TaxTMI 
TaxTMI 
2011 (11) TMI 498
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.... Harish Chandra (India) Ltd.,M/s ARSS Infrastructure Projects Pvt. Ltd. And M/s Triveni Enterprises constituted in terms of an agreement entered on 28.9.2004., are that e-return declaring nil income filed on 01.11.2007 by the assessee, a civil contractor after being processed u/s 143(1) of the Income-tax Act, 1961 (hereinafter referred to as the Act) was selected for scrutiny with the service of a notice issued u/s 143(2) of the Act on 16th September, 2008. During the course of assessment proceedings, the Assessing Officer (in A.O. in short) noticed that the assessee claimed deduction of Rs. 41,83,622/- u/s 80IA of the Act in terms of a report in form no. 10CCB while the assessee sub-contracted the work to M/s HCIL. Since the assessee was engaged in the business of infrastructure for railways and did not execute the work on its own while M/s Rail Vikas Nigam Ltd. and M/s Rites Ltd. claimed deduction u/s 80IA of the Act in respect of the said project, the AO disallowed the claim for deduction u/s 80IA of the Act while referring to Explanation below the provisions of sec. 80IA(13) of the Act. Inter alia, penalty proceedings u/s 271(1)(c) of the Act were also initiated for furnishing ....
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.... In the assessment order, the AO has observed that "The assessee has not been able to substantiate with the evidence that his claims are true & bona fide". The AO has further observed that "That was not entitled to claim this deduction ab-initio as it was neither the owner of this infrastructure nor the infrastructure belongs to it. It has merely developed the project on contractual basis. So the eligibility for claiming deduction does not arise from the beginning itself." Had the case not been selected for scrutiny under CASS, this deduction would have otherwise gone to the assessee causing loss of revenue because of wrong inadmissible claim of deduction." 7. Considering the facts mentioned in the assessment order, the appellant was clearly not eligible for deduction u/s 80-IA. Section 80-IA(4) is as follows:- This section applies to- (i) any enterprise carrying on the business/of (i) developing or (ii) operating and maintaining or (iii) developing, operating and maintaining/any infrastructure facility which fulfil all the following conditions, namely- The Explanation below sub-section (13) is as follows: For the removal of doubts, it is hereby declared that not....
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.... before the Assessing Officer, which he is not able to substantiate and has also failed 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. In view of these facts, the penalty imposed u/s 271(1)(c) deserves to be upheld. 11. In the assessment order, the Assessing Officer has discussed various judicial decisions on this subject. The imposition of penalty is also supported by the following judicial decisions. (i) CIT v. Escorts Finance Ltd., 183 Taxman 453(Del.) "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 or purchases have been treated as that of concealment or inaccuracy in particulars of income by the judicial pronouncements (See Krishna Kumari Chamanlal v. CIT [1996] 217 ITR 645 (Bom.), Rajaram & Co. v. CIT [1992] 193 ITR 614 (Guj.) and Beena Metals v. CIT [1999] 240 ITR 222 (Ker.). 14. In the present case, we have to examine as to whether the claim made under section 35D of t....
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....nalty. We may also take note of the following observations of the Supreme Court in the case of Union of India v. Dharamendra Textile Processors [2008] 306 ITR 277. In such a case it is difficult to accept the plea that error was bona fide. (ii) Kuttookaran Machine Tools v. ACIT [2009] 313 ITR 413(Ker.) "The question raised in the appeal is whether the Tribunal is justified in confirming the penalty levied on the assessee under section 271(1)(c) of the Income-tax Act for the assessment year 1989-90. On going through the Tribunal's order and after hearing counsel, we find that the assessee made bogus claims of investment allowance and depreciation in respect of machinery which were not purchased, installed or commissioned during the previous year. The assessee has no case that it had in fact purchased and installed the machinery in respect of which benefits were claimed under the statute. On the other hand, the assessee's case is that this is a mistake committed by the auditor and so much so the assessee is not liable to be subjected to penalty. In support of his contention, counsel also relied on the decision of the Supreme Court in T. Ashok Pai v. CIT [2007] 292 ITR 11. W....
