TaxTMI 
TaxTMI 
2020 (2) TMI 1175
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....ues to furnishing of inaccurate particulars of income. 3. The appellant craves to be allowed to add any fresh ground(s) of appeal and / or Deleted or amend any of the ground(s) of appeal." (B) Assessment Order dated 04.12.2009 was passed under Section 143(3) of Income Tax Act, 1961 ("I.T. Act", for short), wherein, interalia, addition of Rs. 149,31,02,715/- was made. The Assessing Officer ("AO", for short) held that this amount had accrued to the assessee though the assessee had not recognized this Revenue. The assessee's contention was, that pending the settlement of EPC contract, this amount had not accrued to the assessee. However, the AO rejected this contention of the assessee and made the aforesaid addition amounting to Rs. 149,31,02,715/-. Penalty proceedings were initiated by the AO under Section 271(1)(c) of I.T. Act in respect of the aforesaid addition of Rs. 149,31,02,715/-. The AO, however, held that if in appeal the assessee's claim of treating revenues as non-taxable on account of it being uncertain is accepted, then the provision made by assessee for the additional expense to the extent of Rs. 102,60,80,000/- should be disallowed on matching principles an....
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....as completed on 04.12.2009 and income was assessed at Rs. 1106,41,03,850/- thereby making the following additions to the returned income of the assessee:- 1. Depreciation on Participating Interest = Rs. 204,57,99,264/- 2. Depreciation on Support Equipment = Rs. 1,94,58,972/- 3. Disallowance of pre-acquisition expenses = Rs. 112,51,00,000/- 4. Sudan pipeline - Addition to income in respect of claim made to Sudan Government not accepted by them = Rs. 149,31.00.000/- 2. Aggrieved by the above additions made, assessee filed appeal before Ld. CIT(A)-XVI who in his order dated 24.02,2014 in Appeal No. 140/09-10 has decided the appeal as under:- 1. Addition made on account of disallowance of depreciation on Participating Interest issue decided in favour of assessee 2. Addition made on account of disallowance of depreciation on Support Equipment - issue decided in favour of assessee. 3. Addition made on account of disallowance of pre-acquisition expenses - issue decided in favour of assesseee 4. Addition made to income in respect of claim made to Sudan Government not accepted by them has been reduc....
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....and the Pipeline system, under the scope of works of ONGC Videsh Ltd as per the terms and conditions of the Pipeline Contract Agreement (PCA) dated 30/6/04, is ready for commissioning, and handover on 31/8/05 - 2 months ahead of contractual schedule of 31/10/05- Copy Of completion certificate issued by the Government of Sudan is enclosed as Annexure 5 to this letter. Further, on the basis of such certificate, the Assessee has also issued a certificate to the EPC Contractor acknowledging that the provided work/assignment has been completed Liability to EPC Contractor for claim made by them for additional work carried out and accepted/verified by the Assessee 's consultant The EPC Contractor encountered certain constraints such as the scarcity of water for hydro Jesting, port congestion etc. In order to complete the work within the schedule timelines, The EPC Contractor adopted various acceleration measures. including making arrangements for additional spreads, increased resources and airfreight by incurring significant expenditure. In a letter dated 30 June 2005, the Assessee informed the EPC Contractor that variations in quantities of items indicated ....
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....xecuting the project has claimed additional COSIS aggregating to Rs. 1659.00 Million (Company's share being Rs. 1,493,10 (Million), which have not been accepted by the Company as yet. However, part of the claims has been forwarded to MEM for their approval for an aggregate amount of receivables from MEM Rs. 1,524.20 Million (Company's share being Rs. 1371.78 Million), while the balance claims may be forwarded to MEM after further verification. Pending settlement with the EPC Contractor, an amount of Rs. 1,026.08 Million being the Company's share out of Rs, 1,140.08 Million has been provided as expenditure during the year based upon the advices received by the Company from its consultant. The Company's share of the balance amount has been shown as claims not acknowledged as debt. However, no revenue -in this respect has been recognized pending final approvals by MEM. Copy Of the relevant page of the Annual report is enclosed as Annexure 8 to this letter. Since the claim made/expenditure incurred by EPC Contractor was revenue in nature and represent liability already incurred the assessee has claimed deduction of expenses in the return of in....
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....ere absolutely contrary to the admission of amounts due and payable to Dodsal set forth in letters dated May 25, 2006 and October 5, 2007, read with the letter dated November 2, 2007. Further, the additional works undertaken by Dodsal were duly certified by OVL. The amounts payable to Dodsal have already been assessed and confirmed through the above referenced letters dated May 25, 2006; October 5, 2007 and November 2, 2007, Any further assessment suggested in OVL's letter dated July 31. 2008 is not warranted in light of OVL 's prior admissions and is obviously intended only to delay the payment of the Aggregate Amount. Keeping in view that the aforesaid arbitration has initiated on 26 December 2008, your good self may appreciate that there was no dispute in relation to claim raised by EPC Contractor and approval by the consultant of the Company till the date of filing of the tax return for the A Y 2006-07 (both original and revised). Further, the Company has also issued the certificate of completion of work to the EPC Contractor. Accordingly, the liability had been crystallized in the financial year 2005-06 amounting to Rs. 1,026.08 million and claimed as revenue expe....
