GOVARDHAN G VANANI,MUMBAI vs. DCIT (OSD-I) CEN RG 7, MUMBAI

1 ITA 269/Mum/2016

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “G”, MUMBAI

Before Shri Mahavir Singh(JUDICIAL MEMBER) AND Shri G Manjunatha (ACCOUNTANT MEMBER)

I.T.A No.269/Mum/2016 (Assessment year: 2010-11)

Shri Govardhan G Vanani vs DCIT(OSD-I), Central Range-7 112-115, Jewel, TATA RD-2, Mumbai Opera House, Mumbai-4 PAN : AABPV5861F APPELLANT RESPONDENT

Appellant by Shri BV Jhaveri Respondent by Shri V Vidhyadhar

Date of hearing 17-05-2018 Date of pronouncement 15-06-2018 O R D E R Per G Manjunatha, AM : This appeal filed by the assessee is directed against the order of

the CIT(A)-52, Mumbai dated 26-10-2015 and it pertains to AY 2010-11.

had filed his return of income for the AY 2010-11 on 05-10-2010

declaring total income at Rs.44,034. The assessment was completed

u/s 143(3) on 16-12-2012 determining total income at Rs.3,64,00,540 by

making disallowance towards loss claimed on account of write off of

investments made in shares of M/s Niru Jewels Pvt Ltd. Thereafter, the

AO initiated penalty proceedings u/s 271(1)(c) of the I.T. Act, 1961 for

2 ITA 269/Mum/2016

furnishing inaccurate particulars of income. The facts leading to

imposition of penalty are that during the course of assessment

proceedings, AO noticed that in the computation of income filed

alongwith return of income, the assessee had shown short term capital

gain of Rs.4,53,22,995 on sale of land. As against this, the assessee

had set off loss of Rs.3,70,50,000 on account of write off of investments

of M/s Niru Jewels Pvt Ltd. During the course of assessment

proceedings, the assessee had filed a revised computation of total

income wherein the long term capital gain declared on sale of land was

withdrawn stating that the transfer made during the year was void as the

assessee had no right to sell the property and, therefore, the sale

agreement had been cancelled and the land had been repurchased and

thus, no capital gain arose on account of transfer of land. In the revised

computation, the assessee had claimed carry forward of loss of

Rs.3,70,50,000 on account of investments in M/s Niru Jewels Pvt Ltd.

During the course of assessment proceedings, the AO asked the

assessee to furnish necessary details of transactions and supporting

documents in respect of long term capital gain. The AO, after

considering relevant submissions of the assessee observed that the

assessee has claimed loss in respect of investments in shares of M/s

Niru Jewels Pvt Ltd without there being any effective transfer of shares

3 ITA 269/Mum/2016

to set off such loss against long term capital gain determined from sale

of land. Therefore, he opined that the assessee has furnished

inaccurate particulars of income within the meaning of section 271(1)(c)

of the Act and accordingly levied penalty of Rs.1,21,19,016 being 100%

of the tax sought to be evaded which is minimum penalty leviable. While

doing so, the AO has relied upon various judicial precedents including

the decision of Hon’ble Supreme Court in the case of UOI vs

Dharmendra Textile Processors & Ors 306 ITR 277 (SC) to come to the

conclusion that if the scrutiny assessment had not been taken place, the

assessee could have been benefited by filing inaccurate particulars of

income. Had the revenue not detected the inaccurate particulars of

income, the assessee could have enjoyed the fruits of filing inaccurate

particulars of income and would have caused loss to the revenue. It is

also important to mention here that in the instant case, the concealment

/ wrong claim would not have come to the notice of the department if the

case had not been picked up for scrutiny. Therefore, he opined that the

assessee had made an attempt to reduce his tax liability by claiming

wrong deduction which is very much falling within the ambit of provisions

of section 271(1)(c) of the Act.

