VIGILANCE SECURITY SERVICES (P) LTD., SEC'BAD,HYDERABAD vs ACIT (OSD), RANGE-3, HYD, HYDERABAD

Income Tax Appellate Tribunal, HYDERABAD BENCHES “A”, HYDERABAD

Before: SMT. P. MADHAVI DEVI & SHRI B. RAMAKOTAIAH

PER B. RAMAKOTAIAH, A.M. :

This is an appeal by assessee against the order of the Commissioner of Income Tax (Appeals)-5, Hyderabad, dated 30-10-2015 on the issue of levy of penalty u/s. 271(1)(c) of the Income Tax Act [Act].

Briefly stated, assessee a company, filed its return of income declaring NIL taxable income. During the year, assessee has earned Long Term Capital Gain of Rs. 2,34,75,483/- and dividend

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of Rs. 71,90,540/-. Since both the amounts were exempt from taxation, assessee filed NIL return. U/s. 115JB also assessee filed NIL return. In the course of scrutiny assessment, it was noticed that Long Term Capital Gain was not exempt from computation u/s. 115JB and accordingly, assessee filed revised computation and stated to have paid taxes as well. The Assessing Officer (AO) computed the assessment by stating as under:

“02. The assessee, during the course of assessment proceedings has stated that it had claimed exemption for Long Term Capital Gain of Rs. 2,34,75,483/- and Short Term Capital Gain of Rs. 1,089/- while computing income u/s. 115JB but, on verification has found that the said incomes are not exempt. Thus, the an income of Rs. 2,34,76,572/- was offered to tax u/s. 115JB. Hence, income of Rs. 2,34,76,572/- is assessed u/s. 115JB.

Loss returned - Rs. 4,72,070/- Loss assessed - Rs. 4,72,070/- Tax thereon - Nil

Calculation of tax on the income u/s. 115JB:

Book Profit u/s. 115JB - Rs. 2,34,76,570 Tax thereon - Rs. 41,40,614 (+) Surcharge - Rs. 3,10,546 (+) EC & SHEC - Rs. 1,33,535 Tax - Rs. 45,84,695 (+) Interest u/s. 234A - Rs. 3,66,776 (+) Interest u/s. 234B - Rs. 16,50,492 (+) Interest u/s. 234C - Rs. 2,31,526 ----------------------- Tax payable - Rs. 68,33,490 -----------------------

However, he has initiated penalty proceedings u/s. 271(1)(c).

In the proceedings, assessee submitted that they were advised wrongly by their counsel that Long Term Capital Gain was also exempt under the provisions of MAT and once it has been

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pointed out that the claim made is not correct, Assessee has voluntarily filed the revised computation and paid taxes also. It was also submitted in other two assessment years also assessee has similarly volunteered, by paying the taxes and there cannot be any penalty u/s. 271(1)(c) in the circumstances.

AO however, did not agree with assessee’s contentions and levied penalty, stating as under:

“03. The assessee request for dropping penal proceedings is not acceptable. The assessee has made a wrong claim in the Return filed and has not made an effort to come forward voluntarily to offer the said amount to tax even when the case was converted in to scrutiny and the notice u/s. 143(2) was served on the assessee on 21-09-2013. It was during the course of assessment proceedings, that the issue was raised by the under signed to the assessee and the addition made. Further, the assessee’s intent of evasion is apparent that it has made the same wrong claim for Asst. Year 2010-11 and Asst. Year 2009-10 and is not bothered to rectify the same till date. The case is reopened on 04-09-2014 for the said Asst. Years. In view of this, I am of the opinion that it is fit case for levy of penalty u/s. 271(1)(c). The minimum and maximum penalty works out to Rs. 45,84,695/- and Rs. 1,37,54,085/- respectively. Considering the facts and circumstances of the case, I levy a penalty of Rs. 46,00,000/- u/s. 271(1)(c) of the Income Tax Act, 1961”.

Before the Ld.CIT(A), assessee reiterated the submissions and made detailed submissions along with case law it relied upon. However, Ld.CIT(A) did not agree with the contentions. Ld.CIT(A) examined the provisions of Sections 271(1)(c) & 10(38) of the Act and also distinguished various case law relied upon by assessee to come to a conclusion that penalty is warranted. the order in para 5.10 is as under:

“5.10 The appellant also relied upon following cases in support of its argument. These judgments were pronounced in different context as appears from the facts of cases.

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5.10.1 SANTOSH NARAIN KAPOOR vs. DCIT (2008) 115 TTJ 0402 : (2008) 3 DTR 0343 It is held that there being no material with the AO at the time when income was voluntarily surrendered by assessee to establish that such income was concealed income of assessee or in respect of which assessee had furnished inaccurate particulars of income, penalty under s. 271(1)(c) could not be imposed.

5.10.2 ACIT vs. SHIVA POLY PLAST (P) LTD (2007) 26 CCH 0633 LucknowTrib, (2008) 11 DTR 0528: It is held that AO having noted in the assessment order while making addition of Rs. 49 lakhs shown as share capital that “Amount deposited in bank through drafts considered as income due to lack of evidence” and other additions having also been made and it being not clear as to regarding which addition(s) AO was satisfied about contumacious conduct, concealment or furnishing of inaccurate particulars, it could not be said that AO had reached a satisfaction requisite for initiating penalty proceedings under s. 271(1)(c), hence CIT(A) was justified in deleting penalty. This judgment was given before the amendment to section 271.

