|COURT:||Bombay High Court|
|CORAM:||A. K. Menon J., M. S. Sanklecha J|
|CATCH WORDS:||concelment Penalty, furnishing inaccurate particulars of income|
|COUNSEL:||B. V. Jhaveri, S. Sriram|
|DATE:||March 9, 2017 (Date of pronouncement)|
|DATE:||March 23, 2017 (Date of publication)|
|FILE:||Click here to download the file in pdf format|
|S. 271(1)(c): A disclosure of income, or withdrawal of claim for deduction, by the assessee after a specific s. 142(1)/ 143(2) notice is issued cannot be said to be a "voluntary disclosure" so as to avoid the levy of penalty. The argument that the earlier non-disclosure of income/ wrong claim for expenditure was due to "mistake" is not an acceptable defense (Mak Data 358 ITR 593 (SC) followed, Price Waterhouse Coopers 348 ITR 306 (SC) distinguished)|
The assessee is engaged in shipping business. The assessee is assessed to tax under Chapter XIIG of the Act to the extent its income is earned from vessels, satisfying/ qualifying the requirements thereof (tonnage income). So far as the income from other vessels i.e. non qualifying vessels (non tonnage income) is concerned, the same is subjected to tax under the head “Profit & Gain from its Business or Profession”. Thus, classifying its income as tonnage business and non tonnage business. During the subject Assessment Year, the assessee had suffered foreign exchange loss in respect of its tonnage business which is taxable under Chapter XIIG of the Act. However, the above foreign exchange loss of Rs.9.37 lakhs was debited to compute its non tonnage income while bringing it to tax under Profit & Gain from business or profession. The Assessing Officer issued a notice under Sections 142(1) & 143(2) of the Act, calling various details/ information as set out in the annexure thereto. This included information regarding details of expenses debited in its Profit & Loss Account and expenses incurred on account of foreign exchange. Thereafter, the assessee responded to the same and by order dated 24th December, 2009, the Assessing Officer determined the assessee to an income of Rs.2.58 Crores under Section 143(3) of the Act. This was after adding the foreign exchange loss of Rs.9.37 lakhs which had been incorrectly debited while computing its nontonnage income. The order of the Assessing Officer records that this was done after it was found on verification that no foreign exchange loss was incurred in respect of non tonnage income. Besides, initiating penalty proceedings under Section 271(1)(c) of the Act. Thereafter, order dated 30th June, 2010, was passed by the Assessing Officer, imposing a penalty under Section 271(1)(c) of the Act, wherein it specifically records the fact that though there were no transaction in foreign currency resulting in foreign exchange loss, in case of non tonnage income, yet the assessee had debited exchange loss to its non tonnage business only to reduce its non tonnage income being offered to tax. Therefore, by an order dated 30th June, 2010, the Assessing Officer imposed a penalty of Rs.3.09 lakhs being 100% tax sought to be evaded by debiting foreign exchange loss of Rs.9.37 lakhs to determine its non tonnage income. This was confirmed by the CIT(A) and the ITAT. On appeal by the assessee to the High Court HELD dismissing the appeal:
6 Being aggrieved, the assessee carried the above issue of penalty in appeal to the Commissioner of Income Tax (Appeals) [CIT(A)]. By order dated 15th July, 2012, the CIT(A) dismissed the assessee’s appeal. This, by holding that there was a deliberate attempt on the part of the assessee to furnish inaccurate particulars so as to reduce its taxable income. The Explanation of mistake offered for the same by the was not found to be satisfactory even by the CIT(A). 7 Being aggrieved, the assessee filed a second appeal to the Tribunal against imposition of penalty. By the impugned order dated 18th June, 2014, the Tribunal upheld the imposition of penalty under Section 271(1)(c) of the Act. This by negativing the assessee’s contention before it that allocating/ debiting the foreign exchange loss to determine its nontonnage income, was a mistake and the mistake had been voluntarily disclosed by the during the assessment proceedings. The contention of the was not accepted as the socalled disclosure was made by the only after it received notices S.R.JOSHI 3 of 7 ::: Uploaded on – 15/03/2017 ::: Downloaded on – 16/03/2017 22:46:40 ::: Itxa-1718-2014 under Section 142(1) & 143(2) of the Act, calling for various details. Moreover, the Explanation offered by the for having debited foreign exchange loss to determine nontonnage loss, was not found to be satisfactory by the Assessing Officer as well as by the CIT(A). The impugned order of the Tribunal also placed reliance upon the decision of the Apex Court in, that voluntary disclosure itself does not release the assessee from penal consequences.
(i) From the record it is clear that the notice under Sections 142(1) and 143(2) of the Act were issued to the assessee on 14th January, 2009. The notice also contains an annexure, seeking details of expenses debited to Profit and Loss Account, along with details of foreign exchange expenses. Even according to the assessee, the alleged mistake on its part was pointed out by a letter dated 23rd September, 2009 during assessment proceedings where it stated that it had committed a mistake in debiting foreign exchange loss to its determine non tonnage income, when in fact, no foreign exchange loss was involved in respect of its non tonnage business. Thus, it is clear that so called mistake as claimed by the assessee, was only after notices dated 14th January, 2009 were issued under Sections 142 and 143 of the Act. It was only an attempt to preempt the Revenue finding out the assessee had furnished inaccurate particulars. Therefore, it cannot be said that it was voluntary disclosure. In fact, the Apex Court in MAK Data P. Ltd., v/s. Commissioner of Income Tax 358 ITR 593 has observed that “The Assessing Officer, in our view, shall not be carried away by the plea of the Assessee like “voluntary disclosure”, “buy peace”, “avoid litigation” “amicable settlement” etc. to explain its conduct.” The Apex Court has also further observed that “It is trite law that the voluntary disclosure does not release assessee from the mischief of penal proceedings. The law does not provide that when an assessee makes a voluntary disclosure of his concealed income, he had to be absolved from penalty.” In the peculiar fact of the present case, the so called voluntary disclosure was only after the Assessing Officer initiated proceedings under Section 142 of the Act. Thus, it was not a voluntary disclosure. In fact, the Assessment Order dated 24th December, 2009 under Section 143(3) of the Act also records the fact of verification by the Assessing Officer, leading to a finding that the assessee had debited foreign exchange loss to arrive its nontonnage income. This order was accepted and no grievance in respect of the same being found by the Assessing Officer, was made by the assessee. It is only in penalty proceedings that this issue is raised for the first time. Further, the assessee besides stating it is a mistake, has not offered any explanation. Therefore, the explanation under Section 271(1)(c) of the Act was not found to be satisfactory by the authorities under the Act and penalty imposed and sustained.
(ii) Reliance placed by the assessee upon the decision of the Apex Court in Price Waterhouse Coopers (P) Ltd., v/s. CIT 348 ITR 306, is inappropriate in the facts of the present case. In the above case, the Apex Court noted the fact that Tribunal had itself come to a finding that there was a silly mistake on the part of the assessee in not having added the provision for gratuity to its total income even when the documents accompanying the return of income, did show that provision for gratuity is not allowable as deduction under Section 40(7) of the Act. Thus, it was only a computation error in the return of income. In the present facts, none of the authorities including the Tribunal have found the debit of foreign exchange loss to its non tonnage business was made on account of a mistake. Nor can it be classified as a computation error after complete disclosure. Thus, the aforesaid decision does not assist the assessee.