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Income Tax Appellate Tribunal, DELHI BENCH ‘F’, NEW DELHI
Before: SHRI N. K. SAINI & SMT. BEENA A. PILLAI
ORDER
PER BEENA A. PILLAI, JM:
The present penalty appeal has been filed by the revenue against order dated 04/07/13 passed by Ld. CIT(A)-III, New Delhi for assessment year 2005-06 on the following ground of appeal: “Whether on the facts & in the circumstances of the case, the Ld. CIT(A) erred in deleting the penalty of Rs.53,26,776/- imposed by the A.O. u/s 271(1)(c) of the Act.”
2. Admittedly the brief facts of the present case are as under: 2.1 The assessee is engaged in the business of investments and trading in shares and securities. Assessee had filed its original return of income under 2 I.T.A.No.5745/Del/2013 section 139 of the act on 28/10/2005 declaring total loss of Rs.1,45,77,465/-. A search and seizure operation under section 132 of the Act was carried out on 17/03/2010 in the case of Punj Lloyd group of cases. During the course of the search carried out at different premises located in India in Punj Lloyd group, the case of assessee was also covered. Various documents and data storage devices etc. belonging to the assessee company were found and seized. 2.2 Consequent upon the search and centralization, of assessment, notice under section 153A of the Act was issued to the assessee on 25/08/2010, which was duly served upon the assessee, and the assessee was directed to furnish true and correct return of income for the year under consideration. 2.3 The return of income under section 153A was filed by the assessee on 19/10/2010 declaring total loss of Rs.20,450/-. During the assessment proceedings, the Ld. AO observed that the returned loss declared in the return of income under section 153A was less than that of the loss declared in the original return filed under section 139(1) of the Act. The Ld. AO accepted the return filed in view of notice issued under section 153A of the Act and recorded his satisfaction regarding the suppression of income by the assessee to an extent of Rs.1,45,57,015/- (1,45,77,465 - 20,450) while filing the original return of income under section 139(1) and that the assessee is liable to penalty under section 271(1)(c) of the Act.
3 I.T.A.No.5745/Del/2013 2.4 A show cause notice under section 271(1)(c) of the act was issued to the assessee on 10/04/2012 and the assessee filed a reply wide letter dated 17/04/2012 as under: “A search and seizure operation under section 132 of the Income Tax Act, 1961 was carried out in the Punj Lloyd Group of cases on 17.03.2010 and the case-of assessee was also covered under search. Consequent upon, the assessee filed his return of income under section 153A of the Income Tax Act, 1961 on 19.10.2010 declaring loss of Rs.20,450/- which inter alia includes disallowance of deferred revenue expenditure amounting to RS.1,05,077/- and long term capital loss of Rs.1,45,77,465/-. As regard levy of penalty under section 271(1)(c) on account of difference in income declared in original return of income filed under section 139 and return of income filed under section 153A of the Income Tax Act, 1961, we would like to submit that the said difference was due to inadvertent mistake in claiming deferred revenue expenditure amounting to Rs.1,05,077/- in the return of income filed u/s 139 of the' Income Tax Act, 1961. The assessee voluntarily rectified the said mistake in his return of income filed under section 153A after considering the same and paid tax and interest thereon. . . . . . ... It was only inadvertent mistake while filing the return of income under Section 139(1) of the Income Tax Act, 1961 which has rectified in the return of income filed under Section 153A by the assessee company." 2.5 The Ld. AO levied penalty of Rs.53,26,776/- for concealment of income of Rs.1,45,57,015/-in the original return filed under section 139(1) of the Act, as the assessee is covered under Explanation 5A to the provisions of section 271(1)(c) of the Act.
4 I.T.A.No.5745/Del/2013
Aggrieved by the order of the Ld.AO, the assessee preferred an appeal before the Ld. CIT (A). The Ld. CIT (A) held as under: “4.8 In the appellant's case it is seen that loss of Rs.1,45,77,465/- under the head long term capital gain was reflected both in the return of income filed under Section 139 as well as under Section 153A. Having said that, once the return has been filed under Section 153A of the Act and the same is accepted as it is by the A.O. then in my humble view the penalty under Section 271(1)(c) cannot be imposed by comparing the return filed under Section 153A with return of income filed under Section 139 of the Act because as per law section 153A has an overriding affect and it is starts with the non-obstante clause that" Notwithstanding anything contained in section 139 ……” Since in the present case the return of income filed under Section 153A has been accepted by the AO, therefore, even as per Explanation 5A to Section 271(1)(c) of the Income Tax, no penalty is leviable in the instant case because it is applicable only in those cases where during the search the assessee is found to the owner of some unaccounted assets and the such unaccounted assets have not been declared in the return of income filed under Section 153A. Therefore, from the above discussion, I find that in the present case the conditions laid down in Section 271(1) (c) are not being fulfilled as "inaccurate particulars" means the details filed in the return of income are not accurate or exact or correct according to truth or erroneous.”
Aggrieved by the order of the Ld. CIT (A) the revenue is in appeal before us now. 5. The Ld. DR submitted that search seizure operation in this case was carried out on 17/03/2010 and explanation 5A to section 271(1)(c) is a deeming provision
5 I.T.A.No.5745/Del/2013 which has been inserted w.r.e.f. 01/6/2007. As per explanation 5A, assessee to has concealed particulars of income, as the assessee had concealed its true income/loss in the returns filed under section 139(1). He submitted that, the deeming provision of Explanation 5A to section 271(1)(c) of the act are attracted. He further submitted that all the three conditions are fulfilled as per Explanation 5A to Section 271(1)(c) i.e., search conducted on or after 01/6/2007, unaccounted income disclosed by the assessee pursuant to returns filed under section 153A, which has not been disclosed in the original return filed on 28/10/2005.
