MITSUBOSHI BELTING INDIA PRIVATE LIMITED,MUMBAI vs. ASSISTANT COMMISSIONER OF INCOME TAX - RANGE 15(2)(2), MUMBAI

Grounds of appeal read as under :- 1) On the facts and in the circumstances of the case and in law, the (earned CIT(A) erred in confirming the action of the learned Assessing Officer ('AO') in levying penalty under section 271(1)(c) of the Act amounting to Rs.54,73,884 on account of foreign exchange fluctuation loss of Rs 1,68,68,672.

2) On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in upholding the action of the learned AO and not appreciating the fact that the Appellant had neither concealed particulars of income nor furnished inaccurate particulars thereof.

Brief facts of the case relating to levy of penalty are as under :-

In the penalty order u/s. 271(1)(c) of the Act, the Assessing Officer noted that penalty proceedings u/s. 271(1)(c) of the Act was initiated for furnishing inaccurate particulars of income, thereby concealment of income chargeable to tax on account of addition u/s. 37 of the Act. Assessee in response submitted that the assessee’s books of account were audited as prescribed u/s. 44AB of the Act and the assessee has already submitted all the details. That the assessee had suo-motto submitted during the assessment proceedings foreign currency loss on account of capital assets of Rs. 1,68,68,672/- shall be disallowed for computation of tax as it does not pertain to revenue transaction. Further the assessee claimed that the same happened inadvertently and the same was also not reported by the tax auditor in Form 3CD. That at the time of filing of return the assessee has relied on the tax audit report of the Chartered Accountant. The assessee also stated that the 3 Mitsuboshi Belting India P. Ltd Assessing Officer nowhere in the assessment order mentioned that the assessee has furnished inaccurate particulars of income or concealed particulars of income. However, the Assessing Officer was not satisfied. He held as under :-

The Assessing Officer further referred to the decision of Hon'ble Apex Court in the case of Union of India Vs. Dharmendra Textiles Processors (166 Taxmann 65) and decision in the case of K.P. Madhusudanan Vs. CIT (251 ITR 99). The Assessing Officer further distinguished the decision relied upon by the assessee and finally concluded that he was satisfied that the assessee had furnished inaccurate particulars of its income and concealed its income in various issues discussed above.

Against the above order, the assessee has filed the appeal before learned CIT(A). However learned CIT(A) upheld the decision of the Assessing Officer.

Against the above order the assessee is in appeal before us.

At the outset, learned Counsel of the assessee contended that notice in this case u/s. 271(1)(c) is invalid in as much as in appropriate portion of the notice has not deleted by Assessing Officer. For this proposition he referred to several case laws. Learned counsel further referred to the following case laws :  SSA's Emerald Meadows (ITA 380/2015) (Karnataka HC) approved by SC (242 Taxman 180)  CIT Vs Shri Samson Perinchery (Bom) (392 ITR 4) approving the decision of ITAT dated 11 October 2013 (ITA No. 4630/Murn/2013)  Hafeez Contractor (ITA No. 796 of 2016) (Bom) dated 11 December 2018 approving the decision of the ITAT dated 2 September 2015 (ITA No.6222 & 6223/Mum/2013)  CIT Vs. Manjunatha Cotton & Ginning Factory (2013) (359 ITR 565) (Karnataka HC)  Pr. CIT vs Parinee Developers Pvt Ltd (Bom HC) (ITA No. 1344 of 2016) approving the decision of the ITAT dated 11 September 2015) (ITA No.6772/Mum/2013)  Dy. CIT vs Sicom Ltd (ITA No. 6387/Mum/2014) dated 6 April 2018  Jayant Patel (ITA No. 1650/Mum/2017) dated 26 July 2017(Mum)  Tata Communications Transformation Services Ltd (ITA No 3108/Mum/2016) dated 21 February 2018 (Mum)  Gagandeep Singh Alag (ITA No. 6581/Mum/2016) dated 30 May 2018  Shangrila Sales Pvt Ltd (ITA No. 7525/Mum/2016) dated 7 February 2018  Orbit Enterprises (ITA No. 1596 & 1597/Mum/2014) dated 1 September 2017  Mrs Archana D. Talati (ITA No. 2696/Mum/2016) dated 5 June 201

He further referred to the following proposition :-

Per contra, learned Departmental Representative relied upon the orders of the authorities below.

