MESERS KANWARSHREE BUILDCON PRIVATE LIMITED,RAIPUR vs. ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-4(1), RAIPUR

Succinctly stated, the assessee company which is engaged in the business of a builder had filed its return of income for A.Y. 2008-09 on 30.09.2018, declaring an income of Rs.15,72,640/. Original assessment was thereafter framed by the A.O vide order u/s.143(3) dated 24.12.2010 determining its income at Rs.16,47,640/-.

Controversy involved in the present appeal lies in a narrow compass i.e. whether or not the assessee company which had filed its return of loss for the preceding year beyond the time limit contemplated in sub-section (1) of Section 139 of the Act, having wrongly carried forward the loss for the said year to the succeeding year and adjusted the same against its income of the said later year would be liable for penalty u/s.271(1(c) of the Act?

Shorn of unnecessary details, the assessee company had filed its return of income for A.Y.2007-08 on 31.03.2008, declaring a loss of Rs. (-) 16,32,927/-. Although the assessee company had filed its return of income beyond the time limit contemplated under sub-section (1) to Section 139 of the Act, and thus, as per the mandate of section 80 of the Act was not entitled to carry forward and set-off such loss as against its income of the succeeding year under sub-section (1) to Section 72 of the Act, however, it had inadvertently done so. Ostensibly the assessee had carried forward the brought forward business

Subsequently, the A.O realizing his aforesaid mistake issued notice u/s.154 of the Act, dated 27.01.2014 and called upon the assessee to explain as to why its aforesaid adjustment of business loss may not be withdrawn. In reply the assessee did not contest the withdrawing of its claim for set-off of the aforesaid b/forward business loss of Rs. (-) 16,32,927/- (supra) as proposed by the A.O. On the contrary, the assessee vide its reply dated 28.09.2015 fairly admitted its disentitlement for claim of set-off of the aforesaid business loss of Rs. (-) 16,32,927/- (supra). Accordingly, the A.O vide his order passed u/s.154 dated 24.09.2015 disallowed the assessee’s claim for

After passing the rectification order u/s 154, dated 24.09.2015 the A.O subjected the assessee to penalty for furnishing of inaccurate particulars of income u/s.271(1)(c) of Rs. 5,04,600/- i.e as regards its wrong/irregular adjustment of brought forward loss of Rs.16,32,927/.

Aggrieved, the assessee carried the matter in appeal before the CIT(Appeals) but without any success.

The assessee being aggrieved with the order of the CIT(Appeals) has carried the matter in appeal before us. As the assessee appellant despite having been intimated about the hearing of appeal had failed to put up an appearance before us, therefore, we are constrained to proceed with and dispose off

After having given thoughtful consideration to the aforesaid issue in hand, we are of the considered view that the fact that the assessee company had inadvertently carried forward the business loss of AY 2007-08 of Rs. (-) 16,32,927 (supra) to the succeeding year i.e the year under consideration cannot be ruled out. Our aforesaid conviction as regards bonafides of the assessee can safely be gathered from the fact that on being confronted with the aforesaid irregularity in its claim for set-off of the b/forward losses it had fairly admitted the same and had not assailed the consequential addition made by the A.O any further in appeal. Be that as it may, we are of the considered view that the carry forward of the business loss of the preceding year by the assessee company to the succeeding year i.e the year under consideration can to the best be held to be a mistake on its part, which though would

Also support is drawn from the judgment of the Hon’ble High Court of Bombay in the case of CIT Vs. Upendra V. Mithani, Income Tax Appeal (L) No.1860 of 2009, dated 05.08.2009. In its aforesaid order, it was observed by the Hon’ble High Court that no penalty can be imposed if the facts and circumstances are equally consistent with the hypothesis that the amount does not represent concealed income as with the hypothesis that it does. If the assessee gives an explanation which is unproved but not disproved i.e. it is not accepted but circumstances do not lead to the reasonable and positive inferences that the assessee’s case is false, then, no penalty u/s. 271(1)(C) of the Act can justifiably be imposed. Further, reliance is placed on the judgment of the Hon’ble Supreme Court in the case of Price Waterhouse Coopers Pvt. Ltd. vs. CIT, Civil Appeal No.6924 of 2012 dated 25.09.2012. In its aforesaid judgment, it was observed by the Hon’ble Apex Court

Considering the facts involved in the present case in light of the settled position of law, in our considered view the inadvertent carry forward by the assessee company of its business loss of the preceding year i.e. A.Y.2007-08 and, seeking setting-off of the same against its income for the year under consideration cannot, on such standalone basis, i.e de hors any material which would dislodge its bonafides for doing so justify saddling it with penalty u/s.271(1)(c) for furnishing of inaccurate particulars of income.

We, thus, in terms of our aforesaid observations not being able to concur with the view taken by the lower authorities, set- aside the order of the CIT(Appeals) and vacate the penalty imposed by the A.O u/s. 271(1)(c) of the Act.

In the result, appeal of the assessee is allowed in terms of our aforesaid observations.