NITEN KUMAR GOEL,SECUNDERABAD vs. INCOME TAX OFFICER, WARD-10(3), HYDERABAD

This is an appeal by assessee against the order of the Commissioner of Income Tax (Appeals)-6, Hyderabad, dated 19-05-2017 confirming penalty u/s. 271(1)(c) of the Income Tax Act [Act].

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consideration. During the course of scrutiny proceedings, it was found that as per return of income filed by assessee for the A.Y. 2010-11, there was no loss either under the head Business Income or depreciation to be brought forward and carried forward to be claimed as set off from income. When the same was pointed out by AO, assessee accepted the mistake and accepted for disallowance of set off of loss/depreciation claimed in the return of income filed for the assessment year under consideration. Accordingly, assessment was completed by disallowing the business loss and depreciation claimed to an extent of Rs.11,69,914/-. Penalty proceeding u/s. 271(1)(c) of the Act was initiated and notice u/s. 271(1)(c) was issued and served on assessee.

2.1. In reply to the penalty notice, it was submitted that in the return of income filed for AY. 2011-12, by oversight the carry forward of unabsorbed loss was shown by his clerical staff. Based on the return of income filed for AY. 2011-12, it was noticed that the set off of unabsorbed business loss/depreciation was claimed against the income of AY. 2012- 13. No sooner did the assessee came to know of this mistake, a revised computation of total income was filed. It was submitted that assessee had disclosed fully and correctly the details of his income, but due to bonafide mistake committed by his clerical staff, the set off of unabsorbed business loss and depreciation had been claimed.

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2.2. AO did not accept the contention of assessee as it was only on verification made by him that it was found that there was no loss to be carried forward in AY. 2010-11. AO observed that the claim of that set off of loss from the income of the concerned assessment year could not be a bonafide clerical mistake. Further, according to him, assessee came forward only to submit the revised computation after the same was pointed out by the AO. Therefore, it was evident that assessee was well aware of the loss claimed for set off was not eligible to be set off and carry forward. The revised computation was also filed on the last day of finalisation of scrutiny assessment only after the wrong claim was pointed by AO. AO held that it was the responsibility of assessee and his AR to verify the return of income before filing it. Therefore, according to AO, assessee with a wilful intention to misguide the assessment proceeding had claimed set off of false brought forward losses and depreciation and had thereby furnished inaccurate particulars. AO found it to be a fit case for imposition of penalty and levied a minimum penalty of Rs. 2,97,476/- u/s. 271(1)(c) of the Act.

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Hon'ble Supreme Court in the case of Reliance Petro Products [322 ITR 158] and on the decision of ITAT, Hyderabad in the case of Taher Ali (ITA No.129/H/2013) dated 30-08-2013 wherein the Tribunal deleted the penalty by holding that mere rejection of claim did not amount to concealment. It was submitted that it was for AO to verify the records and allow any claim for set off of loss and based on the claim by the assessee. When such was the case holding that there was concealment or furnishing of inaccurate particulars on the part of the assessee was not correct and the penalty should be deleted.

3.1. But Ld.CIT(A) confirmed the same, stating as under:

“04.0 The penalty order of the Assessing Officer and the submission of the appellant had been carefully considered. The appellant failed to give any reasonable explanation for the prima facie false claim of brought forward loss & unabsorbed depreciation. He calls it a 'clerical' error but has not substantiated how claiming of a non- existent loss/depreciation can be called a clerical error. He has also said that he simply made that claim on the basis of statement of income for A.Y. 2011-12. It is not understood how the loss/depreciation could be shown in the statement of A.Y. 2011-12, if it was actually not there for A. Y. 2010-11. Moreover, even that was assessee's own statement and one false statement cannot constitute a reasonable explanation for another false statement. If the ratio of the decisions in the cases of Reliance Petro Products and Taher Ali (supra) were to be applied in the fashion described by the assessee, it would amount to giving a license to everyone to make a false claim and, when caught to withdraw the same. Thus, the provision of penalty u/s. 271(1)(c) of the Act would be rendered illusory. It is held that the assessee made a false claim of brought forward loss and unabsorbed depreciation and has failed to furnish a reasonable explanation for the same”.

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claimed as refund. Since the mistake, in my opinion is bonafide and further the set off of losses and depreciation can also be modified on the basis of record u/s. 154, the facts does not lead to levy of penalty u/s. 271(1)(c) and the same does not come within the concept of ‘concealment of income’ or ‘furnishing of inaccurate particulars’ during the year. For the mistake committed in AY. 2011-12 which AO has not modified in that year, no penalty can be levied during this year for the reason that the computation of income relied on claim made in AY. 2011-12. The penalty laid u/s. 271(1)(c) of the Act is therefore deleted.

Order pronounced in the open court on 11th July, 2018

Sd/- (B. RAMAKOTAIAH) ACCOUNTANT MEMBER

Hyderabad, Dated 11th July, 2018 TNMM

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Copy to : 1. Sri Nitin Kumar Goel, C/o. K. Vasant Kumar, A.V. Raghu Ram, P. Vinod & M. Neelima Devi, Advocates, 610, Babukhan Estate, Basheerbagh, Hyderabad. 2. The Income Tax Officer, Ward-10(3), Hyderabad.