the CIT(A). Before the CIT(A), assessee has filed elaborate written

4 ITA 269/Mum/2016

submissions which has been reproduced at para 5 on pages 3 to 7 of

the order of CIT(A). The sum and substance of the arguments of the

assessee before the CIT(A) are tht he had neither concealed particulars

of his income nor did he furnish any inaccurate particulars of income

while claiming long term capital loss of Rs.3,70,50,000 in respect of

investments in shares of M/s Niru Jewels Pvt Ltd as the underlying

assets of the said company became Nil on account of default in

repayment of loan to the banks and the banks have attached the assets

u/s 13(2) of the Securitisation & Reconstruction of Financial Assets and

Enforcements of Securities Interest Act, 2002 (SRFAESI Act). The

assessee further submitted that it has claimed loss on account of

investment in shares on the basis of Accounting Standard-13 issued by

ICAI which is mandatory in nature w.e.f. 01-04-1995, as per which,

where there is a decline, other than temporary, in the carrying amount of

long term capital investments, the resultant reduction in the carrying

amount is charged to the P&L Account. Therefore, the AO was totally

incorrect in coming to the conclusion that the assessee has deliberately

furnished inaccurate particulars of income so as to evade payment of

taxes which warranted levy of penalty u/s 271(1)(c). The assessee also

relied upon various judgements including the decision of Hon’ble

Supreme Court in the case of CIT vs Reliance Petroproducts Pvt Ltd

5 ITA 269/Mum/2016

(2010) 322 ITR 158 (SC).

assessee and also relying upon various judicial precedents including the

decision of Hon’ble Supreme Court in the case of Mak Data vs CIT 358

ITR 593 (SC) held that the assessee has furnished inaccurate

particulars of income and has also concealed the particulars of income

within the meaning of section 271(1)(c) of the Income-tax Act, 1961 and

hence, upheld the order of the AO levying penalty of Rs.1,21,19,016.

The relevant portion of the order of CIT(A) is reproduced below:-

6 ITA 269/Mum/2016

and, hence, the disallowance of loss was upheld by the learned CIT(Appeals). It appears that the appellant had investments of Rs.3,70,50,0007- in share capital of Niru Jewels Pvt. Ltd., which suffered losses and capital got sunk, and the lender bank took possession of the company along with its property, and the debts valued more than the property, and, therefore, the entire investment of Rs.3,70,50,000/- was claimed as long-term capital loss. The appellant has contended before me that he should be deemed to have transferred his shares to the bank with no realization value, and, consequently, he should be allowed the benefit of long term loss. 8. I have considered the argument of the appellant. The appellant was holding shares worth Rs.3,70,50,000/- in the company, Niru Jewels Pvt. Ltd. It appears that this company suffered losses and defaulted in repayment of loan taken from State Bank of India. From the details furnished, it appears that the bank had attached the company's property situated at Unit No.704, 7th floor, Tower-1, SEEPZ, MIDC, Andheri (E), Mumbai and the said property was put up for auction by the said bank on 13/ 1/2015. Event it is not clear whether the above property was attached by the bank during the year under consideration. It is also not clear whether all the assets of the company had been taken over by the bank. In any case, the process for liquidation of the company and distribution of its assets amongst the stakeholders was not complete during the year under consideration. This is evident from the fact that the bank had put up the above property of the company for auction only on 13/1/2015. Under the circumstances, there was no transfer of shares of the company, by the appellant, during the year. As stated above, the appellant has the consideration for the so-called transfer of shares as nil and the entire amount of investment in shares as loss. However, as of now, it is not clear whether the company will finally go into liquidation and, if so, whether the appellant, as a shareholder, would receive any amount or assets on distribution of assets amongst the stakeholders. The amount or market value of the assets so received is important for determination of the deemed value of consideration for transfer, for the purpose of computing capital gain in such cases. The appellant may or may not receive any amount or assets on distribution of assets consequent to liquidation of the company. But the capital gain in this case will be chargeable to tax only in the year in which the process of liquidation of the company and distribution of assets is completed. Therefore, the appellant's contention that he was entitled to claim the long- term loss of Rs.3,70,50,000/-, during the year, cannot be accepted. This contention had already been rejected earlier by my predecessor, while deciding the appellant's appeal against the disallowance of the said loss. 9. Now let us consider the issue as to whether the appellant is liable for penalty u/s.271(l)(c) of the Act, in respect of claim of loss of Rs.3,70,50,000/-. As stated above, the transfer of shares of the company Niru Jewels Pvt. Ltd. had not taken place during the year under

