TaxTMI 
TaxTMI 
2015 (3) TMI 704
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....d together and are being disposed of by this consolidated order for the sake of convenience. 3. The assessee has raised the following grounds of appeal in I. T. A. No. 149/Chd/2012 : 1. That on the facts and in the circumstances of the case and in law, the worthy Commissioner of Income-tax (Appeals) through his order dated February 7, 2013, has erred in passing that order in contravention of provisions of section 250(6) of the Income-tax Act, 1961. (2)(i) That on the basis of facts and circumstances of the case, the worthy Commissioner of Income-tax (Appeals) has erred in confirming the action of the learned Assessing Officer, wherein he had erred in levying penalty of Rs. 1,04,28,75,000 on addition of Rs. 225 crores on account of expenditure incurred on the development of infrastructure in the form of setting up of an international airport at Mohali, which is accordance with the objects and functions for which the assessee authority has been constituted and the application of funds were in accordance with the provisions of the Act under which the authority h....
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....fore the disposal of the same. 4. In I. T. A. No. 26/Chd/2012, the Revenue has raised the following grounds of appeal : 1. On the facts and in the circumstances of the case and in law, the learned Commissioner of Income-tax (Appeals) has erred in allowing appeal of the assessee without appreciating the facts of the case. 5. On the facts and circumstances of the case and in law, the learned Commissioner of Income-tax (Appeals), has erred in deleting the penalty under section 271(1)(c) on addition of Rs. 5,99,62,243 on account of instal ments received. 6. On the facts and circumstances of the case and in law, the learned Commissioner of Income-tax (Appeals), has erred in deleting the penalty under section 271(1)(c) on addition of Rs. 53,31,784 on account of instalments received pending adjustments. 7. On the facts and circumstances of the case and in law, the learned Commissioner of Income-tax (Appeals), has erred in deleting the penal....
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.... case. 2. On the facts and circumstances of the case and in law, the learned Commissioner of Income-tax (Appeals), has erred in deleting the penalty under section 271(1)(c) on addition of Rs. 1,94,64,044 on account of instal ments for sale of houses/flats received during the year. 3. It is prayed that the order of the learned Commissioner of Income- tax (Appeals) be set aside and that of the Assessing Officer may be restored. 4. The appellant craves leave to add or amend any grounds of appeal before the appeal is heard or disposed of. 7. In I. T. A. No. 254/Chd/2013, the Revenue has raised the following grounds of appeal : 1. On the facts and in the circumstances of the case and in law, the learned Commissioner of Income-tax (Appeals) has erred in allowing appeal of the assessee without appreciating the facts of the case. 2. On the facts and circumstances of the case and in law, the learn....
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....were revised vide order passed under section 154 of the Act, dated March 23, 2011. The assessee's appeal was partly allowed by the Commissioner of Income-tax (Appeals), Chandigarh, and pursuant to the order of the Commissioner of Income-tax (Appeals), the following additions were upheld : (a) Addition of Rs. 16,42,01,257 on account of disallowance of 50 per cent. of administrative expenditure. (b) Addition of Rs. 225 crores on account of amount paid for devel opment of airport at Mohali. (c) Addition of Rs. 46,15,584 on account of instalment received on sale of houses/flats 12. The Assessing Officer completed the penalty proceedings initiated under section 271(1)(c) of the Act in respect of the first addition of disallowance of 50 per cent. of the administrative expenses, and dropped the penalty proceedings initiated under section 271(1)(c) of the Act. However, in respect of the addition of Rs. 225 crores being amount paid for development of the airport at Mohali, the Assessing Officer after considering the reply of the a....
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....once the condition provided in the Explanation are satisfied. The said Explanation shifts the burden of proof from the Department to the assessee as regards the concealed income. In substance, the said Explanation provides for a deeming fiction whereunder any addition or disallowance made to the total income is regarded as concealed income for the purpose of levy of concealment penalty under the circumstances mentioned therein. As per the provisions of Explanation 1 to section 271(1)(c), the onus to establish that the explanation offered was bona fide and all facts relating to the same and material to the computation of its income have been disclosed will be on the person charged with concealment". 13. The Assessing Officer held that the assessee had failed to discharge the onus cast upon it and having furnished inaccurate particulars of income was liable to levy of penalty under section 271(1)(c) of the Act to the extent of 150 per cent. of the tax sought to be evaded. Further, the Assessing Officer held that the assessee had also furnished inaccurate particulars of income in respect of the addition made on account of instalment received during the year on account of sale of ho....