The first ground raised by the assessee is that the penalty levied under section 271(1)(c) of the Act is invalid inasmuch as the inappropriate limb in the notice in the penalty was not struck off. We find that this issue was raised before the learned CIT-A. Learned CIT-A has duly noted the assessee’s submission in his order. However while adjudicating the issue he has omitted to adjudicate this ground raised before him. Hence in our considered opinion the interest of justice requires that this issue should be remitted to the file of learned CIT-A. Learned CIT-A is directed to consider the issue afresh after giving the assessee proper' opportunity of being heard. The learned CIT-A should also take into account the various case laws on the subject as available and as canvassed by the assessee as aforesaid. The learned CIT-A should also take into account the decision of honourable of apex court in the case of CIT Vs. S.V. Angidi Chettiar (XLIV ITR 739). Accordingly this issue raised is remitted to the file of learned CIT-A with directions as above.

Another ground raised is that penalty proceeding is invalid as satisfaction is not recorded by the assessing officer at the time of initiation of penalty.

In our considered opinion the assessee doesn't deserve to succeed on this ground. The assessing officer has after disallowance of the impugned amount duly noted in the assessment order that “penalty proceedings u/s. 271(1)(c) of the Act is initiated”. Consequent to amendment in section 271 by insertion of section 271(1B) duly applicable in the extant assessment year, this is sufficient satisfaction and the penalty cannot be annulled on the ground of lack of satisfaction by the assessing officer. We may gainfully refer to the relevant provisions of section 271(1B) as under :-

The assessee’s case is fully covered under the above provision. There is a disallowance and subsequently noting of initiation of penalty proceedings. In view of the aforesaid amendment the case laws referred by the learned counsel of the assessee do not oxygenate the case of the assessee.

Another ground raised is that penalty may not be levied on bonafide and inadvertent error of the assessee.

In our considered opinion showing a huge amount of foreign currency translation loss on capital account by a multinational company as revenue loss can by no stretch of imagination be considered to be a bonafide and inadvertent error. This argument of the assessee is further devoid of cogency in view of following submission of the assessee before the learned CIT-A.

Hence the assessee was very well aware that it was deliberately showing capital account transaction loss as loss on revenue account. Hence by no stretch of imagination it can be said that there was any inadvertent error. It was fully considered decision of the assessee to show the capital loss as revenue loss. Hence this limb of the argument is dismissed

Another ground raised is that penalty cannot be levied as assessee voluntarily disclosed during the course of assessment proceedings.

Up on careful consideration we are of the considered opinion that on the facts and circumstances of the case by no stretch of imagination it can be said that there was any involuntary disclosure by the assessee. The assessing officer has duly detected the huge amount of capital transaction loss. He had asked the assessee the detail thereof in these circumstances assessee had no option but to disclose the same. By no stretch of imagination it can be said to be voluntarily disclosure. The decision of the apex court in the case of K.P.Madhusudanan fully applies on the facts of the case. Hence this ground raised by the assessee stands dismissed.

Another limb of assessee’s argument is that it had relied upon the tax auditor’s report. We find that the tax audit is conducted on the basis of information and explanation of the assessee. The assessee, a multinational company cannot put the blame on tax auditor, when the tax auditor is not present to defend. It is not the case that there is acceptance on record by the tax auditor that he is guilty of any mistake. Hence, this plea of the assessee is not acceptable.

In the result assessee’s appeal is partly allowed for statistical purposes