This appeal has been filed by the Revenue against the order of CIT(A), dt. 30th Sept., 2013, cancelling the penalty imposed under s. 271(I)(c) of the IT Act, 1961.
2. The AO made an addition while completing the assessment under s. 143(3) of sum of Rs. 60,17,733 on account of provisions for bad and daubtful debts. He initiated penalty proceedings under s. 271 (1)(c) Without mentioning :-whether the penalty has been initiated for concealing the particulars of Income or furnishing of inaccurate particulars of Income and ultimately vide order dt. 24th Dec., 2012 after giving the opportunity to the assessee, the AO took the view that the assessee has furnished inaccurate particulars of income and the case is covered by the Explanation to s. 271(1)(c) and, therefore, he imposed the penalty under s. 271(I)(c) by observing as under:
"5. Thus, it is clear that the assessee has furnished inaccurate particulars of his income and the case is covered by the Explanation to the s. 271(1)(c). Therefore, I am satisfied that this is a fit case for imposition of penalty."
3. The assessee is in appeal before the CIT(A). The learned CIT(A) noted that the assessee has debited the provision on account of bad debts amounting to Rs. 60,17,733 in the P & Laic and same was omitted to be included in the income of the assessee in computation. When the assessee was confronted by the AO, the assessee realized the mistake and immediately withdrawn the claim. The AO also noted in the penalty order dt. 24th Dec., 2012 under para 4 that the assessee committed mistake while showing the provisions for bad and doubtful debts and in turn not adding it back in the computation of income. On the basis of these observations, the learned CIT(A) took the view that it is a clear case of prim.a facie mistake on the part of the assessee not to add back ~he provisions for bad and doubtful debts in the computation of Income. The AO could have pointed out and dealt with this mistake under s. 143(1) of the Act while processing the return. The AO has omitted to rectify the mistake. Therefore, he did not agree with the observations of the -AO that if the assessment was not done under scrutiny, the assessee would have succeeded in getting the wrong claim. Ultimately, the learned CIT(A) took the view that when there is no motive to claim excess deduction, it cannot be considered as concealment or furnishing of inaccurate particulars of income especially when there were carried forward business losses and unabsorbed depreciation running into crores in the case of the assessee. The learned CIT(A), thus, cancelled the penalty relying on the following decisions :
(1) CIT us. Laxmi Vilas Bank Ltd. (2008) 303 ITR 428 (Mad)
(2) CIT us. Reliance Petroproducts (P) Ltd. (2010) 230 CTR (SC) 320 : (2010) 36 DTR (SC) 449 : (2010) 322 ITR 158 (SC).
4. Before us, the learned Authorised Representative reiterated the submissions made before the CIT(A) and contended that the assessee was incurring heavy losses, since the last more than 20 years and carried forward losses are being left beyond eight years since last many years.
The assessee had inadvertently left to add back the provisions of doubtful debts. Even he relied on the decision of the Vijaya Bank us. CIT (2010) 231 CTR (SC) 209 : (2010) 37 DTR (SC) 401 : (2010) 323 ITR 166 (SC) , wherein it was categorically held that in the case of companies the provisions for doubtful debts can be allowed as a deduction under s. 3~(l)(vii) of the Act. In view of the carried forward losses, he contended that there was no motive of excess claim. In this regard, he relied on the following decisions:
(i) Asstt. CIT us. Raj Multiplex (P) Ltd. (2011) 44 SOT 53 (Ahd)(URO);
(ii) AmrutaOrganics (P) Ltd. us. Dy. CIT(ITANo. 1121/Pn/2011).
He also contended that no penalty can be levied, once the mistake is noticed and the assessee has agreed to withdraw the claim. For this, reliance was placed on the following decisions :
(a) CIT us. Lakshmi Vilas Bank Ltd. (supra)
(b) CIT us. Sri Saradha Textile Processors (P) Ltd. (2006) 206 CTR (Mad) 369 : (2006) 286 ITR 499 (Mad).
It is merely a claim which is not sustainable in law. Therefore, no penalty can be levied. Reliance was placed in this regard on the decision of the CIT us. Reliance Petro Products Ltd. (supra). Lastly, he contended that no penalty on making an erroneous claim can be levied. In this regard, he relied on the following decisions :
(A) CIT us. Societex (ITA No. 1497 /Del/2006)
(B) CIT us. Mahanagar Telephone Nigam Ltd. (2011) 63 DTR (Del) 87
(C) PricewaterhouseCoopers (P) Ltd. us. CIT (2012) 253 CTR (SC) 1 : (2012) 77 DTR (SC) 153 : (2012) 348 ITR 306 (SC)
(D) Indian Pesticides us. ITO (1983) 16 TTJ (Chd) 101
(E) Asstt. CIT us AH. Wheelers & Co. (P) LTD. (2011) 142 TTJ (All) 112 : (2011) 60 DTR (All)(Trib) 25 : (2011) 132 ITD 34 (All)
(F) CIT us. S.P.K. Steels (P) Ltd. (2004) 189 CTR (MP) 255 : (2004) 270 ITR 156 (MP).
