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Penalty quashed where AO did not find any inaccuracy or concealment in return

Assessment was completed u/s 153C r.w. s 153A/143(3) at a total income of Rs 18,61,810 as against NIL income declared by assessee. AO noticed that assessee had set off brought forward business losses of AY 2005-06. AO added it back to assessees income, and imposed penalty u/s 271(1)(c). CIT(A) confirmed the penalty. ITAT held that AO went wrong in finding discrepancy in assessee's return thus quashed the penalty.-501634

1. Assessment in the case was completed in terms of order passed u/s 153C read with s 153A/143(3), at a total income of Rs. 18,61,810/- as against NIL income declared by the assessee.

2. AO noticed that the assessee had set off the brought forward business losses of Rs.18,61,812/- of assessment year 2005-06 against the total business income of Rs. 18,61,812/- which resulted in the declaration of NIL income. T

3. AO held that all the available business losses and depreciation had been set off against the income of Assessment Year 2007-08 and hence, there was nothing remaining to be set off.

4. Hence, the set off of brought forward business losses was added back to the income of the assessee.

5. AO imposed a penalty of Rs. 5,75,300 u/s 271(1)( c) for concealment of income and filing inaccurate particulars of income.

6. CIT(A) confirmed the imposition of penalty but reduced it to Rs.3,83,695/-.

On appeal, the ITAT held as under:

7. AO has not found any discrepancy, inaccuracy or concealment in the return.

8. AO''s view is totally misplaced and de hors any merit as section 271(1)(c).

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Nri Investments Ltd., New Delhi vs Assessee on 31 March, 2016Income Tax Appellate Tribunal - DelhiNri Investments Ltd., New Delhi vs Assessee on 31 March, 2016IN THE INCOME TAX APPELLATE TRIBUNALDELHI BENCH 'E' NEW DELHIBEFORE SHRI J.S. REDDY, ACCOUNTANT MEMBERANDSHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBERITA No. 423/Del/2014AY: 2008-09NRI Investments Ltd., vsDy.Commissioner of Income Tax,802, Santosha Complex,Central Circle-8,Banbdar Bagicha,New Delhi.Patna - 80001 (Bihar)(PAN: AABCN8207E)(Appellant)(Respondent)Appellant by : Shri P.K. Mishra, CARespondent by : Shri P. Damkanunjna, Sr. DRDate of hearing: 07.01.2016Date of pronouncement: 31/03/2016ORDERPER SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER This appeal has been filed by the assesseeagainst the impugned order dated 29.11.2013 passed by the Ld. CIT(A)- XXXII, New Delhi,confirming imposition of penalty u/s 271(1)(c) of the Act for assessment year 2008-09.2. The facts leading to the imposition of penalty are that the assessment in this case was completedin terms of order dated 29.12.2011 passed u/s 153C read with section 153A/143(3) of I.T.A. No.423/D/2014 Assessment Year 2008-09 the Income Tax Act, 1961 at a total income of Rs.18,61,810/- as against NIL income declared by the assessee in its return of income filed in responseto notice issued u/s 153C read with section 153A of the Act. During the assessment proceedings, theAssessing Officer noticed that the assessee had set off the brought forward business losses of Rs.18,61,812/- of assessment year 2005-06 against the total business income of Rs. 18,61,812/- whichresulted in the declaration of NIL income. The Assessing Officer issued a show cause notice to theassessee, the contents of which are extracted below:-'In the computation of income. Your income before the set off of losses of A Y.2005-06 was Rs.18,61,811.99/- A 0. in the order passed u/s 147 r. w. s. 143(3) for the A Y. 2004-05 notallowed the losses to be carried forward and for the A Y. 2005-06 reduced the losses.All the available business losses and depreciation had been set off from the income ofA Y. 2007-08. Hence no business loss and depreciation is available with the assesseeIndian Kanoon - http://indiankanoon.org/doc/119482659/1Nri Investments Ltd., New Delhi vs Assessee on 31 March, 2016to set off the losses from die income there is a show cause why the losses claimed andset off from the income should not be disallowed".In response to the show cause notice, vide letter dated nil, the assessee submitted as under:"That in the year under consideration brought forward losses shown by the assesseein the return of income is Rs.19,44,373.18/- and set off of the same was claimedagainst income of Rs 18,61,812/-. That an addition of Rs. 28,34,648/- was made inthe A Y. 2005-06 against which the assessee has filed an appeal and therefore theclaim B/F losses made by the assessee in the I.T.A. No. 423/D/2014 Assessment Year2008-09 return is without accepting the addition of Rs. 28,34,648/- made in the A Y.2005-06."3. However, the Assessing Officer was of the opinion that all the available business losses anddepreciation had been set off against the income of Assessment Year 2007-08 and hence, there wasnothing remaining to be set off against the income of the year under consideration i.e. AssessmentYear 2008-09. Hence, the set off of brought forward business losses amounting to Rs. 18,61,812/- ofAssessment Year 2005-06 against the business income of Assessment Year 2008-09 was added backto the income of the assessee and the assessment was completed at the taxable income of Rs.18,61,812/-. Subsequently, the Assessing Officer imposed a penalty of Rs. 5,75,300/- u/s 271(1)( c)of the Act for concealment of income and filing inaccurate particulars of income.4. On appeal, the Ld. CIT(A) confirmed the imposition of penalty but reduced it to Rs.3,83,695/-.The relevant para of the Ld. CIT(A) order is para 5 which is being reproduced for ready reference asunder:-" I h a v e considered the facts of the case, and the I.T.A. No. 423/D/2014 Assessment Year 2008-09written submissions of the appellant. In the instant case I find that when the appellant filed itsreturn of income for the assessment year under consideration in response to notice u/s 153C r.w.s.153A on 14.10.2011, its assessment u/s 147 r.w.s. 143(3) had already been competed vide order dated28.12.2007 and the loss to be carried forward was determined at Rs.1,63,200/- as against thereturned loss of Rs.29,97,850/-. Thus, when the return of income in response to notice u/s 153Cr.w.s. 153A of the I.T. Act for the assessment year under consideration was filed on 14.10.2011, it wasin the knowledge of the appellant that its loss of the assessment year 2005-06 which was to bebrought forward was determined at Rs.1,63,200/-. Therefore, it was the duty of the appellant tomake a correct and complete disclosure of particulars of brought forward losses while filing itsreturn for the assessment year under consideration in response to notice u/s 153C r.w.s. 153A on thebasis of loss determined in terms of order u/s 147 r.w.s. 143(3) for the assessment year 2005-06.The appellant failed in its duty by not disclosing the correct particulars of brought forward losses ofassessment year 2005-06. By doing so the appellant committed a breach of its duty, which entailsthe penal consequences contemplated under section 271(1)(c) of the I.T. Act, 1961. Therefore, theAssessing Officer was justified in holding the appellant to be in default within the meaning of section271(1)(c) of the I.T. Act, 1961 and imposing penalty under the said section. Accordingly, theAssessing Officer's action in imposing penalty u/s 271(1)(c) is upheld. However, I agree with the ARsIndian Kanoon - http://indiankanoon.org/doc/119482659/2Nri Investments Ltd., New Delhi vs Assessee on 31 March, 2016of the appellant that the tax sought to be evaded in this I.T.A. No. 423/D/2014 Assessment Year2008-09 case should have been Rs.3,83,695/- which is the additional tax liability that has beencropped up due to the assessment framed u/s 153C of the I.T. Act, 1961. The tax liability as per thereturn of income on the book profit under MAT provisions was Rs.1,91,604/- and the assessed taxliability determined in this case was Rs. 5,75,299/-. Therefore, the additional tax