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

आदेश / ORDER PER RAVISH SOOD, JM: 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.

“(1) On the facts and circumstances of the case whether the Id. CIT(A), National Faceless Appeal Centre was justified in deleting the penalty amount of Rs.2,92,58,402/- made by the A.0 for furnishing inaccurate particulars/concealment of income. (2) The order of the Id. CIT(A), National Faceless Appeal Centre is erroneous both in law and on facts. (3) Any other ground which may be adduced at the time of hearing.”

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On the other hand, the assessee company, as a cross-objector, has assailed the impugned order of the CIT(Appeals) on the following grounds of cross-objection (CO No.19/RPR/2023):

“1. On facts and in the circumstances of the case, CIT(A) has erred in confirming penalty of Rs.16,20,646/- levied by the AO u/s 271(1)(c) on disallowance of Rs.49,01,692/- made u/s 36(1)(va). 2. That in any case and in any view of the matter, the action of CIT(A) in confirming the action of AO in imposing penalty of Rs.16,20,646/- u/s 271(1)(c) is bad in law and against the facts and circumstances of the case and the same is not sustainable on various legal and factual grounds. 3. That CIT(A) was justified in cancelling penalty of Rs. 2,92,58,402/- levied by the AO u/s 271(1)(c) on account of addition of Rs. 8,84,92,885/-.”

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Particulars which are As filed in (revised As disclosed during Difference amount ( debited in profit and return of income) ( in assessment In Rs.) loss account Rs.) proceedings ( in Rs.) Any other rate, tax, 14,05,48,123/- 7,98,71,053/- (+) 6,06,77,070/- duty or cess incl. STT and CTT Electricity Expenses 8,89,71,315/- 8,71,00,455/- (+) 18,71,082/- Other expenses 46,71,61,966/- 44,12,17,233/- (+) 2,59,44,733/- Total addition on 8,84,92,885/- books profit

The AO, based on the aforesaid revision in the expenses, made an addition of Rs.8,84,92,885/- to the “book profit” disclosed by the assessee company in its revised return of income. Apart from that, the A.O made a further addition /disallowance of the delayed deposit by the assessee company of the employee’s share of contribution towards labour welfare funds u/s. 36(1)(va) (sic.) of the Act amounting to Rs.49,01,692/-.

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“The appellant has quoted various decisions in support of its claim. The appellant has argued that the income declared can be revised / modified before completion of the assessment. The Assessing Officer clearly brought out in the order passed u/s.271(1)(c) of the Act, dt.29/01/2022 that the mistakes crept in were accepted and offered for taxation by the assessee only when they were noticed by the Assessing Officer during the course of the assessment proceedings and levied penalty u/s.271(1)(c) stating that the explanation offered by the assessee were not acceptable and further, the details of the income / expenses was not disclosed in the return of income, but the same was unearthed during the assessment proceedings. But the appellant states that "return data was corrected on the basis of information already available with assessing officer in form of 3CA, 3CD report, form 29B and audited annual account." In the circumstances, it is clear that the mismatch between the data incorporated in the audited reports and the return of income; filed were set right during the course of the assessment

