AI Drafter 
TaxTMI 
TaxTMI 
TaxTMI 
2018 (3) TMI 1585
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....r 1 (a). On the facts and in the circumstances of the case and in law, the learned Commissioner of Income Tax (Appeals) erred in confirming penalty of Rs. 1,29,880/- under section 271(1)(c) of the Income Tax Act, 1961 (the Act) and the reasons assigned for doing so are wrong and contrary to the facts and circumstances of the case, the provisions of Income Tax Act, 1961, and the Rules made there under. (b) The learned Commissioner of Income Tax (Appeals) erred in confirming that the appellant had furnished inaccurate particular of income and concealed its income by way of claiming set off of long term capital loss to the extent of Rs. 3,27,524/- which the appellant suo-moto offered as LTCG in the return of income filed in response to notice u/s.148 of the Act. (c) The learned Commissioner of Income Tax (Appeals) erred in confirming penalty without appreciating the following: (i). the appellant has filed its return of income in response to notice u/s.l48 of the Act before receiving any communication of the recorded reasons from the learned assessing officer, wherein there was no set off of long term capital loss of Rs. 5,13,908/-. Thus. the claim w....
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....t the assessee is engaged in the business of development, maintenance and licensing of computer software and providing consultancy services in the area of hardware, application software and products for finance and capital market within and outside India. The assessee filed its return of income for the impugned assessment year on 21.10.2005 declaring total income of Rs. 5,76,54,770/- which was assessed u/s. 143(3) vide assessment order dated 05.12.2017, wherein the income assessed was Rs. 8,22,78,960/- . The case of the assessee was reopened u/s. 147 and notices u/s. 148 was issued to the assessee on 15.07.2009. The assessee filed return of income in response to notices u/s. 148 declaring total income of Rs. 5,80,13,941/-, wherein the assessee withdrew its claim of setting off of long term capital gain of Rs. 5,13,908/- from the long term capital loss of Rs. 6,47,13,206/- in respect of sale of 58,65,000/- equity share of M/s. Dotex International Ltd. to National Stock Exchange India Ltd. The National Stock Exchange of India Limited(NSE) is 100% holding company of the assessee company and also NSE is holding company of Dotex International Limited and consequently transaction of sale....
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.... department without any additions. 2. In this context, it is to be stated that penalty u/s 271(1)(c) is leviable either for concealment of income or for furnishing of inaccurate particulars of income. The word 'concealment' denotes a deliberate, conscious attempt on the part of the assessee to hide his Income, while 'furnishing of inaccurate particulars of income' means furnishing of factually incorrect details and information about income. Such details are not in conformity with the facts or the truth. Accordingly, when an assessee has made a claim regarding a particular deduction and made a mention thereof in the return, he has disclosed the facts. Accordingly, the question of levy of penalty should not arise in such cases. Thus, in the instant case the return of income filed in response to notice u/s 148 has been filed voluntarily before detection and conduct of assessee is bona fide therefore, penalty should not be leviable. Further as the penalty proceedings is initiated in the re-assessment order, the return filed in response to notice u/s.148 should be taken as a base and as returned income is accepted as assessed income, no penalty....
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....nd that since the assessee was a well known and reputed Chartered Accountant firm and a tax consultant, it was not expected to make such a mistake and that there had been a failure to discharge the strict liability to furnish true and correct particulars of income. On appeal by the assessee to the Supreme Court, HELD reversing all the lower authorities: "Notwithstanding the fact that the assessee is undoubtedly a reputed firm and has great expertise available with it, it is possible that even the assessee could make a "silly" mistake. The fact that the Tax Audit Report was filed along with the return and that it unequivocally stated that the provision for payment was not allowable u/s 40A(7) indicates that the assessee made a computation error in its return of income. Apart from the assessee, even the AO who framed the original assessment order made a mistake in overlooking the contents of the Tax Audit Report. 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. All that happened in the present case is that through a bona fide and inadv....
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..... Deputy Commissioner of' Income-tax IT Appeal no. 991 (Pune) of 2008 Wherein, it has been held that: "The issue as to whether there was concealment of particulars of income on the part of the assessee so as to attract penalty under section 271(1)(c) depends on the acceptability of the explanation of the assessee that the mistake in this regard was inadvertent due to his ignorance of Indian Income-tax law, hence there was bona fide reason for the same. Explanation 1 to section 271 (1)(c) depends on the acceptability of the explanation of the assessee that the mistake in this regard was inadvertent due to his ignorance of Indian income-tax law, hence there was bona fide reason for the same. The penalty is not an automatic consequence of addition to income; penalty under section 271 (1)(c) can come into play only when the conditions laid down under that section are satisfied; concealment of income cannot be a passive situation and it implies that the person concealing the income is hiding, covering up or camouflaging an income; penalty is not leviable in case where assessee is able to provide a 'bona fide' explanation; and penalty is no....