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....legal department and legal department of MEM was of the view that Assessee is not legally entitled to claim the amount from MEM. The response of the legal department is reproduced as under: Referring to the above mentioned Subject and after review and study of the Contract signed between MEM and OVL and the related documents, would like to convey to you that the Contractor is not entitled to any amount under his claims for additional amounts, as the alleged variations were not approved by the Owner before implementation of the works the subject of the variations. In addition the required procedures under the contract for both, variations approval .or claims were not followed. However, the high standard of performance and early completion by of the project the Contractor (OVL) is appreciated and high valued and could be a matter of consideration at your company's own discretion and consideration, without any legal obligation to do the same, Copy of the letter is enclosed as Annexure 13 to this letter. Thereafter, there has been a series of communication with MEM to process the payments of the additional claim raised by the Assessee, Arbitratio....
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....IT(4) also disallowed the expenditure claimed by the Assessee on account of claims of the EPC Contractor by stating that the liability to pay is pending in arbitration tribunal. In this regard, we wish to submit that till the time of filing of original as well as the revised return Of income, arbitration was not pending, rather the Assessee had in principal approved the expenses claimed by the EPC Contractor. Accordingly, your goodself may appreciate that the Assessee has made full disclosures and elaborate legal submissions and cannot be said to have either concealed any income or furnished any inaccurate particulars of income, therefore, penalty should not be imposed on the Assessee. Further, Assessee submitted that the admission or rejection of a claim is a subjective exercise and whether a claim is accepted or rejected has nothing to do with furnishing of inaccurate particulars of income. What is a correct claim and What is an incorrect claim could be a matter of perception. Various judicial precedents have held that legislature intends to levy penalty only in cases where there is a concealment of income or furnishing of inaccurate particulars Of income With a....
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.... of income. The Hon'ble court in the said ruling further observed that: "In order to expose the assessee to the penalty unless the case is strictly covered by the provision, the penalty provision cannot be invoked by any stretch of imagination, making an incorrect claim in law cannot tantamount to furnishing inaccurate particulars. The above principles have been followed in the following cases: • CIT, New Delhi vs. M/s Dharampal Premchand Ltd [2010-TIOL-654-HC- DEL] • CIT vs- Vijay Kumar Jain [325 ITR 378] Chhatisgarh HC In the above, facts of the case, your goodself may appreciate that the facts in respect of the claim Of the Assessee have been fully disclosed in the note 5 of schedule 27 of the annual report of the Assessee. Also, the Assessee has .specifically mentioned the details of such claim in the notes 10 the computation of income. Further, the Assessee has also filed the relevant documents with the tax authorities during the course of assessment and appeal proceedings. In view of the above, it is submitted that Assessee had fully disclosed all the relevant particulars and facts and there was no co....
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....filing of the revised return of income, the arbitration proceeding were not initiated by the EPC Contractor. Accordingly, there was a bonafide reason for the claim of the expenditure in the revised return as well. Also, during the course of assessment proceedings, the Assessee had explained truly and correctly the entire facts. Your goodself may appreciate that the observations in the assessment order do not refute the explanations given by the Assessee in respect of the expenditure rather, the assessing officer has proceeded to consider the income attributable to such expenses. Therefore your goodself may appreciate that the Assessee does not fall in any of the above-said criteria since: The Assessee has neither failed to offer an explanation nor such explanation is found to be false; or Further, the Assessee has been able to substantiate the explanations and demonstrated that such explanations were bonafide Therefore, it cannot be said that Assessee had failed to offer an explanation or any explanation have been found to be false or the explanation relating to the facts lacks bonafide. Hence, the provisions of section 271 (I) (c) of the ACI are not attr....
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....in consortium with Oil India Ltd., company's share being 90%. The aforesaid project was completed during the relevant assessment yean The EPC contractor executing the project on behalf of the consortium has claimed additional costs aggregating to Rs. 1,026.08 million. being the company's share out of Rs. 1,140.08 million has been provided as expenditure during the year. 8.2 The company has forwarded to MEM claims of 524.20 million (company's share being 1,493.10 million) which have not been accepted by MEM. Accordingly, the company has not considered any revenue in its Profit and Loss account for the F Y .2005-06. 6. After considering the reply filed by the assessee, the Assessing Officer held that: "on completion of the project during the year, the company had a definite right to claim its share of revenues to the extent of 1493.10 million. The assessee company also forwarded its claim of Rs. 1493.10 million to MEM during the year. As such, for the year under consideration the income was ascertained and definite and hence should have been returned as taxable income. The principal of matching in accounts which IS upheld in server judgments of ....
