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TMI Blog2017 (9) TMI 642X X X X Extracts X X X X X X X X Extracts X X X X ..... total income of Rs. 5,39,17,510/-. 3. Thereafter, the Assessing Officer initiated penalty proceedings u/s.271(1)(c) for the reason that assessee has concealed particulars of its income and furnished inaccurate particulars of income. The AO initiated penalty proceedings on the ground that the assessee has furnished inaccurate particulars in respect of provision created for impairment in value of investments in security receipts to the extent of Rs. 1,81,25,000/-, however, filed revised return withdrawing provision created for impairment of investment in security receipts after issue of detailed questionnaire calling for specific explanations in respect of major expenses debited to the profit and loss account. The AO further observed that though the assessee has filed revised return withdrawing provision created for impairment in investment in security receipts, the revised return has been filed after detection of furnishing of inaccurate particulars of its income in respect of Rs. 1,81,25,000/-. Therefore, filing of revised return cannot be considered as voluntary. Accordingly, a show-cause notice u/s.274 r.w.s. 271(1)(c) dated 06/12/2010 was issued to the assessee calling for its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... judicial pronouncements including decision of Hon'ble Supreme Court in the case of Union of India vs. Dharmendra Textile Processor (2007) 212 CTR 432 held that the assessee has knowingly furnished inaccurate particulars of its income within the meaning of Section 271(1)(c) of the IT Act and hence, liable for penalty of 100% of the tax sought to be evaded. Accordingly, levied penalty of Rs. 61,60,688/- u/s. 271(1)(c) of the IT Act. 6. Aggrieved by the penalty order, the assessee preferred an appeal before the CIT(A). Before the CIT(A), the assessee has reiterated its submission before the AO. The assessee further submitted that it has disclosed necessary facts relating to the provisions created for impairment in investment in security receipts and also disclosed necessity of creation of such provision in its books of accounts. The assessee further submitted that as per the provisions of RBI guidelines, the assessee being an asset-reconstruction company required to make provision in respect of its investment in security receipts as per the market rates as on the balance- sheet data, as per the value determined by the rating agency approved by SEBI. The assessee company has valued it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urity receipts in the form of notes to accounts and also explained the necessity of creation of such provision in its books of accounts. The learned AR referring to the RBI guidelines submitted that the assessee company being an asset reconstruction company, as per the guidelines of RBI, the assessee has to disclose its investment in security receipts at the end of the financial year as per the rating given by rating agency registered with SEBI. The assessee has valued its two security receipts from the rating agency which has suggested a provision for two security receipts, accordingly, it has made a provision of Rs. 1,81,25,000/- in its books of accounts to disclose NAV of security receipts. The learned AR further submitted that such provision has been withdrawn and filed a revised return before completion of assessment, therefore, it cannot be held that the assessee has furnished inaccurate particulars of its income. The learned AR further submitted that the assessee has voluntarily filed revised return withdrawing provision created for impairment in investment in security receipts before the completion of assessment. Since, it has created provision in respect of investment in s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... O levied penalty u/s.271(1)(c) for the reasons that the assessee has willfully furnished inaccurate particulars in respect of provision created for impairment in value of investment in security receipts, even though such provision is not allowable as detection under the provisions of Income Tax Act 1961. The AO further observed that the assessee has filed revised return after detection of provision created in respect of impairment in value of investment, therefore, such revised return cannot be considered as voluntary. The AO further observed that a specific questionnaire was issued in respect of major expenses and also called for necessary documentary evidence justifying expenses in the profit and loss account. The assessee has filed revised return withdrawing provision created for impairment in value of investment after issue of notice u/s. 142(1). According to the AO, the moment there is an enhancement of return income there comes to an existence a presumption of concealment / furnishing of inaccurate particulars of income and the burden of proof lies on the assessee to explain the same. It is clear from the facts that the assessee has failed to prove the burden of proof in resp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome or furnished inaccurate particulars of income, such person may be directed to pay penalty of a sum equal to not less than 100% and not more than 300% of tax sought to be evaded. The concealment of income and furnishing of inaccurate particulars of income should be referred to return of income, books of accounts and other documents available with the authorities at the time of proceedings under this Act. In the present case, admittedly assessee has made a provision in respect of investments in security receipts and also disclosed necessity of creation of provision in respect of security receipts in its financial statements by way of notes to accounts. According to the assessee, it has created provision in respect of impairment in value of investment in security receipts as per the guidelines of RBI which mandates creation of provision at the end of the financial year as per the rating given by the rating agency approved by SEBI. We find that the RBI guidelines mandates valuation of security receipts at the end of the financial year from a rating agency approved by the SEBI. We further observed that the assessee has taken a rating on its two security receipts from the rating agen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bited in the profit and loss account. We do not find merit in the findings of the AO for the reason that the assessee has filed revised return although after issue of notice u/s.142(1), but much before the date of completion of assessment, therefore, the AO cannot hold that the assessee has filed revised return only after issue of notice u/s.142(1) of the IT Act 1961. We further, observe that mere making a claim in respect of certain expenditure and disallowance of such expenditure by the AO during the course of assessment proceedings cannot be called as furnishing of inaccurate particulars of income in respect of such income. More so, when assessee has filed revised return voluntarily before completion of assessment withdrawing such provision created / expenditure debited in the profit and loss account. Therefore, we are of the considered view that the AO was incorrect in coming to the conclusion that the assessee has furnished inaccurate particulars of its income which warrants levy of penalty u/s. 271(1)(c) of the Act. 13. It is pertinent to discuss the case law relied upon by the assessee. Assessee has relied upon decision of Hon'ble Supreme Court, in the case of CIT vs. Relia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ount to furnishing of inaccurate particulars regarding the income of the assessee. Such claim made in the return cannot amount to the inaccurate particulars. [Para 9] The revenue contended that since the assessee had claimed excessive deductions knowing that they were incorrect, it amounted to concealment of income. It was argued that the falsehood in accounts can take either of the two forms: (i) an item of receipt may be suppressed fraudulently; (ii) an item of expenditure may be falsely (or in an exaggerated amount) claimed, and both types attempt to reduce the taxable income. and, therefore, both types amount to concealment of particulars of one's income as well as furnishing of inaccurate particulars of income. Such contention could not be accepted as the assessee had furnished all the details of its expenditure as well as income in its return, which details, in themselves, were not found to be inaccurate nor could be viewed as the concealment of income on its part. It was up to the authorities to claim in the return or not. Merely because the assessee had claimed the expenditure, which claim was not accepted or was not acceptable to the revenue, that, by itself would n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 15. The assessee relied upon the decision of the Hon'ble High Court of Delhi, in case of CIT vs. Harnarayan 67 DTR 0172. The Hon'ble High Court, while deleting penalty u/s. 271(1)(c) observed that the AO having included the amount of gifts in the total income of the assessee merely on the basis of assessee's declaration without pointing out or referring to any evidence or material to show that the gift received by the assessee was bogus or sham and there being any allegation that the assessee has offered the amount after a detection of any incriminating material by the department. Surrender of the amount by the assessee was voluntary and therefore, penalty u/s. 271(1)(c) was not leviable. The relevant portion of the order is extracted below:- "The AO included the amount of gift in the total income of the assesses merely on the basis of the assessee's declaration. A/so, the AO did not point out or refer to any evidence or material to show and establish that the gift received by the assessee was either bogus or sham. Admittedly, the assessee had offered the gift for taxation voluntarily and it was not the case of the Revenue that the same was done after its detection by the Dep ..... X X X X Extracts X X X X X X X X Extracts X X X X
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