7 ITA 269/Mum/2016

consideration. Yet, the appellant claimed the said loss. The appellant has not been able to offer any satisfactory explanation as to why such claim was made. It is obvious that the appellant had claimed this loss to set off major portion of the long-term capital gains of Rs.4,53,22,995/-, which had arisen during the year on account of sale of land, and thereby avoid payment of taxes on such long-term capital gains. Though the sale transaction is claimed to have been cancelled later, it has to be noted that the cancellation deed had been entered into by the appellant after filing of the return of income for the 'year under consideration. Thus, as on the date of filing of return of income for the year under consideration, the appellant had huge amount of capital gains, which could be set off by claiming non-genuine loss, and the appellant has done exactly the same, jpellant cannot plead ignorance of law, as he was represented by a Chartered Accountant during the course of assessment proceedings and appellate proceedings and still pursued the claim of loss, which shows that the appellant had deliberately made the claim with malafide intention. Under the circumstances, I have no hesitation in holding that the appellant has furnished inaccurate particulars of income, within the meaning of Sec.271(l)(c) of the Act. 10. Further, the appellant's case is also covered by Explanation 1 to Sec.271(1) of the Act, which are reproduced as under :- "Explanation 1. - Where in respect of any facts material to the computation of the total income of any person under this Act, - (A) such person fails to offer an explanation or offers an explanation which is found by the Assessing Officer or the Commissioner (Appeals) r the Commissioner to be false, or (B) such person offers an explanation which he is not able to substantiate and fails to prove that such explanation is bona fide and that all the facts relating to the same and material to the computation of his total income have been disclosed by him, then, the amount added or disallowed in computing the total income of such person as a result thereof shall, for the purpose of clause (c) of this sub- section, be deemed to represent the income in respect of which particulars have been concealed."

The appellant claimed long-term capital loss of Rs.3,70,50,0007- on transfer of shares, but there was no transfer of shares, during the year. The appellant has filed to offer any satisfactory explanation as to why such loss was claimed. Therefore, the appellant has also concealed the particulars of his income, within the meaning of Explanation 1 to Sec.271(1). 11. The appellant has placed reliance on certain case laws, such as CIT Sudhewal Co-op, Sugar Mills Ltd. (200) 312 ITR 92 (P & H); CIT v. Auric Investment & Securities Ltd. (2009) 310 ITR 121 (Del); CIT, Ahmedabad v. Reliance Petroproducts Pvt. Ltd.; and Dr. Francis P. Candes v. ITO. These decisions are to the effect that where certain loss/expenditure is claimed and the claim was bona fide and where certain claim made by the assessee was merely not acceptable to the revenue, penalty is not leviable. However, in the present case, it has been found that the appellant had deliberately claimed non-