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....er, CIT(A) has also mentioned in the order that assessee is not eligible to claim deduction of expenditure incurred in respect of liability claimed by EPC contractor as arbitration proceedings are pending. 'Therefore to this extent, the assessee has furnished inaccurate particulars of its income and is therefore liable to penalty u/s 271(1)(c) of the Income-tax Act, 1961. Reliance in this regard is placed on the following decisions:- (i) The Hon'ble ITA T in the case of Sanjay Enterprises Pvt ltd Vs ITO in ITA No 3036 & 4083/Del/2007 dated 16.12.2011 has elaborately considered the provisions of Section 271 (1)( c) of the Act and has come to the conclusion that a heavy onus was placed on the assessee to explain the difference between the assessed income and returned income. It has been held that the onus is not on the Revenue to prove mala fide, even When the primacy onus was on the assessee to prove that there was no concealment in view of Expln. I to Section of the Act and no separate enquiry is necessary before imposing tie penalty. It is well established that whenever 'here is difference between the returned and assessed income. there inference of concealmen....
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....ction of these defaults of concealment or of furnishing inaccurate particulars of income and indeed concealment of particulars of income and inaccurate particulars of income may at times overlap, as for example when half of the income under particular head is not at all disclosed that would be concealed to that extent while the remaining half which is in fact disclosed would, not being his complete disclosure amount to inaccurate particulars of income as regards that constituent item of _the return_ By the _very nature of the assessment proceedings the ITO While ascertaining the total income chargeable to tax would be in a position to detect the specific or definite particulars of income concealed or of which false particulars are furnished. Where in the constituents of income returned, such specific or definite particulars of income are detected as concealed, then even in the total income figure to that extent they reflect, it would amount to concealment to that extent. In the same way where specific and definite particulars of income are detected as inaccurate, then such figure will also make the total income inaccurate in particulars to the extent it does not include such income....
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....e particulars of such income, such person may be directed to pay penalty. The operative part of the decision of Apex Court is reproduced hereunder:- "close look at Section 271(1) (c) and Explanation (i) appended thereto would show that course of any proceedings under 'he Act, inter alia, If the Assessing Officer is satisfied that a person has concealed the particulars of his income or furnished inaccurate particulars of such income, such person may be directed to pay penalty. The quantum of penalty is prescribed in Clause (iii). Explanation I, appended to section 271(1) provides that if that person fails to offer an explanation or (he explanation offered by such person is found to be false or the explanation offered by him is not substantiated and he fails to prove that such explanation is bonafide and that all the facts relating the sane and material to the computation of his total income has been disclosed by him, for the purposes of Section 271(1)(c), the amount added or disallowed in computing the total income is deemed to represent the concealed income. The penalty spoken of in Section 271(1)(c), is neither criminal nor quasi criminal but a civil liability," albei....
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.... the case of CIT' Vs Rakesh Suri, 331 ITR 458 held as under: Held, allowing the appeal, that the assessee had concealed the material facts and given incorrect statement of facts in the application and also not provided information requbed.by the Assessing Officer, after receipt of notice. Accordingly the action of the assessee was neither bona fide nor voluntary. The manner in which the assessee had tried to prolong the case before the Assessing Officer by not providing information immediately and by narrating incorrect facts in the letter dated December 6.2006 showed that the assessee had concealed the income and disclosure was not voluntary but under compulsion being cornered by the Assessing Officer. Penalty had to be imposed " (viii) Furthermore the Hon'ble Delhi High Court, in the case of M/S Zoom Communication Pvt. Ltd., in ITA No. 7/2010 dated 24.05.2010 has held that- "The Court cannot overlook the fact that only a small percentage of Ike Income Tax Returns are picked up for scrutiny. if the assessee makes a claim which is not only incorrect in laws but is also wholly without any basis and the explanation furnished by him for making such a....
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....ration Limited ('ONGC') Appellant filed its original return Of income on 29 November 2006 which was subsequently revised on 31 March 2008. The assessment was completed Vide order under section 143(3) of the Act dated 04 December 2009 after making additions/disallowances aggregating to Rs. 4,683,458,236. The appeal filed by the Appellant has been disposed by the Hon'ble/e CIT(A) vide order dated 24 February 2014. Vide such Order, the Hon'ble CIT(A) has deleted all the aforesaid additions made in the assessment order- However, Hon'ble CIT(A) has disallowed the amount of claim raised by EPC Contractor to the extent accepted by the Company and provided as liability in the audited balance sheet. White passing the order, the Hon'ble CIT (A) has observed that There is no legal entitlement to the claim to the contractor as well as to the appellant, Neither the claim of the EPC Contractor has been accepted by the appellant company nor has the claim of the appellant company been accepted by MEM. In view Of the above neither revenue is recognizable in the hands of EPC Contractor not it can be recognized in the hands of the appellant company. The principle which the a....
