TaxTMI 
TaxTMI 
2013 (9) TMI 901
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....eclaring loss of Rs.13,65,54,483/- duly supported by audited accounts and this return was processed under Section 143(1) of the Act. Subsequently, re-assessment notice was issued after noticing that the assessee had claimed depreciation on plant and machinery though no manufacturing activity was conducted during the year under consideration and had wrongly claimed capital loss on sale of investments amounting to Rs.59,15,000/- as business loss. 3. In response to the notice under Section 148 of the Act, the respondent-assessee filed a letter dated 9th August, 2007 stating that their earlier return filed under Section 139 dated 31st October, 2002 should be treated as a return filed in response to the said notice. The assessee on receipt of reasons for reopening, filed objections to the initiation of the re-assessment proceedings and contested the notice under Section 148 of the Act. The said objections of the assessee were rejected vide order sheet entry dated 24th December, 2007. 4. During the course of assessment proceedings, the assessee filed a revised computation in which they accepted that Rs.59,15,000/- was wrongly claimed as a revenue loss and was in fact capital loss. The ....
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....was allowed the claim of loss is not disputed. The only difference between assessee's claim and the assessed loss is the head of allowability of loss i.e. capital loss as against assessee's claim of business loss. In our view all the relevant details were filed by the assessee along with the return of income and a change in claim of head of income cannot be considered as concealment of particulars of income or furnishing inaccurate particulars of such income. The assessee made a legal claim which was not found to be allowable by the Assessing Officer under the head business loss but the same was allowed as long term capital loss. In these facts and circumstances we are not inclined to hold that the assessee concealed any particulars or furnished inaccurate particulars in this behalf. 5.2. In respect of PF and ESI also the assessee had disclosed in its Chartered Accountant's report that these amounts were not deposited, therefore, assessee itself claimed them to be exfacie not allowable. The only mistake committed by the assessee is in not giving proper effect to P&L A/c. With these disclosure on record, the mistake can be held to be of technical or venial in nature and cannot be t....
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....preciation of plant and machinery is concerned. Claim of depreciation was a debatable issue. Passive use entitles an assessee to claim depreciation (see CIT versus Geo Tech Construction Corporation, [2000] 244 ITR 452 (Ker.) and Commissioner of Income Tax versus Refrigeration and Allied Industries Limited, [2001] 247 ITR 12). No manufacturing activities were conducted during the assessment year in question but the assessee had approached Board of Financial Reconstruction for rehabilitation of the company under the provisions of Sick Industrial Companies (Special Provisions) Act, 1985. We also notice that penalty imposed in the last year for same reason was deleted by the tribunal. The real contest is with regard to loss on sale of investments and sale of vehicles of Rs.59,15,000/- and Rs.1,27,930/- respectively and disallowance under Section 43B of Rs.4,48,19,194/- and Rs.17,325/- on account of finance charges and PF/ESI dues respectively. 10. In paragraph 5.1 of the impugned order, the tribunal has referred and stated that details were furnished by the respondent along with the return of income and observed change of head of income cannot be considered as concealment of particula....
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.... recording the explanation, though not proved and established. It is not for the Revenue to show that the explanation offered is not false or bogus. 12. Learned counsel for the respondent referred to paragraph 5.3 of the impugned order and has stated that the revised return was prepared by the Chartered Accountant but due to dispute with regard to payment of professional fee with them, the same was not furnished. This explanation given by the assessee has been accepted by the tribunal but is on the face of it contrary. In fact, the tribunal has not discussed the facts or basis for the said conclusion. The assessee had filed original return of income, as noticed above, on 31st October, 2002. Return was supported by duly audited accounts. Copy of the said audited accounts, auditor's report etc. have been filed on record before us by the respondent-assessee. The accounts were audited by a Chartered Accountant and the audit was dated 30th August, 2002. Subsequently, after re-assessment notice under Section 148 dated 7th July, 2008 was issued, the respondent-assessee filed a letter dated 9th August, 2007, nearly four years after the date of filing of the original return, that the earli....
