Income Tax Appellate Tribunal - Chennai
Rattha Citadines Boulevard Chennai (P) ... vs Department Of Income Tax on 31 July, 2015
आयकर अपील य अ
धकरण, 'सी' यायपीठ, चे नई
IN THE INCOME TAX APPELLATE TRIBUNAL
' C' BENCH : CHENNAI
ी एन.आर.एस. गणेशन, या यक सद य एवं
ी चं पज
ू ार , लेखा सद य के सम$ ।
[BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND
SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER]
आयकर अपील सं./I.T.A.No.243/Mds/2015
नधा रण वष /Assessment year : 2010-2011
The Deputy Commissioner Vs. M/s. Rattha Citadines
of Income Tax, Boulevard Chennai (P) Ltd,
Corporate Circle 5(1) No.37, TTK Road,
Chennai 600 034. Alwarpet,
Chennai 600 018.
[PAN AADCR 4383D ]
(अपीलाथ'/Appellant) (()यथ'/Respondent)
अपीलाथ क ओर से/ Appellant by : Shri. A.V. Sreekanth, IRS, JCIT.
यथ क ओर से /Respondent by : Shri. K.M. Mohandass, C.A.
सन
ु वाई क तार ख/Date of Hearing : 13-07-2015
घोषणा क तार ख /Date of Pronouncement : 31-07-2015
आदे श / O R D E R
PER CHANDRA POOJARI, ACCOUNTANT MEMBER
This appeal by the Revenue is directed against the order of the Commissioner of Income-tax (Appeals)-V, Chennai, dated 7.10.2014 for the assessment year 2010-2011.
:- 2 -: ITA No.243/Mds/2015
2. The ground raised by the Revenue is with regard to deletion of penalty by the Commissioner of Income Tax (Appeals) levied by the Assessing Officer u/s.271(1)(c) of the Income Tax Act, 1961.
3. The facts of the case are that the assessee filed the return of income on 14-10-2010 declaring Nil income which was revised subsequently on 18-03-2011 admitting a loss of C1,23,51,488/- after adjusting the notional income of C4,76,517/- computed on account of restatement of foreign currency loan liability. The case was selected for scrutiny and the assessment was completed under Section 143(3) of the Act, disallowing the loss claimed by the assessee and assessed the income at C4,76,517/-. The Assessing Officer had relied upon the order of the Apex Court in the case of Tuticorin Alkali & Chemicals Fertilizers Limited vs. CIT reported in 227 ITR 172 and arrived at the said conclusion on the reason that the assessee has not commenced any business activity during the year under consideration. Subsequently, notice under Section 274 read with Section 271(1)(c) was issued by the Assessing Officer showcausing the assessee as to why penalty under section 271(1)(c) of the Act cannot be levied for furnishing inaccurate particulars of income. The Assessing Officer has not considered the submission of the assessee and levied a penalty of C39,63,854/- which was 100% of the tax sought to be evaded, had the expenditure claimed by the assessee in the revised Return of Income :- 3 -: ITA No.243/Mds/2015 been allowed. Aggrieved by the order of the Assessing Officer made u/s.271(1)(c) of the Act dated 26.09.2013. Against this, the assessee carried the appeal before the Commissioner of Income Tax (Appeals).
4. The Commissioner of Income Tax (Appeals) placing reliance on the order of the Supreme Court in the case of CIT vs. Reliance Petro Products Pvt. Ltd 322 ITR 158 (SC), deleted the penalty. Against this, the assessee is in appeal before us.