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.... Sudan ('MEN'). Facts in respect of the claim raised by EPC Contractor for additional work carried out and accepted /verified by the Appellant's consultant. The EPC Contractor encountered certain constraints such as the scarcity Of Water for hydro testing, port congestion etc. In order to complete the work within the schedule timelines, the EPC Contractor adopted various acceleration measures and significant expenditure. In a letter dated 30 June 2005, the Appellant informed the EPC Contractor that variations in quantities of items indicated and / or identified in the Contract shall be settled on the As Built Data and / or Documents in accordance with the provisions and unit rates set forth in Annexure C of the Contract. The EPC Contractor was also requested to submit their variation proposals based on As guilt Data and Documents. Subsequently, on 14 August 2005, a meeting was held among the representatives the Appellant's consultant and EPC Contractor to discuss the adjustment to the contract price consequent upon the alterations/variations to the scope of work undertaken by the EPC Contractor. Further, the EPC Contractor was advised by ....
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....nicated that its claims have been assessed quantitatively by ONGC (Consultant) and such claims are now being legally scrutinized in totality for their admissibility. Upon receipt of the above letter wherein the claims Of the EPC Contractor were legally scrutinized, the EPC Contractor initiated arbitration proceedings against the Appellant, vide its letter dated 26 December 2009, since these amounts of claims had been assessed and admitted by the Company/consultant earlier. In such arbitration petition, it has been categorically mentioned that: The contents of this letter were absolutely contrary to the admission Of amounts due and payable to Dodsal set forth in Letters dated May 25, 2006 and October 5, 2007, read with the letter dated November 2, 2007. Further, the additional works undertaken by were duly certified by OVL. The amounts payable to Dodsal have already been assessed and confirmed through the above referenced letters dated May 25, 2006; October 5, 200/ and November 2, 2007. Any further assessment suggested in OVL's letter dated July 31, 2008 is not warranted in light of OVL's prior admissions and is obviously intended only to delay the payment of t....
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.... On perusal or me provisions Section 271(1)(c) of the Act, your honor may appreciate that that the AO may direct a person to pay penalty, if he is satisfied that in the course of any proceedings under the Act either a) such person has concealed the particulars Of income or b) has furnished inaccurate particulars of such income. On perusal or the above, your honor may appreciate that it IS a pre-requisite that for the case to under the section 271(1)(c) of the Act, there should De either concealment or income or there should be furnishing or inaccurate particulars of income. Concealment of income In the present case, your honor may appreciate that the facts in respect Of the claim raised by the EPC Contractor on the Appellant have been fully disclosed in the note 5 Of schedule 27 Of the annual report. Also, the Appellant has specifically mentioned the details of such in the notes to the computation Of income. Further, the Appellant has also filed the relevant documents with the tax authorities during the course or assessment. penalty and appeal proceedings. In view of the above. It is submitted that Appellant had fully disclosed a....
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....eld that penalty is not imposable if the assessee had a bonafide claim: • Shervani Hospitalities Ltd. vs. CIT [2013] 35 taxmann.com 271 (Delhi) In this case, the Hon'ble Delhi court while deleting the penalty has observed that the assessee had an arguable case or had taken a bona fide plea. The had given his explanation and categorically and clearly Stated the true and full facts in the return itself. He did not try to camouflage rover up the expenses claimed. It is not uncommon and unusual for an assessee to make a bona fide claim of a particular expenditure as a revenue deduction And expense but not succeed. Every addition or disallowance made does not justify and mandate levy Of penalty for concealment under section 271(1)(c). Levy of penalty is not an automatic consequence when pp addition is made by disallowing an expense and by not accepting the interpretation given by the assessee- The plea and contention raised by the assessee has to be examined before it is decided Whether or not the aesessee has been able to bring his case Within the four corners Of the Explanation. Explanation 1 clearly stipulates that the penalty can be imposed When th....
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.... MAK Data (P) Ltd. vs. CIT [2013] 38 taxmann.com 448 (SC) Explanation to Section 271(1) raises a presumption of concealment, when a difference is noticed by the AO, between reported and assessed income. The burden is then on the assessee to show otherwise, by cogent and reliable evidence. When the initial onus placed by the explanation, has been discharged by him, the onus shifts on the Revenue to show that the amount in question constituted the income and not otherwise. On perusal of the above judicial precedents, your honor may appreciate that the Hon'ble Courts have observed that the Explanation 1 to section 271(1)(c) of the Act is not applicable if the assessee has provided a bonafide explanation and the same has not been refuted by the tax authorities. The concept Of bonafide has been explained in the case Of New Holland Tractors (India) P. Ltd. vs. CIT [2014] 49 taxmann.com 573 (Delhi) Wherein the Hon'ble Delhi High Court has Observed as under: Test Of bona fide has to be applied keeping in mind the position as it existed. when the return Of income was filed. The Act, i.e. the Income Tax Act, is a complex legislation involving intricate ....
