In the Income-Tax Appellate Tribunal,
Delhi Bench ` G', New Delhi
Before : Shri H.S. Sidhu, Judicial Member And
Shri L.P. Sahu, Accountant Member
ITA No. 3471/Del/2015
Assessment Year: 2007-08
DDIT, Circle 3(1)(1), vs. RBM Pati Joint Venture, C/o Vijay Raj
New Delhi. & Co., 305, 3rd Floor, Kanchan House,
Karampura Commercial Complex,
New Delhi. PAN- AAATR 3650D
(Appellant) (Respondent)
Appellant by Sh. Sanjay Tripathi, Sr. DR
Respondent by Sh. Gautam Jain, Advocate &
Sh. Lalit Mohan, Advocate
Date of Hearing 01.11.2018
Date of Pronouncement 03.12.2018
ORDER
Per L.P. Sahu, A.M.:
This appeal is directed by the Revenue against the order of ld.CIT(A)-43,
New Delhi dated 31.03.2015 for the assessment year 2007-08 on the following
grounds :
1. Whether on the facts and in the circumstances of the case, the Ld. CIT
(A) has erred in deleting penalty of Rs.25,62,569/- u/s 271(1)(c) of the
Income Tax Act, 1961 (`the Act') imposed by the Assessing Officer.
1 (a). Whether the Ld CIT (A) has erred in relying upon, inter alia, the
decision of the Hon'ble High Court in the case of M/s Reliance Petroproducts
[(2010) 322 ITR 158] in deleting the penalty, not appreciating the fact that
the ratio of the said case is applicable only in cases where there is a bona
ITA No. 3471/Del/2015 2
fide difference of opinions with regard to admissibility of a claim and not to
the cases where the claim of the assessee is patently untenable.
1(b). Whether the LD CIT(A) has erred in holding that it was a case of a
bonafide error not amounting to furnishing of inaccurate particulars and
that case is covered by the decision in Price Water House Coopers Vs CIT
[348 ITR 306 (SC)], not appreciating the fact that the said case did not lay
down any general proposition to the effect that penalty is not to be levied in
all cases of so-called error.
1(ba). The Ld CIT (A) erred in not appreciating the fact that the decision in
the case of Price Water House Coopers turned on the peculiar fact situation
involved therein, as, a) the factum of non-allowability of the item was
prominently mentioned in the Tax Audit Report and b) the assessee filed a
revised return immediately after the omission came to its notice. As against
this, in the present case, the assessee was apparently aware of that the claim
of loss was wrong and did not take any suo motu action for correcting the
error either at the time of original assessment proceedings or at the time of
re-assessment.
1(c). Whether the Ld CIT(A) has erred in ignoring the ratio of the decisions
in the cases of Zoom Communications [327 ITR 510 (Del)] and Escorts
Finance [328 ITR 44] wherein it has been held that the plea of "oversight"
was not acceptable in the era of no-scrutiny assessment."
2. The brief facts of the case are that the assessee filed return of income at a
loss of Rs. 19,22,47,512/-. Assessment order u/s 143(3) was completed on
7.12.2009, whereby the declared loss was reduced to Rs. 16,78,25,520/- by
making addition amounting to Rs. 24421992/- in the following heads :
ITA No. 3471/Del/2015 3
Sr. Particulars Amount (Rs.)
No
. Disallowance under section 40A(2)(b) of the
i) Act 43,18,590
Disallowance of taxes paid to expectorate
ii) employees 5,25,160
iii) Disallowance of provision for doubtful 1,94,80,078
advances made under section 36(l)(vii) of the
iv) Disallowance
Act of doubtful debts and advances 98,164
written off
Total 2,44,21,992
Based on the above additions, the AO initiated penalty proceedings u/s
271(1)(c) and issued notice dated 7.12.2009. Pursuant to assessee's submission
made vide letter dated 5.1.2010, the AO dropped the penalty proceedings vide
his order dated 7.1.2010. Thereafter, the Assessing Officer on the basis of some
information in his possession, reopened the case vide notice u/s 148 dated
27.3.2012. The AO recorded the following reasons:
"The assessee is a Non-Resident. For the year under reference, the
assessment was done u/s 143(3) at loss of Rs.16,78,25,520/-.
The assessee has claimed an expenditure of Rs 61,21,337/ -on account of loss
on sale of fixed assets. As this is a capital loss to the company, it should have
been added back to the income of the assessee. This resulted in over
assessment of loss of Rs 61,21,337/- involving potential tax effect, of Rs
25,59,943/-.
The assessee has claimed an expense of Rs (21517294- 19480078=203722)
on account of provision for doubtful advance. As this is a capital loss to the
company, it should be disallowed.
The assessee has claimed Rs 45,19,389/- on account of Bank guarantee
Commission which as per Act is not an admissible expenditure. This should
be disallowed.
