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Income Tax Appellate Tribunal, ‘D’ BENCH, CHENNAI
Before: SHRI MAHAVIR SINGHAND SHRI MANOJ KUMAR AGGARWAL
आदेश /O R D E R PER MAHAVIR SINGH, VP: This appeal by the assessee is arising out of order of the Commissioner of Income Tax (Appeals)-3, Coimbatore in Appeal No.163/13-14 dated 22.01.2015. The assessment was framed by the ITO, Ward 1(2), Tirupur u/s.143(3) of the Income Tax Act, 1961 (hereinafter the ‘Act’) for the assessment year 2010-11 vide order dated 22.03.2013. The penalty under dispute was levied by the ITO,
2 ITA No.1211/Chny/2015 Ward 1(2), Tirupur u/s.271(1)(c) of the Act vide order dated 30.09.2013.
The only issue in this appeal of assessee is as regards to levy of penalty u/s.271(1)(c) of the Act by the AO and confirmed by the CIT(A) on the wrong claim of capital expenses, brought forward business loss and brought forward unabsorbed depreciation.
Brief facts are that the assessee is an individual engaged in the business of running a Textile Processing and Printing unit. The AO during the course of assessment proceedings noted that the assessee has claimed unabsorbed depreciation of dissolved partnership firm, where he was partner till 23.05.2009 and the assessee firm claimed to have taken over the entire assets and liabilities of the dissolved partnership firm to the tune of Rs.80,88,481/- and brought forward business loss of Rs.15,67,196/- The AO after considering the purchase of steel for installing of new boiler and replacing the entire machinery considered the claim of dissolved depreciation of Rs.12,75,024/- as capital in nature and also disallowed brought forward business loss of Rs.15,67,196/- and also unabsorbed depreciation brought forward of Rs.80,88,481/-. Finally, the AO determined the income at Rs.25,09,183/-. The
3 ITA No.1211/Chny/2015 assessee has not challenged the assessment order and it has become final. The AO levied the penalty on unabsorbed depreciation brought forward amounting to Rs.80,88,481/- and brought forward business loss of Rs.15,67,196/-. The AO noted that that the claim of assessee on both the accounts is not allowable as it is a wrong claim and for this, he recorded the finding in para 6 of penalty order as under:- “6. On careful consideration of the issues involved and the material evidence placed on record, I am of the opinion that the conduct of the assessee, by claiming unabsorbed depreciation and setting off of business loss of the dissolved firm against the current income of the assessee which is not mandated by any of the provisions of the Income tax Act, 1961 is a clear case of concealment of income and warranting penalty envisaged in the Section 271(1)(c) of the Income tax Act, 1961.”
Thereby, the AO levied penalty amounting to Rs.28,35,283/-. Aggrieved, assessee preferred appeal before CIT(A).
The CIT(A) confirmed the penalty by observing in para 5 to 5.2 as under:- “5.0 I have considered the penalty order and the rival submissions. The appeal of the assessee in relation to assessment proceedings have been dismissed vide my order dated 22/1/2015 in Appeal No.162/2013-14. The assessee’s claim of revenue expenditure has been capitalized and brought forward business loss and unabsorbed depreciation of the erstwhile partnership firm cannot be set off in the hands of the individual.
5.1 The above wrong claims of the assessee could not have come to light but for scrutiny u/s.143(3) of the Income Tax Act. The above claims
4 ITA No.1211/Chny/2015 of the assessee would clearly fall under the provisions of Section 271(1)(c) wherein it is stated that “has concealed the particulars of his income or furnished inaccurate particulars of such income”.
5.2 The wrong claim of the assessee regarding revenue expenses, brought forward business losses and brought forward unabsorbed depreciation will clearly fall within the mischief of filing inaccurate particulars of income and therefore liable to penalty u/s 271(1)(c). Therefore, penalty of Rs.28,35,283/- u/s.271(1)(c) levied by the Assessing Officer is confirmed in the hands of the assessee.”
