S.H.R TRADING P.LTD, MUMBAI V. DCIT 9(3), MUMBAI

ITA 2204/MUM/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 79306 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-07-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: E
• Assessment Year: 2009-2010
• Appeal Filed On: 19-03-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: NIRJA PRADHAN
• Assessee Lawyers: G L PURSNANY
• Keywords: Depreciation; Question of law; Wrong claim; Difference of opinion; Revenue expenditure
• Section: 32; 54; 143(3); 54F

Judgement Text

, INCOME TAX APPELLATE TRIBUNAL,MUMBAI - E BENCH. .. , ! , BEFORE S/SH.I.P.BANSAL, JUDICIAL MEMBE R & RAJENDRA,ACCOUNTANT MEMBER /. ITA NO.2204/MUM/2013, ' ' ' ' # # # # / ASSESSMENT YEAR-2009-10 S.H.R. TRADING PVT. LTD. HIRA PREM MILAN CHS, PLOT NO. 563/564, 18 TH ROAD, KHAR (W), MUMBAI-400052 VS DCIT 9(3 ), AAYAKAR BHAVAN, MUMBAI-400020 PAN: AAFCS8612N ( $% / APPELLANT) ( &'$% / RESPONDENT) '() '() '() '() * * * * / ASSESSEE BY : SHRI G.L.PURSNANY + * / REVENUE BY : SMT. NIRJA PRADHAN ' ' ' ' + ++ + ), ), ), ), / DATE OF HEARING : 19-06-2014 -.# + ), / DATE OF PRONOUNCEMENT : 02-07-2014 ' ' ' ' , 1961 + ++ + 254 )1( )/) )/) )/) )/) 0 0 0 0 ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA,AM ! ! ! ! ' ' ' ' : CHALLENGING THE ORDER DT.16.01.2013 OF THE CIT(A)-2 0,MUMBAI,ASSESSEE-COMPANY HAS RAISED FOLLOWING GROUNDS OF APPEAL: THE LEARNED D.C.HAS ERRED IN MATTER OF FACTS AS WE LL AS LAW,AS UNDER TO LEVY PENALTY U/S.271(1) (C). 1.FAILED TO TAKE COGNIZANCE OF THE FACT THAT NECES SARY PARTICULARS IS QUESTION ARE DULY DECLARED IN RETURN OF INCOME.UNDER SCHEDULE CAPITAL GAIN AS WEL L AS COMPUTATION OF TOTAL INCOME. 2.HAS NOT GATHERED ANY FRESH MATERIAL TO RELY UPON WHILE DECIDING TO LEVY THE PENALTY. 3.PENALTY PROCEEDINGS ARE DISTINCT FROM PROCEEDING U/S.143 AND ARE INDEPENDENT OF ADDITION AND DISALLOWANCES. 4.FAILED TO PROVE AS FALSE THE SUBMISSION VIDE LETT ER DATED 23.04.2012, UNDER SECTION 271 (1) (C) OF THE INCOME TAX ACT, 1961 WHICH HAS BEEN DULY SUBSTA NTIATED. 5.FAILED TO FOLLOW SUPREME COURT PRONOUNCEMENT IN C ASE OF CIT V RELIANCE PETRO PRODUCTS LTD. [2010]322 ITR 158 (SC), WHEREIN THE APEX COURT HAS DEFINED THE MEANING OF TERM PARTICULARS. 6.ASSESSEE CRAVES FOR LEAVE TO ADD, OMIT OR ALTER G ROUNDS OF APPEAL ON OR BEFORE FINAL HEARING. THOUGH THERE ARE SIX GROUNDS OF APPEAL,BUT THE EFFE CTIVE GROUND OF APPEAL DEALS WITH IMPOSITION OF PENALTY FOR CONCEALMENT U/S.271(1)(C)OF THE ACT. 2. ASSESSEE-COMPANY,ENGAGED IN THE BUSINESS OF LETTING OUT OF IMMOVABLE PROPERTY FILED ITS RETURN OF INCOME ON 26.08.2009 DECLARING INCOME OF RS.82,1 7,407/-.THE ASSESSMENT WAS COMPLETED U/S. 143(3) OF THE ACT BY THE AO (AO)ON 25.10.2011 DETER MINING THE INCOME OF THE ASSESSEE AT 2,02, 43,923/-.DURING THE ASSESSMENT PROCEEDINGS HE FOUND THAT THE ASSESSEE HAD SOLD IMMOVABLE PROPERTY;BEING UNIT NO:II ADMEASURING 1422 SQ. FT A ND ONE STILT CAR PARK NO.75;IN RAHEJA CENTRE PREMISE CO-OPERATIVE SOCIETY LIMITED, MUMBAI, THE RESULTANT LONG TERM CAPITAL GAIN(LTCG) ARISING OUT OF THE SAID SALE WAS QUANTIFIED AT RS.1 ,21,82,871 AGAINST WHICH IT CLAIMED EXEMPTION U/S.54 OF THE ENTIRE LTCG HAVING INVESTED 2, 63,17, 760/-IN ACQUIRING NEW RESIDENTIAL PROPERTIES. HE HELD THAT THE ASSESSEE,BEING A COMPANY, WAS NOT ENTITLED TO CLAIM DEDUCTION U/S. 54 / 54F OF THE 2 ITA NO. 2204/MUM/2013 S.H.R. TRADING PVT. LTD. ACT.SO, HE MADE REJECTED THE CLAIM MADE BY THE ASSE SSEE.BESIDES,HE ALSO INITIATED PENALTY PROCEEDINGS AFTER ISSUING A NOTICE,DATED,25.10.2011 , U/S.274 R.W. S.271(1)(C) OF THE ACT.THE ASSESSEE WAS GIVEN A FURTHER OPPORTUNITY ,VIDE LETT ER DATED 13.04.2012, TO EXPLAIN AS TO WHY PENALTY U/S.271(1)(C) SHOULD NOT BE LEVIED.AFTER CO NSIDERING THE REPLY,DATED 23.04.2012,FILED BY THE ASSESSEE,AO HELD THAT BEING A COMPANY THE ASSES SEE WAS NOT ENTITLED TO CLAIM DEDUCTION U/S. 54 OF THE ACT, THAT IT HAD FURNISHED INACCURATE PAR TICULARS AND HAD CONCEALED ITS INCOME. HE LEVIED PENALTY OF RS.41,00,754/-. AO HELD THAT THE ACCOUNTS OF THE ASSESSEE COMPANY W ERE AUDITED BY A CHARTERED ACCOUNTANT AND IN THE COMPUTATION OF INCOME IT HAD ACCOUNTED FOR T HE CAPITAL GAIN RECEIVED BY IT AS INCOME FROM LTCG DULY CLAIMING INDEXATION BENEFIT AS PROVIDED I N THE ACT FOR COMPUTING THE INCOME CHARGEABLE UNDER THE HEAD CAPITAL GAINS,THAT THE ASSESSEE WAS FULLY AWARE OF THE PROVISIONS OF ACT,THAT IT WAS ALSO CONVERSANT WITH THE PROVISIONS OF THE ACT IN RESPECT OF TAXABILITY OF INCOME FROM CAPITAL GAIN AS LAID DOWN IN SECTION 48 OF THE ACT,THAT THE ASSESSEE HAD CLAIMED EXEMPTION OF THE LTCG AS PER SECTION 54 OF THE ACT EVEN THOUGH T HE PROVISIONS OF SECTION 54 WERE APPLICABLE ONLY TO AN INDIVIDUAL OR A HUF,THAT THE ASSESSEE HA D FURNISHED INACCURATE PARTICULARS OF ITS INCOME BY CLAIMING EXEMPTION AMOUNTING TO RS.1,21,82,871 U /S.54, WHEN IN FACT IT WAS NOT ELIGIBLE TO DO SO AS PER THE PROVISIONS OF THE ACT,IT WAS NOT A CA SE OF MERELY MAKING A CLAIM WHICH WAS NOT SUSTAINABLE IN LAW BUT WAS CLEARLY A CASE OF MAKING AN INELIGIBLE CLAIM AFTER DUE APPLICATION OF MIND,THAT THE DECISION OF RELIANCE PETROPRODUCTS PR IVATE LIMITED WAS NOT