CitiFinancial Consumer Finance India Ltd., New Delhi V. DCIT, New Delhi

ITA 3628/DEL/2013

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 7362 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 4 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-10-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 01-10-2014
• Assessment Year: 1998-1999
• Appeal Filed On: 06-06-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PARWINDER KAUR
• Keywords: Depreciation; Question of law; Wrong claim; Capital receipt; Revised return; Revenue expenditure; Capital expenditure
• Section: 143(3); 139(5); 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH B, NEW DELHI BEFORE SHRI S.V. MEHROTRA, ACCOUNTANT MEMBER & SHRI H.S. SIDHU, JUDICIAL MEMBER ITA NO. 3628/DEL/2013 ASSESSMENT YEAR: 1998-99 M/S CITIFINANCIAL CONSUMER FINANCE INDIA LTD. VS. DCIT, 3, LOCAL SHOPPING CENTRE, CIRCLE 3(1), PUSHP VIHAR, NEW DELHI. NEW DELHI. AABCA3223B (APPELLANT) (RESPONDENT) APPELLANT BY : SH. C.S. AGRAWAL, SR. ADV., SH. RAVI PRATAP MALL, ADV. RESPONDENT BY : SMT. PARWINDER KAUR, SR. DR ORDER PER H.S. SIDHU, J.M. THE ASSESSEE HAS FILED THE PRESENT APPEAL AGAINST THE IMPUGNED ORDER DATED 26.03.2013 PASSED BY THE COMMISSIONER O F INCOME TAX (APPEALS)-X, NEW DELHI FOR A.Y. 1998-99. 2. THE ASSESSING OFFICER COMPLETED THE ASSESSMENT U /S 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER CALLED THE ACT) O N 28/02/2000, WHEREIN THE LOSS OF THE ASSESSEE COMPANY WAS COMPUTED AT RS . 2,34,24,580/- AS AGAINST THE RETURNED LOSS OF RS. 3,82,00,780/-. WHI LE COMPLETING THE ASSESSMENT THE AO MADE AN ADDITION AMOUNTING TO RS. 1,11,70,464/- ON THE GROUND THAT THE SAID EXPENDITURE WERE INCURRED PRIOR TO SETTING UP OF THE BUSINESS AND ARE IN NATURE OF PRE-OPERATIVE EXP ENSES. THE AO INITIATED PENALTY PROCEEDING U/S 271(1)(C) OF THE A CT ON THIS ADDITION. ITA NO. 3628/D/2013 M/S CITI FINANCIAL CONSUMER I NDIA LTD. 2 3. AGAINST THE SAID ORDER OF AO, THE ASSESSEE FILED AN APPEAL BEFORE THE LD. FIRST APPELLATE AUTHORITY WHO VIDE ORDER DA TED 22/03/2004 UPHOLD THE ADDITION MADE BY THE AO AND DISMISSED THE APPEA L FILED BY THE ASSESSEE. THE ASSESSEE FILED THE SECOND APPEAL BEF ORE THE ITAT AGAINST THE ORDER DATED 22/03/2004 PASSED BY THE LD. FIRST APPELLATE AUTHORITY AND THE ITAT DISMISSED THE APPEAL FILED BY THE ASSESSEE VIDE ITS ORDER DATED 31/07/2009. 4. THE AO INITIATED THE PENALTY PROCEEDINGS U/S 271 (1)(C) OF THE ACT IN THE CASE OF ASSESSEE AND FIXED THE CASE OF ASSES SEE FOR 26/04/2010 AND ON THE REQUEST OF ASSESSEE THE CASE WAS ADJOURN ED FOR 28/04/2010. THE ASSESSEE FILED WRITTEN SUBMISSION AND STATED TH AT ALL THE FACTS RELEVANT TO THE RETURN OF INCOME WERE DULY DISCLOSE D BY THE ASSESSEE AND THERE WAS NO MALAFIDE INTENTION ON PART OF THE ASSE SSEE AND UNDER THESE CIRCUMSTANCES THERE CANNOT BE ANY ALLEGATION FOR CO NCEALMENT OF INCOME OR FURNISHING OF ANY INACCURATE PARTICULARS THEREOF . 5. AFTER EXPLAINING THE FACTS OF THE CASE AND THE R ELEVANT PROVISIONS OF LAW AS WELL AS THE CASE LAW THE AO REJECTED THE EXP LANATION GIVEN BY THE ASSESSEE AND FINALLY IMPOSED THE PENALTY OF RS. 39, 09,662/- U/S 271(1)(C) OF THE ACT FOR FURNISHING OF INACCURATE PARTICULARS OF ITS INCOME VIDE ORDER DATED 28/04/2010 PASSED U/S 271(1)(C) OF THE I.T. A CT. 6. AGGRIEVED BY THE ORDER DATED 28/04/2010 THE ASSE SSEE FILED AN APPEAL BEFORE THE LD. FIRST APPELLATE AUTHORITY WHO VIDE IMPUGNED ORDER DATED 26/03/2013 DISMISSED THE APPEAL FILED BY THE ASSESSEE BY UPHOLDING THE PENALTY IN DISPUTE. NOW THE ASSESSEE HAS FILED THE PRESENT APPEAL AGAINST THE IMPUGNED ORDER DATED 26/03/2013 PASSED BY THE LD. FIRST APPELLATE AUTHORITY. 7. LD. COUNSEL FOR THE ASSESSEE FILED HIS WRITTEN S UBMISSION CONTAINING PAGE 1 TO 22 AS WELL AS SNAP SHOT DATED 01/10/2014 IN WHICH ITA NO. 3628/D/2013 M/S CITI FINANCIAL CONSUMER I NDIA LTD. 3 HE HAS NARRATED THE HISTORICAL BACKGROUND OF THE AS SESSEE AND HIS ARGUMENT SUPPORTED BY THE RELEVANT PROVISION OF LAW AS WELL AS MANY DECISIONS RENDERED BY THE HONBLE VARIOUS HIGH COUR TS AND THE HONBLE SUPREME COURT OF INDIA. HE HAS ALSO FILED TWO PAPE R BOOK IN WHICH HE HAS ATTACHED VARIOUS DOCUMENTARY EVIDENCE AS WELL A S THE CASE LAWS SUPPORTING THE CLAIM OF ASSESSEE AND HE REQUESTED T HAT THE PENALTY IN DISPUTE MAY BE DELETED. 