The main legal point established in the judgment is the necessity for the assessing officer to clearly specify whether penalty is being levied for concealment of income or for furnishing inaccurate particulars of income when initiating penalty proceedings under Section 271(1)(c) of the Income Tax Act, 1961.

JUDGMENT

[Physical Hearing/Hybrid Hearing (as per request)]

Rajiv Shakdher, J. (Oral)

CM No. 26497/2023

1. Allowed, subject to all just exceptions.

CM Nos. 26498-99/2023

2. The above-captioned applications have been moved on behalf of the appellant/revenue, seeking condonation of delay in filing and re-filing the appeal.

2.1. According to the appellant/revenue, there is a delay of 24 days in filing and delay of 28 days in re-filing the appeal.

3. Mr Puneet Rai, learned senior standing counsel who appears on behalf of the appellant/revenue says, that the period of delay, both in filing and re-filing is short.

4. Accordingly, the delay in the above-captioned applications is condoned.

5. The above-captioned applications are disposed of in the aforesaid terms.

ITA 291/2023

6. This appeal concerns Assessment Year (AY) 2012-13.

7. The appeal seeks to lay challenge to the order dated 29.09.2022 passed by the Income Tax Appellate Tribunal [in short, "the Tribunal"].

8. The facts emerging from the record, which are necessary for adjudicating the appeal are the following.

9. On 28.09.2012, the respondent/assessee filed its return of income, wherein it had declared a loss amounting to Rs. 12,83,96,466/-.

9.1. The Assessing Officer (AO), having regard to the fact that there was a substantial increase in the expenses claimed by the respondent/assessee towards Real Estate Project Expenses, as compared to the previous years' claim issued a show-cause notice to the respondent/assessee.

9.2. It appears, that in response, the respondent/assessee filed a reply, wherein it, inter alia, stated that it was following the percentage completion method in the earlier years, whereby expenditure for ascertaining the revenue was based on expected estimates, and since the project was completed in the given AY, there was an enhancement in the expenses.

10. It appears, that the AO also flagged the fact, that the expenditure in the completion of project, which was claimed by the respondent/assessee as amounting to Rs. 78,40,58,041/- included a component, which according to the AO had yet not been incurred. This component was an amount equal to Rs. 35,34,96,000/-. It also appears, that although an explanation was sought, the respondent/assessee ultimately surrendered the loss claimed via its return, which resulted in the AO disallowing the loss in the initial return.

11. As noticed above, the loss claimed by filing the initial return was Rs. 12,83,96,466/-. Besides this, the AO also made an addition of Rs. 3,02,436/- out of a total amount of Rs. 3,89,61,695/- shown towards trade payables.

11.1. The reason given by the AO for this was, that even though trade payables qua two entities were shown as outstanding for more than three years, no legal proceedings had been initiated. The AO, thus, took recourse to the provisions of Section 41(1) of the Income Tax Act, 1961 [in short, "the Act"] and added Rs. 3,02,436/- which was payable by the said entities, on the ground that there was cessation/remission of liability.

12. It is on account of the aforementioned additions i.e., the surrender of loss by the respondent/assessee and the addition made towards trade payables which were outstanding for more than three years, that the AO was propelled to trigger penalty proceedings under Section 271(1)(c) of the Act. The net result was that the AO, via order dated 23.09.2015 levied the penalty of Rs. 4,36,41,961/-.

13. The respondent/assessee, being dissatisfied, preferred an appeal to the Commissioner of Income Tax (Appeals) [in short, CIT(A)]. The CIT(A), however, rejected the appeal, and sustained the penalty order passed by the AO. It is in this backdrop, that the respondent/assessee preferred a second appeal with the Tribunal.

14. The Tribunal, after noticing the backdrop which is set forth hereinabove, disposed of the appeal and set aside the penalty order, based on the defect which was noticed by it, insofar as the penalty proceedings were concerned.

15. Acco