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.... only contention raised by the Ld. AO in making addition in respect of accrual of income is matching principle. Further, during the appeal proceedings, the Hon'ble CIT(A) has concurred with view of the Appellant that the no income has arisen. However, Hon'ble CIT(A) has disallowed the expenditure claimed by the Appellant stating that liability has not crystallized. Therefore; your honor may appreciate that the Department itself has different views at different levels on the same set of facts. Therefore, your honor may appreciate that whether the liability in respect of claim of EPC contractor has crystallized during the year or not is a legal issue on which difference of view exist, We wish to submit before your honor that various judicial bodies have unanimously held that the penalty is not imposable in the case of a debatable issue or in the case of bonafide difference of opinion: • CIT vs Reliance Petroproducts Pvt. Ltd. [2010] 322 ITR 158 (SC) In this ruling, the Hon'ble Supreme Court has held that making a claim which is disallowed by the Assessing Officer would not tantamount to furnishing of inaccurate particulars ....
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....onvoluted and complex and there can be manifold opinions on interpretation and understanding Of a provision Or the tax treatment. In such cases, even when the interpretation placed by Revenue is accepted, penalty should not be imposed if the contention Of the assessee was plausible and bona fide. • Karan Raghav Exports (P) Ltd. vs. (2012] 21 taxmann.com 8 (Delhi) As far as disclosure of facts is concerned, this is deer from the note, Which attached with the return itself. We have quoted the relevant portion or the note above. Fun and correct facts have been stated in the said note. The other question is Whether the claim made was palpably wrong and legally untenable or a debatable and plausible claim on which the assessee did not succeed on legal interpretation. We have examined the nature of the claim made and the findings recorded by the High Court in their order dated 1st November, 2010. The claim made by the appellant may have been rejected, but it cannot be said that the same was not plausible Or legally tenable. This aspect has been discussed above end it has been held that the claim made was bona fide. Regarding the legal opinion in writing, it is not m....
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....ishing of inaccurate particulars because the issue regarding allowability or deduction of depreciation on membership fee of stock exchange under section 32 of the Act was debatable issue. A mere rejection of the Claim of the assessee by relying on different interpretation dose not amount to concealment of the particulars of income or furnishing inaccurate particulars thereof by the assessee. In the Case under consideration, there is nothing to Suggest that the assessee furnished any inaccurate particulars or concealed the particulars. • Similar view has been taken in following laws: • Whirlpool of India Limited vs. [2008] 114 TTJ 211 (Del) • ACIT vs. Jindal Equipment I-easing [2011] 131 ITD 263 (Del) • ADIT vs. Citicorp Investment Bank (Singapore) Ltd. (ITA No. 7592/Mum/2010) • Additional CIT vs. Delhi Cloth and Genera' Miffs co. [157 ITR 822 (Del)] • Durga Kamal Rice Milts vs Commissioner or Income-tax [265 ITR 25 (Cal)] • Principal Commissioner of Income-tax vs. Control & Switchgear Contractors Ltd. [2016] 377 ITR 215 (Delhi)(MAG.) • Devsons (P.) Ltd. vs. ICT [2010] 329 ITR....
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....concerned. Merely because the evidence was disbelieved in assessment proceedings, not be said that the assessee failed to discharge the initial of explaining the payment claimed to be made by it." Further, we wish to draw your kind attention towards the following judicial wherein the judicial bodies, including the jurisdictional High Court and ITAT have disposes off the quantum appeal and penalty appeal through a common order and he'd that even though the additions are confirmed in the quantum appeals, the penalty is not Imposable due to absence or the conditions section 271(1)(c) of the Act: • New Holland Tractors (India) P. Ltd. vs. CIT (2014] 49 taxmann.com 573(Delhi) We have had the advantage of penning the judgment in the appeal preferred in relation to the quantum proceedings and have held that the assessee was wrong in not offering the whole or entire amount of the technical fee for tax in the year of receipt. But, it does not follow that penalty for concealment must be Imposed as the quantum appeal is decided against the assessee. The findings in the assessment proceedings cannot be considered as conclusive and final for the pu....
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....n 271(1)(c) of the Act. On the basis of the judicial precedents mentioned above, it is abundantly clear that penalty shall not be imposed merely on account Of addition made/sustained in the quantum proceedings, rather, the or requirements of section 271(1)(c) of the Act should also be satisfied. The above conclusion of the Ld. AO does not Provide any basis of concluding that inaccurate particulars were furnished, Other than additions made in the order of the CIT(A). Therefore, the penalty levied-by the Ld AC deserves to be deleted. Further, while imposing penalty on the Appellant, the Ld. AO has relied on certain judicial precedents. In this regard, we wish to submit that the case taws relied upon by the Ld- AO are factually different from me present case, Also, the Appellant has specifically differentiated each of the case law relied upon by the Ld. AO in its detailed submission dated 05 August 2046." 2.2. Penalty u/s 271(1)(c) is levied by the AO pursuant to the decision of the Ld. CIT(Appeals)-XVI in A. No. 140/09-10 for A Y. 2006-07 against the order Of the AO relating to addition of Rs. 149,31,00,000/- (as against the correct amount of Re 1371.78 mil....
