TaxTMI 
TaxTMI 
2018 (2) TMI 503
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....ulsiyan, Ld. Authorized Representative appeared on behalf of assessee. 2. Solitary issue raised by Revenue in this appeal is that Ld. CIT(A) erred in deleting the penalty of Rs.23,68,786/- imposed by the Assessing Officer u/s. 271(1)(c) of the Act. 3. Briefly, the facts are that the assessee in the year under consideration field its return of income dated 29. 09. 2011 declaring total income of Rs.15,55,40,588/- only. Subsequently the case was selected under scrutiny on the basis of CASS module and accordingly notice u/s. 143(2)/142(1) were issued upon the assessee dated 10. 09. 2011. Again another notice was issued by the AO u/s. 142(1) dated 16. 04. 2013 requiring the assessee to furnish the certain details. 4. The AO on perusal of the details filed by the assessee observed that it has claimed depreciation in the computation of income for Rs.78,95,954/- on the land for Rs.7,89,59,536/- purchased during the year. On being confronted to the impugned issue, assessee conceded its mistake and offered amount of depreciation to tax vide letter dated 05. 08. 2013. Accordingly, AO disallowed the amount of depreciation claimed by assessee on land and added to the total income of assessee....
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....e jurisdicioial Hon'ble ITAT, Kolkata under similar circumstances, as narrated supra, has waived the penalty impose u/s. 271(1)(c) of the Act by taking into consideration the decisions in the case of CIT vs. Reliance Petroproducts Pvt. Ltd. (2010) 322 ITR 158 (SC); CIT vs. Snia Mirza (A. P. High Court ITA No. 526 of 2011 dated 09. 02. 2012) and Price Waterhouse Coopers (P) Ltd. vs. CIT (21012) 348 ITR 306 (SC). In the case of CIT vs. Reliance Petroproducts Pvt Ld. (2010) 322 ITR 158 (SC), the Apex Court specifically ruled that - "A mere making of a claim, which is not sustainable n law, by itself, will not amount to furnishing inaccurate particular regarding the income of the assessee. Such a claim made in the return cannot amount to furnishing inaccurate particulars". I find that the ratio of the other court decisions cited by the AR supra to be also applicable in the appellant's case considering the similar facts and circumstances. In view of the foregoing and considering the facts and circumstances of the appellant's case, I do not find any merit in the action of the AO in imposing the impugned penalty which is now directed to be deleted. " The Revenue, being aggrieved, is....
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.... Hon'ble Tribunal's referred to para 59 of decision of the Hon'ble Karnataka High Court in case of Manjunatha Cotton while arriving at its decision, excerpt of which is reproduced as under: "59. As the provision stands, the penalty proceedings can be initiated on various ground set out therein. If the order passed by the Authority categorically records a finding regarding the existence of any said grounds mentioned therein and then penalty proceedings is initiated, in the notice to be issued under Section 274, they could conveniently refer to the said order which contains the satisfaction of the authority which has passed the order. However, if the existence of the conditions could not be discerned from the said order and if it is a case of relying on deeming provision contained in Explanation 1 or in Explanation 1 (B), then though penalty proceedings are in the nature of civil liability, in fact, it is penal in nature. In either event, the person who is accused of the conditions mentioned in Section 271 should be made known about the grounds on which they intend imposing penalty on him as the Section 274 makes it clear that assessee has a right to contest such procee....
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....rystal clear the assessee was made aware of the penalty proceedings having initiated against it and was granted two opportunities by the Assessing officer to present its case offer its explanation. However, the assessee chooses to ignore those show-cause notices and now has come up before us and pleaded that the principle of natural justice has been violated by stating that the show-cause notice is vague. In our view, by not attending to the penalty proceedings before the AO without showing any reasonable cause, the assessee has effectively waived its right to contest at higher appellate forum that his rights to plead have been violated. Even before us, no pleadings have been taken to show that there existed a reasonable cause for not attending to the penalty proceedings and offering its explanation before the AD. Further, no such pleading has been taken before the Id CIT(A) as well regarding violation of principle of natural justice. Having recorded the satisfaction in the assessment order, the penalty proceedings have been validly initiated and the issuance of notice u/s 274 is in furtherance of recording of such satisfaction and has thus to be read along with the assessment orde....