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proceedings on agreed basis. Accordingly, it is inferred that no mala fide intention on the part of the assessee being an entity working under the State Government of Chhattisgarh, in hiding/concealing the income in not properly showing/reflecting the information once incorporated in the audited statements and submitted before the Department for examination. It is worth to note the contention of the appellant that "return data was corrected on the basis of information already available with assessing officer in form of 3CA, 3CD report, form 29B and audited annual account. On perusal of the assessment order dated 14.12.2019, page 3, based on the appellant's submission, the AO has made addition of Rs. 8,84,92,885/- for the reason that there is a difference in the MAT profit declared as there was a mistake on the part of the appellant while feeding expenses and income data in ITR. Also, it is seen from records that the appellant has filed Form No.29B on 21.10.2019 vide which in Row no.18 — Book profit as computed is shown at Rs. 35,84,30,033/-. Further, the appellant has filed the tax audit reports in Form 3CA and 3CD on 23.12.2016. So, all the data were already available in different reports / forms filed online by the appellant with the amount requested to be corrected during the scrutiny assessment proceedings. As submitted by the appellant, it can be construed as a data transmission error. It is observed that, there is true element of bonafideness in the conduct of the assessee. The Hon'ble Apex Court in CIT Vs. Reliance Petro products 322ITR 158 (SC) has held that no penalty should be imposed when the assessee adopts a bona fide view and has declared all the necessary particulars concerning the income in dispute. In the case of DCIT Vs. M/s. Mahalaxmi Realtors, ITAT 'B' Bench, Pune has observed that, 'penalty cannot be imposed in a methodological manner but it can only be imposed if it is required in the facts and circumstances of the case suggesting and confirming any concealment or furnishing of inaccurate particulars of income by the assessee. Hence, I am of the opinion that the appellant did not have any malafide intention to evade taxes as the same was already disclosed much before the assessment was concluded and accordingly, penalty levied against the addition of Rs.8,84,92,885/- deserves to be deleted. As regard to the addition made of Rs.49,01,692/- being the disallowance u/s 36(1)(iv) of the Act and penalty levied, in the light of the recent Supreme Court Judgement in the case of Checkmate Services P. Ltd., Vs. CIT-1 vide Civil Appeal No. 2833 of 2016 dated 12.10.2022, the addition made and the taxes levied by the AO is upheld. Hence, the penalty levied proportionate to the addition made / tax levied is also upheld and the ground of appeal specifically in respect of this addition / levy of penalty is 'dismissed'. 4.3 Ground No.1 is general in nature and no separate adjudication is required. Ground No.4 also doesn't need separate adjudication as the

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appellant had not raised any such grounds/issues during the course of the appellate proceedings. 5. Accordingly, the appeal of the Appellant for AY 2016-17 stands partly allowed.”

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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.

Date Particulars

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29.11.2016 The original return of income for AY 2016-17 was filed by the assessee company based on the provisional financial statements. 15.12.2016 The accounts of the assessee company were audited u/s 44AB of the Act. 26.03.2018 The revised return of income filed by the assessee company 06.12.2019 The assessee company, in the course of the assessment proceedings, revised certain expenses aggregating to Rs.8.84 crore (supra) for the reason that some mistakes had crept while feeding the expenses/income in the revised return of income and thus, disclosed its “book profit” under the MAT provisions at Rs.35,74,90,033/- as against that disclosed in its revised return of income at Rs.26,89,97,367/-

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assessment proceedings on an agreed basis. Accordingly, the CIT(Appeals) was of the view that there was no malafide intention of the assessee company, an entity working under the State Government of Chhattisgarh, in hiding/concealing its income and not properly disclosing the same. The CIT(Appeals), thus, was of the view that the A.O had made the addition of Rs.8.84 crore (supra) to the “book profit” disclosed by the assessee company in its revised return of income under the MAT provisions on account of certain bonafide mistakes of the latter that had crept in while feeding the data of income and expenditure in the return of income. Referring to the records, the CIT(Appeals) observed that the assessee company had filed Form 29B dated 21.10.2019, wherein it had, at Row No.18, disclosed the “book profit” at Rs.35.84 crore (approx.). Also, the CIT(Appeals) observed that the assessee company had filed its tax audit report in Form 3CA and Form 3CD on 23.12.2016. Considering the aforesaid facts, the CIT(Appeals) was of the view that now, when all the data was already available in different reports/forms that were filed online by the assessee company, disclosing the amounts that were requested to be corrected during scrutiny assessment proceedings, therefore, it could be concluded that the failure leading to the aforesaid mismatch was merely on account of a data transmission error. Accordingly, the CIT(Appeals), considering the bonafide conduct of the assessee company, vacated the penalty imposed by the A.O u/s 271(1)(c) with respect to the aforesaid addition of Rs.8.84 crore (supra.).