7.1 HE ARGUED THAT IMPOSITION OF PENALTY IN DISPUTE IS WITHOUT JURISDICTION IN ABSENCE OF ANY SATISFACTION HAVING BEEN RECORDED BY THE AO OF THE ASSESSEE HAVING FURNISHED ANY INACCURATE PARTICULARS OF INCOME, AS IT IS EVIDENT FROM THE ORDER OF ASSESSME NT WHEN HE MADE A DISALLOWANCE OF THE EXPENDITURE INCURRED OF RS. 1,1 1,70,464/- ON THE GROUND THAT SUCH AN EXPENDITURE HAD BEEN INCURRED P RIOR TO COMMENCEMENT OF BUSINESS AND WAS THUS NOT AN ALLOWA BLE DEDUCTION. THOUGH HE AT THE END OF THE ORDER OF ASSESSMENT MER ELY STATED THAT PENALTY PROCEEDING U/S 271(1)(C) HAVE BEEN INITIATE D SEPARATELY. HE FURTHER STATED THAT THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF MS. MADHUSHREE GUPTA VS. UNION OF INDIA REPORTED IN 317 ITR 107 AT PAGE 185 HAS HELD THAT THERE IS NO CHANGE OF LAW WHEN IT HAD HELD THAT THE AO HAVE TO ARRIVE AT A PRIMA FACIE SATISFACTION DURING THE COURSE OF PROCEEDINGS WITH REGARD TO THE ASSESSEE HAVING CONC EALED PARTICULARS OF INCOME OR FURNISHED INACCURATE PARTICULARS BEFORE H E INITIATED THE PROCEEDINGS. HE DRAW OUR ATTENTION TOWARDS PARA 4 OF THE ASSESSMENT ORDER AND STATED THAT AO HAS NOT EITHER REACHED OR RECORDED ANY SUCH FINDING. THEREFORE, THE IMPOSITION OF PENALTY IN D ISPUTE IS WITHOUT JURISDICTION AND DESERVE TO BE CANCELLED ON THIS GR OUND ONLY. IN SUPPORT OF THIS CONTENTION HE ALSO CITE THE DECISION OF HONBL E KARNATAKA HIGH COURT IN THE CASE OF CIT VS. MANJUNATHA COTTON & GINNING FACTORY REPORTED IN ITA NO. 3628/D/2013 M/S CITI FINANCIAL CONSUMER I NDIA LTD. 4 359 ITR 565, CIT VS. AUTO LAMPS LTD., REPORTED IN 2 78 ITR 32 (DEL.)., CIT VS. MWP LTD. 264 CTR 502 (KARNATAKA). 7.2 HE HAS ALSO ARGUED THE CASE OF ASSESSEE ON MERI T AND STATED THAT THE AO HAS IMPOSED THE PENALTY IN DISPUTE IN RESPEC T OF AN EXPENDITURE INCURRED OF RS. 1,11,70,464/- WHICH HAD BEEN UPHELD BY THE LD. FIRST APPELLATE AUTHORITY. HE FURTHER STATED THAT THE AO IN HIS ORDER HAS HELD THAT THE ASSESSEE HAS NOT FURNISHED INACCURATE PART ICULARS OF ITS INCOME, WHEREAS THE LD. CIT(A) HAS HELD AT PAGE 13 OF HIS O RDER THAT IN THE PRESENT CASE, THE ASSESSEE HAS FURNISHED INACCURATE PARTICU LARS OF INCOME THAT, IT HAD PROVIDED SELF CONTRADICTORY EXPLANATION IN ITS NOTES TO ACCOUNTS BY CLAIMING THAT THE PROFIT AND LOSS ACCOUNT AND BUSIN ESS ACTIVITY PERTAINED TO THE PERIOD 25/09/1997 TO 31/03/1998 AND ON THE OTH ER HAND ALSO CLAIMED EXPENSES PRIOR TO THIS PERIOD. THE AFORESAID OBSER VATION, IT APPEARS HAVE BEEN MADE ON THE BASIS OF PARA 2 OF SIGNIFICANT ACC OUNTING POLICY AND NOT AS OBSERVED BY HIM AS STATED ABOVE. HE ALSO DRAW O UR ATTENTION TOWARDS PARA 2 & 3 AT PAGE 14 OF ASSESSEES PAPER BOOK AND HE STATED THAT LD. FIRST APPELLATE AUTHORITY WENT WRONG WHEN HE MISREA D THE NOTES AND THAT TOO WHEN HE READ THEM PARTIALLY, THOUGH IT IS TRUE THAT THE FIGURES IN THE PROFIT AND LOSS ACCOUNT REPRESENTS FIGURES OF ACCRU AL OF INCOME AND EXPENDITURE FROM 25.09.1997 WHEN THE BUSINESS OF TH E ASSESSEE COMMENCED. HE ALSO DRAW OUR ATTENTION TOWARDS PAGE 6 OF ASSESSEES PAPER BOOK. 8. LD. COUNSEL FOR THE ASSESSEE ALSO SUBMITTED THAT EXPENDITURE INCURRED OF RS. 1,11,70,464/- HAD BEEN INCURRED BY THE ASSESSEE AFTER THE DATE OF SETTING UP OF THE BUSINESS ON 17/06/1997 TI LL THE BUSINESS WAS COMMENCED I.E. 25/09/1997. THE AO HAD DISALLOWED T HE CLAIM OF EXPENDITURE ON THE GROUND THAT EXPENDITURE INCURRED PRIOR TO THE COMMENCEMENT OF BUSINESS IS CAPITAL EXPENDITURE. H E DRAW OUR ATTENTION TOWARDS PAGE 160 OF THE ASSESEES PAPER BOOK BUT TH E LD. FIRST APPELLATE ITA NO. 3628/D/2013 M/S CITI FINANCIAL CONSUMER I NDIA LTD. 5 AUTHORITY HAS OVERLOOKED THAT THE NOTES TO ACCOUNTS HAD CLEARLY STATED THAT BUSINESS ACTIVITIES HAD COMMENCED W.E.F. 25/09 /1997 AND THE SAID EXPENDITURE OF RS. 1,11,70,464/- HAD BEEN INCURRED AFTER THE SETUP OF THE BUSINESS, WHEN THE ASSESSEE HAD EMPLOYED KEY PERSON AL FOR CARRYING ITS BUSINESS ACTIVITIES. THE EXPENDITURE INCURRED BETW EEN 17.06.1997 TILL 25.09.1997 AGGREGATED TO RS. 1,11,70,464/- AND THIS EXPENDITURE HAD BEEN INCURRED AFTER THE BUSINESS HAD BEEN SETUP AND BEFORE THE COMMENCEMENT OF BUSINESS. IT IS WELL SETTLED THAT THE ASSESSEE IS ELIGIBLE TO A CLAIM OF DEDUCTION OF SUCH EXPENDITURE