TaxTMI 
TaxTMI 
2009 (8) TMI 677
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....that the assessee had claimed deduction of Rs. 21,02,228 under section 35D of the Act being 1/10th of Rs.2,10,22,279 relating to public issue of shares. The Assessing Officer required the assessee to explain as to why such expenses be not disallowed as it is hit by the provisions of section 35D(2) of the Act as it is neither an investment company nor an industrial company. The assessee contended that the expenses had to be amortized as per section 35D of the Act. However, the Assessing Officer was not convinced with the same and relying on the judgment of the Supreme Court in the case of Brooke Bond India Limited v. CIT [1997] 225 ITR 798 disallowed the same treating the expenditure as capital in nature. During the assessment proceedings, the Assessing Officer further found that the assessee had claimed 50 per cent. of the entertainment expenses as on account of the employees' participating in the business meetings while entertaining the company's guests. In earlier years, the employees' participation was estimated only at 25 percent. Accordingly, he disallowed a sum of Rs. 1,18,247 out of the total entertainment expenditure. Similarly, the Assessing Officer further noticed that in....
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....xpenses incurred in connection with the public issue of shares, such as underwriting commission, brokerage and other charges, etc., qualify for amortization over a period of 10 years under section 35D of the Act. Thus, it was only a question of interpretation of section 35D as to whether the expenses claimed by the assessee could be allowed under that section or not and, therefore, penalty could not be levied on this amount. Regarding addition on account of capital loss, as per the Commissioner of Income-tax (Appeals) it was found to be correct. The assessee-company had itself filed a revised statement for the error committed which was a bona fide mistake and, therefore, there was no concealment. Qua entertainment, expenses which were restricted to 35 per cent. instead of 55 per cent. claimed by the assessee-company, again it could not be said that the assessee-company had concealed the income or had furnished inaccurate income. On this basis the appeal was allowed and the penalty was deleted. 5. The Tribunal has upheld the order of the Commissioner of Income-tax (Appeals) on two grounds, namely :- (a) in the assessment order the Assessing Officer had not recorded his satisfa....
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...." 10. It is repeatedly held by the courts that the penalty on the ground of concealment of particulars or non-disclosure of full particulars can be levied only when in the accounts/return an item has been suppressed dishonestly or the item has been claimed fraudulently or a bogus claim has been made. When the facts are clearly disclosed in the return of income, penalty cannot be levied and merely because an amount is not allowed or taxed to income, as it cannot be said that the assessee had filed inaccurate particulars or concealed any income chargeable to tax. Further, conscious concealment is necessary. Even if some deduction or benefit is claimed by the assessee wrongly but bona fide and no mala fide can be attributed, the penalty would not be levied. A fortiori, if there is a deliberate concealment and false/inaccurate return was filed, which was revised after the assessee was exposed of the falsehood, it would be treated as concealment of income in the original return and would attract penalty even if revised return was filed before the assessment is completed. Likewise, where the claim made in the return appears to be ex facie bogus, it would be treated as case of concealm....
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....ed accountants, qualify for amortization over a period of 10 years under section 35D of the Act. The submission of the learned counsel for the Revenue was that merely because information in this behalf was made available in the tax audit report, would not absolve the assessee of the penalty proceedings when such a claim was ex facie bogus. She submitted that hardly 5 per cent. returns are taken up for scrutiny under section 143(2) of the Act and assessment is made under sub-section (3) of section 143 of the Act. Therefore, with the hope that his/her return may not come under scrutiny and may be assessed on the basis of "self-assessment", an assessee can venture to give wrong information. Therefore, merely because information was available in the tax audit report would not absolve the assessee. What was to be seen was that whether the claim made was bogus. 15. We are inclined to agree with the aforesaid submission of learned counsel for the Revenue. Even if there is no concealment of income or furnishing of inaccurate particulars, but on the basis thereof the claim which is made is ex facie bogus, it may still attract penalty provision. Cases of bogus hundi loans or bogus sales o....