AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2014 (5) TMI 664
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....business loss of Rs.2,27,88,104/- and unabsorbed depreciation of Rs.7,27,38,068/- available with the assessee as per the return of income filed. The Assessing Officer initiated the penalty proceedings u/s 271(1)(c) and levied on 26.06.2009. The CIT (A) confirmed the levy of penalty. Now, the assessee is in appeal before us by taking the following grounds of appeal :- "1. That the learned Commissioner of Income-tax (Appeals) has erred on facts and in law in dismissing the appeal filed by the appellant company in respect of order u/s 271(1)(c) of the Act levying penalty of Rs.1,60,00,000/-. 2. Without prejudice to ground no.'l' above, that the learned Commissioner of Income-tax (Appeals) has erred on the facts and circumstances of the case in confirming the levy of penalty in respect of disallowance of payments Rs.3,89,78,000/- towards administrative charges (other than expenses relating to production & sale) made to M/s. APR Ltd. as not related to the business of the appellant company particularly when the appellant company did not have the requisite infrastructure to perform necessary administrative tasks as is evident from the assessment records of various assessment yea....
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....sioner of Income Tax (Appeals) has erred in holding that the claim for expenses of Rs.3,96,801/- made in accounts in the assessment year 2000-01 has been with the intention to reduce the year's income for the purpose of payment of tax and that the appellant company is liable to be hit within the mischief of section 271(l)(c) without pointing out any material in support of this finding. 5. Without prejudice to ground no. '1' to '4A' above, that the learned Commissioner of Income-tax (Appeals) has erred in law and on facts in dismissing the appeal against the order of penalty on disallowances of administrative expenses of Rs.3,89,78,000/- in spite of the fact that the assessing officer has not recorded any satisfaction that the said disallowances call for initiation of penalty proceedings as has been recorded in various paragraphs of assessment order in respect of payments of interest of Rs.37,97,357/-, Bad debt written off Rs.8,65,014/- etc. 6. Without prejudice to grounds no. '1' to '5' above, that the learned Commissioner of Income-tax (Appeals) has erred in confirming the levy of penalty in respect of various disallowances of expenses in asse....
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....findings of the assessment proceedings which have no relevance in the penalty proceedings. For this, ld. AR relied on the judgment of Hon'ble Calcutta High Court in the case of CIT Vs Bimal Kumar Damini - 261 ITR 857(Cal.) wherein it is held that observations made by the Appellate Tribunal in quantum proceedings are not a finding for the purpose of penalty proceedings and are not binding in penalty proceedings. Ld. AR also relied on the case of CIT Vs J.K. Synthetics - 219 ITR 267 (Del.) wherein it is held that penalty proceedings are different from assessment proceedings and separate and distinct provisions have been enacted in the statute for initiation of the penalty proceedings, therefore, the findings recorded by the Tribunal in quantum appeal cannot be held to be decisive. Ld. AR further submitted that the assessee's claim is bonafide. The expenses payable to M/s APR Ltd. were shown separately by the assessee in profit and loss account and which has been discussed by the auditor categorically in the audit report, which is placed at pages 50 and 51 of the paper book. He submitted that the assessee has made a claim in an open and bona fide manner without concealing any thin....
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....se are not applicable. For this proposition, he relied on the decision of ACIT vs. VIP industry in ITA No.5424/Mum./2006 dated 20.03.2009, placed at page 72 of the paper book. He further submitted that in the case of M/s. Pfizer Limited vs. DCIT in ITA No.154/Mum/2010 dated 25.01.2012, ITAT, Mumbai Bench 'C' had considered the provisions of clause B of Explanation 1 and held as under :- "14. At this juncture it would be relevant to take note that conjunction "and" has been used by the legislature between these two essential conditions of clause (B) of Explanation (1) to section 271(1)(c). It shows that both the above referred conditions must be cumulatively satisfied so as to bring a case within the mischief of this clause. If only one condition is satisfied and the other is not, the penalty would not follow. In other words, if the person offers an explanation which he is not able to substantiate [being condition(i) above] but succeeds in proving that such explanation is bona fide and that all the material facts relating to the same were disclosed by him, [being condition (ii) above], the penalty would not be attracted." Ld. AR further submitted that the provisions of section 271....
