TaxTMI 
TaxTMI 
2010 (6) TMI 566
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.... appeal. 2. On the facts and in the circumstances of the case, the Ld. CIT(A) ought to have upheld the order of the Assessing Officer 3. It is therefore prayed that the order of the Ld. CIT(A) may be cancelled and that of the Assessing Officer may be restored to the above effect." "The Ld. CIT(A) erred on facts and in law in confirming levy of penalty u/s 271(1)(c) on disallowance of depreciation of Rs. 1,21,185/-." 2. Facts, in brief, as per relevant orders are that return declaring income of Rs.11,03,104 filed on 30-10-2001 by the assessee contractor, after being processed on 9.9.2002 u/s 143(1) of the Income-tax Act,1961[hereinafter referred to as the 'Act'], was taken up for scrutiny with the issue of notice u/s 143(2) of the Act on 29.10.2002. The assessment was finalized vide order dated 24-03-2004, determining income of Rs.45,61,000 Inter alia, following disallowances were made: (1) Addition on account of IT retention money and ST Rs.10,86,654 (2) (2) Salary Rs. 2,03,958 (3) (3) Depreciation R....
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....for levy of penalty. 2.2 As regards disallowance of Rs. 10,46,098 in respect of bank guarantee commission paid on the basis of interpretation of method of accounting employed by the assessee company, the assessee pleaded that during the course of assessment proceedings as well as before the Ld. C1T(A), it was submitted that there was no stipulation in the term of contract as to the continuity of the bank guarantees, which could be invoked and encashed at any time during the currency of the contract and once encashed, there was no continuity of the guarantee for the remaining period. In view of this, it was submitted that the bank guarantee commission was eligible for deduction under the mercantile system of accounting as and when paid to the bank. The assessee, being in the business of civil contract for more than 20 years, had been claiming deduction of bank guarantee commission in the year of payment itself, in accordance with the mercantile system of accounting and therefore, there was a bona-fide belief that the assessee company was eligible for deduction, it was argued. Continuing, it was further submitted that the Ld. CIT(A) while disposing of their appeal for the yea....
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....t the assessee furnished inaccurate particulars of income leading to concealment of income. 4. On appeal, the assessee contended that they were justified in claiming deduction for the entire amount of bank guarantee commission in the year in which it has been incurred in view of decisions in the case of Addl. CIT vs. Akkamba Textiles Ltd., 227 ITR 464 (SC); CIT vs. Shivakami Mills Ltd., 227 ITR 465 (SC); Mihir Textiles Ltd. vs. CIT, 251 ITR 686 (Guj.) and Kinetic Engineering Ltd. v. CIT, 233 ITR 762 (Bom). The disallowance had been sustained merely on account of difference in the opinion of the AO and the assessee. This cannot be said to be a case of furnishing of inaccurate particulars of income and therefore, no penalty ought to have been levied by the AO. As regards disallowance of depreciation amounting to Rs. 1,21,185, the assessee contended that the same came to be disallowed merely because machinery was accounted for in the books by the principal contractor in their books in the subsequent year whereas the assessee accounted for in their books in the year under consideration, on the basis of the transfer advice received during the year. This cannot be held to be a case of....
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....eard both the parties and gone through the facts of the case. We find that penalty u/s 271(1)(c) had been levied by the AO on the ground that the assessee furnished inaccurate particulars of an amount attributable to disallowance of bank guarantee commission, which was not admissible in the year under consideration and pertained to the subsequent year as also on account of disallowance of depreciation on assets acquired through JV entry dated 31.3.2001 on the basis of a delivery cum debit note issued by Unitech Ltd. as also on the basis of a provisional statement of account issued by the latter. The AO in his order has not brought out as to how the assessee furnished inaccurate particulars of income in respect of amount claimed towards bank guarantee commission when undisputedly, a similar claim of the assessee had been allowed in the preceding years. The expression 'has concealed the particulars of income' and 'has furnished inaccurate particulars of income' have not been defined either in section 271 or elsewhere in the Act. However, notwithstanding the difference in the two circumstances, it is now well established that they lead to the same effect namely, keeping off a certain ....
