TaxTMI 
TaxTMI 
2014 (5) TMI 1249
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....s engaged in supplying electricity in and around 183 villages and tehsils of Ahmednagar district in Maharashtra since 1969-70. The assessee is one of the five pilot projects undertaken by the State Govt. under the Electric Co-operative movement and established in 1969-70 under the project sponsored by USAID in collaboration with NRECA through Rural Electrification Corporation Limited (in short "RECL"). The assessee purchases electricity from the Maharashtra State Electricity Board (MSEB) and distributes to the customers in the earmarked area. The assessee filed the return of income for the A.Y. 2002-03 declaring loss of Rs. 59,61,16,520/-. The Assessing Officer completed the assessment and made the addition of Rs. 541,80,37,753/- u/s. 41(1) of the Income-tax Act which was towards the reduction of liability of MSEB due to the relief given by the Govt. of Maharashtra by determining the viable Tariff for the period of 1977-78 to 1999-2000. After giving the benefit of set off of brought forward losses and other adjustments, the Assessing Officer finally assessed the assessee's income at Rs. 260,82,24,399/-. 3. It is pertinent to note here that the assessee challenged the action of t....
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....elief to the assessee out of the addition of Rs. 541.80 Crores made by the Assessing Officer u/s. 41(1) of the Act to the extent of Rs. 36,53,65,905/- which was declared by the assessee in the A.Y. 2000-01 and further relief of Rs. 139,35,75,305/-. In sum and substance the assessee could get the total relief to the extent of Rs. 175.89 Crores. As per the order passed by the Assessing Officer giving effect to the order of the Tribunal u/s. 254 of the Income-tax Act dated 16-08-2013. 5. The Ld. CIT(A) confirmed the penalty order. It appears that the Ld. CIT(A) has called for the remand report of the Assessing Officer. The assessee took the multiple contentions before the Ld. CIT(A) including his contentions since the assessment proceedings that even if Sec. 41(1) is to be invoked then the A.Y. 2002-03 is not a correct assessment year but at the most A.Y. 2000-01 in which the Govt. Resolution was issued. The Ld. CIT(A) rejected all the contentions of the assessee and confirmed the penalty levied by the Assessing Officer on principle but directed the Assessing Officer to rework the penalty after considering the orders of the CIT(A) and the Tribunal in quantum proceedings. The operat....
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....lly disclosed all the particulars of income and there is no question of furnishing inaccurate particulars of income. d) Explanation 1 to Sec 271(1)(c) cannot be invoked for furnishing inaccurate particulars of income since it provides deeming fiction on concealment of income. Therefore, it cannot be extended to furnishing of inaccurate particulars of income. The penalty is levied on incorrect charge of filing inaccurate particulars of income and hence is invalid. e) The conditions of Explanation (1) to section 271(1)(c) are not satisfied. f) Penalty cannot be levied merely because there is a difference of opinion or because the issue is debatable and when the Appellant's view is bona fide. g) The learned AO has taken contradictory position by assessing part of the remission in AY 2000-01 and part in AY 2002-03, this shows that the issue is debatable. h) Penalty cannot be levied merely because the claim made by the Appellant is not sustained by the learned AO. 2.3.7 In view of the above, it is to be decided as to with respect to the addition confirmed by the Tribunal, whether penalty levied by the learned AO is sustainable or....
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....s to substantiate and prove his explanation, which is bona fide. 2.3.9 The Appellant's explanation is that it was under the bonafide view that the remitted amount is taxable in the AY 2000-01 and in the years to which remission of tariff relate to. Accordingly, it filed revised returns of the six years. I have considered the Appellant's explanation. I do not find this explanation to be bonafide for two reasons. Firstly, in order to consider any explanation to be bonafide, the Appellant should have demonstrated me basis on which, it holds such a view. Merely by stating the explanation is bonafide cannot make the explanation bonafide, if the basis or surrounding circumstances for holding such view is not demonstrated. The Appellant has stated that the liability is spread to each of the prior years from AY 200-01 to AY 1995-56. However, the Appellant has not furnished any legal provision or judicial decisions on the basis of which, it held such a view and decided to spread remission over years. 2.3.10 Secondly, provisions of section 41(1) are clear that it taxes the amount in the year of cessation of liability. According to the Appellant's own view, the r....
