TaxTMI 
TaxTMI 
TaxTMI 
2020 (12) TMI 229
X X X X Extracts X X X X
X X X X Extracts X X X X
....dings of the learned Income Tax Appellate Tribunal in the order impugned before us are quoted below for ready reference:- 21. On the facts of the present case, we are dealing with not only an inadmissible claim of deduction but a claim of deduction which is contrary to the plain words of the statute and on which no two opinions are possible. This situation cannot be equated with a claim of deduction under section 14 A in respect of which, as Supreme Court had observed in the case of Reliance Petroproducts (supra), the assessee's plea was that "that the disallowance made by the Assessing Authority in the assessment order under section 143(3) of the Act were solely on account of different views taken on the same set of facts and, therefore, they could, at the most, be termed as difference of opinion but nothing to do with the concealment of income or furnishing of inaccurate particulars of such income". In the present case, related quantum addition is not on account of different views being taken on the same set of facts but on account of plain words of the statute which admit no ambiguity. The assessee does not, therefore, derive any help from Supreme Court's judgment in t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e Act. There was no illegality in the Department initiating penalty proceedings". 24. Thus, in the present case, claim of the assessee towards administrative expenditure at Rs. 2,97,275/- and finance charges at Rs. 1,25,30,730/- as business expenditure is not at all admissible as the assessee has not commenced business during the relevant financial year under consideration. The Assessing Officer is of the view that the expenditure is not based on any sound reason as the assessee was fully aware of the facts that it is not revenue expenditure when it had filed its original return of income. Therefore, it cannot be said that the assessee discovered any omission or wrong statement subsequent of filing of original return of income on 14.10.2010. Being so, it cannot be believed that the assessee chose to revise its earlier return consequent upon knowing that there are omissions or wrong statements in the original return of income. The assessee is having full knowledge about the wrong claim made by it and therefore, it cannot take a plea that the error is bona fide and it is to be condoned. 25. Being so in the present case the impugned penalty is not in respect of a bogus claim but i....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... in penalty proceedings. Before the assessee is held liable for furnishing inaccurate particulars for claim of expenditure as revenue expenditure, it has to be independently found in penalty proceedings that the appellant has consciously furnished inaccurate proceedings for claiming such expenditure as revenue expenditure with a malafide intention to evade tax. The AR of the appellant has relied on the decision of the Apex Court in the case of CIT vs Reliance Petroproducts Pvt. Ltd. reported in 322 ITR 158, the relevant portion of which is reproduced hereunder: '.....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. In Commissioner of Income Tax, Delhi Vs. Atul Mohan Bindal [2009(9) SCC 589], where this Court was considering the same provision, the Court observed that the Assessing Officer has to be satisfied that a person has concealed the particulars of his income or furnished inaccurate particulars of such income. This Court referred to another decision of this Cou....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e or it is not the case of bona fide belief or the explanation offered by the appellant was found to be false or untrue, I am of the view that making a wrong claim is not at par with the concealment or giving inaccurate information which may call for levy of penalty under Section 271(1)(c) of the Act. Therefore, I am fortified by the argument of the appellant that mere making of a claim which is not sustainable in law, by itself, would not tantamount to furnishing inaccurate particulars for such claim. It is not proven on record by the AO that the appellant has furnished inaccurate particulars for claim of loss, as the appellant has accounted the amount spent towards interest and other administrative expenses and claimed the same as expenditure in the Profit & Loss account forming part of the Audited Statements of Account filed along with the Return of Income under the bonafide belief that the said expenditure is revenue in nature. It is only a difference of opinion and no inaccurate particulars were furnished by the appellant. Also, the AR has relied on the decision of the Hon'ble Jurisdictional High Court in the case of CIT, Chennai - IV vs. M/s.Gem Granites (Karnataka) in Ta....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s 271(1)(c) is not called for. 11. Keeping in view of the various submissions and also supporting case laws filed by the AR of the appellant and respectfully following the ratios held in the case laws mentioned, the Assessing Officer is not justified in levying of penalty in the case under consideration and accordingly direced to delete the levy of penalty. The appellant succeeds on this ground of appeal. 5. The learned counsel for the Assessee Mr.G.Baskar submitted that the Assessee originally filed its Return of Income for A.Y. 2010-11 on 14.10.2010 declaring "Nil" income. The Assessee subsequently filed a Revised Return on 18.03.2011 and while disclosing a taxable income as per the audit report which was filed with the original returns also to the extent of Rs. 4,76,517/- as the foreign exchange gain, which was earned by the Assessee during this assessment year even prior to commencement of its business claimed against the said income, the deduction of the expenditure to the extent of Rs. 2,97,275/- being operating and administrative expenses and Rs. 1,25,30,730/- as finance charges being interest on loan taken by the Assessee and thus in the Revised Return, a net loss of Rs.....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sand Eight Hundred and Fifty Four Only) which is 100% of tax sought to be evaded as worked out below:- Reduction of loss as discussed above 1,28,28,005 Tax thereon @ 30% 38,48,402 Add: Surcharge Nil Add: Cess @ 3% 1,15,452 Total Tax sought to be evaded 39,63,854 Amount of penalty levied @ 100% 39,63,854 (SARATHA.G IRS) Deputy Commissioner of Income Tax, Company Circle - V(3), Chennai" 6. He submitted that the Assessing Authority also resorted to Section 154 to enhance the said penalty amount later on under Section 154 of the Act vide order dated 31.12.2015 and further imposing surcharge and education cess on the said deemed evaded tax at the rate of 30% on "deemed income" in the form of "reduction of loss" as discussed in the penalty order dated 26.09.2013 and he increased the amount of penalty at the rate of 100% of alleged evasion of tax to the extent of Rs. 43,60,239/-. The appeal of the Assessee against the said order under Section 154 however came to be dismissed by the learned Commissioner (Appeals) on 29.03.2019. 7. The learned counsel for the Assessee submitted that since the audited Balance Sheet in which the said figures of income and expenditure wa....