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....ed to the additional claims and liability chimed by EPC Contractors which is pending in arbitration is not accepted by the appellant. In view of the above, the addition made by the AO is reduced from Rs. 1,493.10 million to Rs. 1,026.08 million. The appeal is portly allowed in this ground. " 2.3. The AO levied penalty u/s. 271(1)(c) at Rs. 34,53,78,528/- holding that the appellant has furnished inaccurate particulars-of its income to the extent of Rs. 102,60.80 000/- in respect of claim raised by the EPC Contractor for Sudan Pipeline Project Aggrieved by the aforesaid penalty order, the appellant has filed this appeal. 2.4. I have carefully considered the penalty order and submissions filed by the Ld. AR. Snapshot Of the Ld. ARS submission is that there is no case of concealment of income or furnishing inaccurate particulars Of income, as the appellant company has disclosed all the facts in the audited account for the F. Y. 2006-07 in Note 5 of Schedule 27 of the Annual Report. The same is reproduced as under: "During the year, the Company completed the execution of the 12"X741 kms multi-product pipeline from Khartoum Refinery to Port Sudan for the minist....
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.....10 Million) Which have not been accepted by MEM. Accordingly, the company has not considered any revenue in its Profit d Loss A for the FY 05-06" 2.6. In terms of the above note, the Ld. AR has claimed that the said expenditure was claimed based upon advices received from its consultant. The advice of the consultants with reference to the said claim filed by the appellant is reproduced as under: "Having read the above facts, the query, the PCA (Pipeline Contract Agreement), the contract with M/S Dodsal (EPC Contractor) and having regard to the accounting standard applicable in India unless OVL (appellant) obtains expert opinion which opines that the above clam made by Ms Dodsal are not acceptable/enforceable under the provisions of the contract between OVL and Dodsal we are of the opinion with the above costs should be recognized. In the above opinion M/S Dodsal is the EPC Contractor and OVL is the appellant. 2.7. The Ld. AR has vehemently argued that' there was no dispute in relation to claim raised by EPC Contractor and approved by the consultant company till the date of filing oi tax return for the A. Y. 2006-07 (both original and revised....
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....enalty for concealment 271(1)(c) is mandatory whenever an addition or disallowance is made. The appellant in penalty proceedings had stated that it had made full_ disclosure and elaborate legal submissions and it cannot be said to have either concealed any income or furnished inaccurate particulars of income and therefore, was not. liable for penalty u/s 271(1)(c). The AO however, held, that in view of the CIT(Appeals) decision that the appellant is not eligible to claim deduction of expenditure in respect of additional claims made by EPC Contractor, the appellant company had furnished inaccurate particulars of its income to this extent. He accordingly, invoked the provisions of Explanation 1 to Section 271(1)(c) of the Act and charged the appellant for furnishing inaccurate particulars of its income and levied the impugned penalty. 2.10. It will be relevant here to examine the provisions of Section 271(1)(c) which is reproduced below: "271. Failure to furnish returns, comply with notices concealment of incomer etc.--(1) If the Assessing Officer or the Deputy Commissioner (Appeals) or the Commissioner (Appeals) in the course of any proceedings under this Act, is s....
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........... 31. Primary issue which anises for consideration is whether the conduct of the assessee was bonafide. We have used very strong words like erroneous, fallacious, untenable etc. with reference to various contentions and submissions made by the assessee in the quantum appeal but we do not think we will be contradicting ourselves when we hold that the conduct of the assessee was" bonafide and the anus to show and establish bonafides has been-discharged. The observations and adjectives used by us in the quantum appeal rejecting the submission of the assessee have been made after having advantage and benefit of the assessment order, appellate orders and hearing arguments of the counsel for the appellant assessee and the Revenue Hindsight results in greater clarity and wisdom. Test of bona fide has to be applied keeping in mind the position as it existed. when the return of income was filed. The Act i.e- the Income Tax Act, is a complex legislation involving intricate and often debatable positions. The legal issue involved may relate to principles of accountancy. Invariably, on questions of interpretation, the assessees do adopt a legal position which they perceived as mo....
