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Case Law Details

Case Name : Jehangir HC Jehangir Vs ACIT (ITAT Mumbai)
Appeal Number : I.T.A. No.1261/Mum/2011
Date of Judgement/Order : 17/05/2017
Related Assessment Year : 2006-07
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1. Briefly stated the assessee, being resident individual engaged in development of land by construction of residential/ commercial premises, was assessed for impugned AY u/s 143(3) at Rs. 28,20,17,740/- after certain adjustments/ dis allowances as against returned income of Rs. 18,95,66,240/-. One of the dis allowances pertained to dis allowances u/s. 40(a)(ia) amounting to Rs. 1,81,29,209 for non- deduction of tax at source on certain contractual payments. Another adjustment was related with assessee’s claim towards set-off of unabsorbed brought forward business losses for AY 2001-02 and 2003-04 amounting to Rs.5,35,96,798/- and Rs. 2,07,79,491/- respectively from business income which, during assessment proceedings, was found unavailable to the assessee. Subsequently, dis allowance u/s 40(a)(ia) was deleted by Mumbai Tribunal in ITA No. 1643/Mum/2011 order dated 06/02/2015. The assessee withdrew its claim with respect to brought forward business losses for AY 2001- 02 & 2003- 04 on the ground that it was inadvertently claimed and due to mistake on the part of the assessee.

2. In the meanwhile, penalty proceedings were initiated for both these adjustment/ dis allowance in quantum order and consequently, the assessee was issued notice u/s 274 read with section 271(1)(c) dated 30/12/2008. Finally, the assessee was saddled with impugned penalty on both accounts by AO vide its order dated 30/06/2009 by placing reliance on Apex court judgment in CIT Vs. Dharmendra Textile Processor (306 ITR 277) wherein it was held that levy of penalty is a civil liability and willful concealment is not an essential ingredient for attracting civil liability. Reliance was also placed on Apex court decision in the case of Dilip N. Shroff Vs. JCIT (291 ITR 519).

3. Aggrieved, the assessee contested the penalty without any success before Ld. CIT(A) vide impugned order dated 15/12/2010 wherein Ld. CIT(A) confirmed the penalty by noting that the assessee made a false claim and the assessee failed to establish that the mistake in the return was inadvertent and by making the wrong claim, the assessee has tried to reduce the tax liability. Aggrieved, the assessee is in appeal before us and assailed the penalty on legal grounds as well on merits of the case.

4. The Ld. Counsel for Assessee [AR], while drawing our attention to documents placed in the paper book, first of all contended that since the assessee’s quantum appeal qua dis allowance u/s 40(a)(ia) has been allowed by the Tribunal, penalty to that extent do not survive. Upon perusal of the documents, we concur with the same and at the outset hold that since quantum dis allowance has been deleted by the Tribunal, penalty in respect thereof do not survive.

5. Proceeding further, the Ld. AR stated that initially the business losses for AY 2001- 01 stood at Rs. 535.36 Lacs, however, the same got reduced to Rs. 64.50 Lacs after giving effect to appellate orders. However, the set-off of business losses for AY 2001- 02 & 2003- 04 was claimed at wrong figures due to inadvertent error and the assessee, upon being pointed out, accepted the same and paid necessary taxes thereupon without filing any further appeal. Since, the claim was due to inadvertent oversight /error, the penalty against the same was not justified particularly keeping in view the conduct of the assessee. In support, the documents pertaining to AY 2001-02 and appellate orders have been placed in the paper book. Reliance has been placed on the judgment of Apex Court in Price Water house Coopers Pvt. Ltd. Vs. CIT [CA No. 6924 of 2012 25/09/2012] to contend that inadvertent error do not entail levy of penalty.

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