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Income Tax Appellate Tribunal, INDORE BENCH, INDORE
Before: SHRI B.M. BIYANI & SHRI PARESH M. JOSHI
आदेश/ O R D E R
Per B.M. Biyani, A.M.:
Feeling aggrieved by order of first appeal dated 27.02.2024 passed by learned Commissioner of Income-tax-NFAC, Delhi [“CIT(A)”] which in turn arises out of penalty-order dated 30.04.2019 passed by learned DCIT-1(1), Bhopal [“AO”] u/s 271(1)(c) of Income-tax Act, 1961 [“the Act”] for assessment-year [“AY”] 2013-14, the revenue has filed this appeal on following grounds:
11. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in interpreting the provision of section 80P of the IT Act, 1961 and allowing the appeal of the assessee, thereby deleting the penalty u/s 271(1)(c) of Rs. 1,75,00,000/-, when inaccurate particulars of income are clearly apparent from the return of income filed and the submissions of the assessee during the penalty proceedings?
2. The background facts leading to present appeal are such that the assessee is a co-operative society registered under MP State Co-operative Societies Act, 1960. For AY 2013-14 under consideration, the assessee filed its original return of income on 01.10.2013 declaring a total income of Rs.
Nil. Subsequently, the assessee filed revised return of income on 25.11.2014 again declaring total income of Rs. Nil. The case was selected for scrutiny- assessment and the AO completed assessment vide order dated 29.01.2016 accepting returned income. This order was set aside by PCIT-1, Bhopal vide revision-order dated 20.03.2018 u/s 263 on the ground that the AO has wrongly allowed deduction u/s 80P to assessee without first setting of brought forward loss of earlier year. The PCIT directed the AO to reframe assessment. In pursuance thereof, the AO passed fresh assessment-order dated 31.10.2018. Vide Para 3 to 10 of same, the AO observed that the assessee has claimed deduction of Rs. 5,49,57,638/- u/s 80P against “Income from Business or Profession” of Rs. 5,49,57,638/- and carried forward its entire brought forward loss of Rs. 25,32,12,148/- for AYs 2008- 09 to 2010-11 which is against law. The AO observed that the correct law is such that the brought forward losses shall be first set off against business income of current year and thereafter deduction u/s 80P shall be allowed.
Finally, the AO made following assessment:
Income under the head Business and Profession before set off of Rs. 5,49,57,638/- brought forward losses Brought forward losses Rs. 25,32,12,148/- Income under the head Profits and Gains of Biusiness and Profession Rs. Nil after set-off of brought forward losses Assessed Carried Forward Losses Rs. 19,82,54,510/- Assessed Total Income Rs. Nil 2.1 Thus, the AO computed the taxable “Income from Business or Profession” at Rs. Nil after setting off brought forward loss of Rs.
5,49,57,638/-. Further, the AO also reduced the quantum of losses to be carried forward by assessee by Rs. 5,49,57,638/- (from Rs. 25,32,12,148/- to Rs. 19,82,54,510/-). The AO also initiated penalty proceedings u/s 271(1)(c) in assessment-order and issued notice u/s 274 r.w.s. 271(1)(c).
Ultimately, the AO passed penalty-order dated 30.04.2019 imposing a penalty of Rs. 1,75,00,000/- qua the adjustment/variation of Rs. 5,49,57,638/- made by him in assessment-order. Aggrieved, the assessee went in first-appeal and succeeded. Now, the revenue has come in next appeal before us assailing the order of first-appeal passed by CIT(A).
We have heard learned Representatives of both sides and carefully perused the case record including the orders of lower-authorities.
During hearing, Ld. AR for assessee iterated repeatedly that the assessee did not claim any deduction u/s 80P and the AO has wrongly imposed penalty upon assessee. He carried us to Pages 47 and 74 of Paper-
Page 3 of 10 Book which are the pages of the original return and revised return respectively filed by assessee. Referring to same, he submitted that the assessee has mentioned “0” against deduction u/s 80P in both original return and revised return. Then, he also carried us to the impugned order of CIT(A) wherein the CIT(A) has re-produced the very same page of revised return (i.e. Page No. 74 of Paper-Book) and taking into account same, accepted that the assessee did not claim deduction u/s 80P. He carried us to the following conclusion ultimately made by CIT(A):
“Thus, it is safe to held that the AO has adjusted the business income and denied unclaimed deduction u/s 80P under erroneous assumptions, therefore, the consequence of leying penalty u/s 271(1)(c) of the Act also becomes legally and factually invalid. Thus, I find no reason to agree with the AO in sustaining the penalty and hence the same is deleted and the corresponding grounds of appeal are therefore allowed.” Ld. AR submitted that the CIT(A) has rightly passed impugned order and his order must be upheld.