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....x (Appeals) that the assessee's case was not covered under any of the conditions laid down in Explanation 1 below section 271(1) of the Act as the assessee had not proved that the explanation given by it was bona fide. The Commissioner of Income-tax (Appeals) held that the case of the assessee was squarely covered by Explanation 1(B) under section 271(1) of the Act because the correct facts relating to the claim of Rs. 225 crores were not disclosed. The Commissioner of Income-tax (Appeals) thus, held that where the said amount had been spent on the directions of the Punjab Government and such incurring of the expenditure by the assessee being not for business purposes, could not be apportioned for a fund as deduction from the taxable income. In view thereof, the Commissioner of Income-tax (Appeals) upheld levy of penalty under section 271(1)(c) of the Act. 17. The learned authorised representative for the assessee pointed out that the appeal of the assessee is in respect of the levy of penalty under section 271(1)(c) of the Act on addition of Rs. 225 crores. It was pointed out by the learned authorised representative for the assessee that the said amount was debited to the p....
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....] 327 ITR 510 (Delhi) and it was pointed out that the hon'ble Delhi High Court in the said decision had not said anything new except that has been laid down by the hon'ble Supreme Court in CIT v. Reliance Petroproducts P. Ltd. [2010] 322 ITR 158 (SC). 19. The next argument of the learned authorised representative for the assessee was that where the claim is not found to be bogus, even though it was disallowed, no penalty was leviable under section 271(1)(c) of the Act. Reliance was placed on CIT v. Deeksha Holidays Ltd. [2010] 186 Taxman 183 (Del) and Asst. CIT v. T. R. B. Exports (P.) Ltd. [2010] 134 TTJ (Chd.) 49. Further, where the issue is a debatable issue against which complete facts were furnished on record, there is no basis for levy of penalty under section 271(1)(c) of the Act. Reliance was placed on CIT v. Gurdaspur Cooperative Sugar Mills Ltd. [2013] 354 ITR 27 (P&H) and CIT v. Raj Overseas [2011] 336 ITR 261 (P&H). The learned authorised representative for the assessee further pointed out that the assessee was a Government organisation and the intent was to pay due taxes and in such circumstances lenient view needs to be taken. Reliance was placed on CIT v. ....
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....her pointed out by the learned Departmental representative for the Revenue that Comptroller and Auditor General of India audit was only to check the accounts and not the legality of allowability of expenditure and the submissions made by the assessee in this regard were thus, to be dismissed. In respect of the audit report, it was pointed out by the learned Departmental representative for the Revenue that the auditors have failed to remark on the said expenditure and in the absence of the same, it could not be said that the disclosure made by the assessee was bona fide. Further reference was made to Explanation 1 to section 271(1)(c) of the Act and it was pointed out that though an explanation has been filed by the assessee but the assessee is unable to substantiate that it is bona fide or prove it is true. As the assessee had failed to show how the expenditure incurred by it was genuine and incurred for the purpose of business, no immunity could be provided to the assessee from penal consequences. Reliance was placed on MAK Data P. Ltd. v. CIT [2013] 358 ITR 593 (SC). In the conclusion it was pointed out by the learned Departmental representative for the Revenue that the Commissio....
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....at the onus on the assessee has not been discharged to prove its bona fide. Where any addition to, or disallowance from, had been made to the returned income, it per se cannot be the foundation of penalty under section 271(1)(c) of the Act as findings in the assessment order cannot be taken a conclusive proof of concealment for the purpose of levy of penalty under section 271(1)(c) of the Act. Under Explanation 1 to section 271(1), the onus is upon the assessee to establish the bona fide of his claim and where the assessee discharges its onus of proving his claim to be bona fidely made, the courts have held that there is no merit in levy of penalty under section 271(1)(c) of the Act. 26. In the fact of the present case, the assessee had claimed an expenditure of Rs. 225 crores against the cost of land for establishing an international airport at Mohali. The said expenditure was claimed by the assessee as business expenditure under section 37(1) of the Act on the plea that the establishment of international airport in the vicinity of the area, which is under the control of the assessee authority, would result in higher profitability to the assessee vis-a-vis the increase in the p....