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....laim cannot automatically lead to the conclusion that there was concealment of particulars of his income by the assessee or furnishing of inaccurate particulars thereof. What is to be seen is whether the said claim made by the assessee was bona-fide and whether all the material facts relevant thereto have been furnished and once it is so established, the assessee cannot be held liable for concealment penalty u/s 271(1)(C) of the Act. Since all the material facts relevant to the said claim of bank guarantee commission had been furnished by the assessee. In our opinion, it is not a fit case to attract the levy of penalty u/s 271(1)(c) of the Act on that score. A mere rejection of the claim of the assessee by relying on different interpretations does not amount to concealment of the particulars of income or furnishing inaccurate particulars of income, by the assessee. Hon'ble Punjab & Haryana High Court in the case of CIT vs. Ajaib Singh & Co. (2001) 170 CTR (P&H) 489: (2002) 253 ITR 630 (P&H) have observed that merely because certain expenses claimed by the assessee are disallowed by an authority, it cannot mean that particulars furnished by the assessee were wrong, it was held that ....
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....ntry was made and machines were used, on the basis of the delivery note cum debit note issued by M/s Unitech Ltd. and also on the basis of the provisional statement of account issued by them. However, on enquiries with M/s Unitech Ltd., the AO obtained a copy of account of the assessee in the books of M/s Unitech Ltd. and found that no such corresponding entry appeared in the books of the said company and instead, M/s Unitech Ltd. claimed to be the owner of the assets and consequently, claimed depreciation on the aforesaid assets for the year under consideration.. The reply of M/s Unitech Ltd. was also confronted to the assessee. In these circumstances, the assessee could not substantiate the explanation in support of their claim of depreciation either during the assessment proceedings or even during the penalty proceedings. As is evident from the provisions of cl. (c) of s. 271(1) of the Act, the words used are 'has concealed the particulars of his income' or furnished 'inaccurate particulars of such income'. Thus, both in case of concealment and inaccuracy, the phrase 'particulars of income' 'has been used. The legislature has not used the words 'concealed his income'. From this ....
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.... explanation about their claim of depreciation on the strength of a JV entry dated 31.3.2001 while on enquiries it was found by the AO that no such corresponding entry appeared in the books of M/s Unitech Ltd. and instead it was revealed that they alone had claimed depreciation on the aforesaid assets in the year under consideration. In these circumstances it is apparent that the assessee deliberately made an incorrect claim in their return of income and therefore, the explanation that they claimed depreciation on the basis of a JV entry dated 31.3.2001 was found to be false in the wake of enquiries from Unitech Ltd. Apparently, in the computation of income under the head "Business", the assessee made an incorrect claim not supported by any provision of law. It is well established that so long as the assessee has not concealed any material fact or the factual information given by him has not been found to be incorrect, he will not be liable to imposition of penalty under section 271(1)(c) of the Act even if the claim made by him is not sustainable in law, provided that he either substantiates the explanation offered by him or the explanation, even if not substantiated, is found to ....
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....equence would be that the persons who make claims of this nature, actuated by an intention to evade tax otherwise payable by them would get away without paying the tax legally payable by them, if their cases are not picked up for scrutiny. This would take away the deterrent effect, which these penalty provisions in the Act have. We find that the assessee before us could not substantiate their explanation before the AO during the assessment proceedings. Even during penalty proceedings before the AO/CIT(A), the onus laid down upon the assessee in terms of Explanation 1 was not discharged. We cannot ignore the fact that the assessee is a company, which is having professional assistance in computation of its income, and its accounts are compulsorily subjected to audit. In these circumstances, especially when explanation given by the assessee during the penalty proceedings has not been substantiated nor found to be bona fide and there is no material before us to take a different view in the matter, we are of the opinion that the ld. CIT(A) was justified in upholding the levy of penalty on account of furnishing of inaccurate particulars of income in relation to claim of depreciation. In ....
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....ion on the Assessing Officer as to whether he can invoke the explanation or not. 8.1. In their decision in the case of Usha Fertilisers v. CIT.269 ITR 591 (Guj.), the Hon'ble jurisdictional High Court, while upholding the levy of penalty observed that "The Supreme Court in the case of Mussadilal Ram Bharose (19871165 ITR 14 has specifically laid down the scope of the Explanation in the following words: "The position, therefore, in law is clear. If the returned income is less than 80 per cent, of the assessed income, the presumption is raised against the assessee that the assessee is guilty of fraud or gross or wilful neglect as a result of which he has concealed the income but this presumption can be rebutted. The rebuttal must be on materials relevant and cogent." As to what could be the explanation by which the assessee can rebut the presumption raised against it, is stated by the Apex Court in the same decision in the following words while confirming the view expressed by the Full Bench of the Patna High Court in the case of CIT v. Nathulal Agarwala and Sons [1985] 153 ITR 292 "The Patna High Court emphasised that as to the nature of the explanation to be rendered....