TaxTMI 
TaxTMI 
2012 (3) TMI 335
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....ssessment year in question it had claimed depreciation on building, which was being used by the partnership firm in which the assessee was a partner. The total claim for depreciation was Rs. 41,62,650/-. It is not in dispute and it is accepted that in the quantum proceedings it has been held that the assessee is not entitled to depreciation on the building as the same was being used by the partnership firm and not by the assessee company. The aforesaid addition/disallowance made by the Assessing Officer has been confirmed by this Court vide decision dated 1st November, 2010 in ITA No. 955/2010. The relevant portion of the said decision will be referred to and examined later on. 4. The question, which arises for consideration, is that whether the assessee has been able to discharge onus under Explanation 1 to Section 271(1)(c) of the Act. Section 271(1)(c) postulates and mandates imposition of penalty for concealment of income or furnishing of inaccurate particulars of income. Explanation (1) to Section 271(1) (c) stipulates when penalty under the said Section should be imposed and reads as under:- "Explanation 1 : Where in respect of any facts material to the computa....
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....Less Share of profit Partnership Firm M/s Gaurav Intl to be assessed separately In the hand of the firm and claimed as Exempt u/s 10(2A) 1,238,042 1,238,042 (4,162,650) 173,885 (3,988765) Note: The assessee company enjoys share of profit from the partnership firm M/s Garav Int'l as one of the partner of the firm by virtue of the Partnership Deed dated 02.04.2004, copy of the Partnership Deed is enclosed for ready reference. On the basis of legal advice the company has claimed depreciation on Land and Building etc. bearing No.225, Udyog Vihar, provided by the company as owner, to the said firm for its used in terms of Partnership Deed of 2.4.2004. Depreciation on the said Land, Building etc is claimed u/s 32 of the Income Tax Act, 1961, being used for the purpose of business. Further the company has earned interest of Rs. 2,52,000/- from the aforesaid firm which is assessable u/s 28(v) of the Income Tax Act, 1961. 2. This is submitted keeping in view the law laid down by the Delhi High Court in CIT v. Textile & General Trading Co. (Delhi) 244 ITR 876." 8. The contention of the appellant-assessee was that under Section 28(v) of the Act, sal....
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....not be applicable after the amendment and induction of Section 10 (2A) of the Act. The said provision stipulates that the share of profit received by a partner, from the partnership firm which is separately assessed is exempt, subject to certain conditions. We have noted that the said observation only to point out the debatable nature of the controversy and the fact that two views were possible. It is not a case of the Revenue that the partnership firm had claimed depreciation and two entities have claimed depreciation on the same capital asset. 12. The findings and reasons recorded by the tribunal to hold that the assessee has not been able to discharge onus under Explanation 1 to Section 271(1)(c) reads:- "From the above para of this judgment of Hon'ble High Court of Delhi rendered in the case of CIT Vs. Zoom Communications (supra), we find that it is held by Hon'ble High Court of Delhi that case that if the assessee makes a claim which is not only incorrect in law but is also wholly without any basis and the explanation furnished by him for making such a claim is not found to be bona fide, it will be difficult to say that the assesee would still not be liable to penalty u/....
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.... The existence of any legal advice on this has not been established by submitting a copy of such legal advice before us or before the authorities below or before the Hon'ble High Court of Delhi in the quantum proceedings. We find that in the P & L account of the assessee company as available on page 7 of the Paper Book, no expense has been accounted for by the assessee company on account of any legal advice. Hence, even existence of legal advice in doubt and therefore, the explanation submitted by the assessee cannot be accepted as bona fide in our considered opinion. Hence, in our considered option, the judgment of Hon'ble High Court of Delhi rendered in the case of Zoom Communications (supra) is squarely applicable in the present case and by respectfully following this judgment, we decline to interfere in the order of Ld. CIT (A)." 13. The aforesaid reasoning consists of two parts. The tribunal has held that copy of the legal advice has not been brought on record and perhaps was never obtained as no expense has been specifically claimed. Secondly, observations had been made on the deduction claimed under the head "depreciation". 14. On the second aspect, we record that a wr....
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.... (SC) has held as under:- "A glance at this provision would suggest that in order to be covered, 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 present is not a case of concealment of the income. That is not the case of the Revenue either. However, the learned counsel for Revenue suggested that by making incorrect claim for the expenditure on interest, the assessee has furnished inaccurate particulars of the income. As per Law Lexicon, the meaning of the word "particular" is a detail or details (in plural sense) ; the details of a claim, or the separate items of an account. Therefore, the word "particulars" used in the section 271(1)(c) would embrace the meaning of the details of the claim made. It is an admitted position in the present case that no information given in the return was found to be incorrect or inaccurate. It is not as if any statement made or any detail supplied was found to be factually incorrect. Hence, at least, prima facie, the assessee cannot be held guilty of furnishing inaccurate particulars. The learned counsel argued that "submitting an inc....
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....ffered by him or the explanation, even if not substantiated, is found to be bona fide. If the explanation is neither substantiated nor shown to be bona fide, Explanation 1 to section 271(1)(c) would come in to play and the assessee will be liable to for the prescribed penalty. The assessee before us is a company which declared an income of Rs. 1,21,49,861 and accounts of which are mandatorily subjected to audit. It is not the case of the assessee that it was advised that the amount of income-tax paid by it could be claimed as a revenue expenditure. It is also not the case of the assessee that deduction of income-tax paid by it was a debatable issue. In fact, in view of the specific provisions contained in section 40(a)(ii) of the Act, no such advice could be given by an auditor or other tax expert. No such advice has been claimed by the assessee even with respect to the amount claimed as deduction on account of certain equipment having become useless and having been written off. As noticed earlier, the Tribunal was entirely wrong in saying that section 32(1)(iii) of the Act applies to such a deduction. It was not the contention before us that claiming of such a deduction under sect....