TaxTMI 
TaxTMI 
2018 (6) TMI 896
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....ceedings, AO noticed that in the computation of income filed alongwith return of income, the assessee had shown short term capital gain of Rs. 4,53,22,995 on sale of land. As against this, the assessee had set off loss of Rs. 3,70,50,000 on account of write off of investments of M/s Niru Jewels Pvt Ltd. During the course of assessment proceedings, the assessee had filed a revised computation of total income wherein the long term capital gain declared on sale of land was withdrawn stating that the transfer made during the year was void as the assessee had no right to sell the property and, therefore, the sale agreement had been cancelled and the land had been repurchased and thus, no capital gain arose on account of transfer of land. In the revised computation, the assessee had claimed carry forward of loss of Rs. 3,70,50,000 on account of investments in M/s Niru Jewels Pvt Ltd. During the course of assessment proceedings, the AO asked the assessee to furnish necessary details of transactions and supporting documents in respect of long term capital gain. The AO, after considering relevant submissions of the assessee observed that the assessee has claimed loss in respect of investmen....
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....995, as per which, where there is a decline, other than temporary, in the carrying amount of long term capital investments, the resultant reduction in the carrying amount is charged to the P&L Account. Therefore, the AO was totally incorrect in coming to the conclusion that the assessee has deliberately furnished inaccurate particulars of income so as to evade payment of taxes which warranted levy of penalty u/s 271(1)(c). The assessee also relied upon various judgements including the decision of Hon'ble Supreme Court in the case of CIT vs Reliance Petroproducts Pvt Ltd (2010) 322 ITR 158 (SC). 4. The Ld.CIT(A), after considering relevant submissions of the assessee and also relying upon various judicial precedents including the decision of Hon'ble Supreme Court in the case of Mak Data vs CIT 358 ITR 593 (SC) held that the assessee has furnished inaccurate particulars of income and has also concealed the particulars of income within the meaning of section 271(1)(c) of the Income-tax Act, 1961 and hence, upheld the order of the AO levying penalty of Rs. 1,21,19,016. The relevant portion of the order of CIT(A) is reproduced below:- 6. I have considered the facts of the ca....
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....m capital loss. The appellant has contended before me that he should be deemed to have transferred his shares to the bank with no realization value, and, consequently, he should be allowed the benefit of long term loss. 8. I have considered the argument of the appellant. The appellant was holding shares worth Rs. 3,70,50,000/- in the company, Niru Jewels Pvt. Ltd. It appears that this company suffered losses and defaulted in repayment of loan taken from State Bank of India. From the details furnished, it appears that the bank had attached the company's property situated at Unit No.704, 7th floor, Tower-1, SEEPZ, MIDC, Andheri (E), Mumbai and the said property was put up for auction by the said bank on 13/ 1/2015. Event it is not clear whether the above property was attached by the bank during the year under consideration. It is also not clear whether all the assets of the company had been taken over by the bank. In any case, the process for liquidation of the company and distribution of its assets amongst the stakeholders was not complete during the year under consideration. This is evident from the fact that the bank had put up the above property of the company for au....
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....claiming non-genuine loss, and the appellant has done exactly the same, jpellant cannot plead ignorance of law, as he was represented by a Chartered Accountant during the course of assessment proceedings and appellate proceedings and still pursued the claim of loss, which shows that the appellant had deliberately made the claim with malafide intention. Under the circumstances, I have no hesitation in holding that the appellant has furnished inaccurate particulars of income, within the meaning of Sec.271(l)(c) of the Act. 10. Further, the appellant's case is also covered by Explanation 1 to Sec.271(1) of the Act, which are reproduced as under :- "Explanation 1. - 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) r 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 computatio....
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....d there is no explanation for such failure. 13. In the case of MAK DATA vs CIT as reported in 358 ITR 593(SC) 2013, the Hon'ble Supreme Court went one step further and held that even in the cases where the assessee had admitted certain income during the course of search/survey or otherwise, with a view to buy peace or with a view to avoid litigation or with a view to have amicable settlement, still the assessee cannot escape penalty u/s.271(l)(c) of the Act. The relevant portion of the judgment is reproduced as under:- " The AO, shall not be carried away by the plea of the assessee like "voluntary disclosure", "buy peace", "avoid litigation", "amicable settlement", etc. to explain away its conduct. The question is whether the assessee offered any explanation for concealment of particulars of income or furnishing inaccurate particulars of income. Explanation to Section 271(1) raises a presumption of concealment, when a difference is noticed by the AO, between reported and assessed income. The burden is then on the assessee to show otherwise, by cogent and reliable evidence. When the initial onus placed by the explanation, has been discharged by him, the onus sh....
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....e instant case. Therefore, the view of the High Court was fully agreed." 14. In view of the above facts and legal position, I hold that the appellant has furnished inaccurate particulars of income and has also concealed the particulars of income within the meaning of Sec.271(l)(c) of the Act. Consequently, I uphold the order of the AO levying penalty of Rs. 1,21,19,016/- on the appellant, and the ground taken by the appellant is rejected." 5. The Ld.AR for the assessee submitted that the assessee has neither concealed particulars of his income nor furnished any inaccurate particulars of his income while claiming long term capital loss of Rs. 3,70,50,000 in respect of investments in shares of M/s Niru Jewels Pvt Ltd as the said claim is based on AS-13 issued by ICAI which is mandatory in nature w.e.f. 01-04-1995. The Ld.AR further submitted that there is a reason for the assessee to write off investments in its books of account as the underlying assets of the said company were taken over by the banks as the same were mortgaged to the banks against their liabilities and hence, the value of the said shares had become Nil. The assessee further submitted that as per AS-13, w....
