INDIAN CHRONICLE LTD.,,AHMEDABAD vs. THE INCOME TAX OFFICER,WARD-4(3),, AHMEDABAD

The brief facts of the case are that the assessee is a limited company and had filed its return of income for A.Y. 2007-08 on 30.10.2007 declaring total income of Rs.62,90,780/-. The assessee had derived long term capital gain (‘LTCG’) of Rs.8,52,63,544/- during the year, which was claimed as exempt from income under the provision of section 10(38) of the Act.

The assessee had filed a miscellaneous application u/s.254(2) of the Act with a request to rectify the mistakes apparent from the record in the order passed by the ITAT in 09.02.2017. The rectification was sought in respect of the first two grounds taken by the assessee, which are reproduced below:

Also while finding the assessee to have acted malafidely by not paying taxes on book profits by including therein exempt long term capital gain, the ITAT we have noted has not dealt with the explanation of the assessee that inclusion of exempt capital gain in Book Profits was by way of amendment in law applicable from the impugned year onwards and therefore missed out for its consideration. We agree with the Ld.Counsel for the assessee that there was a mistake apparent on record in the order of the ITAT finding the assessee to have acted malafidely by only considering the fact that the assessee had consistently been disclosing computation of book profits as per section 115JB of the Act in preceding years while not doing so in the impugned year, without dealing with the aforestated explanation of the assessee of exempt income being included in Book Profits being a recent amendment. This explanation of the assessee not only addresses non-disclosure of Book Profits in the impugned year but also the fact why it was consistently disclosed in earlier years. Not dealing with this explanation of the assessee has resulted in there being a mistake in the order of the ITAT.

In the light of the same, we hold, that there is a clear mistake in the order of the ITAT, while holding the assessee to have not established its bona fides for escaping the levy of penalty, on ground no.2 raised by the assessee.”

Shri TusharHemani, Ld. Senior Counsel appearing for the assessee explained that the assessee had earned LTCG of Rs.8,52,63,544/- during the year which was claimed exempt u/s.10(38) of the Act. This LTCG was duly disclosed in the return of income, in the Tax Audit Report and also in the annual accounts. The AO had made adjustment of this exempt LTCG Chronicle Ltd. Vs. ITO] A.Y. 2007-08- 5 – of Rs.8,52,63,544/- to the book profit u/s.115JB of the Act. The Ld. Sr. Counsel submitted that the assessee had not filed any appeal against the assessment order and thus the adjustment was accepted. He further submitted that the penalty proceeding was initiated by the AO for the reason that the assessee had furnished inaccurate particulars of income. However, in the impugned penalty order, the AO had imposed the penalty on the count that the assessee had concealed particulars of income. The Ld. Sr. Counsel submitted that it was well settled that when penalty proceeding was initiated for one charge but ultimately the penalty was levied for some other charge, such penalty cannot be sustained. In this regard, he has relied upon the following decisions:

The Ld. Sr. Counsel has drawn our attention to the penalty notice dated 30.11.2009 issued by the AO, a copy of which was filed in a paper book. He submitted that from the said notice, it was evident that the AO had not been able to make up his mind as to whether penalty proceeding was initiated for furnishing “inaccurate particulars of income” or for “concealment of income”. He further submitted that when the charge for levy of penalty was not clearly mentioned in the notice, then the Chronicle Ltd. Vs. ITO] A.Y. 2007-08- 6 – penalty cannot be levied. In this regard, he has relied upon the following decisions: ✓ Manu engineering Works- (1980) 122 ITR 306 (Guj]; ✓ Whiteford India Ltd. - (2013) 38 taxmann.com 15 (Guj); ✓ New SorathiaEngg. Co. (2006) 282 ITR 642 (Guj); ✓ Manjunatha Cotton & Ginning Factory -359 ITR 565 (Kar);

The Ld. Sr. Counsel further submitted that when the LTCG, which was claimed as exempt income u/s.10(38) of the Act, was duly disclosed in the return of income, tax audit report and the annual accounts, there cannot be a case of concealment of income. Therefore, penalty was wrongly levied for concealment of income.

