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Income Tax Appellate Tribunal, MUMBAI BENCH “F”, MUMBAI
Before: SHRI KULDIP SINGH & SHRI PRASHANT MAHARISHI,
IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH “F”, MUMBAI BEFORE SHRI KULDIP SINGH, JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER, ITA No.4490/M/2018 Assessment Year: 2013-14
DCIT - 9(3)(2), M/s. Future E-Commerce 418, 4th Floor, Infrastructure Ltd., Aayakar Bhavan, Knowledge House, M.K. Marg, Off Jogeshwari-Vikhroli Vs. Mumbai - 400020 Link Road, Shyam Nagar, Jogeshwari – East, Mumbai – 400 060 PAN: AABCF 1008K (Appellant) (Respondent)
Present for: Assessee by : Shri Vipul Joshi, A.R. Revenue by : Shri Pinisetty Satya Prasanth, D.R. Date of Hearing : 29.12.2021 Date of Pronouncement : 19.01.2022
O R D E R Per Kuldip Singh, Judicial Member: Appellant DCIT-9(3)(2), Mumbai (hereinafter referred to as the Revenue) by filing present appeal sought to set aside the impugned order dated 05.04.2018 passed by Commissioner of Income Tax (Appeals) [hereinafter referred to as the CIT(A)]
deleting the penalty levied by the Assessing Officer under section 271(1)(c) of the Act on the grounds inter alia that:-
2 ITA No.4490/M/2018 M/s. Future E-Commerce Infrastructure Ltd. “1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) ignored the fact that assessee is repeatedly ignoring the findings of Tax Auditor about the inadmissibility of expenses for A.Y. 2012-13 and claimed inadmissible expenses not only in the instant year but also in preceding year. 2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the penalty ignoring the provisions of sec. 27i(i)(c) of the Act. The appellant prays that the order of the CIT(A) on the above ground be set aside and that of the DCIT 9(3X2) be restored. The appellant craves leave to amend or alter any grounds or add a new ground which may be necessary.”
Briefly stated facts necessary for adjudication for the
controversy are that; on the basis of assessment framed under
section 143(3) of the Act by making disallowance of
Rs.5,33,08,153/- and Rs.9,58,000/- under section 40(a)(ia) of the
Act and on account of prior period expenses respectively, Assessing
Officer initiated the penalty proceedings against the assessee by
way of issuance of notice under section 274 read with section
271(1)(c) of the Act. Declining the contentions raised by the
assessee the Assessing Officer proceeded to levy the penalty to the
tune of Rs.1,85,000/- @ 100% of the tax sought to be evaded under
section 271(1)(c) of the Act.
Assessee carried the matter before the Ld. CIT(A) by way of
filing appeal who has partly allowed the same. Feeling aggrieved
the Revenue has come up before the Tribunal by way of filing the
present appeal.
3 ITA No.4490/M/2018 M/s. Future E-Commerce Infrastructure Ltd. 4. We have heard the Ld. Authorised Representatives of the
parties to the appeal, perused the order passed by the Ld. Lower
Revenue Authorities in the light of the facts and circumstances of
the case and case law relied upon.
Undisputedly the assessee is a public limited company who
has filed its return of income declaring loss at Rs.32,81,02,698/-. It
is also not in dispute that assessee company has accepted the
disallowance made by the Assessing Officer. It is also not in
dispute that Assessing Officer initiated the penalty proceedings on
the basis of “tax audit report”. It is also not in dispute that penalty
has been initiated on the basis of two additions made by the
Assessing Officer viz. making disallowance/addition of
Rs.5,33,08,153/- and Rs.9,58,000/- under section 40(a)(ia) of the
Act on account of prior period expenses respectively.
Assessee by moving an application under rule 27 of the
Income Tax Appellate Tribunal Rules sought to support the
impugned order passed by Ld. CIT(A) on the following technical
grounds also.
“(i) The statutory show - cause notice issued by the Assessing Officer is not as per the legal requirement, in as much as the irrelevant portion of the notice has not been struck - off. (ii) No penalty can be levied with respect to disallowance made u/s. 40 (a) (ia), being a deeming provision. (iii) The penalty not leviable if there is huge assessed loss of which no benefit taken in future years.