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....essee was assisted by tax experts and so ignorance of the law was no excuse. However, the Tribunal deleted the penalty on the ground that (i) there were multiple amendments to the statutory provisions (s. 10(b)(vii)) and the concept of grossing-up embedded therein is of a technical nature and out of the scope of common knowledge of the tax payers, (ii) the possibility of mistake by even tax experts cannot be ruled out; (iii) the assessee relied on the tax experts and signed the ROI, (iv) the conduct of the assessee in paying up the taxes for all the years including those that were beyond reassessment showed his bona fides, (v) the claim of bona fide belief need not be substantiated with documentary evidence but can also be substantiated by circumstantial evidence; (vi) penalty is not an automatic consequence of addition to income; (vii) concealment implies that the person is hiding, covering up or camouflaging an income; penalty is not leviable in case where assessee is able to provide a 'bona fide' explanation; penalty is not leviable in cases where assessee made errors, under bona-fide beliefs. On appeal by the department to the High Court, HELD dismissing the appeal: ....
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....o materials to hold that the assessee had deliberately or consciously concealed this income. " iii). Commissioner of Income-tax v Amalendu Paul(1983) 13 Taxman 325(Cal) The High Court of Calcutta has held that "It is well-settled that the onus of proving that the assessee concealed the particulars of his income or failed to disclose his income is on the revenue. In view of the facts and findings recorded by the Tribunal, it was evident that the assessee submitted the revised return showing the impugned cash credits as income from other sources as the same could not be proved, with a prayer that no penalty might be levied. Thus, the admission, if any, was a conditional admission and could not be relied upon for imposing penalty as an unconditional admission. " Hence, relying on the above case laws your goodself would appreciate that as the assessee has on suo moto basis has filled the revised computation of income no penalty can be levied in instant case. 6. Without prejudice to above we have to state as under: Section 275 contains the bar of limitation for imposing penalties which reads as under: 275. [(1)] No order imposing a p....
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....lty proceedings within the expiry of the financial year in which the proceedings, in the course of which action for the imposition of penalty has been initiated, or within six months from the end of the month in which action for imposition of penalty is initiated, whichever period expires later. As the assessing officer has not done so, the initiation of penalty proceedings is time barred." The AO observed that it is only in pursuance of the initiation of the reopening of the case u/s. 147 of Act that the assessee has revised return of income and also withdrew the carry forward and set off of brought forward of short term capital loss of Rs. 1,86,384/- which was earlier allowed inadvertently and hence the assessee withdrew its claim after being cornered by the revenue. The AO held the assessee had submitted inaccurate particulars of income and penalty was imposed u/s. 271(1)(c) of the Act. The AO while imposing penalty u/s 271(1)(c) relied upon Hon'ble Supreme Court decision in the case of Union of India v. Dharmendra Textile Processors & others 306 ITR 277, the Hon'ble Allahabad High Court decision in the case of CIT v. Rakesh Suri (2010) 233 CTR (AU) 184, the Hon'ble Delhi Hig....
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..... In such a situation, in accordance with the undisputed scheme of s. 271(1)(c), neither the penalty was leviable prior to Hon'ble Supreme Court's judgment in the case of Dilip N. Shroff (supra), nor is it leviable after the Dharamendra Textile Processors' case (supra). I am of the view that the case of the appellant falls in the first scenario i.e the addition made is on account of contumacious conduct of the appellant in which mens rea can be reasonably inferred. As far as this situation is concerned, penalty was always leviable under section 271(1)(c). 1.3.2 I find that appellant had filed the return of income on for AY 2005-06 on 21.10.2005 declaring total income of Rs. 5,76,54,770/- alongwith Tax Audit Report and audited financial statements. The notice u/s 143(2) was issued on 31.10.2006 and the assessment u/s. 143(3) of the I.T. Act, 1961 was completed vide order dated 05.12.2007 assessing the total income at Rs. 8,22,78,960/ - by making various additions and disallowances. Against the same, the appellant has filed an appeal before CIT(A) wherein the appellant obtained substantial relief and the total income was re- determined at Rs. 5,76,86,417/- vide o....
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....evised return which according to the assessee, is correct and complete. It is quite possible and natural that in submitting a return and disclosing full particulars of income in the return some bona fide omission or some wrong statement may have occurred. In order to obviate this possibility, legislature enacted s. 139(5) enabling the assessee to furnish a revised return. But to come under the said provision, the omission or wrong statement that might have occurred or crept in (i) must be bona fide and (ii) must have been discovered by the assessee himself. Where revised return is made by assessee on his own volition before concealment was detected in the course of assessment proceedings, conduct of assessee has to be taken note of. Sec. 139(5) applies only to cases of omission or wrong statement and not to cases of concealment or false statements. Thus s. 139(5) has application to limited category of cases, namely, where in the original return there was an omission or any wrong statement. The very word "omission" denotes an omission bona fide. Equally, the words "wrong statement" will not take in "a statement known to be false to the person who made statement". However, the word "....
