The ACIT,Vapi Circle, Vapi V. Hotel Dan Pvt.Ltd., Vapi

ITA 3447/AHD/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 50950 (ITAT-AHMEDABAD)
• Duration Of Justice: 10 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-11-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 21-10-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 28-12-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: K N BHATT
• Keywords: Bogus purchase; Depreciation; Initiation of penalty proceedings; Wrong claim; Bad and doubtful debts
• Section: 271(1)(c); 143(3); 250; 27

Judgement Text

, , . .. . . .. . , , , , ! !! ! . .. .'# !'# '# !'# '# !'# '# !'# , $ $ $ $ % % % % IN THE INCOME TAX APPELLATE TRIBUNAL : B BENCH : AHMEDABAD BEFORE HONBLE SHRI D.K.TYAGI, J.M. & HON BLE SHRI A.MOHAN ALANKAMONY, A.M.) ITA NO.3447/AHD/2010 (ASSESSMENT YEAR:-2007-08) THE ASSISTANT COMMISSIONER OF INCOME- TAX, VAPI CIRCLE, VAPI V/S HOTEL DAN PRIVATE LIMITED 21, RCM MORARJI CIRCLE, GIDC, VAPI PAN: AA BCH 7284 H ( '( /APPELLANT) ( )'( /RESPONDENT) '( * + / APPELLANT BY :- SHRI SAMIR TEKRIWAL, SR. DR )'( * + / RESPONDENT BY:- SHRI K N BHATT, A.R. ,#- * .$ / DATE OF HEARING:- 21-10-2011 /'0 * .$ /DATE OF PRONOUNCEMENT:- 25-11-2011 1 1 1 1 / ORDER PER SHRI A. MOHAN ALANKAMONY, A.M. THIS APPEAL IS FILED BY THE REVENUE, AGGRIEVED BY T HE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS), AHMEDABAD IN APPEAL NO.CIT(A)/VLS/193/10-11 DATED 01.10.2010 FOR THE ASSESSMENT YEAR 2007-2008 PASSED UNDER SECTION 250 R.W.S. 271(1)(C) OF THE I.T. ACT, 1961. 2 DURING THE YEAR, THE ASSESSEE FILED ITS RETURN OF INCOME ON 07-11-2007 DECLARING NIL INCOME AFTER SET OFF OF BROUGHT FORWA RD LOSS OF RS.3,21,774/-. THE ASSESSMENT WAS COMPLETED U/S 143(3) OF THE ACT ON 21-12-2009, DETERMINING TOTAL INCOME AT RS.10,08,150/-. WHILE F INALIZING THE ASSESSMENT, AN ADDITION OF RS.10,45,349/- WAS MADE ON THE GROUN D THAT THE ASSESSEE HAD CLAIMED EXCESS DEPRECIATION TO THAT EXTENT. PENALTY PROCEEDINGS U/S 271(1)(C) WERE INITIATED FOR FURNISHING INACCURATE PARTICULAR S OF INCOME BY THE ASSESSEE. 2 ITA NO. 3447/AHD./2010 2.1 A SHOW CAUSE NOTICE U/S 274 READ WITH SECTION 2 71(1)(C) OF THE ACT WAS ISSUED ON 21-12-2009, CALLING FOR THE EXPLANATION O F THE ASSESSEE ON 22-01- 2010. ACCORDING TO THE AO, THE ASSESSEE DID NOT COM PLY WITH THIS NOTICE. THEREFORE, A FURTHER OPPORTUNITY WAS GRANTED TO THE ASSESSEE VIDE LETTER DATED 15-06-2010. IN RESPONSE, THE ASSESSEE SUBMITTED THA T THE DEPRECIATION WAS CLAIMED BY IT ON STRAIGHT LINE METHOD AND THE DEPAR TMENT HAD ALLOWED THE SAME ON WRITTEN DOWN METHOD AND HENCE THERE WAS NEI THER ANY CONCEALMENT NOR FURNISHING OF INACCURATE PARTICULARS OF INCOME ON THE PART OF THE ASSESSEE. HOWEVER, THE LD.AO DID NOT ACCEPT THE SUBMISSION / EXPLANATION OF THE ASSESSEE AND PROCEEDED TO LEVY PENALTY OF RS.3,51,8 64/- WITH THE FOLLOWING OBSERVATIONS:- THE EXPLANATION OF THE ASSESSEE HAS BEEN PERUSED AN D THE SAME IS NOT ACCEPTABLE. THE DEPRECIATION HAS TO BE CLAIMED AND ALLOWED AS P ER THE PROVISIONS OF SECTION 32(1) R. W. SECTION 43(6) OF THE I.T. ACT, 1961. TH E ASSESSEE HAS TO PREPARE TWO CHARTS FOR CLAIM OF