Allahabad High Court
M/S Paswara Petrochem Ltd. vs Commissioner Of Income ... on 14 August, 2018
Bench: Bharati Sapru, Dinesh Kumar Singh
HIGH COURT OF JUDICATURE AT ALLAHABAD
Reserved AFR
Case :- INCOME TAX APPEAL No. - 105 of 2017
Appellant :- M/S Paswara Petrochem Ltd.
Respondent :- Commissioner Of Income Tax,Meerut And Another
Counsel for Appellant :- Rakesh Ranjan Agrawal,Suyash Agrawal
Counsel for Respondent :- Krishna Agarwal,Krishna Agarawal
Hon'ble Bharati Sapru,J.
Hon'ble Dinesh Kumar Singh,J.
(Per Dinesh Kumar Singh, J. )
1. This Income Tax Appeal has been filed by the appellant-assessee under Section 260-A of the Income Tax Act, 1961 (hereinafter referred to as 'the Act') against the order dated 30.09.2010 passed by the Income Tax Appellate Tribunal, New Delhi, Bench 'F' (hereinafter referred to as 'the Tribunal') in Income Tax Appeal No.1994/DL/2010 which was filed by the assessee against the order dated 26.03.2010 passed by the CIT(A). Assessment year involved in the present appeal is 2004-05.
2.The following questions of law have been framed in the memo of appeal for decision by this Court:
(i)Whether on the facts and circumstances of the case the ITAT was right in confirming the penalty under Section 271(i)(c) of the Act.
(ii)Whether on the facts and circumstances of the case the I.T.A.T. was correct to confirmed the penalty under Section 271(1)(c) of the Act on the ground that the appellant is wrongly claimed loss amounting to Rs. 84,78,052/- by debiting it to P & L Account on account of loss on sale of assets whereas the same was capital loss and not business loss.
(iii)Whether the ITAT rightly applied the decision of CIT Vs. Zoom Communication (P) Ltd. 327 ITR 510 (Del.) ignoring the decision of CIT Vs. Siddharth Enterprises 322 ITR 80.
(iv)Whether the I.T.A.T. Rightly confirmed the penalty under Section 271(1)(c) of the Act when the Assessee filed return of income declaring loss and the assessment was made at Nil income by the Assessing Authority by order dated 27.03.2007 under Section 154 of the Act.
3. The assessee filed return of its income on 29.10.2004 declaring a loss of Rs. 1,04,25,550/-. Return was processed under Section 143(1) of the Act and the case was taken up in scrutiny. The Assessing Officer (hereinafter referred to as 'the AO') noted that the assessee had inter alia debited an amount of Rs. 84,78,057/- in Profit and Loss account as business loss incurred on account of sale of assets. The AO finalised the assessment order under Section 143(3) of the Act on 15.12.2006 and treated this loss as capital loss and held that the same could not have been debited in Profit and Loss account as business loss. The AO added back this amount and calculated total assessed income at Rs.27,29,187/-. The AO was also of the view that the assessee had intentionally entered the capital loss in the profit and loss account in order to decrease profits, hence, penalty proceedings under Section 271(1)(c) of the Act were to be initiated and issued the penalty notice to the assessee.
4. Aggrieved by the assessment order, the assessee filed an appeal before the CIT(A) who dismissed the appeal of the assessee.
5. The show cause notice (hereinafter referred to as 'the SCN') under Section 271(1)(c) of the Act was issued on 19.03.2009 to which the appellant-assessee filed its reply on 23.03.2009. In reply to the SCN, the assessee said that despite the additions, no tax was payable by the assessee as per the AO's order under Section 154 of the Act dated 27.03.2007 in which the AO had allowed the entire amount as deduction under Section 80-IB(9) of the Act and, therefore, income was assessed as Nil in the order passed under Section 154 of the Act by the AO. If there was no income, there could not be any penalty.
6. The AO after considering reply to the SCN filed by the assessee passed the order of penalty under Section 271(1)(c) of the Act on 30.03.2009. The AO rejected the contention of the assessee and held that the penalty under Section 271(1)(c) of the Act could be levied even if the return income was a loss. The AO was of the view that the assessee had intention to conceal particulars of its income and, therefore, penalty under Section 271(1)(c) of the Act was imposable. The AO levied 100% penalty of tax amounting to Rs. 37,40,165/-.
7. Aggrieved by the aforesaid penalty order, the assessee filed an appeal before the CIT(A). The CIT(A) dismissed the appeal and upheld the order passed by the AO.