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....ide paragraphs 258 to 263 are as under (page 619) : "The last condition for allowability of expenditure under section 37 was that it should not be in the nature of capital expenditure. In the case before us, it has been held that the expenditure was incurred for the purpose of acquisition of land and therefore, being of capital nature it is not allowable. In this regard we have perused joint venture agreement (in short JVA) carefully and find that the same was entered on 17th day of September, 2009 between Airport Authority of India (statutory authority established under the Airport Act, 1994) and Government of Punjab through GMADA (statutory authority constituted by the Government of Punjab and HUDA (statutory authority constituted by the Haryana Housing Development Autho rity). In the recitation clause it has been recited that memorandum of understanding was signed among those parties on January 4, 2008, which broadly provide for the following terms and conditions : 'a joint venture company (JVC) would be formed with 51 per cent. equity stake of AAI and 24.5 per cent. equity....
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.... obtained by GMADA from concerned authorities- Activities/services for responsibilities for clearance/permission. Transfer of land (200 acres) to GMADA the JV company for development of project. The GMADA shall acquire the land of around 300 acres and transfer to the joint venture company for the development of Chan digarh International Airport. The GMADA and HUDA shall bear all the expenditure in equal share in respect of claim or liabilities arising out the any litigation, present or future in the matter of land acquisition. The GMADA shall ensure that initial establishment of sub-station and waterline to be done by State Government free-of-cost. The GMADA shall exempt the civil air terminal complex including apron, i.e., area including city side development staff colony and the land used for the installation of navigational aids and other related equipment from property tax and other municipal taxes initially for a period of ten years commencing from the date of transfer of land to JVC to minimise operational looses. The need for further extension of these concession and exemptions will be jointly reviewed by GMADA and AAI at the end of the ten year period. The....
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....he parties shall subscribe to the equity share capital of the joint venture company shall be as follows subject to provisions contained in paragraph 5 : AAO = 51% GMADA = 24.5% HUDA = 24.5% (B) The State Government would transfer the required land located at Mohali, Punjab to the JVC and AAI would be responsible for creating the airside facilities and terminal building for the JVC, which will be appropriated towards share capital and share premium. At the time of voluntary winding up of the company, the share premium paid by GMADA, HUDA and AAI shall be considered for determining the value of assets to be bifurcated/allocated to these three parties.' 263. Rest all the clauses are general clauses and not very relevant for us and therefore, same are not being reproduced. Combined reading of above clauses clearly shows that both the State Governments have contributed towards development of the airport at Mohali in terms of acquisition of land and against such acquisition of land the Government of Punjab through GMADA has been allowed 24.5 per cent. equity stake in the airport which would ultimately be run as business venture by floating private limited company. Ther....
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.... is not allowable for the purpose of computing 'profits and gains of business or profession'." The Tribunal further held that the expenditure, i.e., the contribution made by the assessee was not for business purposes but was in the form of capital contribution and in the nature of capital expenditure and hence, not allowable under section 37(1) of the Act. Thereafter, the Tribunal analysed the case laws relied upon by both authorised representatives and vide paragraph 213 has elaborated upon the decision relied upon by the Revenue of Oil Industry Development Board v. CIT (Asst.) [2009] 318 ITR (AT) 327 (Delhi) and held as under : "From above it is clear that unless and until the expenditure is related to the business of the assessee so as to meet the requirement of section 37 that the expenditure has been incurred 'wholly and exclusively' for the purpose of business, same is not allowable. Therefore, clearly this case law is applicable to the assessee in the sense that even if the expenditure is incurred to meet the objects of a particular undertaking the same is still not allowable un....
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....stablish that the explanation offered was bona fide and all facts relating to the same and material to the computation of its income had been disclosed, would be upon the person charged with concealment. The Assessing Officer, in the present case had held the assessee to have failed to discharge the onus cast upon it and having furnished inaccurate particulars of income, was liable to levy of penalty under section 271(1)(c) of the Act. As per the Commissioner of Income-tax, the expenditure incurred by the assessee was purely a case of application of income which had no direct or indirect connection with the business carried on by the assessee and hence, the same was disallowed as business expenditure and in the facts of the case where the assessee had debited the expenditure of Rs. 225 crores to its income and expenditure having been disallowed in the hands of the assessee, the onus was upon the assessee to establish that the case of the assessee was not covered by Explanation 1 to section 271(1)(c) of the Act. 32. Section 271(1) of the Act reads as under : "271. (1) If the Assessing Officer or the Commissioner (Appeals) ....
