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IN THE INCOME-TAX APPELLATE TRIBUNAL “J” BENCH MUMBAI BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI PAWAN SINGH, JUDICIAL MEMBER (Assessment Year 2010-11) Shakti Hardware Collections Pvt. DCIT CC -3(3), Ltd. 60/62, Kika Street, Mumbai. Gulabwadi, Mumbai-400004. Vs. PAN: AAECS6501K Appellant Respondent Appellant by : Shri Ryan Saldanha (AR) Respondent by : Ms. Arju Garodia (DR) Date of Hearing : 20.06.2018 Date of Pronouncement : 20.06.2018 ORDER UNDER SECTION 254(1)OF INCOME TAX ACT PER PAWAN SINGH, JUDICIAL MEMBER;
This appeal by assessee is directed against the order of ld. Commissioner of Income-tax (Appeals)-51, Mumbai [ld. CIT(A)] dated 023.11.2016 for Assessment Year 2010-11. The ld. CIT(A) confirmed the penalty levied by Assessing Officer under section 271(1)(c). The assessee has raised the following grounds of appeal:
1. On the facts and in the circumstances of the case, the Ld. CIT(A) erred in confirming the penalty of Rs. 13,63,872/- levied by the Assessing Officer in respect of variation in value of inventories considering the same as "inaccurate particular of income/concealed particulars of income".
2. On the facts and in the circumstances of the case, the Ld. CIT(A) erred in confirming the penalty on variation in value of inventories without appreciating the fact that the same was offered by the appellant on its own by way of revised return of income without anything being detected by the department.
17 Shakti hardware Collections Pvt. Ltd.
3. The appellant prays that the penalty levied of Rs. 13,63,872/- may be deleted.
Brief facts and of the case are that the assessee company is engaged in the business of hardware goods, filed its return of income for Assessment Year 2010-11 on 29.09.2010 declaring total loss of Rs. 43,26,781/-.
Subsequently, a revised return of income was filed on 29.09.2011 revising the total loss to Rs. 3,14,213/-. The assessment was completed on 24.01.2013 under section 143(3). The Assessing Officer while framing the assessment order made the addition of Rs. 40,12,568/- on account of variation in entries in the books of accounts . The assessing officer initiated the penalty under section 271(1)(c) of the Act. Notice under section 274 r.w.s 271(1)(c) was issued to the assessee on 24.01.2013. The assessee filed its reply dated 25.03.2015. In the reply the assessee contended that during the course of assessment proceeding the assessee realized that at the time of filing of original return of income, there was error in valuation of inventories and closing inventories were undervalued by Rs. 40,12,568/-. The assessee offered the difference in valuation of inventories through revised return, as there was time for filing revised return of income as provided under section 139(5) . The contention of assessee was not accepted by Assessing Officer. The Assessing Officer took his view that assessee was served notice under section 143(2) on 12.09.2011 and soon after on receipt of notice, the assessee filed its 17 Shakti hardware Collections Pvt. Ltd. revised return and bringing down the capital loss from Rs. 43,26,781/- to Rs. 3,14,213/-. The Assessing Officer levied the penalty @ 100% of tax sought to be evaded. The Assessing Officer worked out the penalty of Rs. 13,63,872/- in its order dated 30.05.2015. On appeal before the ld. CIT(A), the action of Assessing Officer was confirmed. Therefore, further aggrieved by the order of ld. CIT(A), the assessee has filed the present case before us.
We have heard the ld. Authorized Representative (AR) of the assessee and ld. Departmental Representative (DR) for the Revenue and perused the material available on record. The ld. AR of the assessee submits that the assessee filed revised return of income. Revised return of income was filed within the period of limitation prescribed under section 139(5). The assessee during the assessment realized that there was an error in valuation of inventories in the books of accounts. There was no concealment of income or furnishing inaccurate particular of income. The assessee suo- moto offered the difference in valuation in inventories on its own without being asked by the Assessing Officer. In support of his submission, the ld. AR of the assessee besides the other decision heavily relied upon the decision of Tribunal in Prema Gopal Rao v DCIT (ITA No. 8653/Mum/2011 dated 07.01.2015). The ld. AR of the assessee further submits that the closing stock as on 31.03.2010 would have become the opening stock for next Assessment Year that i.e Assessment Year 2012- 3 ITA No. 212/Mum 17 Shakti hardware Collections Pvt. Ltd.
