UDYOGI INTERNATIONAL PRIVATE LIMITED,KOLKATA vs. A.C.I.T., CIRCLE-1(1), KOLKATA

Brief facts of the case of the assessee are that the assessee is a company, return of income for AY 2014-15 was scrutinized and assessment order was passed u/s 147 Assessment Year: 2014-15 Udyogi Internaitonal pvt. Ltd. read with Section 144 read with Section 144B of the Act. A penalty proceeding has also been initiated u/s 271(1)(C) of the Act and penalty of Rs. 8,45,315/- have been levied against the assessee.

The said order has been challenged by the assessee before the Ld. CIT(A) wherein the appeal of the assessee has been dismissed.

The ld. Counsel for the assessee challenges the impugned order thereby submitting that the Ld. CIT(A) has erred in sustaining the penalty though there was no concealment of income from the side of the assessee. The Ld. Counsel submits that the AO imposed penalty only on this account the assessee did not prefer any appeal against the assessment order and paid the taxes. The ld. Counsel submits that the penalty proceedings and assessment proceeding are different and on this ground that the assessee did not prefer appeal against the assessment order imposition of penalty is bad in law. The Ld. Counsel vehemently submits that there was no concealment but mere disallowance of loss claimed by the assessee. He has cited following decisions: i) India Cine Agencies vs. DCIT [2005] 275 ITR 430 (Mad) ii) CIT vs. Auric Investment and Securities Ltd. [2009] 310 ITR 121 (Del) iii) CIT vs. SSP Ltd. [2010] 189 Taxman 282 (P & H) iv) Mahavir Irrigation Pvt. Ltd. vs. CITY [2009] 314 ITR (Trib)(Del)

Contrary to that the ld. DR supports the impugned order.

Upon hearing the submission of the ld. Counsel for the respective parties, we have perused the record and find that the assessee is a company. During the assessment year, the assessee entered into derivative transaction on recognized stock exchange i.e. Bombay Stock Exchange through registered stock broker resulting in a loss of Rs. 24,86,221/- which were duly debited in the audited statement of accounts. The Ld. AO in course of assessment proceedings believed that the transaction was not genuine and disallowed the genuine loss and, in the process, raised demand of Rs. 28,87,060/-. It is a fact that the assessee did not prefer any appeal against the said raised demand. The penalty proceedings have been initiated on the ground that wrong declaration of the list in the audited financials does amount to concealment of income as such loss. It has been held that in the penalty proceeding that the loss is also income and if claimed wrongly, it is of the nature of concealed income. It is evident from the record that the loss is duly stated in the audited financial statement hence in our view, there is no concealment but it is a mere disallowance of loss claimed by the assessee.

It is well settled that the purpose of imposing penalty u/s 271(1)(c ) are different from those applied for making or confirming the addition. Then the assessee has made a particular claim in the return of income and also furnished all the material facts Assessment Year: 2014-15 Udyogi Internaitonal pvt. Ltd. relevant thereto disallowance of such claim cannot lead to the conclusion that there was the concealment of particulars of its income. The Hon’ble ITAT, Delhi in the case of Mahavir Irrigation Pvt. Ltd. vs. CIT (supra) has held thus:

Going over the cited decision as well as the facts of the case, we find substance in the argument of the ld. Counsel of the assessee and accordingly imposition of penalty is hereby directed to be deleted. The order of the AO confirmed by the Ld. CIT(A) is hereby set aside. In the result, the appeal of the assessee is allowed. Order is pronounced in the open court on 19th December, 2024