APPLICABLE,THAT IT HAD FURNISHED INACCURATE PARTICULARS OF ITS INCOME BY C LAIMING DEDUCTION OF RS.1.21 CRORES FROM ITS INCOME UNDER CAPITAL GAINS.FINALLY,HE LEVIED PENAL TY OF RS.41,00,754/- U/S.271 (1)(C) OF THE ACT. 3. IN THE APPELLATE PROCEEDINGS,FIRST APPELLATE AUTHOR ITY(FAA)HELD THAT IT WAS NOT THE CASE WHERE SIMPLE DISALLOWANCE HAD BEEN MADE,THAT IT WAS A CAS E WHERE TAXABLE INCOME HAD BEEN SUPPRESSED BY WAY OF PATENTLY WRONG CLAIM OF DEDUCTION U/S.54 KNOWING WELL THAT IT WAS A COMPANY NOT ENTITLED FOR ANY SUCH DEDUCTION,THAT IN THE CASE OF RELIANCE PETRO PRODUCTS LTD.IT WAS SPECIFICALLY MENTIONED THAT EVERYTHING DEPENDED UPON RETURN OF I NCOME,THAT IN THE CASE UNDER CONSIDERATION THE ASSESSEE HAD SUPPRESSED THE TAXABLE INCOME IN T HE RETURN OF INCOME,THAT THE DECISIONS RELIED UPON BY THE ASSESSEE I.E.ATUL MOHAN BINDAL (317ITR1 ) AND RELIANCE PETRO PRODUCTS PVT. LTD.(322 ITR158)WERE NOT APPLICABLE TO THE FACTS OF THE CASE .HE RELIED UPON THE CASES OF BALAKRISHNA TEXTILES (193 ITR 361),NAGIN CHAND SHIV SAHAI(6 ITR 534),VIDYA SAGAR OSWAL (108 ITR 861), HOSHAIRPUR EXPRESS TRANSPORT CO.LTD.(162ITR393),ELE CTRICAL AGENCIES CORPORATION(253ITR 619), DHARMENDRA TEXTILE PROCESSORS & OTHERS(306 IT R 277),M V. VALLIAPPAN (170ITR 238), K.R. HOGANATHAN (174 ITR 658), SMT.NAYANTARA G.AGRA WAL (207 ITR 639). 4. BEFORE US,AUTHORISED REPRESENTATIVE (AR) STATED THA T THE ASSESSEE HAD DISCLOSED FULL FACTS,THAT THERE WAS STATEMENT OF ACCOUNTS BEFORE THE AO,THAT THE ASSESSEE HAD NO INTENTION EVADE ANY TAX.HE RELIED UPON THE JUDGMENT OF THE HONBLE SUPREME COU RT DELIVERED IN THE CASE OF RELIANCE PETRO PRODUCTS PRIVATE LIMITED (322ITR158).DEPARTMENTAL R EPRESENTATIVE (DR) ARGUED THAT THE ASSESSEE WAS NOT ENTITLED TO CLAIM ANY DEDUCTION U/ S.54/54 F OF THE ACT,THAT THE AO HAD RIGHTLY IMPOSED PENALTY U/S.271(1)(C)OF THE ACT.HE RELIED U PON THE DECISION OF ZOOM COMMUNICATION PVT. LTD. (327ITR510). 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.UNDISPUTED FACT OF THE CASE ARE THAT THE ASSESSEE IS A CORPORATE ENTITY,TH AT IT HAD PURCHASED A RESIDENTIAL PROPERTIES AFTER SELLING AN IMMOVABLE PROPERTY, THAT LTCG ARISING ON SALE OF PROPERTY WAS NOT OFFERED FOR TAXATION,THAT IT CLAIMED DEDUCTION U/S.54 OF THE AC T FOR RS.1.21 CRORES,THAT THE AO/FAA LEVIED/CONFIRMED PENALTY FOR FILING INACCURATE PART ICULARS OF INCOME AND FOR CONCEALING INCOME FOR THE YEAR UNDER CONSIDERATION.THE MAIN ARGUMENT OF T HE ASSESSEE IS THAT IT HAD DISCLOSED EVERYTHING IN THE RETURN OF INCOME AND THAT FOLLOWING THE DECI SION OF THE APEX COURT IN THE MATTER OF RELIANCE PETROCHEMICALS(SUPRA)PENALTY SHOULD BE DEL ETED. 3 ITA NO. 2204/MUM/2013 S.H.R. TRADING PVT. LTD. IN OUR OPINION THERE IS A BASIC AND FUNDAMENTAL DIF FERENCE BETWEEN A DEBATABLE CLAIM AND AN INADMISSIBLE CLAIM I.E. A PATENTLY WRONG OR FALSE C LAIM.IN THE CASE OF FIRST KIND OF CLAIM THERE CAN BE TWO OPINION AS TO WHETHER OR NOT THE ASSESSEE CO ULD MAKE SUCH A CLAIM ON THE BASIS OF CERTAIN FACTS OF THAT PARTICULAR YEAR.PROVISIONS OF THE ACT DO NOT DISENTITLE THE ASSESSEE TO MAKE SUCH CLAIM.BUT,IN THE SECOND TYPE OF CLAIM THERE IS CLEA R AND EMPHATIC BAR IN THE ACT-ASSESSEE ARE NOT ENTITLED TO CLAIM SUCH EXPENDITURE/DEDUCTION/REBATE / EXEMPTION.ABSENCE OF A VALID BASIS FOR MAKING ANY CLAIM OF DEDUCTION,RESULTING IN LOW TAX OR NO TAX,IS LIKE GOING AGAINST THE LETTER AND SPIRIT OF THE LAW. IN OTHER WORDS,CLAIMS MADE UNDER THE SECOND CATEGORY HAVE NO LEGS OF THEIR OWN TO STAND,BECAUSE SUCH CLAIMS ARE TENABLE NEITHER LE GALLY NOR FACTUALLY.COURTS ARE OF THE VIEW THAT DISPUTABLE CLAIMS AND INADMISSIBLE CLAIMS ARE TO BE TREATED DIFFERENTLY.AN ASSESSEE MAKING A BLATANTLY INADMISSIBLE CLAIM IS LIKE A CAR DRIVER W HO CROSSES THE RED LIGHT AT THE TRAFFIC SIGNAL AND TAKES A CHANCE OF NOT BEING CAUGHT AND NOT BEING PE NALISED BY THE AUTHORITIES IMPLEMENTING LAW.A PERSON TAKING RISK OF NOT OBEYING THE LAW OF LAND H AS TO BE VISITED BY PENAL PROVISIONS. WE ARE AWARE THAT PENALTY CANNOT BE SHOULD NOT BE S OURCE OF REVENUE,BUT AT THE SAME TIME IT IS ESSENTIAL TO DETER THE ASSESSEES WHO INTERPRET THE ACT IN THE MANNER THEY WANT AND DEPRIVE THE STATE OF ITS DUE TAXES.FEAR OF LONG HANDS OF STATE CATCHING THE WRONG DOERS IS ONE OF THE PRECONDITION OF SMOOTH IMPLEMENTATION OF THE PROVIS IONS OF LAW.INVOKING PENAL PROVISION AND IMPOSING EXEMPLARY PENALTY HAS BECOME NECESSARY AS MOST OF THE RETURNS FILED BY THE ASSESSEE ARE BEING ACCEPTED BY THE DEPARTMENT WITHOUT SCRUTI NY.A DUTY HAS BEEN CAST UPON THE CITIZENS TO MAKE ONLY AND ONLY LEGITIMATE CLAIMS.COURTS ARE VER Y LIBERAL WHEN ANY DEBATABLE OR LEGITIMATE CLAIM IS MADE,BUT ARE VERY HARSH WHEN A CLAIM IS MA DE THAT IS NOT ADMISSIBLE AT ALL.PENALTY IMPOSED BY THE AO.S IN SUCH CASES HAVE BEEN INVARIA BLY UPHELD. IN THE CASE OF SHARMA ALLOYS (INDIA) LTD.