The order of the Bench was delivered by
Saktijit Dey, J. M.-This appeal preferred by the Revenue is directed against the order dated 19/02/2013 passed by the CIT(A)-IV, Hyderabad in ITA No. 17/DC-3(3)/CIT(A)- IV/2012-13 for the assessment year 2007-08.
2. Briefly the facts are, the assessee is a company promoted by the AP Housing Board and M/s IJM (India) Infrastructure Ltd. for the purpose of developing Integrated Townships and other allied construction and development works. For the impugned assessment year, the assessee filed its return of income on 30/10/2007 declaring total income of Rs. 15,95,32,740/-. Subsequently revised return was filed on 22/08/2008 declaring income of Rs. 56,17,006/- before set off of brought forward losses and Nil income after set off of the losses. During the scrutiny assessment proceeding, the Assessing Officer made a reference to the TPO for determining the Arm's Length Price of the international transaction. In pursuance to the order passed by the TPO a draft assessment order has passed. The assessee objected to the draft assessment order before the DRP. The DRP having confirmed the draft assessment order, the final assessment order in case of assessee was passed u/s 143(3) read with section 144C(13) of the Act on 11/10/2011 on the directions of the Dispute Resolution Panel (in short 'DRP') by making the following additions/disallowances:
i) Disallowance towards cost of land transferred by APHB - Rs. 13,43,96,800/-.
ii) Disallowance of incentive paid to IJIMI India - Rs. 18,59,85,000/-.
iii) Disallowance of charges paid to IJIMI India for delay in handing over - Rs. 7,74,36,597/-.
iv) Disallowance of land cost attributable to the land sold by APHB on 500 LIG houses sold by it - Rs. 1,92,19,200/-.
v) Disallowance of cost of construction of houses handed over to APHB - Rs. 18,06,75,000/-.
vi) Disallowance of interest paid to IJMI India - Rs. 2,21,95,301/-.
vii) Adjustment u/s 92CA(4) - Rs. 38,34,39,486/-.
3. Against the aforesaid assessment order, the assessee preferred appeal before the ITAT. During the pendency of appeal before the ITAT, the Assessing Officer initiated proceeding for imposition of penalty u/s 271(1)(c) by issuing show cause notice on 17/04/2012. In reply to the show cause notice, the assessee explained that since its appeal against the assessment order is pending before the ITAT the penalty proceeding should be dropped. It was submitted that isallowances/additions made due to difference of interpretation of provisions of Act, hence, penalty u/s 271(1)(c) cannot be levied. The assessee relying on the decision of the Hon'ble Supreme Court in the case of CIT Vs. Reliance Petro Products (P) Ltd., [2010] 322 ITR 158 (SC) submitted that there must be concealment of income or furnishing of inaccurate particulars of income for invoking provisions of section 271(1)(c) of the Act. The Assessing Officer, however, rejecting the contentions of the assessee passed an order imposing penalty of Rs. 20,86,60,998/- u/s 271(1)(c) of the Act.
4. The assessee being aggrieved of the penalty order passed by the Assessing Officer, preferred appeal before the CIT(A).
5. In course of the appellate proceedings, the AR submitted that the appeal before the ITAT against the assessment order in the meanwhile has been disposed off by the Tribunal by deleting the following additions:
1. Disallowance towards cost of land transferred by APHB - Rs. 13,43,96,800/-.
2. Disallowance of incentive paid to IJIMI India - Rs. 18,59,85,000/-
3. Disallowance of charges paid to IJIMI India for delay in handing over - Rs. 7,74,36,597/-.
4. Disallowance of cost of construction of houses handed over to APHB - Rs. 18,06,75,000/-
5. Disallowance of interest paid to IJMI India - Rs. 2,21,95,301/-.
The only addition of Rs. 1,92,19,200/- towards land cost attributable to the land sold by APHB on 500 LIG houses sold was sustained by the Tribunal.
6. The AR of the assessee bringing the said facts to the notice of the CIT(A) submitted that imposition of penalty with regard to the additions already deleted no more survives. So far as the issue of levy of penalty on the disallowance of Rs. 1,92,19,200/- sustained by the ITAT, it was submitted that as per the agreement the entire land including 13,728 sq.yds., was made available to the assessee for development of the integrated township and that the assessee paid compensation for the entire land, including for the 13,728 sq. yds. He, therefore, contended that conclusion of the Assessing Officer that land to the extent of Rs. 13,728 sq.yds. had not been transferred is without any basis. The Assessing Officer, however, rejected the claim of the assessee. The ITAT upheld the disallowance by observing as under:
"18. The land was not registered in favour of the assessee by APHB. The APHB is always the owner of the impugned land. There is no question of retransferring of the said land to APHB when the land itself is not registered in favour of the assessee and the cost of the land attributable to the flats handed over to APHB cannot be claimed as deduction in the hands of the assessee. This ground is rejected."
