Pr. Commissioner Of Income Tax - 2 vs Tata Industries Ltd
2023 Latest Caselaw 11601 Bom

2023:BHC-OS:13681-DB
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                              IN THE HIGH COURT OF JUDICATURE AT BOMBAY
                                  ORDINARY ORIGINAL CIVIL JURISDICTION
                                      INCOME TAX APPEAL NO.1039 OF 2018

            Pr. Commissioner of Income Tax-2                    ....Appellant
                   V/s.
            Tata Industries Ltd.                                ....Respondent

                                                     ----
            Mr. Suresh Kumar for Appellant.
            Ms. Aarti Vissanji a/w Mr. Srihari Iyer for Respondent.
                                                  ----
                                            CORAM : K. R. SHRIRAM &
                                                        Dr. NEELA GOKHALE, JJ.

DATED : 9th NOVEMBER 2023

P.C. :

1 This is an appeal under Section 260A of the Income Tax Act 1961

(the Act) impugning an order dated 28 th September 2016 passed by the

Income Tax Appellate Tribunal (ITAT) dismissing the appeal filed by the

revenue.

2 Assessee had filed return of income on 30 th October 2004 declaring

total income at loss of Rs.15,97,83,660/-. The case was selected for scrutiny

and notice dated 26th April 2005 under Section 143(2) of the Act was

issued. Further notices were issued and served on assessee. The Assessing

Officer (AO) completed the assessment under Section 143(3) of the Act

determining the total income at Rs.32,38,84,147/- under the normal

provisions of the Act. The difference between the returned loss of

Rs.15,97,83,660/-. and assessed income of Rs.32,38,84,147/- was due to

various additions / disallowances. Three of the disallowances made were

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related to capitalization of fees paid to S. B. Billimoria & Co. of

Rs.19,44,000/-, disallowance of legal fees claimed in case of Deejay System

Consultants Pvt Ltd. of Rs.4,85,000/- and disallowance of claim of provision

of diminution in value of investments written back of Rs.38,84,00,000/-.

3 The penalty proceedings under Section 271(1)(c) of the Act was also

commenced. The AO came to the conclusion that assessee had committed

default by filing inaccurate particulars of total income in respect of certain

disallowances and levied penalty of Rs.1,60,96,088/- being 100% of the tax

on the income of Rs.44,86,69,234/- sought to be evaded under the normal

provisions of the Act and Rs.18,43,03,149/- being 100% of the tax on the

income of Rs.51,37,37,000/- sought to be evaded under Section 115JB of

the Act. The assessment order under Section 271(1)(c) of the Act dated

30th March 2010 came to be impugned before the Commissioner of Income

Tax (Appeals) [CIT (A)] and CIT(A) by an order dated 29 th July 2013

allowed the appeal and the penalty levied by AO was deleted. Aggrieved by

this order, revenue preferred an appeal before the Tribunal, which appeal

came to be dismissed by the impugned order dated 28th September 2016.

4 The following three substantial questions of law have been proposed

in this appeal :

1. Whether on the facts and circumstances of the case and in law the Hon'ble ITAT was justified in deleting the penalty levied u/s. 271(1)(c) of the I.T. Act on account of disallowance of professional fees of Rs.19,42,000/- paid by the assessee to SB Billimoria & Company for the valuation of shares taxable under the head capital gain without appreciating that the assessee has furnished inaccurate particulars of income by claiming the

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above expenses as business expenditure.

2. Whether on the facts and circumstances of the case and in law the Hon'ble ITAT was justified in deleting the penalty levied u/s.271(1)(c) of the L.T. Act on account of disallowance of legal fees of Rs.4,85,000/- paid by the assessee to Deejay System Consultant Pvt Ltd. in connection with joint venture with Power Grid Corporation without appreciating that the assessee has furnished) inaccurate particulars of income by claiming the above expenses incurred in connection with new business venture as business expenditure as against capital expenditure.

