TaxTMI 
TaxTMI 
2014 (6) TMI 181
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....sessing Officer made the following additions/disallowances: i) Excess Expenses : Rs. 8,59,553/- ii) Production Bonus : Rs. 47,50,000/- iii) Disallowance u/s 43B : Rs. 35,183/- iv) Interest earned : Rs. 2,996/- v) Abandonment Reserve : Rs. 5,30,875/- vi) Interest expenses : Rs. 98,391/- vii) Reduction in exemption u/s 10A : Rs. 2,23,148/- Total : Rs. 65,00,146/- 3. On the basis of the above additions/disallowances, the Assessing Officer imposed penalty to the tune of Rs. 23 lakh by observing that the assessee accepted the additions at serial No. i to vi above without raising any objection in appeals and the last addition of Rs. 2,23,148/- at serial no. vii. was unsuccessfully contested in appeal. The ld. CIT(A) ordered for the deletion of penalty. The Revenue is aggrieved against such deletion of penalty. 4. After considering the rival submissions and perusing the relevant material on record, we find that there are certain inconsistencies in the penalty order passed by the Assessing Officer in mentioning that the additions at serial no. i to vi were accepted by the assessee uncontested and lost its case in appeal in res....
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....arned but not offered for taxation. The AO noticed that the assessee directly took such amount to its balance sheet by crediting it to the reserve account. Penalty was imposed on such addition, which was erased in the first appeal. 9. Having heard both the sides on this issue and perused the relevant material on record, we find it as an admitted position that the assessee, in fact, earned such interest income of Rs. 2,996/- but instead of showing it as income directly took it to reserve account. The ld. AR also candidly admitted that this amount was rightly chargeable to tax. When a particular item of income earned by the assessee is routed to balance sheet without passing through the Profit and loss account, the natural interference which is to be drawn is that the assessee did not intend to offer such amount to tax. No explanation has been advanced on behalf of the assessee as to under which circumstances the amount was not offered for taxation but straightway taken to the reserve account in balance sheet. It is a clear cut case of concealment of income warranting the imposition of penalty. By overturning the impugned order, we hold that the penalty was rightly imposed by the ....
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....e assessee along with the Government of India and others under the PSC undertook to restore the site after the prospecting mineral oil etc. at the end of the stipulated period. As per the PSC, the parties were bound to restore the site to its original position by incurring expenses which were estimated on a scientific basis. The amount under dispute is the assessee's share in such estimate of site restoration expenses to be incurred under the PSC. Even though the site was to be restored to the original position at the end of the stipulated period, but the extent of the damage caused to the site on yearly basis was capable of quantification, which exercise was done by the Consortium and the total amount of expenses on restoration was estimated. The assessee incurred liability towards such Site Restoration at the end of each year after prospecting mineral oil etc. from the site on matching principle. The amount of such abandonment cost fell on the assessee at the end of each year though it was to be discharged at the end of the stipulated period. Under the mercantile system of accounting, an expense is allowed as deduction on incurring the liability irrespective of the actual dischar....
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....sessee's tax liability. If income-tax itself is not a permissible deduction under s. 37, any interest payable for default committed by the assessee in discharging his statutory obligation under the I.T. Act, which is calculated with reference to the tax on income cannot be allowed as a deduction.' In view of the fact that the assessee claimed deduction for payment of income-tax by clubbing it with `Interest expenditure', which amount is clearly not allowable even as per the law laid down by the Apex Court way back in 1998, we have absolutely no doubt in mind that the provisions of sec. 271(1)(c) of the Act were rightly magnetized. 11.3. Similar is the position of interest on late deposit of Wealth-tax amounting to Rs. 19,084/-. The amount of wealth-tax is also not an allowable deduction as per the clear terms of section 40(a)(iia) of the Act. When the amount of wealth tax itself is not deductible, evidently the amount of interest on late deposit of such wealth tax also ceases to be deductible as per the law enunciated in Bharat Commerce and Industries Ltd. (supra). The assessee's action in claiming deduction for the amount of income-tax paid and interest on wealth-tax is vividly....
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....inability or otherwise of such application. Rule 27 of ITAT Rules, 1963 with its marginal note reads as under :- `Respondent may support order on grounds decided against him. The respondent, though he may not have appealed, may support the order appealed against on any of the grounds decided against him.' 14.3. The effect of this rule is that a respondent has been entitled to support the order on the ground which has been decided against him. The underlying idea and the spirit of Rule 27 is to arm a respondent, in an appeal filed by the plaintiff, with an option to contest unfavourable decision of the CIT(A) on the aspect(s) of an issue, the final decision on which issue has been delivered in his favour. Take an instance of first appellate authority deciding the legal issue of reopening of an assessment against the assessee but deleting the addition on merits in favour of the assessee. When the Revenue files appeal against this order before the tribunal, it will naturally assail the finding of the CIT(A) qua the deletion of addition on merits. Notwithstanding the fact that the respondent assessee did not file any appeal against the order passed by the CIT(A), shall still b....
