TMI Blog2018 (6) TMI 896X X X X Extracts X X X X X X X X Extracts X X X X ..... onsidered view that the claim made by the assessee is a bonafide claim and hence, the AO was erred in levying penalty u/s 271(1)(c) for furnishing inaccurate particulars of income - hence AO is directed to delete the penalty - Decided in favor of assessee. - I.T.A No.269/Mum/2016 - - - Dated:- 15-6-2018 - Shri Mahavir Singh(JUDICIAL MEMBER) AND Shri G Manjunatha (ACCOUNTANT MEMBER) For The Appellant : Shri BV Jhaveri For The Respondent : Shri V Vidhyadhar ORDER Per G Manjunatha, AM : This appeal filed by the assessee is directed against the order of the CIT(A)-52, Mumbai dated 26-10-2015 and it pertains to AY 2010-11. 2. The brief facts of the case are that the assessee is an individual and had filed his return of income for the AY 2010-11 on 05-10-2010 declaring total income at ₹ 44,034. The assessment was completed u/s 143(3) on 16-12-2012 determining total income at ₹ 3,64,00,540 by making disallowance towards loss claimed on account of write off of investments made in shares of M/s Niru Jewels Pvt Ltd. Thereafter, the AO initiated penalty proceedings u/s 271(1)(c) of the I.T. Act, 1961 for furnishing inaccurate particulars of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d not have come to the notice of the department if the case had not been picked up for scrutiny. Therefore, he opined that the assessee had made an attempt to reduce his tax liability by claiming wrong deduction which is very much falling within the ambit of provisions of section 271(1)(c) of the Act. 3. Aggrieved by the penalty order, assessee preferred appeal before the CIT(A). Before the CIT(A), assessee has filed elaborate written submissions which has been reproduced at para 5 on pages 3 to 7 of the order of CIT(A). The sum and substance of the arguments of the assessee before the CIT(A) are tht he had neither concealed particulars of his income nor did he furnish any inaccurate particulars of income while claiming long term capital loss of ₹ 3,70,50,000 in respect of investments in shares of M/s Niru Jewels Pvt Ltd as the underlying assets of the said company became Nil on account of default in repayment of loan to the banks and the banks have attached the assets u/s 13(2) of the Securitisation Reconstruction of Financial Assets and Enforcements of Securities Interest Act, 2002 (SRFAESI Act). The assessee further submitted that it has claimed loss on account of inv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Hence, the submissions made by the appellant with regard to non-inclusion of the long-term capital gain of ₹ 4,53,22,995/- in the revised computation of income are not relevant for deciding the issue involved in this appeal. Accordingly, these submissions are not being considered. 7. In the return of income filed, the appellant had shown long-term capital loss of ₹ 3,70,50,000/-. The loss was claimed to be in respect of investments in Niru Jewels Pvt. Ltd. Further, this loss was adjusted by the appellant against long-term capital gain of ₹ 4,53,22,995/-, arising on sale of land. During the course of assessment proceedings, the appellant did not furnish the relevant details and documentary evidence, in support of the claim of loss. Accordingly, the claim of loss was disallowed by the AO. The appellant also could not substantiate the claim during appellate proceedings, and, hence, the disallowance of loss was upheld by the learned CIT(Appeals). It appears that the appellant had investments of ₹ 3,70,50,0007- in share capital of Niru Jewels Pvt. Ltd., which suffered losses and capital got sunk, and the lender bank took possession of the company along wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as entitled to claim the longterm loss of ₹ 3,70,50,000/-, during the year, cannot be accepted. This contention had already been rejected earlier by my predecessor, while deciding the appellant's appeal against the disallowance of the said loss. 9. Now let us consider the issue as to whether the appellant is liable for penalty u/s.271(l)(c) of the Act, in respect of claim of loss of ₹ 3,70,50,000/-. As stated above, the transfer of shares of the company Niru Jewels Pvt. Ltd. had not taken place during the year under consideration. Yet, the appellant claimed the said loss. The appellant has not been able to offer any satisfactory explanation as to why such claim was made. It is obvious that the appellant had claimed this loss to set off major portion of the long-term capital gains of ₹ 4,53,22,995/-, which had arisen during the year on account of sale of land, and thereby avoid payment of taxes on such long-term capital gains. Though the sale transaction is claimed to have been cancelled later, it has to be noted that the cancellation deed had been entered into by the appellant after filing of the return of income for the 'year under consideration. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the claim was bona fide and where certain claim made by the assessee was merely not acceptable to the revenue, penalty is not leviable. However, in the present case, it has been found that the appellant had deliberately claimed nonexisting loss with a view to reduce tax liability. Hence, the facts of the present case are distinguishable from the facts of the cases relied upon by the appellant. The appellant, therefore, cannot derive any support from these decisions. 12. The Hon'ble Delhi High Court in the case of CIT Vs. Zoom Communications Pvt Ltd. (2O10) 327 ITR 510 has, after considering the decision of the Hon'ble Apex Court in the case of Reliance Petro Products Pvt Ltd., held that if the assessee makes a claim which is not only incorrect in law but is wholly without any basis and the explanation offered by him for making such a claim is not found to be bona fide, Explanation 1 to section 271(1) c would come into play and the assessee will be liable for penalty. Similarly in the case of CIT vs. Lal Chand Tirath Ram (1997) 225 ITR 684, Hon'ble Punjab Haryana High Court held that mere offering an explanation would not absolve an assessee from the li ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment proceedings had noticed that certain documents were impounded in the course of survey proceedings under Section 133A, in the case of a sister concern of the assessee. The survey was conducted more than 10 months before the assessee filed its return of income. Had it been the intention of the assessee to make full and true disclosure of its income, it would have filed the return declaring income inclusive of the amount which was surrendered later during the course of the assessment proceedings. Consequently, it was clear that the assessee had no intention to declare its true income. It was the statutory duty of the assessee to record all its transactions in the books of ount, to explain the source of payments made by it and to declare its true income in the return of income filed by it from year to year. The AO, in our view, has recorded a categorical finding that he was satisfied that the assessee had concealed true particulars of income and is liable for penalty proceedings under Section 271 read with Section 274. The AO has to satisfy whether the penalty proceedings be initiated or not during the course of the assessment proceedings and the AO is not required to record ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able but the AO has not accepted the claim of loss may not lead to an inference that the assessee has furnished inaccurate particulars of income. The lower authorities failed to appreciate the facts in right perspective and hence requested to delete penalty levied u/s 271(1)(c) of the Act. 6. On the other hand, the Ld.DR strongly supporting the order of the Ld.CIT(A) submitted that the assessee has deliberately furnished inaccurate particulars of income so as to reduce his tax liability arose from transfer of capital asset which is evident from the fact that the assessee has set off such loss against long term capital gain computed from sale of agricultural land. The AO has brought out clear facts to the effect that if the department had not taken scrutiny proceedings, the loss claimed by the assessee could be unnoticed and as a result, the assessee would be benefitted by wrong claim of set off of loss which resulted in evasion of tax and hence, the AO was right in levying penalty u/s 271(1)(c) and his order should be upheld. 7. We have heard both the parties and perused the materials available on record. The AO levied penalty u/s 271(1)(c) of the Act for furnishing inaccurat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ences to prove that the underlined assets of the company, M/s Niru Jewels Pvt Ltd became Nil as the assets of the said company were taken over by banks u/s 13(2) of the Securitisation Reconstruction of Financial Assets and Enforcements of Securities Interest Act, 2002 (SRFAESI Act) and also the recovery proceedings were commenced before the Debt Recovery Tribunal. 9. Having heard both the sides, we find merit in the arguments of the assessee for the reason that the loss claimed on account of write off of investment in shares of M/s Niru Jewels Pvt Ltd is based on AS-13 issued by ICAI which is mandatory in nature w.e.f. 01-04-1995 as per which where there is a permanent decline in the value of long term investments, the resultant reduction in the carrying amount is to be charged to the P L Account. The said AS-13 further stated that the reduction in carrying amount is reversed when there is a rise in the value of the investment or if the reason for reduction no longer exists. The assessee has claimed such loss on the basis of advice of tax consultant which is further supported by the accounting principles decaled by ICAI. The assessee also explained the reasons for write off of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the loss fromsuch source could not be set off from another source under the same head of income. In view of theabove, theassessing officer also initiated penalty proceedings and imposed penalty under Secton 271(l)(c) of the income Tax Act, 1961. 