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Income Tax Appellate Tribunal, “B” BENCH, MUMBAI
Before: Shri R.C. Sharma, & Shri Sandeep Gosain
Per Sandeep Gosain, JM :
This present appeal has been filed by the revenue against the order passed by learned CIT(A) 17, Mumbai dated 29-01-2014 for A.Y 2006-07 on the following grounds:- 1) "On the fact and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the penalty u/s 271(1)(c) of the Act without appreciating that the assessee had failed to rebut the presumption in Explanation - 1 of section 271(1)(c) of the Act.
2) "On the fact and in the circumstances of the case and in law, the Ld. CIT(A) erredin deleting the penalty u/s 271(1)(c) of the Act without appreciating that although there is no dispute that the assessee defaulted in following the clear provisions of S145A and there being a definite impact on profits and tax liability as a result".
3) The appellant prays that the order of the CIT (A) on the above ground be set aside and that of the AO be restored.
4) The appellant craves leave to amend or alter any grounds or add a new ground which may be necessary.
1 M/s. Monsanto India Ltd
Brief facts of the case are that the assessee is engaged in manufacturing, trading in agrochemical, growing and selling of seeds. The assessee electronically filed its return of income for the A.Y under consideration declaring total income at Rs. 122,719,795/-. The assessment proceedings in this case was completed on 27-11-2009 u/s. 143(3) of the Act determining the total income of Rs. 67,94,04,470/- as against returned income of Rs. 122,719,795/. In the assessment, the AO has made adjustment u/s. 145A to the value of closing stock of rs.3,48,18,,98/- apart from other additions. The AO estimated the tax on normal provisions of income and as per book profit u/s. 115JB of the Act . During the course of assessment proceedings, penalty proceedings u/s. 271(1) ( c ) were initiated for furnishing inaccurate particulars of income and concealment of income. Accordingly the penalty u/s. 271(1)( c) of the Act was initiated by issuance of notice u/s. 274 r.w.s 271 of the Act for furnishing inaccurate particulars of income and concealment of income. In response to which the assessee vide its letter dated 22-03-2012 submitted as under:- ( c) Adjustment under section 145A of the Act to the value of closing stock: With regards to adjustment made by AO under section 145A of the Act to the value of closing stock, MIL has to state as under:- During the year under consideration, MIL has followed an exclusive method as far as the provisions of section 145A of the Act are concerned. As per Annexure B to the tax audit report it could be observed that the tax auditor has duly certified that the net effect of deviations from the valuation prescribed under section 145A and claims and/or disallowances connected thereto is NIL. Also, a Guidance Note on Tax Audit under section 44AB of the Act issued by the Institute of Chartered Accountants of India (ICAI) clarifies that there is no impact on the profits of the Company on account of adjustments envisaged under section 145A of the Act. The unutilized MOD VAT credit as on 31 March. 2006 is nothing but excise duty paid on input to be utilized on manufacture of excisable product. The said credit not related to the closing stock of finished goods. Accordingly, the same should not be added in closing stock in compliance with the provisions of section 145A of the Act. Further, MIL has placed reliance on the following judicial precedents to support its contention: …………
2 M/s. Monsanto India Ltd
All the relevant particulars in respect of valuation of closing sock were already provided during the assessment proceedings. Hence, there is no question of providing inaccurate particulars and accordingly, no penalty ought to be levied on this count.
Without prejudice to the above, it is submitted that penalty proceedings are independent proceedings. Accordingly, the matter has to be considered afresh in the light of the law applicable to penalty. In light of the above background, we have detailed below submissions against the levy of penalty under section 271(1)(c) of the Act. …….. We therefore request you to drop the penalty proceedings which have been initiated under section 271(1( c) of the Act.”
3.1 During the course of penalty proceedings u/s. 271(1) ( c) before the AO the assessee has relied on various case laws in support of its submissions. Finally, relying on the decision of the Hon’ble SC in the case of Union of India Vs. Dharmendra Textiles & Ors (306 ITR 277), wherein it has been held that the assessee concealed its income and submitted inaccurate particulars of income, the AO levied a penalty u/s. 271(1)( c) of the Act of Rs.1,17,20,074/- for submission of concealment/inaccurate particulars of income.
Aggrieved by the penalty order the assessee filed appeal before learned CIT(A). Learned CIT(A) after considering the various submissions of the assessee and by relying on the various judgments of the courts deleted the impugned penalty as levied by the AO u/s. 271(1) (c ) of the Act.
Aggrieved by the order of learned CIT(A) now the revenue preferred appeal before the Tribunal.
At the very outset, the ld. Ld. Departmental Representative appearing on behalf of the revenue submitted before us that the learned CIT(A) has erred in deleting the impugned
3 M/s. Monsanto India Ltd penalty. He also submitted that the assessee has failed to rebut the presumption given in Explanation 1 of s. 271(1) (c) of the Act. He relied on the orders of the Assessing Officer in levying the impugned penalty being furnishing of concealment/inaccurate particulars of income on profits/tax liability.
On the hand, the learned AR appearing on behalf of the assessee reiterated the same submissions as made before the CIT(A). He relied on the impugned order of the learned CIT(A) in deleting the same.
We have heard the rival contentions and perused the material available on record. We have noted that the learned CIT(A) has deleted the impugned penalty after considering the various submissions/case laws as relied on by the assessee. We find that the learned CIT(A) has passed a reasoned order thoroughly considering the provisions of section 145. Now, it is relevant to reproduce herein below the Explanation 1 to section 271.
Explanation 1 to section 271(1) ( c): “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) or 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 purposes of clause ( c) of this sub-section, be deemed to represent the income in respect of which particulars have been concealed. “
8.1 Ld. CIT(A) after thoroughly considering the facts as well as legal position has rightly held that where an agreeable, controversial or debatable deduction is claimed, the claim could not be false, otherwise, it would become impossible for any assessee to raise any claim or deduction which might be debatable and it was not the intention of the legislature to make punishment such claims, if they were not accepted. The ld.
4 M/s. Monsanto India Ltd CIT(A) rightly concluded that there was no furnishing of inaccurate particulars of income. 8.2 From the above, it could be safely concluded that as per Explanation 1 to section 271 ( c ) of the Act no penalty could be imposed on the assessee in the facts of the case.
The decision of Hon’ble apex court in the case of CIT v. Reliance Petroproducts Pvt. Ltd. (2010) 322 ITR 174 (SC) is squarely covered in favour of the assessee, wherein the Hon’ble apex court has held :- “We are not concerned in the present case with the mens rea. However, we have to only see as to whether in this case, as a matter of fact, the assessee has given inaccurate particulars. In Webster’s Dictionary, the word “inaccurate” has been defined as: ”not accurate, not exact or correct ; not according to truth ‘ erroneous ‘ as an inaccurate statement, copy or transcript.” We have already seen the meaning of the word “particulars” in the earlier part of this judgment. Reading the words in conjunction, they must mean the details supplied in the return, which are not accurate, not exact or correct, not according to truth or erroneous. We must hasten to add here that in this case, there is no finding that any details supplied by the assessee in its return were found to be incorrect or erroneous or false. Such not being the case, there would be no question of inviting the penalty under section 271(1)(c) of the Act. A mere making of the claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee. Such claim made in the return cannot amount to the inaccurate particulars.”
In view of the given facts and circumstances and relying on the decision of Hon’ble Apex Court cited supra, we uphold the order of ld. CIT(A) and appeal of revenue is liable to be dismissed.
5 M/s. Monsanto India Ltd
In the result, the appeal of the revenue is dismissed as stated above. Order pronounced in the open court on 20-07-2016