8 ITA 269/Mum/2016

existing loss with a view to reduce tax liability. Hence, the facts of the present case are distinguishable from the facts of the cases relied upon by the appellant. The appellant, therefore, cannot derive any support from these decisions. 12. The Hon'ble Delhi High Court in the case of CIT Vs. Zoom Communications Pvt Ltd. (2O10) 327 ITR 510 has, after considering the decision of the Hon'ble Apex Court in the case of Reliance Petro Products Pvt Ltd., held that if the assessee makes a claim which is not only incorrect in law but is wholly without any basis and the explanation offered by him for making such a claim is not found to be bona fide, Explanation 1 to section 271(1) c would come into play and the assessee will be liable for penalty. Similarly in the case of CIT vs. Lal Chand Tirath Ram (1997) 225 ITR 684, Hon'ble Punjab & Haryana High Court held that mere offering an explanation would not absolve an assessee from the liability of penalty. The appellant's case is on a much stronger footing, as it is a case of failure to include substantial income in the return and there is no explanation for such failure. 13. In the case of MAK DATA vs CIT as reported in 358 ITR 593(SC) 2013, the Hon'ble Supreme Court went one step further and held that even in the cases where the assessee had admitted certain income during the course of search/survey or otherwise, with a view to buy peace or with a view to avoid litigation or with a view to have amicable settlement, still the assessee cannot escape penalty u/s.271(l)(c) of the Act. The relevant portion of the judgment is reproduced as under:- " The AO, shall not be carried away by the plea of the assessee like "voluntary disclosure", "buy peace", "avoid litigation", "amicable settlement", etc. to explain away its conduct. The question is whether the assessee offered any explanation for concealment of particulars of income or furnishing inaccurate particulars of income. Explanation to Section 271(1) raises a presumption of concealment, when a difference is noticed by the AO, between reported and assessed income. The burden is then on the assessee to show otherwise, by cogent and reliable evidence. When the initial onus placed by the explanation, has been discharged by him, the onus shifts on the Revenue to show that the amount in question constituted the income and not otherwise. In present case the assessee only stated that he had surrendered the additional sum of Rs.40,74,OOO/- with a view to avoid litigation, buy peace and to channelize the energy and resources towards productive work and to make amicable settlement with the income tax department. Statute does not recognize those types of defences under the explanation 1 to Section 271(l)(c) of the Act. It is trite law that the voluntary disclosure does not release the assessee from the mischief of penal proceedings. The law does not provide that when an assessee makes a voluntary disclosure of his concealed income, he had to be absolved from penalty. The surrender of income in this case was not voluntary in the sense that the offer of surrender was made in view of detection made by the AO in the search conducted in the sister concern of the assessee. In that situation, it

9 ITA 269/Mum/2016

cannot be said that the surrender of income was voluntary. AO during the course of assessment proceedings had noticed that certain documents were impounded in the course of survey proceedings under Section 133A, in the case of a sister concern of the assessee. The survey was conducted more than 10 months before the assessee filed its return of income. Had it been the intention of the assessee to make full and true disclosure of its income, it would have filed the return declaring income inclusive of the amount which was surrendered later during the course of the assessment proceedings. Consequently, it was clear that the assessee had no intention to declare its true income. It was the statutory duty of the assessee to record all its transactions in the books of ount, to explain the source of payments made by it and to declare its true income in the return of income filed by it from year to year. The AO, in our view, has recorded a categorical finding that he was satisfied that the assessee had concealed true particulars of income and is liable for penalty proceedings under Section 271 read with Section 274. The AO has to satisfy whether the penalty proceedings be initiated or not during the course of the assessment proceedings and the AO is not required to record his satisfaction in a particular manner or reduce it into writing. No illegality was found in the department initiating penalty proceedings in the instant case. Therefore, the view of the High Court was fully agreed."