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.... deliberately claimed set off of loss on account of write off of investment in shares to set off long term capital gain derived from sale of agricultural land. Therefore, he opined that the assessee has deliberately furnished inaccurate particulars of income so as to evade tax which warranted levy of penalty u/s 271(1)(c) of the Act. The AO further observed that concealment of income can be done in many manners. The concealment can result in by claiming wrong deduction in the manner different from the one prescribed under law. The concealment not only refers to deliberate attempt to file inaccurate particulars but it also means claiming wrongful deduction thereby reducing its taxable income. The assessee is doing exactly the same thing by claiming incorrect loss by writing off its investments in shares of other company without any effective transfer of shares. The AO also taken support from various judicial precedents including the decision of Hon'ble Delhi High Court in the case of CIT vs Zoom Communications Pvt Ltd (2010) 327 ITR 510 (Del). 8. It is the contention of the assessee that mere making a wrong claim which is not allowable under the Act does not tantamount to furnish....
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....ed assets of the company were taken over by the banks as the same were mortgaged to the banks. The assessee further claims that M/s Niru Jewels Pvt Ltd is indebted to the banks for more than Rs. 62 crores and the assets of the company were taken over by the banks and proceedings were commenced by issue of notice u/s 13(2) of the Securitisation & Reconstruction of Financial Assets and Enforcements of Securities Interest Act, 2002 (SRFAESI Act) and recovery proceedings were commenced before the Debt Recovery Tribunal and also a notice of e-auction was issued to auction the assets. These facts are proved with documentary evidences and not found to be incorrect. Under these facts and circumstances, if we examine the claim of the assessee that he had made a bona fide claim of loss on account of write off of investments appears to be genuine and there is no mala fide intention to evade payment of tax. We further observe that the assessee has claimed such loss as per the mandatory accounting policies prescribed by ICAI and also on the basis of advice of tax consultants. Since the assessee has made such claim on the basis of mandatory accounting principles, we are of the view that the clai....
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....he proposed question of law." 11. The assessee also relied upon the decision of ITAT, Mumbai "H" Bench in the case of Hindalco Industries Ltd vs ACIT (2010) 41 SOT 254 (Mum). The co-ordinate bench, in the said case, after following the ratio laid down by the Hon'ble Supreme Court in the case of CIT vs Reliance Petroproducts Pvt Ltd (supra) held that where there is no finding that any details supplied by the assessee in its return are found to be incorrect or erroneous or false, there is no question of inviting penalty u/s 271(1)(c) of the Act. The relevant portion of the order is extracted below:- The word 'conceal' is derived from the latin 'word 'concelare' which implies con+celare, i.e., to hide. Webster in his New International Dictionary equates its meaning to hide or withdraw from observation; to cover or keep from sight; to prevent the discovery of and to withhold knowledge of The offence of concealment is, thus, a direct attempt to hide an item of income or a portion thereof from the knowledge of the income-tax authorities. [Para 10.2] There is strict liability on the assessee for concealment or for giving inaccurate particulars whil....
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....ceedings on one or both of the grounds of default as may have been specifically and directly detected. [Para 10.5] A conspectus of the Explanation 1 to section 271(l)(c) makes it clear that the statute visualises the assessment proceedings and penalty proceedings to be wholly distinct and independent of each other. In essence, the Explanation is a rule of evidence. Presumptions which are rebutting in nature are available to be drawn. The initial burden of discharging the onus of rebuttal is on the assessee. The rationale behind this view is that the basic facts are within the special knowledge of the assessee. Section 106 of the Indian Evidence Act, 1872, gives statutory recognition to this universally accepted rule of evidence. There is no discretion conferred on the Assessing Officer as to whether he can invoke the Explanation or not. Explanation 1 comes into operation when, in respect of any fact material to the computation of total income of any person, there is failure to offer an explanation or an explanation is offered which is found to be false by the Assessing Officer or the first appellate authority, or an explanation is offered which is not substantiated. In suc....
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....furnished in the paper book. According to Schedule C - Capital gain of the income-tax return form, an assessee in column A states regarding detail of capital gain/loss where it was filled up by the assessee by writing as 'Please refer Annexure II giving complete details'. It was noticed that there were no specific requirements in the return form applicable to the year under consideration. Such column in the return has been inserted by the amendment in return form, ITR-6, at page 17, 'Schedule CG capital gain' S. No. 3(d) which is applicable from the assessment year 2007-08. The Apex Court in the case o/CIT v. Reliance Petroproducts (P.) Ltd. [2010] 322 1TR 158 / 189 Taxman 322 (at page 164) regarding the word 'particulars' used in section 27I(I)(c) had held that there can be no dispute that everything would depend upon the return filed because that is the only document, where the assessee can furnish the particulars of his income. When such particulars are found to be inaccurate, the liability would arise. But in the case under consideration, it was found that the assessee had furnished full detail and had not concealed any particulars of income or had furni....