5. In appeal, CIT (A) upheld the order of Assessing Officer levying penalty. 6. On further appeal, the Tribunal in the impugned order held that the respondent-assessee had in its returnof income filed a note with its computation of income disclosing all details about the sale of US-64 units,the loss and resultant carry forward. Further, all details were disclosed in its return of income as is evidentfrom the fact that the assessing officer gathered information about the carry forward loss and sale of units from return filed by the respondent-assessee. The Tribunal held that the from the aforesaid facts at the highest it can be said that the claim of the assessee was not sustainable in law but there was no furnishing of inaccurate particulars or concealment of income on the part of the respondent-assessee. Thus, the penalty was set aside. We find that the same view is taken by the Apex Court in the matter of CIT v.Reliance Petropro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... concealment or of furnishing inaccurate particulars of income and indeed concealment of particulars of income and inaccurate particulars of income may at times overlap. It depends upon the facts of each case. In the assessment proceedings, the Assessing Officer while ascertaining the total income chargeable to tax would be in a position to detect the specific or definite particulars of income concealed or of which, false particulars are furnished. Where in the constituents of income returned, such specific or definite particulars of income are detected as concealed, then even in the total income, figure to the extent that they reflect, would amount to concealment. In the same way where specific and definite particulars of income are detected as accurate, then such figure will also make the total income inaccurate in particulars to the extent it does not include such income. In other words, the Assessing Officer cannot invoke provisions of section 27I(I)(c) on the basis of routine and general presumptions. Whether it be a case of only concealment or of only inaccuracy or both, the particulars of income so vitiated would be specific and definite and be known in the assessment proceed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the matter of claiming and securing reliefs and in this regard the officers should take the initiative in guiding a taxpayer where proceedings or other particulars before them indicate that some refund or relief is due to him. It is further stated that officers should, when requested, freely advice assessees the way in which entries should be made in various forms, they should not themselves make any entry in them on their behalf Where such advice is given, it should be clearly explained to them that they are responsible for the entries made in any form and that they cannot be allowed to plead that they were made under official instructions. [Para 10.9] In the light of above discussion, the facts of the case under consideration were to be seen. On perusal of the orders of revenue authorities, it was found that the penalty under section 27I(l)(c) was levied mainly on the ground that the assessee 's claims under sections 94(7), 80GGB and 80HHC were not correct. In such case, the explanation of the assessee was to be seen. Explanation must be preceded by a finding as to how and in what manner; the assessee had furnished the particulars of his income. The assessee had demon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e cancelled. [Para 10.10] 12. The assessee also relied upon the decision of Hon ble Supreme Court in the case of Reliance Petroproducts Pvt Ltd (supra). The Hon ble Supreme Court while deleting penalty u/s 271(1)(c) held that merely because the assessee had claimed the expenditure which claim was not accepted or was not acceptable to the revenue that, by itself, would not attract penalty u/s 271(1)(c) of the Act. If the contention of the revenue was accepted, then in case of every return where the claim made was not accepted by the AO for any reason, the assessee would invite penalty u/s 271(1)(c). That is clearly not the intentment of the legislature. 13. In this case, the assessee has furnished necessary details in respect of claim of loss on account of write off of investments in shares in return of income. The assessee also filed explanation before the AO with reasons for claiming such loss. We further observe that the assessee has claimed set off of such loss against long term capital gain derived from sale of agricultural land. The said long term capital gain has been withdrawn by filing revised statement of total income during the course of assessment proceedings. T ..... X X X X Extracts X X X X X X X X Extracts X X X X
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