13, even if less profit had been shown in Assessment Year 2010-11, the higher profit would have been shown in next Assessment Year i.e. Assessment Year 2011-12. In support of his submission, the ld. AR of the assessee relied upon the decision of Tribunal in DCIT vs. Jehangir H C Jehangir (ITA No. 1484/Mum/2007), DCIT v OTIS Elevator Co. (I) Ltd. [2014] 61 SOT 26 (Mum Trib.)] and Parinee Developers (P.) Ltd. v. ACIT [2015] 174 TTJ 137 (Mum)].
On the other hand, the ld. DR for the Revenue supported the order of lower authorities. The ld. DR for the Revenue further submits that the assessee filed his revised return of income only after issuing notice under section 143(2). It was further submitted that the assessee has nowhere explained the mistake during the assessment proceeding or in penalty proceeding. In support of her submission, the ld. DR relied upon the decision of MAK Data Pvt. Ltd. vs. CIT. (358 ITR 539).
We have considered the rival submission of the parties and gone through the assessment order passed under section 143(3) dated 24.01.2013, order of penalty under section 271(1)(c) dated 30.03.2015, order of ld. CIT(A) and the other material placed before us. We have noted that initially the assessee filed return of income on 29.09.2010 by declaring loss of Rs. 43,26,781/-. The notice under section 143(2) dated 19.08.2010 was served on assessee on 12.09.2011. The assessee filed its revised return of income on 29.09.2011 and bringing down the loss to Rs. 3,14,213/- thereby the 4 17 Shakti hardware Collections Pvt. Ltd. assessee added income of Rs. 40,12,568/-. The ld. AR of the assessee explained due to variation of inventories and closing inventories the additional income was offered, which was accepted by assessing officer.
We have further noted that the revised return of income was filed within prescribed period under section 139(5) and offered the difference in valuation of inventories through revised return of income. The revised computation was accepted by Assessing Officer, however, the AO initiated the penalty under section 271(1)(c) of the Act on the same amount of income offered in the revised computation. The ld. CIT(A) confirmed the order of Assessing Officer on the similar line held that the assessee deliberately and willfully tried to reduce its profit by showing less inventories. We have noted that no discrepancy was found by Assessing Officer in the revise return of income. The assessee has voluntarily and suo-moto offered difference in valuation of inventories without being asked by Assessing Officer. The assessing officer nowhere in the assessment order recorded that any deficiency was detected by assessing officer in the books of accounts of assessee. The co-ordinate bench of Tribunal in Prema Gopal Rao v DCIT (supra) while considering the grounds relates to levy of penalty on similar set of facts, under section 271(1)(c) held that when revised return of income was filed within time prescribed under section 139(5), even though the assessee filed revised return of income after reply of notice under section 143(2), the fact 5 17 Shakti hardware Collections Pvt. Ltd. remains that Assessing Officer did not seek any type of particulars in that notice and the mistake in offering income could not have come to the notice of Assessing Officer at that point of time. In such circumstances, the return of income was voluntary and no penalty can be levied on enhance income declared in revised return of income.
Further, the Hon’ble Delhi High Court in ACIT vs. Ashok Raj Nath [2013] 33 taxmann.com 588 (Del. Trib.) held that merely because a notice under section 143(2) had already been issued and assessee filed revised return thereafter, disclosing additional income towards the capital gains, which was not correctly shown in original return, that did not tantamount to deduction of concealment of income under section 271(1)(c). The assessee voluntarily disclosed additional income during the course of assessment proceedings and paid tax thereon. Even though the revised return was found to be invalid, the Assessing Officer accepted the income as declared in the revised return and computation, the penalty under section 271(1)(c) was not justified.
Therefore, considering the decision of Hon’ble Delhi High Court in ACIT Vs Ashok Raj Nath (supra) and decision of co-ordinate bench which are directly applicable on the fact of the present case, we do not find any justifiable reason for imposing the penalty, when the assessee voluntarily and suo-moto offered the additional income in revised return. Hence, we ITA No. 212/Mum 17 Shakti hardware Collections Pvt. Ltd. direct the Assessing Officer to delete the penalty levied under section 271(1)(c).
The case law relied by ld. DR in MAK Data Pvt. Ltd. (supra) is not applicable on the facts of the present case. As the facts in the case in hand is at variance. In the present case, the assessee has voluntarily and suo- moto offered income in revised return of income without being detected by Assessing Officer as inaccurate particular of concealed income or inaccurate particular thereof. In MAK Data Pvt. Ltd. (supra) the assessee admitted certain income in course of search and seizure and the assessee was confronted before offering the same during the assessment, the assessee offered income, therefore, the facts of the case in MAK Data Pvt. Ltd. are not applicable on the present case. In the result, the grounds of appeal
raised by assessee are allowed.
9. In the result, appeal filed by assessee is allowed.