DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-1(1), RAIPUR vs. CHHATTISGARH STATE POWER TRANSMISSION COMPANY LTD., RAIPUR

The captioned appeals filed by the revenue are directed against the respective orders passed by the Commissioner of Income-Tax (Appeals), National Faceless Appeal Center (NFAC), Delhi, dated 15.11.2022, which in turn arises from the orders passed by the A.O under Sec.271(1)(c) AND Sec. 270A of the Income-tax Act, 1961 (in short ‘the Act’) dated 29.01.2022 and 18.01.2022 for the assessment years 2016-17 and 2017-18, respectively. Also, the assessee company is before us as a cross-objector for both the aforementioned years. As the issues involved in the captioned appeals are inextricably interlinked or, in fact, interwoven, the same are being taken up and disposed of by way of a consolidated order.

We shall first take up the appeal filed by the revenue in for the assessment year 2016-17 wherein the impugned order has been assailed on the following grounds of appeal before us:

Succinctly stated, the assessee company is a statutory body formed by the Government of Chhattisgarh under the Electricity (Supply) Act, 1948, on 19.05.2003 and is engaged in the business of extra high voltage power transmission services through its high voltage power substations and transmission lines throughout the State of Chhattisgarh. The assessee company had filed its return of income for A.Y.2016-17 on 29.11.2016 declaring an income of Rs. Nil [after setting off unabsorbed loss of Rs.14.64 crore (approx.)]. The “book profit” as per MAT provisions was disclosed by the assessee company at Rs.26.90 crore (approx.), Page 41-42 of APB. Thereafter, the assessee company came up with a revised return of income on 26.03.2018, wherein the income returned was disclosed at Rs. Nil [after setting off an unabsorbed loss of Rs.93.48 crore (approx.)]. The “book profit” u/s. 115JB of the Act as per the MAT provisions was disclosed in the revised return of income at Rs.26.89 crore (approx.), Page 43-44 of APB.

The A.O. framed the original assessment vide his order passed u/s. 143(3) dated 14.12.2019, wherein the income of the assessee company was assessed at Rs. Nil [after setting off the unabsorbed loss of Rs.102.82 crores (approx.)]. Elaborating on the reasons leading to the filing of the revised return, it was the claim of the assessee company that it had filed its original return of income on the basis of its provisional financial statements, which, thereafter, was revised due to the difference between the returned MAT income based on the final audited financial statements as against that disclosed in the original return of income. For the sake of clarity, the difference between the original returned income and the revised return of income along with the respective assessed incomes as had been filed by the assessee before us is culled out as follows:

The A.O., after concluding the assessment vide his order, passed u/s. 271(1)(c) dated 29.01.2022 imposed a penalty of Rs.2,72,92,117/- with respect to the aforesaid two-fold additions made in the hands of the assessee company.

We have heard the ld. Authorized Representatives of both the parties, perused the orders of the lower authorities and the material available on record, as well as considered the judicial pronouncements that have been pressed into service by the Ld. AR to drive home his contentions.

At the threshold, we may herein refer to the peculiar facts involved in the present case before us. It is the claim of the Ld. Authorized Representative (for short ‘AR’) that as the accounts of the assessee company were not finalized as of the date of filing of the return of income; therefore, the same was filed on the basis of the provisional financial statements on 29.11.2016. As is discernible from the records the accounts of the assessee company were audited on 15.12.2016, Pages 51-104 of APB. Thereafter, the assessee company filed a revised return of income on 26.03.2018, which, as stated by the Ld. AR was prompted by the difference between the “book profit” under the MAT provisions that was disclosed based on the provisional financial statements in the original return of income as against that computed as per the final audited financial statements. The Ld. A.R had failed to come up with any explanation that now when the accounts of the assessee company were finally audited on 15.12.2016 then why the filing of the revised return of income was kept in abeyance for a substantial period and was filed only as on 26.03.2018, i.e., after the lapse of one and half years. Apart from that, we find it incomprehensible that though the assessee company had filed a revised return of income on 26.03.2018, but after that, it had, on 06.12.2019, come up with a revision of certain expenses aggregating to Rs.8.84 crore (supra) for the reason that certain mistakes had crept while feeding the expenses in the revised return of income.