Per contra, Ld. DR for revenue expressed a serious doubt in the matter. He submitted that when the AO has reduced quantum of loss carried forward by assessee in assessment-order from Rs. 25,32,12,148/- to Rs. 19,82,54,510/-, why the assessee has not filed any appeal etc. against the assessment-order?
In re-joinder, Ld. AR submitted that the assessee only filed a rectification-application dated 28.05.2019 u/s 154 (Page 89 of Paper-Book) but the same is not disposed by AO.
Replying to same, Ld. DR submitted that the rectification-application was filed by assessee on 28.05.2019 after passing of penalty-order dated 30.04.2019. Further, he insisted that the CIT(A) has deleted penalty just by looking at a particular page of return which is not a sufficient adjudication.
He, however, left the matter for the wisdom of bench.
With above arguments of parties, the hearing was concluded on 01.05.2025. Subsequently, at the time of dictation of order, following pages of Paper-Book were also noticed:
Page 5 of 10 Page 44 of Paper-Book – This is a page of original return filed by asessee:
Page 6 of 10 Page 71 of Paper-Book – This is a page of revised return filed by assessee:
On comparison of these two pages, it was noticed that in the original return filed to department, the assessee claimed set off of brought forward loss of Rs. 5,49,57,638/- against “Income from Business or Profession” head and claimed carry forward of losses of Rs. 19,82,54,510/- (Page 44 re- produced above). But in the revised return, the assessee did not claim set off of brought forward loss against business income and instead claimed carry forward of entire brought losses of Rs. 25,32,12,148/- (Page 71 re-produced above). This raised a doubt. To clarify this, the case was re-fixed for “clarification”.
Today, when the matter was heard for “clarification”, the Ld. AR drew us to Page No. 63 of Paper-Book and submitted that in the revised return, the assessee claimed exemption of Rs. 5,49,57,638/-. When we further questioned as to the nature of exemption, he submitted that the assessee is eligible to exemption u/s 10(26B). Ld. AR further submitted that because of exemption u/s 10(26B) claimed in revised return, the assessee’s taxable income of business turned out to Rs. Nil and hence the assessee claimed carry forward of entire loss of Rs. 25,32,12,148/-. When we asked Ld. AR as to whether this factual state of assessee’s case i.e. claiming exemption u/s 10(26B) came to the knowledge of AO during assessment-proceedings or penalty-proceeding or even CIT(A) during first-appellate proceedings, Ld. AR answered in negative and expressed that there were queries and replies only qua the deduction u/s 80P.
Replying to same, Ld. DR for revenue submitted that the issue of exemption u/s 10(26B) has never surfaced before AO. But it is a fact that the assessee claimed carry forward of loss of Rs. 25,32,12,148/- in the revised return and the AO reduced the same to Rs. 19,82,54,510/- in asesment order and in that circumstance, the AO imposed penalty.
Therefore, the penalty imposed by AO is proper. However, Ld. DR agreed that in the interest of justice this case may be remitted back to the file of AO for a fresh adjudication so that the AO will take appropriate call from all sides.
We have considered submissions of both sides. After a careful consideration, we find that in present case, the correct picture of assessee’s case has not come to the attention of AO for whatever reason. Therefore, the case needs to be re-visited by AO. Hence, Ld. DR’s proposal to remit this case back to the file of AO is a suitable remedy at this stage. In that view of matter, we remit this matter back to the file of AO for adjudication afresh after giving a fresh opportunity of hearing to assessee. We also direct the assessee to participate in proceedings and make adequate and proper submissions to AO.
Resultantly, this appeal is allowed for statistical purpose.