TaxTMI 
TaxTMI 
2011 (5) TMI 609
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.... forward losses are being rightly claimed it is the Managing Director who has signed the verification column, which states that particulars shown in return are true. It does not need any professional qualification to ensure that brought forward losses have not being doubly claimed. (b) The ITAT has accepted that loss on equity shares and shares of UTS are not the business loss and therefore by claiming it as a business loss the assessee had clearly furnished inaccurate particular of income. (c) The assessee could not prove before the Assessing Officer that the donation was given for business consideration. The assessee has wrongly debited the amount of Rs. 94,001 as business expenses under the head Charity and donation and again claimed deduction under section 80G on an amount of Rs. 75,000 which was included in that head. 2. Any other ground raised at the time of hearing." 2. From the above grounds it would be clear that the only grievance of the Department relates to the deletion of penalty imposed by the Assessing Officer under section 271(1)(c) of the IT Act, 1961 (hereinafter, referred to as "Act"). 3. The facts related....
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....er, the losses as claimed by the assessee in the return of income and determined under section 143(1) of the Act were Rs. 79,77,560 and Rs. 67,61,480 for the assessment years 2001-02 and 2002-03 respectively and that in the assessment year 2003-04 the assessee claimed a business profit of Rs. 40,77,175 and after setting off the brought forward business loss of assessment years 2001-02 and 2002-03, the assessee claimed a business loss of Rs. 1,06,61,865 (Rs. 79,77,560 + Rs. 67,61,480 = Rs. 1,47,39,040 (-) Rs. 40,77,175) and a capital loss of Rs. 2,48,63,399. The Assessing Officer pointed out that in the assessment year 2003-04, the aggregate balance brought forward business losses of assessment year 2001-02 and assessment year 2002-03 were left at Rs. 1,06,49,360 which the assessee ought to have claimed as brought forward business loss in the assessment year 2004-05, however, the assessee claimed a brought forward business loss of Rs. 5,02,64,294 in assessment year 2004-05 and did not claim the capital loss of Rs. 2,48,63,299 of assessment year 2003-04 as brought forward business loss in assessment year 2004-05. According to the Assessing Officer, the aforesaid action of the assesse....
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....the total loss carried forward by the assessee to the next assessment year i.e., assessment year 2004-2005 at Rs. 5,02,64,294 was made as under: Capital loss Rs. 2,48,63,299 Business loss for assessment year 2001-02 Rs. 79,77,560 Business loss for assessment year 2002-03 Rs. 67,61,480 Loss for assessment year 2003-04 Rs. 1,06,61,955 4.1 It was further stated that during the course of assessment proceedings the assessee revised the Schedule 6 of the Tax Audit Report as under: S. No. A.Y. Nature of loss particulars Amount as returned Amount as assessed (give reference to relevant order) 1 2001-02 Business loss 5,377,707.00 7,977,560.00 Unabsorbed Dep. 2,599,853.00 Assessed u/s 143(1) Order dated: 7,977,560.00 2. 2002-03 Business loss 4,689,370.00 Assessment order awaited Unabsorbed 2,072,105.00 Dep. 6,761,475.00 3. 2003-04 Carried forward Loss & Dep. 14,739,035.00 10,661,860.00 Assessed u/s 143(1) Profit for the year 4,077,175.00 24,363,299.00 ....
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....tation of law which is contrary to the intention of penal provisions. In other words, all facts regarding carry forward of loss as well as set-off of loss were within the knowledge of the Department. In fact in such cases, carry forward and set off is always allowed on the basis of the records of the Department, it is not based on the claim made by the assessee in its return. On the whole owing to some bona fide mistake in showing set off and carry forward of loss or in showing capital loss on the part of the professional while preparing the return will not amount to concealment liable to penalty under section 271(1)(c) of the Act 1961. (ii) Another important issue to which we wish to invite attention is that it is the intent of legislature that penalty is imposable with reference to the income of a financial year under assessment. The word 'income' has been defined under section 2(24) of the Act, which refers only to the income of year under assessment. The definition of income under section 2(24) do not include carry forward and set-off of loss. The definition does not take into account the determined loss of earlier years. Therefore, on account of capital loss and....
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..... Allahabad Bench in the case of Omrao Industrial Corpn. (P.) Ltd. v. ITO [1987] 20 ITD 739. It was further contended that the assessee rebutted the allegation of concealment of income/furnishing of inaccurate particulars of income and the explanation of the assessee was duly substantiated in view of the Tax Audit Report and engagement of Professionals, therefore, the principle of justice and fairness has to be applied and the penalty was liable to be quashed. The reliance was placed on the following case laws: (i) Navinbhai M. Patel v. ITO [1988] 27 ITD 411 (Ahd.) (ii) Asstt. CIT v. Supreme Industries Ltd. [2009] 122 TTJ 56/28 SOT 19 (Mum.) (iii) Madan Gopal Bansal & Sons v. IAC [1984] 19 TTJ (Delhi) 493 4.6 The other submissions of the assessee has been incorporated by the learned CIT(A) in paras 6.4 to 6.11 of the impugned order, which are reproduced verbatim as under: "6.4 It was further submitted that the appellant company has engaged the professionally qualified persons as required under the law or otherwise as under: Professional Purpose (i) M/s Amit Ray & Co. Charter....