DEPRECIATION I.E. ONE AS PER THE COMPA NIES ACT I.E. ON STRAIGHT LINE METHOD, WHICH IS TO BE SUBMITTED WITH THE ROC AND O NE CHART AS PER THE I.T. ACT, 1961, AND CLAIM OF WHICH CAN BE MADE WHILE DETERMIN ING THE TOTAL INCOME FOR THE YEAR UNDER CONSIDERATION. IN THE PRESENT CASE, THE ASSESSEE HAS CLAIMED THE DEPRECIATION ON STRAIGHT LINE METHOD, WHICH YIELDED EXTENT BENEFIT TO THE TUNE OF RS.10,45,349/- TO THE ASSESSEE. IN OTHER WORDS, THE ASSESSEE HAS CLAIMED EXCESSIVE DEDUCTION ON ACCOUNT OF DEPRECIATION AND THEREBY AV OIDED TO PAY LEGITIMATE TAX TO THE GOVERNMENT EXCHEQUER BY FURNISHING INACCURATE PARTI CULARS OF INCOME. THUS, IN THE YEAR UNDER CONSIDERATION, THE ASSESSEE TOOK CHANCE WITH THE DEPARTMENT BY CLAIMING UNLAWFUL DEDUCTION AND WHEN CAUGHT BY T HE DEPARTMENT, IT HAS SIMPLY SUBMITTED THAT THE DEPRECATION HAS BEEN CLAIMED ON SLM BASIS. IN VIEW OF THESE FACTS, IT IS CLEAR THAT THIS IS A CASE WHERE THE ASSESSEE HAS DELIBERATELY CLAIMED THE UNLAWFUL DEDUCTION BY FURNISHING INACCURATE PARTICULARS OF I NCOME, HAD THE ASSESSEE'S CASE NOT BEEN SELECTED FOR SCRUT INY, THE ASSESSEE COULD HAVE BEEN BENEFITED BY FILLING INACCURATE PARTICULARS OF INCO ME. THE ASSESSEE TOOK CHANCE WITH THE DEPARTMENT. HAD THE REVENUE NOT DETECTED THE IN ACCURATE PARTICULARS OF INCOME OF THE ASSESSEE, THE ASSESSEE COULD HAVE ENJOYED THE F RUITS OF FILING INACCURATE PARTICULARS OF INCOME AND WOULD HAVE CAUSED LOSS TO THE REVENUE. FROM THE DISCUSSION ABOVE, IT IS EVIDENTLY CLEAR TH AT THE ASSESSEE HAS NOT FURNISHED ANY EXPLANATION SUBSTANTIATING THE CIRCUMSTANCES AN D REASONS LEADING TO APPLICATION OF INCORRECT FACTS/LAW AS APPLIED BY THE ASSESSEE F OR COMPUTING LESS TOTAL INCOME BY WAY OF CLAIMING UNLAWFUL DEDUCTION AND THEREBY SUPP RESSING THE ACTUAL PROFITS FOR THE YEAR UNDER CONSIDERATION. THUS, FROM THE FACTS GIVE N ABOVE, IT IS CLEAR THAT THE 3 ITA NO. 3447/AHD./2010 ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF IN COME WITHIN THE MEANING OF SECTION 271(1)(C) OF THE I. T. ACT, 1961 AND THEREF ORE EXPLANATION 1 TO SECTION 271(1)(C) IS CLEARLY ATTRACTED. THUS, I AM OF THE O PINION AND HEREBY HOLD THAT THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF IN COME AND HENCE LIABLE FOR LEVYING PENALTY U/S. 271(1)(C) OF THE I. T. ACT, 1961. 3 THE ASSESSEE CARRIED THE MATTER BEFORE THE LEARNE D CIT(A). AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, THE LD . CIT(A) DELETED THE PENALTY WITH THE FOLLOWING OBSERVATIONS: 4 .2 SUBMISSION OF THE AR:- REFERRING TO THE OBSERVATION OF THE A.O. ON PAGE NO . 1 AND 2 OF THE ASSESSMENT ORDER, THE AR OF THE APPELLANT SUBMITTED THAT ONLY ISSUE UPON WHICH, THE PENALTY IS LEVIED UPON BY THE AO IS IN RESPECT OF CLAIM OF DEP RECIATION MADE BY THE APPELLANT. HE STATED THAT THE APPELLANT BEING A COMPANY PREPAR ED FINANCIAL STATEMENTS IN CONFORMITY WITH THE REQUIREMENTS OF THE COMPANIES A CT AND PLACED THE SAME BEFORE THE ANNUAL GENERAL MEETING OF THE COMPANY. THE SAID SET OF FINANCIAL STATEMENTS, WHICH WERE FURNISHED WITH THE REGISTRAR OF COMPANIE S, GUJARAT WERE FURNISHED ALONG WITH THE RETURN OF INCOME. HE FURTHER CONTENDED THA T IN THE CASE PENALTY