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Income Tax Appellate Tribunal, MUMBAI BENCH “L” MUMBAI
Before: SHRI SAKTIJIT DEY & SHRI N.K. PRADHAN
ORDER
PER N.K. PRADHAN, AM
This is an appeal filed by the Revenue. The relevant assessment year is 2010-11. The appeal is directed against the order of the Commissioner of Income Tax (Appeals)-56, Mumbai [in short ‘CIT(A)’] and arises out of the penalty imposed u/s 271(1)(c) of the Income Tax Act 1961, (the ‘Act’).
The grounds of appeal
read as under:
1. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the penalty merely because the assessee has Channel V Music Networks revised the return within the permitted time u/s. 139(5) without appreciating that the revised return was filed only after the issue of notice u/s 143(2)?
2. Whether on the facts and circumstances of the case and in law the CIT(A) erred in taking cognisance of the note appended by the assessee in the original return filed on 14/10/2O10 stating that the income returned therein was liable to change once the global accounts of the assesses are finalised, without appreciating that the global accounts for the relevant A.Y.2010-11 ended on 30/06/2010 and the accounts were also finalised as per the audit report dated 03/05/2011 and hence there was inordinate delay in filing revised return on 29/03/2012 and hence the bonafide of the explanation of the assessee is not substantiated within the meaning of Explanation 1 to 271(1)(c)?
3. Whether on the facts and circumstances of the case and in law the CIT(A) erred in deleting penalty on the reduction of claim of loss in revised return to Rs.1,86,83,208/- from original loss claim of Rs.11,55,96,816/-?
4. Whether on the facts and circumstances of the case and in law the CIT(A) erred in not appreciating that it is the original return which Is relevant for levy of penalty if the explanation of assessee has not been found satisfactory, in view of Bombay High Court decision in the case of Vadilal Icchanand 32 ITR 569?
3. In a nutshell, the facts are that the assessee is a non-resident partnership firm and tax resident in Hong Kong. During the financial year (FY) 2009-10 relevant to the assessment year (AY) 2010-11, the assessee owned the satellite television channel called Channel V (‘Channel’). The Assessing Officer (AO) completed the assessment u/s 143(3) r.w.s. 144C(13) on 30.12.2014 determining the income at Channel V Music Networks Rs.5,48,08,461/-. The AO also initiated penalty proceedings by issuing notice dated 30.12.2014 u/s 271(1)(c). The reasons given by the AO for imposing penalty u/s 271(1)(c) are that (i) the assessee had filed the original Return of Income (RoI) u/s 139 on 14.10.2010 showing income at Rs. Nil for AY 2010-11; no revised RoI was filed till 19.09.2011, when the assessee was served a notice u/s 143(2) selecting the case for scrutiny assessment, (ii) though, in the case of the assessee, the year ended on 30.06.2010 for his global operations, which is the basis claimed by it for filing the proper income under the Income Tax in India, no revised RoI was filed before the case was selected for scrutiny, (iii) it was only on 29.03.2012 that the assessee revised the returned Nil income to Rs.3,61,25,253/-. The AO vide penalty order dated 30.06.2015 concluded that the assessee had concealed an amount of Rs.14,58,06,187/- by furnishing inaccurate particulars of income. Therefore, the AO levied a penalty of Rs.6,15,30,210/- u/s 271(1)(c).
4. Aggrieved by the order of the AO, the assessee filed an appeal before the Ld. CIT(A). The Ld. CIT(A) observed that the AO has levied penalty on the ground that the assessee has filed RoI on 29.03.2012 only after the issuance of notice dated 19.09.2011 u/s 143(2) and not immediately after its Global Financial Statements (GFS) were audited and there is a significant variation between the taxable income as well as tax credit claimed in its original and revised RoI. The Ld. CIT(A) held that merely because a RoI is revised, that fact by itself cannot lead to any presumption as to the concealment in the Channel V Music Networks RoI in case of any omission in the original RoI. Further, the assessee had also filed notes to the RoI with the AO prior to the issue of notice u/s 143(2) stating that the RoI would be subsequently revised on the basis of its audited GFS for the year ended 30.06.2010. Having observed that the assessee had submitted full information/particulars in relation to its income in the revised RoI and also during the course of assessment proceedings, the Ld. CIT(A) deleted the penalty of Rs.6,15,30,210/- levied by the AO.