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....to be imposed, as has been urged . . . " 2. 7. The Hon'ble Mumbai E Bench in the case of Earthmoving Equipment Service Corporation vs DCIT 22(2), Mumbai (2017) 84 taxmann. com 51 held "that after perusing the ratio of the judgement rendered in Manjunatha Cotton and Ginning Factory, we find that the assessee's appeal was allowed by the Hon'ble High Court after considering the multiple factors and not solely on the basis of defect in notice u/s 274. Therefore we are of the opinion that the penalty could not be deleted merely on the basis of defect pointed by the Ld AR in the notice and therefore the legal grounds raised are rejected. " 3. Therefore, it is submitted that penalty proceedings for levy of penalty u/s. 271(1)(c), were correctly initiated and the case may be heard on merits. He vehemently relied on the order of AO. On the other hand, Ld. AR for the assessee filed paper book which is running pages from 1 to 54 and filed written submissions. Ld. AR drew our attention on the provisions of Section 271(1)(c) of the Act which are reproduced hereunder:- "(1) lf the Assessing Officer or the Commissioner (Appeals) or the Commissioner in the course of any proc....
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....hed inaccurate particulars of such income ". The present was not a case of concealment of the income. As regards the furnishing of inaccurate particulars, no information given in the Return was found to be incorrect or inaccurate. The words "inaccurate particulars" mean that the details supplied in the Return are not accurate, not exact or correct, not according to truth or erroneous. In the absence of a finding by the AO that any details supplied by the assessee in its Return were found to be incorrect or erroneous or false, there would be no question of inviting penalty u/s 271(1)(c). (ii) The argument of the revenue that "submitting an incorrect claim for expenditure would amount to giving inaccurate particulars of such income" is not correct. By no stretch of imagination can the making of an incorrect claim in law tantamount to furnishing inaccurate particulars. A mere making of the claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee. If the contention of the Revenue is accepted then in case of every Return where the claim made is not accepted by the AO for any reason, the assessee will ....
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....f inaccurate particulars of income unless it is established that the assessee had acted with mala fide intention or has claimed deduction being aware of well settled legal position. 4. 1. Thus from the above facts it is evident that the assessee had not furnished inaccurate particulars of income or had concealed or furnished inaccurate particulars of income in its Return of Income. In light of the aforesaid decision of the Hon'ble Supreme Court it is submitted that a mere claim of depreciation on land which is not sustainable in law, which was further corrected and offered to tax, does not amount to furnishing inaccurate particulars regarding the income of the assessee. 4.2. Reliance for the above can also be placed on the following judicial pronouncements: * Commissioner of Income Tax V. Samurai techno Trading P. Ltd (2016) 389 ITR 357 (Ker) wherein it is held that "Under section 271 (l)(c) of the Incometax Act, 1961, if anyone of the officers mentioned therein is satisfied that any person has concealed the particulars of income or furnished inaccurate particulars of such income, he may direct that such person shall pay by way of penalty, the amount indicated. While ap....
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....nce of expenditure under section 40(a)(ia) of the Income-tax Act, 1961. The assessee had made a claim to deduction in the return of income. No finding had been recorded by the authorities below that the claim made by the assessee was mala fide. It had been categorically recorded by the Tribunal after examining the entire material on record that the Commissioner (Appeals) had rightly cancelled the penalty against the assessee. It was further recorded that the assessee made a bona . fide claim to deduction of the expenditure and even though it was not acceptable to the Department it would not lead to the conclusion that the assessee had concealed the particulars of income or . filed inaccurate particulars of income. The Tribunal was justified in cancelling the penalty under section 271 (1)(c) of the Act. " * PCIT Vs. S. S. Food Industries [2016] 382 ITR 388 (P&H) wherein it is held that "The assessee-firm engaged in the business of manufacturing of biscuits, cookies and other bakery products filed a nil return for the assessment year 2009-10 on September 30, 2009, claiming deduction under section 80-IC of the Income-tax Act, 1961. The Assessing Officer disallowed the deduction amo....