(357ITR379 )HONBLE MADRAS HIGH COURT FOUND THAT MACHINERY WAS NOT AT ALL PUT TO USE DURING THE YEA R BY THE ASSESSEE AND DEPRECIATION WAS CLAIMED BY IT FOR THAT MACHINERY,THAT THE ASSESSEE HAD MADE CLAIM FOR DEDUCTION TOWARDS FINE AND PENALTY SECTION U/S.37 OF THE ACT.DECIDING THE MATTER AGAIN ST THE ASSESSEE HONBLE COURT HELD THAT THE CLAIM FOR DEPRECIATION WAS A BOGUS CLAIM,THAT CLAIM MADE BY THE ASSESSEE ON ACCOUNT OF FINE AND PENALTY WAS NOT LEGALLY SUSTAINABLE IN TERMS OF SEC TION 37,THAT LEVY OF PENALTY FOR CONCEALMENT OF INCOME WAS JUSTIFIED NOW,WE WOULD LIKE TO MENTION THE MATTER OF ECS LTD. (336ITR162)DECIDED BY THE HONBLE DELHI HIGH COURT.IN THAT MATTER THE ASSESSEE HAD PROVIDED CONSULTANCY SERVICES TO FOREIGN CLIENTS AND HAD CLAIMED DEDUCTION UNDER SECTION 80-O OF THE ACT .THE ASSESSEE HAD CLAIMED THE DEDUCTION AT 50% OF THE GROSS INCOME RECEIVED IN CONVERTIBLE FOR EIGN EXCHANGE IN INDIA PROVIDED BY IT TO ITS FOREIGN CLIENTS.THE AO WAS OF THE VIEW THAT ON THE CORRECT INTERPRETATION UNDER SECTION 80-O, DEDUCTION IS RESTRICTED TO THE NET INCOME.IN VIEW O F THE SHORT ALLOWANCE OF DEDUCTION UNDER SECTION 80-O OF THE ACT,HE IMPOSED PENALTY U/S.271(1)(C)OF THE ACT.DECIDING THE MATTER,HONBLE COURT HELD THAT IT IS SETTLED NOW THAT CLAIMING EXCESSIVE DEDUCTIONS ALSO AMOUNTS TO CONCEALMENT OF INCOME,THAT FALSEHOOD IN ACCOUNTS CAN TAKE EITHER O F TWO FORMS : EITHER AN ITEM OF RECEIPT MAY BE SUPPRESSED FRAUDULENTLY, OR AN ITEM OF EXPENDITURE MAY BE FALSELY CLAIMED,THAT BOTH TYPES ATTEMPT TO REDUCE THE TAXABLE INCOME,THAT BOTH TYPES AMOUNT TO CONCEALMENT OF PARTICULARS OF ONE'S INCOME AS WELL AS FURNISHING OF INACCURATE PARTICULARS OF INCOME,THAT PENALTY MAY BE IMPOSED FOR EITHER OR BOTH SUCH ATTEMPTS.HONBLE COURT ALSO REFERRED T O THE CASES OF INDIA SEA FOODS(105ITR708),NAGIN CHAND SHIV SAHAI(6 ITR 534) AND GATES FOAM AND RUBBER CO.(91ITR467),WHILE DECIDING THE APPEAL. IN THE CASE OF HARPARSHAD AND COMPANY LTD.(328ITR53 ),HONBLE DELHI HIGH COURT HAS GONE ONE 4 ITA NO. 2204/MUM/2013 S.H.R. TRADING PVT. LTD. STEP FURTHER AND HAS HELD THAT 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.IN THAT MATTER A BO GUS CLAIM TO DEDUCTION ON ACCOUNT OF COMMISSION PAID TO DIRECTOR WAS MADE BY THE COMPANY THOUGH THE PERSON TO WHOM COMMISSION PAID WAS NOT DIRECTOR OF COMPANY AT RELEVANT TIME.IN THE QUANTUM APPEAL TRIBUNAL HELD THAT NO SERVICES WERE RENDERED BY HER.PENALTY LEVIED BY THE AO WAS CONFIR MED BY THE FAA,BUT WAS DELETED BY THE TRIBUNAL.DECIDING THE ISSUE IN FAVOUR OF THE ASSESS EE,HONBLE COURT HELD AS UNDER THE ASSESSEE HAD FAILED TO OFFER ANY EXPLANATION I N RESPECT OF THE ADDITION OF RS. 1,83,078 AND IT COULD BE DEEMED TO HAVE CONCEALED THE PARTICULARS O F INCOME OR FURNISHED INACCURATE PARTICULARS THEREOF, BY VIRTUE OF THIS EXPLANATION.THE TRIBUNAL WAS NOT JUSTIFIED IN DELETING THE PENALTY IMPOSED BY THE INCOME-TAX OFFICER UNDER SECTION 271(1)(C) O F THE ACT.THE FINDINGS GIVEN IN ASSESSMENT PROCEEDINGS ARE RELEVANT AND HAVE PROBATIVE VALUE. WHERE THE ASSESSEE PRODUCES NO FRESH EVIDENCE OR PRESENTS ANY ADDITIONAL OR FRESH CIRCUM STANCE IN PENALTY PROCEEDINGS, HE WOULD BE DEEMED TO HAVE FAILED TO DISCHARGE THE ONUS PLACED ON HIM AND THE LEVY OF PENALTY COULD BE JUSTIFIED. IT IS SAID THAT THE EXPLANATIONS APPENDED TO SECTIO N 271(1)(C) OF THE ACT ENTIRELY INDICATE THE ELEMENT OF STRICT LIABILITY ON THE ASSESSEE FOR CON CEALMENT OR FOR GIVING INACCURATE PARTICULARS WHILE FILING RETURN.COURTS HAVE HELD THAT THE OBJEC T BEHIND ENACTMENT OF SECTION 271(1)(C) READ WITH THE EXPLANATIONS INDICATE THAT THE SECTION HAS BEEN ENACTED TO PROVIDE FOR A REMEDY FOR LOSS OF REVENUE,THAT THE PENALTY UNDER THAT PROVISION IS A CIVIL LIABILITY,THAT WILFUL CONCEALMENT IS NOT A N ESSENTIAL INGREDIENT FOR ATTRACTING CIVIL LIABILITY AS IS THE CASE IN THE MATTER OF PROSECUTION UNDER SECTION 276C OF THE ACT. HERE,IT WOULD BE RELEVANT TO DISCUSS THE MATTER OF ESCORTS FINANCE LTD.,DECIDED BY THE HONBLE DELHI HIGH COURT(328ITR44).IN THAT MATTER,DURING TH E ASSESSMENT PROCEEDINGS, THE AO NOTICED THAT THE ASSESSEE HAD CLAIMED DEDUCTION OF RS. 21,0 2,228 UNDER SECTION 35D OF THE ACT, 1961 BEING ONE TENTH OF RS. 2,10,22,279 RELATING TO PUBL IC ISSUE OF SHARES.THE AO REJECTED THE CLAIM OF THE ASSESSEE MADE U/S.35D OF THE ACT,AS IT WAS A FI NANCE COMPANY AND NOT AN INDUSTRIAL UNDERTAKING THAT COULD CLAIM DEDUCTION UNDER THE SA ID SECTION.HE ALSO LEVIED PENALTY U/S.271(1)(C)OF THE ACT.IN THE APPELLATE PROCEEDING S,THE TRIBUNAL DELETED THE PENALTY.DECIDING THE APPEAL,HONBLE COURT HELD AS UNDER: THAT THE ASSESSEE HAD NOWHERE PLEADED THAT THE RET URN WAS FILED CLAIMING BENEFIT OF SECTION 35D OF THE ACT ON THE BASIS OF THE OPINION OF THE CHART ERED ACCOUNTANTS. MERELY BECAUSE INFORMATION WAS AVAILABLE IN THE TAX AUDIT REPORT THAT WOULD NO T ABSOLVE THE ASSESSEE.EVEN IF THERE WAS NO CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE P ARTICULARS, BUT ON THE BASIS THEREOF THE CLAIM WHICH WAS MADE WAS EX FACIE BOGUS, IT COULD ATTRACT PENALTY PROVISION. IT WAS NOT A CASE WHERE TWO OPINIONS ABOUT THE APPLICABILITY OF SECTION 35D WER E POSSIBLE. THEREFORE, IT COULD NOT BE A CASE OF A BONA FIDE ERROR ON THE PART OF THE ASSESSEE. THE RELIEF UNDER SECTION 35D OF THE ACT WAS CONFINED ONLY TO AN EXISTING INDUSTRIAL UNDERTAKING FOR EXTE NSION OR FOR SETTING UP A NEW INDUSTRIAL UNIT. IT WAS, THUS, NOT A 'WRONG CLAIM'' PREFERRED BY THE AS SESSEE, BUT WAS A CLEAR CASE OF 'FALSE