TaxTMI 
TaxTMI 
2019 (9) TMI 654
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....x Act, 1961 ('Act') on the addition made by the learned AO on account of write off of security deposit forfeited. 1.1. On the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in alleging that the issue of deduction of write off of security deposit forfeited is not a debatable issue without fully appreciating the judicial precedents relied upon by the Appellant, and has accordingly erred in not holding that penalty u/s 271(1 )(c) cannot be levied in the instant case where more than one legal view is possible. 1.2. On the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in placing reliance on the decisions in case of Robert Addie & Sons' Colleries v. C1T [1924] 8 Tax Cas. 671 and Bharat Collieries Ltd. Vs. C1T (32 1TR 547). 1.3. On the facts and in the circumstances of the case and in law, the learned CIT(A) has erred, in alleging that the claim of the Appellant with respect to the aforesaid write off was made under the hope that the return of income for the subject AY will not be picked up for scrutiny, and, in holding that penalty provisions do not require culpable mens rea. All the above grounds are ....
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....ile of the tax sought to be evaded by the assessee in respect of the addition of Rs. 24,75,000/-. On further appeal, the Ld. CIT(A) upheld the penalty. Aggrieved, the assessee is in appeal before the Tribunal raising the grounds as reproduced above. 4. In the additional ground raised, the assessee has challenged the notice issued for initiation of the penalty. According to the assessee, the charges for initiation of penalty, whether for concealment of particulars of income or furnishing inaccurate particulars of income, was not striked down in the notice dated 29/12/2008 issued under section 274 read with section 271 of the Act. 4.1 The Ld. counsel of the assessee submitted that this ground being only legal in nature and does not require investigation of the fresh facts and thus may be admitted at any stage of appellate proceedings, in view of the decision of the Hon'ble Supreme Court in the case of NTPC Vs. CIT, 229 ITR 383. 4.2 The learned DR, on the other hand, opposed admission of the additional ground. 4.3 We have heard the parties on the issue of admission of the additional ground. This being a legal ground and all facts in respect of the issue are available on record....
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....ault in declaring the income as provided under Explanation 1 of section 271(1)(c) of the Act. According to her the assessee has offered the explanation for claiming the expenses as revenue expenditure and such explanation is bonafide and all the facts in relation to same and material to the computation of the total income have been disclosed by the assessee and therefore, lower authorities were not justified in sustaining the penalty levied under section 271(1)(c) of the Act. In support of her contention that there are two opinion available on whether the expenditure in question could be considered as revenue expenditure or capital expenditure, she relied on the following decisions: 1. Mysore Sugar Company Ltd. (SC), 46 ITR 649 2. IBM World Trade Corporation Vs. CIT (Bom. HC), 186 ITR 412 3. Inden Biselers (Mad. HC), 181 ITR 69 4. Narandas Mathuradas & Co. Vs. CIT (Bom. HC), 35 ITR 460 5. Jhalani and Company Vs. CIT (Del. ITAT), 77 ITD 44 7.2 Further, in support of her claim that, no penalty could be levied where assessee discloses all the transactions, she relied on following decisions; 1. Commissioner of Income-tax Vs. Amtek Auto Ltd. (P&H) 36 taxmann.com 342;....
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....ty invoking Explanation-1 of section 271(1) of the Act. The contentions of the assessee were not accepted by the Assessing Officer. The Ld. CIT(A) also upheld the penalty mainly on the ground that the assessee has not made full disclosure of the transaction either in the tax audit report or in the financial statements of the assessee or in the computation of income. The relevant finding of the Ld. CIT(A) in para 5.11 to para 5.13 is reproduced as under: "5.11 Further, a perusal of the Form No. 3CD (which is a part of tax audit report) dated 27.03.2006 issued by the appellant's tax auditor contains a remark regarding claim of 100% depreciation on certain assets as against the item no. 17(a)-- "Amount debited to the profit and loss account being expenditure of capital nature". However, no such remark/mention was made in respect of claim of forfeiture of security deposit amounting to Rs. 24,75,001 /- as revenue expenditure. 5.12 The appellant claimed that it has not disallowed forfeiture of security deposit Rs. 24,75,000/- while computing taxable income and claimed the same as revenue expenditure based on certain judgments. Therefore, two opinions are possible and penalty for co....
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....efore the appellant has failed to furnish any valid reason for non-furnishing of note in respect of claim for forfeiture of security by the appellant." 7.6 In view of the above finding of the lower authorities, it is relevant for us to reproduce the Explanation 1 of section 271(1)(c), relying on which penalty is levied, as under: "Failure to furnish returns, comply with notices, concealment of income, etc. 271. (1)................................................................................................. Explanation 1.-Where in respect of any facts material to the computation of the total income of any person under this Act,- (A) such person fails to offer an explanation or offers an explanation which is found by the Assessing Officer or the Commissioner (Appeals) or the Principal Commissioner or Commissioner 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 of such person as a ....
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....se, it is quite obvious which it is. The amount was an advance against price of one crop. The Oppigedars were to get the assistance not as an investment by the assessee company in its agriculture, but only as an advance payment of price. The amount, so far as the assessee company was concerned, represented the current expenditure towards the purchase of sugarcane, and it makes no difference that the sugarcane thus purchased was grown by the Oppigedars with the seedlings, fertiliser and money taken on account from the assessee company. In so far as the assessee company was concerned, it was doing no more than making a forward arrangement for the next year's crop and paying an amount in advance out of the price, so that the growing of the crop may not suffer due to want of funds in the hands of the growers. There was hardly any element of investment which contemplates more than payment of advance price. The resulting loss to the assessee company was just as much a loss on the revenue side as would have been, if it had paid for the ready crop which was not delivered. In our judgment, the decision of the High Court is right. The appeal fails and is dismissed with costs." 7.9 I....