5. The learned senior Departmental Representative contended before us that it is not a case where the assessee has voluntarily withdrawn the claim. The claim has been withdrawn once it has been brought to the knowledge of the assessee by the AG. Reliance was placed in this regard on the decision of Hon'ble Delhi High Court in the case of CIT us. Harparshad & Company Ltd. (2010) 48 DTR (Del) 182 : (2011) 237 CTR (Del) 468 : (2010) 328 fTR 53 (Del).
6. We have heard the rival submissions and carefully considered the same along with the orders of the tax authorities below. We have also gone through the case law as have been relied on before us. The provisions ofs. 271(1)(c) of the IT Act, 1961, read as under:
"271. (1) If the AD or the CIT(A) or the Principal CIT or CIT in the course of any proceedings under this Act, is satisfied that any person-
(c) has concealed the particulars of his income or furnished inaccurate particulars of such income .
he may direct that such person shall pay by way of penalty.-
(iii) in the cases referred to in cl. (c) or cl. (d). in addition to tax. if any. payable by him. a sum which shall not be less than. but which shall not exceed three times. the amount of tax sought to be evaded by reason of the concealment of particulars of his income or fringe benefits or the furnishing of inaccurate particulars of such income or fringe benefits.
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Explanation 1. : Where in respect of any facts material, to the computation of the total income of any person under this Act.-
(A) such person fails to offer an explanation or offers an explanation which is found by the AO or the CIT(A) or the Principal CIT or CIT to be false. or
(B) such person offers an explanation which he is not able to substantiate and fails to prove that such explanation is bona fide and that all the facts relating to the same and material to the computation of his total income have been disclosed by him.
then. the amount added or disallowed in computing the total income of such person as a result thereof shall. for the purposes of d. (c) of " this sub-section. be deemed to represent the income in respect of which particulars have been concealed."
7. From the said provision. it is apparent that if the AD in the course of any proceedings is satisfied that any person has concealed the particulars of his income or furnished inaccurate particulars of such income. then he may levy the penalty on the assessee. Thus. there are two different charges Le .. the concealment of particulars of income or furnishing of inaccurate particulars of income. The penalty can be imposed for a specific charge. Furnishing of inaccurate particulars means when the assessee has not disclosed the particulars correctly or the particulars disclosed by the assessee are incorrect. Concealment of particulars of income means when the assessee has concealed the' income· and has not shown the income in its return or in its books of account.
8. Explanation 1 is a deeming provision and it is applicable when an amount is added or disallowed in computation of total income which is deemed to represent the· income in respect of which particulars have been concealed. Expln. 1 is not applicable in this case of furnishing inaccurate particulars of income. In this case, we noted that the AO has initiated penalty proceedings under s. 271(1)(c) without pomtmg out whether the assessee has concealed the particulars of income. The penalty ultimately was levied on the assessee for furnishing inaccurate particulars by observing that the case of the assessee is covered by the Expln. to s. 271(1)(c). We may observe that in the case of furnishing inaccurate particulars of income, the onus is on the Revenue ~o, .prove that the assessee had furnished the inaccurate particulars, while the case of concealment of particulars of income, where the Expln. 1 is applicable, the onus is on the assessee to prove that he has not concealed the particulars of income. As is apparent from the Explanation, this Explanation clearly states where in respect of any facts material to the computation of total income of any person such person fails to offer an explanation or offers explanation which .is foun.d by the AO to be false or such person offers an explanation Which he is not able to substantiate or fails to prove that such explanation is bona fide and all the facts relating to the same and meterial to the computation of his total income have been disclosed by him. This is not denied that the particulars of provisions of doubtful debts have duty been shown by the assessee and debited in the audited P&L a/c. It is also not denied that the assessee has submitted the explanation in reply to show-cause notice issued by the AO. Even though the AO, in our opinion, failed to discharge his onus as he was not sure at the initiation of penalty under s. 271(1)(c) for which specific charge of penalty has been initiated by the AO. Even while levying the penalty also the AO simply relied on the Explanation to s. 271(1)(c) even though he levied the penalty for furnishing the inaccurate particulars of income. This is apparent from the provisions of s. 271(1)(c) that Explanation of s. 271(1)(c) is not applicable in case. inaccurate particulars are furnished. Therefore. in our opinion, the basis of levy of penalty itself is not correct. In this regard, we rely on the decision of Hon'ble Gujarat High Court in the case of CIT us. New Sorathta Engineering Co. us. CIT (2006) 202 CTR (Guj) 188 : (2006) 282 ITR 642 (Guj), in Which it was held (headnote) :
"It is incumbent upon the AO to state whether penalty was being levied for concealment of particulars of income by the assessee or whether any inaccurate particulars of income had been furnished by the assessee."
9. Respectfully following the decision of the Hon'ble Gujarat High Court, we quash the penalty levied by the AO.
10. In the result. the appeal of the Revenue is dismissed.