X X X X Extracts X X X X
X X X X Extracts X X X X
....84 (All) (vii) Prasanna Dugar vs CIT - 373 ITR 681 (SC) (viii) CIT vs Prasanna Dugar - 371 ITR 19 (Cal) (ix) Sundaram Finance Limited - 93 Taxman.com 253 (Mad) (x) Sundaram Finance Ltd vs ACIT - 259 Taxman 220 SC (xi) Express Infrastructure P Ltd vs DCIT - TCA No.783 of 2018 (xii) Tuticorin Alkalies and Fertilizers Ltd vs CIT - 227 ITR 172 (SC) (xiii) Magna Credit & Financial Services Ltd vs CIT - 408 ITR 621 (Mds) and (xiv) Samtel India Ltd vs CIT, Delhi - 25 Taxmann.com page 535 (SC) 9. We have heard the learned counsels at length and perused the records and case laws cited. 10. Section 271(1)(c) of the Act, to its relevant extent, is quoted below for ready reference:- Failure to furnish returns, comply with notices, concealment of income, etc. 271. (1) If the Assessing Officer or the Commissioner (Appeals) or the Principal Commissioner or Commissioner in the course of any proceedings under this Act, is satisfied that any person- (a) [***] (b) has failed to comply with a notice under subsection (2) of Section 115WD or under sub-section (2) of Section 115WE or under sub-section (1) of Section 142 or sub-section (2) of Section 143 or fails to comply with a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....its original return of income, as it had not commenced the business, but filed revised return of income to fairly disclose its foreign exchange gain made during the year, even prior to commencement of business, but, at the same time bona fide claimed the expenditure incurred during that year in the form of interest or finance charges or administrative expenses against such income, and disclosed all these facts in audited Balance Sheet filed with the Return of Income and filed a Loss Return before the authority, the authority concerned was entitled to take a different view of the matter that such expenditure was not allowable, as the Assessee had not commenced its business operations and on that issue, there was no serious dispute from the side of the learned counsel for the Assessee before us also and that is why, the Assessee seems to have accepted the income tax liability of Rs. 2,00,240/- fixed upon him and paid the said tax without a demur. 12. The considerations for imposition of penalty under Section 271(1)(c) of the Act are however entirely different. It requires existence of mens rea on the part of the Assessee and either of the twin conditions of (i) concealment of income....
X X X X Extracts X X X X
X X X X Extracts X X X X
....0,239/-. Of course, the authority this time was different and one Mr.C.Balakrishnan, Income Tax Officer, Corporate Ward-1(1), Chennai did these honours to the Assessee. What a heartless and headless application of penalty provisions by the authorities concerned in this case!! 16. The Assessee was absolutely bona fide in filing the Revised Return and disclosing income and had also made a bona fide claim of deduction in the form of administrative expenses and interest or finance charges. Even if these expenditure were not to be allowed, how could Assessee be blamed for filing inaccurate particulars or concealment of income. Whatever he had to file was already on the record of the Assessing Authority, right with the original return. The authorities concerned have not arrived at any figures or disclosures from any material outside the record, which was furnished to them by the Assessee. Therefore, the blame of concealment or filing of inaccurate particulars could not be simply laid at the doors of the Assessee. 17. The misfortune of the Assessees at the hands of such errant officials is that such authorities consider imposition of penalties under Section 271(1)(c) of the Act as a reg....