TaxTMI 
TaxTMI 
2018 (3) TMI 1585
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....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 the claim was suo moto withdrawn on realizing bonafide mistake in original return of ....
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....n 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 of shares of Dotex International Limited by the assessee to its holding company NSE was hit by provisions of Section 47(v) of the 1961 Act a....
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....hing 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 u/s 271(1)(c) can be levied as there could be no concealment and furnishing of inaccurate particulars warranting levy of penalty. It will be appreciated that it is settled prin....
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.... 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 inadvertent error failed to add the provision for gratuity to its total income. This can only be described as a human error which we are all prone to make. The calibre and expertise of the assessee has little or not....
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....er 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 not leviable in cases where assessee made errors, under bona fide beliefs. In view of the above, Assessing Officer was not justified in levying penalty under section 271 (1)(c) and same is directed to be deleted. " d) CIT vs. Societex- ITA 1190/2011 Delhi HC Held....
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....e 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: In the ROI, the assessee had not offered the above reimbursed amount to tax under the bonafide belief that the same were not taxable. However, when a query was raised by the AO during the assessment proceedings, the assessee immediately offered that amount to tax for all the years. The p....
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.... 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 penalty under this Chapter shall be passed- [(a) in a case where the relevant assessment or other order is the subject-matter of an appeal to the Commissioner (Appeals) under section 246 [or section 246A) or an appeal to the Appellate Tribunal under section 253, after the expiry of the financial year in which the proceedings, in the course of which action for the imposition o....
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....d 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 High Court decision in the case of CIT v. Zoom Communication P. Ltd. 233 CTR 465 (Del), vide penalty order dated 26-03-2012 passed by the AO u/s 271(1)(c) of the 1961 Act. 4. Aggrieved by penalty order dated 26-03-2012 passed by the AO u/s 271(1)(c) of the 1961 Act, the assessee carried the matter in an appeal filed before the learned CIT-A who rejected the contentions of the assessee vide appellate order date....
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....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 order giving effect to appellate order. Subsequently, the case was re-opened u/s 147 of the Income Tax Act, 1961 and notice u/s 148 was issued to the appellant on 15.07.2009. In response to the said notice appellant filed the return of income wherein it offered the additional income of Rs. 3,59,171/-. It is a fact that appellant has filed revised return in response to notice u/s.148 withdrawing its claim of set off of capital gai....
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....tement 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 "discovered" coming in s. 139(5) makes it clear that at the time of discovering only a person who has furnished return finds out that an inadvertent omission or an unintended wrong statement had crept in the return filed by him. If a person who filed return was aware of the falsity of statement and incorrectness of the particulars of income even at the time when he filed original returns, there was no question of that person subsequent....
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....ent, 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. Joseph & Bros. vs. CIT (2000) 158 CTR (Ker) 104 it was held that where the surrender of income in the revised return is not voluntary but is as a result of detection by assessing authority, the filing of revised return is of no consequence. Simply because assessee agreed to addition of concealed income after detection thereof by spreading the amount over four years and filed returns in response to notice under s.148 offering additional income, it ca....
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....tion 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 revised Return of Income was not agitated. As, assessing officer has initiated penalty proceedings in respect of additional income offered in the returned income which is not agitated by the appellant, the assessing officer should have completed the said penalty 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 mont....
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....d 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 against the said long term capital loss in the return filed in pursuant to notices u/s 148, however, the assessee set off short term capital loss of Rs. 1,86,384/- against this long term capital gains of Rs. 5,13,908/- which was allowed by the AO and hence the difference was Rs. 3,27,524/- on which purportedly penalty was levied u/s 271(1)(c). Our attention was drawn to the assessment order of the AO passed u/s. 143(3) as well as the assessment order passed in reasse....
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....uance 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 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 u/s 139(1) 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 passed u/s 143(3), wherein the income assessed was Rs. 8,22,78,960/- . The case of the assessee was reopened by Revenue....
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....in 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 original return of income, the assessee made this legal claim of set off of long term capital gains against long term capital loss arising from the sale of shares of Dotex International Limited to its 100% holding company NSE Limited which was hit by provisions of Section 47(v) of the Act as it will not constitute transfer which claim stood withdrawn by the assessee itself, but every legal claim which is filed and which is not allowed by the Revenue does not automatically lead ....