The Ld. AR on being specifically queried by the Bench that when the books of accounts of the assessee company were audited on 15.12.2016, then why the aforesaid discrepancies, i.e., revision of expenses of Rs.8.84 crore (approx.) was not considered while filing the revised return of income on 26.03.2018 and was kept in abeyance for the period as long as three years (approx.) and was filed before the A.O in the course of the assessment proceedings only on 06.12.2019, submitted that the moment the assessee company learned about the aforesaid discrepancies/ infirmities it immediately brought the same to the notice of the A.O.

We have thoughtfully considered the aforesaid issue and are unable to persuade ourselves to concur with the claim of the Ld. AR. For a better understanding of the issue, the sequence of events involved in the present case are culled out as follows:

We have thoughtfully considered the issue in the backdrop of the contentions of the Ld. Authorized Representatives of both parties. We are unable to concur with the view taken by the CIT(Appeals) that as the “book profit” of Rs.35.84 Crore (supra), which the assessee company had sought to get corrected in the assessment proceedings was already disclosed in its tax “audit report” in Form 3CA and Form 3CD on 23.12.2016, thus, the fact that it had not tried to hide/suppress its income was established. As observed by us hereinabove, the CIT(Appeals), based on his aforesaid conviction as regards the bonafide conduct of the assessee company had vacated the penalty imposed by the AO u/s 271(1)(c) of the Act. The Ld. AR on being specifically queried as to why, after obtaining the “audit report” on 15.12.2016, the assessee company had delayed filing the “revised return of income” till 26.03.2018, failed to come forth with any plausible explanation. Apart from that, the Ld. AR on being queried that now when the assessee company, based on its finally audited financial statements dated 15.12.2016, had revised its return of income on 26.03.2018, then why the aforesaid mistakes in the expenses of Rs. 8.84 crores (supra) were not incorporated in the said revised return of income, submitted that the moment the assessee company learned about the said mistake it had immediately brought the same to the notice of the AO vide its letter dated 06.12.2019. We are unable to persuade ourselves to subscribe to the aforesaid claim of the assessee/ Ld. AR. It is incomprehensible that the assessee company, a State government undertaking, would be so naïve in not bringing its return of income in conformity with its audited financial statements dated 15.12.2016. As the assessee company, in its “revised return of income,” had based on inflated expenses of Rs. 8.84 crores (supra) suppressed its “book profit” for computing the tax liability under the MAT provisions; therefore, we find no infirmity in the view taken by the A.O who had rightly saddled it with penalty u/s. 271(1)(c) of the Act. Although it is the claim of the assessee company that it had vide its letter dated 06.12.2019 filed in the course of the assessment proceedings sought for correction of its “book profit” under the MAT provisions and, thus, had brought to the notice of the AO that by mistake certain expenses aggregating to Rs. 8.84 crores (supra) were wrongly claimed in the “revised return of income” on the higher side, we are afraid that the said unsubstantiated claim of the assessee would not carry its case any further. We say so for the reason that the very claim of the assessee company that it had, due to a bonafide mistake, not disclosed its “book profit” for computing its tax liability under the MAT provisions in its “revised return of income,” dated 26.03.2018 is in itself incomprehensible. Although the assessee company had in its finally audited financial statements dated 15.12.2016, Page 79 of APB disclosed its “Net profit” at Rs. 3,574.90 lacs but strangely it had while computing the “book profit” under the MAT provisions taken the same in its “revised return of income”, dated 26.03.2018 at Rs. 2,689.97 lacs, Page 43-44 of APB, which, thus had resulted to a difference in the “book profit” of Rs. 8.84 crores (supra). We are not only unable to comprehend where from and on what basis the assessee company had picked up the figure of Rs. 2,689.97 lac (supra), but also fail to fathom why the amount of “Net profit” of Rs. 3,574.90 lacs (supra) duly disclosed by the assessee company in its audited financial statements dated 15.12.2016 was not considered in the “revised return of income” filed on 26.03.2018. Rather, it transpires from a perusal of the record that though the assessee company had in its original return of income filed on 29.11.2016, Page 41- 42 of APB disclosed its correct profit at Rs. 3,574.90 lacs (supra) but thereafter had in its revised return of income filed on 26.03.2018 revised the same at Rs. 2,689.97 lacs (supra), Page 43-44 of APB. Accordingly, based on the aforesaid facts it can safely be concluded that the assessee company had purposively scaled down its income in the revised return of income; which, thereafter, on being confronted by the AO was sought to be corrected and offered for tax vide its letter dated 06.12.2019 filed in the course of the assessment proceedings. The fact that the assessee company had sought for correction of its profit only on being confronted by the AO is discernible from the latter's observations in the order passed u/s 271(1)(c) of the Act, dated 29.01.2002, which reads as under (relevant extract):