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....which was upheld by the Ld. CIT(A), the Hon'ble Tribunal upheld the imposition but reduced the quantum of penalty on the view that the assessee had made a mistake which could be described as a silly mistake. But since the assessee was a high calibre and competent organization, it was not expected to make such a mistake. The matter went to the Hon'ble High Court where the order of the Tribunal was confirmed. The matter ultimately went to the Hon'ble Supreme Court and the crux of the issue for consideration was whether it was a bona fide and inadvertent error on the part of the assessee, warranting no imposition of penalty u/s 271(1)(c) of the Act. According to the Hon'ble Apex Court, although undoubtedly the assessee is a reputed firm and has great expertise available with it, despite this it is possible that even the assessee could make a silly mistake. The relevant portion of the observation/finding (para 19 & 20) of the Hon'ble Supreme Court, to quote, is as under: "The contents of the Tax Audit Report suggest that there is no question of the Assessee concealing its income. There is also no question of the Assessee furnishing any inaccurate particulars. It a....
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....lanation 1 to section 271(1) of the Act. Explanation 1 to section 271(1)(c): "Where in respect of any facts material to the computation of the total income of any person under this Act- (A) such person fails to offer an explanation or offers an explanation which is found by the assessing Officer or the Commissioner (Appeals) or the Commissioner to be false, or (B) Such person offers an explanation which he is not able to substantiate and fails to prove that such explanation is bona fide and that all the facts relating to the same and material to the computation of his total income have been disclosed by him, then the amount added or disallowed in computing the total income of such person as an result thereof shall, for the purposes of clause (c) of this sub-section, be deemed to represent the income in respect of which particulars have been concealed. 11 In the instant case, the assessee had furnished the explanation to the assessee by filing a revised computation of income offering long term capital gains voluntarily. We also find that the assessee had also given explanation for not offering the same in the original return of income due to his bona fide belief as stated s....
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..../0400/2016 wherein it is held that "Following the law laid down by the Hon'ble Apex Court in the judgment cited as Price Waterhouse Coopers Pvt. Ltd. (supra) and in view of the facts discussed in the preceding paras, we are of the considered view that the impugned order passed by the CIT(A) confirming the penalty order is not sustainable in the eyes of law as the assessee has claimed provision for bad and doubtful debts due to inadvertent and bona fide mistake and voluntarily revised the income by offering the said amount of Rs. 4,59,7141- for taxation. Consequently, the impugned order passed by CIT(A) is hereby set aside. In view of what has been discussed above, the present appeal filed by the assessee is hereby allowed. " 14. 1. Applying the ratio of the above judicial decisions to the facts of the case of the assessee, it is submitted that the assessee had claimed depreciation on land amounting to 7,89,59,536/- due to inadvertent and bona fide mistake and voluntarily offered the same for taxation during the course of assessment. The said fact was clearly appreciated by the Ld. CIT and thus deleted the impugned penalty imposed by the Ld. AO. u/s 271 (1)(c) of the Income T....
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..... We have heard the rival contentions of both the parties and perused the material available on record and the judicial pronouncements cited by both the parties. It is beyond doubt that the assessee has claimed depreciation on the land for which it was not entitled under the provisions of the Act. The mistake committed by the assessee was admitted during assessment proceedings and therefore the income of the assessee was enhanced by the amount of depreciation claimed on the land. It is also a fact that the assessee is also a private limited company and assisted by the tax consultants. Therefore such silly mistake cannot be expected by such organized company. However the Hon'ble Supreme Court in such a situation has held that the inadvertent mistakes committed by the assessee do not warrant the imposition of liability under section 271(1)(c) of the Act. The relevant case law is Price Waterhouse Coopers (P) (ltd) Vs. CIT reported in 348 ITR 306 where the Hon'ble Apex Court has held as under :- 19. The contents of the Tax Audit Report suggest that there is no question of the assessee concealing its income. There is also no question of the assessee furnishing any inaccurate particula....