liabilitydetermined in terms of order u/s 153C r.w.s. 153A/143(3) was Rs.3,83,6695/- which could only beattributed to the tax sought to be evaded. Therefore, the Assessing Officer in directed to modify thequantum of penalty imposed u/s 271(1)(c) and restrict the same to Rs.3,83,695/-. The appellantthus gets a relief of Rs. 1,91,605/-."5. Now, the assessee is in appeal before us and has raised the following grounds:-"1. That the order of learned Commissioner of Income-tax (Appeals) is bad in law andon facts of the case.2. That the learned Commissionerof Income-tax(Appeals) erred in sustaining thepenalty imposed u/s 271(1) (c) of the Income Tax Act, 1961 to the tune ofRs.3,83,695/- holding that the assessee has sought to evade tax.3. That the learned Commissionerof Income-tax (Appeals) erred in holding that "theassessee has failed in its duty for not disclosing correct particulars of brought forwardlosses for assessment year 2005-06" ignoring the evidences and submissionsadduced by the appellant during assessment and penalty proceedings.4. The above grounds of appeal are without prejudice to each other.5. The Appellant craves leave to add, alter, amend and/or modify the above groundsof appeal."I.T.A. No. 423/D/2014 Assessment Year 2008-096. The Ld. AR submitted that in this case, the return was filed u/s 153C and in the return of income,the brought forward loss of Rs. 18,61,812/- (remaining after set off of Rs. 9,80,699/-) forAssessment Year 2005-06 was claimed on the basis of returned loss of Rs. 29,97,850/-. Theassessment for Assessment Year 2005-06 was completed u/s 147 read with section 143(3) vide orderdated 28.12.2007 at a loss of Rs.1,63,200/- as against the returned loss of Rs. 29,97,850/-. It wassubmitted that the assessee had challenged the assessment order before the First AppellateAuthority and now the issue has been decided in favour of the assessee. He drew our attention topage 16 to 19 of the Paper Book which contain a copy of the order of the First Appellate Authority i.e.the Ld. CIT(A)-I, Patna wherein vide his order dated 04.07.2014, the Ld. CIT(A) has deleted theaddition of Rs. 27,47,526/- for Assessment Year 2005-06. It was further submitted that as aconsequence of the deletion, the carried forward losses for Assessment Year 2005-06 will beincreased to the tune of Rs.27,47,526/- which will be more than sufficient to offset the surplus forAssessment Year 2008-09. It was submitted that in view of the order of the First Appellate I.T.A.Indian Kanoon - http://indiankanoon.org/doc/119482659/3Nri Investments Ltd., New Delhi vs Assessee on 31 March, 2016No. 423/D/2014 Assessment Year 2008-09 Authority for Assessment Year 2005-06, the penaltyought to be deleted. It was further submitted that as on date, the brought forward losses of A.Y.2005-06 are again available to the assessee as claimed in the return of income and consequentialeffect of the same will be that the assessed income for A.Y. 2008-09 will again be reduced to thebook profit taxable under MAT provisions (as returned by the assessee) hence, there was noconcealment or furnishing of inaccurate particulars of income as the assessee had made a bona fideclaim in the return of income which was rejected and it had disclosed all the particulars of income.7. The Ld. DR relied on the order of the lower authorities.8. We have heard the rival submissions and perused the relevant material on record. It is seen thatinitially during the assessment proceedings, addition was made by the Assessing Officer because asper him, the brought forward losses were insufficient to cover the business profits for AssessmentYear 2008-09. However, with the First Appellate Authority allowing the appeal of the assessee forAssessment Year 2005-06, the business losses to be set off against the income for Assessment Year2008-09 have again increased so as to reduce the business I.T.A. No. 423/D/2014 Assessment Year2008-09 income for Assessment Year 2008-09 to NIL. In our considered view, the starting point ofdetermining concealment for imposing penalty is the return of income. In the present appeal, theAssessing Officer has not found any discrepancy, inaccuracy or concealment in the return. TheAssessing Officer's view is totally misplaced and de hors any merit as section 271(1)(c) of the IncomeTax Act, 1961 empowers the Assessing Officer to impose penalty on the assessee when such assesseehas concealed the particulars of his income or has furnished inaccurate particulars. However, in thepresent appeal, there is nothing on record to hold that the assessee has either concealed theparticulars of its income or furnished any inaccurate particulars thereof. We accordingly decide theissue in favour of the assessee and direct the Assessing Officer to delete the penalty.8. In result, the appeal of the assessee is allowed. Order pronounced in the Open Court on 31st ofMarch, 2016.Sd/-(J.S. REDDY)ACCOUNTANT MEMBERDated: the'GS'Sd/-(SUDHANSHU SRIVASTAVA)JUDICIAL MEMBER31st of March, 2016I.T.A. No. 423/D/2014Assessment Year 2008-09Copy forwarded to: -1.2.3.AppellantRespondentCITIndian Kanoon - http://indiankanoon.org/doc/119482659/4Nri Investments Ltd., New Delhi vs Assessee on 31 March, 20164.5.CIT(A)DR, ITATBy OrderASSTT. REGISTRARIndian Kanoon - http://indiankanoon.org/doc/119482659/5

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1. Assessment in the case was completed in terms of order passed u/s 153C read with s 153A/143(3), at a total income of Rs. 18,61,810/- as against NIL income declared by the assessee.2. AO noticed that the assessee had set off the brought forward business losses of Rs.18,61,812/- of assessment year 2005-06 against the total business income of Rs. 18,61,812/- which resulted in the declaration of NIL income. T3. AO held that all the available business losses and depreciation had been set off against the income of Assessment Year 2007-08 and hence, there was nothing remaining to be set off.4. Hence, the set off of brought forward business losses was added back to the income of the assessee.5. AO imposed a penalty of Rs. 5,75,300 u/s 271(1)( c) for concealment of income and filing inaccurate particulars of income.6. CIT(A) confirmed the imposition of penalty but reduced it to Rs.3,83,695/-.On appeal, the ITAT held as under:7. AO has not found any discrepancy, inaccuracy or concealment in the return.8. AO''s view is totally misplaced and de hors any merit as section 271(1)(c).

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Penalty quashed where AO did not find any inaccuracy or concealment in return