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....or wrong statement in the original return was not bona fide or due to inadvertence or mistake on the part of assessee, penalty was held to be justified. 1.3.5 In CIT vs. C. Ananthan Chettiar (2004) 192 CTR (Mad) 164 assessee having offered no explanation at all for disclosure of additional income after seizure of jewellery and cash during the search except to assert that he has disclosed the said income only to buy peace with the Department, the Hon'ble Madras High Court held that Tribunal erred in setting aside the penalty under section 271(1)(c). In Ravi & Co. vs. Asstt. CIT (2004) 271 ITR 286 (Mad) it was held that the though the assessee has filed a revised return, unless the assessee can show that the same was filed voluntarily, penalty was imposable for concealment of income. In CIT vs. Dr. A. Mohd. Abdul Khadir (2003) 183 CTR (Mad) 543 : (2003) 260 ITR 650 (Mad) penalty under s. 271 (1) (c) was held justified in spite of filing of revised return when such revised return could not be said to be voluntary in view of facts that it was filed after search operations had taken place and after the accountant of assessee had made admission about concealment. In P.C. Jos....
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....lty under s. 271(1)(c) was justified. [New United Construction Co. vs. CIT (2004) 270 ITR 214 (Jharkhand)]. Where original return is neither under s. 139(1) or under s. 139(2) but is a return filed under s. 139(4) which could not have been revised under s. 139(5) as held by the Supreme Court in the case of Kumar Jagdish Chandra Sinha vs. CIT (1996) 133 CTR (SC) 143, the assessee cannot get any advantage or benefit of revised return filed by him in relation to imposition of penalty for concealment in the original return filed under s. 139(4). This was also held by Allahabad High Court in Smt. Kusum Jaiswal vs. CIT (2005) 193 CTR (All) 651. In view of the foregoing, I don't find the revised return filed by the appellant is suo moto but it was only after the detection by the revenue that it was forced to revise the return, the penalty is thus exigible in the case of the appellant. 1.3.7 Further, the Ld. AR of the appellant submitted that section 275 which contains the bar of limitation for imposing penalties. The appellant has preferred an appeal against the order passed u/s. 147 r.w.s 143 only in respect of short credit of TDS. Additional income offered while filing revi....
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....3) r.w.s. 147 accepting return of income filed in response to notice issued u/s 148 . It was contended that assessee has declared the said income suo moto in return of income filed in pursuance to notice u/s 148 on which purportedly penalty was levied u/s 271(1)(c) . It was submitted that penalty proceedings were initiated u/s. 271(1)(c) and difference of Rs. 3,27,524/- was considered for levying penalty u/s. 271 (1)(c) on the grounds that the assessee has furnished inaccurate particulars of income which was suo-moto disallowed by the assessee in the return of income filed in pursuance to notice issued u/s 148 . The difference was on account of long term capital gain of Rs. 5,13,908/- which was sought to be adjusted against long term capital loss to the tune of Rs. 6,47,13,206/- on sale of shares of Dotex International Limited to NSE Limited, the said Dotex International Limited is subsidiary of NSE Limited and also assessee is 100% subsidiary of NSE Limited and hence by virtue of Section 47(v), the same is not treated as transfer and hence long term capital loss was not allowable on sale of shares. The assessee submitted that the assessee did not set off long term capital gains ag....
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..../s 143(3) r.w.s. 143(2), the assessee did not came forward to disclose the said income. The learned DR drew our attention to the decision of Hon'ble Supreme Court in the case of Mak Data Private Limited v. CIT (2013) 358 ITR 593(SC) and submitted that penalty will be levied u/s 271(1)(c) even if the said income is declared in the return of income filed in pursuance to notices issued u/s 148 . It was submitted that no challenge has been made by the assessee to the issuance of notice u/s. 148. The assessee relied upon the decision of the Hon'ble Supreme Court in the case of CIT v. Reliance Petroproducts Private Ltd. reported in (2010) 322 ITR 158(SC) and also decision of Supreme Court in the case of Price Water Coopers P. Ltd. v. CIT reported in (2012) 348 ITR 306(SC), and also relied upon the decision of Bombay High Court in the case of CIT v. Somany Evergreen Knits Ltd. in ITA no. 1332 of 2011 order dated 21st March 2013. 6. We have considered rival contentions and have perused material on record including case laws relied upon by rival parties. We have observed that the assessee is engaged in the business of development, maintenance and licensing of computer software and pro....
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....06-07-2010 . The AO invoked penalty proceeding u/s 271(1)(c) against the assessee for furnishing of inaccurate particulars of income u/s. 271(1)(c) of the Act in the assessment order passed u/s 143(3) r.w.s. 147 dated 06-07-2010 w.r.t. net long term capital gain of Rs. 3,27,524/- (net after adjustment of short term capital loss of Rs. 1,86,384/- against long term capital gains of Rs. 5,13,908/-) . No doubt the assessee has claimed the said set off of long term capital gain against the long term capital loss on sale of shares of Dotex International Ltd. to its holding company NSE in the original return of income filed u/s 139(1) but assessee on coming to know of said error has suo-moto disallowed/withdrawn the same without being confronted by the Revenue, in the return of income filed in pursuant to notice u/s 148. The reasons for reopening of the concluded assessment u/s 147 was supplied by Revenue to the assessee only after the assessee filed its return of income in pursuance to notice u/s 148. Thus assessee has, thus, demonstrated its bona-fide by withdrawing the said claim of set off long term capital gains in the return of income filed pursuant to notice u/s.148. In the origina....