WHICH H AS BEEN INCURRED AFTER THE SETTING UP OF THE BUSINESS. THE EXPRESSION SET TING UP MEANS TO PLACE ON FOOT OR TO ESTABLISH. THE ASSESSEES CONTENT ION WAS THAT IT HAD SETUP ITS BUSINESS WHEN IT WAS READY TO COMMENCE ITS BUSI NESS, AS IT HAS EMPLOYED KEY PERSONAL AND THUS SUCH EXPENDITURE IS AN ALLOWABLE EXPENDITURE AND THUS EXPENDITURE CLAIMED BY THE ASS ESSEE WAS WHOLLY BONAFIDE. HE STATED THAT THE ASSESSEE COMPANY HAD SETUP ITS BUSINESS ON 17/06/1997 WHEN IT HAD APPOINTED EMPLOYEES, TAKE N OFFICE PREMISES ON LEASE, PURCHASED VARIOUS FIXED ASSETS, OPENED BA NK ACCOUNT AND RECEIVED FOREIGN REMITTANCES RESULTING IN AVAILABIL ITY OF RS. 4.08 CRORES IN THE BANK ACCOUNT FOR CARRYING OUT THE FINANCING ACT IVITY. IT IS THE FIRST YEAR OF ASSESSMENT. THEREAFTER, APPELLANT MADE AN APPLI CATION ON 03/07/1997 TO THE RESERVE BANK OF INDIA FOR REGISTRATION AS NO N BANKING FINANCE COMPANY WHICH REGISTRATION WAS GRANTED TO THE ASSES SEE ON 25/09/1997 VIDE A CERTIFICATE OF REGISTRATION WHICH THE ASSESS EE HAS PLACED AT PAGE NO. 188-189 OF PAPER BOOK AND THE APPLICATION AT PA GE 187 OF THE ASSESSEES PAPER BOOK. HE STATED THAT IN FACT WHEN THE ASSESSEE HAD FURNISHED ITS BALANCE SHEET, IN THE NOTES TO ACCOUN TS, IT HAD CLEARLY STATED THAT, THE BUSINESS HAD COMMENCED W.E.F. 25/09/1997 AND THUS, IT CANNOT BE HELD THAT THERE WAS EITHER ANY CONTRADICTORY CLA IM MADE OR THAT IT HAD FURNISHED ANY INACCURATE PARTICULARS OF INCOME AND THE CLAIM MADE WAS ITA NO. 3628/D/2013 M/S CITI FINANCIAL CONSUMER I NDIA LTD. 6 NOT BONAFIDELY CLAIM. THEREFORE, UNDER THE CIRCUMS TANCES, THE PENALTY IN DISPUTE DESERVES TO BE CANCELLED. IN SUPPORT OF HI S ARGUMENT HE CITED THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CAS ES OF CIT VS. HUGHES ESCORTS COMMUNICATIONS (2009) 311 ITR 253 (DEL.), W ESTERN INDIA VEGETABLE PRODUCTS LTD. VS. CIT (1954) REPORTED IN 26 ITR 151 (BOM.), CIT VS. RELIANCE PETRO PRODUCTS (P) LTD. (2010) REP ORTED IN 11 SCC 762 AND CIT VS. M/S DEEKASHA HOLDING LTD. REPORTED IN 1 86 TAXMAN 183 (DEL.). LASTLY HE STATED THAT MERELY BECAUSE THE A DDITION HAS BEEN SUSTAINED UPTO THE ITAT DOES NOT MEANS THAT THE PEN ALTY IN DISPUTE IS SUSTAINABLE BECAUSE THE ASSESSEE HAS DISCLOSED ALL THE MATERIAL FACTS IN ITS RETURN AND HAS NOT CONCEALED ANY PARTICULARS OF ITS INCOME AND HAVE ALSO NOT FILED ANY INACCURATE PARTICULARS OF SUCH I NCOME. IN THE END HE STATED THAT THE WRITTEN ARGUMENT ALONG WITH THE VAR IOUS CASE LAWS AS WELL AS THE RELEVANT PROVISION OF LAW MENTIONED IN THE W RITTEN SUBMISSIONS MAY BE CONSIDERED AND THE PENALTY IN DISPUTE MAY BE CAN CELLED. 9. LD. DR RELIED ON THE ORDER PASSED BY THE LD. FIR ST APPELLATE AUTHORITY. SHE STATED THAT IN THE PENALTY ORDER TH E AO HAS ELABORATELY DISCUSSED THE ISSUE IN DISPUTE WITH THE SUPPORT OF RELEVANT PROVISION OF LAW AND THE VARIOUS DECISIONS OF THE HONBLE COURTS AND RIGHTLY LEVIED THE PENALTY IN DISPUTE WHICH HAS RIGHTLY BEEN UPHELD BY THE LD. FIRST APPELLATE AUTHORITY. SHE STATED THAT ASSESSEE HAS CLAIMED A WRONG CLAIM FOR WHICH THE ASSESSEE IS NOT ENTITLED AND HAS FURNISHED INAC CURATE PARTICULARS OF ITS INCOME. THEREFORE, THE PENALTY IN DISPUTE RIGHTLY BEEN IMPOSED BY THE AO AND UPHOLD BY THE LD. FIRST APPELLATE AUTHORITY. 10. WE HAVE HEARD THE BOTH PARTIES AND PERUSED THE RELEVANT RECORD AVAILABLE WITH US SPECIALLY WRITTEN SUBMISSION FILE D BY THE LD. COUNSEL FOR THE ASSESSEE ALONG WITH DOCUMENTARY EVIDENCE FILED BY HIM IN THE SHAPE OF TWO PAPER BOOK ONE CONTAINING PAGE 1-189 AND THE SECOND IS ALSO CONTAINING 1-137. THE ASSESSEE HAS FILED ALL THE D OCUMENTARY EVIDENCE ITA NO. 3628/D/2013 M/S CITI FINANCIAL CONSUMER I NDIA LTD. 7 WITH SUPPORT OF VARIOUS DECISIONS RENDERED BY THE H ONBLE SUPREME COURT OF INDIA AND HONBLE HIGH COURTS INCLUDING THE HON BLE JURISDICTIONAL HIGH COURT WHICH HE HAS ATTACHED IN THESE PAPER BOOKS. WE HAVE ALSO THOROUGHLY PERUSED THE ORDERS PASSED BY THE REVENUE AUTHORITIES. LD. COUNSEL FOR THE ASSESSEE HAS RAISED A PRELIMINARY O BJECTION REGARDING JURISDICTION OF THE AO FOR LEVYING THE PENALTY IN D ISPUTE ON THE GROUND THAT HE HAS NOT RECORDED HIS SATISFACTION BEFORE INITIAT ING THE PENALTY IN DISPUTE IN THE CASE OF ASSESSEE HAVING FURNISHED ANY PARTIC ULAR OF INCOME. WE HAVE SEEN THE