Executive Director (Finance) Of ... vs Assessee

Airports Authority of India, Vs. ACIT, Circle 1(1) Rajiv Gandhi Bhawan, New Delhi Safdarjung Airport, New Delhi.

(PAN AAACA 6412 D)

(Appellant) (Respondent)

Date of hearing : 24.02.2015 Date of Pronouncement : 27.04.2015

Appellant by : Sri Ved Jain Adocate And Rano Jain, CA Respondent by : Ms. Y Kakkar, DR And Shri V. Chaurasia, CA

ORDER

PER SHRI C.M. GARG, JM:

1. This appeal has been preferred by the assessee against the order of the

Commissioner of Income Tax (Appeals)-IV, New Delhi dated 11.04.2013 in Appeal

No.214/2012-13 for the AY 2008-09 by which the penalty order dated 31.01.2013

passed u/s 271(1)(c) of the Act has been confirmed, upholding the penalty of

Rs.50,98,500/-.

ITA No.4274/Del /2013 2

2. Although the assessee has raised as many as seven grounds in this appeal, but

except Ground No.1 other grounds are argumentative and supportive to the main

Ground No.1, which reads as under:-

"1. On the facts and circumstances of the case, the order passed by the learned CIT(A) confirming the penalty under section 271(1)(c) is bad both in the eye of law and on facts."

3. Briefly stated the facts giving rise to this appeal are that the assessee had

capitalized a sum of Rs.20.18 crores under the head fixed assets for Amritsar

Airport during the year under appeal and claimed depreciation thereon. The

Assessing Officer noticed that the Comptroller & Auditor General C&AG has made

an observation that completion certificate in respect of above amount was not

produced. The AO asked the assessee to justify the claim of the depreciation on

fixed assets. The assessee vides its letter dated 25.10.2010 filed the details of said

amount capitalized by it during the year. The Assessing Officer found that the work

of fixed assets of Rs.14.62 only was completed during the previous year and

therefore, the assessee could have claimed depreciation on that amount only. The

AO was of the view that the assessee made wrong claim of the depreciation in

respect of fixed assets of Rs.5.56 crores and he disallowed the depreciation of Rs.1.5

crores. In the appeal preferred by the assessee, the CIT(A) vide his appeal order

dated 10.01.2012 had given a finding that the assessee had actual claimed

depreciation of Rs.1.5 crores in respect of the assets of Rs.5.56 crores and he

directed the AO to verify the actual depreciation claimed by the assessee in respect ITA No.4274/Del /2013 3

of above assets of Rs.5.56 crores and directed the AO to restrict the disallowance to

Rs.1.5 crores as against Rs.2.48 crores disallowed by the AO. Since the assessee did

not prefer any appeal against the order of the CIT(A), therefore, the disallowance of

Rs.1.5 crores had attained finality. Thereafter, the AO initiated penalty proceedings

and after giving due opportunity of hearing for the assessee levied impugned penalty

of Rs.50,98,500/- u/s 271(1)(c) of the Act by observing that the assessee has

furnished inaccurate particular of its income to the extent of 1.5 crores and,

therefore, the assessee liable for penalty.

4. Being aggrieved by the said penalty order dated 31.01.2013, the assessee

preferred an appeal before the CIT(A) but remained empty handed as the appeal of

the assessee was also dismissed by passing the impugned order and the penalty

levied by the AO was confirmed. Now, the assessee is before this Tribunal with the

main ground as reproduced hereinabove.

5. We have heard the arguments of both the sides carefully and perused the

material placed on record. The Ld. counsel of the assessee submitted that the

assessee is a public sector undertaking functioning under the Ministry of Civil

Aviation, Government of India and it was formed by special enactment of the

Parliament through Airport Authority of India Act, 1994. The Ld. Counsel further

pointed out that the Assessing Officer disallowed the claim of depreciation

amounting to Rs.2.48 crores but the CIT(A) directed the AO to restrict the

disallowance to Rs.1.5 crores, which attained finality as the assessee did not prefer ITA No.4274/Del /2013 4

any appeal against the said disallowance. Ld. counsel of the assessee further

contended that the AO imposed impugned penalty ignoring the fact that neither

there was a mala fide concealment of income nor assessee furnished inaccurate

particulars of its income, because the assessee being a public sector undertaking is

subject to C&AG audit and the report of the C&AG was the basis of the

disallowance of the claim of depreciation which was also part of annual report. Ld.

counsel further pointed out that the assessee filed its return of income for AY 2008-

09 on 30.09.2008 and subsequently the C&AG made certain observation about the

claim of depreciation on assets capitalized vide its report dated 27.10.2008 i.e. after

assessee had filed the return of income showing the bona fide act of the assessee.