8. The assessee filed second appeal before the Tribunal against the order passed by the CIT(A), Meerut on 26.03.2010. The CIT(A) vide impugned order had dismissed the appeal. The Tribunal had held that the claim of the assessee to treat loss on sale of assets as business loss was not a bona-fide mistake and, therefore, the penalty under Section 271(1)(c) of the Act was imposable. The claim was actuated by mala-fide to evade the tax that was otherwise payable by the assessee. The Tribunal vide impugned order had dismissed the appeal.
9. Heard Mr. Suyash Agarwal, learned counsel for the appellant and Mr. Krishna Agarwal, learned counsel for the Revenue.
10. Learned counsel for the appellant-assessee submits that the assessee could have wrongly claimed Rs. 84,78,057/-, loss incurred on sale of assets as business loss in the Profit and Loss account which was a capital loss. However, the assessee had disclosed every detail in the return which was before the AO. Nothing was concealed from the assessment authority. There was no concealment of particulars of its income in any manner. Only the assessee had treated an amount as business loss which was to be treated as capital loss. This was not an attempt to conceal the income, therefore, penalty under Section 271(1)(c) of the Act was not imposable on these facts.
11. Learned counsel for the assessee further submits that in view of the order passed under Section 154 of the Act by the AO on 27.03.2007 whereby the assessed income of the assessee was assessed to be Nil, no penalty could have been levied inasmuch as under Section 271(1)(c) of the Act, the penalty proceedings can be initiated when the assessee has concealed the particulars of income. When the income itself has been assessed to be Nil, there was no question of any concealment of income and, therefore, the initiation of penalty proceedings as well as the penalty order are bad in law.
12. Learned counsel for the assessee has placed reliance on the judgment of the Supreme Court in the case of Commissioner of Income-tax, Ahmedabad vs. Reliance Petroproducts (P.) Ltd.: [2010] 189 Taxman 322(SC) to buttress his submission that merely because the assessee had claimed expenditure, which was not accepted or was not acceptable, that, by itself, would not attract penalty under Section 271(1)(c) of the Act.
13. On the other hand, Sri Krishna Agrawal, learned counsel for the Revenue has submitted that showing loss in the sale of assets as business loss was not a bona-fide mistake but it was a deliberate attempt on the part of the assessee to furnish inaccurate particulars of income and, therefore, the authorities have rightly imposed penalty under Section 271(1)(c) of the Act. In support of his submission, learned counsel for the Revenue has placed reliance on the judgment of Delhi High Court, in the case of Commissioner of Income-tax v. NG Technologies Ltd.: [2015] 370 ITR 7 (Delhi). Against the aforesaid judgment of Delhi High Court the SLP was dismissed by the Supreme Court in limine.
14. We have considered the rival submissions carefully.
15. Section 271(1)(c) of the Act reads as under:-
"271.1. If the (Assessing) Officer or the (commissioner (Appeals)) (or the (Principal Commissioner or) Commissioner in the course of any proceedings under this Act, is satisfied that any person-
....
(c) has concealed the particulars of his income or furnished inaccurate particulars of such income
....."
16. Thus, under the provisions of Section 271(1)(c) of the Act, there has to be concealment of the particulars of income by the assessee or he should have furnished inaccurate particulars of the income. The Supreme Court in the case of Dilip N. Shroff v. Jt. CIT [2007] 6 SCC 329 had explained terms 'concealment of income' and 'furnishing inaccurate particulars of income'. The Supreme Court has held that in order to attract the penalty under Section 271(1)(c) of the Act, mens rea was necessary inasmuch as the word 'inaccurate' signifies a deliberate act or omission on behalf of the assessee. Further, the jurisdiction under Section 271(1)(c) of the Act is a discretionary jurisdiction vested upon the assessing authority and the amount of penalty could not be less than the amount sought to be evaded by reason of such concealment of particulars of income but it could exceed three times thereof. 'Inaccurate particulars' is not defined anywhere in the Act. In order to attract the provision of Section 271(1)(c) of the Act, the assessee must be found to have failed to prove that explanation offered is not only bona-fide but all the facts relating to the same and material to the computation of his income have been disclosed by him. If the assessee has disclosed all facts and material in computation of his income, it cannot be said that he has furnished inaccurate particulars of his income.
17. In the present case, it is clear that the assessee has disclosed particulars of the loss in sale of assets which was not in dispute. Instead of treating that loss as capital loss the assessee had treated the same as business loss. Thus, the assessee cannot as such be said to have not disclosed all the material to the computation of his income. This was a wrong belief of the assessee that loss in sale of assets could be treated as business loss and not the capital loss.
18. We find that there was no concealment of the income by the assessee and, therefore, the penalty proceedings should not have been initiated against the assessee. We, therefore, set aside the impugned judgment passed by the Tribunal and allow this appeal.
19. The questions of law are answered in favour of the assessee and against the Revenue.
Order Date :- 14.08.2018
sushama