5. The ld. Departmental Representative pointed out that the assessee had filed a revised return of income and it was obviously as per the provisions of sub section (5) of Section 139 which reads as under:
(5) If any person, having furnished a return under sub-section (1), or in pursuance of a notice issued under sub-section (1) of section 142, discovers any omission or any wrong statement therein, he may furnish a revised return at any time before the expiry of one year from the end of the relevant assessment year or before the completion of the assessment, whichever is earlier:
Provided that where the return relates to the previous year relevant to the assessment year commencing on the 1st day of April, 1988, or any earlier assessment year, the reference to one year aforesaid shall be construed as a reference to two years from the end of the relevant assessment year The assessee had already filed the original return of income on 14.10.2010. Therefore, when the assessee filed a revised return it should have been warranted by either of the following two situations:
:- 4 -: ITA No.243/Mds/2015
a) The assessee discovers any omission
b) The assessee discovers any wrong statement therein In the original return of income, the assessee had filed a 'Nil' income whereas in the revised return of income, the assessee has claimed a loss of C1,25,30,730/-. Therefore, it can be safely stated that the omission or the wrong statement based on which the assessee chose to revise by filing a revised return is the claim of loss of C1,25,30,730/-
which was in turn based on the expenditure. How was the loss arrived? In this regard, the assessee submitted before the CIT (Appeals) that it filed a revised return claiming loss, on account of expenditure( administrative expenditure and finance charges) under the bonafide belief that it was 'revenue expenditure'. If that be so, then the moot question is this - Did the assessee not believe the very same expenditure to be 'revenue' when it filed the original return of income on 14.10.2010? It followed logically that the assessee believed that the expenditure cannot be claimed as revenue when it filed the original return of income. That was the reason why it filed a return showing 'NIL' Income. However, for reasons best known to it, the assessee filed a revised return claiming the very same expenditure to be 'revenue'.
6. The ld. Departmental Representative further submitted that the original return of income has been filed by the assessee within :- 5 -: ITA No.243/Mds/2015 the time allowed due date for filing return of income under section 139(1) of the Act. By that time, the accounts have been finalized and audit of the accounts was also over. Therefore, there could be no change in the facts and figures, be it the profit and loss account, the balance sheet or the audit report or the Director's report. The original return of income has been filed based on these figures and facts. By signing the verification column in the return of income, the assessee had declared that the information in the return and the schedules thereto are correct and complete and the amount of total income and other particulars shown therein are truly stated and are in accordance with the provisions of the Income tax Act 1961. Therefore, at the time of filing of original return of income, the assessee was fully aware of the correctness and completeness of the information furnished in the return of income. The assessee chose to file a revised return of income based on the same set of facts and figures, profit and loss account and the balance sheet as declared in the original return of income, but claiming loss, on account of expenditure. The very act of filing a revised return of income claiming loss as against 'Nil' income in the original return by itself amounts to furnishing of inaccurate particulars warranting penalty u/s 271(1)(c). Assuming that the claim of the assessee that it filed the revised return of income on the bonafide belief that the expenditure was revenue, the fact that the :- 6 -: ITA No.243/Mds/2015 assessee chose to meekly accept the disallowance and decide not to contest the same in appeal support's the argument of the revenue that the assessee filed the revised return consciously and fully aware that the claim was wrong and should not have been made in the first place.
7. The ld. Departmental Representative further contended that the CIT(Appeals) in his order referred to the reliance of the ld. Authorised Representative for assessee on the decision of the Jurisdictional High Court in the case of CIT vs. M/s. Gem Granites (Karnataka) in Tax Case (Appeal) No.504 of 2009 dated 12.11.2013 wherein it was held that for sustaining penalty, the bonafide explanation of the assessee must be looked into, so that the contumacious conduct of the assessee for the purpose of sustaining the penalty would be taken as a condition that was the main requirement under section 271(1)(c) of the Act. As pointed out, the very act of filing a revised return of income claiming loss as against 'Nil' income in the original return by itself amounts to furnishing of inaccurate particulars warranting penalty u/s 271(1)(c). The contumacious conduct of the assessee was established because the assessee makes a claim of loss in the revised return of income based on the very facts and figures which were existing when the assessee files the original return of income. Consequently, in this case :- 7 -: ITA No.243/Mds/2015 penalty u/s 271(1)(c) was attracted and it was prayed that the order of the Assessing Officer be upheld.