Ld. counsel also contended that on verification, the assessee company found that out

of amount of Rs.20.18 crores, the claim of depreciation on assets of Rs.14.62 crores

was correct as these works were completed in the Financial year 2007-08 pertain to

AY 2008-09. The Ld. counsel also pointed out that agreeing with the view and

observation of C&AG, the assessee company reversed its claim in the return for AY

2009-10 filed on 29.09.2009 voluntarily suo moto .

6. The Ld. counsel strenuously contended that AO, first time raised the issue of

C&AG report by issuing notice and questionnaire about claim of depreciation on

09.08.2010 on the basis of discloser made by the assessee in the return for AY 2009-

10, which was filed on 29.09.2009. Ld. counsel further made it is clear that the

assessee revised its claim of depreciation suo moto voluntarily and the CIT(A) was ITA No.4274/Del /2013 5

not correct in agreeing with the view of the AO that the reversal of claim was not a

bona fide mistake and the assessee has made a wrong claim of depreciation and

furnished inaccurate particulars of its income to the extent of Rs.1.5 crores.

7. Ld. counsel vehemently contended that while confirming the penalty, the

CIT(A) misunderstood the entire facts and circumstances of the case because the

amount of Rs.20.18 crores comprises of two figures which Rs.14.62 crores for

which the assessee has filed the certificates of completion, which has not been

disputed by the AO and the CIT(A) as well and on balance amount of Rs.5.56

crores, the depreciation was reversed in the return of next assessment year i.e. 2009-

10 and this reversion was made much before the AO raised the issue. During the

arguments, Ld. counsel of the assessee submitted that a copy of the return of income

for AY 2009-10 which was filed on 29.09.2009 and also submitted that copy of the

30th Annual Report 2007 page 52 of the assessee undertaking wherein date of

submission of report has been mentioned as 27.10.2008, wherein the C&AG has

pointed out that the capital work in progress and profit are under stated by 20.18

crores and 2.48 crores respectively and the depreciation is over stated by 2.48

crores.

8. From the penalty order, we note that the Assessing Officer at Page 4 has

noted that AO vide letter dated 09.08.2010 has asked the assessee to justify the

claim of depreciation on fixed assets and the assessee in its reply dated 25.10.2010

filed details of Rs.20.18 crores capitalized by it during the year. Undisputedly, the ITA No.4274/Del /2013 6

Assessing Officer has made addition of Rs.2.48 crores on the basis of C&AG report

and reversion of the claim by the assessee in its return of income for AY 2009-10. In

this situation, we are declined to accept this contention of the Revenue that the

assessee revised its claim only after when the AO raised query about the claim of

depreciation. While in the penalty order, AO himself noted that the query was raised

by the AO vide letter dated 09.08.2010 then this fact is clear that the assessee filed

its return of income for AY 2008-09 on 30.09.2008, the C&AG pointed out

statement of depreciation vide 30th Annual Report dated 27.10.2008 and the assessee

reversed its claim of depreciation as per direction of the C&AG in its return for AY

2009-10 filed on 29.09.2009. We clearly note that the Assessing Officer picked up

this issue on the basis of reversal of claim submitted by the assessee in the return of

income for the subsequent year which was undisputedly filed on 29.09.2009.

9. Under above note facts and circumstances of the case, contention of the Ld.

counsel for the assessee that the assessee revised and reversed its claim in the return

of subsequent year as per comments and observation of C&AG made in the 30th

Annual Report 2007 voluntarily and suo moto are found to be acceptable .

10. Ld. counsel of the assessee further placing reliance of decisions of High Court

of Madhya Pradesh in the case of DCIT Vs. Electrical Cooperative Society Ltd.

reported in 279 ITR 319 (MP) submitted that every concealment does not attracted

the penalty u/s 271(1)(c) of the Act and it must be a deliberate and intentional being

in the knowledge of the assessee so as to evade payment of income tax. The Ld. ITA No.4274/Del /2013 7

counsel further pointed out that the assessee being a nonprofit organization managed

and controlled by the Government of India for providing services in the field of

Civil Aviation in India then it cannot be held that at deliberate intention to evade to

payment of due tax.