On the contrary the Ld. AR submitted that the loss of Rs.1,45,77,465/- under the head long term capital gain was reflected in both the return of income filed under section 139(1) as well as under section 153A of the act which has been accepted by the Ld. AO, then the penalty under section 271(1)(c) cannot be imposed for filing inaccurate particulars of income. The Ld. AR submitted before us the copy of the return filed u/s.139(1) of the Act, dated 28/10/2005 and return filed u/s.153A of the Act dated 19/10/2010. He has placed his reliance upon the decision of Hon’ble Supreme Court in the case of Pricewaterhouse Coopers (P.) Ltd vs. CIT reported in (2012) 25 taxman.com 400.
6 I.T.A.No.5745/Del/2013
We have perused the records placed before us, the orders passed by the authorities below and the decisions relied upon by both the sides. 7.1 On perusal of the copies of the return of income filed under section 139 and 153A of the Act, we observe that the difference in the return filed under section 153A was due to the loss shown under the head ‘income from business and profession’. The Ld.AR submitted that there was omission in the original return to include the deferred tax expenditure while calculating income under the head business and profession amounting to Rs.1,05,077/- in the return of income filed u/s.139 of the Act. He submitted that while filing the return in lieu of notice under section 153A, the assessee rectified this error voluntarily declaring loss of Rs.20,450/-. 7.2. Further from the return filed by the assessee under section 139 and section 153A of the Act, it appears that the assessee had carried forward the business loss amounting to Rs.1,25,527/-. The Ld.AR has not presented before us complete audited financial statements filed along with the return of income under section 139 and section 153A of the Act. At this juncture we do not wish to analyse whether the expenditure that has been shown as deferred revenue expenditure in the computation annexed to the returns filed under section 153A, relates to the year under consideration
7 I.T.A.No.5745/Del/2013 7.3. Be that as it may such omission or non-inclusion of the deferred revenue expenditure in the original return by the assessee was discovered at the time when the assessment proceedings were going on, post search. 7.4. The Ld. AR has placed his reliance upon the decision of Hon’ble Supreme Court in the case of Price Waterhouse Coopers Pvt. Ltd. Vs. CIT reported in (2012) 25 taxman.com 400. The facts of the present case in hand are very much different from the facts in the case of Price Waterhouse Coopers Pvt. Ltd (supra). The assessment year involved in the case of Price Waterhouse Cooper private limited (supra) is 2000-01. In that case the assessing officer had reopened the assessment on the basis of its finding that provision towards payment of gratuity was not allowable as some employees of the assessee therein had been taken over upon acquisition of a business, but these employees were not members of an approved gratuity fund unlike other employees of the assessee that. The assessee therein, had claimed deduction thereof in its return of income and on realising the mistake assessee therein revised its return. Hon’ble Supreme Court also observed that in the tax audit report filed along with the return had stated that the provision for payment was not allowable under section 40A(7) of the Act and that ‘to such peculiar facts’, imposition of penalty u/s.271(1) (c ) was not justified. In the case before Hon’ble
8 I.T.A.No.5745/Del/2013 Supreme Court, the assessment was not under section 153A or 153C. 7.5. The assessment year involved in the present case before us is 2005-06 and search was carried out on 17/03/2010. Explanation 5A to sec.271(1) (c ) has been inserted by Finance (No. 2) Act, 2009 with retrospective effect from 1/06/2007, and is applicable, where search has been initiated under section 132 on or after 1st day of June 2007. The Ld. AO has levied penalty under section 271 (1) (c ) by invoking deeming Explanation 5A. Under such difference in the factual position the decision of Hon’ble Supreme Court in Price Waterhouse Cooper Pvt.Ltd., (supra) cannot be applied to the facts in hand before us. 7.6. It is observed that Ld. CIT (A), has been deleted penalty by holding that the conditions laid down to satisfy the requirement of ‘furnishing inaccurate particulars’ has not been fulfilled to levy the penalty under section 271 (1) (c ) of the Act. From the computation of penalty in the penalty order it is observed that the Ld. AO has sought to levy penalty of Rs.53,26,776/- on the concealed income of Rs.1,45,57,015/-, being the difference between the returned loss declared in the return under section 139 (1) and section 153A of the Act. It is interesting to note that assessee filed original return of income by declaring capital loss of Rs.1,45,77,465/-and a carry forward the business loss amounting to Rs.1,25,527/-. Subsequently
9 I.T.A.No.5745/Del/2013 as a result of search, the business loss was reduced to Rs.20,450/-by reducing the deferred revenue expenditure amounting to Rs.1,05,077/- and assessee chose not to carry forward such business loss. Explanation 5A to section 271 (1) (c) is now very clear, that if there is a difference in the original return filed under section 139 (1) of the Act and the return filed in response to section 153A of the Act, the assessee is deemed to have concealed the income. We do not find any scope of any explanation to be given by the assessee when explanation 5A of the Act has been invoked. Thus in our considered opinion the Ld.AO was correct in levying the penalty under section 271 (1) (c) by invoking Explanation 5A of the Act. However he cannot include such income/loss that was already declared in the original return of Income. The capital loss of Rs.1,45,77,465/- that was declared by assessee should be excluded while calculating the penalty. Accordingly we set aside the issue back to the files of AO for re-computing the as per law. In the result the appeal filed by the revenue stands statistically allowed.
Order pronounced in the open court on 14th February, 2017.