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....ll of the CIT(A) on a particular aspect, which is otherwise germane to the overall issue decided in favour of the respondent, can the respondent espouse such aspect under rule 27 in an appeal filed by the plaintiff ? If we go by the literal interpretation of the Rule, then the answer is in negative that unless the ground is not `decided against' the respondent, he cannot take recourse to this provision. However, it is of paramount importance to keep in mind the fundamental object of enshrining rule 27, being giving an opportunity to the respondent to support the impugned order in an appeal filed by the plaintiff. A pragmatic approach on consideration of the object of such Rule, in our considered opinion, necessitates the adoption of liberal interpretation that when a particular issue is decided in favour of the respondent and the plaintiff has come up in appeal against such decision on the issue, then all the relevant aspects having bearing on the overall issue, even though not specifically decided against the plaintiff, should be open for challenge by the respondent under the rule. If the respondent is debarred from raising that aspect of the issue, which was not taken up before t....
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....e considered and decided in Nalwa Sons (supra), we admit the application under Rule 27 for consideration on merits. 15.1. At the cost of repetition, we once again note that the assessee filed its return declaring net loss of Rs. 2,07,90,899/- under the normal provision of the Act and declaring income of Rs. 22,52,830/- u/s 115JA of the Act. The assessment was concluded u/s 143(3) of the Act by computing a positive total income under the normal provision of the Act at Rs. 1,83,56,802/- and income u/s 115JA at Rs. 34,03,022/-. The assessee in its application under Rule 27 has stated that after giving effect to the orders of the CIT(A)/ITAT, the income of the assessee was finally assessed u/s 115JA at Rs. 27,06,612/- which was higher than the loss under the normal provisions of the Act determined at Rs. 4,68,443/- as against income of Rs. 2.07 crore originally declared by the assessee. 15.2. Before considering the applicability of the ratio decidendi in the case of Nalwa Sons (supra), let us see the facts and the decision in that case. The assessee in that case filed return declaring loss of Rs. 43.47 crore and revised return declaring income at Rs. 3.86 crore u/s 115JB of the A....
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....isions of sub-section (2) of section 32 or sub-section (3) of section 32A or clause (ii) of sub-section (1) of section 72 or section 73 or section 74 or sub-section (3) of section 74A.' As per the prescription of the sub-section (3), the assessee would be entitled to carry forward loss under the regular provisions of the Act for set off in the subsequent year subject to the relevant provisions. It means that now with the making of addition of Rs.10, the assessee would be entitled to carry forward the amount of reduced loss of Rs.50 to subsequent years for set off, which would otherwise have been at Rs.60 but for the addition. The nitty gritty of the judgment in Nalwa Sons (supra) is that since the assessee is still liable to pay tax under the MAT provisions of sec. 115JA on the income of Rs.100, no penalty u/s 271(1)(c) can be levied on the assessee w.r.t. the addition of Rs.10 to the income under the regular provisions of the Act. The rationale of the judgment is that when the computation is made under s. 115JA or sec. 115JB of the Act, then the concealment of Rs. 10 has no role to play and is totally irrelevant and hence such concealment cannot lead to tax evasion at all. 15.5....
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....isions of the Act for the current year because the computation made under s. 115JA or sec. 115JB of the Act is unaffected with the concealment of Rs. 10. 15.6. The crucial part of the judgment in the case of Nalwa Sons (supra) is that : `When the computation was made under s. 115JB of the Act, the aforesaid concealment had no role to play and was totally irrelevant. Therefore, the concealment did not lead to tax evasion at all. The ratio decidendi of the decision which ergo follows is that if there is certain concealment of income touching only the computation of income under the normal provisions of the Act but the final income is determined u/s 115JB which is unaltered because of the items of concealment of income, then no penalty can be imposed u/s 271(1)(c) of the Act in the light of its Explanation 4(a). It is impermissible to read this judgment as laying down a universal principle that if income is computed under Chapter XII-B of the Act covering secs. 115JA and 115JB etc., then there can never be any penalty u/s 271(1)(c) of the Act. Going by the judgment, the penalty would be very much attracted where the addition leading to the concealment or furnishing of inaccurate pa....