CLAIM'. THE MATTER WAS REMITTED BACK TO THE AO FOR DETERMIN ING THE PENALTY AFRESH ATTRIBUTING THE CONDUCT RELATING TO CLAIM UNDER SECTION 35D OF THE ACT ONLY AS ATTRACTING PENALTY PROCEEDINGS. IT IS REPEATEDLY HELD BY THE COURTS THAT THE PENALT Y ON THE GROUND OF CONCEALMENT OF PARTICULARS OR NON-DISCLOSURE OF FULL PARTICULARS CAN BE LEVIED ON LY WHEN IN THE ACCOUNTS/RETURN AN ITEM HAS BEEN SUPPRESSED DISHONESTLY OR THE ITEM HAS BEEN CLAIMED FRAUDULENTLY OR A BOGUS CLAIM HAS BEEN MADE. WHEN THE FACTS ARE CLEARLY DISCLOSED IN THE RETURN OF INCOME, PENALTY CANNOT BE LEVIED AND MERELY BECAUSE AN AMOUNT IS NOT ALLOWED OR TAXED TO INCOME , AS IT CANNOT BE SAID THAT THE ASSESSEE HAD FILED INACCURATE PARTICULARS OR CONCEALED ANY INCOM E CHARGEABLE TO TAX..WHERE THE CLAIM MADE IN THE RETURN APPEARS TO BE EX FACIE BOGUS,IT WOULD BE TREATED AS CASE OF CONCEALMENT OR INACCURATE PARTICULARS AND PENALTY PROCEEDINGS WOULD BE JUSTIF IED. THE SUBMISSION OF THE LEARNED COUNSEL FOR THE REVEN UE 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. S HE SUBMITTED THAT HARDLY 5 PER CENT. RETURNS 5 ITA NO. 2204/MUM/2013 S.H.R. TRADING PVT. LTD. ARE TAKEN UP FOR SCRUTINY UNDER SECTION 143(2) OF T HE 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 INFORMA TION 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.WE ARE INCLINED TO AGREE WITH THE AFORESAID S UBMISSION OF LEARNED COUNSEL FOR THE REVENUE. EVEN IF THERE IS NO CONCEALMENT OF INCOME OR FURNIS HING OF INACCURATE PARTICULARS, BUT ON THE BASIS THEREOF THE CLAIM WHICH IS MADE IS EX FACIE BOGUS, IT MAY STILL ATTRACT PENALTY PROVISION. ( EMPHASIS BY US ). .WE FIND THAT IT IS NOT A CASE WHERE TWO OPIN IONS ABOUT THE APPLICABILITY OF SECTION 35D WERE POSSIBLE.THEREFORE, IT CANNOT BE A CASE OF A BONA FIDE ERROR ON THE PART OF THE ASSESSEE.AS HAS BEEN POINTED OUT ABOVE, THE RELIEF AVAILABLE UNDER SECTION 35D OF THE ACT TO FINANCE COMPANY IS EX FACIE INADMISSIBLE AS THAT IS CONFINED ONLY TO THE EXISTING INDUSTRIAL UNDERTAKING FOR THEIR EXTENSION OR FOR SETTING UP A NEW INDUSTRIAL UNIT. IT WAS, THUS, NOT A 'WRONG CLAIM' PREFERRED BY THE ASSESSEE, BUT IS A CLEAR CA SE OF 'FALSE CLAIM'. IN CIT V. VIDYAGAURI NATVERLAL [1999] 238 ITR 91, THE GUJARAT HIGH COURT MADE A DISTINCTION BETWEEN WRONG CLAIM AS OPPOSED TO FALSE CLAIM AND HELD THAT IF THE CLAIM I S FOUND TO BE FALSE,THE SAME WOULD ATTRACT PENALTY. THE HONBLE COURT FURTHER HELD THAT CASES OF BOGUS HUNDI LOANS OR BOGUS SALES OR PURCHASES HAD BEEN TREATED AS THAT OF CONCEALMENT OR INACCURACY I N PARTICULARS OF INCOME BY THE JUDICIAL PRONOU- NCEMENTS AND REFERRED TO THE CASES OF KRISHNA KUMAR I CHAMANLAL (217ITR645),RAJARAM & CO. (193ITR614)BEENA METALS (240ITR222) AND DHARAMENDRA TEXTILE PROCESSORS (306ITR277). IN THE MATTER OF ZOOM COMMUNICATION PVT. LTD. (SUPR A),THE ASSESSEE-COMPANY,ENGAGED IN THE BUSINESS OF HIRING AUDIO AND VIDEO EQUIPMENT,FILED A RETURN DECLARING INCOME OF RS.1,21,49, 861. DURING THE ASSESSMENT PROCEEDINGS IT WAS NOTICED TH AT CERTAIN SUM HAD BEEN DEBITED UNDER THE HEAD EQUIPMENT WRITTEN OFF. IT WAS STATED BY THE AS SESSEE THAT DUE TO OVERSIGHT, THIS AMOUNT WAS NOT ADDED BACK IN THE COMPUTATION OF INCOME AND OUG HT TO HAVE BEEN ADJUSTED IN THE BLOCK OF ASSETS.IT WAS FURTHER NOTICED THAT ANOTHER SUM OF R S.1 LAKH HAD BEEN DEBITED UNDER THE HEAD INCOME-TAX PAID, IN SCHEDULE9,RELATING TO ADMINISTR ATION AND OTHER EXPENSES.THE ASSESSEE CLAIMED THAT DUE TO OVERSIGHT, THIS AMOUNT WAS NOT ADDED BA CK IN THE COMPUTATION OF INCOME. BOTH THE AMOUNTS WERE ADDED BACK TO THE INCOME OF THE ASSESS EE.PENALTY PROCEEDINGS WERE ALSO INITIATED AGAINST THE ASSESSEE. DURING THE PENALTY PROCEEDING S,THE ASSESSEE CLAIMED THAT IT HAD COMMITTED A BONA FIDE MISTAKE AND ALL THE FACTS MATERIAL TO THE COMPUTATION WERE DISCLOSED. THE AO WAS OF THE VIEW THAT THERE WAS NO DIFFERENCE OF OPINION AS REGARDS DISALLOWANCE OF THESE EXPENSES AND THE INCORRECT COMPUTATION GIVEN BY THE ASSESSEE WAS AN ACT OF PAYING LESS TAX THAN WHAT WAS DUE FROM IT.HE WAS OF THE VIEW THAT THE AS SESSEE WAS A BIG COMPANY, ASSISTED BY A TEAM OF TAX AUDITORS AND, THEREFORE, IT WAS A CASE OF CO NCEALMENT OF INCOME AS WELL AS OF FURNISHING WRONG PARTICULARS FOR COMPUTATION OF INCOME.THE FAA UPHELD THE PENALTY IMPOSED UPON THE ASSESSEE.THE TRIBUNAL ACCEPTED THE CONTENTION OF TH E ASSESSEE AND DELETED THE PENALTY HOLDING THAT ALL THE RELEVANT MATERIALS RELATING TO THAT ISSUE W ERE DULY DISCLOSED BY THE ASSESSEE IN THE COURSE OF THE ASSESSMENT PROCEEDINGS. ( EMPHASIS BY US). ON APPEAL TO THE HIGH COURT,HONBLE COURT HELD AS U NDER AS REGARDS THE AMOUNT CLAIMED ON ACCOUNT OF UNUSAB LE AND DISCARDED ASSETS, THE TRIBUNAL, WAS ENTIRELY INCORRECT IN TAKING THE VIEW THAT THE DEDU CTION CLAIMED BY THE ASSESSEE WAS ADMISSIBLE TO IT UNDER SECTION 32(1)(III)..ADMITTEDLY, THE ASSESSEE -COMPANY WAS NOT ENGAGED IN GENERATION AND FOR DISTRIBUTION OF POWER,DURING THE RELEVANT YEAR. THUS, THE PROVISIONS, OF CLAUSE (I) OF SUB-SECTION (1) OF SECTION 32 WOULD NOT APPLY IN RESPECT OF THE ASSETS CLAIMED TO HAVE BECOME UNUSABLE AND WRITTEN OFF. THEREFORE, THE ASSESSEE HAD NO JUSTIFI CATION TO CLAIM THIS AMOUNT OF RS. 13,24,539 AS A REVENUE EXPENDITURE.IT WAS ALSO NOT THE CASE OF THE ASSESSEE THAT IT WAS UNDER A BONA FIDE BELIEF THAT THESE TWO AMOUNTS COULD BE CLAIMED AS REVENUE EXPENDITURE. THE ASSESSEE WAS A COMPANY WHICH MUST BE HAVING PROFESSIONAL ASSISTANCE IN COM PUTATION OF ITS INCOME, AND ITS ACCOUNTS WERE COMPULSORILY SUBJECTED TO AUDIT. 