2014 (12) TMI 338

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.... The only issue arising in this appeal is the maintainability in law of the penalty, levied in the sum of Rs. 10,54,869/- u/s.271(1)(c) of the Act, in the facts and circumstances of the case, since deleted by the ld. CIT(A). The facts in brief are that the assessee-company, in the business of sports event management and brand promotion, wrote off in its accounts for the relevant year balances accumulated under the head 'Talent Management Asia' (or TMA, at Rs. 18,30,957/-), World Open Squash (WOS) (at Rs. 11,58,206/-), as well as that outstanding in the names of various parties (aggregating to Rs. 3,83,000/-), claiming the same as an expense. The assessee's explanation for the same was that the balances written off represent expenses incurre....

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....nce in the sum of Rs. 22.14 lacs was accordingly effected, and penalty proceedings initiated. The assessee's appeal before the first appellate authority could not be proceeded with in the absence of proper verification, i.e., as prescribed by law and, accordingly, dismissed as not maintainable. The assessee failing to respond to the notice u/s.274, penalty was imposed for the same reasons. Even though the bills for the purchase of fixed assets had not been produced, the same, even so, would only be capital expenditure and, as such, not admissible (refer para 2 of the penalty order). In appeal, the assessee found favour with the ld. CIT(A). The A.O's charge was that the expenditure had been incurred in the preceding years and, further, that ....

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.... said issue. If the assessee had indeed filed its' explanation (which we have no reason to believe was not), the same being admittedly not considered by the A.O., he ought to have called for a remand report from him after verifying/ascertaining the veracity of the assessee's claim, toward which we find no finding. The assessee also does not raise this issue before us, presumably as its appeal stands decided in its favour. So, however, a detailed submission having been made before the ld. CIT(A), which stands reproduced by him in his order, we under the circumstances consider the same to have included the assessee's case as made out before the A.O. as well. Further, we observe the same to be on facts the same as that assumed by the assessee ....

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.... while correctly framing the issue, does not explain if the conditions of Explanation 1, providing the circumstances under which the assessee would not be deemed to have concealed his income, and thus is to be read along with, stand satisfied or not. 3.3 The law on penalty for concealment or furnishing inaccurate particulars of income u/s. 271(1)(c) of the Act has been the subject matter of several decisions by the apex court, crystallizing into a dictum that a plausible explanation saves penalty. Where, therefore, the assessee furnishes an explanation, i.e., for making the claim, which is borne out by the material on record, so that all the material facts have been disclosed, no penalty could be levied. This is as the assessee is square....

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....g position of the law in the matter. A plausible explanation for a claim, made bona fide, saves penalty, which though is a strict civil liability; mens rea or willful neglect being not an essential ingredient thereof. The facts of its' claim, per its return, being only in its' know, the onus to explain the same is only on the assessee, which he is required to substantiate, further establishing his bona fides, as where there is proper disclosure of all material facts. The failure to do so would attract penalty, as indeed it would where the assessee offers no explanation, or same is found to be false. 3.4 Qua merits, we shall proceed to examine the case for both the disallowances: a) TMA (Rs.18.31 lacs): The A.O.'s reason is that the....

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....ngs, whereat our perspective is qua the plausibility of the claim, which we have found as so, so that there is no case for levy of penalty. However, with regard to its claim comprising admittedly purchase cost of fixed assets, stated to be at Rs. 3.82 lacs, we are unable to find any substance in the assessee's claim. The ld. Authorized Representative (AR), on being communicated so during hearing, could not furnish any answer, though would contend that the fixed assets also includes fixture and fittings, claim qua which may be valid, being in respect of rented premises. We agree. If and to the extent the assessee's claim is in respect of fittings, etc., which cannot be removed or would be of little value upon being so, the same would bear....