BHARAT SPRINGS P.LTD,MUMBAI vs. ITO 6(1)(4), MUMBAI

The only issue in this appeal of assessee is against the order of CIT(A) confirming the levy of penalty by the AO under section 271(1)(c) of the Act on account of addition made by the AO under the head rent, rates and taxes being paid to MIDC towards differential premium obtained for NOC for sale of factory premises at Taloja and consequential computation of capital gains. For this assessee has raised the following ground: - “On the facts and circumstances of the case and in law:

Briefly stated facts are that during the course of assessment proceedings the AO noted that the assessee company was engaged in the business of Manufacturing of Automobile leaf Springs. On the perusal of the records it is also noted that the assessee was having leasehold rights for 95 years in respect of plot of land admeasuring 10,500 m2 ITAs No. 5864/Mum/2015 bearing Plot No. C-4, MIDC land at Taloja to Shri Hariprasad M Shah, Shri Amritlal Shah, Shri Janki Prasad Shah & Maharashtra Steel Rolling Mills Pvt. Ltd. being partners of Eagle Steels (herein after referred as Shah Group) for a consideration of ₹ 2,80,00,000/-. In the Capital Gain working, assessee has debited ₹ 23,62,584/- as differential premium paid to MIDC. However, under the head Rent Rates and taxes, the assessee has debited ₹ 23,62,584/- in respect of part of land admeasuring 3430 m2 and ₹ 48,69,816/- in respect of land measuring 7,070 m2 which was subsequently transferred to SSZ Commodities Pvt. Ltd. (SSZCPL) during AY 2012-13, towards differential premium. The assessing officer further found that the differential premium of ₹ 48,69,816/- pertains to the part of the land that was transferred during AY 2012-13 and not during the year under consideration. Therefore, the assessing officer disallowed the sum of ₹ 48,69,813/- and added to the total income of the assessee. As the assessee wrongly claimed the deduction of ₹ 48,69,813/- while calculating the capital gain income on the sale of plot of land at Taloja in the assessment year 2011-12. Hence, penalty proceedings under section 271(1)(c) of the Act was initiated by the AO for furnishing of inaccurate particulars of income. The assessee has not challenged the quantum addition in appeal and accepted the addition of Rs. 48,64,816/- being differential premium. The AO issued show cause notice for levy of penalty dated 14.07.2014 as to why the penalty should not be levied for furnishing the inaccurate particulars of income. The assessee replied that for AY 2011-12, it had debited the rent, rate and taxes amounting to Rs. 73,68,489/-. The details of which are as under:-

The assessee contended that due to inadvertent mistake this amount of Rs. 48,69,816/- being amount paid to MIDC towards sale of property admeasuring 7070 sq. meters to SSZ commodities private Limited could not be disallowed for the reason that it was under bona fide belief that this amount pertains to this AY 2011-12, actually it pertains to AY 2012-13. The learned Counsel for the assessee stated that the assessee agreed for addition of this amount and has not contested this shows the bona fide of the assessee. The learned Counsel stated that there is no concealment of facts and facts were very much available before the AO during the course of assessment proceedings and claim have been made on this count but it should have been made in AY 2012- 13 instead of claim made in AY 2011-12, the year under consideration. But the AO has not accepted the claim of assessee and levied the penalty under section 271(1)(c) of the Act. The AO stated the reason that the assessee has claimed differential premium of Rs. 48,69,813/- which was paid in AY 2012-13 but claimed from sale and purchase of land admeasuring 3430 sq. meters and 7070 sq. meters respectively. The AO noted that despite the service of notice under section 143(3) of the Act dated 21.09.2012 and further notice under section 142(1) of the Act dated 15.07.2013 and again on 13.11.2013, the assessee did not revised the statement of total income but choose to keep silent on the wrong claim of ITAs No. 5864/Mum/2015 differential premium. Accordingly, the AO noted that the assessee has furnished inaccurate particulars of income and he levied the penalty under section 271(1)(c) of the Act. Aggrieved, assessee preferred the appeal before CIT(A). The CIT(A) confirmed the action of the AO by observing in Para 5 as under: - “I have carefully considered the assessment order, the penalty order and the written submissions of the appellant dated 4/11/2015. Considering the (acts and circumstances of the case, the appeal is disposed off as under:

Before us, the learned Counsel for the assessee stated that the assessee in the return of income for AY 2011-12 declared capital gain on sale of land admeasuring 3430 sq. meters to Shah Group for consideration of Rs. 2.80 crores. The differential premium paid in respect to this amount was Rs. 23,62,584/- which was claimed in the P&L Account under the head rent, rate and taxes. The assessee also debited a sum of Rs. 48,69,816/- as differential premium. The assessee explained that this inadvertent mistake occurred in the return of income filed for the AY 2011-12 for the reason that the assessee received a letter from MIDC dated 12.10.2010 in which they made condition that land of 3430 Sq. meters and 7070 sq. meters will not be allowed to be sold unless the differential premium is paid by assessee. The assessee ought to pay this amount otherwise there would not have been any sub-division of land. It was explained that land admeasuring 3430 sq. meters was sold in AY 2011-12 and differential premium paid to MIDC amounting to Rs. 23,62,584/- was correctly claim as cost of improvement. However, the assessee claimed this differential premium of Rs. 48,69,816/- because there was a letter received from MIDC dated 12.10.2010 and filed the reasons it was included by the accountant in the return of income but this payment of Rs. 48,69,816/- remained to be disallowed in the computation of income as the sale of property against which this differential premium was paid for its capital gain has been accounted for AY 2012-13. It was claimed that this property of 7070 sq. meters was sold in AY 2012-13 wherein this amount should have been computed or claimed. The learned Counsel for the assessee in view of the above stated that this error has unintentional on the part of the assessee and for this it cannot be stated ITAs No. 5864/Mum/2015 that the assessee has furnished inaccurate particulars of income or made concealment of income. On the other hand, the learned Sr. DR relied on the penalty order of AO and the appellate order of CIT(A). According to the learned DR neither during the course of assessment proceedings at the stage of initial notice issued under section 143(2) of the Act dated 21.09.2012 nor again on 15.07.2013 when notice under section 142(1) was issued, he did not revise its statement of total income disallowing this differential premium paid to MIDC actually this differential premium was paid in AY 2012-13 and it should have been claimed in that year only. According to him, the assessee is unable to prove its bona fide and explanation filed by assessee has been itself disbelieved by the AO as well as CIT(A).

We have head the rival contentions and gone through the facts and circumstances of the case. We noted that the assessee was under the bonafide belief that the entire expenditure was to be claimed in AY 2011- 12 for the reason that the letter of MIDC was dated 12.10.2010. It was only when it was pointed out by the AO that the assessee filed return of income and claimed ₹ 48,69,816/- as cost of improvement in the subsequent year i.e. AY 2012-13. The inadvertent error made by the assessee to bifurcate the expenses in two years, was unintentional and was not to defraud the Government. This cannot be a fit case for penalty under section 271(1)(c) of the Act as the assessee has not furnished inaccurate particulars of income nor has it concealed any income. The assessee had furnished complete particulars of its income and expenditure and had also furnished the details of the Premium paid to the MIDC before the Revenue authorities. The assessee having furnished complete particulars of income and mere disallowance in the hands of the ITAs No. 5864/Mum/2015 assessee, does not warrant levy of penalty u/s 271(1)(c) of the Act. One must understand the meaning of the words "particulars of income”. The expression 'particular' refers to facts, details, specifics or the information about someone or something. Thus, the details or information about the income would deal with factual details of income and cannot be extended to areas which are subjective such as status of the taxability of an income, admissibility of a deduction and interpretation of law. Accordingly, it was held that mere rejection of 'a' claim would not amount to furnishing of inaccurate particulars of income. Mere making of the claim, which is not sustainable in law, by itself, will not amount to furnishing of inaccurate particulars regarding the income of the assessee. The intention of the assessee was never to evade any taxes and to defraud the Government. The assessee had furnished all the details of its expenditure as well as income in the return of income and they were not found to be inaccurate nor could be viewed as the concealment of income on its part. Merely because the assessee had claimed the expenditure, which claim was not accepted to the Department, that by itself would not attract the penalty u/s 271(1)(c) of the Act. In the course of assessment proceedings, it was admitted that the above said expenditure was wrongly claimed through inadvertence and the assessee had no intention to defraud the revenue in view of huge brought forward business losses and brought forward unabsorbed depreciation. The assessee has sold all its factory premises and has no intention to defraud the Department, especially when it was legally allowable in AY 2012-13 (which was actually not claimed when the original return of income was filed). In view of these facts, we are of the view that the penalty levied by AO and confirmed by the CIT(A) on account of furnishing of inaccurate 10 ITAs No. 5864/Mum/2015