7. It was contended on behalf of the assessee before the first appellate authority that penalty u/s 271(1)(c) is leviable when the assessee conceals its income or furnishes inaccurate particulars. It was submitted that when compensation is paid in accordance with the agreement, which is part of the record before the Assessing Officer and that none of the information furnished in the return of income had been found to be factually incorrect then there was neither concealment of income nor furnishing of inaccurate particulars of income inviting imposition of penalty u/s 271(1)(c) of the Act. In support of such contention, the assessee relied on the decision of the Hon'ble Supreme Court in case of CIT Vs. Reliance Petro Products P. Ltd., [2010] 322 ITR 158 (SC).
8. The CIT(A) after considering the submissions of the assessee and taking note of the fact that ITAT ha deleted most of the additions, deleted penalty in respect of those additions, which were deleted by the ITAT. So far as the addition of Rs. 1,92,19,200/- sustained by the ITAT, the CIT(A) after considering the submissions of the assessee in the context of law laid down by the Hon'ble Supreme Court in the case of Reliance Petro Products P. Ltd. (supra), deleted the penalty imposed by holding as under:
"The facts in the appellant's case are also similar. The appellant has made a claim of land cost which has been found inadmissible by the Assessing Officer. However, the Assessing Officer has not brought on record any specific facts or details which were found by the Assessing Officer to be incorrect, inaccurate or false. Whether or not the expenditure claimed by the appellant is allowable is a legal issue that does not imply any inaccuracy in the particulars furnished by the appellant. As held by the Supreme Court, the mere making of an inadmissible claim of deduction does not amount to furnishing of inaccurate particulars. Following the ratio of the decision of the Supreme Court the penalty u/s 271(1)(c) is directed to be deleted with regard to the claim of land cost of Rs. 1,92,19,200/-."
9. Aggrieved by the order of the CIT(A) the revenue is in appeal before us raising the following grounds of appeal:
"i) The learned CIT(A) erred both in law and on facts of the case.
ii) The learned CIT(A) ought to have upheld the penalty u/s 271(1)(c) and should not have equated the case with a case of wrong claim of deduction.
iii) The learned CIT(A) ought to have appreciated that it is neither a case of claiming a deduction (as defined under Chapter VIA) nor a case of claiming exemption (as defined under Chapter III) so as to have a legal implication, but a case of investigation of various issues, to income/disallowances of various expenses enhancing the income returned and as such should have held that the assessee ought not to have made such a wrong computation of income consciously."
10. We have heard the submissions of the parties and perused the material on record including the orders of the revenue authorities. It is a fact on record that the Assessing Officer in the present case has passed the order imposing penalty u/s 271(1)(c) on the basis of additions made in the assessment order passed u/s 143(3) read with section 144C of the Act. However, the aforesaid assessment order was subjected to appeal before the ITAT and the ITAT vide order dated 31/12/2012 passed in ITA No. 2072/Hyd/2011 had deleted all the additions excepting the addition of Rs. 1,92,19,200/- towards the land cost attributable to the land sold by APHB on 500 LIG houses sold by it. Therefore, as would be evident, the Assessing Officer had passed order imposing penalty before the order passed by the ITAT disposing of the assessee's appeal against assessment order. In this connection, we refer to section 275(1A) of the Act, which reads as under:
"275(1A) In a case where the relevant assessment or other order is the subject-matter of an appeal to the Commissioner (Appeals) under section 246 or section 246A or an appeal to the Appellate Tribunal under section 253 or an appeal to the High Court under section 260A or an appeal to the Supreme Court under section 261 or revision under section 263 or section 264 and an order imposing or enhancing or reducing or cancelling penalty or dropping the proceedings for the imposition of penalty is passed before the order of the Commissioner (Appeals) or the Appellate Tribunal or the High Court or the Supreme Court is received by the Chief Commissioner or the Commissioner or the order of revision under section 263 or section 264 is passed, an order imposing or enhancing or reducing or cancelling penalty or dropping the proceedings for the imposition of penalty may be passed on the basis of assessment as revised by giving effect to such order of the Commissioner (Appeals) or, the Appellate Tribunal or the High Court, or the Supreme Court or order of revision under section 263 or section 264:"
11. A plain reading of the aforesaid section, makes it clear that where the Assessing Officer has passed penalty order before the disposal of appeal against the assessment order by the appellate authority i.e. CIT(A) or ITAT, then, the order imposing or reducing or cancelling penalty or dropping the proceedings for the imposition of penalty may be passed on the basis of assessment as revised by giving effect to such order of the CIT(A) or the Appellate Tribunal or the High Court or the Supreme Court or the order of revision u/s 263 or u/s 264.
12. In the present case, the ITAT having passed the order in appeal deleting all the additions excepting one, it is the requirement u/s 275(1A) that the Assessing Officer must pass an order giving effect to the order of the Tribunal and only thereafter consider the issue of imposition of penalty u/s 271(1)(c) after giving opportunity of being heard to the assessee. In the aforesaid view of the matter, we set aside the order passed by the CIT(A) and restore the matter back to the file of the Assessing Officer, who shall consider the issue of imposition of penalty u/s 271(1)(c) of the Act after giving effect to the order of the Tribunal and after duly giving opportunity of being heard to the assessee in the matter. Accordingly, the grounds raised by the revenue are allowed for statistical purposes.
13. In the result, appeal of the revenue is allowed for statistical purposes.
The order pronounced in the open court on 27/09/2013.