Pfizer Ltd, Mumbai vs Assessee

Assessee by : Shri Kirit Kamdar, A.R. & Charul Toprani, A.R. Revenue by : Shri Premanand J., D.R.

Date of Hearing : 18.12.2014 Date of Pronouncement : 11.03.2015

ORDER

Per Sanjay Garg, Judicial Member:

The above titled two appeals preferred by the same assessee in relation to assessment years 2003-04 and 2004-05 respectively have been directed against the orders of the Ld. CIT(A) dated 19.04.2012 & 10.04.2012 respectively agitating the levy of penalty under section 271(1)(c) of the Income Tax Act (hereinafter referred to as the Act). First we take up the assessee's appeal for A.Y. 2004-05.

ITA No.4600/M/2012 (for A.Y. 2004-05) 2. In this case, penalty, under section 271(1)(c) of the Act, of Rs.3,00,00/- has been levied by the Assessing Officer (hereinafter referred to as the AO) on the ground that the assessee had wrongly computed the deduction under 2 ITA Nos.4621 & 4600/M/2012 M/s. Pfizer Ltd.

section 80HHC as the assessee had failed to reduce 90% of other income comprising of rent, insurance claim, provision written back and sundry income while computing deduction under section 80HHC. It may be noted here that the original assessment order was passed under section 143(3) of the Act. However, the case was reopened under section 147 on the above stated ground. In the reopened assessment proceedings, the assessee had failed to file any explanation in pursuance to show cause notice issued for the proposed adjustment. The assessment order, thus, was passed ex-parte under section 144 read with section 147 of the Act. In the penalty proceedings initiated under section 271(1)(c) of the Act, the assessee again failed to appear and offer any explanation for wrongly computing the deduction under section 80HHC despite notice served upon him, in this respect. The AO therefore concluded that since the assessee had made a claim in the return which was not substantiated in the assessment proceedings, hence the same amounted to furnishing of inaccurate particulars of income as per the provisions of section 271(1)(c) read with explanations thereto. He therefore levied the penalty under section 271(1)(c) of the Act at the rate of 100% of the tax sought to be evaded.

3. In appeal before the Ld. CIT(A), the assessee submitted that the issue was highly debatable and that the mistake in computation of deduction was bonafide mistake. There was no intention on the part of the assessee to file inaccurate particulars of income or concealment of income. The Ld. CIT(A), however, did not agree with the contentions of the assessee and confirmed the penalty. The assessee has, thus, come in appeal before us.

4. The Ld. A.R., before us, has relied upon the decision of the Hon'ble Supreme Court in the case of "Price Waterhouse Coopers Pvt. Ltd. vs. CIT"

(2012) 348 ITR 306 (SC) to contend that penalty is not leviable, if the mistake is bonafide and due to inadvertent error.

3 ITA Nos.4621 & 4600/M/2012

M/s. Pfizer Ltd.

On the other hand, the Ld. D.R. has relied upon the findings of the lower authorities.

5. We have considered the rival submissions of the Ld. Representatives of the parties. We find that in this appeal, the assessee has taken the plea that the mistake in computation of deduction under section 80HHC was due to inadvertent error. There was no concealment of income or furnishing of inaccurate particulars of income. Though, on the face of it, the contention of the Ld. A.R. seems to have force, however, when we go to the records of the assessment order in the reopened assessment proceedings as well as the penalty order, we find that the assessee did not furnish any explanation or reply not only to the notice under section 148 of the Act but also to the notice under section 142(1) of the Act. The assessee neither attended nor furnished any explanation regarding wrong computation of the deduction which resulted into the evasion of the tax. Since the assessee neither attended nor offered any explanation, the AO was left with no alternative, then to proceed to finalize the assessment order under section 144 of the Act. Even in the penalty proceedings, the assessee did not offer any explanation regarding the wrong computation of deduction. The plea of bonafide mistake or inadvertent error has been taken for the first time in the appellate proceedings before the Ld. CIT(A). The conduct of the assessee shows that it had no explanation to offer neither during the assessment proceedings nor during the penalty proceedings. Under such circumstances, the plea of bonafide mistake or inadvertent error during the appellate proceedings seems to be an afterthought version. If the contention of the assessee of bonafide mistake or inadvertent error was correct, the assessee could have come to the AO on receipt of notice under section 148 of the Act and should have offered the explanation that the computation was wrongly made due to some bonafide mistake and that it was ready to offer the 4 ITA Nos.4621 & 4600/M/2012 M/s. Pfizer Ltd.

income for tax which had escaped assessment. But the assessee did not do so and even not bothered to appear before the AO. Even during the penalty proceedings, despite service of notice, the assessee did not bother of offer any explanation regarding the wrong computation of deduction. In the case of "Price Waterhouse Coopers Pvt. Ltd. vs. CIT" (supra) upon which the Ld. A.R. has relied, the crucial fact was that soon after the assessee was communicated the reason for reopening of the assessment, the assessee realized the mistake and by a letter informed the AO that there was no willful suppression of the facts by the assessee but a genuine mistake or omission had been committed. The assessee had immediately filed a revised return on the same day. A reassessment order was passed on that very day and the assessee paid the tax with due interest. The Hon'ble Supreme Court, after considering the above conduct of the assessee, had observed that it was a bonafide mistake and inadvertent error which had not been noticed by the assessee but not a case of furnishing of inaccurate particulars of income or attempting to concealment of income. In the case in hand, since the assessee did not offer any explanation, hence the AO was justified in levying the penalty, rather he was not left with any alternative, in view of the provisions of section 271(1)(c). We therefore do not find any infirmity in the said order of the AO. Hence, the appeal of the assessee is therefore dismissed.

6. Now we take up the appeal for A.Y. 2003-04.

ITA No.4621/M/2012 (for A.Y.2003-04) 7. In this appeal, the assessee has agitated the levy of penalty of Rs.3,00,000/- under section 271(1)(c) for wrongly claiming the sales tax penalty as expenditure. In this case also the assessment was reopened under section 147 and the disallowance of Rs.9,64,151/- was made in relation to expenditure on account of penalties and fine charged. In the reopened 5 ITA Nos.4621 & 4600/M/2012 M/s. Pfizer Ltd.

assessment proceedings, the assessee did not offer any explanation and the assessment was completed under section 144 of the Act. As observed in the assessee's appeal for A.Y. 2004-05, when the assessee did not appear and offer any explanation in the penalty proceedings also, then the AO was left with no alternative, then to proceed in accordance with law as per provisions of section 271(1)(c) of the Act and therefore, levied the penalty at the rate of 100% of the tax amount sought to be evaded. In this appeal also, the assessee has taken the ground of bonafide mistake and inadvertent error.

8. In view of our findings given above in assessee's appeal for A.Y. 2004- 05, in this appeal also we do not find any merit in the explanation offered by the assessee at this appellate stage. Therefore, the penalty levied in this appeal is also upheld.

9. In the result, both the appeals of the assessee are hereby dismissed.

Order pronounced in the open court on 11.03.2015.

Sd/- Sd/- (R.C. Sharma) (Sanjay Garg) ACCOUNTANT MEMBER JUDICIAL MEMBER

Mumbai, Dated: 11.03.2015 * Kishore, Sr. P.S.

Copy to: The Appellant The Respondent The CIT, Concerned, Mumbai The CIT (A) Concerned, Mumbai The DR Concerned Bench //True Copy// [ 6 ITA Nos.4621 & 4600/M/2012 M/s. Pfizer Ltd.

By Order

Dy/Asstt. Registrar, ITAT, Mumbai.