Income Tax Appellate Tribunal - Mumbai
Dcit 2(2)(1), Mumbai vs Israni Investment P.Ltd, Mumbai on 16 November, 2018
1
ITA No.386/Mum/2017
IN THE INCOME TAX APPELLATE TRIBUNAL
MUMBAI BENCH "C", MUMBAI
Before Shri Mahavir Singh (JUDICIAL MEMBER)
AND
Shri G Manjunatha (ACCOUNTANT MEMBER)
I.T.A No.386/Mum/2017
(Assessment year: 2012-13)
Dy.CIT, Cir. 2(2)(1), Mumbai vs M/s Israni Investments Pvt Ltd
104, Sir Vithaldas Chambers
16, Mumbai Samachar Marg
Fort, Mumbai 400 023
PAN : AAACI1459C
APPELLANT RESPONDEDNT
Appellant by Shri Abi Rama Kartikeyan
Respondent by Shri S.C. Tiwari
Date of hearing 17-10-2018
Date of pronouncement 16-11-2018
ORDER
Per G Manjunatha, AM :
This appeal filed by the revenue is directed against the order of the CIT(A)-5, Mumbai dated 06-10-2016 and it pertains to AY 2012-13. The revenue has raised the following grounds of appeal:-
1. ''Whether on the facts and in the circumstances of the case and in Law, the id.
CIT(A) was right in deleting the penalty levied u/s. 271(l)(c) of the Act amounting to Rs.15,51,146/-without appreciating the fact that assessee has wilfully avoided the disallowance of STT and donation paid to its computation of total income.
2. Whether on the facts and circumstances of the case and in law, the id. CIT(A) was right in deleting the penalty levied u/s. 271(l)(c) of the Act amounting to Rs.15,51,146/- without appreciating the fact that the assessee is not entitled for deduction on account of donation paid in the absence of required documentary evidences like receipt and valid exemption certificate of the done."
2ITA No.386/Mum/2017
2. The brief facts of the case are that the assessee is a domestic company engaged in the business of trading in shares and securities, filed its return of income for AY 2012-13 on 26-09-2012 declaring total loss of Rs.84,31,405. The assessment has been completed u/s 143(3) of the Act on 13-02-2015 determining the total loss at Rs.1,94,650. Thereafter, the AO initiated penalty proceedings u/s 271(1)(c) for furnishing inaccurate particulars of income in respect of disallowance of donation paid amounting to Rs.50 lakhs and disallowance of security transaction tax amounting to Rs.19,891. Accordingly, a show cause notice was issued and asked as to why penalty shall not be levied for furnishing inaccurate particulars of income. In response to show cause notice, the assessee, vide its letter dated 14-08-2015 submitted that the question of furnishing inaccurate particulars of income does not arise in respect of disallowance of donation paid amounting to Rs.50 lakhs and disallowance of STT amounting to Rs.19,891 as the same has been included in revised statement of total income filed before completion of assessment immediately after noticing inadvertent error committed in filing return of income. The assessee, further submitted that the facts regarding payment of donation and STT has been disclosed in the financial statements under 'administrative & other expenses' but by inadvertent error, the same have not been taken into statement of total income while filing return of income; hence, 3 ITA No.386/Mum/2017 the same cannot be considered as furnishing of inaccurate particulars of income within the meaning of section 271(1)(c). The AO, after considering the submissions of the assessee and also by following the decision of Hon'ble Supreme Court in the case of Dharmendra Textile Processors vs UOI (2008) 306 ITR 277 held that the additions made in the quantum assessment having attained finality and such addition has been made after examination of books of account, therefore, there is no merit in the arguments of the assessee that it is an inadvertent error while computing total income. The evidence against the assessee would not have come to light but for the enquiries conducted in the course of the scrutiny assessment proceedings. Therefore, he opined that it is a fit case for imposition of penalty for furnishing inaccurate particulars of income and hence levied penalty of Rs.15,51,146 which is 100% of tax sought to be evaded.