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....vernment's policy decision to remit the liability. However, the actual remission of liability has happened only on receipt of the Order of the MSEB dated 23.05.2001. The amount of arrears to be written off was determined on the basis of the Order of the MSEB dated 23.05.2001. This explains that the date of filling of revised returns of 27.12.2002. Had the Appellant genuinely held the view of liability getting ceased in AY 2000-01 in consequence to GR issued in 1999, the Appellant would have filed revised returns of AY 1995-96 to AY 2000-01 in the year 1999 or in the year 2000 itself/but not in the year 2002. Even otherwise, the Appellant could not have filed revised returns in the year 1999 or year 2000 in absence of quantification of remission amount, which was worked out in 2001 in consequence to MSEB Order. Therefore, 'the Appellant's conduct is not consistent with its explanation and therefore, the Appellant's explanation is neither bonafide nor is substantiated by it. 2.3.14 The Appellant has stated that the penalty cannot be levied when the issue is debatable or merely because the Appellant's bonafide view was not accepted by the learned AO becaus....
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....nt reduction in bills the income of the A Y 1978-79 to 1994-95 have been recomputed. These details show that there is positive income for all these a years up to 1994-95. As this period falls beyond six years prior to A Y 2001-02 the income so recomputed now cannot be taxed. However the recomputed income for the A years 1995-96 is taxable and there being loss for the A Y 1996-97 onward there is no tax liability. The assessee society has therefore filed the revised returns showing the recomputed income for A years 1995-96 to 2001-02. For the A Y 1995-96 the assessee society is liable to pay tax of Rs. 1,29,65,631. However there being acute financial crunch the society has not been able to pay any tax and therefore the said return is filled without making the self assessment payment of the tax determined. 2.3.16 The perusal of the above stated Note and the disclosure made in the Audit Report show that there is no reference to the main event of the Order issued by the MSEB dated 23.05.2001. On the basis of which, the honourable ITAT has held that year of taxability u/s 41(1) is- AY 2002-03. In view of this, it can be stated that the Appellant did not disclos....
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....ed by the honourable Supreme Court^ in the case of Dharmendra Textile Processor's case. Accordingly, I dismiss this argument of the Appellant. 2.3.20 The Appellant has also stated that the learned AO has assessed part of the remission in AY 2000-01 and other part in AY 2002-03, hence this action itself shows that the issue is debatable as different interpretations are possible on the year of taxability of remission. I find this argument without merit as the there was no Order u/s 143(3) in AY 2000-01, but the return was accepted u/s 143(1). Further, when the learned-AO initiated the reassessment proceedings in the year 2008, reopening AY 2001-02, was barred by statutory limitation. 2.3.21 The Appellant has also raised the issue of invalidity of the penalty order in absence of providing of adequate opportunity to it for defending its case during the penalty proceedings. I do not consider this objection material as this opportunity was provided to the Appellant during the appellate stage before me and also before the learned AO by calling a remand report from him on the Appellant's submission. Therefore, I dismiss this argument of the Appellant. 2.3....
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....n compilation at Page No. 25 of the Paper Book. He submits that the previous arrears for the period April, 1977 to March, 2001 are shown in the bill of the MSEB dated 16-05-2001. He referred to the letter addressed by the assessee dated 21-05-2001 (Page No. 26 of the Paper Book) and submits that clarification was sought from the MSEB and vide letter dated 23-05-2001 the MSEB sent the reply mentioning the viable rate which were applied for working out the arrears from the year 1977-78 to 1999-2000 (Page Nos. 27 to 29 of P.B.). He submits that the assessee has already worked out the relief given by the Govt. by finalizing the viable rates and filed the returns for the six preceding assessment years i.e. for the A.Ys. 1995-96 to 1999-2000 on 27-02-2002 as the assessee was under the bonafide believe that the relief is to be worked out year wise. He submits that in respect of the waiver of the liability to the extent of Rs.36.89 Crores which was related to F.Y. 1998-99 and 1999-2000, the accounting entry was made in the books of account in F.Y. 1999-2000 and offered the said amount for the A.Y. 2000-01 when the original return was filed on 23-10-2000. He argues that the entire amount of....