In view of the above, I have reasons to believe that income of more than Rs 1
ITA No. 3471/Del/2015 4
lakh of the assessee company for AY 2007-08, has escaped assessment. I am
therefore satisfied that it is a suitable case to be reopened for reassessment.
Based on the above reasons, reassessment was completed u/s. 147/148 on
27.05.2013 making an addition of Rs.61,21,337/- observing as under :
"During the course of assessment the assessee was informed -about the
provision section 50 of the income tax Act 1961. Wherein it is provided that
the profit or loss of depreciable asset will be assessed only in the situation if
the whole of the block of assets is exhausted and there is loss or profit which
is to be assessed as such. In the case of assessee the block of assets exists and
as per the provision of the Act the loss is not allowable. Therefore the loss
claim at Rs 61,21,337/- is liable to be disallowed. The counsel of assessee did
not make an objection to it thus an amount of Rs 61,21,337/- is disallowed
and added back to the total income of assessee. "
Based on this addition, the Assessing Officer initiated penalty proceedings u/s.
271(1)(c) of the Act and after considering the explanation of the assessee, a
penalty of Rs.25,62,569/- was imposed against the assessee. In appeal, the ld.
CIT(A) deleted the penalty vide impugned order. Aggrieved, the Revenue is in
appeal before the Tribunal.
3. The learned DR reiterating the grounds of appeal submitted that the ld.
CIT(A) was not justified in deleting the penalty ignoring the fact that the
decisions relied on by first appellate authority are distinguishable on facts. It
was submitted that there was no bona fide on the part of assessee to claim a
capital loss as revenue loss. Therefore, the assessee has furnished inaccurate
particulars of income and therefore, the Assessing Officer had rightly imposed
penalty which has been wrongly deleted by the ld. CIT(A).
4. On the other hand, the ld. AR of the assessee reiterating the detailed
ITA No. 3471/Del/2015 5
submissions made before the ld. CIT(A) supported the impugned order and
relied on various case laws as also relied by the ld. CIT(A). He has made
extensive arguments on various aspects of the case, such as invalidity of notice
specifying no particular charge and the bona fide of assessee in making the
claim of loss etc.
5. We have heard the rival submissions and have gone through the entire
material available on record. An insight over the penalty order, we find that the
penalty was initiated on account of loss claimed by the appellant on sale of
assets, even though, that particular block of assets had not been exhausted. We
do not find any justification to discard the findings reached by the ld. CIT(A)
that the assessee had duly disclosed the loss on sale of assets at Rs. 61,21,337/-,
being part of administrative expenses and this amount was duly appearing in
the schedules forming part of profit and loss account for the year under
consideration. The accounts are audited by qualified chartered accountant. In
presence of these facts, the ld. CIT(A) has not fallen in error while holding that
this was not a case of concealment. However, the fact remains that the assessee
had made ineligible claim, for which the bona fide of the assessee stands proved
from the fact that as per Form No. 3CD, at item no. 17(a), the auditor has
reported that there is no expenditure of capital nature which has been debited
to the profit and loss account. Therefore, in our considered opinion, the claim of
loss made on the basis of tax audit report cannot be said to be non-bona fide.
We have also gone through the decisions relied by the ld. CIT(A) and we find
that in the present scenario, the said decisions are found applicable to the case
in hand and the distinguishing features given in the grounds of appeal are not
found tenable in the eyes of law. It is also worth consideration that at the initial
ITA No. 3471/Del/2015 6
stage of original assessment, the assessee had claim similar loss, which was
partly accepted by the Assessing Officer and penalty proceedings initiated at
that point of time were also dropped. Therefore, there appear different opinions
of revenue authorities at different points of time. In such circumstances, the ld.
has rightly following the decision in CIT vs. Reliance Petro Products Pvt. Ltd,
322 ITR 158), where it has been held that " mere making of the claim, which is
not sustainable in law, by itself, will not amount to furnishing inaccurate
particulars regarding the income of the assessee. Such claim made in the Return
cannot amount to the inaccurate particulars." Moreover, though the assessee is
neither in appeal nor in cross objection, the ld. DR could also not rebut the
contention of the assessee made before ld. CIT(A) as well as before us in its
submissions that the penalty notice itself was defective having not specifying a
particular charge whether concealment of particulars of income or furnishing
of inaccurate particulars thereof. We, therefore, do not find any infirmity in the
order of the ld. CIT(A) while deleting the impugned penalty.
6. In the result, the appeal of the Revenue is dismissed.
Order pronounced in the open court on 03.12.2018.
Sd/- Sd/-
(H.S. Sidhu) (L.P. Sahu)
Judicial member Accountant Member
Dated: 03.12.2018
*aks*
Copy of order forwarded to:
(1) The appellant (2) The respondent
(3) Commissioner (4) CIT(A)
(5) Departmental Representative (6) Guard File
By order
Assistant Registrar
Income Tax Appellate Tribunal
Delhi Benches, New Delhi
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