4 ITA No.4490/M/2018 M/s. Future E-Commerce Infrastructure Ltd. 7. Keeping in view of the undisputed facts recorded in the
preceding paras assessee is allowed to support the impugned order
passed by the Ld. CIT(A) on technical grounds, apart from other
arguments on merit to be addressed in this case under rule 27 of the
Income Tax Appellate Tribunal Rules. Because, technical
arguments now sought to be raised by the assessee have not been
dealt with by Ld. CIT(A) in the impugned order.
In the backdrop of the aforesaid undisputed facts and
circumstances of the case, the sole question arises for determination
in this case is;
“as to whether assessee company has concealed the particulars of income or has furnished inaccurate particulars of such income during the assessment proceedings so as to attract the penal provisions contained under section 271(1)(c) of the Act”?
The Ld. D.R. for the Revenue, challenging the impugned
order passed by the Ld. CIT(A), contended inter alia that the
assessee company has intentionally concealed its income by
furnishing inaccurate particulars of income by claiming
inadmissible amount under section 40(a)(ia) of the Act despite
being pointed out by “tax audit report” and that assessee company
has also debited prior period expenses of Rs.9,58,000/- on account
of electricity expenses again despite being pointed out in “tax audit
report” and relied upon the assessment order as well as penalty
order passed by the Assessing Officer.
5 ITA No.4490/M/2018 M/s. Future E-Commerce Infrastructure Ltd. 10. However, on the other hand, the Ld. A.R. for the assessee, in
order to repel the argument addressed by Ld. D.R. for the Revenue,
relied upon impugned order passed by Ld. CIT(A) and contended
inter alia that initiation of the penalty proceedings by way of
issuance of notice under section 274 read with section 271(1)(c) of
the Act is bad in law as the assessee has not been made aware of as
to whether he was being penalized for concealing the particulars of
income or for furnishing inaccurate particulars of such income and
drew our attention towards the notice of penalty available at page
No.1 of the paper book; that even at the time of assessment,
Assessing Officer has failed to apply his mind, if assessee company
has concealed the particulars of its income or has furnished
inaccurate particulars of such income rather borrowed his
satisfaction to initiate the penalty proceedings from the “tax audit
report”; that assessee company has brought on record all the facts
and its financials during the assessment proceedings and has never
concealed particulars of income nor has furnished inaccurate
particulars of such income.
So far as contentions raised by Ld. D.R. for the Revenue that
assessee has claimed inadmissible amount of Rs.5,33,08,153/-
without deducting TDS despite being pointed out by “tax audit
report” in clause 17(f) is concerned, we are of the considered view
6 ITA No.4490/M/2018 M/s. Future E-Commerce Infrastructure Ltd. that when the assessee company has brought on record the entire
amount on record, though inadmissible, it does not amount to
concealment of particulars of income or furnishing of inaccurate
particulars of income so as to attract section 271(1)(c) of the Act.
Because, it is for the Revenue Authority to examine if the amount
claimed is admissible or not as has been held by the Hon’ble Apex
Court in the case of CIT vs. Reliance Petroproducts (P.) Ltd. (2010)
189 Taxman 322, operative part of which is as under:
“A glance at the provisions of section 271(1)(c) of the I.T. Act, 1961 suggests that in order to be covered by it, 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. The meaning of the word “particulars” used in section 271(1)(c) would embrace the detail of the claim made. Where no information given in the return is found to be incorrect or inaccurate, the assessee cannot be held guilty of furnishing inaccurate particulars. In order to expose the assessee to penalty, unless the case is strictly covered by the provision, the penalty provision cannot be invoked. By no stretch of imagination can making an incorrect claim tantamount to furnishing inaccurate particulars. There can be no dispute that everything would depend upon the return filed by the assessee, 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. To attract penalty, the details supplied in the return must not be accurate, not exact or correct, not according to the truth or erroneous. 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 the penalty under section 271(1)(c). A mere making of a claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee. Such a claim made in the return cannot amount to furnishing inaccurate particulars.”