On merits, the Ld. Sr. Counsel explained that the A.Y. 2007-08 was the first year of e-filing where details relating to MAT were required to be auto filled and Form 29B could not have been filled until there was liability under MAT. He explained that under these circumstances, the addition was attributable to the technical glitch on the part of the department. He further submitted that the assessee was under a bona-fide belief that the provision of Section 115JB of the Act did not apply toexempt income u/s 10(38) in the present assessment year. The Ld. Senior Counsel submitted that there was a bona- fide error on the part of the assessee and there was no intention to conceal or to furnish any inaccurate particulars; which was evident from the fact that the LTCG derived by the assessee was duly disclosed in the return of income. He further submitted that the MAT tax is available as credit in subsequent years. Therefore, there was no motivation on the part of the assessee either to furnish any inaccurate particulars of income or to Chronicle Ltd. Vs. ITO] A.Y. 2007-08- 7 – conceal any particulars of income. There was no deliberate attempt on the part of the assessee to furnish inaccurate particulars of income or to conceal any income and, therefore, the imposition of penalty was not justified. The Ld. Sr. Counsel submitted that merely because an addition was made to the return of income, it does not mean that penalty proceeding has to be automatically initiated. In this regard, he placed reliance on the decisions of Hon’ble Supreme Court in the case of Reliance Petroproducts Pvt. Ltd., 332 ITR 158(SC) and in the case of Price Water House Coopers P. Ltd. 348 ITR 306 (SC).

Per contra, Shri Rignesh Das, Ld. SR DR submitted that the assesse had not responded to the query raised by the AO in the course of assessment proceeding in respect of working of MAT income, which was clear manifest of the fact that the assessee had deliberatelyneither provided working of MAT income nor responded to the proposed adjustment. Thus, there was a clear-cut case of furnishing of inaccurate particulars of income for which the penalty was rightly levied by the AO. He, therefore, strongly supported the orders of the AO & CIT(A).

We have carefully considered the rival submissions.The first ground taken by the assessee is in respect of validity of the penalty order passed by the AO. The assesse has contended that the penalty proceeding was initiated for furnishing inaccurate particulars of income, whereas penalty order u/s. 271(1)(c) of the Actwas passed for concealment of income. It is found from the assessment order that the AO had initiated penalty u/s. 271(1)(c) of the Act for furnishing inaccurate particulars of Chronicle Ltd. Vs. ITO] A.Y. 2007-08- 8 – income in respect of book profit. However, in the penalty order u/s. 271(1)(c) of the Act dated 20.05.2010, the AO had imposed penalty for concealment of MAT income of Rs.9,87,99,018/-. The Co-ordinate Bench of this Tribunal in the case of MultivisionInfotech P. Ltd.(supra) has held that where the penalty proceeding u/s. 271(1)(c) of the Act was initiated for furnishing inaccurate particulars of income, but the penalty was imposed for concealment of income, such order was invalid and liable to be cancelled. An identical view was taken by the Co- ordinate Bench, Mumbai in the case of Samson Perinchery vs. ACIT in to 4630/Mum/2013, which was upheld by Hon’ble Bombay High Court in the case of CIT v. Samson Perinchery [2017] 88 taxmann.com 413/392 ITR 4 (Bom.).

It is found that notice u/s.274 of the Act was issued by the AO on 30.11.2009 i.e. on the same date when the order u/s.143(3) of the Act was passed. Thus, the notice was for furnishing of inaccurate particulars of income as recorded by the AO in the assessment order. However, the penalty u/s. 271(1)(c) of the Act was imposed for concealment of income. The facts of the present case are, thus, found to be identical to the facts as discussed in the above referred decisions. We, therefore, hold that the order imposing penalty in this case for concealment of income when the penalty proceeding was initiated for furnishing of inaccurate particulars of income, was invalid. Therefore, the penalty imposed u/s. 271(1)(c) of the Actfor concealment of income is cancelled. The legal ground taken by the assesse is allowed.

The ground no.3 was already adjudicated vide order dated 09/02/2017 and allowed and the grounds 4 & 5 were held to be general in nature.

In the result, the appeal ofthe assessee is allowed.