U/S. 271(1)(C), THE A.O. TO SATISFY HIMSELF WITH THE FOL LOWING THREE ISSUES:- (1) THE EXPLANATION OFFERED BY THE ASSESSEE IS FOU ND TO BE FALSE. (2) THE ASSESSEE FAILS TO PROVE HIS BONAFIDES. (3) THE DISCLOSURE OF FACTS NECESSARY FOR ASSESSMEN T WERE NOT FURNISHED. FURNISHING THE AFORESAID THREE CONDITIONS, HE CONTE NDED THAT IN THE INSTANT CASE OF THE APPELLANT, THE APPELLANT ADMITTEDLY STA TED THAT THEY HAVE BEEN CLAIMING DEPRECIATION ON STRAIGHT LINE METHOD BEING APPROVED METHOD OF DEPRECIATION UNDER THE COMPANIES ACT, 1956.THESE FACTS WERE STATED AND DISCLOSED IN THE AUDITED FINANCIAL STATEMENTS AND THE COMPUTATION OF INCOME/ RETURN OF INCOME AND THEREFORE, ONE CANNOT SAY THAT THE EXPLANATION OF T HE APPELLANT IS FALSE ONE. HE FURTHER CONTENDED THAT EVEN THOUGH, THE BENEFITS OF THE ASSESSEE WERE VERY TRANSPARENT BECAUSE, THE CLAIM OF DEPRECIATION VIS- A-VIS FILING THE RETURN OF INCOME BEING THE LEGAL ISSUE / OBLIGATIONS PERFORMED BY TH E PROFESSIONALS / CHARTERED ACCOUNTANTS BEING THE EXPERTS IN THE FIELD OF PROFE SSION OF ACCOUNTANCY AND TAX LAWS. THUS, ON THE BASIS OF THEIR EXPERT SUM AND TH EY SHOULD NOT VIEW THE CLAIM OF DEPRECIATION A MALAFIDE INTENTION. HE ALSO SUBMITTE D THAT SINCE THE DEPRECIATION BEING AN ALLOWANCE GIVEN UNDER THE ACT, CLAIM OF AN EXCESSIVE DEPRECIATION MA}' OTHERWISE BE STATED THAT THE APPELLANT HAS DIFFERED HIS TAX LIABILITY BY CLAIMING EXCESSIVE DEPRECIATION. SUMMARIZING HIS SUBMISSION, THE A.R. OF THE APPELLANT STATED THAT SINCE THE APPELLANT HAS PAID THE TAXES ON THE ASSESSED INCOME, HE MAY NOT BE PENALIZED U/S. 271(1)(C) FOR WRONG CLAIM OF DEPRECI ATION AS:- 4 ITA NO. 3447/AHD./2010 A) THE APPELLANT MADE A WRONG CLAIM WHICH IS DISALLOWE D AND APPELLANT PAID THE DEMAND RAISED THROUGH THE ASSESSMENT ORDER. B) THE APPELLANT BEING IGNORANT OF THE ISSUES I.E. RAT ES OF DEPRECIATION UNDER THE INCOME-TAX LAW AND COMPANIES ACT, RELIED UPON T HE ADVISE OF THE CONSULTANT. C) THE FACTS OF WRONG CLAIM OF DEPRECIATION WERE DULY, FULLY AND TRULY DISCLOSED THROUGH THE AUDITED FINANCIAL STATEMENTS. D) THE APPELLANT ACTED WITH THE UTMOST BONAFIDES WHILE CLAIMING DEPRECIATION WHICH IS DISALLOWED. E) THE APPELLANT NOT DISPUTED WITH THE ASSESSMENT ORDE R WHEREBY HIS CLAIM OF DEPRECIATION IS DISALLOWED. FINALLY, QUOTING THE FOLLOWING DECISIONS, THE A.R. OF THE APPELLANT REQUESTED THIS OFFICE TO DELETE THE PENALTY LEVIED BY THE A.O . FOR DISALLOWANCE OF WRONG CLAIM OF DEPRECIATION MADE BY THE APPELLANT. 1. C.I.T. V/S. RELIANCE PETROCHEMICALS (P) LTD. (20 10) 189 TAXMAN 322 (SC). 2. MODEL FOOTWARE (P) LTD. V/S. ITO (2O10) 124 ITD 353 (DEL). 3. YOGESH R. DESAI V/S. ACIT(2OIO) 38 DTR 101 (MUM) 4. C.I.T. V/S. DEEPAKKUMAR (2010) 232 CTR 78 (P&H) 4.3 CONCLUSION:- I HAVE CONSIDERED THE OBSERVATIONS MADE BY THE A.O. IN THE PENALTY ORDER AS WELL AS THE CONTENTIONS RAISED BY THE A.R. OF THE APPELLANT IN THE WRITTEN SUBMISSION. I FOUND THAT THE ARGUMENTS ADVANCED BY THE A.R. OF THE APPE LLANT IS WORTH CONSIDERABLE, AS HE HAS RIGHTLY STATED THAT THE DEPRECIATION BEING AN A LLOWANCE GIVEN UNDER THE ACT, THE WRONG/ EXCESSIVE CLAIM OF DEPRECIATION WOULD DIFFER THE TAX LIABILITY. HE HAS RIGHTLY FURNISHED THE DECISIONS OF APEX COURTS, WHEREIN, TH E ISSUE OF DISALLOWANCE OF WRONG CLAIM OF DEPRECIATION VIS-A-VIS LEVY OF PENALTY U/S . 