ACIT, NEW DELHI vs. M/S SCHNEIDDER ELECTRIC INDIA (P) LTD.,, GURGAON

This is an appeal filed by the Revenue against the order of Ld.

At the outset, the ld. DR submitted that assessee had claimed fee paid to ROC for increase in share capital as business expenditure and it was only when the assessee was confronted vide questionnaire dated 15/07/2013 and dated 26/07/2013, the assessee surrendered the amount out of business expenditure and the ld. CIT(A) has wrongly stated that even before the questioning by the AO, the assessee had its own had surrendered the same Our attention was invited to the findings of the ld. CIT(A) where he has mentioned that the assessee itself offered amount in question to tax vide its letter dated 17/12/2013. It was pointed out that surrender was made by the assessee after the questionnaire, therefore, the findings of the Ld. CIT(A) are contrary to the facts.

The Ld. DR heavily placed her reliance on the order of the Delhi High Court in the case of CIT vs Zoom Communication (P.) Ltd. [2010] 327 ITR 510(Del.) and further placed her reliance on the order of the Hon’ble Supreme Court in the case of MAK Data P. Ltd. vs CIT [38 taxmann.com 448](SC). The Ld. DR in view of this facts and circumstances vehemently argued that the ld. CIT(A) has wrongly allowed relief to the assessee.

The Ld. AR on the other hand submitted that this was an inadvertent mistake by the assessee as the amount was only Rs.1 crore whereas the assessee had incurred a loss of Rs.15 crores and further the assessee at its own had made additions in the computation of income to the extent of Rs.34-35 crores. The ld. AR in this respect invited our attention to para 3 onwards of Ld. CIT(A)’s order where he has noted all these facts. The ld. AR therefore heavily placed his reliance on the order of the Ld. CIT(A).

We have heard the rival parties and have gone through the material available on record. We find that though the contention of Ld. DR that assessee had surrendered the amount for taxation after Assessing Officer issued notices u/s 142(1) are correct, but the fact remains that the AO came to know about the claim of the assessee regarding revenue item for ROC fee from the audited accounts of the assessee company only and which proves that the assessee had duly disclosed fully the particulars of income and the Assessing Officer from the information provided by assessee had only observed that it was a wrongly claim. The Hon’ble Supreme Court in the case of Reliance Petro Products Pvt. Ltd. has held that any wrong claim made by the assessee will not tantamount to concealment of income. Moreover we find that the assessee had filed return declaring loss of Rs 15 crores and suo moto added back to the income in the computation of income an amount of Rs.34-35 crores which fact is coming out of order of the Ld. CIT(A) and therefore, the claim of Rs.1crore cannot be said to be a deliberate claim and it was necessarily an inadvertent mistake. Therefore, keeping in view these facts and circumstances, we hold that assessee had committed an inadvertent and bonafide mistake and had not intended or attempted to conceal its income or furnish inaccurate particulars of income.

The Hon’ble Supreme Court in the case of Price Waterhouse Coopers Ltd. vs CIT 348 ITR 306 (SC) in a similar case has deleted peantly u/s 271(1)(c) of the Act by holding as under:-

During the course of hearing this appeal against the judgment and order of the Calcutta High Court, we had required the assessee to explain to us how and why the mistake was committed.

The assessee has filed an affidavit dated 14th September, 2012 in which it is stated that the assessee is engaged in Multidisciplinary Management Consulting Services and in the relevant year it employed around 1000 employees. It has a separate accounts department which maintains day to day accounts, pay rolls etc. It is stated in the affidavit that perhaps there was some confusion because the person preparing the return was unaware of the fact that the services of some employees had been taken over upon acquisition of a business, but they were not members of an approved gratuity fund unlike other employees of the assessee. Under these circumstances, the tax return was finalized and filled in by a named person who was not a Chartered Accountant and was a common resource.

It is further stated in the affidavit that the return was signed by a director of the assessee who proceeded on the basis that the return was correctly drawn up and so did not notice the discrepancy between the Tax Audit Report and the return of income.

Having heard learned counsel for the parties, we are of the view that the facts of the case are rather peculiar and somewhat unique. The assessee is undoubtedly a reputed firm and has great expertise available with it. Notwithstanding this, it is possible that even the assessee could make a "silly" mistake and indeed this has been acknowledged both by the Tribunal as well as by the High Court.

The fact that the Tax Audit Report was filed along with the return and that it unequivocally stated that the provision for payment was not allowable under Section 40A(7) of the Act indicates that the assessee made a computation error in its return of income. Apart from the fact that the assessee did not notice the error, it was not even noticed even by the Assessing Officer who framed the assessment order. In that sense, even the Assessing Officer seems to have made a mistake in overlooking the contents of the Tax Audit Report.

The contents of the Tax Audit Report suggest that there is no question of the assessee concealing its income. There is also no question of the assessee furnishing any inaccurate particulars. It appears to us that all that has happened in the present case is that through a bona fide and inadvertent error, the assessee while submitting its return, failed to add the provision for gratuity to its total income. This can only be described as a human error which we are all prone to make. The calibre and expertise of the assessee has little or nothing to do with the inadvertent error. That the assessee should have been careful cannot be doubted, but the absence of due care, in a case such as the present, does not mean that the assessee is guilty of either furnishing inaccurate particulars or attempting to conceal its income.

We are of the opinion, given the peculiar facts of this case, that the imposition of penalty on the assessee is not justified. We are satisfied that the assessee had committed an inadvertent and bona fide error and had not intended to or attempted to either conceal its income or furnish inaccurate particulars.

Under these circumstances, the appeal is allowed and the order passed by the Calcutta High Court is set aside. No costs.”

In view of the above facts and circumstances and judicial precedents, the appeal filed by the Revenue is dismissed.