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.... invoked when an assessee furnishes inaccurate particulars or conceals his income. Explanation 1 can come to the rescue of the assessee in case he had offered an explanation but was unable to substantiate it, provided he is able to establish that the explanation offered was bona fide and the facts relating to furnishing of inaccurate particulars and material for computation of total income were duly disclosed by him. In the present case, the assessee had furnished inaccurate particulars of income and this is established beyond doubt. Assessment order passed under Section 143(3)/147 of the Act dated 28th December, 2007 was accepted by the respondent-assessee in which the aforesaid disallowance/additions were made. In fact, submission of the assessee before us is that the aforesaid errors pointed out in the assessment order were conceded to and accepted by the respondent-assessee during the course of the assessment proceedings by filing a revised computation. In these circumstances, the contradictory contention of the respondent-assessee that they had not furnished inaccurate particulars of their income is not acceptable. The moot question and issue is whether the assessee has discha....
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....on. In such cases, we have to examine two conditions: (1) Whether the assessee has been able to show that his explanation was bonafide; (2) whether the assessee had furnished and disclosed facts and material relating to computation of his income. Onus of establishing that the assessee satisfies the two conditions is on the assessee. Both the conditions have to be satisfied. In case the assessee satisfies the twin condition, penalty should not be imposed. 17. On the second aspect, which relates to addition on account of disallowance under Section 43B of the Act, position remains the same. In the audited accounts, there is no mention or reference to the said Section or that in the profit and loss account expenditure which has to be disallowed under Section 43B has been debited and claimed. The fact that interest due and payable to the financial institution has not been paid but was treated as expenditure in the profit and loss account was not stated or adverted to. Thus, full facts relating to the assessment of income were not stated. 18. In the present case, additions or disallowance has been made on account of wrong claim of revenue loss, which was in fact capital loss and disall....
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....the loss was a capital loss. Anyone remotely conversant with the provisions of the Act or accounts would know that loss on the sale of the investments cannot be booked and treated as a business loss, yet the respondent-assessee had booked the said loss as a business loss instead of a capital loss. This was contrary to elementary principles of accountancy and something which is very basic. Learned counsel for the respondent has emphasized that the figures, i.e., loss of Rs.59,15,000/- has not been disputed. Therefore, full facts were on record. This is partly correct but would not satisfy the requirements of Explanation 1. Explanation 1 has two stipulations; firstly, the assessee should have furnished facts and material relating to computation of his income and secondly, establish that the explanation furnished by him was bona fide. Furnishing of figures or non-interference with the figures would show only furnishing of facts and material but would not satisfy the second requirement. Similarly, with regard to the disallowance made under Section 43B, the law on the point and the provision in question is well known and not capable of two interpretations. The assessee had not paid inte....
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....s filed after the objections to the re-opening were dismissed by the Assessing Officer. 21. At this stage, we would like to notice and refer to the judgments relied by the counsel for the respondents in Commissioner of Income Tax, Lucknow versus Hari Om Ashok Kumar Sugar Works, (2007) 295 ITR 507 (Allahabad), Commissioner of Income Tax versus Sidhartha Enterprises, (2010) 322 ITR 80 (P&H), Commissioner of Income Tax versus Somany Evergree Knits Limited, (2013) 352 ITR 592 (Bombay) and Commissioner of Income Tax versus Sania Mirza, (2013) 259 CTR (AP) 386 and Price Waterhouse Coopers Private Limited versus Commissioner of Income Tax, (2012) 11 SCC 316 . 22. At the very outset, we observe that whether an assessee had offered an explanation and whether the explanation was bona fide when discussed and examined as stipulated in Explanation 1, is a question of fact and depends upon several factors, including whether the assessee is an individual or corporate assessee, literate or illiterate, the nature, character and quantum of the deduction, his past conduct relating to the same claim/deduction, the provision or section applicable etc. (Failure to apply Explanation 1, as per law would....