5. Before us, the Ld. DR submits that the Assessing Officer (AO) has rightly imposed penalty of Rs.6,15,30,210/- as the assessee reported Nil income in the original RoI for the AY 2010-11 and a taxable income of Rs.3,61,25,253/- in the revised RoI. The revised RoI was filed by the assessee on 29.03.2012 only after issuance of notice dated 19.09.2011 by the AO u/s 143(2) and not immediately after its GFS were audited. There is a significant variation between the taxable income as well as the tax credit claimed in the original and revised RoI. The assessee has considered brought forward loss as per the RoI of AY 2009-10 amounting to Rs.11,55,96,816/- in its RoI for AY 2010-11, however, the claim of brought forward loss was reduced to Rs.1,86,83,208/- in the revised RoI of AY 2010-11. Thus the Ld. DR supports the order of the AO.
6. Per contra, the Ld. counsel of the assessee files a Paper Book (P/B) containing (i) a statement the chronology of events relevant for the Channel V Music Networks (ii) original computing of income along with acknowledgement of RoI for AY 2009-10, (iii) notes to original RoI filed by Channel V for AY 2009-10, (iv) original computation of income along with acknowledgement of RoI for AY 2010-11, (v) revised computation of income along with acknowledgement of RoI for AY 2009-10, (vi) notes to original RoI filed by Channel V for AY 2010-11, (vii) notes to revised RoI filed by Channel V for AY 2009-10, (viii) notice issued u/s 143(2) of the Income Tax Act, 1961 by the Assessing Officer for AY 2010-11, (ix) revised computation of income along with acknowledgement of RoI for AY 2010-11, (x) notes to revised RoI filed by Channel V for AY 2010-11, (xi) notice issued u/s 142(1) of the Act by the AO for AY 2010-11, (xii) submission filed by Channel V before the AO on 10 October 2012 in response to the aforesaid notice issue u/s 142(2) of the Act, (xiii) submission filed by Channel V before the AO on 17 January 2014 during the course of assessment proceedings, (xiv) application filed by Channel V before the Dispute Resolution Panel (DRP) on April 2014 during the course of DRP proceedings, (xv) submission filed by Channel V before the AO on 14 January 2015 in response to notice issued u/s 274 r.w.s 271(1)(c) of the Act and (xvi) submission filed by Channel V before the Commissioner of Income Tax (Appeals) on 13 July 2016 during the course of appellate proceedings. 6.1 The Ld. counsel submits that no penalty can be imposed in a case where, notice u/s 143(2) is issued prior to filing of the revised return. Reliance is placed by him on the decision in Cheap Cycle Stores 281 ITR 166, Ashok Raj Nath 33 taxmann.com 588 (Delhi-Trib), Prema Gopal Rao Channel V Music Networks v. DCIT (ITA No. 8653/Mum/2011) for AY 2004-05 by ITAT ‘C’ Bench Mumbai, Ravi Sud v. ACIT (2015) 60 taxmann.com 241 (Mumbai-Trib). Also it is submitted by him that as the AO has mentioned incorrectly ‘concealed’ and ‘inaccurate particulars of income’, no penalty is leviable in the instant case. Reliance is placed by him on the decision in SSA’s Emerald Meadows 73 taxmann.com 241 (Karnataka), SSA’s Emerald Meadows 73 taxmann.com 248 (SC), Manjunath Cotton & Giving Factory 35 taxmann.com 250 (Karnataka) and Ms. Sandhya Gadkari Sharma 82 taxmann.com (Mumbai-Trib). Finally, the Ld. counsel submits that no penalty is leviable in a case such as the present one where the AO has disallowed mere set off claim. He relied upon the decision in Reliance Petroproducts (P) Ltd. 322 ITR 158 (SC), Nalin P. Shah (HUF) 40 taxmann.com 86 (Bombay-HC), Ranbir Chemicals (P) Ltd. 91 TTJ 692 (Chandigarh-Trib) and Atotech India Ltd. 170 TTJ 8 (Delhi-Trib).