neither concealed particulars of his income nor furnished any inaccurate

particulars of his income while claiming long term capital loss of

Rs.3,70,50,000 in respect of investments in shares of M/s Niru Jewels

Pvt Ltd as the said claim is based on AS-13 issued by ICAI which is

mandatory in nature w.e.f. 01-04-1995. The Ld.AR further submitted

that there is a reason for the assessee to write off investments in its

books of account as the underlying assets of the said company were

10 ITA 269/Mum/2016

taken over by the banks as the same were mortgaged to the banks

against their liabilities and hence, the value of the said shares had

become Nil. The assessee further submitted that as per AS-13, where

there is a permanent decline in the value of long term investments, the

resultant reduction is to be charged to the P&L Account and hence, the

assessee was advised by his tax consultants, relying on AS-13 to debit

the cost of the shares as a loss to P&L account and accordingly, the

assessee has claimed such loss in its books of account. The Ld.AR

further submitted that the decision taken by the assessee to write off

investments in shares is based on opinion given by tax consultant on the

basis of AS-13, therefore, the AO is incorrect in coming to the conclusion

that the assessee has deliberately shown loss to set off against long

term capital gain ignoring the fact that the ITAT finally deleted addition

made by the AO towards computation of long term capital gain from sale

of agricultural land. The claim made by the assessee is bona fide and

also on the basis of advice of experts. When there is a divergent vie on

the issue of allowability of certain expenses or loss and the assessee

has claimed such expenses or loss as allowable but the AO has not

accepted the claim of loss may not lead to an inference that the

assessee has furnished inaccurate particulars of income. The lower

authorities failed to appreciate the facts in right perspective and hence

11 ITA 269/Mum/2016

requested to delete penalty levied u/s 271(1)(c) of the Act.

Ld.CIT(A) submitted that the assessee has deliberately furnished

inaccurate particulars of income so as to reduce his tax liability arose

from transfer of capital asset which is evident from the fact that the

assessee has set off such loss against long term capital gain computed

from sale of agricultural land. The AO has brought out clear facts to the

effect that if the department had not taken scrutiny proceedings, the loss

claimed by the assessee could be unnoticed and as a result, the

assessee would be benefitted by wrong claim of set off of loss which

resulted in evasion of tax and hence, the AO was right in levying penalty

u/s 271(1)(c) and his order should be upheld.

on record. The AO levied penalty u/s 271(1)(c) of the Act for furnishing

inaccurate particulars of income in respect of loss claimed on account of

write off of investments of M/s Niru Jewels Pvt Ltd. According to the AO,

the assessee has deliberately claimed set off of loss on account of write

off of investment in shares to set off long term capital gain derived from

sale of agricultural land. Therefore, he opined that the assessee has

deliberately furnished inaccurate particulars of income so as to evade

tax which warranted levy of penalty u/s 271(1)(c) of the Act. The AO

12 ITA 269/Mum/2016

further observed that concealment of income can be done in many

manners. The concealment can result in by claiming wrong deduction in

the manner different from the one prescribed under law. The

concealment not only refers to deliberate attempt to file inaccurate

particulars but it also means claiming wrongful deduction thereby

reducing its taxable income. The assessee is doing exactly the same

thing by claiming incorrect loss by writing off its investments in shares of

other company without any effective transfer of shares. The AO also

taken support from various judicial precedents including the decision of

Hon’ble Delhi High Court in the case of CIT vs Zoom Communications

Pvt Ltd (2010) 327 ITR 510 (Del).

which is not allowable under the Act does not tantamount to furnishing of

inaccurate particulars of income so as to evade tax. The assessee

further contended that it has made a claim of loss on account of write off

of investments in shares of company on the basis of AS-13 issued by

ICAI and also based on expert advice given by tax consultants. The

claim against long term capital gain although is on the basis of advice of

tax consultants, ultimately the ITAT has held that no capital gain arose

on transfer of agricultural land. From this it is abundantly clear that the

claim made by the assessee towards set off of loss on account of write

13 ITA 269/Mum/2016

off of investments in shares against long term capital gain from transfer

of land is a bona fide claim which is based on certain principles of

accounting, which cannot be considered as deliberate attempt to evade

tax. The assessee has referred to AS-13 issued by ICAI to argue that

where there is a decline other than temporary, in the value of long term

investments, the resultant reduction is to be charged to the P&L account.

The assessee also filed necessary evidences to prove that the

underlined assets of the company, M/s Niru Jewels Pvt Ltd became Nil

as the assets of the said company were taken over by banks u/s 13(2) of

the Securitisation & Reconstruction of Financial Assets and

Enforcements of Securities Interest Act, 2002 (SRFAESI Act) and also

the recovery proceedings were commenced before the Debt Recovery

Tribunal.

assessee for the reason that the loss claimed on account of write off of

investment in shares of M/s Niru Jewels Pvt Ltd is based on AS-13

issued by ICAI which is mandatory in nature w.e.f. 01-04-1995 as per

which where there is a permanent decline in the value of long term

investments, the resultant reduction in the carrying amount is to be

charged to the P&L Account. The said AS-13 further stated that the

reduction in carrying amount is reversed when there is a rise in the value

14 ITA 269/Mum/2016

of the investment or if the reason for reduction no longer exists. The

assessee has claimed such loss on the basis of advice of tax consultant

which is further supported by the accounting principles decaled by ICAI.