11. Ld. counsel of the assessee also placed reliance on the plethora of judgment

including the decision of Hon'ble jurisdictional High Court of Delhi in the case of

CIT Vs. MTNL in ITA No. 626/2011 delivered on 10.10.2011, the decision of the

Hon'ble Supreme Court in the case of CIT Vs Reliance Petro Products Pvt. Ltd.

reported in 322 ITR 158 (SC) and the decision of Hon'ble Supreme Court in the

case of Price Waterhouse Coopers (P.) Ltd. reported in [2012] 348 ITR 306 (SC). Ld. counsel of the assessee also sought support from the decision of the Hon'ble

Madhya Pradesh High Court in the case of CIT Vs. Senior Accounts Officer,

Madhya Pradesh Electricity Board reported in [2005] 276 ITR 84 (MP), decision of

ITAT Nagpur Bench in the case of Steel Authority of India Ltd. Vs. ITO reported in

ITD 100, 029/TTJ 107, 372, ITAT [Nagpur], the decision of ITAT Ahemdabad

Bench in the case of DCIT Vs. Indian Petrochemicals Corporation Ltd. reported in

123 ITD 293 (ITAT Ahemdabad) and decision of ITAT Bombay Bench in the case

of Dena Bank Vs. Inspecting Assistant Commissioner reported in 25 ITD 109

(ITAT Bombay) and submitted that it would not be an unreasonable presumption

that it could not be an intention of organization owned and run by Government of

India to conceal its income or to furnish inaccurate particulars of its income with a ITA No.4274/Del /2013 8

view or intention to evade payment of proper and due taxes to the Government of

India. We also note that while confirming the impugned penalty, the CIT(A) has

placed reliance on the judgment of the Hon'ble Supreme Court in the case of Union

of India Vs. Dharmendra Textile Processors reported in 306 ITR 277 (SC) wherein

it was held that penalty under the fiscal statue is for breach of civil liability and

willful concealment is not an essential ingridment for attracting the civil liability.

Ld. DR has also drawn our attention towards this fact that when the assessee did not

had completion certificate in respect of in completed assets amounting to Rs.5.56

crores then the claim of depreciation on entire amount of Rs.20.18 crores is enact of

furnishing of inaccurate particulars and also an act of concealing the true particulars

of income of the assessee, therefore, penalty levied by the AO was correctly

confirmed and upheld by the CIT(A).

12. In view of above rival contention, we note that since by the earlier part of this

order we have already held that the assessee reversed its claim of depreciation when

the C&AG report pointed out over statement of claim of depreciation in the 30th

Annual Report dated 27.10.2008 and the assessee voluntary and suo moto reversed

and revised its claim of depreciation in its return of income filed for AY 2009-10 on

30.09.2009. It is also clear that the Assessing Officer noted this fact that the assessee

itself accepts that the fixed assets amounting to Rs.5.56 crores were reversed in the

subsequent financial year, therefore, depreciation of above assets is not admissible

during the year. In this situation, the assessee being a public sector undertaking, ITA No.4274/Del /2013 9

Government of India would not furnish inaccurate particulars of its income with the

conscious intention to conceal its income with the view to evade payment of proper

taxes due to the Government of India.

13. As this juncture, we respectfully take cognizance of observation of the

Hon'ble Supreme Court in the case of Reliance Petro Products Pvt. Ltd. (Supra)

wherein it was held that u/s 271(1)(c) of the Act penalty cannot be imposed even for

making unsustainable claim. The Hon'ble Apex Court has also considered and

referred the ratio of its judgment in the case of Dharmendra Textile Processors

(Supra). The relevant part of this order reads as under:-

"(i) S. 271 (1) (c) applies where the assessee "has concealed the particulars of his income or furnished inaccurate particulars of such income". The present was not a case of concealment of the income. As regards the furnishing of inaccurate particulars, no information given in the Return was found to be incorrect or inaccurate. The words inaccurate particulars" mean that the details supplied in the Return are not accurate, not exact or correct, not according to truth or erroneous. In the absence of a finding by the AO that any details supplied by the assessee in its Return were found to be incorrect or erroneous or false, there would be no question of inviting penalty u/s 271 (1 )(c).

(ii) The argument of the revenue that "submitting an incorrect claim for expenditure would amount to giving inaccurate particulars of such income" is not correct. By no stretch of imagination can the making of an incorrect claim in law tantamount to furnishing inaccurate particulars. A mere making of the claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee. If the contention of the Revenue is accepted then in case of every Return where the claim made is not accepted by the AO for any reason, the assessee will invite penalty u/s 271 (1 )(c). That is clearly not the intendment of the Legislature.

ITA No.4274/Del /2013 10 (iii) The law laid down in Dilip Shroff291 ITR 519 (Se) as to the meanings of the words "conceal" and "inaccurate" continues to be good law because what was overruled in Dharmendra Textile Processors306 ITR 277 (SC) was only that part in Dilip Shroff where it was held that mens rea was an essential requirement for penalty u/s 271 (1)(c)."

