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Income Tax Appellate Tribunal, DELHI BENCH ‘E’ NEW DELHI
Before: SHRI J.S. REDDY & SHRI SUDHANSHU SRIVASTAVA
PER SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER This appeal has been filed by the assessee against the impugned order dated 29.11.2013 passed by the Ld. CIT(A)- XXXII, New Delhi, confirming imposition of penalty u/s 271(1)(c) of the Act for assessment year 2008-09.
The facts leading to the imposition of penalty are that the assessment in this case was completed in terms of order dated 29.12.2011 passed u/s 153C read with section 153A/143(3) of Assessment Year 2008-09 the Income Tax Act, 1961 at a total income of Rs. 18,61,810/- as against NIL income declared by the assessee in its return of income filed in response to notice issued u/s 153C read with section 153A of the Act. During the assessment proceedings, the Assessing Officer noticed that the assessee had set off the brought forward business losses of Rs. 18,61,812/- of assessment year 2005-06 against the total business income of Rs. 18,61,812/- which resulted in the declaration of NIL income.
The Assessing Officer issued a show cause notice to the assessee, the contents of which are extracted below:-
'In the computation of income. Your income before the set off of losses of A Y. 2005-06 was Rs. 18,61,811.99/- A 0. in the order passed u/s 147 r. w. s. 143(3) for the A Y. 2004-05 not allowed the losses to be carried forward and for the A Y. 2005-06 reduced the losses. All the available business losses and depreciation had been set off from the income of A Y. 2007-08. Hence no business loss and depreciation is available with the assessee to set off the losses from die income there is a show cause why the losses claimed and set off from the income should not be disallowed".
In response to the show cause notice, vide letter dated nil, the assessee submitted as under:
"That in the year under consideration brought forward losses shown by the assessee in the return of income is Rs.19,44,373.18/- and set off of the same was claimed against income of Rs 18,61,812/-. That an addition of Rs. 28,34,648/- was made in the A Y. 2005-06 against which the assessee has filed an appeal and therefore the claim B/F losses made by the assessee in the 2 Assessment Year 2008-09 return is without accepting the addition of Rs. 28,34,648/- made in the A Y. 2005-06."
However, the Assessing Officer was of the opinion that all the available business losses and depreciation had been set off against the income of Assessment Year 2007-08 and hence, there was nothing remaining to be set off against the income of the year under consideration i.e. Assessment Year 2008-09. Hence, the set off of brought forward business losses amounting to Rs. 18,61,812/- of Assessment Year 2005-06 against the business income of Assessment Year 2008-09 was added back to the income of the assessee and the assessment was completed at the taxable income of Rs. 18,61,812/-. Subsequently, the Assessing Officer imposed a penalty of Rs. 5,75,300/- u/s 271(1)( c) of the Act for concealment of income and filing inaccurate particulars of income.
On appeal, the Ld. CIT(A) confirmed the imposition of penalty but reduced it to Rs.3,83,695/-. The relevant para of the Ld. CIT(A) order is para 5 which is being reproduced for ready reference as under:-
“ I h a v e considered the facts of the case, and the 3 Assessment Year 2008-09 written submissions of the appellant. In the instant case I find that when the appellant filed its return of income for the assessment year under consideration in response to notice u/s 153C r.w.s. 153A on 14.10.2011, its assessment u/s 147 r.w.s. 143(3) had already been competed vide order dated 28.12.2007 and the loss to be carried forward was determined at Rs.1,63,200/- as against the returned loss of Rs.29,97,850/-. Thus, when the return of income in response to notice u/s 153C r.w.s. 153A of the I.T. Act for the assessment year under consideration was filed on 14.10.2011, it was in the knowledge of the appellant that its loss of the assessment year 2005-06 which was to be brought forward was determined at Rs.1,63,200/-. Therefore, it was the duty of the appellant to make a correct and complete disclosure of particulars of brought forward losses while filing its return for the assessment year under consideration in response to notice u/s 153C r.w.s. 153A on the basis of loss determined in terms of order u/s 147 r.w.s. 143(3) for the assessment year 2005-06. The appellant failed in its duty by not disclosing the correct particulars of brought forward losses of assessment year 2005-06. By doing so the appellant committed a breach of its duty, which entails the penal consequences contemplated under section 271(1)(c) of the I.T. Act, 1961. Therefore, the Assessing Officer was justified in holding the appellant to be in default within the meaning of section 271(1)(c) of the I.T. Act, 1961 and imposing penalty under the said section. Accordingly, the Assessing Officer’s action in imposing penalty u/s 271(1)(c) is upheld. However, I agree with the ARs of the appellant that the tax sought to be evaded in this 4 Assessment Year 2008-09 case should have been Rs.3,83,695/- which is the additional tax liability that has been cropped up due to the assessment framed u/s 153C of the I.T. Act, 1961. The tax liability as per the return of income on the book profit under MAT provisions was Rs.1,91,604/- and the assessed tax liability determined in this case was Rs. 5,75,299/-. Therefore, the additional tax liability determined in terms of order u/s 153C r.w.s. 153A/143(3) was Rs.3,83,6695/- which could only be attributed to the tax sought to be evaded. Therefore, the Assessing Officer in directed to modify the quantum of penalty imposed u/s 271(1)(c) and restrict the same to Rs.3,83,695/-. The appellant thus gets a relief of Rs. 1,91,605/-.”