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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

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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

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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):

“It is pertinent to note that during the course of assessment proceedings the assessee agreed to the addition made by the AO, once the same was raised by the AO. 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 duly been accepted by the assessee.” (emphasis supplied by us)

We, thus, based on our aforesaid observations, are of the view that as the assessee company had not only failed to come up with any bonafide explanation for having raised in its revised return of income filed on 26.03.2018 a wrong claim for deduction of inflated expenses, which was contrary to its audited financial statements, dated 15.12.2016; thus, are of the view that the disallowance by the AO of the said inflated expenses clearly falls within the realm of the “Explanation 1” r.w. “Explanation 4” (for

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quantification) of Section 271(1)(c) of the Act. Apart from that, we are of the view that as the assessee company could have only revised its claim for deduction of expense by filing a revised return of income, which, it had failed to do; therefore, its letter dated 06.12.2019 (supra) wherein it had after being confronted by the AO sought to correct its wrong claim would not assist its case. Our aforesaid view is supported by the judgment of the Hon’ble Supreme Court in the case of Goetze (India) Ltd. Vs. CIT (2006) 284 ITR 323 (SC). The Hon’ble Apex Court, in its aforesaid order, had observed that an assessee is not vested with any right to raise a claim before the AO otherwise than by filing a revised return of income. In case the assessee company before us intended to seek a further correction of the “book profit” disclosed by it in its revised return of income by an amount of Rs. 8.84 crore (supra), then, the only remedy available with it was to have further filed a revised return of income, which, we find it had failed to do.

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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.

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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.

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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.

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expenses of Rs. 8.84 crore (supra) in the revised return of income by the assessee company.

CO No.19/RPR/2023 A.Y.2016-17 20. We shall now deal with the captioned cross-objection filed by the assessee before us. As regards the addition/disallowance of Rs.49,01,692/- made by the A.O u/s. 36(1)(va)(sic) of the delayed deposit of employees' share of contribution towards labor welfare funds; we find substance in the claim of the Ld. AR that the assessee company was not liable to be visited with penalty u/s. 271(1)(c) of the Act as regards the aforesaid addition/disallowance.

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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.

ITA No.3/RPR/2023 CO No.20/RPR/2023 AY 2017-18

“(1). On the facts and circumstances of the case whether the Ld. CIT(A), National Faceless Appeal Centre was justified in deleting the

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penalty amount of Rs.2,17,52,866/- made by the A.O for furnishing inaccurate particulars/concealment of income. (2) The order of the ld. CIT(A), National Faceless Appeal Centre is erroneous both in law and on facts. (3) Any other ground which may be adduced at the time of hearing.”

On the other hand the assessee company as a cross-objector has assailed the impugned order of the CIT(Appeals) on the following grounds of cross-objection (CO No.20/RPR/2023): “1. On facts and in the circumstances of the case, CIT(A) has erred in confirming penalty of Rs.55,39,257/- levied by the AO u/s. 270A on disallowance of Rs. 83,76,816/- made u/s 36(1)(va). 2. That in any case and in any view of the matter, the action of CIT(A) in confirming the action of AO in imposing penalty of Rs.55,39,257/- u/s.270A is bad in law and against the facts and circumstances of the case and the same is not sustainable on various legal and factual grounds. 3. That CIT(A) was justified in cancelling penalty of Rs.2,17,52.860/- levied by the AO u/s. 270A on account of addition of Rs.3,28,96,087/-.”

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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.

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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.”

As the reply filed by the assessee company did not find favor with the A.O., therefore, he vide his order passed u/s. 270A of the Act dated 18.01.2022 saddled it with penalty of Rs. 2,72,92,117/-,i.e, @200%. For clarity, the observation of the A.O. based on which he had imposed penalty u/s. 270A of the Act is culled out as under:

“4. Before discussing the issue of levy of penalty in the case of assessee, it is necessary to take into consideration the extant provisions of Section 270A. The same are re-produced hereunder for ready reference: 270A. (1) The Assessing Officer or the Commissioner (Appeals) or the Principal Commissioner or Commissioner may, during the course of any proceedings under this Act, direct that any person who has under-reported his income shall be liable to pay a penalty in addition to tax, if any, on the under-reported income. (2) A person shall be considered to have under-reported his income, if— (a) the income assessed is greater than the income determined in the return processed under clause (a) of sub-section (1) of section 143;

