provision been applied, no tax was leviable on the assessee. The order of the Assessing Officer clearly mentioned that the book profit as per the return filed by the assessee was ₹ 3,84,87,419 whereas the profit exempt under section 10(38) was ₹ 25,33,912. Thus the calculation of minimum alternate tax was ₹ 3,59,53,507 .....

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the scheme of section 271(1)(c) has concluded that in case the income of the assessee was assessed under section 115JB and not under normal provision, the penalty under section 271(1)(c) is not leviable, as the levy of penalty is dependent upon the tax sought to be evaded. Paras 21 and 24 dealing with the abovesaid issue in the Nalwa Sons Investments Ltd. (supra) held below (pages 552, 553) : "21. The question, however, in the present case, would be, as to whether furnishing of such wrong p .....

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s higher, such amount is the total income of the assessee, otherwise, 'book profits' are deemed as the total income of the appellant in terms of section 115JB of the Act. 24. The income of the assessee was thus assessed under section 115JB and not under the normal provisions. It is in this context that we have to see and examine the application of Expla nation 4." 17. In the present case the assessee has given the full and complete details of the short-term loss accrued to it and al .....

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fect to section 94(7) has no bearing on the payment of tax to be paid, therefore no penalty can be imposed on the basis of tax sought to be evaded, as there is no evasion of any tax liability. Moreover we are bound to follow the judgment of the hon'ble Delhi High Court on this issue and, therefore, we hereby allow the appeal of the assessee and set aside the order passed by the Assessing Officer and the Commissioner of Income-tax (Appeals) on imposition of the penalty. 18. We will be failing .....

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