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....Y. 2002-03. He placed his heavy reliance on the decision of the Hon'ble Supreme Court in the case of Price Waterhouse Coopers Pvt. Ltd. Vs. CIT 348 ITR 306 (SC). He argues that nowhere the Assessing Officer has invoked the Expl. 1(A) or (B) to Sec. 271(1)(c) of the Act. He placed his reliance on the decision in the case of CIT Vs. Reliance Petroproducts Pvt. Ltd. 322 ITR 158 (SC). He also vehemently assailed the order of the Ld. CIT(A) and finally submitted that even if the addition is made but the loss determined by the Assessing Officer is more than the loss declared by the assessee. He pleaded for deleting the penalty. We have also heard the Ld. DR who supported the order of the authorities below. 10. We have heard the rival submissions of the parties and perused the record. The assessee society was formed for supplying the electricity around 183 villages in the district of Ahmednagar in the year 1969-70. It was one of the pilot projects of the Govt. of Maharashtra. The assessee society purchases the electricity (Power) from the MSEB and sells the same to the consumers in the area earmarked for it. It is stated that the rates for the electricity purchase from the MSEB and....
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....ete the said amount. The contention of the assessee is that the benefit to the assessee in the form of partial remission of the MSEB liability towards the purchase of electricity was in the year 1999-2000 as the Govt. issued the Govt. Resolution on 21-05-1999, fixing the viable Tariff. On the basis of the Govt. Resolution whatever the bills were subsequently revised by the MSEB on 16-05-2001 was only giving effect and hence, even if the provisions of Sec. 41(1) are attracted as the benefit accrued to the assessee society towards the partial remission of the MSEB liability may at the most be taxed in the A.Y. 2000-01 was not accepted by the Assessing Officer and the same was also rejected by the Tribunal. 12. The assessee moved the Miscellaneous Application u/s. 254(2) in the order passed by the ITAT, Pune in ITA No. 1308/PN/2010 dated 06-03-2012 dismissing the assessee's appeal on the reason that one of the grounds of the alternate contention was not adjudicated. The Tribunal recalled the order passed in ITA No. 1308/PN/2010 dated 06-03-2012 and adjudicated the ground which was remained to be decided. The Tribunal passed the order in ITA No. 1308/PN/2010 dated 31-05-2013 accepti....
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....uld get the final working from the MSEB in the F.Y. 2001-02, but the fact remained that the Govt. Resolution dated 21-05-1999 has given the relief to the assessee and MSEB has only done arithmetical job by working out the revised bills as per the viable Tariff as fixed in Govt. Resolution. 14. It is true that the Tribunal has confirmed the action of the Assessing Officer that the benefit received by the assessee society towards the MSEB liability is a taxable in the A.Y. 2002-03 but at the same time there is force in the argument of the Ld. Counsel that the Govt. Resolution is dated 21-05-1999 fixing the viable Tariff giving the benefit to the assessee. It is also seen that the MSEB raised the bill for the period April, 1998 to July, 1999 @ 48.87 Paisa Per Unit as per the viable Tariff fixed vide Govt. Resolution dated 21-05-1999 and the said bill was raised in the form of the supplementary bill dated 10-09-1999. As the MSEB implemented the GR dated 21-05-1999 in the F.Y. 1999-2000 itself that suggest that there can be debate in respect of the taxability of the benefit received by the assessee to the extent of the assessment year. 15. The main plank of the argument of the Ld.....