3. Aggrieved by the penalty order, the assessee filed appeal before the CIT(A). Before the CIT(A), assessee reiterated its submissions made before the AO to argue that there is no question of furnishing of inaccurate particulars of income in respect of addition made by the AO towards donation and STT paid as the same has been rectified by filing revised statement of total income immediately after noticing the inadvertent error committed in filing return of income. The assessee further submitted that the details of donation paid and 4 ITA No.386/Mum/2017 STT have been disclosed in the financial statements under the head administrative & other expenses in its accounts. Although the assessee has omitted to add back the said two amounts in its total income, but the same is on account of an inadvertent human error which cannot be considered as deliberate attempt made to evade payment of taxes. In this regard, the assessee relied upon the decision of Hon'ble Supreme Court in the case of Price Waterhouse Coopers Pvt Ltd vs CIT, Kolkatta in Civil Appeal No.6924 of 2012.
4. The Ld.CIT(A), after considering relevant submissions of the assessee and also by following the decision of Hon'ble Supreme Court in the case of Price Waterhouse Coopers Pvt Ltd vs CIT, Kolkatta (supra) held that the case of the assessee is squarely covered by the decision of the Hon'ble Apex Court where, under identical set of facts, the Hon'ble Court held that when primary facts have been disclosed in the accounts, merely for the reason that the disallowance needs to be added back in total income, have not been added, cannot be considered as furnishing of inaccurate particulars of income which warrants levy of penalty u/s 271(1)(c). The relevant observations of the Ld.CIT(A) are extracted below:-
"3.2 I have considered the appellant's submissions. In this case AO had levied penalty u7s 271(1)(c) on the ground that appellant had filed inaccurate particulars of income. AO in the assessment order disallowed Rs. 50,00, 0007- on donation paid and Rs. 19, 891 7- on account of Security transaction, tax. In the appellant's submission appellant states that they filed claim of 5 ITA No.386/Mum/2017 donation and Security transaction tax to Administrative and Other expenses in its Accounts which is reflected in paperbook page 14 of the submissions Appellant further states that after noticing the error they have filed revised computation by adding these two items on which assessment was finalised by the AQ. Appellant claimed that it is a bonafide and inadvertent error which was rectified and hence penalty should not be levied. Here the issue is that appellant had mentioned the two items in the accounts in the Administrative and other expenses claiming the donation and Security transaction as expenses. However, in the computation of income appellant failed to disallow the same. For this appellant states that this is a bonafide and inadvertent error which they have rectified by filing revised computation during the assessment proceedings. Appellant relies on Hon'ble Supreme Court decision in the case of Price Waterhouse Coopers (P) Ltd. v CIT Kolkatta in Civil appeal No. 6924 2012 where it is held as under:
"Contents of Tax Audit Report suggest that there is no question of the assessee concealing its income. There is also no question of the assessee furnishing any inaccurate particulars. All that happened in present case is that through bonafide and inadvertent error failed to add provision for gratuity to its total income. This can only be described as a human error which we are all prone to make. The caliber and expertise of the assessee has little or nothing to do with the inadvertent error. That the assessee should have been careful cannot be doubted, but absence of due care, in a case such as the present, does not mean that the assessee is guilty of either furnishing inaccurate particulars or attempting to conceal its income. Consequently, given the peculiar facts of this case, the imposition of penalty on the assessee is not justified."
In the above Supreme Court case also appellant had claimed provision for gratuity as an expenditure but they have not disallowed the same by adding to the total income while filing the return of income. When AO levied penalty, Supreme Court held that here the particulars filed by appellant are not inaccurate or there is no question of concealment of income. According to the Supreme Court all that happened in the above Pricewater House Coopers Pvt. Ltd. case is bonafide and inadvertent error where they failed to add income from gratuity to total income. If we apply the case of Pricewater House Coopers Pvt. Ltd., in this case also appellant had shown donation and Security transaction in Administrative and other expenses, but failed to add it to the total income in the computation. This is identical to the facts of Pricewater House Coopers Pvt. Ltd. case of Supreme Court. Hence applying the above case, this has to be treated as bonafide and inadvertent error. In such a case Supreme Court held that penalty cannot levied u/s 271(1)(c) of the Act. In view of the above decision of Supreme Court, penalty levied is cancelled. This ground of appeal is allowed."