6 ITA NO. 2204/MUM/2013 S.H.R. TRADING PVT. LTD. THE PROPOSITION OF LAW WHICH EMERGES FROM THIS CASE ,WHEN CONSIDERED IN THE BACKDROP OF THE FACTS OF THE CASE BEFORE THE COURT,IS THAT SO LONG AS THE ASSESSEE HAS NOT CONCEALED ANY MATERIAL FACT OR THE FACTUAL INFORMATION GIVEN BY HIM HAS NOT BEEN F OUND TO BE INCORRECT,HE WILL NOT BE LIABLE TO IMPOSITION OF PENALTY UNDER SECTION 271(1)(C) OF TH E ACT, EVEN IF THE CLAIM MADE BY HIM IS UNSUSTAINABLE IN LAW, PROVIDED THAT HE EITHER SUBST ANTIATES THE EXPLANATION OFFERED BY HIM OR THE EXPLANATION, EVEN IF NOT SUBSTANTIATED, IS FOUND TO BE BONA FIDE. IF THE EXPLANATION IS NEITHER SUBSTANTIATED NOR SHOWN TO BE BONA FIDE, EXPLANATIO N 1 TO SECTION 271(1)(C) WOULD COME IN TO PLAY AND THE ASSESSEE WILL BE LIABLE TO FOR THE PRESCRIB ED PENALTY. IT IS TRUE THAT MERE SUBMITTING A CLAIM WHICH IS IN CORRECT IN LAW WOULD NOT AMOUNT TO GIVING INACCURATE PARTICULARS OF THE INCOME OF THE ASSESSE E, BUT IT CANNOT BE DISPUTED THAT THE CLAIM MADE BY THE ASSESSEE NEEDS TO BE BONA FIDE. IF THE CLAIM BESIDES BEING INCORRECT IN LAW IS MALA FIDE, EXPLANATION 1 TO SECTION 271(1)(C) WOULD COME INTO PLAY AND WORK TO THE DISADVANTAGE OF THE ASSESSEE.THE COURT CANNOT OVERLOOK THE FACT THAT ON LY A SMALL PERCENTAGE OF THE INCOME-TAX RETURNS ARE PICKED UP FOR SCRUTINY. IF THE ASSESSEE MAKES A CLAIM WHICH IS NOT ONLY INCORRECT IN LAW BUT IS ALSO WHOLLY WITHOUT ANY BASIS AND THE EXPLANATION F URNISHED BY HIM FOR MAKING SUCH A CLAIM IS NOT FOUND TO BE BONA FIDE, IT WOULD BE DIFFICULT TO SAY THAT HE WOULD STILL NOT BE LIABLE TO PENALTY UNDER SECTION 271(1)(C) OF THE ACT. IF WE TAKE THE VIEW T HAT A CLAIM WHICH IS WHOLLY UNTENABLE IN LAW AND HAS ABSOLUTELY NO FOUNDATION ON WHICH IT COULD BE M ADE, THE ASSESSEE WOULD NOT BE LIABLE TO IMPOSITION OF PENALTY, EVEN IF HE WAS NOT ACTING BO NA FIDE WHILE MAKING A CLAIM OF THIS NATURE, THAT WOULD GIVE A LICENCE TO UNSCRUPULOUS ASSESSEES TO M AKE WHOLLY UNTENABLE AND UNSUSTAINABLE CLAIMS WITHOUT THERE BEING ANY BASIS FOR MAKING THE M, IN THE HOPE THAT THEIR RETURN WOULD NOT BE PICKED UP FOR SCRUTINY AND THEY WOULD BE ASSESSED O N THE BASIS OF SELF-ASSESSMENT UNDER SECTION 143(1) OF THE ACT AND EVEN IF THEIR CASE IS SELECTE D FOR SCRUTINY, THEY CAN GET AWAY MERELY BY PAYING THE TAX, WHICH IN ANY CASE, WAS PAYABLE BY THEM.THE CONSEQUENCE WOULD BE THAT THE PERSONS WHO MAKE CLAIMS OF THIS NATURE, ACTUATED BY A MALA FIDE INTENTION TO EVADE TAX OTHERWISE PAYABLE BY THEM WOULD GET AWAY WITHOUT PAYING THE TAX LEGALLY PAYABLE BY THEM, IF THEIR CASES ARE NOT PICKED UP FOR SCRUTINY.THIS WOULD TAKE AWAY THE DETERRENT EFFECT, WHICH THESE PENALTY PROVISIONS IN THE ACT HAVE. IN THE MATTER OF KUTTOOKARAN MACHINETOOLS(313ITR413 )IT WAS FOUND BY THE AO THAT THE ASSESSEE HAD MADE BOGUS CLAIMS OF INVESTMENT ALLOWANCE AND D EPRECIATION IN RESPECT OF MACHINERY WHICH WAS NOT PURCHASED,INSTALLED OR COMMISSIONED DURING THE PREVIOUS YEAR.PENALTY IMPOSED BY THE AO FOR CONCEALING THE PARTICULARS OF INCOME WAS CON FIRMED BY BOTH THE APPELLATE AUTHORITIES. BEFORE THE HONBLE KERALA HIGH COURT IT WAS PLEADED THE MAKING A WRONG CLAIM WAS MISTAKE ON PART OF THE AUDITOR.REJECTING THE APPEAL HONBLE CO URT HELD THAT THOUGH THE RETURNS WERE PREPARED BY THE AUDITOR FOR THE ASSESSEE, IT WAS FOR THE ASS ESSEE TO ENSURE THAT WRONG CLAIMS WERE NOT MADE THAT IMPOSITION OF PENALTY WAS VALID. MATTER OF SREE VALLIAPPA TEXTILES,(294 ITR 322),DEC IDED BY THE HONBLE KARNATAKA HIGH COURT, ALSO THROWS LIGHT ON THE ISSUE BEING DISCUSSED BY U S.IN THAT MATTER THE ASSESSEE,A PUBLIC LIMITED COMPANY,HAD CLAIMED THE BENEFIT OF DEPRECIATION AND INVESTMENT ALLOWANCE WITH REGARD TO THE MACHINE INSTALLED FOR THE AY.1985-86 ON THE BASIS O F A CERTIFICATE ISSUED BY THE FACTORY MANAGER TO THE EFFECT THAT THE MACHINERY HAD BEEN RECEIVED BEFORE THE CLOSE OF THE YEAR. WHEN IT CAME TO KNOW OF THE MISTAKES IT WITHDREW THE CLAIM.THE AO L EVIED A PENALTY FOR CONCEALMENT OF INCOME UNDER SECTION 271(1) (C) OF THE ACT.FAA CONFIRMED T HE LEVY OF PENALTY,BUT THE TRIBUNAL CANCELLED THE PENALTY HOLDING THAT MAKING A FALSE CLAIM OF DE PRECIATION,EXTRA SHIFT ALLOWANCE, INVESTMENT ALLOWANCE ETC. NEITHER AMOUNTED TO CONCEALMENT OF I NCOME NOR FURNISHING OF INACCURATE PARTICULARS.HONBLE HIGH COURT FRAMED FOLLOWING SUB STANTIAL QUESTION OF LAW IN THIS REGARD. WHETHER THE TRIBUNAL WAS RIGHT IN LAW IN HOLDING T HAT MAKING A FALSE CLAIM OF DEPRECIATION, EXTRA SHIFT ALLOWANCE, INVESTMENT ALLOWANCE, ETC.,NEITHER AMOUNTS TO CONCEALMENT OF INCOME, NOR FURNISHING OF INACCURATE PARTICULARS TO ATTRACT PEN ALTY UNDER SECTION 271(1)(C)? ALLOWING THE APPEAL FILED BY THE DEPARTMENT,HONBLE COURT HELD AS UNDER: WE CANNOT FORGET THAT THE STATE DEPENDS UPON THE R EVENUE OUT OF THE TAX COLLECTED BY THE 7 ITA NO. 