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(b) the income assessed is greater than the maximum amount not chargeable to tax, where no return of income has been furnished [or where return has been furnished for the first time under section 148]; (c) the income reassessed is greater than the income assessed or reassessed immediately before such reassessment; (d) the amount of deemed total income assessed or reassessed as per the provisions of section 115JB or section 115JC, as the case may be, is greater than the deemed total income determined in the return processed under clause (a) of sub-section (1) of section 143; (e) the amount of deemed total income assessed as per the provisions of section 115JB or section 115JC is greater than the maximum amount not chargeable to tax, where [no return of income has been furnished or where return has been furnished for the first time under section 148]; (f) the amount of deemed total income reassessed as per the provisions of section 115JB or section 115JC, as the case may be, is greater than the deemed total income assessed or reassessed immediately before such reassessment; (g) the income assessed or reassessed has the effect of reducing the loss or converting such loss into income. …………………………… (9) The cases of misreporting of income referred to in sub-section (8) shall be the following, namely:— (a) misrepresentation or suppression of facts; (b) failure to record investments in the books of account; (c) claim of expenditure not substantiated by any evidence; (d) recording of any false entry in the books of account; (e) failure to record any receipt in books of account having a bearing on total income; and (f) failure to report any international transaction or any transaction deemed to be an international transaction or any specified domestic transaction, to which the provisions of Chapter X apply. 5. 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

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accepted by the assessee The reply of assessee is considered but not found to be tenable. 6. 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. 7. Therefore, the penalty should be levied on the assessee because of following facts: i. The contribution received from employees' is not expenditure in the real sense of the term. Such amounts, when received from employees' is treated as income u/s 2(24)(x) of the Act and when paid in time, are allowed as deduction u/s 36(1)(va) of the Act. The items covered u/s 43B of the Act is actual expenditure which is allowed only on actual payment, irrespective of the method of accounting followed. In the present case, when the assessee received the contributions from their employees', the same constituted income as per Section 2(24)(x) of the Act. Since it was not paid in time, no deduction is allowable u/s 36(1)(va) of the Act. ii. Not levying penalty would lead to injustice for other honest tax payers. There is also possibility of repetition of offence by the assessee in case, penalty is not levied. iii. The assessee has not preferred an appeal against the assessment order u/s 143(3) dated 30.12.2019 i.e. the assessee has accepted its misreporting of income. iv. Mens rea —bad intention is not prerequisite for levy of penalty and ignorance of provisions of law is not an excuse. 8. 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:-

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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:-

“The appellant has quoted various decisions in support of its claim. The appellant has argued that the income declared can be revised/ modified before completion of the assessment. The Assessing Officer brought out in the order passed u/s.270A of the Act, dt.18/01/2022 that the mistakes crept in were accepted and offered for taxation by the assessee only when they were noticed by the Assessing Officer during the course of the assessment proceedings and levied Penalty u/s. 270A stating that the explanation offered by the assessee were not acceptable and further the details of the income / expense s was not disclosed in the return of income, but the same was unearthed during the assessment proceedings. But the appellant states that "return data was corrected on the basis of information already available with assessing officer in form of 3CA, 3CD report, form 29B and audited annual account." In the circumstances, it is clear that the mismatch between the data incorporated in the audited reports and the return of income filed were set right during the course of the assessment proceedings on agreed basis. Accordingly, it is inferred that no mala fide intention on the part of the assessee being an entity working under the State Government of Chhattisgarh, in hiding/concealing the income in not properly showing/reflecting the information once incorporated in the audited statements and submitted before the Department for examination.