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....e penalty proceedings, the assessee has filed confirmation of M/s APR Limited to whom these expenses were payable. The CIT (A) has not considered the same and confirmed the penalty. The assessee could obtain the confirmation only on 20.03.2010 when the quantum proceedings were culminated. However, this confirmation was filed during the penalty proceedings. Such confirmation of third party cannot be discarded in a summary manner because no third party will give false evidence to oblige an assessee. For this proposition, ld. AR relied on the decision of Hon'ble Allahabad High Court in the case of Sheo Narian Duli Chand reported in 72 ITR 766 wherein it is held that there is no presumption that witnesses appearing for an assessee come forward to give false evidence to oblige the assessee. He submitted that if the CIT (A) had any doubt then he could have verified the confirmation from the executor of the confirmation before upholding the penalty, as the powers of CIT (A) are coterminous with of Assessing Officer, as held by the Hon'ble Apex Court in the case of Kanpur Coal Syndicate reported in 53 ITR 225 (SC). He further submitted that M/s. APR Ltd. to whom the impugned expens....
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..... The Assessing Officer held that no basis of working out the cost of scrap value of such goods was submitted and CIT (A) upheld it on account of excise approval was not granted and goods were not removed. The CIT (A) has confirmed the addition only because assessee has failed to obtain necessary approval from the excise authorities in this regard. The assessee has made this claim in a bonafide manner, therefore, such disallowance should not have been made. The obsolete stocks are allowed on provisional basis as held by ITAT, Delhi Bench 'C' in the case of Pepperi + Fuchs (India) Ltd. vs. DCIT reported in (2006) 6 SOT 10 and a copy of the same was furnished. It was a bonafide written off of stocks and unsaleable stocks which is reflected in financial statements filed along with return of income. Nothing has been brought on record by the Assessing Officer that assessee has reused these items or has not excluded these items from its books. Therefore, in view of the decision of Hon'ble Supreme Court in the case of CIT vs. M/s. Reliance Petroproducts Pvt. Ltd., cited supra, penalty cannot be levied in such cases as assessee has not furnished any inaccurate particulars of income. 5....
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....llowable as these were unascertainable liabilities. Therefore, the assessee has not disclosed the correct income in the return of income. He pleaded to sustain the orders of the authorities below. 7. We have heard both the sides. The assessee claimed the expenses of Rs.3,89,78,000/- being the amount payable to M/s. APR Limited for the services provided to the assessee. This amount was debited with debit notes received from M/s. APR Limited and the expenditure were pertaining to salary and wages of Rs.1,65,99,000/-, communication & telephone expenses of Rs.38,90,000/-, traveling & conveyance expenses of Rs.75,60,000/- and other expenses of Rs.1,09,29,000/- totaling Rs.3,89,78,000/-. The assessee claimed that M/s. APR Limited has provided services to the assessee and this was a genuine expenditure debited to the books of accounts of the assessee which has been settled by way of issuing the shares and this fact has been accepted by the ITAT in its quantum order which the revenue has not denied. Sharing of administrative expenses with M/s. APR Limited in a pool arrangement was disallowed by the Assessing Officer for the reason that assessee has not got any benefit out of these expense....
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.... assessee must have furnished inaccurate particulars of his income. The meaning of the word "particulars" used in section 271(l)(c) would embrace the details of the claim made. Where no information given in the return is found to be incorrect or inaccurate, the assessee cannot be held guilty of furnishing inaccurate particulars. In order to expose the assessee to penalty, unless the case is strictly covered by the provision, the penalty provision cannot be invoked. By no stretch of imagination can making an incorrect claim tantamount to furnishing inaccurate particulars. There can be no dispute that everything would depend upon the return filed by the assessee, because that is the only document where the assessee can furnish the particulars of his income. When such particulars are found to be inaccurate, the liability would arise. To attract penalty, the details supplied in the return must not be accurate, not exact or correct, not according to the truth or erroneous. Where there is no finding that any details supplied by the assessee in its return are found to be incorrect or erroneous or false there is no question of inviting the penalty under section 271(1)(c). A mere making of....