2204/MUM/2013 S.H.R. TRADING PVT. LTD. DEPARTMENT.TAX EXEMPTION, TAX CONCESSION, TAX DEDUC TION HAS TO BE FOR BONA FIDE REASON AND NOT FOR THOSE WHO MAKE FALSE DECLARATION FOR THE PURPOS E OF BENEFIT IN TERMS OF THE STATUTE. SECTION 271(1)(C) HAS TO BE STRICTLY APPLIED IN THE LARGER INTEREST OF DISCIPLINE IN FILING CORRECT RETURNS BY THE ASSESSEE. IN OUR OPINION,THE MATTER OF VIDYAGAURI NATVERLAL(2 38ITR91),DECIDED BY THE HONBLE GUJARAT HIGH COURT,IS ALSO RELEVANT FOR DECIDING THE ISSUE UNDER CONSIDERATION.IN THAT CASE,IN THE RETURN FILED BY THE ASSESSEE IN PART III OF THE RETURN,THE ASSESSEE HAD DISCLOSED CASH CREDIT IN HIS BOOKS O F ACCOUNT AS MONIES BORROWED FROM THREE DIFFERENT PER SONS.DURING THE COURSE OF ASSESSMENT PROCEEDINGS, EXPLANATION ABOUT THE NATURE AND SOURC E OF SUCH CASH CREDITS WERE NOT FOUND TO BE SATISFACTORY BY THE REVENUE AND THE SAME WERE CONSI DERED TO BE INCOME OF THE ASSESSEE FOR THE PREVIOUS YEAR.IN THE FACE OF THIS FINDING ABOUT FAL SEHOOD OF THE STATEMENT MADE IN THE RETURN, PENALTY FOR CONCEALMENT WAS LEVIED. DELETING THE PENALTY,THE TRIBUNAL HELD THAT THE AMO UNT IN DISPUTE HAD BEEN DISCLOSED BY THE ASSESSEE IN PART III OF THE RETURN OF INCOME,THAT I T COULD NOT BE SAID THAT THE ASSESSEE HAD CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHED INACCURA TE PARTICULARS OF SUCH INCOME.WHEN THE MATTER TRAVELLED TO THE HONBLE HIGH COURT,IF FRAMED THE F OLLOWING QUESTION: WHETHER, IN THE FACTS AND CIRCUMSTANCES OF THE CAS E, SOLELY ON THE GROUND THAT THE ASSESSEE HAS DISCLOSED RECEIPTS IN PART III OF THE RETURN FILED BY HIM, A CONCLUSION CAN BE REACHED THAT THE ASSESSEE IS NOT GUILTY OF CONCEALING PARTICULARS OF HIS INCOME OR FOR FURNISHING INACCURATE PARTI- CULARS ? DECIDING THE APPEAL IN FAVOUR OF THE REVENUE,THE HO NBLE COURT HELD AS UNDER: TO US,IT APPEARS OBVIOUS THAT SUCH A WIDE PROPOSIT ION AS HAS BEEN PROPOUNDED BY THE TRIBUNAL CANNOT BE ACCEPTED AS A MATTER OF LAW.THE WORD CON CEALMENT INHERENTLY CARRIES WITH IT THE ELEMENT OF MENS REA.THEREFORE, THE MERE FACT THAT S OME FIGURE OR SOME PARTICULARS HAVE BEEN DIS- CLOSED BY ITSELF, EVEN IF TAKES OUT THE CASE FROM T HE PURVIEW OF NON-DISCLOSURE, IT CANNOT BY ITSELF TAKE OUT THE CASE FROM THE PURVIEW OF FURNISHING IN ACCURATE PARTICULARS. IN ANY CASE, DISCLOSURE WHICH HAS BEEN MADE IN ANY PART OF THE RETURN WHICH IS INCORRECT OR FALSE TO THE KNOWLEDGE OF THE ASSESSEE AND IF THAT FACT IS ESTABLISHED, SUCH DISC LOSURE CANNOT TAKE IT OUT FROM THE PURVIEW OF THE ACT OF CONCEALMENT OF PARTICULARS OF INCOME OR ACT OF FURNISHING INACCURATE PARTICULARS FOR THE PURPOSE OF LEVY OF PENALTY.CONSIDERING ALL THESE FA CTS, WHETHER THE PARTICULARS FURNISHED ARE TRUE AND CORRECT OR WHETHER THE PARTICULARS FURNISHED BY THE ASSESSEE ARE INACCURATE AND WHETHER THE PARTICULARS FURNISHED BY THE ASSESSEE ARE INACCURAT E OR INCORRECT TO HIS KNOWLEDGE,ALL ARE QUESTIONS WHICH REQUIRE AN INQUIRY INTO THE FACTS A ND CONSIDERATION OF THE MATERIAL ON RECORD BEFORE ARRIVING AT ANY CONCLUSION WHETHER THE PENAL TY IS TO BE IMPOSED OR NOT, DEPENDING ON THE FINDING REACHED AS A RESULT OF THAT INQUIRY. THE PROCESS OF INQUIRY INTO THE CORRECTNESS, TRUTHF ULNESS OR ACCURACY OF THE PARTICULARS FURNISHED BY THE ASS ESSEE CANNOT BE CLOSED AT THE THRESHOLD BY LOOKING AT THE RETURN.THAT WOULD NEGATIVE AND RENDE R OTIOSE THE VERY PROVISIONS OF THE STATUTE. (EMPHASIS BY US.) THE EXPRESSION OF THE PRINCIPLE THAT MERE REJECTION OF THE EXPLANATION IS NOT SUFFICIENT TO SUSTAIN PENALTY IS NOT BACKED UP BY NECESSARY ENQUIRY. IT M AY BE NOTICED THAT AS PER RULE OF EVIDENCE, THERE IS DISTINCTION BETWEEN SET OF FACTS NOT PROVED AN D FACTS DISPROVED AND FACTS PROVED. BENEFIT OF THE PRINCIPLE THAT MERE NON-SATISFACTORY NATURE OF EXPL ANATION FURNISHED CANNOT AMOUNT TO PROOF OF FALSITY OF EXPLANATION FURNISHED CAN APPLY IN CASE THE FACT-FINDING AUTHORITY REACHES TO A STAGE WHERE IT CAN ONLY CONCLUDE THAT THE FACT ALLEGED IS NOT PROVED WHICH WOULD RESULT THAT EXCEPT REJECTION OF THE EXPLANATION FURNISHED BY THE ASSES SEE, THERE IS NO MATERIAL TO SUSTAIN THE PLEA OF CONCEALMENT. BUT, ON THE OTHER HAND, IF THE STATE O F AFFAIRS REVEALS A STAGE WHERE ONE CAN POSITIVELY REACH A CONCLUSION THAT THE FACT ALLEGED IS PROVED OR DISPROVED, THE PRINCIPLE THAT MERE REJECTION OF EXPLANATION CANNOT RESULT IN LEVY OF PENALTY WILL H AVE NO APPLICATION. TO REACH THIS STAGE ALSO, INQUIRY WILL HAVE TO BE UNDERTAKEN OF THE DISCLOSUR E MADE IN THE RETURN OR IN THE STATEMENT ANNEXED TO THE RETURN AND TO ARRIVE AT A FINDING WHETHER TH E PARTICULARS DISCLOSED ARE TRUTHFUL, OR FALSE OR NOT PROVED TO BE SATISFACTORY. THE PRINCIPLE TO WHI CH THE TRIBUNAL HAS REFERRED WOULD APPLY IN THE LAST CASE. IN THE FIRST CASE, IT WOULD BE A POSITIV E CASE OF NO CONCEALMENT, IN THE SECOND STAGE, IT 8 ITA NO. 2204/MUM/2013 S.H.R. TRADING PVT. LTD. WOULD BE A POSITIVE CASE OF CONCEALMENT AND IN THE THIRD CASE, BENEFIT OF DOUBT WILL GO IN FAVOUR OF THE ASSESSEE. BUT IN EITHER CASE, INQUIRY MUST PROC EED FROM THE STAGE THE ALLEGED DISCLOSURE HAS TAKEN PLACE AND NOT STOP AT THAT STAGE AND CLOSE TH E INQUIRY AT THE THRESHOLD ON THE