Apropos the view taken by the CIT(Appeals) that as the information that was sought by the assessee company to be corrected in the assessment proceedings vide its letter dated 06.12.2019 (supra) was already available with the AO in Form No. 3CA, Form No. 3CB report, Form 29B and audited financial statements; therefore, it could safely be inferred that it had no malafide intention in hiding/concealing its income, the same does not find favor with us. Rather, the fact that the assessee company had duly disclosed the correct amount of expenses in its final audited financial statements/forms/report but had failed to disclose the same in its revised return of income filed on 26.03.2018, which in turn was based on the audited financial statements, dated 15.12.2016 therein supports the penalty imposed by the AO u/s 271(1)(c) of the Act. As stated by the Ld. DR, and rightly so, if the case of the assessee company had not been selected for scrutiny assessment, then its aforesaid wrong claim of inflated expenses would have gone unchecked with a consequential loss to the revenue. If an AO who comes across an assessee who had raised a wrong/false claim of expenses in his return of income but a correct disclosure of the same in his audited financial statements/forms/reports, does not visit such assessee with penalty u/s 271(1)(c) for admittedly having raised a wrong/false claim for deduction of expenses in the return of income with an attempt to suppress its income, then, it would send a wrong message and may lead to the adoption of such nefarious practice by certain assessee’s who would though correctly disclose their claim for deduction of expenses in the audited financial statements/forms/reports but knowingly raise an inflated/wrong claim of such expenditure in the return of income, which, in case, on being confronted would be offered by them for tax without being subjected to any penalty. We, thus, in terms of our aforesaid observations are of a firm conviction that the AO had rightly saddled the assessee company with penalty u/s 271(1)(c) of the Act w.r.t the inflated/false claim of expenses raised by it in the revised return of income.

Apropos the judgment of the Hon’ble Supreme Court in the case of Price Waterhouse Coopers Pvt. Ltd. Vs. CIT (2012) 348 ITR 306 (SC) as had been pressed into service by the Ld. AR, the same being distinguishable on facts, would not carry the case of the assessee company any further. We say so for the reason that the Hon’ble Apex Court had observed that where the assessee had committed an inadvertent and bonafide error and not intended to or attempted to conceal its income or furnished inaccurate particulars of income, penalty u/s. 271(1)(c) could not be imposed. As in the present case before us, it is not a case of bonafide mistake in raising a wrong claim of inflated expenses, i.e., not in conformity with those disclosed by the assessee company in its audited financial statements; therefore, the aforesaid judicial pronouncement would not assist the case of the assessee company.

Apropos the order of the ITAT, Mumbai, in the case of DCIT Vs. Reliance General Insurance Company Ltd. (2018) 52 CCH 375 (Mum) as had been relied upon by the Ld. AR, we find that the same, too, being distinguishable on facts, would not carry the case of the assessee any further. In the aforesaid case as the return of income filed by the assessee u/s. 148 of the Act was accepted by the A.O., who did not make any further disallowance; therefore, it was in the backdrop of the said facts, that the Tribunal had held that no penalty u/s. 271(1)(c) of the Act could be imposed on the assessee. On a similar footing, the order of the ITAT, Bilaspur, in the case of ACIT Vs. Agrawal Round Rolling Mills Ltd., dated 14.07.2010, being distinguishable on facts would not assist the case of the assessee company. In the case before the Tribunal, as the assessee due to negligence of its staff, was unable to produce the necessary papers to substantiate the authenticity of the share application money of Rs.61 lacs that was received from 12 share applicants, therefore, it had in order to buy peace on a suo motto basis offered the said amount as its income with a request not to initiate any penal action as regards the said amount. At this stage, we are reminded of the judgment of the Hon’ble Supreme Court in the case of Mak Data P. Ltd. v. CIT (2013) 358 ITR 593 (SC), wherein the Hon’ble Apex Court had observed that a voluntary disclosure does not absolve the assessee from the mischief of penal proceedings u/s 271(1)(c) of the Act. The Hon’ble Apex Court observed that the law does not provide that when an assessee makes a voluntary disclosure of his concealed income, he has to be absolved from penalty. It was further observed that the Assessing Officer should not be carried away by the plea of the assessee, such as “voluntary disclosure,” “buy peace,” “avoid litigation,” or “amicable settlement,” to explain away its conduct. The Hon’ble Court observed that what is material is whether or not the assessee had offered any explanation for the concealment of particulars of income or furnishing inaccurate particulars of income.