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.... loss under the head "Capital Gains". Thus, ground Nos. 1 and 2 are decided accordingly." In view of such finding, penalty is not leviable under section 271(1)(c) of the Act. 6.9 Regarding amount mentioned at para 3.2(5), the counsel has submitted the details of Rs. 94,001 being the amount of Donation & Charity. Such sum includes a sum of Rs. 75,000 mentioned at para 2(6). Therefore, there remains a sum of Rs. 19,000. From the details it is evident that such sum was incurred for business exigencies Further, there was neither concealment of income nor furnishing of inaccurate particulars as such sum was duly shown in schedule 'R' of the audited statement of accounts for the year ending on 31-3-2004. Hence, penalty under section 271(1)(c) is not leviable. 6.10 Regarding amount mentioned at para 3.2(6), the counsel submitted that the recognition under section 80G was available to 'Wheeler Sewa Trust' earlier. Accordingly, there was bona fide belief to claim deduction under section 80G of the Act. While preparing computation of income, it seems that Original Donation Receipt was not verified by the professionals in view of this company should not be liable for levy of penalty ....
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....a) of the Act. (x) The mistake if any, in making excessive claim for carry forward of loss or Capital Loss was not on the part of the appellant. (xi) In terms of the decision cited by the appellant, penalty is leviable only on the income (including loss) of the year under assessment excluding the carry forward losses of earlier years. (xii) The Assessing Officer made up his mind to drop the penalty proceedings but later on disproved the preposition as is evident from the following Order Sheet entry; "11-3-2010 - As addition made by the Assessing Officer is deleted by the Hon'ble ITAT, All. vide ITA No. 45(All.)/2009, dated 24-4-2009, the penalty proceedings under section 271(1)(c) is hereby dropped." (xiii)On the matter of loss on account of sale of Units, Hon'ble ITAT has already held that it is capital loss and not simply disallowable business loss. (xiv) From the details of Donation & Charity, it is evident these were incurred for business consideration. (xv) Since the appellant could not get any effective hearing hence could not submit proper reply before Assessing Officer. (xvi) The Assessing Officer has not been able to prove ho....
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....before the authorities below and further submitted that the assessee acted on the advice of the counsel and the mistake pointed out by the Assessing Officer in the Tax Audit Report was rectified, therefore, the penalty was not leviable since the assessee neither concealed the income for the year under consideration nor furnished the inaccurate particulars of the income and if there was any mistake relating to the claim of brought forward losses to be set off that was rectifiable under section 154 of the Act but no penalty was leviable. He accordingly supported the impugned order passed by the learned CIT(A). The learned counsel for the assessee placed his reliance on the case laws cited before the learned CIT(A) and also relied on the following case laws: (i) CIT v. Manmohan Das [1966] 59 ITR 699 (SC) (ii) T. Ashok Pai v. CIT [2007] 292 ITR 11/161 Taxman 340 (SC) (iii) CIT v. Sri Saradha Textile Processors (P.) Ltd. [2006] 286 ITR 499 (Mad.) (iv) CIT v. Reliance Petroproducts (P.) Ltd. [2010] 322 ITR 158/189 Taxman 322 (SC) (v) CIT v. Mahalaxmi Sugar Mills Co. Ltd. [1986] 160 ITR 920/27 Ta....
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....de belief based on the advice of the Tax Consultant, it cannot be held that there was any concealment of income or furnishing of inaccurate particulars of income, particularly when the amount to be set off was relating to the earlier years and the record, in the shape of income-tax returns pertaining to the earlier years, was already available with the Department. The Hon'ble Supreme Court in the case of Manmohan Das (supra) has held as under: "Whether the loss in any year may be carried forward to the following year and set off against the profits and gains of the subsequent year under section 24(2) has to be determined by the Income-tax Officer who deals with the assessment of the subsequent year. A decision recorded by the Income-tax Officer who computes the loss in the previous year that the loss cannot be set off against the income of the subsequent year is not binding on the assessees." 7.2 In the present case also the loss was allowed to be carried forward to the following year and set off against the profits and gains of the year under consideration and the Assessing Officer determined the figures, which were already available on the record with the Department, so it ....
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....as the duty cast on the Assessing Officer to apply the relevant provisions of the Income-tax Act for the purpose of determining the true figure of the assessee's taxable income and the consequential tax liability and even if the assessee failed to provide the figures relating to set off of the loss already determined by the Department, it was the duty of the Assessing Officer to consider the correct figure while allowing the benefit of the set off and merely on this basis that wrong figures, by mistake, were provided by the assessee, the Assessing Officer could not have rejected the claim and consequentially levied the penalty under section 271(1)(c) of the Act considering the wrong claim as concealment of income. In the present case, as regards to the loss carried forward to be set off, there was neither concealment of the income nor inaccurate particulars of income were furnished because the correct figures were already available on record with the Assessing Officer in the form of Income-tax returns of earlier years wherein loss to be set off and carried forward in the succeeding year was determined, so he should have considered only those figures, which were correct. Furthermore....
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....ddition made on account of loss on sale of equity shares claimed by the assessee amounting to Rs. 3,34,941 is concerned, it is noticed that this issue was the subject matter of the assessee's appeal in ITA No. 45/All./2009 for the assessment year 2004-05. This addition has been deleted by holding that the said loss was not a business loss but a loss under the head 'capital gains'. The relevant finding given in para 2.1 of the order dated 22-4-2009 in ITA. No. 45/All./09 (supra), read as under: "2.1 In this connection, our attention was drawn to the discussion made by the Assessing Officer on paragraph 7 of his order, in which it was mentioned that the units of the UTI were capital assets and exchange thereof with bonds amounted to transfer, as held by Hon'ble Andhra Pradesh High Court in the case of CIT v. Trustees of HEH The Nizam's Second Supplementary Family Trust [1976] 102 ITR 248. The units were held as investments and, therefore, the loss could not be said to be business loss. Therefore, the loss could not be debited to profit and loss account for setting it off against the business income. These findings were upheld by the learned CIT(Appeals). The limited case made by t....