14. On this issue, we further respectfully take cognizance of observation and

conclusion of Hon'ble Madhya Pradesh High Court in the case of CIT Vs. Senior

Accounts Officer (Supra) wherein it was held that if the explanation offered by the

assessee was bona fide and deserves to be accepted, then it would not a case of

deliberate concealment with the view to evade payment of tax and putting in

Revenue to loss. In this judgment their lordship speaking for Hon'ble High Court of

Madhya Pradesh observed as follows:-

"In our opinion, the Tribunal rightly accepted the explanation offered by the Board/assessee. It was not a case of deliberate attempt on the part of the assessee to avoid payment by way of deduction for being deposited. The assessee is not a private businessman but it is a Government statutory organization. Moreover there was some confusion as regards the extent of percentage to be deducted from the different class of customers. No sooner it was clarified, the Board made compliance from their own funds. In a case of this nature, the law laid down by the Supreme Court in the case of Hindustan Steel Ltd. v. State of Orissa [1972J 83 ITR 26 (SC); [1970J 25 STC 211 (SC), when their Lordships held:

"Penalty will not also be imposed merely because it is lawful to do so. Whether penalty should be imposed for failure to perform a statutory obligation is a matter of discretion of the authority to be exercised judicially and on a consideration of all the relevant circumstances. Even if a minimum penalty is prescribed, the authority competent to impose the penalty will be justified in refusing to impose penalty when there is a technical or venial breach of the provisions of the Act ITA No.4274/Del /2013 11

or where the breach flows from a bona fide belief that the offender is not liable to act in the manner prescribed by statute. "

In our opinion, the aforesaid principle of law squarely apply to the facts of this case, if we examine the explanation offered by the Board/assessee for not depositing/deducting the tax deducted at source from the particular class of consumers. In our view, the explanation was bona fide and deserves to be accepted. In no case, was it a case of deliberate concealment or was done with a view to evade payment of tax and putting the Revenue to loss.

In view of the aforesaid discussion, while concurring with the view taken by the Tribunal, we dismiss the appeal and uphold the order of the Tribunal."

15. On the basis of foregoing discussion, we reach to a conclusion that the

penalty u/s 271(1)(c) of the Act cannot be imposed a merely because it is lawful to

do so but for imposing penalty it is incumbent upon the Revenue authority to so that

the assessee has concealed the particular of his income or furnished inaccurate

particulars of such income. As per Explanation-1 to Section 271(1)(c) of the Act the

penalty is unavoidable wherein respect of any facts material to the computation of

the total income of any such person under the Act is found to be an act of conscious

concealment of particulars of income or found to be having furnished inaccurate

particulars of income. The said Explanation-1 to Section 271(1)(c) of the Act reads

as under:

"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 [Assessing] Officer or the [Commissioner (Appeals)] [or the [ Principal Commissioner or] Commissioner] to be false, or ITA No.4274/Del /2013 12

(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 clause (c) of this sub-section, be deemed to represent the income in respect of which particulars have been concealed."

16. Turning to the facts of the present case, as we have already note and observed

that the assessee being a public sector undertaking of Government of India, reversed

its claim in the subsequent return of income for AY 2009-10 on receipt of C&AG

report dated 27.10.2008. The assessee reversed its claim of depreciation on

29.09.2009. The AO at the very first time raised query about the claim of

depreciation on 09.08.2010 when the AO noticed that the assessee itself accepted

that the depreciation claimed on fixed assets amounting to Rs.5.56 crores is

overstated and the same was reversed in the return of income of the subsequent

financial year. We have already observed that this fact has been mentioned by the

AO in the first para 8 at page 4 of the penalty order which is self speaking and has

not been disputed by the Ld. DR.

17. Under above noted facts and circumstances of the case, we are inclined to

hold that when the assessee itself reversed its overstated claim of depreciation in the

subsequent return, when the mistake of over statement of claim of depreciation was

pointed out by the C&AG report, voluntarily and the Assessing Officer raised query

subsequent to voluntarily reversed of the said claim then act of conscious and ITA No.4274/Del /2013 13

malafidely furnishing of inaccurate particulars of income or concealment of

particulars of income cannot be attributed to the assessee public sector undertaking.

Therefore, in view of foregoing discussions, we hold that the explanation offered by

the assessee was sustainable and bona fide and therefore, penalty u/s 271(1)(c) of

the Act is not imposeable on the assessee. Accordingly, penalty order as well as

impugned order of the CIT(A) are set aside and the AO is directed to delete the

impugned penalty levied on the assessee u/s 271(1)(c) of the Act. Accordingly, the

main ground of the assessee is allowed.

18. In the result, appeal of the assessee is allowed and the AO is directed to delete

the penalty.

(The decision was pronounced in the open Court on 27th April, 2015.)

Sd/- Sd/-

(N.K. SAINI) (C.M. GARG) Accountant Member Judicial Member

Dated: 27th April, 2015. Aks/-

Copy forwarded to 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR Asst. Registrar, ITAT, New Delhi