As the assessee company had failed to come forth with any explanation as regards its claim of inflated expenses of Rs. 8.84 crores (supra) in its “revised return of income,” which claim of it is not borne out from its final audited financials, dated 15.12.2016; therefore, we find no infirmity in the view taken by the AO who vide his order dated 29.01.2022 had rightly saddled it with penalty u/s 271(1)(c) of the Act. We, thus, set aside the order of the CIT(Appeals) and uphold the penalty imposed by the AO u/s 271(1)(c) to the extent it pertains to the variance in the “book profit” under the MAT provisions arising on account of claim of deduction of false/inflated expenses of Rs. 8.84 crore (supra) in the revised return of income by the assessee company.

In the result, the appeal of the revenue in for A.Y.2016- 17 is allowed in terms of our aforesaid observations.

Admittedly, as on the relevant point of time, i.e., at the stage of filing return of income/revised return of income by the assessee company, the allowability of the assessee’s claim for deduction of delayed deposit of employee’s share of contribution towards labor welfare funds there was a judgment of the Hon’ble Supreme Court in the case of Commissioner of Income Tax Vs. Alom Extrusions Limited, [2009] 319 ITR 306 (SC) [reversing the judgment of the Hon’ble High Court of Bombay in CIT Vs. Pamwi Tissues Ltd. (2009) 313 ITR 137 (Bom)] favoring the assessee. Also, there were certain Hon’ble High Courts that took a view in favor of the assessee’s on the aforesaid issue. As the claim of the assessee company for deduction of the delayed deposit of the employees share of contributions towards labour welfare funds, as long as the same was made within the “due date” prescribed under sub-section (1) of Sec.139 for filing of the assessee’s return of income, was at the stage of filing of the return of income/revised return of income by the assessee company a possible and plausible view, thus, the same in our view would not attract penalty u/s. 271(1)(c) of the Act.

We, thus, not being able to persuade ourselves to subscribe to the view taken by the CIT(Appeals) to the extent he had upheld the penalty imposed by the A.O u/s. 271(1)(c) of the Act w.r.t the delayed deposit by the assessee company of the employees share of contributions towards labour welfare funds, set aside the same.

In the result, the cross-objection filed by the assessee in CO No.19/RPR/2023 for A.Y.2016-17 is allowed in terms of our aforesaid observations.

Resultantly, both the appeal of the revenue and cross-objection filed by the assessee company for A.Y.2016-17 are allowed in terms of our aforesaid observations. CO No.20/RPR/2023 AY 2017-18

We shall first take up the appeal filed by the revenue in for assessment year 2017-18 wherein the revenue has assailed the impugned order on the following grounds of appeal before us:

Succinctly stated, the assessee company had e-filed its return of income for A.Y.2017-18 on 30.10.2017 declaring an income of Rs. Nil. Subsequently, the return of income was revised by the assessee company on 09.01.2018 at Rs. Nil. Once again, the assessee company filed a revised return of income on 31.03.2018 declaring an income of Rs. Nil. Thereafter, the case of the assessee company was selected for scrutiny assessment under CASS.

During the assessment proceedings, the A.O observed that the assessee company had filed its original return of income before completion of the audit, which, thereafter, was followed by various revised returns of income. The A.O further observed that the total gross receipts originally reported by the assessee company in its return of income was Rs.9,91,25,36,835/- but the same was, thereafter, in the assessment proceedings offered at Rs.9,94,09,89,590/-. Also, the A.O observed that the “book profit” for MAT purpose that was earlier disclosed by the assessee company vide its revised return of income filed on 31.03.2018 was raised to Rs.67,38,09,917/- in the subsequently revised return of income that was filed on 29.03.2019. Accordingly, the A.O noticed that the difference between the “book profit” for MAT as per the revised return of income filed on 31.03.2018 and the subsequently revised return of income filed on 29.03.2019 worked out at Rs.3,28,96,087/- [Rs.67,38,09,917/- (-) Rs.64,09,13,830/-]. Based on the aforesaid facts, the A.O. held a conviction that the assessee company had not disclosed the true and correct figure of “book profit” while filing its return of income, and thus, initiated penalty proceedings u/s. 270A of the Act for misreporting of income.