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....n 01.11.2007 even when the Explanation below section 80IA(13) of the Act was inserted by the Finance Act ,2007 w.e.f. 01.04.2000 while the Finance bill received the assent of the President on 11th May, 2007. Indisputably, the deduction u/s 80IA was claimed on the basis of report of the CA in form no. 10CCB. The ld. CIT(A) in the impugned order concluded that claim being not bona fide after the insertion of Explanation below section 80IA(13) of the Act, levy of penalty was justified. On the other hand, the ld. AR contended that the said Explanation escaped the attention of not only the assessee but even the auditors, submitting report in form no. 10CCB. Immediately when the AO referred to the said Explanation, the assessee accepted the view of the AO and paid tax accordingly. We find that it is not a case where the assessee has not disclosed full details at the time of assessment. In terms of provisions of sec. 80IA(7) of the Act, the deduction under the said section is not admissible unless the assessee furnishes in the prescribed form, along with the return of income, the report of an accountant, as defined in the Explanation below sub-section (2) of section 288, certifying that t....
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.... copy or transcript.". 7.2 The penalty u/s 271(1)(c) of the Act is leviable if the AO is satisfied in the course of any proceedings under this Act that any person has concealed the particulars of his income or furnished inaccurate particulars of such income. It is well settled that assessment proceedings and penalty proceedings are separate and distinct and as held by Hon'ble Supreme Court in the case of Anantharam Veerasinghaiah & Co. v. CIT [1980] 123 ITR 457, the findings in the assessment proceedings cannot be regarded as conclusive for the purposes of the penalty proceedings. It is also well settled that the criterion and yardsticks for the purpose of imposing penalty u/s 271(1)(c) of the Act are different than those applied for making or confirming the additions. It is, therefore, necessary to reappreciate and reconsider the matter so as to find out as to whether the addition or disallowance made in the quantum proceedings actually represents the concealment on the part of the assessee as envisaged in sec. 271(1)(c) of the Act and whether it is a fit case to impose the penalty by invoking the said provisions. The provisions of section 271(1)(c) of the Act stipulate that ....
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....ed by him, the assessee shall be out of the clutches of Explanation 1 to section 271(1)(c) of the Act, and in that case, the penalty shall not be imposed. Hon'ble Supreme Court in the case of Dilip N. Shroff v. Jt. CIT [2007] 291 ITR 519/161 Taxman 218 while considering the scope of the provisions u/s 271(1)( c) of the Act observed in the following terms: "The legal history of section 271(1)(c) of the Act traced from the 1922 Act prima facie shows that the Explanations were applicable to both the parts. However, each case must be considered on its own facts. The role of the Explanation having regard to the principle of statutory interpretation must be borne in mind before interpreting the aforementioned provisions. Clause (c) of sub-section (1) of section 271 categorically states that the penalty would be leviable if the assessee conceals the particulars of his income or furnishes inaccurate particulars thereof. By reason of such concealment or furnishing of inaccurate particulars alone, the assessee does not ipso facto become liable for penalty. Imposition of penalty is not automatic. Levy of penalty is not only discretionary in nature but such discretion is required to be ex....
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....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. Following this decision, Hon'ble jurisdictional High Court in M/S Dharm Pal Prem Chand (supra) upheld the cancellation of penalty levied in relation to incorrect claim of deduction u/s 80IA & 80IB of the Act. Mere disallowance of a claim will not amount to filing of inaccurate particulars of income. It can at best be a "wrong claim" not "a false claim". In such circumstances, Hon'ble Delhi High Court held in the case of CIT v. Bacardi Martini India Ltd. [2007] 288 ITR 585/158 Taxman 348 that no penalty was leviable. In the case under consideration, there is nothing to suggest that the assessee furnished any inaccurate particulars or concealed the particulars . Admittedly, the claim for deduction u/s 80IA was duly supported by the certificate of the chartered accountant in the prescribed form. In these circumstances, no fault can be found with the claim of the assessee that it had claimed the deduction in a bona fide manner. In somewhat similar circum....