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....ms of an account. Therefore, the word "particulars" used in section 271(1)(c) would embrace the meaning of the details of the claim made. It was further held as under (page 165) : "We have already seen the meaning of the word 'particulars' in the earlier part of this judgment. Reading the words in conjunction, they must mean the details supplied in the return, which are not accurate, not exact or correct, not according to truth or erroneous. We must hasten to add here that in this case, there is no finding that any details supplied by the assessee in its return were found to be incorrect or erroneous or false. Such not being the case, there would be no question of inviting the penalty under section 271(1)(c) of the Act. Amere making of the claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee. Such claim made in the return cannot amount to the inaccurate particulars." (emphasis supplied) 35. The hon'ble Supreme Court in CIT v. Reliance Petroproducts P. Ltd. [2010] 322 ITR 158 (SC) further noted that i....
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....-tax (Appeals) and the High Court have correctly reached this conclusion.-Sree Krishna Electricals v. State of Tamil Nadu [2009] 23 VST 249 (SC) applied ; CIT v. Reliance Petro products P. Ltd. [2010] 322 ITR 159 (Guj) (judgment dated October 23, 2007 of the Gujarat High Court in Tax Appeal No. 1149 of 2007) affirmed. 37. The hon'ble Punjab and Haryana High Court in CIT v. Amtek Auto Ltd. [2013] 352 ITR 394 (P&H) held that the assessee had disclosed the nature of transaction in its return of income and based on interpretation of provisions of the statute where the Assessing Officer found that the expenditure claimed by the assessee was not revenue in nature but capital expenses, merely for that reason would not render the assessee liable to penalty proceedings. The relevant findings of the hon'ble Punjab and Haryana High Court vide paragraph 5 are as under (page 396) : "5. The assessee has disclosed the nature of transactions in its return. It was on the basis of the interpretation of the provisions of the statute, the Assessing Officer found that such ex....
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....t exact or not correct. Something which is untrue is inaccurate. The same facts can be given two interpretations. If the interpretation given is plausible though not accepted by the assessing authority it cannot be said that the statement of particulars is so inaccurate or erroneous as to invite imposition of penalty. True it is, that mensrea is not required to be proved. When mens rea is proved it shows that the person had an intention of evading payment of tax by illegal means. Merely because a wrong interpretation to the same set of facts is given would not, in our opinion, mean that the assessee is liable to pay penalty also. We must remember that penalty is by its very nature penal and somebody is being punished for an act which is unjustified. The assessee in the present case has already been burdened with tax and interest on the amount added to his income. The moot question is whether the assessee should be made liable to pay penalty. 22. The apex court in Reliance Petroproducts' case [2010] 322 ITR 158 (SC) has clearly laid down that merely because the assessee makes a claim which is....
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.... to substantiate and fails to prove that such explanation is bona fide and that all the facts relating to the same and material to the computation of his income have been disclosed by him, then such amount added to his income is to be treated as income in respect of which particulars have been concealed. Clause (B) to Explanation 1 under section 271(1) of the Act, thus set out that in case where the assessee offers an explanation which, (a) is not able to substantiate and ; (b) he is unable to prove that the explanation offered by him was bona fide and all the facts relating to the same had been disclosed by him, then he is liable to levy of penalty under section 271(1)(c) of the Act. However, where the explanation furnished by such person is bona fide and all the facts and material relating to the computation of income had been furnished on record, then the said person having discharged, his onus cannot be said to have concealed the particulars of his income. 43. The hon'ble Delhi High Court in CIT v. Deeksha Holidays Ltd. [2010] 186 Taxman 183 (Del) had deliberated upon the issue and had upheld the order of the Tribunal who in turn had considered various judicial propositi....