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...., in our opinion bonafide of the assessee society for declaring the benefit received/accrued vide Govt. Resolution dated 21-05-1999 should not be disputed and the said explanation cannot be treated either false or nongenuine within meaning of Explanation 1(A) or (B) to u/s. 271(1)(c) of the Act. In our opinion the income assessed u/s. 41(1) always remained debatable issue. The conduct of the assessee in filing the revised returns for the A.Ys. 1995-96 to 1999-2000 and further declaring the benefits in the A.Y. 2000-01 shows that there was no conscious act on the assessee to furnish any inaccurate particulars of its income. 17. The next argument of the Ld. Counsel is that there can be a bonafide mistake also as the Income tax law is such complex to understand and in that context he relied on the decision in the case of Price Waterhouse Coopers Pvt. Ltd. (supra). Ld. Counsel submits that the assessee society never thought of applicability of Sec. 41(1) of the Act but as per bonafide belief was of opinion that the benefit accrued due to Govt. Resolution dated 21-05-1999 would be spread over from 1977-78 to 2000-01. In the case of Price Waterhouse Coopers Pvt. Ltd. (supra) the asses....
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....ng the loss at Rs. 66,44,43,348/- as against the return loss for the A.Y. 2002-03 at Rs. 59,61,16,518/- hence, there is no reduction in the loss also whereby the Explanation 4(a) below Sec. 271(1)(c) can said to be applicable. 19. In the case of Reliance Petroproducts Pvt. Ltd. (supra) the Hon'ble Supreme Court has held as under: 8. A glance at this provision would suggest that in order to be covered, there has to be concealment of the particulars of the income of the assessee. Secondly, the assessee must have furnished inaccurate particulars of his income. Present is not the case of concealment of the income. That is not the case of the Revenue either. However, the Learned Counsel for Revenue suggested that by making incorrect claim for the expenditure on interest, the assessee has furnished inaccurate particulars of the income. As per Law Lexicon, the meaning of the word "particular" is a detail or details (in plural sense); the details of a claim, or the separate items of an account. Therefore, the word "particulars" used in the Section 271(1)(c) would embrace the meaning of the details of the claim made. It is an admitted position in the present case that no inf....
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....tionary jurisdiction upon the Assessing Authority, inasmuch as the amount of penalty could not be less than the amount of tax sought to be evaded by reason of such concealment of particulars of income, but it may not exceed three times thereof. It was pointed out that the term "inaccurate particulars" was not defined anywhere in the Act and, therefore, it was held that furnishing of an assessment of the value of the property may not by itself be furnishing inaccurate particulars. It was further held that the assessee must be found to have failed to prove that his explanation is not only not bona fide but all the facts relating to the same and material to the computation of his income were not disclosed by him. It was then held that the explanation must be preceded by a finding as to how and in what manner, the assessee had furnished the particulars of his income. The Court ultimately went on to hold that the element of mens rea was essential. It was only on the point of mens rea that the judgment in Dilip N. Shroff Vs. Joint Commissioner of Income Tax, Mumbai & Anr. was upset. In Union of India Vs. Dharamendra Textile Processors (cited supra), after quoting from Section 271 extensi....
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....t or correct, not according to truth or erroneous. We must hasten to add here that in this case, there is no finding that any details supplied by the assessee in its Return were found to be incorrect or erroneous or false. Such not being the case, there would be no question of inviting the penalty under Section 271(1)(c) of the Act. 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. Such claim made in the Return cannot amount to the inaccurate particulars. 20. In the present case, the Assessing Officer has levied the penalty u/s. 271(1)(c) on the specific charge of furnishing inaccurate particulars of income and the same has been endorsed by the Ld. CIT(A) while confirming the penalty. A penalty u/s. 271(1)(c) can only be imposed if the mandates of the said sections are fulfilled and it is not an automatic consequence of an addition made to the income of the assessee in the course of assessment proceedings. The finding recorded in the assessment order may constitute good evidence in the penalty proceedings but those findings cannot be regarded as a conclusive proof for....