PENALTY ORDER DATED 28/04/2010 PASSED BY THE AO U/S 271(1)(C) OF THE IT ACT AS WELL AS THE IMPUGNED ORD ER. WE HAVE NOT FOUND THAT THE ASSESSEE HAS RAISED THIS OBJECTION BEFORE THE AO WHEN HE ISSUED A NOTICE TO THE ASSESSEE FIXING THE PENALTY PROCEED ING ON 26/04/2010. THE ASSESSEE APPEARED BEFORE THE AO ON 26/04/2010 A ND ONLY REQUESTED FOR ADJOURNMENT AND THE AO ADJOURN THE CASE FOR 28/ 04/2010. ON 28/04/2010 THE ASSESSEE HAS FILED HIS SUBMISSION WH ICH IS AS UNDER: ALL THE FACTS RELEVANT TO THE RETURN OF INCOME WER E DULY DISCLOSED BY THE ASSESSEE AND THERE WAS NO MALAFIDE INTENTION ON THE PART OF THE ASSESSEE. IT IS VEHEMENTLY SUBM ITTED THAT IN SUCH CIRCUMSTANCES, THERE CANNOT BE ANY ALLEGATION FOR CONCEALMENT OF INCOME OR FURNISHING OF ANY INACCURA TE PARTICULARS THEREOF. 11. THE ASSESSEE HAS NOT RAISED ANY OBJECTION REGAR DING RECORDING THE SATISFACTION BY THE AO BEFORE IMPOSING THE PENA LTY IN DISPUTE FOR FURNISHING ANY INACCURATE PARTICULARS OF ASSESSEES INCOME. SIMILARLY WE HAVE ALSO SEEN THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE BEFORE THE LD. FIRST APPELLATE AUTHORITY AS WELL AS THE OTHER DOCUMENTARY EVIDENCE FILED BY THE ASSESSEE BEFORE THE LD. FIRST APPELLAT E AUTHORITY. WE FOUND THAT ASSESSEE HAS NOT RAISED THIS OBJECTION REGARDI NG IMPOSING OF PENALTY U/S 271(1)(C) WITHOUT JURISDICTION IN ABSENCE OF AN Y SATISFACTION HAVING BEEN RECORDED BY THE AO HAVING FURNISHING INACCURAT E PARTICULARS OF INCOME. IT IS PERTINENT TO MENTION THAT AT THE TIM E OF HEARING THE ITA NO. 3628/D/2013 M/S CITI FINANCIAL CONSUMER I NDIA LTD. 8 ASSESSEES COUNSEL HAS FILED ONE HISTORICAL BACKGRO UNDS WHICH IS JUST LIKE A WRITTEN SUBMISSIONS DATED 01/10/2014 AND SNAP SHO T DATED 01/10/2014. WE HAVE PERUSED THE SAME AND WE FOUND THAT ASSESSEE S COUNSEL HAS NOT RAISED THIS OBJECTION OF JURISDICTION IN THE MA IN WRITTEN ARGUMENT DATED 01/10/2014 HE HAS ONLY RAISED IN THE SNAP SHOT DATE D 01/10/2014. WE HAVE GONE THROUGH THE WRITTEN SUBMISSIONS FILED BY THE ASSESSEE ALONG WITH THE SNAP SHOT DATED 01/10/2014 AND WE ARE OF T HE CONSIDERED VIEW THAT ON THIS LEGAL OBJECTION OF JURISDICTION, ASSES SING OFFICER AS WELL AS LD. FIRST APPELLATE AUTHORITY HAS NOT GIVEN ANY FINDING BECAUSE ASSESSEE HAS NOT RAISED THIS ISSUE BEFORE THEM. AT THIS STAGE K EEPING IN VIEW OF THE AFORESAID DISCUSSION, WE ARE REJECTING THE OBJECTIO N OF LD. COUNSEL FOR THE ASSESSEE AND PROCEEDED TO DECIDE THE CASE OF ASSESS EE ON THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE AS WELL AS THE FIN DING GIVEN BY THE REVENUE AUTHORITY. 12. AFTER HEARING THE BOTH PARTIES AND PERUSING THE MATERIAL AVAILABLE WITH US, WE ARE OF THE VIEW THAT THE PENALTY IN DIS PUTE HAD BEEN IMPOSED BY THE AO IN RESPECT OF EXPENDITURE INCURRED OF RS. 1,11,70,464/-. THE SAID PENALTY HAD BEEN UPHOLD ON APPEAL BY THE CIT(A ) ALSO. WE HAVE TO SEE WHETHER THE ASSESSEE HAS CONCEALED THE PARTICUL ARS OF ITS INCOME OR FURNISHED INACCURATE PARTICULARS OF ITS INCOME. TH E ASSESSEE COMPANY HAD SETUP ITS BUSINESS ON 17/06/1997 WHICH IS THE F IRST YEAR OF ASSESSMENT. THE ASSESSEE COMPANY MADE AN APPLICATI ON ON 03/07/1997 TO THE RBI FOR REGISTRATION AS NON BANKING FINANCE COMPANY FOR WHICH REGISTRATION WAS GRANTED TO THE ASSESSEE ON 25/09/1 997. WE HAVE PERUSED THE PAPER BOOK FILED BY THE ASSESSEE AT PAG E 187-189. THE ASSESSEE FILED ITS RETURN OF INCOME ON 27/11/1998 D ECLARING A LOSS OF RS. 382,00,780/- WHICH WAS REVISED BY THE ASSESSEE U/S 139(5) OF THE ACT ON 27/12/1999 REVISING THE COMPUTATION OF INCOME AT A LOSS OF RS. 426,50,098/- WHICH THE ASSESSEE HAS ATTACHED AT PAG E 17-19 OF ITS PAPER ITA NO. 3628/D/2013 M/S CITI FINANCIAL CONSUMER I NDIA LTD. 9 BOOK. IN THE RETURN OF INCOME THE ASSESSEE CLAIMED A SUM OF RS. 1,11,70,464/- BEING EXPENDITURE INCURRED DURING THE PERIOD OF 17/06/1997 TO 25/09/1997 WHICH IS AT PAGE 160 OF ASSESSEES PA PER BOOK. IT IS VERY PERTINENT TO MENTION THAT ASSESSEE HAS ALSO APPENDE D A NOTE TO THE RETURN OF INCOME WHICH THE ASSESSEE HAS ATTACHED AT PAGE 1 9 OF THE PAPER BOOK WITH REGARD TO THE CLAIM OF EXPENDITURE OF RS. 1,11 ,70,464/- FOR THE SAKE OF CONVENIENCE I.E. REPRODUCED BELOW: - THE ASSESSEE IS ENGAGED IN THE BUSINESS OF ACTING AS FINANCIERS AND AGENTS. ATTENTION IS