Aggrieved assessee came in appeal before the Tribunal.
We have heard rival contentions and gone through the facts and circumstances of the case. We noted that the assessee’s claim of revenue expenditure which has been capitalized, brought forward business loss and unabsorbed depreciation added by the AO was nowhere held to be concealment of income, as the case was made by the Revenue was, that the assessee furnished inaccurate particulars of income. The CIT(A) noted that this is a wrong claim of assessee regarding revenue expenses, brought forward business loss and brought forward unabsorbed depreciation but the Revenue could not make out a case of concealment of income by furnishing inaccurate particulars of income. The assessee has furnished all the particulars but it may be allowable, may not be allowable. Hence, the assessee’s case is fully covered by the decision of Hon’ble
5 ITA No.1211/Chny/2015 Supreme Court in the case of CIT vs. Reliance Petroproducts Pvt. Ltd., 322 ITR 158, wherein the Hon’ble Supreme Court held that: “10………………..It was tried to be argued that the falsehood in accounts can take either of the two forms; (i) an item of receipt may be suppressed fraudulently; (ii) an item of expenditure may be falsely (or in an exaggerated amount) claimed, and both types attempt to reduce the taxable income and, therefore, both types amount to concealment of particulars of one's income as well as furnishing of inaccurate particulars of income. We do not agree, as the assessee had furnished all the details of its expenditure as well as income in its Return, which details, in themselves, were not found to be inaccurate nor could be viewed as the concealment of income on its part. It was up to the authorities to accept its claim in the Return or not. Merely because the assessee had claimed the expenditure, which claim was not accepted or was not acceptable to the Revenue, that by itself would not, in our opinion, attract the penalty under Section 271(1)(c). If we accept the contention of the Revenue then in case of every Return where the claim made is not accepted by Assessing Officer for any reason, the assessee will invite penalty under Section 271(1)(c). That is clearly not the intendment of the Legislature.
In this behalf the observations of this Court made in Sree Krishna Electricals v. State of Tamil Nadu & Anr. [(2009) 23VST 249 (SC)] as regards the penalty are apposite. In the aforementioned decision which pertained to the penalty proceedings in Tamil Nadu General Sales Tax Act, the Court had found that the authorities below had found that there were some incorrect statements made in the Return. However, the said transactions were reflected in the accounts of the assessee. This Court, therefore, observed: "So far as the question of penalty is concerned the items which were not included in the turnover were found incorporated in the appellant's account books. Where certain items which are not included in the turnover are disclosed in the dealer's own account books and the assessing authorities include these items in the dealer's turnover disallowing the exemption, penalty cannot be imposed. The penalty levied stands set aside.
The situation in the present case is still better as no fault has been found with the particulars submitted by the assessee in its Return.”
6 ITA No.1211/Chny/2015 6. Respectfully, following the decision of Hon’ble Supreme Court in the case of Reliance Petroproducts PVt. Ltd., supra, we delete the penalty levied by AO and confirmed by CIT(A) and allow the appeal of the assessee.
In the result, the appeal filed by the assessee is allowed.
Order pronounced in the open court on 24th June, 2022 at Chennai.
Sd/- Sd/- (महावीर �सह ) (मनोज कुमार अ�वाल) (MAHAVIR SINGH) (MANOJ KUMAR AGGARWAL) उपा�य� /VICE PRESIDENT लेखा सद�य /ACCOUNTANT MEMBER चे�ई/Chennai, �दनांक/Dated, the 24th June, 2022 RSR आदेश क� �ितिलिप अ�ेिषत/Copy to: 1. अपीलाथ�/Appellant 2. ��यथ�/Respondent 3. आयकर आयु� (अपील)/CIT(A) 4. आयकर आयु� /CIT 5. िवभागीय �ितिनिध/DR 6. गाड� फाईल/GF.