ABSTRACT PRINCIPLE THAT MERE REJECTION OF EXPLANATION DOES N OT RESULT INTO LEVY OF PENALTY. THE TRIBUNAL HAS OBVIOUSLY ERRED IN STOPPING AT THAT STAGE AND NOT C ONSIDERING THE MATERIAL BEFORE IT ON THE BASIS OF WHICH THE AUTHORITY LEVYING PENALTY HAS COME TO A P OSITIVE FINDING AS NOTICED BY US. THE TRIBUNAL APPEARS TO HAVE IGNORED THAT EVEN WHER E THERE IS SOME DISCLOSURE PENALTY MAY STILL BE IMPOSED IF DISCLOSURES IN THE RETURN ARE INACCURATE . IN OUR OPINION, THE PRINCIPLE APPEARS TO BE PLAIN FROM THE READING OF THE STATUTE ITSELF. STILL, IF ANY AUTHORITY IS NEEDED, REFERENCE MAY BE MADE TO DECISIONS OF VARIOUS HIGH COURTS : (1) KANTILAL MANILAL V. CIT [1981] 130 ITR 411 (GU J) ; (2) CIT V. SULEMAN ABDUL SATTAR [1983] 139 ITR 8 (GUJ) ; (3) CIT V. NAMLABHAI BHANABHAI [1 987] 163 ITR 189 (GUJ) ; (4) CIT V. VILASBEN HASMUKHLAL SHAH (SMT.) [1991] 192 ITR 214 (GUJ) ; A ND (5) CIT V. ABDULGAFUR AHMED WAGMAR [1993] 199 ITR 827 (GUJ). EXCEPT THE FIRST CASE, ALL OTHER CASES RELATE TO DI SCLOSURE OF PARTICULARS OF INCOME UNDER PART IV OF THE RETURN BY THE ASSESSEE CONCERNED.LIKE ARGUMENT THAT THE ASSESSEE HAVING DISCLOSED INCOME PARTICULARS OF RECEIPT OF CLAIMS TO BE EXEMPT THE F ACT THAT HIS CLAIM FOR EXEMPTION WAS NOT ACCEPTED, CANNOT RESULT IN LEVY OF PENALTY BY HOLDI NG THAT MERE DISCLOSURE IN PART IV OF THE RETURN WOULD NOT ABSOLVE THE ASSESSEE FROM SCRUTINY OF FAC TS WHETHER THE DISCLOSURE MADE BY HIM IS TRUE OR FALSE.WHEREAS, IN THE FIRST REFERRED CASE, WHEN THE ASSESSING AUTHORITY FOUND THAT THERE HAS BEEN MANIPULATION OF ACCOUNTS AND THE ASSESSEES EXPLANA TION WAS FOUND TO BE MUNTRUE, LEVY OF PENALTY WAS HELD TO BE VALID AND THE CONTENTION THAT MERE R EJECTION OF THE EXPLANATION FOR THE PURPOSE OF ADDING THAT SUM IN THE RETURNED INCOME CANNOT RESUL T IN LEVY OF PENALTY, WAS REJECTED IN THE FACTS AND CIRCUMSTANCES OF THAT CASE.THIS IS TO EMPHASISE THAT INQUIRY INTO THE QUESTION ABOUT DISCLOSURE OR ACCURACY OF DISCLOSURE CANNOT BE STOPPED WHILE L OOKING AT THE DISCLOSURE MADE IN THE RETURN.IN FACT, THIS IS THE STARTING POINT OF INQUIRY WHETHER SUCH DISCLOSURES ARE TRUTHFUL OR ACCURATE. WE ARE, THEREFORE, OF THE OPINION THAT THE QUESTION AS REFRAMED BY US SHOULD BE ANSWERED IN THE NEGATIVE THAT IS-IN FAVOUR OF THE REVENUE AND AGAIN ST THE ASSESSEE. FROM THE ABOVE DISCUSSION,IT IS CLEAR THAT COURTS A RE DISTINGUISHING BETWEEN THE DEBATABLE CLAIMS AND PATENTLY WRONG/INADMISSIBLE CLAIMS.THEY ARE OF THE FIRM VIEW THAT IF AN ASSESSEE CLAIMS ANY DEDUCTION,HE HAS TO SUBSTANTIATE THE CLAIM BY PRODU CING POSITIVE EVIDENCE-OTHERWISE IT CANNOT ESCAPE THE RIGOR OF PENAL PROVISIONS.IN OTHER WORDS PENALTY U/S.271(1)(C)CANNOT BE IMPOSED BECAUSE AN ASSESSEE TAKES A PARTICULAR LEGAL STAND. BUT,THIS DOES NOT MEAN THAT IT CAN CLAIM WRONG DEDUCTIONS OR CLAIM WITHOUT ANY BASIS OR FOUNDATION ,BECAUSE,FALSE,SPURIOUS AND MENDACIOUS CLAIMS DO NOT FALL UNDER THE CATEGORY OF A LEGAL ST AND. SECONDLY,JUST BECAUSE SOMETHING IS MENTIONED IN THE RETURN OF INCOME DOES NOT PROVE THAT THE CLAIM MADE IN IT IS JUSTIFIED AND ALLOWABLE.FILING OF RETURN DOES NOT TIE DOWN THE HANDS OF AN AO. A FINAL DECISION DEPENDS UPON THE TRUTHFULNESS OF T HE PARTICULARS OF INCOME FILED BY THE ASSESSEE.THE PHRASE PARTICULARS OF INCOME APPEARING IN SECTION 271(1)(C),HAS TO BE INTERPRETED AS FACTS LEADING TO CORRECT COMPUTATION OF INCOME.SO,I T CAN SAFELY BE SAID THAT WHENEVER ANY MATERIAL FACT IS NOT FILED FOR CORRECT COMPUTATION OF INCOME OR IF FILED IS INACCURATE,THEN PENALTY HAS TO BE IMPOSED. PERUSAL OF THE PROVISIONS OF EXPLANATION 1 TO THE SECTION PROVIDE THAT SUCH PENALTY CAN BE IMPOSED ONLY IF THE PERSON FAILS TO OFFER AN EXP LANATION OR OFFERS AN EXPLANATION WHICH IS FOUND BY THEM TO BE FALSE OR OFFERS AN EXPLANATION WHICH ASSESSEE IS NOT ABLE TO SUBSTANTIATE AND FAILS TO PROVE SUCH EXPLANATION IS BONA FIDE AND ALL THE FAC TS RELATING TO THE SAME AND MATERIAL TO COMPUTATION OF TOTAL INCOME HAVE BEEN DISCLOSED BY HIM. WE ARE ALSO OF THE OPINION THAT BONA FIDE BELIEF OF AN ASSESSEE IN MAKING A CLAIM HAS LIMITED ROLE FOR DECIDING THE ISSUE OF PENALTY TO BE IMPOSED U/S .271(1)(C).FACT OF THE CASE DECIDE WHETHER SUCH A BELIEF COULD BE TREATED AS BONA FIDE OR NOT.IN OT HER WORDS,IT CAN SAFELY BE HELD THAT IF AN 9 ITA NO. 2204/MUM/2013 S.H.R. TRADING PVT. LTD. ASSESSEE,DISREGARDING ALL THE RELEVANT FACTS AND CI RCUMSTANCES,INTERPRETS A SECTION THAT SUITS ITS INTEREST THEN SUCH INTERPRETATION CANNOT BE HELD BO NA FIDE BELIEF.IN THE GARB OF THE BONA FIDE CLAIM AN ASSESSEE CANNOT ESCAPE LEVY OF PENALTY. NOW, WE WOULD LIKE TO DISCUSS THE FACTS OF THE CASE OF RELIANCE PETRO PRODUCTS PVT. LTD. (SUPRA). IN THAT MATTER THE ASSESSEE HAD DISCLOSED A CLAIM O F INTEREST U/S. 36(1)(III) OF THE ACT.THIS DEDUCTION HAD ALSO BEEN CLAIMED BY THE ASSESSEE IN THE EARLIER YEAR AND THE FAA HAD ALLOWED THE DEDUCTION,WHILE THE ITAT HAD RESTORED THE ISSUE BAC K TO THE FILE OF THE AO. DECIDING THE APPEAL TRIBUNAL HELD THAT THE ASSESSEE HAD DULY FILED AN E XPLANATION GIVING THE REASONS FOR MAKING A CLAIM,THAT ONCE THE ASSESSEE OFFERED AN EXPLANATION THE ONUS WOULD SHIFT ON THE REVENUE TO