DRAWN TO NOTE 3 IN SCHEDULE 17 OF THE FINAL ACCOUNTS WHEREIN IT HAS BE EN STATED THAT THE BUSINESS OF THE ASSESSEE WAS SETUP IN JUNE, 1997AND THE NBFC REGISTRATION WITH THE RESERVE BANK OF INDIA WAS RECEIVED ON 25 TH SEPTEMBER, 1997. THE EXPENSES INCURRED DURING THE PERIOD JUNE 1997 TO SEPTEMBER 1 997 AMOUNTING TO RS. 1,11,70,464/- (EXCLUDING DEPRECIAT ION) ARE FOR THE PURPOSE OF THE BUSINESS OF THE ASSESSEE AFTER THE BUSINESS WAS ACTUALLY SETUP AND IS THEREFORE, ALLOW ABLE AS REVENUE EXPENDITURE IN THE YEAR IN WHICH IT IS SO I NCURRED. ACCORDINGLY, THE SAME IS CLAIMED AS ALLOWABLE BUSIN ESS. 13. THE ASSESSEE HAS ALSO FILED ITS REPLY DATED 02/ 01/2001 BEFORE THE AO IN WHICH THE ASSESSEE HAS STATED THESE FACTS IN THE ASSESSMENT PROCEEDING. BUT THE AO COMPLETED THE ASSESSMENT ON 28/02/2000 BY DISALLOWING THE CLAIM OF THIS EXPENDITURE TO THE AS SESSEE, WHEREIN HE DISALLOWED THE CLAIM OF EXPENDITURE ON THE FOLLOWIN G GROUNDS: I. APPELLANT WAS GIVEN LICENSE TO WORK AS NBFC W.E.F. 25/09/1997; II. ASSESSEE IN ITS BOOKS HAS TREATED THE EXPENDITURE P RIOR TO 25/09/1997 AS DEFERRED REVENUE EXPENDITURE; III. IN THE REVISED RETURN ASSESSEE HAS CLAIMED EXPENSES OF RS. 1,11,70,464/- AS REVENUE EXPENDITURE; IV. EXPENDITURE INCURRED PRIOR TO THE COMMENCEMENT OF B USINESS IS CAPITAL EXPENDITURE. 13.1 ALTHOUGH THE SUBMISSIONS OF THE ASSESSEE WERE NOT ACCEPTED BY THE REVENUE AUTHORITIES AS WELL AS BY THE ITAT BUT IN THE PENALTY ITA NO. 3628/D/2013 M/S CITI FINANCIAL CONSUMER I NDIA LTD. 10 PROCEEDING WE HAVE TO SEE WHETHER THE CASE OF THE A SSESSEE IS COVERED U/S 271(1)(C) OF THE ACT OR NOT. 14. THE BUSINESS OF THE ASSESSEE WAS SETUP IN THE M ONTH OF JUNE, 1997 IS ALSO EVIDENT FROM NOTES TO ACCOUNT OF THE A UDIT REPORT, WHEREIN IN NOTE 3 OF SCHEDULE 17 AUDITORS HAVE STATED AS UNDER : (3) THE COMPANYS BUSINESS WAS SETUP IN JUNE 1997 . HOWEVER, REGISTRATION WITH RESERVE BANK OF INDIA AS A NON BANKING FINANCE COMPANY (NBFC) WAS RECEIVED ONLY ON SEPTEMBER 25, 1997 AFTER WHICH THE COMPANY COULD CA RRY ON THE BUSINESS OF A NBFC, ACCORDINGLY THE EXPENSES IN CURRED UPTO SEPTEMBER 24, 1997 I.E. UPTO THE DATE OF REGIS TRATION WITH RBI AS NBFC AS PER DETAILS HEREUNDER ARE BEING AMOR TIZED OVER 5 YEARS FROM SEPTEMBER 25, 1997. 15. FROM THE PERUSAL OF THE AFORESAID IT WOULD BE S EEN THAT BUSINESS OF THE ASSESSEE WAS SETUP IN THE MONTH OF JUNE, 1997 W HEN IT WAS READY TO COMMENCE ITS BUSINESS AND IT WAS NOT SETUP WHEN REG ISTRATION WITH THE RBI WAS GRANTED. THE BUSINESS OF THE ASSESSEE WAS SETUP IN THE MONTH OF JUNE, 1997 IS ALSO EVIDENT FROM THE PARA 14 OF T HE ORDER OF THE TRIBUNAL WHEN IT HELD AS UNDER: THEREFORE, THOUGH AS PER SECTION 3, THE PREVIOUS YEAR MAY COMMENCE ON SETTING UP OF THE BUSINESS, YET THE INCOME WILL BE CHARGEABLE TO TAX UNDER THE HEAD PROFITS A ND GAINS OF BUSINESS ONLY WHEN THE BUSINESS OR PROFESSION WAS CARRIED ON BY THE ASSESSEE. THEREFORE, FOR PURPOSE OF ALLOWIN G ANY EXPENSES U/S 37 IN RESPECT OF ANY BUSINESS OR PROFE SSION, SUCH BUSINESS OR PROFESSION SHOULD HAVE BEEN CARRIED ON DURING THE PREVIOUS YEAR. ADMITTEDLY, SINCE THE EXPENSES WERE INCURRED PRIOR TO CARRYING ON OF BUSINESS AS NBFC, THE EXPEN SES ARE NOT ALLOWABLE AS SUCH. TAKING THE PREMISE ON HIRE WILL ONLY DEMONSTRATE THE INTENTION OF SETTING UP OF THE BUSI NESS BUT CANNOT BE SAID TO BE CARRYING ON OF THE BUSINESS IN THE PRESENT CASE THERE IS NO DISPUTE REGARDING SETU P OF THE BUSINESS OF THE ASSESSEE BUT FOR CLAIMING EXPENSES U/S 37, WHAT IS REQUIRED TO BE ESTABLISHED IS WHETHER SUCH EXPENSES WERE INCURRED WHOLLY AND EXCLUSIVELY FOR THE BUSINE SS PROFESSION CARRIED ON BY THE ASSESSEE ITA NO. 3628/D/2013 M/S CITI FINANCIAL CONSUMER I NDIA LTD. 11 16. IT IS A MATTER OF RECORD THAT EXPENDITURE INCUR RED PRIOR TO 25/09/1997 HAS BEEN AMORTIZED IN THE BOOKS OF THE A SSESSEE, HOWEVER, IN THE REVISED RETURN, ASSESSEE CLAIMED THE EXPENDITUR E INCURRED OF RS. 1,11,70,464/- DURING THE PERIOD OF 17/06/1997 TO 25 /09/1997 AT REVENUE EXPENDITURE. IN THE RETURN OF INCOME, ASSESSEE ALS O GAVE A NOTE TO THIS EFFECT AND ALSO SUPPORTED ITS RETURN ON THE BASIS O F VARIOUS JUDICIAL PRONOUNCEMENTS THAT AFTER THE BUSINESS WAS SETUP, T HE EXPENDITURE INCURRED HAS TO BE ALLOWED. THEREFORE, IN OUR VIEW THE ASSESSEE HAS FURNISHED COMPLETE PARTICULARS OF ITS INCOME AND IT IS NOT A CASE, WHEREIN THE ASSESSEE HAS MADE AN APPARENTLY WRONG CLAIM OR CLAIM OF THE ASSESSEE WAS FALSE IT IS BONAFIDE. THEREFORE, THE PENALTY IN DISPUTE IS NOT LEVIABLE IN THE CASE OF ASSESSEE. 