The assessee also explained the reasons for write off of investment in

shares in its books of account. According to the assessee, the

investment in shares o M/s Niru Jewels Pvt Ltd had become Nil as the

underlined assets of the company were taken over by the banks as the

same were mortgaged to the banks. The assessee further claims that

M/s Niru Jewels Pvt Ltd is indebted to the banks for more than Rs.62

crores and the assets of the company were taken over by the banks and

proceedings were commenced by issue of notice u/s 13(2) of the

Securitisation & Reconstruction of Financial Assets and Enforcements of

Securities Interest Act, 2002 (SRFAESI Act) and recovery proceedings

were commenced before the Debt Recovery Tribunal and also a notice

of e-auction was issued to auction the assets. These facts are proved

with documentary evidences and not found to be incorrect. Under these

facts and circumstances, if we examine the claim of the assessee that

he had made a bona fide claim of loss on account of write off of

investments appears to be genuine and there is no mala fide intention to

evade payment of tax. We further observe that the assessee has

claimed such loss as per the mandatory accounting policies prescribed

15 ITA 269/Mum/2016

by ICAI and also on the basis of advice of tax consultants. Since the

assessee has made such claim on the basis of mandatory accounting

principles, we are of the view that the claim of the assessee appears to

be bona fide. If for any reasons, the AO does not accept the claim of the

assessee, that by itself, would not lead to an inference that the assessee

had furnished inaccurate particulars of income within the meaning of

section 271(1)(c) of the Act.

assessee has relied upon the decision of Hon’ble Bombay High Court in

the case of CIT vs Nalin P Shah, HUF (2013) 40 Taxman.com 86. The

Hon’ble jurisdictional High Court in the said case held that where

assessee made wrong claim of loss on sale of US-64 units, but

disclosed the same in return, there was no concealment of income. The

relevant portion of the order is extracted below:-

"4. In this case, the respondent-assessee had declared long term capital loss of Rs.4.39 crores which wereinclusive of loss incurred on the sale of US-64 units. The assessing officer disallowed the loss on sale US-64 units on the ground that where income from particular source was exempt from tax then the loss fromsuch source could not be set off from another source under the same head of income. In view of theabove, theassessing officer also initiated penalty proceedings and imposed penalty under Secton 271(l)(c) of the income Tax Act, 1961. "5. In appeal, CIT (A) upheld the order of Assessing Officer levying penalty. "6. On further appeal, the Tribunal in the impugned order held that the respondent-assessee had in its returnof income filed a note with its computation of income disclosing all details about the sale of US-64 units,the loss and resultant carry forward. Further, all details were

16 ITA 269/Mum/2016

disclosed in its return of income as is evidentfrom the fact that the assessing officer gathered information about the carry forward loss and sale of units from return filed by the respondent-assessee. The Tribunal held that the from the aforesaid facts at the highest it can be said that the claim of the assessee was not sustainable in law but there was no furnishing of inaccurate particulars or concealment of income on the part of the respondent-assessee. Thus, the penalty was set aside. We find that the same view is taken by the Apex Court in the matter of CIT v.Reliance Petroproducts (P.) Ltd. [2010] 322 ITR 158/189 Taxman 322 (SC). As the decision of theTribunal is essentially based on finding of fact, we see no reason to entertain the proposed question of law."

