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Judgment
PER MADHUMITA ROY, J. M.:
The instant appeal filed by the Revenue is directed against the order dated 01/01/2026 passed by the Ld. Commissioner of Income-tax (Appeals)/National Faceless Appeal Centre, Delhi [hereinafter referred to as the ‘Ld. CIT(A)’/’NFAC’] under Section 250 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) arising out of the Assessment Order dated 31/05/2023 passed by the Assessment Unit, Income-tax Department under Section 147 of the Act for Assessment Year 2015-16.
The brief facts leading to the case is this that, the assessee, a private limited company, engaged in the business of real estate filed its return of income for the year of consideration on 29.09.2015 declaring loss at Rs.14,57,003/-. Reassessment proceeding, subsequently under Section 147 of the Act was initiated on the claim of fictitious short-term capital loss of Rs.1,14,59,383/- suffered on sale of equity shares of Negotium International Trade Ltd. on recognized stock exchange. With sufficient documentary evidences the assessee clarified the issue of short-term capital loss before the Assessing Officer but no benefit of set-off or carryforward of such loss was claimed in the original ITR. However, while filing ITR in response to the notice under Section 148 of the Act, the assessee claimed the carry forward of loss which was unfruitful and non-est in view of Section 80 of the Act as per the Assessing Officer and, finally, the reassessment proceeding was completed under Section 147 at returned loss of Rs.14,57,003/- on 31.05.2023. The Assessing Officer initiated penalty proceeding under Section 271(1)(c) of the Act on the alleged ground of concealment of income. Such proceeding was finalized upon imposing penalty of Rs. 76,21,433/- which was deleted by the First Appellate Authority. Hence, the instant appeal before us.
It is the case of the assessee that Explanation 4 to Section 271(1)(c) of the Act requires computation of ‘tax sought to be evaded’. When there is neither any set-off of loss claimed nor any tax advantage derived, the figure of tax sought to be evaded effectively becomes NIL and therefore, the penalty does not survive. The Ld. AR relied upon the judgment passed by the Hon’ble Bombay High Court in the case of Commissioner of income tax -vs-First Data (India) (P.) Ltd., reported in [2016] 66 taxmann.com 27(Bombay) dated January 18, 2016 in support of the order passed by the Ld. CIT(A) in deleting the penalty against the assessee.
On the other hand, the Ld. DR relied uponthe order passed by the Ld. AO in imposing the penalty under Section 271(1)(c) of the Act.
We have heard the respective parties and we have also perused the relevant material available on record. It is the case of short term of capital loss of Rs. 3,77,64,468 including disputed loss of Rs. 1,15,41,987/- incurred. No benefit of set-off or carry forward of such losses was ever claimed in the original return and even subsequently no carry forward benefit has been availed in later years which is verifiable from the ITR records and furthermore, the reassessment was eventually completed accepting the returned loss originally filed. It was further case made out by the assessee that the e-returned filed under Section 148 of the Act reflected automatic carry forward of loss; such reflection was system generated and therefore, otherwise non-est in the eyes of law in view of Section 80 of the Act and thus, does not constitute concealment or furnishing of inaccurate particulars of income by the assessee.
We find that the Ld. CIT(A) further observed that the transaction were disclosed, there is no suppression of income neither the loss was ever utilized for setoff nor carried forward in reality. The alleged “wrong claim” in ITR under Section 148 of the Act is explained as system driven and legally non operative in view of Section 80 of the Act. Furthermore, no tax advantage accrued and reassessment concluded at the original returned loss. Therefore, the mens rea or deliberate furnishing of inaccurate particulars is not present in the facts and circumstances of the matter. He has further relied upon the order passed by the Hon’ble Apex Court passed in the matter of Reliance Petroproducts Pvt. Ltd. 322 ITR 158 (SC).
In this regard, we are further considered the judgment passed by the Hon’ble Bombay High Court in the case of Commissioner of Income Tax -vs-First India Private Limited wherein the assessee filed an e-return wherein certain loss declared as business loss suo moto was reflected as carry forward loss. In view of the fact that the assessee had in subsequent assessment year not claimed any carry forward loss, it could be concluded that there was no intent to furnish inaccurate particulars of income and the impugned penalty order passed under Section 271(1)(c) of the Act was to be set aside. The relevant paragraph thereof is reproduced hereinbelow:
“3 Regarding Question 1:
(a)On 31st March, 2010 the Respondent-Assessee filed its return of income, claiming an expenditure of Rs.3.92 Crores. This resulted in business loss for the year under consideration. However, the Assessing Officer by order dated 22nd October, 2010 disallowed the expenditure as the business had not commenced and added the same to the income of the Respondent Assessee. Besides, the Assessing Officer disallowed the carry forward loss as claimed in the return of income as it was filed beyond the due date, thereafter disallowed under Section 80 of the Act. However, penalty proceedings under Section 271(1)(c) of the Act were initiated.