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It is worth to note the contention of the appellant that "return data was corrected on the basis of information already available with assessing officer in form of 3CA, 3CD report, form 29B and audited annual account. On perusal of the assessment order dated 24.12.2019, page 2, the AO has made addition of Rs.3,28,96,087/- for the reason that the assessee had not disclosed the true and correct figure during filing of ROI. However, it is seen from records that the appellant has filed Form No.29B on 31.12.2018 vide which in Row no.18 — Book profit as computed is shown at Rs.67,38,09,917/-. Further, in the revised ROI filed on 29.03.2019, in the computation of total income the appellant has reflected the same amount against — Deemed total income u/s.115JB. It is observed that, there is true element of bonafideness in the conduct of the assessee. The Hon'ble Apex Court in CIT Vs. Reliance Petro products 322ITR 158 (SC) has held that no penalty should be imposed when the assessee adopts a bona fide view and has declared all the necessary particulars concerning the income in dispute. In the case of DCIT Vs. M/s. Mahalaxmi Realtors, ITAT `13' Bench, Pune has observed that, 'penalty cannot be imposed in a methodological manner but it can only be imposed if it is required in the facts and circumstances of the case suggesting and confirming any concealment or furnishing of inaccurate particulars of income by the assessee. Hence, I am of the opinion that the appellant did not have any malafide intention to evade taxes as the same was already disclosed much before the assessment was concluded and accordingly, penalty levied against the addition of Rs.3,28,96,087/- deserves to be deleted. As regard to the addition made of Rs.83,76,816/- being the disallowance u/s 36(1)(iv) of the Act and penalty levied, in the light of the recent Supreme Court Judgement in the case of Checkmate Services P. Ltd., Vs. CIT-1 vide Civil Appeal No. 2833 of 2016 dated 12.10.2022, the addition made and the taxes levied by the AO is upheld. Hence, the penalty levied proportionate to the addition made / tax levied is also upheld and the ground of appeal specifically in respect of this addition / levy of penalty is 'dismissed'. 4.3 Ground No.1 is general in nature and no separate adjudication is required. Ground No.4 also doesn't need se crate adjudication as the appellant had not raised any such grounds/issues-during the course of the appellate proceedings. 5. Accordingly, the appeal of the Appellant for AY 2017-18 stands 'partly allowed'.”

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of the jurisdiction assumed by the A.O. for imposing penalty u/s. 270A of the Act by filing a cross-objection.

31 ITA Nos. 2 & 3/RPR/2023 CO Nos. 19 & 20/RPR/2023

Electric South East Asia (HQ) PTE Vs. ACIT (2022) 443 ITR 186 (Delhi) and orders of the Co-ordinate Benches of the Tribunals, viz., (i) M/s. Alrameez Construction Pvt. Ltd. Vs. CIT (NFAC) (2023) 202 ITD 379 (Mum); (ii) Kishor Digambar Patil Vs. ITO, ITA Nos,54 & 55/PUN/2023 dated 30.03.2023; and (iii) Saltwater Studio LLP Vs. NFAC (2023) 68 CCH 113 (Mum). The Ld. AR took us through the relevant observations of the Courts/Tribunal in the aforementioned judicial pronouncements, based on which penalty u/s. 270A of the Act was quashed in the respective cases for want of valid assumption of jurisdiction by the A.O.

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994,09,89,590/- as against that as was originally returned in its return of income at Rs.991,25,36,835/-; therefore, no penalty as per the mandate of clause (a) of Section (2) to Section 270A of the Act was called for in the hands of the assessee company. The Ld. AR, to fortify his claim that the assessee company had in its revised return of income dated 29.03.2019 revised its gross receipts at Rs.994.09 crore (approx.), drawn our attention to the “Profit and loss account” (revised) of the assessee company that was filed alongwith the aforesaid return of income, Page 70 of APB. Carrying out a conjoint reading of the “Profit and loss account” (revised), Page 70 of APB, r.w. computation of income (revised), Page 39 of APB, the Ld. AR submitted that it stood established beyond doubt that the net profit of Rs.67.38 crore (approx.) disclosed by the assessee company in its revised return of income (supra) was, in turn, based on the gross receipts (revised) of Rs.994.09 crore (approx.). Based on the aforesaid facts, the Ld. AR submitted that even as per the general provisions of the Act the assessee company could not be visited with penalty as per the mandate of clause (a) of sub-section (2) to Section 270A of the Act.