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an essential ingredient for attracting civil liability. It is obvious that the penal provisions would operate when there is concealment of particulars of income or a failure of duty to disclose fully and truly particulars of income, imposed under the Act and the Rules thereunder. The duty is enjoined upon a person to make a correct and complete disclosure of particulars of his income and it is only when he fails in his duty by not disclosing particulars of his income or part thereof, he conceals the particulars of his income. The duty is enjoined upon him to make a complete disclosure of particulars of his income as well as a correct disclosure. Therefore, if the disclosure made of the particulars of income is incorrect, then also he commits breach of his duty. Such defaults entail the penal consequences contemplated by section 27J(l)(c). [Para 10.4] There cannot be a straitjacket formula for detection of these defaults of concealment or of furnishing inaccurate particulars of income and indeed concealment of particulars of income and inaccurate particulars of income may at times overlap. It depends upon the facts of each case. In the assessment proceedings, the Assessing Officer while ascertaining the total income chargeable to tax would be in a position to detect the specific or definite particulars of income concealed or of which, false particulars are furnished. Where in the constituents of income returned, such specific or definite particulars of income are detected as concealed, then even in the total income, figure to the extent that they reflect, would amount to concealment. In the same way where specific and definite particulars of income are detected as accurate, then such figure will also make the total income inaccurate in particulars to the extent it does not include such income. In other words, the Assessing Officer cannot invoke provisions of section 27I(I)(c) on the basis of routine and general presumptions. Whether it be a case of only concealment or of only inaccuracy or both, the particulars of income so vitiated would be specific and definite and be known in the assessment proceedings by the ITO, who on being satisfied about each concealment or inaccuracy of particulars of income would be in a position to initiate the penalty proceedings on one or both of the grounds of default as may have been specifically and directly detected. [Para 10.5]

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A conspectus of the Explanation 1 to section 271(l)(c) makes it clear that the statute visualises the assessment proceedings and penalty proceedings to be wholly distinct and independent of each other. In essence, the Explanation is a rule of evidence. Presumptions which are rebutting in nature are available to be drawn. The initial burden of discharging the onus of rebuttal is on the assessee. The rationale behind this view is that the basic facts are within the special knowledge of the assessee. Section 106 of the Indian Evidence Act, 1872, gives statutory recognition to this universally accepted rule of evidence. There is no discretion conferred on the Assessing Officer as to whether he can invoke the Explanation or not. Explanation 1 comes into operation when, in respect of any fact material to the computation of total income of any person, there is failure to offer an explanation or an explanation is offered which is found to be false by the Assessing Officer or the first appellate authority, or an explanation is offered which is not substantiated. In such a case, the amount added or disallowed in computing the total income is deemed to represent the income in respect of which particulars have been concealed. As per the provisions Explanation 1, the onus to establish that the explanation offered is bona fide and all facts relating to the same and material to the computation of his income have been disclosed by him, will be on the person charged with concealment. [Para 10.7] It is the duty of the assessee to furnish particulars of income simultaneously he has right to claim all exemptions and deductions provided in the Act, according to him for which he is entitled. The duty of the Assessing Officer is to assess real and correct income in accordance with law. The CBDT in its Circular No. I4(XL35) of 1955, dated 11-4-1955, 'regarding departmental attitude towards' - stated that the officers of the department must not take advantage of ignorance of an assessee as to his rights. It is one of their duties to assist a taxpayer in every reasonable way, particularly in the matter of claiming and securing reliefs and in this regard the officers should take the initiative in guiding a taxpayer where proceedings or other particulars before them indicate that some refund or relief is due to him. It is further stated that officers should, when requested, freely advice assessees the way in which entries should be made in various