3. Whether on the facts and circumstances of the case and in law the Hon'ble ITAT was justified in deleting the penalty levied u/s.271(1)(c) of the 1.T. Act on account of disallowance of assessee's claim of provision for diminution in value of investments written back of Rs.38,84,00,000/- on the ground that there was complete disclosure by the assessee in the computation of income in respect of the above reduction from book profit u/s.115JB of 1.T. Act without appreciating that there is no such clause or explanation in the section 115JB of the IT. Act to claim such reduction and therefore the assessee has furnished inaccurate particulars of income by claiming a patently wrong claim while computing the book profit u/s. 115JB of the I.T. Act.

5 As regards question no.1, the Tribunal has upheld the findings of the

CIT(A) on the basis that the entire claim was made by assessee making full

disclosure and no facts were concealed or hidden. According to Tribunal,

the disallowance was made by the AO as in his opinion these expenses were

not allowable under the head capital gains.

6 As regards question no.2 proposed, the disallowance was made by

the AO due to difference in the opinion of assessee and the AO. We have

considered the question and we agree with the ITAT that the explanation

given by assessee is a plausible explanation. Further the AO has not found

the expenses to be not genuine or not bonafide. The nature of the

disallowance does not appear to us also as the case of concealment or

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furnishing inaccurate particulars of claim.

7 As regards question no.3 proposed, again it is not a case of

concealment of income or furnishing of inaccurate particulars of income.

The ITAT has agreed with the CIT(A) that the circumstances were such that

if assessee would not have made this claim in the relevant assessment year,

i.e., A.Y. 2004-2005, assessee would have lost the benefit for many years.

The ITAT on the facts has agreed with the CIT(A) that assessee had made

claim in transparent and befitting manner. In view of these conclusions

arrived on facts, the ITAT agreed with the view of the CIT(A) that assessee

has not committed any default or filed any inaccurate particulars of income

warranting imposition of penalty.

8 It would be apposite to reproduce paragraph 12 of the Judgment of

the Apex Court in Commissioner of Income Tax Vs. Reliance Petroproducts

Pvt Ltd.1 which reads as under:

12. It was tried to be suggested that Section 14A of the Act specifically excluded the deductions in respect of the expenditure incurred by the assessee in relation to income which does not form part of the total income under the Act. It was further pointed out that the dividends from the shares did not form the part of the total income. It was, therefore, reiterated before us that the Assessing Officer had correctly reached the conclusion that since the assessee had claimed excessive deductions knowing that they are incorrect; it amounted to concealment of income. It was tried to be argued that the falsehood in accounts can take either of the two forms; (i) an item of receipt may be suppressed fraudulently; (ii) an item of expenditure may be falsely (or in an exaggerated amount) claimed, and both types attempt to reduce the taxable income and, therefore, both types amount to concealment of particulars of one's income as well as furnishing of inaccurate particulars of income. We do not agree, as the assessee had furnished all the details of its expenditure as well as income in its Return, which details, in themselves, were not found to be inaccurate nor could be viewed as the concealment of income on 1 (2010) 322 ITR 158(SC)

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its part. It was up to the authorities to accept its claim in the Return or not. Merely because the assessee had claimed the expenditure, which claim was not accepted or was not acceptable to the Revenue, that by itself would not, in our opinion, attract the penalty under Section 271(1)(c). If we accept the contention of the Revenue then in case of every Return where the claim made is not accepted by Assessing Officer for any reason, the assessee will invite penalty under Section 271(1)(c). That is clearly not the intendment of the Legislature.

9 The Apex Court has held that where assessee has furnished all the

details of its expenditure as well as income in its return, which details, in

themselves, were not found to be inaccurate nor could be viewed as

concealment of income on its part and where the AO has taken a particular

view contrary to the view that assessee had, it would not attract any penalty

under Section 271(1)(c) of the Act. The Apex Court held that if this

contention of the Revenue is accepted then in case of every return where

the claim made is not accepted by Assessing Officer for any reason, assessee

will invite penalty under Section 271(1)(c). That is clearly not the

intendment of the Legislature.

10 In the circumstances, no substantial question of law arise. Appeal

dismissed.

(Dr. NEELA GOKHALE, J.)                                          (K. R. SHRIRAM, J.)




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