PROVE THAT THE EXPLANATION OFFERED BY THE ASSESSEE WAS FA LSE,THAT BONA FIDES OF THE EXPLANATION WERE CLEARLY PROVED,THAT NO MATERIAL OR EVIDENCE WAS BRO UGHT ON RECORD OR POINTED OUT BY THE DR PROVING THAT THE REVENUE HAD DISCHARGED ITS ONUS FO R PROVING THE FALSENESS OF EXPLANATION OF THE ASSESSEE,THAT THE ASSESSEE HAD ALSO DULY DISCHARGED ITS ONUS WHICH WAS CAST ON THE ASSESSEE. WHEN THE MATTER TRAVELLED UP TO THE HONBLE SUPREME COUR T IT WAS OBSERVED BY THE APEX COURT THAT IN THAT CASE,THERE WAS NO FINDING THAT ANY DETAILS SUP PLIED BY THE ASSESSEE IN ITS RETURN WERE FOUND TO BE INCORRECT OR ERRONEOUS OR FALSE, THAT SUCH NOT B EING THE CASE, THERE WOULD BE NO QUESTION OF INVITING THE PENALTY UNDER SECTION 271(1)(C) OF THE ACT. IN OUR OPINION, FACTS OF THE RELIANCE PETRO PRODUCTS PVT.LTD.(SUPRA) ARE NOT APPLICABLE TO THE FACTS OF THE CASE UNDER CONSIDERATION. IN THE PRESENT CASE AO AS WELL AS FAA HAS GIVEN A FACTUAL AND CATEGORICAL FINDING THAT ASSESSEE HAD FURNISHED INACCURATE PARTICULAR OF INCOME AND HAD C ONCEALED INCOME. BOTH OF THEM FOUND THAT EXPLANATION FILED BY THE ASSESSEE WAS NOT AS PER TH E PROVISIONS OF LAW. NOW,IF THE FACTS OF THE MATTER UNDER APPEAL ARE CON SIDERED IT BECOMES CLEAR THAT CLAIM MADE BY THE ASSESSEE U/S. 54/54 F OF THE ACT WAS NOT JUSTIFIED AT ALL AND IT FALLS IN THE CATEGORY OF FALSE/SPURIOUS/ UNSUBSTANTIATED CLAIM.THERE WAS NO CLEAVAGE OF OPINION ABOUT THE AVAILABILITY OF EXEMPTION TO A CORPORATE ASSESSEE U/S.54 OF THE ACT .IN OTHER WORDS A BARE READING OF SECTION 54 WOULD REVEAL EVEN TO A LAYMAN THAT THERE WAS NO SCO PE FOR GETTING THE BENEFIT OF THOSE PROVISIONS IN RESPECT IMMOVABLE PROPERTY SOLD BY A COMPANY.SO, BY CLAIMING A DEDUCTION FOR WHICH IT WAS NOT ELIGIBLE, THE ASSESSEE-COMPANY HAS PROVED ITS G UILTY MIND OF FURNISHING INACCURATE PARTICULARS OF INCOME TO ESCAPE THE CORRECT IMPOSITION OF TAXES . THE PENALTY ORDER IN ITS ENTIRETY SHOWS THAT THE A O HAD BEEN INFLUENCED BY THE CONSIDERATION THAT THE ASSESSEE HAD NOT ONLY INTERPRETED THE LAW WRONG LY,BUT ALSO DID NOT FURNISH THE DETAILS OF STCG CORRECTLY.IT WAS OPEN TO THE ASSESSEE TO SHOW THAT CLAIM MADE BY IT WAS SUSTAINABLE IN THE QUANTUM AND AS WELL AS IN PENALTY PROCEEDINGS. HOWEVER,NO M ATERIAL WAS BROUGHT ON RECORD BY IT IN THE COURSE OF THE PENALTY PROCEEDINGS OR IN THE COURSE OF THE HEARING BEFORE US TO SHOW THAT THE STAND TAKEN BY IT WAS AS PER THE PROVISIONS OF SECTION 54 OF THE ACT.THEREFORE,AO WAS JUSTIFIED IN HOLDING THAT THE PARTICULARS FURNISHED BY THE ASSES SEE WERE NOT FALSE AND INACCURATE.THE ASSESSEE HAD NOT BEEN ABLE TO DISPROVE THE FACT,THROUGHOUT T HE PENALTY PROCEEDINGS,THAT THE CONCLUSIONS DRAWN BY THE AO AND FAA WERE UNSUSTAINABLE. DURING THE ASSESSMENT AND PENALTY PROCEEDINGS ASSES SEE HAD NOT PRODUCED ANY POSITIVE EVIDENCE THAT PARTICULARS FILED BY IT IN THE RETURN WERE TRU E.AO MADE INVESTIGATION ABOUT THE CLAIM MADE BY THE ASSESSEE.HE FOUND THAT THE CLAIM WAS MADE IN TO TAL DISREGARD OF THE PROVISIONS OF THE ACT.HE ISSUED A SHOW CAUSE NOTICE AND ASKED THE ASSESSEE T O PROVE THE GENUINENESS OF THE CLAIM MADE BY IT. AS STATED EARLIER IT WAS PRIME DUTY OF THE ASSE SSEE TO SUPPORT THE CLAIMS MADE BY IT IN THE RETURN OF INCOME.ONUS WAS NOT ON THE AO TO PROVE THE NEGAT IVE.ONCE A CLAIM WAS FILED BY IT U/S.54 OF THE ACT,IT SHOULD HAVE LED SOME EVIDENCE THAT A REA SONABLE PRUDENT PERSON WOULD CONSIDER THE SAME AS SUFFICIENT.IN THE CASE UNDER CONSIDERATION, THE ISSUE IS NOT ABOUT SUFFICIENCY OF EVIDENCES,BUT NON EXISTENCE OF THE CLAIM THAT HAS B EEN SHOWN IN BOOKS OF ACCOUNTS AND THAT WAS 10 ITA NO. 2204/MUM/2013 S.H.R. TRADING PVT. LTD. VERIFIED TO BE TRUE IN THE RETURN FILED.A RETURN OF INCOME IS NOT A JUST PIECE OF PAPER IT GIVES DETAI LS OF INCOME,POSITIVE OR NEGATIVE OF AN ASSESSEE.IT IS CONSIDERED THE ACCEPTED AN ADMISSIBLE EVIDENCE IN THE COURTS.IT IS EXPECTED FROM THE ASSESSEES THA T THEY WOULD FILED TRUE AND ACCURATE PARTICULARS OF THEIR INCOME.THE ASSESSEE BEFORE US,NOT A SMALL TRA DER OF A REMOTE PLACE OF INDIA-IT IS A COMPANY THAT HAD FILED RETURN OF INCOME OF MORE THAN 50 LAK HS AND IS ASSISTED BY THE PROFESSIONALS.A HIGHER DEGREE OF RESPONSIBILITY IS EXPECTED FROM THE CORPO RATE ENTITIES. IN THE MATTER UNDER CONSIDERATION DETAILS FILED BY THE ASSESSEE WERE NOT TRUE AND SAME AMOUNTED TO FURNISHING OF INACCURATE PARTICULARS.THEREFORE,CONF IRMING THE ORDER OF THE FAA,WE DECIDED THE EFFECTIVE GROUND OF APPEAL AGAINST THE ASSESSEE-COM PANY. AS A RESULT,APPEAL FIL ED BY THE ASSESSEE STANDS DISMISSED. 1)2 '() + UK UKUK UK 3 + ) 45. ORDER PRONOUNCED IN THE OPEN COURT ON 2ND JULY,2014 . 0 + -.# 6 7' 2 TWYKBZ , 201 4 . + / 8 SD/- SD/- ( .. / I.P. BANSAL) ( ! ! ! ! / RAJENDRA) / JUDICIAL MEMBER /ACCOUNTANT MEMBER / MUMBAI, 7' /DATE: 02.07 . 2014. SK 0 0 0 0 + ++ + &)9 &)9 &)9 &)9 : 9#) : 9#) : 9#) : 9#) / COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE / $% 2. RESPONDENT / &'$% 3. THE CONCERNED CIT(A)/ ; < , 4. THE CONCERNED CIT / ; < 5. DR E BENCH, ITAT, MUMBAI / 9=/ &)' , . . . 6. GUARD FILE/ / 1 '9) '9) '9) '9) &) &)&) &) //TRUE COPY// 0' / BY ORDER, > / 4 DY./ASST. REGISTRAR , /ITAT, MUMBAI