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forms, they should not themselves make any entry in them on their behalf Where such advice is given, it should be clearly explained to them that they are responsible for the entries made in any form and that they cannot be allowed to plead that they were made under official instructions. [Para 10.9] In the light of above discussion, the facts of the case under consideration were to be seen. On perusal of the orders of revenue authorities, it was found that the penalty under section 27I(l)(c) was levied mainly on the ground that the assessee 's claims under sections 94(7), 80GGB and 80HHC were not correct. In such case, the explanation of the assessee was to be seen. Explanation must be preceded by a finding as to how and in what manner; the assessee had furnished the particulars of his income. The assessee had demonstrated that its claims were bona fide claims after making full disclosure. It referred to the relevant portion of return of income photocopy of which was furnished in the paper book. According to Schedule C - Capital gain of the income-tax return form, an assessee in column A states regarding detail of capital gain/loss where it was filled up by the assessee by writing as 'Please refer Annexure II giving complete details'. It was noticed that there were no specific requirements in the return form applicable to the year under consideration. Such column in the return has been inserted by the amendment in return form, ITR-6, at page 17, 'Schedule CG capital gain' S. No. 3(d) which is applicable from the assessment year 2007-08. The Apex Court in the case o/CIT v. Reliance Petroproducts (P.) Ltd. [2010] 322 1TR 158 / 189 Taxman 322 (at page 164) regarding the word 'particulars' used in section 27I(I)(c) had held that there can be no dispute that everything would depend upon the return filed because that is the only document, where the assessee can furnish the particulars of his income. When such particulars are found to be inaccurate, the liability would arise. But in the case under consideration, it was found that the assessee had furnished full detail and had not concealed any particulars of income or had furnished any inaccurate particular of income. In the case of Reliance Petroproducts (P.) Ltd. (supra) the Supreme Court held that where there is no finding that any details supplied by the assessee in its return are found to be incorrect or erroneous or false there is no question of inviting the penalty under section

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271(I)(c ). A mere making of a claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee. Such a claim made in the return cannot amount to furnishing inaccurate particulars. The assessee had demonstrated that its claims were bona fide claims. The claim regarding sections 80HHC and 80GG had been sent back to the Assessing Officer and some part of ground related to section 80HHC had been decided in favour of the assessee by the Tribunal, therefore, in the light of above discussion, it was not found that the case under consideration was a fit case for levy of penalty under section 27I(I)(c ). Therefore, the penalty levied was to be cancelled. [Para 10.10]” 12. The assessee also relied upon the decision of Hon’ble Supreme Court in the case of Reliance Petroproducts Pvt Ltd (supra). The Hon’ble Supreme Court while deleting penalty u/s 271(1)(c) held that merely because the assessee had claimed the expenditure which claim was not accepted or was not acceptable to the revenue that, by itself, would not attract penalty u/s 271(1)(c) of the Act. If the contention of the revenue was accepted, then in case of every return where the claim made was not accepted by the AO for any reason, the assessee would invite penalty u/s 271(1)(c). That is clearly not the intentment of the legislature. 13. In this case, the assessee has furnished necessary details in respect of claim of loss on account of write off of investments in shares in return of income. The assessee also filed explanation before the AO with reasons for claiming such loss. We further observe that the

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assessee has claimed set off of such loss against long term capital gain derived from sale of agricultural land. The said long term capital gain has been withdrawn by filing revised statement of total income during

the course of assessment proceedings. The AO made addition towards long term capital gain; however, on appeal before ITAT, the ITAT deleted addition made by the AO towards long term capital gain computed on transfer of agricultural land. Since the assessee has made

a claim of set off of loss on account of write off of investments in shares against along term capital gain derived from transfer of land and such long term capital gain has been finally deleted by the ITAT, we are of the

considered view that the claim made by the assessee is a bona fide claim and hence, the AO was erred in levying penalty u/s 271(1)(c) for furnishing inaccurate particulars of income. Hence, we direct the AO to

delete penalty levied u/s 271(1)(c) of the Act. 14. In the result, appeal filed by the assessee is allowed.

Order pronounced in the open court on 15th June, 2018.

Sd/- sd/- (Mahavir Singh) (G Manjunatha) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai, Dt : 15th June, 2018 Pk/-

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Copy to : 1. Appellant 2. Respondent 3. CIT(A) 4. CIT 5. DR /True copy/ By order

Sr.PS, ITAT, Mumbai