TaxTMI 
TaxTMI 
2015 (10) TMI 2301
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....the Assessing Officer restored. 3. The appellant craves leave to amend or alter any ground or add a new ground which may be necessary." Assessee-company, engaged in the business of financing diamond-trade, filed its return of income on, 30.10.2005, declaring a total income of Rs. 21.91 Crores. The AO completed the assessment on, 28.12.2007, determining the total income of the assessee at Rs. 23.87 Crores. 2. Effective ground of appeal deals with deletion of penalty imposed by the AO u/s.271(1)(c) of the Act. While completing the assessment the AO made a disallowance of Rs. 88,56,354/- under the head payment made by the Branch Office to the Head Office (HO). Aggrieved by the order of the AO, the assessee preferred an appeal before the Fi....
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....m of expenditure, that in earlier years HO expenses were allowed in appellate proceedings, that in the succeeding year DRP has directed the AO to allow the HO expenditure as per the provisions of section 44C of the Act. He referred to the matter of Haryana Ware Housing Corporation - ( 2009-TIOL-332-HC-P&H-IT ) , Kanbay Software India Pvt.Ltd. (22 DTR 481) and held that in the case under consideration the assessee had made a legal claim while filing of return by disclosing necessary facts, that the view adopted by the assessee was a plausible view, that the claim was not a frivolous claim, that the stand taken by the assessee was not untenable or unsustainable, that the issue was debatable. Finally, he held that assessment with r....
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....nt views as to whether the expenditure claimed by the assessee could be allowed or not. In our opinion, disallowance of any claim does not and should not result in automatic levy of penalty, as assessment and penalty proceedings are totally different proceedings. What has to be seen, in deciding the penalty proceedings, is the explanation filed by the assessee in response to the penalty notice. In response to the notice the assessee had filed an explanation and same was plausible. It is said that the prime factors required to be considered while imposing penalty under section 271(1)(c) are concealment of particulars of income or submission of inaccurate particulars of such income. There is no dispute that the assessee had disclosed all deta....
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....ticulars have been furnished. This is the object and purpose behind enacting Explanation 1 to section 271(1)(c), which consists of two limbs, i.e., clause (A) and clause (B). Clause (A) applies when an assessee fails to furnish an explanation or when the explanation offered is found to be false. In such cases, penalty can be imposed. Clause (B) applies to cases where an explanation is offered but the assessee has not been able to substantiate the explanation. The assessee can escape rigours of penalty, provided he satisfies the two conditions, namely, (i) the assessee should demonstrate that his explanation was bona fide ; and (ii) that he had furnished and disclosed facts and material relating to computation of his income. The onus of esta....