Smt. Maltidevi Birbal Singh Vs. ITO (ITAT Mumbai), ITA No. 2863/Mum/2010, Dated 30th March, 2011 Briefly stated facts of the case are that the assessee, an individual derives income from manufacture of wire & wire ropes. The return was filed declaring total income at ` 4,07,734/-. However, the assessment was completed at an income of […] |
CIT not justified in passing ex parte order without allowing proper opportunity of being heard
Smt. Maltidevi Birbal Singh Vs. ITO (ITAT Mumbai), ITA No. 2863/Mum/2010, Dated 30th March, 2011
Briefly stated facts of the case are that the assessee, an individual derives income from manufacture of wire & wire ropes. The return was filed declaring total income at ` 4,07,734/-. However, the assessment was completed at an income of ` 5,08,730/- vide order dated 25.06.2007 passed u/s 143(3) of the Act. Subsequently, the ld. CIT in exercise of his powers u/s 263 of the Act observed that the assessment completed by the A.O. is found to be erroneous and prejudicial to the interests of the Revenue and accordingly he issued notice dated 14.12.2007 to show Smt. Maltidevi Birbal Singh cause as to why action u/s 263 should not be taken and the case was fixed for hearing on 4.12.2007 i.e. prior to the date of issuance of notice u/s 263. Thereafter, the case was fixed for hearing on various dates. The assessee sought adjournments and the case was finally fixed on 23.12.09. In the absence of any response by the assessee, the ld. CIT observed that the assessee has nothing to say against the proposed revision, therefore, he passed an ex parte order setting aside the assessment of the A.O. with a direction to pass fresh order after giving proper opportunity of being heard to the assessee.
Appellant's Contention
Appellant's chartered accountant attended twice before the Commissioner of Income Tax and on both the occasions as the Commissioner was busy with some other matters, the hearing could not take place and the appellant's chartered accountant was informed that a fresh notice would be issued. However, without issuing a fresh notice, the appellant received the order u/s.263.
Accordingly, the principles of natural justice were violated in as much as no fresh notice was issued and the order was passed without affording an opportunity to the appellant to put forth her case.
Held By ITAT
After carefully hearing the rival parties and perusing the material available on record and in the absence of any contrary material placed on record by the ld. D.R., we are of the view that the ld. CIT was not justified in passing ex parte order without allowing proper opportunity of being heard to the assessee, therefore, in the interest of justice, we consider it fair and reasonable that one more opportunity be provided to the assessee to represent her case before the ld. CIT and accordingly we set aside the order passed by the ld. CIT and restore the matter to his file who shall decide the same afresh and according to law after providing a reasonable opportunity of being heard to the assessee.
CIT vs Reliance Petro Products (P) Ltd. (322 ITR 158) Supreme Court- It was held that 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 and if the contention of the Revenue to this effect 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) which is clearly not the intendment of the Legislature. |
Mere making of a claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars
A.D.I.T. Vs. Fidelity Management & Research Co. (ITAT Mumbai), ITA No.6648/MUM/2009, ITA No.6649/MUM/2009, Dated 31st January, 2010It is observed that in the returns of income originally filed, both the assessees had declared the profit on sale of securities as capital gains. Subsequently, on the basis of the order passed by AAR in the case of XYZ/ABC Equity Fund (250 ITR 194) and Fidelity Advisors Series VIII (271 ITR 1), the assessees felt that the said profits may constitute their business profits and as the assessees did not have any Permanent establishment in India, the same would not be taxable in India. Accordingly, they filed revised returns claiming the income as exempt and appending a note explaining the reason for the same. This claim of the assessees, however, was not accepted by the AO and the income of the assessees was held to be chargeable to tax as capital gain by him in the assessments. He also imposed penalties u/s 271(1)(c) holding that there was concealment on the part of the assessees in the revised returns filed by them. As demonstrated by the assessees before the learned CIT(A) on the basis of a note appended to the revised returns, there was however no case of furnishing of any inaccurate particulars by the assessses. The said note has already been extracted by us above from the impugned order of the learned CIT(A) and a perusal of the same shows that the reason for claiming exemption of its income on the basis of AAR ruling was duly explained by the assessees which is sufficient to show that the said claim was made bona-fide and in good faith. Moreover, all the material particulars relevant to the said claim were fully and truly furnished by the assessees alongwith their revised returns. Even the AO has not pointed out any falsity in the said particulars either in the assessment order or in the penalty order.In its recent judgment delivered in the case of CIT vs Reliance Petro Products (P) Ltd. (322 ITR 158), Hon'ble Supreme Court has held that S. 271 (1) (c) applies where the assessee "has concealed the particulars of his income or furnished inaccurate particulars of such income". As regards the furnishing of inaccurate particulars, it was found by the Hon'ble Supreme Court that no information given in the Return was found to be incorrect or inaccurate. It was held that 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 and 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). The argument of the revenue raised in this regard that "submitting an incorrect claim for expenditure would amount to giving inaccurate particulars of such income" was not found to be acceptable by the Hon'ble Apex Court observing that by no stretch of imagination can the making of an incorrect claim in law tantamount to furnishing inaccurate particulars. It was held that 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 and if the contention of the Revenue to this effect 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) which is clearly not the intendment of the Legislature. It is observed that applying this ratio of the decision of Hon'ble Supreme Court in the case of Reliance Petro Products (P) Ltd. (supra), the penalties imposed by the AO u/s 271(1)(c) in the cases of Fidelity Management & Research Co. A/C Fidelity Focus Technology Fund and Fidelity Management & Research Co. A/C Fidelity Investment Canada involving identical facts and circumstances have been held to be not sustainable by the Tribunal vide its order dated 30th September, 2010 in ITA Nos. 14 & 15/MUM/2010. Respectfully following the said judicial pronouncement, we uphold the impugned orders of the learned CIT(A) cancelling the penalties imposed by the AO and dismiss these appeals filed by the Revenue.- See more at: Mere making of a claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars
A.D.I.T. Vs. Fidelity Management & Research Co. (ITAT Mumbai), ITA No.6648/MUM/2009, ITA No.6649/MUM/2009, Dated 31st January, 2010
It is observed that in the returns of income originally filed, both the assessees had declared the profit on sale of securities as capital gains. Subsequently, on the basis of the order passed by AAR in the case of XYZ/ABC Equity Fund (250 ITR 194) and Fidelity Advisors Series VIII (271 ITR 1), the assessees felt that the said profits may constitute their business profits and as the assessees did not have any Permanent establishment in India, the same would not be taxable in India. Accordingly, they filed revised returns claiming the income as exempt and appending a note explaining the reason for the same. This claim of the assessees, however, was not accepted by the AO and the income of the assessees was held to be chargeable to tax as capital gain by him in the assessments. He also imposed penalties u/s 271(1)(c) holding that there was concealment on the part of the assessees in the revised returns filed by them. As demonstrated by the assessees before the learned CIT(A) on the basis of a note appended to the revised returns, there was however no case of furnishing of any inaccurate particulars by the assessses. The said note has already been extracted by us above from the impugned order of the learned CIT(A) and a perusal of the same shows that the reason for claiming exemption of its income on the basis of AAR ruling was duly explained by the assessees which is sufficient to show that the said claim was made bona-fide and in good faith. Moreover, all the material particulars relevant to the said claim were fully and truly furnished by the assessees alongwith their revised returns. Even the AO has not pointed out any falsity in the said particulars either in the assessment order or in the penalty order.
In its recent judgment delivered in the case of CIT vs Reliance Petro Products (P) Ltd. (322 ITR 158), Hon'ble Supreme Court has held that S. 271 (1) (c) applies where the assessee "has concealed the particulars of his income or furnished inaccurate particulars of such income". As regards the furnishing of inaccurate particulars, it was found by the Hon'ble Supreme Court that no information given in the Return was found to be incorrect or inaccurate. It was held that 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 and 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). The argument of the revenue raised in this regard that "submitting an incorrect claim for expenditure would amount to giving inaccurate particulars of such income" was not found to be acceptable by the Hon'ble Apex Court observing that by no stretch of imagination can the making of an incorrect claim in law tantamount to furnishing inaccurate particulars. It was held that 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 and if the contention of the Revenue to this effect 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) which is clearly not the intendment of the Legislature. It is observed that applying this ratio of the decision of Hon'ble Supreme Court in the case of Reliance Petro Products (P) Ltd. (supra), the penalties imposed by the AO u/s 271(1)(c) in the cases of Fidelity Management & Research Co. A/C Fidelity Focus Technology Fund and Fidelity Management & Research Co. A/C Fidelity Investment Canada involving identical facts and circumstances have been held to be not sustainable by the Tribunal vide its order dated 30th September, 2010 in ITA Nos. 14 & 15/MUM/2010. Respectfully following the said judicial pronouncement, we uphold the impugned orders of the learned CIT(A) cancelling the penalties imposed by the AO and dismiss these appeals filed by the Revenue.
PFA
Section 144 of the Companies Act,2013
Extract of Section 144 of the Companies Act,2013
144. Auditor not to render certain services
An auditor appointed under this Act shall provide to the company only such other services as are approved by the Board of Directors or the audit committee, as the case may be, but which shall not include any of the following services (whether such services are rendered directly or indirectly to the company or its holding company or subsidiary company, namely:—
(a) accounting and book keeping services;
(b) internal audit;
(c) design and implementation of any financial information system;
(d) actuarial services;
(e) investment advisory services;
(f) investment banking services;
(g) rendering of outsourced financial services;
(h) management services; and
(i) any other kind of services as may be prescribed:
Provided that an auditor or audit firm who or which has been performing any non-audit services on or before the commencement of this Act shall comply with the provisions of this section before the closure of the first financial year after the date of such commencement.
Explanation.—For the purposes of this sub-section, the term "directly or indirectly" shall include rendering of services by the auditor,—
(i) in case of auditor being an individual, either himself or through his relative or any other person connected or associated with such individual or through any other entity, whatsoever, in which such individual has significant influence or control, or whose name or trade mark or brand is used by such individual;
(ii) in case of auditor being a firm, either itself or through any of its partners or through its parent, subsidiary or associate entity or through any other entity, whatsoever, in which the firm or any partner of the firm has significant influence or control, or whose name or trade mark or brand is used by the firm or any of its partners.
- See more at: Section 144 of the Companies Act,2013
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