271(1)(C) OF THE ACT IS DECIDED IN FAVOUR OF THE APPELLANT. THEREFORE, THE PENALTY LEV IED U/S. 271(1)(C) IS DELETED. 4 DURING THE COURSE OF HEARING BEFORE THE TRIBUNAL, THE LD. D.R. SUPPORTED THE ORDER OF THE AUTHORITIES BELOW AND SUBMITTED TH AT THE LD.AO HAS RIGHTLY LEVIED THE PENALTY. IN SUPPORT, THE LEARNED D.R. RE LIED UPON THE FOLLOWING DECISIONS:- [1] CIT VS. ZOOM COMMUNICATION (P) LTD. [2010] 327 ITR 510 (DELHI) [2] A M SHAH & CO. VS. CIT [1999] 238 ITR 415 (GUJ ) 5 ITA NO. 3447/AHD./2010 [3] ITO VS. GEEP INDUSTRIAL SYNDICATE LTD. [1987] 23 ITD (ALL) 448 [4] CIT VS. LALCHAND TIRATH RAM [1997] 225 ITR 675 (P&H) [5] PSB INDUSTRIES INDIA PVT. LTD. VS. CIT [ITA NO .792 OF 2011] [6] GUJARAT STATE FINANCIAL SERVICES LTD. VS. ACIT [2010] 39 SOT 570 (AHD) 5 ON THE OTHER HAND, THE LD. A.R. SUPPORTED THE ORD ER OF THE LD. CIT(A). THE LD. AR ALSO RELIED UPON THE DECISIONS AS HAVE B EEN REFERRED TO BEFORE THE LD.CIT(A). THE LD.AR SUBMITTED THAT THE ASSESSEE HA D SUBMITTED THE TAX AUDIT REPORT BEFORE THE AO AND THEREFORE THERE WAS NO CON CEALMENT OF ANY FACTS BECAUSE THE DETAILS OF THE DEPRECIATION WERE BEFORE THE REVENUE. IT WAS ONLY AN INADVERTENT MISTAKE ON THE PART OF THE ASSESSEE S AUDITOR TO ADAPT THE DEPRECIATION COMPUTED BY STRAIGHT LINE METHOD IN TH E INCOME TAX COMPUTATION STATEMENT. HOWEVER ALL FACTS WERE BEFORE THE REVENU E AND WHEN THE MISTAKE WAS POINTED OUT THE ASSESSEE HAD READILY ACCEPTED T HE MISTAKE AND PAID TAX WITH INTEREST ACCORDINGLY. THE LD AR ARGUED THAT A BONAFIDE ERROR IN COMPUTATION OF TAX CANNOT BE CONSTRUED TO BE CONCEA LMENT OF INCOME AND PRAYED THAT THE ORDER OF THE LD.CIT(A) MAY BE CONFI RMED. 6 WE HAVE DULY CONSIDERED THE RIVAL SUBMISSIONS AND ALSO PERUSED THE MATERIALS ON RECORD AS WELL AS VARIOUS DECISIONS REFERRED TO BY BOTH THE PARTIES. WE HAVE ALSO GONE THROUGH THE FOLLOWING JUDICIAL PRONOUNCEM ENTS: CIT VS. ZOOM COMMUNICATION (P) LTD. [2010] 327 ITR 510 (DELHI) THE TRIBUNAL ERRED IN LAW IN DELETING THE PENALTY U NDER S. 271(1)(C) IN RESPECT OF CLAIM ON ACCOUNT OF PAYMENT OF INCOME-TAX AND CAPIT AL EXPENDITURE WRITTEN OFF IN THE P&L A/C OF THE ASSESSEE, THE CLAIM BESIDES BEING IN CORRECT IN LAW, WAS MALA FIDE. A M SHAH & CO. VS. CIT [1999] 238 ITR 415 (GUJ):- PENALTY UNDER S. 271(L)(C)CONCEALMENTDISCREPANCIE S IN BOOKS OF ACCOUNTIF THE DISCLOSURE OF 'PARTICULARS OF INCOME IS INCORRECT, SUCH A DEFAULT ATTRACTS PENALTY THEREFORE, ANY CONCEALMENT OR INACCURACY IN THE PAR TICULARS OF INCOME IN THE RETURN OCCURRING AT ANY STAGE UPTO AND INCLUSIVE OF THE UL TIMATE STAGE OF WORKING OUT OF TOTAL INCOME WOULD ATTRACT THE PENALTY PROVISION OF S. 27 1(1)(C) - WORDS 'INACCURATE PARTICULARS' WOULD COVER FALSIFY IN FINAL FIGURES A S ALSO THE_ CONSTITUENT ELEMENTS 6 ITA NO. 3447/AHD./2010 CERTAIN ITEMS NOT SHOWN IN THE CLOSING STOCKPROFIT S, THEREFORE, SUPPRESSED TO THAT EXTENT INCOME NOT SHOWN BY THIS PROCESS OBVIOUSLY WAS CONCEALMENT OF PARTICULARS OF INCOME-PENALTY IMPOSED ON THIS VERY BASIS JUSTIF