(b)In the penalty proceedings, the Respondent-Assessee contended that expenditure had been claimed for the purpose of business which had been set up even though the business had not commenced. Further, it had shown a net loss of Rs. 3.92 Crores which in present format of e-return would automatically reflect also as carry forward loss. In any view of the matter, the Respondent-Assessee pointed out that it had no intent to carry forward this loss, as is evidenced from the copy of the return filed for the Assessment Years 2009-2010 and 2010-2011 dated 15th October, 2010 when no carried forward loss had been claimed i.e. before the Assessment order was passed on 22nd October, 2010. Moreover, as the return of income had been filed beyond the due date, no carried forward loss under Section 80 of the Act was permissible/allowable. Thus, it was submitted that no penalty be imposed. However, notwithstanding above, the Assessing Officer held that the Respondent had deliberately furnished inaccurate particulars of income to the Assessing Officer and concealed its income inviting penalty under Section 271(1)(c) of the Act. Thus, by order dated 28th April 2011 the Assessing Officer imposed a penalty of 100% of the tax sought to be evaded i.e. Rs.1.33 Crores (on Rs.3.92 Crores being the loss/expenditure disallowed).
(c)In Appeal, the Commissioner of Income Tax(Appeals), by order dated 20th September, 2011 allowed Respondent-Assessee's Appeal inter alia holding that this was not case of furnishing of inaccurate particulars of income or concealing of income on the part of the Respondent-Assessee so as to invoke Section 271(1)(c) of the Act. It held that there was no intention of taking advantage of carry forward loss for the reason that the return of income was filed beyond the due date and in terms of Section 80 of the Act such carry forward of loss was not allowable. Further, in the return of income filed for the subsequent Assessment Years 2009-2010 & 2010-2011, no such carry forward loss has in fact been claimed by the Respondent-Assessee. Thirdly, the electronic form prescribed by the Department was such that if in the return of income, a loss is entered then the figure of carry forward loss appears without any control and/or manipulation on the part of the Assessee. In the above facts, the CIT(Appeals) allowed the Respondent-Assessee's Appeal and deleted the penalty.
(d)On further appeal by the Revenue, the Tribunal by the impugned order dismissed the Revenue's appeal. The impugned order holds that the carry forward loss which was shown in the return filed for the subject assessment year was automatically reflected in the E-return filed by the Respondent when it showed net loss. In any case, as the return was filed beyond the due date, thus, there was no question of the Respondent-Assessee claiming set off of the carried forward loss in the subsequent Assessment years. Besides, the impugned order also places reliance on the return of income filed for the subsequent Assessment Year prior to the order of the subject assessment year which also indicate that the Respondent had not claimed any set off or loss carried forward from the earlier assessment years. In the above view, the Appeal of the Revenue was dismissed.
(e)Mr. Pinto, learned counsel for the Revenue submits that the order imposing penalty by the Assessing Officer ought not to have been disturbed. This is so as the Respondent-Assessee had in its return of income filed for the subject assessment year had shown carry forward loss by claiming expenditure which had been disallowed.
(f)We find that the CIT(Appeals) and the Tribunal have concurrently reached a finding of fact that the Respondent had not claimed any carry forward loss either in the return which he has filed for the subject assessment year or in the subsequent assessment years. In the subject assessment year, once a loss was shown in the E-return, the software suo motu reflects the loss returned as carry forward loss. The Respondent has not fed in the entry of carried forward loss while filing its return of income in the E-return. The fact that the Respondent-Assessee had in the subsequent assessment year not claimed carry forward loss is evidence of the fact that there was no intent to furnish inaccurate particulars of income or conceal income. The expenditure had been claimed as it had set up its business though not commenced during the subject Assessment years. This was a claim which was disallowed not on the basis that it had not set up its business.
(g)In any case, both CIT(A) as well as the Tribunal had concurrently reached a finding of fact that there was no intent on the part of the Respondent Assessee to evade tax. This finding is not shown to the arbitrary. Therefore, Question (1) as proposed does not give rise to any substantial question of law. Thus, not entertained.”
Thus, having regard to the facts and circumstances of the matter particularly taking into consideration the Explanation4 to Section 271(1)(c) as narrated hereinabove, further respectfully relying upon the order passed by the Hon’ble High Court in the matter of ITO -vs- First India Private Limited (supra) and Hon’ble Apex Court in the matter of Reliance Petroproducts Pvt. Ltd (supra), wherein it has been held that mere rejection of a claim does not automatically attract penalty and ultimately that penalty provision cannot be invoked merely because an assessee made a claim which is not ultimately result in tax benefits, the order passed by the Ld. CIT(A) in our considered opinion, therefore, found to be just and proper so as not to warrant interference.
In the result, appeal filed by Revenue is dismissed.