8. On the other hand, the ld. Authorised Representative for assessee relied on the order of the Commissioner of Income Tax (Appeals) and submitted that the expenditure claimed by the Assessee was disallowed only on account of difference of opinion between the Assessee and the Assessing Officer, hence the levy of penalty under section 271(1)(c) of the Act was uncalled for. The Assessee had furnished all the details of its expenditure as well as income in its return of income, which details, in themselves, were not found to be inaccurate nor could be viewed as concealment of income on its part. It was upto the Assessing Officer to accept its claim in the return or not. Merely because the assessee had claimed the expenditure, which claim was not accepted that by itself would not attract penalty under Section 271(1)(c) of the Act. The Assessee had filed the Return of Income claiming loss on account of expenditure incurred during the year as revenue expenditure allowable under Section 30 to 37 of the Income Tax Act, as the assessee has already taken steps to commence its activities and also the expenses are mainly comprising of interest payment to the bank of C1,25,30,730/- on the loan borrowed and other regular administrative expenses of C2,97,275/- which was disallowed by the Assessing Officer under the contention that the :- 8 -: ITA No.243/Mds/2015 assessee has not commenced its business operations holds good in assessing the income of the assessee but not for levy of penalty under section 271(1)(c) of the Act. It was held by various courts that levy of penalty was not a necessary concomitant of assessment proceedings. Both the proceedings are different in nature and findings in assessment proceedings are not conclusive in penalty proceedings. The bare fact that it was held in assessment proceedings that the assessee concealed its income cannot be made the basis of the conclusion that he had been guilty of deliberately concealing particulars of its income. Before the assessee is held liable for concealing the particulars of income or furnishing inaccurate particulars of such income, it has to be independently found in penalty proceedings that the disputed amount represents his income.
9. The ld. Authorised Representative for assessee further submitted that the Supreme Court in the case of Ananthraman Veerasinghaiah & Co. vs. CIT 123 ITR 457 has held that the findings in the assessment proceedings cannot be regarded as conclusive for the purposes of the penalty proceedings. It was, therefore, necessary to re-appreciate and reconsider the matter so as to find out as to whether the addition made in the quantum proceedings actually represents the concealment on the part of the :- 9 -: ITA No.243/Mds/2015 assessee as envisaged in Section 271(1)(c) of the Act and whether it was a fit case to impose the penalty by invoking the said provisions. It was submitted that, in the instant case, there was no concealment of income as the income assessed was only a notional income computed by restating the foreign currency liability at the end of the year in compliance with Accounting Standards which cannot by any stretch of imagination can be called as concealment of income or furnishing inaccurate particulars of such income. Further, the expenditure claimed by the assessee was under
bonafide belief that the said expenditure was a revenue expenditure based on the Audited Statements of Account which cannot be termed as furnishing inaccurate particulars of such income, hence levy of penalty under section 271(1)(c) is uncalled for. It was submitted that in order to apply the provisions of Section 271(1)(c), there has to be concealment of particulars of the income of the assessee. Secondly, the assessee must have furnished inaccurate particulars of its income. In the present case, it was not the case of the Assessing Officer that the assessee has concealed the particulars of its income. The Assessing Officer has imposed penalty on the ground that the assessee has furnished inaccurate particulars of its claim of expenditure.
10. The ld. Authorised Representative for assessee placed reliance on the judgment of the Supreme Court in the case of CIT vs. :- 10 -: ITA No.243/Mds/2015 Reliance Petroproducts (P.) Ltd. (cited supra), wherein it was observed as under (page 164 of the report):
In order to expose the assessee to the penalty unless the case is strictly covered by the provision, the penalty provision cannot be invoked. By any stretch of imagination, making an incorrect claim in law cannot tantamount to furnishing inaccurate particulars. In Commissioner of Income-tax, Delhi v. Atul Mohan Bindal [2009] 9 SCC 589, where this Court was considering the same provision, the Court observed that the Assessing Officer has to be satisfied that a person has concealed the particulars of his income or furnished inaccurate particulars of such income. This Court referred to another decision of this Court in Union of India vs. Dharamendra Textile Processors [2008] 13 SCC 369, as also, the decision in Union of India v. Rajasthan Spg. & Wvg. Mills [2009] 13 SCC 448 and reiterated in para 13 that (page 13 of 317 ITR ):
"13. It goes without saying that for applicability of section 271 (1)(c), conditions stated therein must exist. '"
Their Lordships, after considering various decisions including Dilip N. Shroff v. Jt. CIT [2007] 291 ITR 51 9 (SC) and Dharamendra Textile Processors' case (supra) have observed and held (page 158 headnotes) as under:
"A glance at the provisions of section 271(1)(c) of the Income-tax Act, 1961, suggests that in order to be covered by it, there has to be concealment of the particulars of the income of the assessee. Secondly, the assessee must have furnished inaccurate particulars of his income. The meaning of the word "particulars" used in section 271(1)(c) would embrace the details of the claim made. Where no information given in the return is found to be incorrect or inaccurate, the assessee cannot be held guilty of furnishing inaccurate particulars. In order to expose the assessee to penalty, unless the case is strictly covered by the provision, the penalty provision cannot be invoked. By no stretch of imagination can making an incorrect claim tantamount to furnishing inaccurate particulars. There can be no dispute that everything would depend upon the return filed by the assessee, because that is the only document where the assessee can furnish the particulars of his income. When such particulars are found to be inaccurate, the liability would arise. To attract penalty, the details supplied in the return must not be accurate, not exact or correct, not :- 11 -: ITA No.243/Mds/2015 according to the truth or erroneous.