17. AFTER PERUSING THE PAPER BOOKS FILED BY THE ASS ESSEE, WE FIND THAT ASSESSEE HAS ATTACHED VARIOUS JUDGMENTS DELIVER BY HONBLE SUPREME COURT OF INDIA AND THE HONBLE HIGH COURTS. FOR TH E SAKE OF CONVENIENCE SOME OF THE JUDGMENTS SUPPORTING OUR VIEW FOR CANCE LLATION OF THE PENALTY IN DISPUTE UNDER THE CIRCUMSTANCES OF THE PRESENT C ASE ARE REPRODUCED AS UNDER: THE HONBLE HIGH COURT OF DELHI IN THE CASE OF CIT VS. DCM LTD. REPORTED IN 359 ITR 102 HAS BEEN HELD AS UNDER : 10. LAW DOES NOT BAR OR PROHIBIT AN ASSESSEE FOR MAKING A CLAIM, WHICH HE BELIEVES MAY BE ACCEPTED O R IS PLAUSIBLE. WHEN SUCH A CLAIM IS MADE DURING THE CO URSE OF REGULAR OR SCRUTINY ASSESSMENT, LIBERAL VIEW IS REQUIRED TO BE TAKEN AS NECESSARILY THE CLAIM IS BOUND TO BE CAREFULLY SCRUTINIZED BOTH ON FACTS AND IN LAW. FU LL PROBE AND APPRAISAL IS NATURAL AND NORMAL. THREAT OF PENALTY CANNOT BECOME A GAG AND/OR HAUNT AN ASSESSE E FOR MAKING A CLAIM WHICH MAY BE ERRONEOUS OR WRONG, WHEN IT IS MADE DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS. NORMALLY, PENALTY PROCEEDINGS IN SUCH CASES SHOULD NOT BE INITIATED UNLESS THERE ARE VALI D OR GOOD GROUNDS TO SHOW THAT FACTUAL WERE PROVIDED IN THE COMPUTATION. LAW DOES NOT BAR OR PROHIBIT A PERSON FROM MAKING A CLAIM, WHEN HE KNOWS THE MATTER IS GO ING TO BE EXAMINED BY THE ASSESSING OFFICER. THERE IS NO ITA NO. 3628/D/2013 M/S CITI FINANCIAL CONSUMER I NDIA LTD. 12 MERIT IN THE PRESENT APPEAL AND THE SAME HAS TO BE DISMISSED. [EMPHASIS SUPPLIED] THE HONBLE APEX COURT IN THE CASE OF CIT VS. RELIANCE PETRO PRODUCTS (P) LTD. REPORTED IN 322 IT R 158 HAS BEEN HELD AS UNDER: 9. WE ARE NOT CONCERNED IN THE PRESENT CASE WITH THE MENS REA. HOWEVER, WE HAVE TO ONLY SEE AS TO WHETH ER IN THIS CASE, AS A MATTER OF FACT, THE ASSESSEE HAS GI VEN INACCURATE PARTICULARS. IN WEBSTERS DICTIONARY, T HE WORD INACCURATE HAS BEEN DEFINED AS: - NOT ACCURATE, NOT EXACT OR CORRECT; NOT ACCORDING TO TRUTH; ERRONEOUS; AS AN INACCURATE STATEMENT, COPY OR TRANSCRIPT. WE HAVE ALREADY SEEN THE MEANING OF THE WORD PARTICULARS IN THE EARLIER PART OF THIS JUDGMENT. READING THE WORDS IN CONJUNCTION, THEY MUST MEAN TH E DETAILS SUPPLIED IN THE RETURN, WHICH ARE NOT ACCUR ATE, NOT EXACT OR CORRECT, NOT ACCORDING TO TRUTH OR ERR ONEOUS. WE MUST HASTEN TO ADD HERE THAT IN THIS CASE, THERE IS NO FINDING THAT ANY DETAILS SUPPLIED BY THE ASSESSEE I N ITS RETURN WERE FOUND TO BE INCORRECT OR ERRONEOUS OR F ALSE. SUCH NOT BEING THE CASE, THERE WOULD BE NO QUESTION OF INVITING THE PENALTY U/S 271(1)(C) OF THE ACT. A MERE MAKING OF THE CLAIM, WHICH IS NOT SUSTAINABLE IN LA W, BY ITSELF, WILL NOT AMOUNT OF FURNISHING INACCURATE PARTICULARS REGARDING THE INCOME OF THE ASSESSEE. SUCH CLAIM MADE IN THE RETURN CANNOT AMOUNT TO THE INACCURATE PARTICULARS. 332 ITR 334 (DEL) CIT VS. USHA MARKETING PVT. LTD. IF ON THE BASIS OF FURNISHING NECESSARY PARTICULAR S, ADVERSE VIEW IS DRAWN I.E. TO DISALLOW THE SAME, IT DOES NOT RESULT INTO PENAL ACTION FOR LEVY OF PENALTY FO R CONCEALMENT OF PARTICULARS OF INCOME. AS PER EXPLANATION 1 TO SECTION 271(1)(C), PENALTY IS LEVI ABLE ONLY IN A CASE WHERE (A) SUCH PERSON FAILS TO OFFER AN EXPLANATION; OR (B) OFFERS AN EXPLANATION WHICH IS FOUND TO BE FALSE OR (C) SUCH PERSON OFFERS AN EXPLANATION W HICH HE IS NOT ABLE TO SUBSTANTIATE AND FAILS TO PROVE THAT SUCH EXPLANATION IS BONA FIDE AND THAT ALL THE FACTS REL ATING TO THE SAME HAVE BEEN DISCLOSED BY HIM. IN THE PRESEN T CASE, IT IS SEEN THAT THE ASSESSEE HAS OFFERED AN EXPLANA TION. THE SAME IS SUBSTANTIATED ALSO. THE EXPLANATION OFFERE D BY THE ASSESSEE IS NOT FOUND TO BE FALSE BY THE ASSESSING OFFICER. WHEN THE EXPLANATION WAS OFFERED, THE ASSESSEE FILE D ALL THE RELEVANT DETAILS OF THE TRANSACTION IN SALE OF SHARES AND DEBENTURES AND WHEN THE CLAIM WAS MADE, THE SAM E WAS BONA FIDE AS ALL THE FACTS RELATING TO SUCH LOS S AND MATERIAL TO THE COMPUTATION HAVE BEEN DISCLOSED BY HIM. ITA NO. 3628/D/2013 M/S CITI FINANCIAL CONSUMER I NDIA LTD. 13 THUS EXPLANATION 1 TO SECTION 271(1)(C) IS NOT ATTR ACTED HEREIN. IF ON THE FACTS FURNISHED BY THE ASSESSEE THE VIEW ADOPTED IS THAT SUCH LOSS IS NOT ALLOWABLE WITHOUT ANY FINDING THAT THE EXPLANATION OFFERED BY THE ASSESSE E IS FALSE, THE ASSESSEE CANNOT BE VISITED WITH PENALTY BY INVOKING EXPLANATION 1 TO SECTION 271(1)(C). SINCE THERE IS NO OTHER ALLEGATION THAT THE ASSESSEE HAS FURNIS HED INACCURATE PARTICULARS OF INCOME EXCEPT INVOKING EXPLANATION 1 TO SECTION 271(1)(C) FOR LEVY OF PENA LTY, IN OUR OPINION, SINCE EXPLANATION 1 IS NOT ATTRACTED, PENALTY U/S 271(1)(C) IS TO BE CANCELLED. 