IEDFURTHER, ASSESSEE HAD RESORTED TO RECORDING BOGUS PURCHASES AND NON-RECOR DING OF CERTAIN ITEMS EITHER IN SALES OR STOCKSIT CANNOT BE SAID THAT ASSESSMENT W AS MADE ON ESTIMATE BASIS AND THERE WAS NOTHING FALSE OR INCORRECTLEVY OF PENALT Y JUSTIFIED CONCLUSION ANY CONCEALMENT OR INACCURACY IN THE PARTICULARS O F INCOME IN THE RETURN OCCURRING AT ANY STAGE UPTO AND INCLUSIVE OF THE ULTIMATE STA GE OF WORKING OUT OF TOTAL INCOME WOULD ATTRACT THE PENALTY PROVISION OF S. 271(1)(C) ; AS THE ASSESSEE HAD CLEARLY RESORTED TO RECORDING BOGUS PURCHASES AND NON-RECOR DING OF CERTAIN ITEMS EITHER IN SALES OR STOCKS THERE WAS CONCEALMENT OF PARTICULAR S OF INCOME WHICH ATTRACTED PENALTY UNDER S. 271(1)(C). ITO VS. GEEP INDUSTRIAL SYNDICATE LTD. [1987] 23 IT D (ALL) 448 : THE ASSESSEE-COMPANY HAS BEEN IN EXISTENCE FOR A LO NG TIME. IN THE PAST, IT HAD CLAIMED EXTRA SHIFT ALLOWANCE ON THE CORRECT BASIS. ONE FAILS TO COMPREHEND THE PROVOCATION FOR ALTERING THE BASIS FOR THE CLAIM OF EXTRA SHIFT ALLOWANCE. IT IS DIFFICULT TO APPRECIATE/THE CONTENTION OF THE ASSESSEE THAT T HE MISTAKE IN THE CLAIM OF THE EXTRA SHIFT ALLOWANCE FOR THE YEAR UNDER CONSIDERATION WA S ONLY AN INADVERTENT MISTAKE. THE CHANCES OF MAKING A MISTAKE OF THE TYPE WHICH H AS BEEN MADE BV THE ASSESSEE ARE PRACTICALLY NIL. THE WRONG CLAIM OF DEPRECIATIO N CANNOT BE HENCE ATTRIBUTED TO INADVERTENCE, PARTICULARLY KEEPING IN VIEW THE FACT THAT IN THE PAST DEPRECIATION HAD BEEN CLAIMED CORRECTLY. BYE AIMING DEPRECIATION WRO NGLY THE ASSESSEE CONCEALED THE PARTICULARS OF ITS INCOME OR FURNISHED INACCURATE P ARTICULARS OF SUCH INCOME AND THUS HAS MADE ITSELF LIABLE TO THE IMPOSITION OF PENALTY . HENCE THE ASSESSEE BY MAKING A WRONG CLAIM OF DEPRECIATION CONCEALED THE PARTICULA RS OF ITS INCOME OR FURNISHED INACCURATE PARTICULARS OF SUCH INCOME. AS FAR AS OTHER ADDITIONS ARE CONCERNED, THEY DID NOT GIVE RISE TO ANY CONCEALMENT. WHETHER THERE HAS BEEN CONCEALMENT OF INCOME OR NOT WILL NOT DEPEND ON THERE BEING POSITIVE TOTAL INCOME COMPUTED IN ASSES SMENT. IT WILL BE ERRONEOUS TO THINK THAT UNLESS THERE IS POSITIVE TOTAL INCOME DE TERMINED ON ASSESSMENT, THERE CANNOT BE CONCEALMENT OF INCOME. THE WORD 'INCOME' HAS BEEN USED IN CL. (C) IN THE WIDE SENSE AND IT WILL BE WRONG TO UNDERSTAND BY IT ONLY THE ASSESSED TOTAL INCOME. THE WORD 'INCOME' IN CL. (C) HAS A CONNOTATION DIFF ERENT FROM THE CONNOTATION OF 'ASSESSED TOTAL INCOME'. THE VIEW CANVASSED BY THE ASSESSEE IS NOT WARRANTED BY THE LANGUAGE OF THE SECTION AND IF THE INTERPRETATION S OUGHT TO BE GIVEN BY THE ?ASSESSEE WERE TO BE ACCEPTED, THE VERY OBJECT AND PURPOSE OF THE SECTION WOULD HE DEFEATED. - CIT VS. INDIA SEA FOODS (1976) 105 ITR 708 (KER) RE LIED ON. CLAUSE (A) OF EXPLN. 