Where there is no finding that any details supplied by the assessee in its return are found to be incorrect or erroneous or false there is no question of inviting the penalty under section 271(1)(c). A mere making of a claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee. Such a claim made in the return cannot amount to furnishing inaccurate particulars. "
11. The ld. Authorised Representative further placed reliance on the order of the jurisdictional High Court in the case of CIT vs. M/s. Gem Granites (cited supra) wherein it was observed that for sustaining penalty, the bonafide explanation of the assessee must be looked at so that the contumacious conduct of the assessee for the purposes of sustaining the penalty would be taken as condition that is the main requirement under Section 271 (1) (c) of the Act. This view also finds support from the decision in CIT vs. Sidhadha Enterprises (2010) 322 ITR 80 (P&H) and CIT vs. Shahabad Co- op Sugar Mills Ltd (2010) 322 ITR 73 (P&H). In the instant case, the assessee has claimed expenditure incurred during the period of pre-commencement of business as revenue expenditure based on the Audited Statements of Account under bona fide belief, hence treating the said claim as 'furnishing inaccurate particulars' and invoking the provisions of Section 271 (1 )(c) of the Act, is against the provisions of the Act. The ld. Authorised Representative for assessee Has also pleaded during the course of appellate proceedings that the penalty proceedings are :- 12 -: ITA No.243/Mds/2015 independent of the assessment proceedings. He has also relied on the decision of the Supreme Court in the case of Ananthraman Veerasinghaiah & Co. vs. CIT (cited supra) wherein it was held that the findings in the assessment proceedings cannot be regarded as conclusive for the purpose of the penalty proceedings. Just because a claim of deduction has been disallowed and the assessee has not preferred any appeal against the Assessment Order would not mean that the assessee has intended to evade the taxes. It is the duty of the Assessing Officer to consider the facts of the case and the submissions afresh and make a determination as whether an assessee has concealed the income or furnished inaccurate particulars of such income. For a penalty to sustain, the assessee should have a malafide intention to evade the payment of taxes. The assessee, in the present case, has offered the income of C.4,76,517/- which was computed on account of restatement of foreign currency loan liability. Such an income was notional in nature and not actual income earned by the assessee and has been recognized as income only in compliance with the Accounting Standards issued by ICAI. However, the assessee has offered such income to tax and setoff such income against the pre- commencement of business expenses incurred by the assessee in the nature of interest payment of C1,25,30,730/- and other regular administrative expenses of C2,97,275/-. The AO has followed the :- 13 -: ITA No.243/Mds/2015 decision of Apex Court in the case of Tuticorin Alkali Chemicals & Fertilizers Limited vs. CIT (cited supra) and disallowed the setoff of claim of the income against the business pre-commencement expenses incurred during the year. The assessee's AR in his written submissions, has quoted the decision of the Apex Court in the case of Tuticorin Alkali Chemicals & Fertilizers Limited (cited supra) and distinguished the facts of the assessee's case with that of the facts in the case of Tuticorin Alkali Chemicals & Fertilizers Limited. The Supreme Court in that case has held that any income earned by an assessee during the course of pre- production phase is revenue in nature and has to be offered to tax and should not to be offset against the pre-production expenses. On the contrary, the facts in the assessee's case are different as the income computed by the assessee is only a notional income and not an actual income earned. The notional income was computed to restate the foreign currency loan liability at the prevalent exchange rate as at the end of the Financial Year, adhering to the Accounting Standards issued by the ICAI.