335 ITR 558 (P&H) CIT VS. RUBBER UDYOG VIKAS (P) LTD. MAKING AN INCORRECT CLAIM WOULD NOT TANTAMOUNT TO FURNISHING OF INACCURATE PARTICULARS UNLESS IT WAS ESTABLISHED THAT THE ASSESSEE HAD ACTED WITH A MALA FIDE INTENTION OR HAD CLAIMED DEDUCTIONS BEING AWARE OF THE WELL SETTLED LEGAL POSITION. THE ASSESSEE HAD CLAI MED DEDUCTIONS ON ACCOUNT OF SET OFF OF UNABSORBED BUSI NESS LOSSES AGAINST THE INCOME FROM THE CAPITAL GAINS, W HICH WAS HELD NOT TO BE MALA FIDE. HOWEVER, THE AO IMPOSED PENALTY ON THE ASSESSEE. THE TRIBUNAL HELD THAT MA KING AN INCORRECT CLAIM WOULD NOT TANTAMOUNT TO FURNISHING OF INACCURATE PARTICULARS UNLESS IT WAS ESTABLISHED TH AT THE ASSESSE HAD ACTED WITH A MALAFIDE INTENTION OR HAD CLAIMED DEDUCTIONS BEING AWARE OF THE WELL SETTLED LEGAL POSITION. THE TRIBUNAL HAD OBSERVED IN PLAIN WORDS THAT THE ASSESSEE HAD DISCLOSED ALL THE PARTICULARS ALON G WITH THE RETURN OF INCOME AND IT WAS NOT A FIT CASE FOR LEVY OF PENALTY. THE TRIBUNAL DELETED THE PENALTY. [EMPHASIS SUPPLIED] 330 ITR 545 (DEL) CIT VS. MUSHASHI AUTOPARTS INDIA (P) LTD. THE ASSESSEE COMPUTED PRE-OPERATIVE EXPENSES AFTER DEDUCTING INTEREST INCOME. HOWEVER, THE AO HELD TH AT INTEREST COULD NOT BE ADJUSTED AGAINST PRE-OPERATIV E EXPENSES AS CLAIMED BY THE ASSESSEE. THEREFORE, PE NALTY WAS IMPOSED UPON ASSESSEE U/S 271(1)(C). THE COMMISSIONER (APPEALS) AS WELL AS TRIBUNAL DELETED THE PENALTY HOLDING THAT MERELY BECAUSE ASSESSEES CLAI M WAS NOT ACCEPTED BY THE AO, THAT DID NOT MEAN THAT THER E WAS ANY NON-DISCLOSURE OF MATERIAL FACTS BY ASSESSEE WH ICH COULD WARRANT LEVY OF PENALTY. HELD THAT IT WAS CLEAR FROM ORDERS OF THE APPELLATE AUTHORITIES THAT THERE WAS NO CONCEALMENT ON THE PA RT OF THE ASSESSEE AND IN THESE CIRCUMSTANCES PENALTY COU LD NOT BE IMPOSED. 330 ITR 547 (DEL) CIT VS. KRISHNA MARUTI LTD. ITA NO. 3628/D/2013 M/S CITI FINANCIAL CONSUMER I NDIA LTD. 14 CERTAIN EXPENDITURE CLAIMED BY THE ASSESSEE AS REV ENUE EXPENDITURE WAS DISALLOWED BY THE TRIBUNAL HOLDING THE EXPENDITURE TO BE OF CAPITAL NATURE. ON THE BASIS PENALTY PROCEEDINGS WERE ALSO INITIATED BY THE ASSESSING OFFICER U/S 271(1)(C ). THE COMMISSIONER (APPEALS) AS WELL AS THE TRIBUNAL, HOWEVER, SET ASIDE THE PENALTY HOLDING TH AT THE CLAIM MADE BY THE ASSESSEE THAT EXPENSES INCURRED WERE REVENUE IN NATURE, WAS DEBATABLE AND, THEREFORE, IT COULD NOT ATTRACT PENALTY. HELD THAT NO QUESTION OF LAW AROSE FROM THE TRIBUNALS ORDER.[EMPHASIS SUPPLIED] 328 ITR 611 (DEL) CIT VS. IFCI LTD. THE ASSESSEE HAD CLAIMED LOSS ON ACCOUNT OF INVESTM ENT WRITTEN OFF . THE SAID CLAIM WAS DISALLOWED BY THE AO. THEREAFTER, THE AO IMPOSED PENALTY UPON ASSESSEE U/ S 271(1)(C ) ON GROUND THAT ASSESSEE HAD DELIBERATELY FURNISHED INACCURATE PARTICULARS OF INCOME BY WAY OF LOSS UNDER THE HEAD INVESTMENT WRITTEN OFF. HELD THAT THE ASSESSEE HAD FILED THE RETURN AND FUR NISHED ALL PARTICULARS. THE ASSESSEE HAD EXPLAINED DURING THE PENALTY PROCEEDINGS THAT THE INVESTMENTS WERE WRITT EN OFF IN THE BOOKS OF ACCOUNT AND WERE CLAIMED AS DEDUCTI ON ON ACCOUNT OF LOSS INCURRED TO THE ASSESSEE IN THE COMPUTATION OF TOTAL INCOME. IT WAS A CASE WHERE A CLAIM PUT FORTH BY THE ASSESSEE AS REGARDS THE LOSS WAS N OT ACCEPTED BUT THAT WOULD NOT PER SE TANTAMOUNT TO FURNISHING ANY KIND OF INACCURATE PARTICULARS. THU S, THERE HAD BEEN NO CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS AND, THEREFORE, IMPOSITION O F PENALTY U/S 271(1)(C ) WAS NOT JUSTIFIED. [EMPHASIS SUPPLIED] 329 ITR 572 (DEL) CIT VS. DHARAMPAL PREMCHAND LTD. 348 ITR 339 (DEL) CIT VS. BRAHMAPUTRA CONSORTIUM LTD. IN FACT, THE AO DID NOT EVEN CONTRADICT THE PLEA O F THE ASSESSEE