TaxTMI 
TaxTMI 
2011 (10) TMI 45
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....e of its employees. A deduction in this regard was claimed by the assessee under Section 40A (9) of the I.T. Act in respect of contribution amounting to Rs 15,50,000/-. The revenue, however, disallowed the deduction. (ii) The assessee claimed depreciation on vehicles used in rendering services to its customers at the rate of 25%, whereas the A.O allowed the depreciation at the rate of 20% in accordance with rates stipulated in appendix (1) Rule 32 of the Income Tax Rules, 1962 (in short "I.T. Rules‟). The difference in the admissible claim which arose thereby, was added to the income of the assessee; being a sum of Rs 45,47,712/-. 2. It is on account of the aforesaid disallowance under Section 40A (9) of the I.T. Act and the addition of excess depreciation that the A.O. initiated penalty proceedings under Section 271(1)(c) of the I.T. Act. 3. With this prefatory note, the facts which are required to be noticed in order to adjudicate upon the appeal are as follows: 3.1 The assessee, which is a public sector undertaking, had filed its return of income for assessment year 1998-99, on 30.1.1998. In the said return the assessee had declared its total income in the sum ....
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.... had submitted inaccurate particulars in terms of provisions of Section 271(1) (c) of the I.T. Act. 6.2 As regards the addition of excess depreciation claimed by the assessee, Mr Sahni argued that the assessee have been filing returns for a number of years, and had, in the form of able assistance, an array of qualified accountants to maintain their accounts - and, therefore, could not claim ignorance with regard to the provisions of law vis-à-vis the rate of depreciation on vehicles. It was thus contended that given these circumstances the excess depreciation claimed by the assessee would also fall within the ambit of expression "furnishing of inaccurate particulars" within the meaning of Provision of Section 271(1) (c) of the I.T. Act. For these reasons, Mr Sahni submitted that the judgment of the Tribunal was perverse and hence ought to be reversed. 6.3 Mr Sahni also contended that after the insertion of explanation (1) to Section 271(1) (c) of the I.T. Act the onus was on the assessee to establish that there was no mens rea in furnishing inaccurate particulars. 6.4 It was submitted that in view of the judgment of the Supreme Court in....
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....company does not amount to the applicability of the provisions of Section 148. The AO should also use own analytical method, skills in order to determine the applicability of such provisions. It may be further mentioned here that the said expenditure has been issued wholly and exclusively for the purpose of business of the assessee company and for the benefit of its employer. Further, it may be stated here that the company has incurred the said amount in accordance with the rule of the firms (sic fund). In case of Western India Paper & Board vs CIT (1982) 137 ITR525 (Bom), it was held by the Hon'ble Court that for admissibility of a contribution towards a recognized provident fund as permissible deduction, a contribution must have been made in accordance with the rules of that fund. In respect of the issue of depreciation, it is submitted that in order to carry out its main object, the company has to carry its own fleet of vehicle so as to cater the needs of its customers, employees, etc. Promptly. Being extensive used for carrying the service/ object of the company the same were considered part of plant and machinery and accordingly depreciation wa....
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....rant of scholarship for technical and non-technical purposes to handicapped and differently abled children of the members of the fund. The fund, also had provision for granting financial assistance for running crèches, holiday homes, recreational clubs and grant of books etc. to meritorious children of the members of the fund. Attention was also drawn to the provisions of Section 40A (10) of the I.T. Act. In the alternative the assessee had also referred to the provisions of Section 37(1) of the I.T. Act; the expenditure having been incurred wholly and exclusively for the purposes of the business of the assessee, and being otherwise in the nature of a revenue expenditure, which did not fall under the provisions of Section 32 to 36 of the I.T. Act. 10.2 It was contended before the A.O. that a complete disclosure have been made by the assessee in its return of income and the documents/ reports filed in support of such return of income. It was contended that merely because the A.O. disallowed the claim on the basis of a different view held by the auditor, as expressed in his tax audit report, it would not amount to either "concealment" of income or "furnishing of inaccurate ....
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.... for the sake of convenience are extracted hereinbelow: "...... In the instant case. The disallowances on account of (a) depreciation on vehicles amounting to Rs.45,47,712/- and (b) the claim of Rs. 15,50,000/- being payment made towards Bombay Telephone District Staff Welfare Funds in terms of section 40A (9) of the act does not lead to the inference that the assessee has concealed its particulars of income or furnished inaccurate particulars relating to the impugned addition were furnished before the Assessing Officer, Hon'ble Punjab High Court in the case of CIT Vs. Ajaib Singh & Co. (2002) ITR 630 have observed that merely because of 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 mere disallowance of expenses per se cannot mean that assessee has furnished inaccurate particulars of its income ....From the decision cited above, it can be concluded that mere disallowance or addition will not be sufficient for levy of penalty u/s 271 (1) (c). The issue under reference is squarely covered by the above decision. Though it may be argued t....
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....d for mere making a claim which is not sustainable in law by itself in view of this, we confirm the order of the CIT (Appeals) for deleting he levy of penalty u/s 271 (1) (c)...." (Emphasis is ours) 13. Therefore, according to us, it is quite clear, in this particular case, that the A.O. having failed to record a finding that the assessee had furnished inaccurate particulars, the imposition of penalty under Section 271(1) (c) of the I.T. Act was a complete non-starter. This finding of fact has been affirmed by the Tribunal and we find no reason to disagree with the same. A mere erroneous claim made by an assessee, though under a bonafide belief that, it was a claim which was maintainable in law, cannot with more, lead to an imposition of penalty. In the instant case it is quite evident that both claims were made under the belief that they were maintainable in law. In regard to contributions made to the funds, the assessee genuinely differed with the statutory auditor. Similarly, with regard to claim of higher rate of depreciation on vehicles, it was based on the premise that the vehicles used by the assessee were in the nature of plant and machinery as these we....
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....shing inaccurate particulars. The Learned Counsel argued that "submitting an incorrect claim in law for the expenditure on interest would amount to giving inaccurate particulars of such income". We do not think that such can be the interpretation of the concerned words. The words are plain and simple. 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 Vs. Atul Mohan Bindal [2009(9) SCC 589 2009 Indlaw SC 1034], 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(1 3) SCC 369 2008 Indlaw SC 1837], as also, the decision in Union of India Vs.Rajasthan Spg. & Wvg. Mills [2009(13) SCC 448 2009 Indlaw SC 635] and reiterated in para 13 that:- "13. It goes wi....
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....ility on the assessee for the concealment or for giving inaccurate particulars while filing Return, there was no necessity of mens rea. The Court went on to hold that the objective behind enactment of Section 271 (1)(c) read with Explanations indicated with the said Section was for providing remedy for loss of revenue and such a penalty was a civil liability and, therefore, willful concealment is not an essential ingredient for attracting civil liability as was the case in the matter of prosecution under Section 276-C of the Act. The basic reason why decision in Dilip N. Shroff Vs. Joint Commissioner of Income Tax, Mumbai & Anr. 2007 Indlaw SC 896 (cited supra) was overruled by this Court in Union of India Vs. Dharamendra Textile Processors 2008 Indlaw SC 1837 (cited supra), was that according to this Court the effect and difference between Section 271 (1)(c) and Section 276-C of the Act was lost sight of in case of Dilip N. Shroff Vs. Joint Commissioner of Income Tax, Mumbai & Anr. 2007 Indlaw SC 896 (cited supra). However, it must be pointed out that in Union of India Vs. Dharamendra Textile Processors 2008 Indlaw SC 1837 (cited supra), no fault was found ....