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....uestion of fact and has to be decided keeping in mind the entire gamut of events and circumstances. 2.13. Penalty u/s 271(1)(c) was not leviable where the appellant had disclosed all material information as held by the Hon'ble ITAT Delhi Bench in the case of Nuchem Ltd vs. DCIT [49 ITD 441 (DEL)]. The Hon'ble tribunal held as under: "............................................. none of the appellate authority has held that the material facts relating to the computation of income have been suppressed by the assessee. Neither they have held that explanation given by the assessee has been false. nor is there a finding that the explanation remains unsubstantiated. There is no finding that the assessee has suppressed material relating to disallowance. Therefore, it cannot be said that the assessee is guilty of suppressing material facts relating to its income. There is also no finding that full material facts have not been disclosed by the assessee. It only mentions that the authorities have not accepted the explanations of the assessee for certain reasons. It is a different matter that on account of difference 'of opinion, which is also possible amongst v....
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....acts of the case, the appellant had given an explanation, which is bonafide. Further, there is no furnishing Of inaccurate particulars of income or deliberate attempt to conceal income. The rigors or the provisions of section 271(1)(c) are clearly not attracted in this case. In view thereof, the penalty levied u/s 271(1)(c) of the Act of Rs. 34,53,78,528/- is deleted- These grounds of appeal are ruled in favour of the appellant. (B.2) This present appeal has been filed by Revenue against the aforesaid impugned appellate order dated 01.12.2016 of Ld. CIT(A). During appellate proceedings in Income Tax Appellate Tribunal ("ITAT", for short) synopsis was filed from the assessee's side. The relevant portion of the synopsis is reproduced as under: 3. The facts in brief are: (a) The respondent is engaged in exploration, development and production of hydrocarbons in overseas jurisdictions to augment the oil security of India mainly by way of acquiring participating interest in production sharing agreements. Typically, the hydrocarbons in the natural habitat embedded in a particular territory are the property of the State/Government in whose territory/ju....
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....of the assessment order dated 04.12.2009 observed that, penalty proceedings u/s 271(1)(c) of the I.T. Act have been initiated separately. It may however be added that, while making each of the aforesaid four additions, the leamed AO in paras 4.25, 5.10, 8.11 and 9.9 of the assessment order respectively stated that he is "satisfied that the assessee company has furnished inaccurate particulars of its income and concealed its income on this issue". 6. It is further submitted that while making addition of Rs. 149,31,02,715/-, at Sl. No. (3) in the table above, the learned AO in para 8.10 had observed as under: "As the assessee has failed to offer the accrued revenues to the extent of Rs. 1493.10 Million the claim for which has also been forwarded by the assessee company to MEM the same should have been recognised as revenues. This is more so. because the corresponding costs totalling Rs. 1140.08 Million have been provided for in reducing the profits of the year. The sum of Rs. 1493.10 Million is added to the taxable income of the assessee company." 6.1 The aforesaid extracted portion of the learned AO's order shows that the learned AO had made addition o....
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.... were not provided in the books of accounts nor had been claimed by it since it had not been a proved. It is also admitted fact & is also borne out from the documents placed on cord (see compilation of documents in relation to arbitration proceedings) that Dodsal who had initiated Arbitration proceedings had also received an acknowledgement from the assessee's consultant that its claim has been accepted and the payment in respect thereof is being processed. It was this claim which had been debited in its annual accounts and which sum had been claimed as deductible. 6.4 On the basis of the aforesaid claims made by EPC contractor, the assessee raised an additional claim of USD 34,128,976 on MEM Sudan [equivalent to Rs. 1524.20 million (Appellant's share being Rs. 1371.78 million)].. The said claim of the assessee remained un-admitted by MEM Sudan. As no income as claimed by it from MEM had accrued to it, no such sum as claimed was reflected in its accounts as its income. 7. It is submitted that while framing the assessment, the learned AO, as is apparent from para 8.10 of the assessment order had made addition of Rs. 149,31,02,715/-. The aforesaid addition w....
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....s no liability as arisen in the hands s of the appellant. Further, since revenue did not accrue or arise in the hands of the appellant, therefore, the addition of Rs. 1493.10 million made by the AO cannot be justified. The cause laws relied on by the AR are not applicable in the instant case because the contractor is not legally entitled to the additional claims and liability claimed by the EPC contractors which is pending in arbitration tribunal is not accepted by the appellant. in view of the above. the addition made by the AO is reduced from Rs. 1493.10 million to Rs. 1026.08 million. The appeal is partly allowed in this ground." (Emphasis supplied) 10. Aggrieved from the aforesaid order, revenue Gad filed an appeal before the Hon'ble Tribunal which inter-alia raised following three grounds of appeal which reads as under: "6. The Ld. CTT(A) has erred in law and on facts by ignoring the fact that the project had completed during the year. And according to the mercantile law of accountancy, which the assessee has been following, the total cost of the project and the total revenues shall have been taken into account for calculation of profits on accrual basis.....