12. The ld. Authorised Representative for assessee further submitted that the Indian Income Tax Act does not contemplate to tax the notional gains, but the actual gains. Hence, in the present case, though the income computed as a result of restatement of :- 14 -: ITA No.243/Mds/2015 foreign currency loan liability was notional in nature, the assessee has still offered such income to tax and offset against the pre- commencement expenses incurred by the assessee. The AO has disallowed the claim of the assessee and assessed the income of the assessee by assessing the notional income under the head 'Income from Other Sources' and disallowed the resultant loss claimed. The assessee with a view not to have protracted litigation with the Income Tax Authorities has accepted the income assessed and paid the tax due thereon even without disputing the disallowance of claim of expenditure. The AO has disallowed the assessee's claim of loss for the assessment year under consideration and invoked the provisions of Section 271(1)(c) alleging that the assessee had furnished inaccurate particulars for claim of loss and computed the quantum of penalty on the basis of tax sought to be evaded.
13. We have heard both the sides and perused the material on record. We consider it appropriate to reproduce Explanation 1 to Section 271(1)(c), which deals with penalty for concealment of income and for furnishing of inaccurate particulars, as follows Where in respect of any facts material to the computation of the total income of any person under this Act, ' :- 15 -: ITA No.243/Mds/2015 (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 Commissioner to be false, or (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.
14. It is thus clear that the onus is on the assessee to prove, inter alia, that such explanation is given by the assessee is bonafide. In the present case, the assessee's explanation for making this claim for deduction, in respect of entire amount incurred towards administrative and finance charges, is that this admittedly erroneous claim was made because of the Auditors Report for the assessment year concerned, and as such it was a bonafide mistake on the part of the assessee to have claimed the deduction.
15. In the case of CIT v. Nathulal Agarwala & Sons (145 ITR
292), Full Bench of Patna High Court has observed as follows:
"As to the nature of explanation offered by the assessee, it seems plain on principle that it is not the law that the moment any fantastic or unacceptable explanation is given, the burden placed on him will be discharged and presumption rebutted. It is not the law, and perhaps hardly can be, that any and every explanation of the assessee must be accepted. In my view, the explanation of the assessee for avoidance of penalty must be an acceptable explanation. He may not prove what he asserts to the :- 16 -: ITA No.243/Mds/2015 hilt positively, but at least material brought on record must show that what he says is reasonably valid."
16. The above views were approved by the Supreme Court in the case of CIT v. Mussadilal Ram Bharose (165 ITR 14). Referring the judgment of Hon'ble Patna High Court, Their Lordships have observed as follows :
"The Patna High Court emphasized that as to the nature of explanation to be rendered by the assessee, it was plain on principle that it is not the law that the moment any fantastic or unacceptable explanation is given, the burden placed on him will be discharged and presumption rebutted. We agree. We further agree that it is not the law that each and every explanation by the assessee must be accepted. It must be acceptable explanation, acceptable to a fact finding body."
17. Viewed in this perspective, just because assessee has an explanation- whatever be its worth and credibility, it does not cease to be a case in which no penalty can be levied. The explanation of the assessee has to be considered on merits and one has to examine as to whether the explanation so given by the assessee can be treated as an acceptable explanation or not.