Also, the A.O. observed that though the assessee company, in its original return of income, had not offered for disallowance the amount of delayed deposit of employees share of contributions towards ESI/EPF u/s. 36(1)(va) of Rs.83,76,816/- but had disallowed the same and offered it for tax in the assessment proceedings. Also, the A.O with respect to the aforesaid disallowance of the assessee’s claim for deduction of delayed deposit of employee share of contribution towards ESI/EPF initiated penalty proceedings u/s.270A of the Act for misreporting of income.

The A.O., after making the aforesaid addition/disallowance assessed the income of the assessee company at Rs.4,12,72,903/-, which, after setting off the brought forward losses was scaled down to an amount of Rs. Nil.

Also, the A.O., after the culmination of the assessment, issued notice u/s. 274 r.w.s. 270A of the Act dated 24.12.2019, wherein the assessee company was called upon to put forth an explanation as to why penalty u/s. 270A of the Act may not be imposed on it for underreporting/misreporting of income, Page 129 of APB. After the culmination of the assessment proceedings, the assessee company was again issued a “Show Cause Notice” (SCN) dated 16.10.2020 u/s. 274 r.w.s. 270A of the Act, wherein it was called upon to explain why penalty u/s. 270A of the Act may not be imposed on it for underreporting/misreporting income, Page 130 of APB. After that, the assessee company received a “SCN” u/s. 270A of the Act dated 27.07.2021, wherein the A.O. referred to the penalty proceedings which were earlier initiated u/s. 270A of the Act vide his notice dated 24.12.2019 and, thus, called upon it to show cause as to why penalty may not be imposed u/s. 270A of the Act as was initiated in the “SCN” dated 24.12.2019.

The assessee company in compliance to the SCNs that were issued u/s. 274 r.w.s. 270A of the Act, filed its reply vide letter dated 03.01.2021 and 14.08.2021, wherein it tried to impress upon the A.O that no penalty under the aforesaid statutory provision was called for in its case with respect to both the issues, viz., (i) increase in the “book profit” for MAT purpose: Rs.3,28,96,087/-; and (ii) disallowance of its claim for deduction of belated deposit of employees share of contribution towards labor welfare funds: Rs.83,76,816/-. For the sake of clarity, the reply filed by the assessee company before the A.O is culled out as under (extract from the order u/s. 270A of the Act) : “In this case the assessee has filed the original return of income before the completion of audit and therefore the assessee has filed various revised returns. The total gross receipt reported in the return of income was Rs.9,91,25,835/- but during the course of assessment proceeding the assessee has offered me gross receipt of Rs. 9,94,09,89,590/-. As per assessee submission the book profit increased by Rs.3,28,96,087/- i.e. Rs. 67,38,09,917/-. 2. Further, on going through the return of income filed, it is found that the assessee has not offered the amount debited to the profit and loss account, to the extent of disallowance under section 36(1)(iv) of the Act at Rs.83,76,816/-in his original return of income but during the course of assessment proceeding the same has been offered for taxation.”

The reply of the assessee has been carefully perused, however the same is not acceptable. It is pertinent to note that the assessee agreed to the addition made by the AO, once the same was raised by the AO during the course of assessment proceedings. Further, the details of the income/ expenses was not disclosed in the return of income, but the same was unearthed during the assessment proceedings and the same has been duly accepted by the assessee The reply of assessee is considered but not found to be tenable.

From the facts of the case, it can be clearly seen that the assessee has tried to misreport particulars of income by showing less gross receipts thereby reducing the profit of the company impacting the tax liability. Further the assessee also failed to add back the amount which had been debited in the profit and loss account, to the extent of disallowance u/s.36(1)(iv) of the Act as the same had ought to be added back as disallowance u/s.36(1)(iv) of the Act. As the discrepancy has been observed during the course of assessment proceedings, the assessee then offered the same for taxation. In this instance, also it clearly states that the assessee had been trying to evade tax, which should have been done by the assessee as per law.