5. The Ld.DR submitted that the Ld.CIT(A) was erred in deleting penalty levied u/s 271(1)(c) without appreciating the fact that the assessee has willfully avoided disallowance of donation paid & STT in its computation of total 6 ITA No.386/Mum/2017 income. The Ld.DR further submitted that when those two expenses are clearly not admissible under the Act, the assessee ought to have disallowed, in its statement of total income while filing total income but the assessee failed to do so, therefore, the AO was right in levying penalty u/s 271(1)(c).
6. The Ld.AR for the assessee, on the other hand, supporting the order of the CIT(A) submitted that the assessee has disclosed primary facts in its financial statements, while filing return of income, but by inadvertent mistake, failed to add back donation paid and STT in the statement of total income which has been subsequently rectified by filing revised statement of total income before completion of assessment which is evident from the fact that the AO has not made any addition in the assessment order. The AO has accepted the revised statement of total income filed by assessee vide letter dated 27-01-2015, but initiated penalty proceedings on those two items for furnishing inaccurate particulars of income. When the primary facts have been disclosed in the return filed for the relevant year and there is an omission to add back certain disallowance, the same cannot be considered as willful attempt made to evade payment of tax which warrants levy of penalty u/s 271(1)(c) of the Income-tax Act, 1961.
7. We have heard both the parties and perused the material available on record. It is an admitted fact that the assessee has disclosed primary facts in 7 ITA No.386/Mum/2017 respect of donation paid and STT paid in its return of income filed for the relevant assessment year. It is also an admitted fact that the assessee failed to add back donation paid amounting to Rs.50 lakhs and STT paid amounting to Rs.19,891 in the statement of total income. It is also an admitted fact that the assessee has filed revised statement of total income rectifying the said mistakes before completion of assessment proceedings. The reason given by the assessee for not disallowing those two items in the statement of total income is that there is an inadvertent error while filing return of income, which resulted in omission of those two items in the statement of total income. The said mistakes is only a human error which cannot be considered as deliberate attempt made to evade payment of taxes. When we examine the claim of the assessee in the light of the decision of Hon'ble Apex Court in the case of Price Waterhouse Coopers Pvt Ltd vs CIT, Kolkatta (supra), we find that the facts of the assessee's case are identical to the facts of the case decided by the Hon'ble Apex Court while deleting penalty levied u/s 271(1)(c). In the said case, although the tax auditor quantified the disallowance of certain amount, the assessee failed to add back in the statement of total income. Under those facts, the Hon'ble Apex Court held that this cannot be considered as wilful attempt made to evade payment of taxes and at best, it could be termed as a human error which we are all prone to make. In this case, on perusal of facts, 8 ITA No.386/Mum/2017 we find that although the assessee has disclosed all facts in respect of those two items of expenses, but failed to add back in the statement of total income, while filing return of income. The said mistake has been rectified immediately after noticing during the course of assessment proceedings by filing revised statement of total income. Under these facts and circumstances, the AO was incorrect in coming to the conclusion that the assessee has furnished inaccurate particulars of income in respect of donation paid & STT which warrants levy of penalty u/s 271(1)(c). The Ld.CIT(A), after considering relevant facts has rightly deleted penalty levied by the AO. We do not find any error in the findings of the Ld.CIT(A); hence, we are inclined to uphold the finding of Ld.CIT(A) and dismiss the appeal filed by the revenue.
7. In the result, appeal filed by the revenue is dismissed.
Order pronounced in the open court on 16th November, 2018.
Sd/- sd/-
(Mahavir Singh) (G Manjunatha)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Mumbai, Dt : 16th November, 2018
Pk/-
Copy to :
1. Appellant
2. Respondent
3. CIT(A)
4. CIT
5. DR
/True copy/ By order
Asstt. Registrar, ITAT, Mumbai