4 PROVIDES THAT IN CERTAIN CAS ES, THE AMOUNT OF TAX SOUGHT TO BE EVADED WOULD BE THE TAX THAT WOULD BE CHARGEA BLE ON THE INCOME IN RESPECT OF WHICH PARTICULARS HAVE BEEN CONCEALED. HENCE, NO MO RE THE QUANTIFICATION OF THE 7 ITA NO. 3447/AHD./2010 PENALTY IS DEPENDENT ONLY UPON THE TAX PAYABLE BY T HE ASSESSEE ON ASSESSMENT. ON ACCOUNT OF THIS EXPLANATION, IT IS OBVIOUS THAT IT IS NO MORE NECESSARY THAT THERE MUST BE TAX PAYABLE ON ASSESSMENT IN ORDER TO GIVE RISE TO THE PENALTY AS WAS THE CASE PREVIOUSLY. HENCE, IT WILL BE NO MORE VALID TO SAY THAT UNLESS THERE WAS TAX PAYABLE ON ASSESSMENT, NO PENALTY COULD BE LEVIED. THE USE OF THE WORDS 'IN ADDITION TO ANY TAX PAYABLE BY HIM' IN CL. (III) CANNOT BE INTERPRE TED TO MEAN THAT THERE MUST BE TAX PAYABLE ON ASSESSMENT BEFORE PENALTY CAN BE LEVIED. THESE WORDS ONLY MEAN THAT PENALTY WILL BE IN ADDITION TO TAX, BUT THEY DO NOT MEAN THAT THERE BEING TAX IS THE NECESSARY CONDITION FOR THE LEVY OF PENALTY.ADDL. C1T VS. MURUGAN TIMBER DEPOT (1978) 113 ITR 99 (MAD) DISTINGUISHED. DECISION DT. 30TH JULY, 1983 OF THE CHANDIGARH BENCH OF THE TRIBUNAL IN THE CASE OF ITO VS. SUDHA PHARMACEUTICALS (P) LTD. (IT APPEAL NO. 631 (CHD) OF 1981) DISSENTED FR OM. CONCLUSION ASSESSEE HAVING OFFERED SATISFACTORY EXPLANATIONS FOR NOT MAKING DISALLOWANCE UNDER S. 40A(8) AND IN RESPECT OF ENTERTAINMENT EXP ENDITURE AND TRAVELLING EXPENSES WHILE RETURNING ITS INCOME, IT CANNOT BE SAID THAT IT HAD CONCEALED THE PARTICULARS OF ITS INCOME BUT WRONG CLAIM FOR DEPRECIATION CANNOT BE ATTRIBUTED TO INADVERTENCE AND AMOUNTED TO CONCEALMENT OF PARTICULARS OF INCOME AT TRACTING PENALTY. CIT VS. LALCHAND TIRATH RAM [1997] 225 ITR 675 (P&H ): PENALTY UNDER S. 271(1)(C), EXPLN.SCOPE AND APPLIC ABILITY OF CL. (B) OF EXPLN. 1 TO S. 271 (1)(C)UNDER CL. (B) OF EXPLN. TO S. 271(1)(C) AS SUBSTITUTED BY THE TAXATION LAWS (AMENDMENT) ACT, 1975, W.E.F. 1ST APRIL, 1976, THE BURDEN IS ON THE ASSESSEE AND MERE OFFERING OF AN EXPLANATION WOULD NOT ABSOL VE HIM FROM LIABILITY TO PENALTY BUT HE HAS ALSO TO SUBSTANTIATE ITEXCESS STOCK OF GRAIN FOUND IN THE WAREHOUSE THAN SHOWN IN THE BOOKS OF ASSESSEEASSESSEE EXPLAINING THAT THE EXCESS STOCK BELONGED TO ONE SCONFIRMATORY LETTER OF S AS ALSO S HIMSELF PRODUCED FOR EXAMINATION AT THE FIRST APPELLATE STAGES FOUND BASICALLY TO BE A TRU CK DRIVER AND NO MATERIAL WAS PRODUCED TO SHOW THAT S POSSESSED AGRICULTURAL LAND AND CULTIVATED ITNO EVIDENCE TO SHOW THAT S HAD BROUGHT THE STOCK FROM THE FIELD AND DELIVERED THE SAME TO ASSESSEERECORD OF THE WAREHOUSE ALSO DID NOT SHOW THAT THE EXCESS STOCK BELONGED TO SEXPLANATION OFFERED BY ASSESSEE HAVING NOT BEE N SUBSTANTIATED, PENALTY UNDER S. 271(1)(C) R/W EXPLN. 1(B) WAS RIGHTLY LEVIED BY AO CONCLUSION EXPLANATION OFFERED BY ASSESSEE HAVING NOT BEEN S UBSTANTIATED, PENALTY UNDER S. 271(1)(C) R/W EXPLN. 1(B) WAS RIGH TLY LEVIED BY AO. GUJARAT STATE FINANCIAL SERVICES LTD. VS. ACIT [201 0] 39 SOT 570 (AHD): THE ASSESSEE CLAIMED DEDUCTION FOR PROVISION FOR BA D AND DOUBTFUL DEBTS AND PROVISION FOR DIMINUTION IN VALUE OF INVESTMENTS IN VIOLATION OF PROVISIONS OF THE ACT AND NOT AN IOTA OF EVIDENCE WAS PLACED IN RELATION TO THE BONA FIDE OF THE CLAIM. AS IS APPARENT FROM THE FINDINGS OF THE CIT(A), THE CLAIM MADE IN THE RETURN WAS NOT 8 ITA NO. 3447/AHD./2010 SUPPORTED EITHER ON FACTS OR IN LAW. THUS, THE ASSE SSEE WHILE CLAIMING DEDUCTION OF THE AFORESAID PROVISIONS FURNISHED INACCURATE PARTI CULARS.CIT VS. RELIANCE PETROPRODUCTS (P) LTD. (2010) 230 CTR (SC) 320 : (3 6 DTR (SC) 449 : (2010) 322 ITR 158 (SC) DISTINGUISHED. CONCLUSION : ASSESSEE WAS LIABLE TO PENALTY UNDER S. 271(1)(C) I N RESPECT OF DISALLOWANCE OF CLAIM FOR DEDUCTION OF PROVISION FOR BAD AND DOUBTFUL DEB TS AND PROVISION FOR DIMINUTION IN THE VALE OF INVESTMENT AS THERE WAS NOTHING TO SUGG EST THAT THE CLAIM REGARDING DEDUCTION FOR EITHER PROVISION FOR BAD AND DOUBTFUL DEBTS OR DIMINUTION IN VALUE OF INVESTMENTS WAS BONA FIDE OR SUPPORTED BY ANY PROVI SIONS UNDER THE ACT. WHERE THE ASSESSEE FAILED TO SUBSTANTIATE THEIR EXPLANATION T HAT THEY WERE NOT AWARE OF PROVISIONS OF EXPLANATION INTRODUCED BY THE FINANCE ACT, 2001 W.E.F. 1ST APRIL, 1989 OR THAT THE RBI GUIDELINES OVERRIDE THE PROVISIONS OF THE ACT OR THAT THEIR EXPLANATION WAS BONA FIDE, CIT(A) WAS JUSTIFIED IN UPHOLDING TH E LEVY OF PENALTY ON ACCOUNT OF FURNISHING OF INACCURATE PARTICULARS OF INCOME IN R ELATION TO PROVISION FOR BAD AND DOUBTFUL DEBTS AND PROVISION FOR DIMINUTION IN THE VALUE OF INVESTMENTS. PENALTY UNDER S. 271(1)(C)VALIDITYRECORDING OF SA TISFACTION BY AO PENALTY UNDER S. 271(1)(C) IS LEVIABLE IF THE AO IS SATISFIED IN THE COURSE OF ANY PROCEEDINGS UNDER THIS ACT THAT ANY PERSON HAS CONC EALED THE PARTICULARS OF HIS INCOME OR FURNISHED INACCURATE PARTICULARS OF SUCH INCOMESUB-S. (IB) INSERTED IN S. 271 BY FINANCE ACT, 2008 PURPORTS TO CREATE A FICTI ON BY WHICH SATISFACTION OF THE AO IS DEEMED TO HAVE BEEN RECORDED IN CASES WHERE AN A DDITION OR DISALLOWANCE IS MADE BY THE AO AND A DIRECTION FOR INITIATION OF PENALTY PROCEEDINGS IS ISSUEDSAID PROVISION IS MADE EFFECTIVE RETROSPECTIVELY W.E.F. 1ST APRIL, 1989AO HAD THEREFORE VALIDLY ASSUMED JURISDICTION TO LEVY THE PENALTY HELD : IF THE DISCLOSURE OF FACTS IS INCORRECT OR FALSE T O THE KNOWLEDGE OF THE ASSESSEE AND IT IS ESTABLISHED, THEN SUCH DISCLOSURE CANNOT TAKE IT OUT FROM THE PURVIEW OF THE ACT OF CONCEALMENT OF PARTICULARS OR FURNISHING INACCURATE PARTICULARS THEREOF FOR THE PURPOSE OF LEVY OF PENALTY. THE PENALTY UNDER S. 27 1(1)(C) IS LEVIABLE IF THE AO IS SATISFIED IN THE COURSE OF ANY PROCEEDINGS UNDER TH IS ACT THAT ANY PERSON HAS CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHE D INACCURATE PARTICULARS OF SUCH INCOME. THE DECISIONS RELIED UPON BY THE ASSESSEE O N THE ISSUE OF RECORDING OF SATISFACTION BY THE AO BEFORE INITIATING PENALTY PR OCEEDINGS UNDER S. 271(1)(C) ARE NO LONGER RELEVANT IN VIEW OF SUB-S. (IB) INSERTED IN S. 271 BY FINANCE ACT, 2008. THE SAID PROVISION PURPORTS TO CREATE A FICTION BY WHIC H SATISFACTION OF THE AO IS DEEMED TO HAVE BEEN RECORDED IN CASES WHERE AN ADDITION OR DISALLOWANCE IS MADE BY THE AO AND A DIRECTION FOR INITIATION OF PENALTY PROCEEDIN GS IS ISSUED. THE SAID PROVISION IS MADE EFFECTIVE RETROSPECTIVELY W.E.F. 1ST APRIL, 19 89. THE AUTHORIZED REPRESENTATIVE ON BEHALF OF THE ASSESSEE HAS NOT EXPLAINED AS TO H OW THE DECISIONS RELIED UPON BY HIM REGARDING RECORDING OF SATISFACTION WERE RELEVA NT IN VIEW OF THE SAID PROVISIONS OF S. 271(IB). 