Not only this, AO at the time of initiating the penalty
proceedings during framing assessment order has failed to apply his
mind as he was not clear enough as to whether he is initiating the
7 ITA No.4490/M/2018 M/s. Future E-Commerce Infrastructure Ltd. penalty proceedings for furnishing inaccurate particulars of income
or for concealing the particulars of income rather invoked both the
limbs of section 271(1)(c) of the Act. Operative part of the
assessment order initiating the penalty proceedings is extracted as
under for ready reference:
“Penalty proceedings u/s. 271(1)(c) are initiated separately for furnishing inaccurate particulars of income and for concealing the particulars of income.”
So we are of the considered view that AO has not applied his
mind before initiating the penalty proceedings rather borrowed his
satisfaction from the “tax audit report” and proceeded to initiate and
levy the penalty which is not sustainable in the eyes of law.
Furthermore, when we examine penalty notice issued by the
Assessing Officer under section 274 read with section 271(1)(c) of
the Act it is again vague and ambiguous being not specific as to
whether the assessee has concealed the particulars of its income or
has furnished inaccurate particulars of income so as to make aware
the assessee under which of the limb of section 271(1)(c) of the Act
it is going to be penalized.
8 ITA No.4490/M/2018 M/s. Future E-Commerce Infrastructure Ltd. 15. For ready perusal penalty notice is extracted as under:
9 ITA No.4490/M/2018 M/s. Future E-Commerce Infrastructure Ltd. Since the Assessing Officer has not issued a valid notice by framing
a specific charge to be initiated against the assessee rather invoked
both the limbs of section 271(1)(c) of the Act for furnishing
inaccurate particulars of income or for concealing the particulars of
income no penalty can be imposed on the basis of the same.
Hon’ble Bombay High Court in the case of Mohd. Farhan A.
Shaikh vs. DCIT (2021) 434 ITR 1 (Bombay) has decided the
identical issue as to initiating the penalty proceedings on the basis
of invalid notice and held that penalty levied on the basis invalid
notice issued under section 274 read with section 271(1)(c) of the
Act is not sustainable and is liable to be set aside.
It is further contended by Ld. A.R. for the assessee that when
the assessee company has suffered huge losses no penalty under
section 271(1)(c) of the Act can be levied and relied upon the order
passed by Hon’ble Gujarat High Court and order passed by the co-
ordinate Bench of the Tribunal in the cases cited as National
Textiles vs. CIT 249 ITR 125 (Guj), Qpro Infotech Ltd. vs. DCIT–
ITA No.2197/M/2013 order dated 13.07.2016 and ACITvs. Manish
Organics India Ltd.–ITA No.2155/Ahd/10 order dated 30.11.201.
Ratio of the order passed by co-ordinate Bench of the
Tribunal is that when the disallowance made by the AO has not
10 ITA No.4490/M/2018 M/s. Future E-Commerce Infrastructure Ltd. been contested by the assessee as it had incurred huge losses, which
were not even available for carrying forward and set off in future
years, no motive can be attributed to the assessee to make a bogus
or inflated claims while filing the return of income as the entire
process is revenue neutral. So in this case also when the assessee
company is suffering huge losses no motive can be attributed to it.
When there is no intention of the assessee to gain by making
inadmissible claim penalty proceedings are not attracted as it
appears to be a bonafide mistake. Even otherwise Assessing
Officer has not brought on record any evidence if the assessee has
claimed bogus, false or ingenuine expenses rather blindly relied
upon the “tax audit report” without recording his satisfaction and as
such penalty levied by AO is not sustainable.
In view of what has been discussed above we are of the
considered view that penalty levied by Assessing Officer has been
rightly deleted by Ld. CIT(A), hence finding no illegality of
perversity in the impugned order passed by Ld. CIT(A). Present
appeal filed by the Revenue is hereby dismissed.
Order pronounced in the open court on 19.01.2022.
Sd/- Sd/- (PRASHANT MAHARISHI) (KULDIP SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai, Dated: 19.01.2022. * Kishore, Sr. P.S.
11 ITA No.4490/M/2018 M/s. Future E-Commerce Infrastructure Ltd. Copy to: The Appellant The Respondent The CIT, Concerned, Mumbai The CIT (A) Concerned, Mumbai The DR Concerned Bench
//True Copy//
By Order
Dy/Asstt. Registrar, ITAT, Mumbai.