18. A plain look at the profit and loss account shows that statutory auditor has opined that the assessee has incurred loss for the year ended on 31.03.2010. There cannot indeed be any quarrel with this proposition, but then this Auditors Report does not deal with the provisions of Income Tax Act. As per Income Tax Act expenditure :- 17 -: ITA No.243/Mds/2015 incurred during pre-commencement period cannot be allowed as deduction while computing the income of the assessee. There was thus no reason for assessee to deviate from the provisions of Income Tax Act, when admittedly the assessee has not commenced its business activities in the assessment year under consideration. The onus is on the assessee to prove that the explanation is bonafide but there is nothing from the assessee to even indicate, leave aside proving, that there was any reason to believe that the expenditure is allowable. The Auditor's report did not deal with this aspect at all. One can perhaps even understand ignorance about a legal provision, but once the assessee is on record not only being aware about this provision but also preparing the income tax return in the light of the said provision, there cannot be any justification about assessee ignoring the clear mandate of the provision. Such an action on the part of the assessee, in our considered opinion, cannot be said to be bonafide. In our humble understanding, the explanation of the assessee is not acceptable and we reject the same. In any case, Auditors report obtained by the assessee cannot override Income Tax provisions and just because the assessee's claim is supported by a chartered accountant's opinion, this fact per se cannot absolve the assessee from penalty under section 271(1)(c).
:- 18 -: ITA No.243/Mds/2015 19. As regards learned counsel's reliance on Supreme Court
judgment in the case of Reliance Petroproducts Ltd. (supra), we have noticed that it was a case in which Their Lordships were only concerned with the question whether "in this case, as a matter of fact, the assessee has given inaccurate particulars". Their Lordships noted that "in this case, there is no finding that any details supplied by the assessee in its return were found to be incorrect or erroneous or false"
and add that "such being the case, there would be no question of inviting the penalty under section 271(1)(c) of the Act" and that "a mere making of the claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding income of the assessee.
20. However, this is not the end of the matter. Not only that the penalty provisions cover the situations in which the assessee has concealed income or furnished the inaccurate particulars, in certain situation, even without there being anything to indicate so, statutory deeming fiction for income in respect of which 'particulars have been concealed'. In addition to normal connotations of 'concealment' thus, a deeming fiction is also implicit in the scheme of penalty provisions. This deeming fiction, by way of Explanation 1 to section 271(1)(c) envisages two situations (a) first, where in respect of any facts material to the computation of total income under the provisions of the :- 19 -: ITA No.243/Mds/2015 Act, the assessee fails to offer an explanation or the explanation offered by the assessee is found to be false by the Assessing Officer or the CIT(A); and, (b) second, where in respect of any facts material to the computation of total income under the provisions of this Act, the assessee is not able to substantiate the explanation and the assessee fails to prove that such explanation is bona fide and that the assessee had disclosed all the facts relating to the same and material to the computation of total income. In the first situation, the deeming fiction is triggered by the inaction of the assessee by his not giving the explanation with respect to any fact material to the computation of total income, or by action of the Assessing Officer by giving categorical finding to the effect that the explanation given by the assessee is false. In the second situation, the deeming fiction is triggered by the failure of the assessee leading to satisfaction of conditions laid down in Clause B of Explanation 1 to section 271(1)(c), viz the assessee is not able to substantiate an explanation in respect of any fact material to the computation of total income, and, in addition to this, the assessee is also not able to prove that such given explanation was bona fide and all the facts relating to the same and material to the computation of total income have been disclosed by the assessee. When this deeming fiction comes into play, the related addition or disallowance in computing the total income of the assessee, :- 20 -: ITA No.243/Mds/2015 for the purposes of section 271(1)(c), is deemed to represent the income in respect of which inaccurate particulars have been furnished, but then the levy of penalty hinges on assessee's substantiating the explanation, proving that it is bona fides and that all the material facts are disclosed.
21. On the facts of the present case, we are dealing with not only an inadmissible claim of deduction but a claim of deduction which is contrary to the plain words of the statute and on which no two opinions are possible. This situation cannot be equated with a claim of deduction under section 14 A in respect of which, as Supreme Court had observed in the case of Reliance Petroproducts (supra), the assessee's plea was that "that the disallowance made by the Assessing Authority in the assessment order under section 143(3) of the Act were solely on account of different views taken on the same set of facts and, therefore, they could, at the most, be termed as difference of opinion but nothing to do with the concealment of income or furnishing of inaccurate particulars of such income". In the present case, related quantum addition is not on account of different views being taken on the same set of facts but on account of plain words of the statute which admit no ambiguity. The assessee does not, therefore, derive any help from Supreme Court's judgment in the case of Reliance Petroproducts (supra) either. We reject the same.