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.... order dated 30.03.2015. The learned CIT(A), however, by his order dated 01.12.2016 has deleted the penalty. He has held in the aforesaid order in para 2.15 as under: "In view of the legal position and the facts of the case, the appellant had given an explanation, which is bonafide. Further, there is no furnishing of inaccurate particulars of income or deliberate attempt to conceal income. The rigors of the provisions Of section 271(1)(c) are clearly not attracted in this case. In view thereof, the penalty levied u/s of the Act of Rs. 34,53,78,528/- is deleted. These grounds of appeal are ruled in favour of the appellant." 15. The assessee-respondent while supporting the order of the learned CIT(A) seeks to further add that even the levy of penalty by the AO was without jurisdiction in as much as there had been no initiation of penalty proceedings in respect of an addition sustained by the learned CIT(A) of Rs. 1026.08 million. It is submitted that the AO had not disallowed the claim of expenditure incurred of Rs. 1026.08 million which was the sum claimed by it as deductible. The said sum was not a sum which had been either added by the AO or had been disallowed b....
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....l as the revenue are accordingly dismissed." 17.1 It is respectfully submitted that the matching principle as has been adopted has no application in the facts of this case.- In the instant case the question involved was about the allowability of expenditure incurred. It is well settled rule of law that expenditure incurred is allowable in the year in which they are incurred. It is equally well settled that an income accrues when an assessee had right to receive such income. the claim of the assessee is that it has incurred expenditure and as such, the same is allowable. 17.2 In so far as the accrual of income is concerned, its claim is that no such income had accrued as it has no right to receive the said sum. This has been admitted by the Hon'ble Tribunal too. 18. It is submitted that, if para 19 of the order of Hon'ble Tribunal is read, it would be found that it has correctly noted the sequence of events where it was stated that the assessee had admitted the claim of Dodsal which was duly intimated to EPC contractor on 25.04.2006 It had also been admitted by the AO himself that the assessee had provided for the aforesaid sum in the books of acco....
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.... assessee had incurred expenditure which had been provided by it in the books of accounts and had not been disputed. Further the fact that the AO had made an addition pertains to a separate amount which in the opinion of the AO had accrued to the assessee which was disputed by the assessee company. 21. In the final analysis it is submitted that in the absence of a satisfaction recorded by the learned AO in the course of proceedings that the assessee has concealed the particulars of income or had furnished the inaccurate particulars in respect of claim of expenditure aggregating o Rs. 1026.08 million, no penalty, could have been levied. Even otherwise, it is submitted that the assessee had furnished full and true particulars in respect Of the claim Of expenditure and thus it is prayed the revenue's appeal be dismissed. It is thus prayed that, it be held that, since there had been no initiation of proceedings in respect of expenditure claimed by it nor was the sum disallowed by the AO and as such Levy of penalty is totally arbitrary and unjustified which had rightly been deleted by the learned CIT(A). (B.2.1) A copy of order dated 02.08.2019 of Hon'ble Delhi ....
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....iled to initiate penalty proceedings under Section 271(1)(c) of I.T. Act in respect of the aforesaid disallowance of expenses amounting to Rs. 102,60,80,000/- although the AO had specifically initiated penalty proceedings in respect of other additions (such as, the addition of aforesaid amount of Rs. 149,31,02,715/-; disallowance of claims of depreciation amounting to Rs. 204,57,99,264/- and Rs. 1,94,58,972/-; and disallowance of pre-acquisition expenses amounting to Rs. 112,51,25,851/-.) On perusal of the aforesaid order dated 01.12.2016 of the Ld. CIT(A); we also find that the Ld. CIT(A) has also failed to initiate penalty proceedings under Section 271(1)(c) of I.T. Act, in respect of the aforesaid disallowance of Rs. 102,60,80,000/-. Thus, penalty proceedings under Section 271(1)(c) of I.T. Act were neither initiated by the AO during assessment proceedings nor by the Ld. CIT(A) during the appellate proceedings in respect of the aforesaid disallowance of Rs. 102,60,80,000/-. The Ld. CIT(A) has also not levied any penalty under Section 271(1)(c) of I.T. Act. When the AO specifically initiates penalty proceedings in respect of certain additions in the assessment order, but does not....
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....rials facts and circumstances by the assessee in the Return of Income and during assessment proceedings; then, on a the disputable issue of quantum addition, on which two different views are legitimately possible, of which the one favourable to the assessee has been adopted by the assessee; eventually, the Assessee may or may not succeed in the quantum proceedings and the disputable issue, on which two different views were possible, may eventually be decided against the Assessee in quantum proceedings. However, the assessee cannot be burdened with penalty U/s 271(1)(c) of I.T. Act, if on a disputable issue of quantum addition, on which two different views were legitimately possible, the Assessee decided to adopt the view which was favourable to the assessee; in a case in which all necessary details were filed by the Assessee in support of the claim and when no material inaccuracies were found in these details, and when the assessee is not guilty of suppression of any material facts. In quantum proceedings, when two different views are legitimately possible on a disputable claim made by the assessee; one of which is favourable to the assessee, the multiplicity of legitimate views an....