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the return of income as prescribed in sub-section (1) of Section 139 of the Act, the same was allowable u/s. 43B(b) of the Act. The Ld. AR submitted that the view of the assessee company at the time of filing the original/revised return of income was duly supported by the judgment of the Hon’ble Supreme Court in the case of Commissioner Of Income Tax Vs. Alom Extrusions Limited (supra), as well as a host of judicial pronouncements, which did hold the ground at the relevant point of time. Carrying his contention further, the Ld. AR submitted that as the judgment of the Hon’ble Supreme Court in the case of Checkmate Servies Pvt. Ltd. Vs. CIT- 1 (supra) was delivered on 12.10.2022; therefore, the bonafide of the assessee company for not having offered the aforesaid amount as a disallowance while filing its return of income/revised return of income stood duly established. Elaborating further on his contention, the Ld. AR submitted that as the aforesaid view of the assessee company was subsequently found to conflict with the judgment of the Hon’ble Supreme Court in the case of Checkmate Servies Pvt. Ltd. Vs. CIT-1 (supra); therefore, the assessee company, in the course of the assessment proceedings had voluntarily offered the aforesaid amount for tax. Accordingly, the Ld. AR submitted that now when the explanation of the assessee company for having not disallowed its claim for deduction of delayed deposit of employee’s share of contributions towards labor welfare funds at the stage of filing of return of income/revised return of income was due to bonafide reasons; thus, both the lower authorities had grossly erred in making/sustaining the penalty u/s 271(1)(c) with respect to the said amount.

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35 ITA Nos. 2 & 3/RPR/2023 CO Nos. 19 & 20/RPR/2023

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.

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ITA No.03/RPR/2023 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).

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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:

“02. The application of assessee has been duly considered. On perusal of record, it is found that the assessee filed return of income showing normal income at Rs. Nil and MAT income at Rs.67,38,09,917/-. Verification reveals that total income as per MAT was taken at Rs. 64,09,13,8301.- in earlier orders whereas the same should have been taken at Rs. 67,38,09,917/- (as evident from ROI filed). Thus computation of tax was made at reduced income of Rs.64,09,13,830/- and the mistake is apparent from record. A letter has been issued to assessee on 28.02.2023 to submit its reply on above issues on or before 03.03.2022. The assessee submits its reply 07.03.2023 and agreed to the fact and rectification. 03. In view of the above, rectification order u/s 154 is hereby passed rectifying the MAT income at Rs. 67,38,09,917/-. Prepaid taxes as per 26AS and e- TDS database has been given after verification. Charge interest u/s 234A, 234B, 234C, 234D as applicable. Issue demand notice/Challan accordingly.”

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Based on the aforesaid facts, we are of the view that now, when the “book profit” that was earlier disclosed by the assessee company in its return of income (revised) on 31.03.2018, Page 36 of APB at Rs.64.09 crore (approx.) was, thereafter, increased by an amount of Rs.3.28 crore (approx.) and disclosed in its return of income (revised) on 29.03.2019 at Rs.67.38 Crore (supra), which, the A.O had thereafter assessed/determined vide his order u/s. 144 of the Act dated 24.12.2019; therefore, no penalty u/s 270A of the Act for the aforesaid amount of Rs. 3.28 crore (supra),i.e., increase in the amount of “book profit” which inadvertently had remained omitted to be considered by the A.O in his order passed u/s.144 of the Act, dated 24.12.2019 could have been imposed on the assessee company.

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assumed by the AO for imposing penalty u/s 270A of the Act, which, thus, are left open.

Order pronounced in open court on 14th day of December, 2023.

Sd/- Sd/- ARUN KHODPIA RAVISH SOOD (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) रायपुर/ RAIPUR ; �दनांक / Dated : 14th December, 2023 ***SB आदेश क� ��त�ल�प अ�े�षत / Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant. 2. ��यथ� / The Respondent. 3. The CIT(Appeals)-1, Raipur (C.G 4. The Pr. CIT, Raipur-1 (C.G) 5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, रायपुर ब�च,

40 ITA Nos. 2 & 3/RPR/2023 CO Nos. 19 & 20/RPR/2023

रायपुर / DR, ITAT, Raipur Bench, Raipur. गाड� फ़ाइल / Guard File. 6. आदेशानुसार / BY ORDER, // True Copy // �नजी स�चव / Private Secretary आयकर अपील�य अ�धकरण, रायपुर / ITAT, Raipur.