TaxTMI 
TaxTMI 
TaxTMI 
2016 (9) TMI 502
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....e electronically on 23.9.2008 declaring total loss of Rs. 12,41,455/-. The case of the assessee was selected for scrutiny assessment, and notice under section 143(2) of the Act was issued on 25.8.2009. On scrutiny of the accounts, it revealed to the AO that the assessee has debited sums of Rs. 9,15,505/- and Rs. 5,985/- under the head "Prior Period Expenditure and "Deferred Taxes". In order to verify the claim of the assessee, theld.AO had issued notice and directed the assessee to furnish necessary evidences in support of genuineness and correctness of prior period expenses, as well as justification for debiting deferred taxes from the total income. Such notice was issued on 22.3.2010. The assessee instead of furnishing any evidence, has r....
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....its case before the ld.CIT(A). Those submission can be considered as explanation of the assessee for absolving it from liability of penalty. In support of his contention, he relied upon the judgment of the Hon'ble Supreme Court in the case of Price Waterhouse Coopers P.Ltd. Vs. CIT, 348 ITR 306 (SC). According to the ld.counsel for the assessee, there was a bona fide mistake while preparing the statement of income, and there is no deliberate attempt at the end of the assessee to reduce its losses. He took me through profit & loss account which has been placed on record. In this profit and loss, he pointed out that net profit before the tax was computed by the assessee at Rs. 3,52,688/-. It is a negative figure. The assessee has, thereafter,....
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....fer an explanation or offers an explanation which is found by the Assessing Officer or the Commissioner (Appeals) or the CIT to be false, or (B) such person offers an explanation which he is not able 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 total income have been disclosed by him, then, the amount added or disallowed in computing the total income or such person as a result thereof shall, for the purposes of Clause (c) of this sub-section, be deemed to represent the income in respect of which particulars have been concealed." 6. A bare perusal of this section would reveal that for visiting any assessee with the penalty, the Ass....
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....cts relating to the same and material to the computation of the total income. Under first situation, the deeming fiction would come to play if the assessee failed to give any explanation with respect to any fact material to the computation of total income or by action of the Assessing Officer or the Learned CIT(Appeals) by giving a categorical finding to the effect that explanation given by the assessee is false. In the second situation, the deeming fiction would come to play by the failure of the assessee to substantiate his explanation in respect of any fact material to the computation of total income and in addition to this the assessee is not able to prove that such explanation was given bona fide and all the facts relating to the same ....
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....mpany never wants to claim prior period expenditure and deferred tax liability as revenue expenditure, because they have not been debited to expenditure account. The onus upon the assessee was to demonstrate as to how mistake has occurred. How such a mistake could be alleged as a bona fide mistake ? The only explanation on that score is that the company is operating at a very small level. Its total turnover was Rs. 19 lakhs. Apart from that the assessee did not bother to go to AO to give any explanation. How the AO could verify that explanation given by the assessee was false or not ? Because no explanation was given. Similarly, the assessee failed to give any material which can substantiate its explanation as to how the mistake has happene....