Both the cases are distinguished and not applicable to present set of facts. Hence from the aforesaid, it is established that there is intention on the part of the Assessee to supress facts from the Department and this is a case of concealment of income. Thus I hold that the imposition of penalty on MAT liability to the tune of Rs.46,00,000/- by the AO is justified.

Hence, I agree with the AO and confirm the penalty. As a result appeal is dismissed”.

Ld. Counsel reiterated the submissions made that assessee was under the impression that Long Term Capital Gain was also exempt under the provisions of Section 115JB, as assessee has not noticed the amendment brought to explanation-1(f) of Sec.115JB w.e.f. 01-04-2007. Further, an affidavit from assessee’s counsel was also placed on record. It was the submission that penalty is not warranted, as assessee has voluntarily filed the computation and paid the taxes and hence the wrong claim made by assessee should not be punished. He relied on the judgment of Hon'ble Supreme Court in the case of Price Waterhouse Coopers Pvt. Ltd., Vs. CIT and Another [348 ITR 306] (SC) for the mistake in giving

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advise by the Counsel and also on the decision of CIT Vs Reliance Petroproducts Limited (322 ITR 158) (SC) that a wrong claim cannot be considered for levy of penalty u/s. 271(1)(c).

Ld.DR, however, submitted that penalty is warranted as assessee has filed NIL return, even though there is liability for 115JB.

We have considered the rival contentions and perused the case law relied upon. As seen from the assessment order, AO has not considered it as a case of either concealment or furnishing of inaccurate particulars in the order. It was simply stated that ‘on verification, it was found that the said incomes are not exempt’. In the penalty order finalized, AO clearly stated that assessee has made a wrong claim in the return filed. AO also notes that similar wrong claims were made in AYs. 2009-10 and 2010-11 also. This indicates that assessee was on the bonafide impression that Long Term Capital Gain was also exempt from computation under Section 115JB as well, as there is no dispute that the Long Term Capital Gain was exempt from levy of income tax under the normal provisions, thus there can be a bonafide mistake. Moreover, as seen from the penalty order, AO himself stated that assessee has made a wrong claim. Making a claim which is not allowable under the provisions of the Act does not attract the provisions of penalty u/s. 271(1)(c), as it cannot be considered as either ‘concealment of income’ or ‘furnishing of inaccurate particulars’. In fact all the particulars are available, not only in the computation, but also in the P&L A/c enclosed. Therefore, it cannot be stated that assessee has furnished inaccurate particulars. Though the taxes were not

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paid initially, assessee has voluntarily paid the taxes also before completion of assessment. It was stated that it was advised wrongly not only in this year but also in other two assessment years as well.

8.1. The Hon'ble Supreme Court in the case of CIT Vs Reliance Petroproducts Limited (322 ITR 158) (SC) has considered the provisions of Section 271(1)(c), wherein it has been held as under:

“(i) S. 271 (1) (c) applies where the assessee “has concealed the particulars of his income or furnished inaccurate particulars of such income”. The present was not a case of concealment of the income. As regards the furnishing of inaccurate particulars, no information given in the Return was found to be incorrect or inaccurate. The words “inaccurate particulars” mean that the details supplied in the Return are not accurate, not exact or correct, not according to truth or erroneous. In the absence of a finding by the AO that any details supplied by the assessee in its Return were found to be incorrect or erroneous or false, there would be no question of inviting penalty u/s 271(1)(c).

(ii) The argument of the revenue that “submitting an incorrect claim for expenditure would amount to giving inaccurate particulars of such income” is not correct. By no stretch of imagination can the making of an incorrect claim in law tantamount to furnishing inaccurate particulars. 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. If the contention of the Revenue is accepted then in case of every Return where the claim made is not accepted by the AO for any reason, the assessee will invite penalty u/s 271(1)(c). That is clearly not the intendment of the Legislature”.

8.2. Respectfully following the above, we are of the opinion that it is a mere claim of exemption which is allowed in the normal computation, but not allowable u/s. 115JB and there cannot be any penalty for a wrong claim. In view of that, we are of the

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opinion that the provisions of Section 271(1)(c) are not attracted. Accordingly, we cancel the penalty. Grounds are allowed.

In the result, appeal of assessee is allowed.

Order pronounced in the open court on 19th January, 2018

Sd/- Sd/- (P. MADHAVI DEVI) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER

Hyderabad, Dated 19th January, 2018 TNMM

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Copy to : 1. M/s. Vigilance Security Services (P) Ltd., C/o. Venugopal & Chenoy, Chartered Accountants, 4-1-889/16/2, Tilak Road, Hyderabad.

The Asst. Commissioner of Income Tax (OSD), Range-3, Hyderabad.

CIT(Appeals)-5, Hyderabad

Pr.CIT-5, Hyderabad.

D.R. ITAT, Hyderabad.

Guard File.

VIGILANCE SECURITY SERVICES (P) LTD., SEC'BAD,HYDERABAD vs. ACIT (OSD), RANGE-3, HYD, HYDERABAD