Deputy Commissioner of Income-tax, Circle - 8, Pune V. M/s. Finolex Cables Ltd, Pune

ITA 86/PUN/2021

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 2857 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 5 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-09-2022
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 29-03-2021
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Capital asset; Search and seizure
• Section: 271(1)(c); 143(3); 153A; 14A; 274

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH “A”, PUNE BEFORE SHRI S. S. GODARA, JUDICIAL MEMBER AND SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER आयकर अपील सं. / ITA Nos.86 & 87/PUN/2021 िनधाᭅरण वषᭅ / Assessment Years: 2010-11 & 2011-12 DCIT, Circle-8, Pune. Vs. M/s. Finolex Cables Ltd., 26/27, Mumbai – Pune Road, Pimpri, Pune- 411018. PAN : AAACF2637D Appellant Respondent आदेश / ORDER PER INTURI RAMA RAO, AM: These are the appeals filed by the Revenue directed against the separate orders of ld. Commissioner of Income Tax (Appeals)- 11, Pune [‘the CIT(A)’] dated 12.10.2020 for the assessment years 2010-11 and 2011-12 respectively. 2. Since the identical facts and common issues are involved in both the above captioned appeals, we proceed to dispose of the same by this common order. Revenue by : Shri Ramnath P. Murkunde Assessee by : Shri J. G. Pendse Date of hearing : 09.09.2022 Date of pronouncement : 26.09.2022 ITA Nos.86 & 87/PUN/2021 2 3. For the sake of convenience and clarity, the facts relevant to the appeal in ITA No.86/PUN/2021 for the assessment year 2010-11 are stated herein. ITA No.86/PUN/2021, A.Y. 2010-11 : 4. Briefly, the facts of the case are that the respondent-assessee is a company incorporated under the provisions of the Companies Act, 1956. It is engaged in the business of manufacturing and sale of insulated wires and cables, optical fiber cables, corrugated PVC, form sheets, finance, trading in goods, rendering services, leasing, letting out of property etc. The Return of Income for the assessment year 2010-11 was filed on 13.10.2010 disclosing the total income of Rs.2,47,42,390/-. Subsequently, the search and seizure operations were conducted in the business premises of the respondent-assessee on 18.11.2010 and notices u/s 153A of the Income Tax Act, 1961 (‘the Act’) were issued to the respondent-assessee. In response to the said notices, the respondent-assessee filed revised return of income declaring income of Rs.1,74,52,730/-. Against the said return of income, the assessment was completed by the Dy. Commissioner of Income Tax, Central Circle-1(2), Pune (‘the Assessing Officer’) vide order dated 28.03.2013 passed u/s 143(3) r.w.s. 153A of the Act at total income of Rs.17,47,79,558/-. While doing so, the Assessing Officer made addition by disallowing the ITA Nos.86 & 87/PUN/2021 3 deduction u/s 80-IC of the Act. The Assessing Officer also disallowed derivative loss incurred on account of foreign currency loan of US Dollar for purchase of plant and machinery. 5. Being aggrieved by the above additions, an appeal was filed before the ld. CIT(A), who vide impugned order confirmed the additions. However, on further appeal before the ITAT, the Tribunal had deleted the additions in respect of section 80-IC and u/s 14A of the Act. However, he confirmed the addition on account of disallowance of loss incurred on derivatives. On receipt of the direction of ITAT, the Assessing Officer also passed a consequential order and proceeded with levy of penalty u/s 271(1)(c) vide order dated 26.07.2018 of Rs.4,46,97,128/- with reference to the addition submitted in respect of disallowance of loss incurred on derivatives. 6. Being aggrieved by the above order of penalty u/s 271(1)(c), the respondent-assessee filed an appeal before the ld. CIT(A), who vide impugned order quashed the penalty proceedings on the ground that the Assessing Officer had not recorded the requisite satisfaction in the assessment order by non-striking off the specific limb in the show cause notice, become fatal to the penalty proceedings u/s 271(1)(c) placing reliance on the decision of the Hon’ble Bombay High Court in the case of Ventura Textiles Ltd. vs. CIT, 117 ITA Nos.86 & 87/PUN/2021 4 taxmann.com 182 and CIT vs. Samson Perinchery, 392 ITR 4 (Bom.) had quashed the penalty proceedings. 7. Being aggrieved by the order of the ld. CIT(A), the Revenue is in appeal before us in the present appeal. 8. It is contended that the ld. CIT(A) ought not to have placed reliance on the decision of the Hon’ble Bombay High Court in the case of Samson Perinchery (supra), inasmuch as, the respondent- assessee had understood the purport and import of the show-cause notice issued u/s 274 r.w.s. 271(1)(c) and also ignoring the decision of the Hon’ble Supreme Court in the case of Sundaram Finance Ltd. vs. DCIT, 259 Taxman 220 (SC). 9. On the other hand, ld. Counsel placing reliance on the order of the ld. CIT(A) submits that the order of ld. CIT(A) deleting penalty u/s 271(1)(c) is based on the ratio laid down by the Hon’ble Jurisdictional High Court in the case of Samson Perinchery (supra) and does not require any interference. 10. We heard the rival submissions and perused the material on record. The issue in the present appeal relates to levy of penalty u/s 271(1)(c) in respect of an item of addition made on account of disallowance of loss incurred on derivatives. The undisputed fact of the issue are as under :- ITA Nos.86 & 87/PUN/2021 5 The respondent-assessee borrowed foreign currency for the purpose of acquisition of capital assets, in order to hedge against the fluctuation on foreign currency, the appellant entered into derivative contract with the bank, the loss incurred on such derivatives was claimed as revenue expenditure. The Assessing Officer had disallowed the same holding to be capital in nature. On appeal before the ld. CIT(A) as well as the ITAT, the action of the Assessing Officer was confirmed. Subsequent to the passing of order by the ITAT, the Assessing Officer had levied penalty u/s 271(1)(c) of the Act. On appeal before the ld. CIT(A), the ld. CIT(A) had quashed the penalty by holding that the Assessing Officer had not recorded any satisfaction in the assessment order nor struck off the relevant limb of the show-cause notice placing reliance on the decision of the Hon’ble Bombay High Court in the case of Samson Perinchery (supra). 