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....of a possible view could not be treated as concealment of its income by the assessee or furnishing of inaccurate particulars of income so as to attract the penal provisions of section 271(1)(c) of the Income-tax Act. 46. The hon'ble Punjab and Haryana High Court in CIT v. Gurdaspur Cooperative Sugar Mills Ltd. [2013] 354 ITR 27 (P&H) on deciding the issue of levy of penalty under section 271(1)(c) of the Act where the assessee had received grant-in-aid which was held to be revenue receipts in the hands of the assessee and not capital receipts, as claimed by the assessee, held that the issue was debatable and there was no merit in the levy of penalty under section 271(1)(c) of the Act. The hon'ble High Court held as under (page 29) : "In the present case, there is no dispute about the quantum of receipt of grant-in-aid from the State Government. The assessee reflected the same as capital receipt, whereas it has been treated as to be revenue receipt. The issue whether the amount of grant-in-aid is capital receipt or a revenue receipt, is a debatable issue. The findings returned in the judgmen....
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....ore the hon'ble High Court. In view thereof, it was pointed out by the learned authorised representative for the assessee that as an appeal is pending before the hon'ble High Court, the issue becomes debatable and no penalty under section 271(1)(c) of the Act is leviable. In relation thereto, the learned authorised representative for the assessee placed reliance on the ratio laid down by the hon'ble Delhi High Court in CIT v. Liquid Investment and Trading Co. 49. The hon'ble Delhi High Court in CIT v. Liquid Investment and Trading Co. held that in cases where the appeal has been preferred against the order of the Tribunal and the same have been admitted and substantial question of law framed shows that the issue is debatable and for these reasons, no penalty under section 271(1)(c) of the Act could be levied. 50. The learned Departmental representative for the Revenue, however in reply, relied upon the ratio laid down by the hon'ble Delhi High Court in CIT v. Splender Construction in I. T. Appeal 1977 of 2010, date of judgment January 14, 2011 [2013] 352 ITR 588 (Delhi), wherein the issue was considered and it was held that in each case wherein appeal has ....
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.... "3. We find that the reliance on the abovesaid judgment is not tenable, as in the aforesaid case, the deductions under section 80-O of the Act was declined for the reason that the assessee has not produced any details of the expenses allegedly incurred by it. The Delhi High Court observed (page 170) : 'The assessee, for claiming deduction under section 80-O of the Act, wanted the same at 50 per cent. of the gross income received in convertible foreign exchange in India provided by it to its foreign clients. The Assessing Officer, however, was of the view that on correct interpretation under section 80-O, deduction is restricted to the net income and, therefore, expenditure incurred in India for earning the foreign exchange had to be deducted. The Assessing Officer, therefore, wanted the assessee to furnish the details of expenses. As the assessee failed to do the needful in respect of various particulars demanded, the Assessing Officer was left with no alternative but to estimate such expenditure in the ratio ....
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....Airport at Mohali was under the bona fide belief that the expenditure is duly allowable as revenue expenditure and same was so claimed in the profit and loss account. The said expenditure has been held by the Tribunal not to have been incurred for the purpose of business. It has also been held by the Tribunal that the expenditure is in nature of capital expenditure and therefore, the same is not allowable. Mere disallowance of expenditure in the hands of the assessee does not establish the charge of concealment in the hands of the assessee. Various courts have time and again laid down the principle that where the assessee has bona fide explanation of non-exclusion of receipts as its income or for claiming particular item of expenditure as deduction, even where claim of the assessee is rejected, no penalty for concealment of income or furnishing of inaccurate particulars of income could be levied under section 271(1)(c) of the Act. The assessee having declared complete facts with regard to expenditure of Rs. 225 crores and the claim of the assessee being bona fide, though not allowed as expenditure in the hands of the assessee, does not justify levy of penalty under section 271(1)(c....
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....ale of houses/flats." 59. Identical issue has been raised by the Revenue in all the appeals and we proceed to decide the same after hearing both authorised representatives by way of this consolidated order for the sake of convenience. 60. The Revenue is in appeal against the deletion of penalty on the issue of addition made on account of instalment received on sale of houses/flats. 61. The brief facts relating to the issue are that during the year under consideration, the assessee had changed its method of accounting to the mercantile system of accounting. However, the instalments received on sales of houses/flats under various schemes were not recognised as income by the assessee, while computing its income for the different years under consideration. The Assessing Officer, in view of the addition made in the hands of the assessee which in turn was confirmed by the Commissioner of Income-tax (Appeals) holding the assessee to be liable for penalty under section 271(1)(c) of the Act and the same was levied upon the assessee. 62. The Commissioner of Income-tax (Appeals), in the appeal filed against the order levying penalty under section 271(1)(c) of the Act deleted the p....