TaxTMI 
TaxTMI 
2009 (10) TMI 903
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....ort, the 'Tribunal') whereby penalty imposed upon the respondent/assessee under the provisions of section 271(1)(c) of the Income-tax Act, 1961 (hereinafter referred to as the 'Act') has been deleted by the Tribunal. Penalty of Rs. 1,28,19,836 was imposed by the Assessing Officer (AO) vide his orders dated 27-2-2004 under the following circumstances :- 3. For the assessment year 1995-96, the assessee had filed the return declaring 'Nil' Income. During the assessment proceedings, the Assessing Officer found that the assessee had incurred expenditure in renovating the leasehold premises and claimed depreciation at the rate of 50 per cent thereon. The Assessing Officer held that the expenditure was of capital nature. The assessee himself had capitalized the same and depreciation at the rate of 10 per cent was available. Accordingly, he disallowed the amount of Rs. 22,86,485 representing 40 per cent of the expenses. The Assessing Officer further found that the assessee had claimed 1/10th of public issue expenses under section 35D of the Act. The Assessing Officer disallowed the same on the ground that the assessee was not an 'industrial undertaking' w....
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....CIT(A), the CIT(A) deleted the penalty in respect of public issue expenses, which was claimed by the assessee as revenue expenditure, but treated as capital expenditure by the Assessing Officer. While doing so, the CIT(A) took note of the fact that the Tribunal in quantum appeal had restored this issue back to the file of the Assessing Officer to find out as to whether the said claim was allowable under any other head in the light of Circular No. 56, dated 19-3-1997 issued by the CBDT. According to the CIT(A), no doubt, on remand also when the case was reconsidered by the Assessing Officer, he opined that this claim cannot be allowed and maintained the addition, but this showed that the claim was not bogus, but bona fide. In this behalf, the CIT(A) observed as under :- "It is observed that the appellant has not claimed the full amount as a deduction in the return filed and has only claimed 1/10th of the same. The Tribunal has given the direction to consider the claim of the assessee if allowable under any other head. The direction given by the Tribunal of considering the allowability under any other head in the light of the Circular No. 56, dated 19-3-1997 issued by the CB....
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....expenditure incurred by it as per the Income-tax Rules. The excess depreciation claimed is definitely concealed income of the appellant as per the deeming provisions. For claiming excess depreciation, the appellant has not been able to give any bona fide explanation. Therefore, the penalty levied by the Assessing Officer on the above amount, i.e., Rs. 22,86,485 is confirmed." 7. Both the revenue as well as the assessee preferred appeals against the aforesaid judgment of the CIT(A). The revenue was aggrieved by the deletion of the penalty which was imposed on disallowing the claim under section 35D of the Act, whereas the assessee preferred the appeal on the penalty maintained in respect of the claim of depreciation. The Tribunal dismissed the appeal of the revenue and allowed the appeal of the assessee thereby deleting the entire penalty. Insofar as the appeal of the revenue is concerned, the Tribunal accepted the reasoning contained in the order of the CIT(A). As far as the appeal of the assessee is concerned, the Tribunal has observed that the provisions of section 271(1)(c) of the Act were attracted and penalty was imposable on imports. However, on the ground that the Assessi....
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....on 35D of the Act. Submission of the learned counsel for the revenue was that merely because information in this behalf was made available in the tax audit report, would not absolve the assessee of the penalty proceedings when such a claim was ex facie bogus. She submitted that hardly 5 per cent returns are taken up for scrutiny under section 143(2) of the Act and assessment is made under sub-section (3) of section 143 of the Act. Therefore, with the hope that his/her return may not come under scrutiny and may be assessed on the basis of 'self-assessment', an assessee can venture to give wrong information. Therefore, merely because information was available in the tax audit report would not absolve the assessee. What was to be seen was that whether the claim made was bogus. 13. We are inclined to agree with the aforesaid submission of learned counsel for the revenue. Even if there is no concealment of income or furnishing of inaccurate particulars, but on the basis thereof the claim which is made is ex facie bogus, it may still attract penalty provision. Cases of bogus hundi loans or bogus sales or purchases have been treated as that of concealment or inaccuracy in....
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....or setting up a new industrial unit. It was, thus, not a 'wrong claim' preferred by the assessee, but is a clear case of 'false claim'. In CIT v. Vidyagauri Natverlal[1991] 238 ITR 91. Gujarat High Court made a distinction between wrong claim as opposed to false claim and held that if the claim is found to be false, the same would attract penalty. We may also take note of the following observations of the Supreme Court in the case of Union of India v. Dharamendra Textile Processors[2008] 306 ITR 277/ 174 Taxman 571. In such a case it is difficult to accept the plea that error was bona fide." [Emphasis supplied] (p. 460) 10. We, thus, are of the opinion that the view of the CIT(A) or the Tribunal on this aspect is not correct and is liable to be set aside. We, thus, answer second question in favour of the Revenue and against the assessee. 11. Insofar as the first question is concerned, we may note that by the amendment vide Finance Act, 2008, there is an amendment to the provisions of section 271 of the Act whereby sub-section (1B) is inserted with effect from 1-4-1989. Relying upon this provision, contention of Ms. Bansal, learned counsel for the revenue, was ....