We have heard the rival submissions and perused the relevant materials on record. The reasons for our decisions are given below. The assessee filed its original RoI for AY 2010-11 on 14.10.2010 declaring Nil income for the purpose of filing the original RoI, the assessee applied the global profitability percentage computed on the basis of unaudited global financial statements (‘GFS’) for the nine month period ended 31.03.2010, to the Indian revenues earned by it for the twelve month period from 01.04.2009 to 31.03.2010 to arrive at the income taxable in its hands. Based on the above approach, an income of Channel V Music Networks Rs.2,46,20,650/- was computed under the head ‘profits and gains from business and profession’ in the hands of the assessee for AY 2010-11. As the assessee had brought forward business loss as per the original RoI for AY 2009-10 (prepared on the basis of un-audited GFS for nine month period ended 31.03.2009) amounting to Rs.11,55,96,816/-, the above business income of Rs.2,46,20,650/- for AY 2010-11 was entirely set off against the same and balance business loss of Rs.9,09,76,166/- (Rs.11,55,96,816/- less Rs.2,46,20,650/-) was carried forward to AY 2011-12. The above facts are clear from the computation of total income along with acknowledgement of RoI for AY 2009-10 as well as AY 2010- 11. Also the assessee had in its notes to original RoI for AY 2010-11 filed on 16.06.2011, reserved the right to revise its RoI on the basis of the audited GFS for the year ended 30.06.2010. A perusal of the notes to the original RoI clearly indicates the above. It shows that the assessee had, vide the said notes to original RoI, duly submitted that the same had been prepared on the basis of unaudited GFS for the nine month period ending 30.03.2010 and the same could be revised on the basis of the audited GFS. Pursuant to the filing of its original RoI for AY 2010-11, the assessee, consistent with the practice adopted by it for preceding years, revised its RoI for AY 2009-10 upon finalization of its audited GFS for the year ended June 2009. In the revised RoI filed by the assessee on 30.03.2011 for AY 2009-10, the carried forward business loss was determined at Rs.1,86,83,208/-.
Channel V Music Networks Subsequently, the assessee, in constancy with the practice followed by it for preceding years, revised the original RoI filed for AY 2010-11 on finalization of GFS for the year ended 30.06.2010. The assessee filed the revised RoI for AY 2010-11 on 29.03.2012 declaring total income of Rs.3,61,25,253/-. The said total income of Rs.3,61,25,253/- was determined by the assessee after setting off of the aforementioned brought forward returned business loss of AY 2009-10 amounting to Rs.1,86,83,208/- claimed by it in its revised RoI filed for AY 2009-10. 7.1 In view of the above facts, we find merit in the order of the Ld. CIT(A) that merely because a return is revised that fact by itself cannot lead to any presumption as to concealment in the RoI. This stand of the CIT(A) is supported by the decision in Ashok Raj Nath (supra), Prema Gopal Rao (supra). 7.2 In the assessment order dated 30.12.2014, the AO has initiated penalty proceedings stating that the assessee has furnished inaccurate particulars of income and has concealed particulars of income. Later on the AO has computed total of concealment or claim on account of inaccurate particulars at Rs.14,58,06,187/- in the penalty order dated 19.08.2016. The above being the facts, the ratio laid down in SSA’s Emerald Meadows (supra) and others relied on by the Ld. counsel is applicable in the instant case.