11. We have carefully gone through the relevant assessment order, the order of the ld. CIT(A) as well as the order of the ITAT in quantum appeal. It would clearly reveal that it is a case of disallowance of a claim by Assessing Officer, which does not tantamount furnishing inaccurate particulars of income or concealment of particulars of income as held by the Hon’ble Supreme Court in the case of CIT vs. Reliance Petroproducts Pvt. ITA Nos.86 & 87/PUN/2021 6 Ltd., 322 ITR 158 (SC). The held portion of the said decision of the Hon’ble Supreme Court in the case of Reliance Petroproducts Pvt. Ltd. (supra) is reproduced as under :- “A glance of provision of section 271(1)(c ) would suggest that in order to be covered, there has to be concealment of the particulars of the income of the assessee. Secondly, the assessee must have furnished inaccurate particulars of his income. The instant case was not the case of concealment of the income. That was not the case of the revenue either. It was an admitted position in the instant case that no information given in the return was found to be incorrect or inaccurate. It was not as if any statement made or any detail supplied was found to be factually incorrect. Hence, at least, prima facie, the assessee could not be held guilty of furnishing inaccurate particulars. The revenue argued that submitting an incorrect claim in law for the expenditure on interest would amount to giving inaccurate particulars of such income. Such cannot be the interpretation of the concerned words. The words are plain and simple. In order to expose the assessee to the penalty unless the case is strictly covered by the provision, the penalty provision cannot be invoked. By any stretch of imagination, making an incorrect claim in law cannot tantamount to furnishing of inaccurate particulars. [Para 7] Therefore, it must be shown that the conditions under section 271(1)(c ) exist before the penalty is imposed. There can be no dispute that everything would depend upon the return filed, because that is the only document, where the assessee can furnish the particulars of his income. When such particulars are found to be inaccurate, the liability would arise. [Para 8] The word 'particulars' must mean the details supplied in the return, which are not accurate, not exact or correct, not according to truth or erroneous. In the instant case, there was no finding that any details supplied by the assessee in its return were found to be incorrect or erroneous or false. Such not being the case, there would be no question of inviting the penalty under section 271(1)(c). A mere making of the claim, which is not sustainable in law by itself will not amount to furnishing of inaccurate particulars regarding the income of the assessee. Such claim made in the return cannot amount to the inaccurate particulars. [Para 9] The revenue contended that since the assessee had claimed excessive deductions knowing that they were incorrect, it amounted to concealment of income. It was 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 ITA Nos.86 & 87/PUN/2021 7 particulars of income. Such contention could not be accepted 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 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 attract the penalty under section 271(1)(c). If the contention of the revenue was accepted, then in case of every return where the claim made was not accepted by the Assessing Officer for any reason, the assessee would invite penalty under section 271(1)(c). That is clearly not the intendment of the Legislature. [Para 10] Therefore, the appeal filed by the revenue had no merits and was to be dismissed.” 12. The ratio laid down by the Hon’ble Supreme Court in the case referred above supra is squarely applicable to the facts of the present case and it cannot be said that the respondent-assessee is guilty of furnishing of inaccurate particulars of income or concealing particulars of income. Therefore, it is not a fit case for levy of penalty u/s 271(1)(c) of the Act. 13. In the result, the appeal filed by the Revenue in ITA No.86/PUN/2021 for A.Y. 2010-11 stands dismissed. ITA No.87/PUN/2021, A.Y. 2011-12 : 14. Since the facts and issues involved in both the appeals of the Revenue are identical, therefore, our decision in ITA No.86/PUN/2021 for A.Y. 2010-11 shall apply mutatis mutandis to the appeal of the Revenue in ITA No.87/PUN/2021 for A.Y. 2011-12 respectively. Accordingly, the appeal of the Revenue in ITA No.87/PUN/2021 for A.Y. 2011-12 stands dismissed. ITA Nos.86 & 87/PUN/2021 8 15. To sum up, both the above captioned appeals of the Revenue stand dismissed. Order pronounced on this 26 th day of September, 2022. Sd/- Sd/- (S. S. GODARA) (INTURI RAMA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER पुणे / Pune; ᳰदनांक / Dated : 26 th September, 2022. Sujeet आदेश कᳱ ᮧितिलिप अᮕेिषत / Copy of the Order forwarded to : 1. अपीलाथᱮ / The Appellant. 2. ᮧ᭜यथᱮ / The Respondent. 3. The CIT(A)-11, Pune. 4. The Pr. CIT (Central), Pune. 5. िवभागीय ᮧितिनिध, आयकर अपीलीय अिधकरण, “A” बᱶच, पुणे / DR, ITAT, “A” Bench, Pune. 6. गाडᭅ फ़ाइल / Guard File. आदेशानुसार / BY ORDER, // True Copy // Senior Private Secretary आयकर अपीलीय अिधकरण, पुणे / ITAT, Pune.