Now, the assessee is in appeal before us and has raised the following grounds:-
“1. That the order of learned Commissioner of Income-tax (Appeals) is bad in law and on facts of the case.
2. That the learned Commissionerof Income-tax(Appeals) erred in sustaining the penalty imposed u/s 271(1) (c) of the Income Tax Act, 1961 to the tune of Rs.3,83,695/- holding that the assessee has sought to evade tax.
3. That the learned Commissionerof Income-tax (Appeals) erred in holding that "the assessee has failed in its duty for not disclosing correct particulars of brought forward losses for assessment year 2005-06" ignoring the evidences and submissions adduced by the appellant during assessment and penalty proceedings. 4. The above grounds of appeal are without prejudice to each other.
5. The Appellant craves leave to add, alter, amend and/or modify the above grounds of appeal.” 5 Assessment Year 2008-09
The Ld. AR submitted that in this case, the return was filed u/s 153C and in the return of income, the brought forward loss of Rs. 18,61,812/- (remaining after set off of Rs. 9,80,699/-) for Assessment Year 2005-06 was claimed on the basis of returned loss of Rs. 29,97,850/-. The assessment for Assessment Year 2005-06 was completed u/s 147 read with section 143(3) vide order dated 28.12.2007 at a loss of Rs.1,63,200/- as against the returned loss of Rs. 29,97,850/-. It was submitted that the assessee had challenged the assessment order before the First Appellate Authority and now the issue has been decided in favour of the assessee. He drew our attention to page 16 to 19 of the Paper Book which contain a copy of the order of the First Appellate Authority i.e. the Ld. CIT(A)-I, Patna wherein vide his order dated 04.07.2014, the Ld. CIT(A) has deleted the addition of Rs. 27,47,526/- for Assessment Year 2005-06. It was further submitted that as a consequence of the deletion, the carried forward losses for Assessment Year 2005-06 will be increased to the tune of Rs.27,47,526/- which will be more than sufficient to offset the surplus for Assessment Year 2008-09. It was submitted that in view of the order of the First Appellate Assessment Year 2008-09 Authority for Assessment Year 2005-06, the penalty ought to be deleted. It was further submitted that as on date, the brought forward losses of A.Y. 2005-06 are again available to the assessee as claimed in the return of income and consequential effect of the same will be that the assessed income for A.Y. 2008-09 will again be reduced to the book profit taxable under MAT provisions (as returned by the assessee) hence, there was no concealment or furnishing of inaccurate particulars of income as the assessee had made a bona fide claim in the return of income which was rejected and it had disclosed all the particulars of income.
The Ld. DR relied on the order of the lower authorities.
We have heard the rival submissions and perused the relevant material on record. It is seen that initially during the assessment proceedings, addition was made by the Assessing Officer because as per him, the brought forward losses were insufficient to cover the business profits for Assessment Year 2008-09. However, with the First Appellate Authority allowing the appeal of the assessee for Assessment Year 2005-06, the business losses to be set off against the income for Assessment Year 2008-09 have again increased so as to reduce the business Assessment Year 2008-09 income for Assessment Year 2008-09 to NIL. In our considered view, the starting point of determining concealment for imposing penalty is the return of income. In the present appeal, the Assessing Officer has not found any discrepancy, inaccuracy or concealment in the return. The Assessing Officer’s view is totally misplaced and de hors any merit as section 271(1)(c) of the Income Tax Act, 1961 empowers the Assessing Officer to impose penalty on the assessee when such assessee has concealed the particulars of his income or has furnished inaccurate particulars.
However, in the present appeal, there is nothing on record to hold that the assessee has either concealed the particulars of its income or furnished any inaccurate particulars thereof. We accordingly decide the issue in favour of the assessee and direct the Assessing Officer to delete the penalty.
8. In result, the appeal of the assessee is allowed.
Order pronounced in the Open Court on 31st of March, 2016.