In view of the above discussion, it is justified that the assessee has misreported its income for the year under consideration, i.e., A.Y. 2017-18. Therefore, as per provisions of section 270A(9) of the Act, the penalty for misreporting of income shall be a sum equal to 200% of the amount of tax payable on mis-reported income of Rs.4,12,72,903/-. In this case such amount of tax payable is Rs.1,36,46,058/-. The amount of penalty has been computed as under:-

The assessee company being aggrieved with the penalty imposed u/s. 270A of the Act carried the matter in appeal before the CIT(Appeals). The CIT(Appeals) was of the view that as the assessee company had revised and modified its return of income before completion of the assessment and had, after accepting the mistakes that had earlier crept in, offered the resulting amount for tax therefore, there was no justification for the A.O to have imposed penalty u/s. 270A of the Act. Also, the CIT(Appeals) finding favor with the claim of the assessee company was of the view that as the returned data was already available with the A.O in Form 3CA, 3CD report, Form 29B, and audited financial accounts; therefore, the said fact in itself dispelled all doubts as regards the bonafide of the assessee with respect to the mistakes in its original return of income. As such, the CIT(Appeals) was of the view that as there was no malafide intention on the part of the assessee company, an entity working under the State government of Chhattisgarh, in hiding/concealing its income, no penalty could have been imposed u/s. 270A of the Act. The CIT(Appeals), while concluding as hereinabove, had drawn support from the judgment of the Hon’ble Supreme Court in the case of CIT Vs. Reliance Petro products, 322 ITR 158 (SC). At the same time, the CIT(Appeals) did not find favor with the claim of the assessee company that the disallowance made by the A.O u/s. 36(1)(va) of Rs.83,76,816/- was not liable to be visited with penalty u/s. 270A of the Act. Accordingly, the CIT(Appeals), drawing support from the judgment of the Hon’ble Supreme Court in the case of Checkmate Services P. Ltd. Vs. CIT-1, Civil Appeal No.2833 of 2016 dated 12.10.2022 upheld the penalty to the said extent as was imposed by the A.O u/s. 270A of the Act. For the sake of clarity, the relevant observations of the CIT(Appeals) are culled out as follows:-

Per contra, the Ld. Departmental Representative (for short ‘DR’) relied on the order of the A.O.

We have heard the ld. Authorized Representatives of both the parties, perused the orders of the lower authorities and the material available on record and considered the judicial pronouncements that have been pressed into service by the Ld. AR to drive home his contentions.

Apropos the contention of the Ld. AR that no penalty u/s. 270A of the Act was called for in the hands of the assessee as regards its claim for deduction of the delayed deposit of employees' share of contributions towards labor welfare funds; we find substance in the same. Admittedly, at the stage of filing the revised return of income by the assessee company on 29.03.2019, the delayed deposit of the employees share of contribution towards labor welfare funds as per the judgment of the Hon’ble Apex Court in the case of Commissioner Of Income Tax Vs. Alom Extrusions Limited (supra) and other judicial pronouncements were not liable for disallowance u/s. 36(1)(VA) of the Act, and were allowable as a deduction as long as the same was deposited by the assessee before the “due date” of filing of its return of income as prescribed in sub-section (1) of Section 139 of the Act. As the aforesaid position of law was dislodged only pursuant to the judgment of the Hon’ble Supreme Court in the case of Checkmate Servies Pvt. Ltd. Vs. CIT-1 (supra)dated 12.10.2022, as per which the delayed deposit by an assessee of the employee's share of contribution towards labor welfare funds was liable for disallowance u/s. 36(1)(va) of the Act; therefore, we find substance in the claim of the Ld. AR that as at the relevant point of time, i.e., on 29.03.2019, the assessee’s claim for deduction was supported by the judgment of the Hon’ble Apex Court in the case of Commissioner Of Income Tax Vs. Alom Extrusions Limited (supra) and a host of other judicial pronouncements of various Hon’ble High Courts, its explanation for not having offered the same as a disallowance at the time of filing of the revised return of income could not have been summarily discarded. Also, we cannot remain oblivion of the fact that the assessee respectfully following the judgment of the Hon’ble Supreme Court in the case of Checkmate Servies Pvt. Ltd. Vs. CIT-1 (supra), had thereafter, in the assessment proceedings offered the aforementioned delayed deposit of employees share of contributions towards labor welfare funds as its income and subjected the same to tax.