9 ITA NO. 3447/AHD./2010 CONCLUSION : IN VIEW OF INSERTION OF SUB-S. (IB) INSERTED IN S. 271 BY FINANCE ACT, 2008 A FICTION IS CREATED BY WHICH SATISFACTION OF THE AO IS DEEMED T O HAVE BEEN RECORDED IN CASES WHERE AN ADDITION OR DISALLOWANCE IS MADE BY THE AO AND A DIRECTION FOR INITIATION OF PENALTY PROCEEDINGS IS ISSUED; SAID PROVISION IS MA DE EFFECTIVE RETROSPECTIVELY W.E.F. 1ST APRIL, 1989 HENCE THE AO HAD VALIDLY ASSUMED JU RISDICTION TO LEVY THE PENALTY . 6.1 ON PERUSING THE CASE REFERRED BY THE REVENUE IT IS APPARENT THAT THEY ARE DISTINGUISHABLE FROM THE FACTS OF THE CASE BEFO RE US. IN THE CASE OF CIT V/S ZOOM COMMUNICATIONS (P)LTD.( SUPRA ), IT WAS HELD THAT THE CLAIM OF THE ASSESSEE BESIDES BEING INCORRECT IN LAW, WAS MALAFI DE. IN THE CASE A. M SHAH & CO. VS. CIT. SUPRA IT WAS HELD THAT THE ASSESSEE HAD CLEARLY RESORTED TO RECORDING BOGUS PURCHASES AND NON RECORDING OF CERT AIN ITEMS EITHER IN SALES OR STOCKS AND THEREFORE PENALTY WAS LEVIED. IN THE CASE, ITO VS. GEEP INDUSTRIAL SYNDICATE LTD., THE ASSESSEE HAD CLAIMED EXTRA SHIFT ALLOWANCE BY ALTERING THE BASIS OF THE CLAIM ADOPTED BY THE ASSE SSEE IN THE PAST WHICH COULD NOT BE COMPREHENDED PARTICULARLY KEEPING IN V IEW OF THE FACT THAT IN THE PAST DEPRECIATION HAD BE CLAIMED CORRECTIVELY. IN THE CASE CIT VS. LALCHAND TIRATH RAM, THE ASSESSEE HAD NOT ADDUCED S UFFICIENT EVIDENCE TO PROVE THAT THE EXCESS STOCK DID NOT BELONG TO HIM. AND FINALLY IN THE CASE, GUJARAT STATE FINANCIAL SERVICES LTD. VS. ACIT WAS NOT WITH RESPECT TO THE FACTS THAT OF THE ASSESSEE. THE ASSESSEE HAD MAINLY RELIED ON THE DECISION OF THE CASE C.I.T. V/S. RELIANCE PETROCHEMICALS (P) LT D. (2010) 322 ITR 158 (SC) WHEREIN IT WAS HELD BY THE HON APPEX COURT THAT A MERE MAKIN G OF A CLAIM WHICH IS NOT SUSTAINABLE IN LAW, BE ITSELF, WILL NOT AMOUNT TO FURNISHING IN ACCURATE PARTICULARS REGARDING THE INCOME OF THE ASSESSEE. SUCH A CLAIM MADE IN THE RETURN CANNO T AMOUNT TO FURNISHING INACCURATE PARTICULARS. IN THE CASE BEFORE US IT IS APPARENT THAT THE ASSESSEE HAD NOT CONCEALED ANY INFORMATION BEFORE THE REVENUE. THE AUDITOR OF THE ASSESSEE HAD PICKED UP A WRONG FIGURE OF DEPRECIATION I.E, THE DEPRECIATION WORKED OUT IN ACCORDANCE WITH COMPANY LAW IN THE COMPUTATION STATEMENT FOR THE PURPOSE OF INCOME TAX . THIS IS A HUMAN ERROR COMMITTED BY THE AUDITOR OF THE COMPANY ON WHICH THE ASSESSEE HA D NO CONTROL. THE ASSESSEE HAD NOT CONCEALED ANY PARTICULARS BUT ON THE CONTRARY READI LY ACCEPTED THE ERROR AND PAID TAX 10 ITA NO. 3447/AHD./2010 ACCORDINGLY. BOTH, THE COMPUTATION OF DEPRECIATION UNDER INCOME TAX ACT AND COMPANIES ACT, WAS BEFORE THE AO AND THE SAME WAS FURNISHED B Y THE ASSESSEE. CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE CONSID ERED OPINION THAT THIS IS NOT A FIT CASE FOR LEVY OF PENALTY IN THE LIGHT OF THE DECISION RENDER ED BY THE HONBLE APPEX COURT RELIED UPON BY THE ASSESSEE ( SUPRA ). THEREFORE WE HEREBY CONFIRM THE ORDER OF THE LD. CIT(A). 7. IN THE RESULT THE APPEAL OF THE REVENUE IS DISMI SSED. 2 1 * /'0 3#!4 25 / 11 /2011 ' 5 * - 6 SD/- SD/- (D.K.TYAGI) (A.MOHAN ALANKAMONY) JUDICIAL MEMBER ACCOUNTANT M EMBER DATED : 25/11/2011 1 1 1 1 * ** * ). ).). ).7 7 7 7 870.4 870.4 870.4 870.4- -- - 1. '( 2. )'( 3. !! . ,= 4. ,=- - 5. 7@ ).# , , 6 6. B2 1 , C/ !E , 6 TALUKDAR/ SR. P.S.