:- 21 -: ITA No.243/Mds/2015
22. Learned counsel for the assessee has also laid a lot of emphasis on the fact that the assessee's explanation has not been found 'false' but then this plea overlooks the fact that when an assessee's explanation is found 'false', this case falls in category (A) of Explanation 1 to Section 271(1)(c) whereas the present case is in category (B) thereof and it covers a situation when assessee offers an explanation and not able to prove its bonafides. These two situations are mutually exclusive situation and just because conditions in part (A) of Explanation 1 are not satisfied, the revenue's case in (B) also does not come to an end. The plea of the assessee does not, therefore, acceptable.
23. Further, we also place reliance on the judgment of Supreme Court in the case of Mak Data (Pvt) Ltd. vs. CIT 358 ITR 593, wherein it was held that '' the assessee had only stated that it had surrendered the additional sum of ₹ 40,74,000 to avoid litigation, buy peace and to channelize the energy and resources towards productive work and to make amicable settlement with the Income-tax Department. The statute did not recognize those types of defences under Explanation 1 to section 271(1)(c) of the Act. The surrender of income in this case was not voluntary in the sense that the offer of surrender was made in view of detection by the Assessing Officer in the search conducted in the sister concern of the assessee. The survey was conducted more than 10 months before the assessee filed its return of income. Had it been the intention of the assessee to make full and true disclosure of its income, it would have filed the return declaring an income inclusive of the amount which was surrendered later during the course of the assessment proceedings. Consequently, it was clear :- 22 -: ITA No.243/Mds/2015 that the assessee had no intention to declare its true income. It is the statutory duty of the assessee to record all its transactions in the books of account, to explain the source of payments made by it and to declare its true income in the return of income filed by it from year to year. The Assessing Officer had recorded a categorical finding that he was satisfied that the assessee had concealed the true particulars of income and was liable for penalty proceedings under section 271 read with section 274 of the Act. There was no illegality in the Department initiating penalty proceedings''
24. Thus, in the present case, claim of the assessee towards administrative expenditure at C2,97,275/- and finance charges at C1,25,30,730/- as business expenditure is not at all admissible as the assessee has not commenced business during the relevant financial year under consideration. The Assessing Officer is of the view that the expenditure is not based on any sound reason as the assessee was fully aware of the facts that it is not revenue expenditure when it had filed its original return of income. Therefore, it cannot be said that the assessee discovered any omission or wrong statement subsequent of filing of original return of income on 14.10.2010. Being so, it cannot be believed that the assessee chose to revise its earlier return consequent upon knowing that there are omissions or wrong statements in the original return of income. The assessee is having full knowledge about the wrong claim made by it and therefore, it cannot take a plea that the error is bonafide and it is to be condoned.
:- 23 -: ITA No.243/Mds/2015
25. Being so in the present case the impugned penalty is not in respect of a bogus claim but in respect of making a claim which is patently inadmissible. In such a situation, it is difficult to understand, much less approve, this plea of the assessee that the assessee as bonafide in claiming the expenditure. In our opinion levy of penalty by Assessing Officer u/s 271(1)(c) of the Act is justified and accordingly, we reverse the order of the Commissioner of Income Tax (Appeals) and restore that of the Assessing Officer.
26. In the result, the appeal of the Revenue in ITA No.243/Mds/2015 is allowed.
Order pronounced on Friday, the 31st day of July 2015, at Chennai.
Sd/- Sd/-
(एन.आर.एस. गणेशन)) (चं पज
ू ार )
(N.R.S. GANESAN) (CHANDRA POOJARI)
या यक सद य/JUDICIAL MEMBER लेखा सद य /ACCOUNTANT MEMBER
चे#नई/Chennai
$दनांक/Dated:31.07.2015
KV
आदे श क त(ल)प अ*े)षत/Copy to:
1. अपीलाथ /Appellant 3. आयकर आयु+त (अपील)/CIT(A) 5. )वभागीय त न/ध/DR
2. यथ /Respondent 4. आयकर आयु+त/CIT 6. गाड फाईल/GF