We, thus, in terms of our aforesaid deliberations, are of a strong conviction that as the assessee company had come up with a bonafide explanation with respect to the aforesaid issue, the same, thus, could not have been construed as an under- reporting of income by the assessee company within the meaning of Clause (a) to sub-section (6) of Section 270A of the Act. We, thus, based on our aforesaid observations vacate the penalty imposed by the A.O u/s. 270A of the Act on the aforementioned amount of Rs.83,76,816/- (supra), which, thereafter, had been upheld by the CIT(Appeals). Thus, the Grounds of cross-objection Nos.1 & 2 raised by the assessee company are allowed in terms of our aforesaid observations.

In the result, Cross-objection filed by the assessee company in CO No.20/RPR/2023 for A.Y.2017-18 is allowed in terms of our aforesaid observations. A.Y.2017-18 43. We shall now deal with the grievance of the department that the CIT(Appeals) had erred in vacating the penalty imposed by the A.O u/s. 270A of the Act as regards the underreporting of income by the assessee amounting to Rs.3,28,96,087/- (supra).

As observed by us hereinabove, the assessee company had vide its revised return of income that was filed on 23.03.2019, Page 38-39 of APB, revised its gross receipts at Rs.994.09 crore (supra) as against that as was earlier recorded in its original return of income at Rs.991.25 crore (approx.), Page 70 of APB. Also, the assessee company, vide its revised return of income filed on 29.03.2019, Page 38- 39 of APB, had revised its “book profit” at Rs. 67.38 crores (supra) as against that as was earlier disclosed in its return of income filed on 31.03.2018 at Rs. 64.09 crores (supra), Page 36-37 of APB. Accordingly, the difference of Rs.3,28,96,087/- [Rs. 67,38,09,917/- (-) Rs. 64,09,13,830/-] was duly considered by the assessee company and offered for tax in its revised return of income filed on 29.03.2019. As observed hereinabove, a conjoint reading of the “Profit and loss account” (revised), Page 70 of APB and the return of income (revised) on 29.03.2019, reveals that the “book profit” of Rs.67.38 crore (approx.) disclosed by the assessee company in its return of income (revised on 29.03.2019) included the additional gross receipt of Rs.3,28,96,087/- (supra). As is discernible from the order u/s. 144 of the Act, dated 24.12.2019, the A.O had failed to take cognizance of the return of income that the assessee company had revised on 29.03.2019, wherein the gross receipts were already raised to an amount of Rs.994.09 Crore (supra). The aforesaid factual position can also be gathered from the fact that the A.O. vide his order u/ss. 154/144 of the Act dated 09.03.2023 had categorically admitted that a perusal of the records revealed that though the assessee company had filed its return of income disclosing normal income at Rs. Nil and “book profit” under the MAT income Rs.67.38 Crore (supra), but the A.O while framing the assessment, had wrongly taken the total income as per the MAT provisions at Rs.64.09 crore (approx.) as against that disclosed by the assessee company in its return of income. Accordingly, for the said limited purpose, the A.O vide his aforesaid order of rectification had revised the MAT income of the assessee at Rs.67.38 crore (supra), i.e., as was disclosed by the assessee company by filing the revised return of income on 29.03.2019. For the sake of clarity, the observations of the A.O. vide his order u/s. 154 r.w.s. 144 dated 09.03.2023 are culled out as under:

We, thus, in terms of our aforesaid observation, approve the view taken by the CIT(Appeals), who had rightly vacated the penalty imposed by the A.O u/s. 270A of the Act as regards the addition of Rs.3,28,96,087/- (supra) made by the A.O. Thus, the Grounds of appeal No.1 raised by the revenue is dismissed in terms of our aforesaid observations.

Ground of appeal Nos. 2 and 3, being general in nature, are dismissed as not pressed.

In the result, the appeal of the revenue in for A.Y.2017- 18 is dismissed in terms of our aforesaid observations.

Accordingly, the appeal filed by the revenue is dismissed, while the cross- objection filed by the assessee company is allowed.

Resultantly, both the appeal of the revenue, i.e., , and cross-objection of the assessee company, i.e, CO No. 19/RPR/2023 for AY 2016-17 are allowed, while for the appeal of the revenue, i.e., is dismissed and cross-objection of the assessee company, i.e., CO. No. 20/RPR/2023 for AY 2017-18 is allowed in terms of our aforesaid observations.