THAT EXCESS CLAIM OF DEPRECIATION WAS AN INADVERTENT ERROR. THAT PART, OTHER ELEMENT PRESEN T IN THE INSTANT CASE GAVE A STRONG INDICATION THAT THE ERRO R WAS GENUINE AND BONA FIDE. RETURN FOR THE ASSESSMENT YEAR IN QUESTION WAS FILED DECLARING LOSS. THE ASSESSMENT WAS COMPLETED AT LOSS. THEREFORE, EXCESS CLAIM OF DEPRECIATION WAS NOT ADVANTAGEOUS TO THE ASSESSEE. ON THE CONTR ARY, IT WAS BETTER FOR HIM TO CLAIM DEPRECIATION AT THE RAT E OF 25 PER CENT IN THE RELEVANT YEAR RESULTING INTO HIGHER WRITTEN DOWN VALUE IN THE NEXT YEAR FOR CLAIM OF DEPRECIATI ON OF A HIGHER AMOUNT ON HIGHER WRITTEN DOWN VALUE THEREBY REDUCING THE TAX LIABILITY. THEREFORE, THE AO WAS NOT CORRECT IN HOLDING THAT SUBMITTING INACCURATE CLAIM WOULD ITA NO. 3628/D/2013 M/S CITI FINANCIAL CONSUMER I NDIA LTD. 15 AMOUNT TO GIVING INACCURATE PARTICULARS.' [EMPHASIS SUPPLIED] 343 ITR 434 (DEL) CIT VS. NOKIA INDIA (P) LTD. 354 ITR 27 (P&H) CIT VS. GURDASPUR CO-OPERATIVE SUGAR MILLS LTD. ASSESSEE RECEIVED A SUM AS GRANT-IN-AID FROM STATE GOVERNMENT AND SAME WAS DISCLOSED AS CAPITAL RECEIP T ASSESSING OFFICER, HOWEVER, TREATED RECEIPT OF GRAN T-IN- AID AS REVENUE RECEIPT AND THEREAFTER LEVIED PENALT Y U/S 271(1)(C ) WHETHER SINCE ISSUE WHETHER AMOUNT OF GRANT-IN-AID WAS CAPITAL RECEIPT OR A REVENUE RECEI PT WAS A DEBATABLE ISSUE, PENALTY U/S 271(1)(C ) WAS NOT IMPOSABLE HELD, YES 2 DTONLINE 312 (DEL) CIT VS. KIRANJIT FOILS LTD. ASSESSEE COMPANY HAD EARNED INTEREST ON INVESTMENT MADE IN SHORT TERM DEPOSITS WITH BANK PRIOR TO COMMENCEMENT OF BUSINESS ISSUE AS TO WHETHER SAID INTEREST INCOME WAS REVENUE RECEIPT OR CAPITAL RECE IPT WAS DEBATABLE ISSUE AND THERE WERE TWO VIEWS POSSIB LE ON SAME ASSESSEES CLAIM WAS BASED ON ONE OF SUCH POSSIBLE VIEWS HOWEVER, ASSESSEES CLAIM WAS REJE CTED AND PENALTY WAS IMPOSED UPON IT U/S 271(1)(C ) TRIBUNAL HELD THAT MAKING OF SUCH CLAIM BONA FIDE O N BASIS OF A POSSIBLE VIEW COULD NOT BE TREATED AS CONCEALMENT OF ITS INCOME BY ASSESSEE OR FURNISHING INACCURATE PARTICULARS OF SUCH INCOME SO AS TO ATTR ACT PENAL PROVISIONS OF SECTION 271(1)(C ) AND, THEREFO RE, TRIBUNAL CANCELLED PENALTY WHETHER NO SUBSTANTIAL QUESTION OF LAW AROSE FROM TRIBUNALS ORDER HELD, YES 352 ITR 354 (P&H) CIT VS. AMTEK AUTO LTD. AFTER HEARING LD. COUNSEL FOR THE PARTIES, WE DO N OT FIND THAT ANY SUBSTANTIAL QUESTION OF LAW ARISES FOR CONSIDERATION. THE ASSESSEE HAS DISCLOSED THE NATU RE OF TRANSACTIONS IN ITS RETURN. IT WAS ON THE BASIS OF INTERPRETATION OF THE PROVISIONS OF THE STATUTE, TH E AO FOUND THAT SUCH EXPENDITURE CLAIMED BY THE ASSESSEE IS NOT THE REVENUE EXPENDITURE BUT THE CAPITAL EXPENSE S. THERE IS FINE DISTINCTION AS TO WHEN AN EXPENDITURE CAN BE TREATED AS A REVENUE OR A CAPITAL EXPENDITURE. THEREFORE, MERELY FOR THE REASON THAT THE ASSESSEE HAS CLAIMED THE EXPENDITURE TO BE REVENUE WILL NOT REND ER THE ASSESSEE LIABLE TO PENALTY PROCEEDINGS. THE ORDER PASSED BY THE TRIBUNAL DOES NOT GIVE RISE TO THE QUESTIONS OF LAW SOUGHT BY THE REVENUE. CONSEQUENTLY, WE DO NOT FIN D ANY MERIT IN THE PRESENT APPEAL AND THE SAME IS DISMISS ED. 40 TAXMANN.COM 86 (BOM.) CIT VS. NALIN P. SHAH (HUF) ITA NO. 3628/D/2013 M/S CITI FINANCIAL CONSUMER I NDIA LTD. 16 THE ASSESSEE CLAIMED A DEDUCTION FOR THE LOSS OF R S. 3.08 CRORES SUFFERED BY HIM ON TRANSFER OF US 64 UNITS T HOUGH THE INCOME FROM THE TRANSFER OF UNITS OF A MUTUAL F UND IS EXEMPT U/S 10(33). THE AO DISALLOWED THE LOSS ON T HE GROUND THAT THE EXEMPTION IN S. 10(33) APPLIED TO A LOSS AS WELL AND IMPOSED PENALTY U/S 271(1)(C ). THE CIT(A ) CONFIRMED THE PENALTY. ON APPEAL BY THE ASSESSEE, THE TRIBUNAL ALLOWED THE APPEAL ON THE GROUND THAT AS T HE ASSESSEE HAD DISCLOSED THE DETAILS WITH THE RETURN, HE HAD NOT FILED INACCURATE PARTICULARS OF HIS INCOME AND THAT THE MAKING OF A WRONG CLAIM/INCORRECT CLAIM DID NOT ATT RACT PENALTY U/S 271(1)(C ). ON APPEAL BY THE DEPARTMEN T TO THE HIGH COURT, FOLLOWING THE JUDGMENT OF THE APEX COUR T IN THE CASE OF RELIANCE PETROPRODUCTS REPORTED IN 322 ITR 158, IT WAS HELD BY THE HIGH COURT THAT AS THE ASSESSEE HAD DISCLOSED ALL DETAILS IN THE RETURN OF INCOME, AT THE HIGHEST IT CAN BE SAID THAT THE CLAIM OF THE ASSESS EE WAS NOT SUSTAINABLE IN LAW. BUT AS THERE WAS NO FURNIS HING OF INACCURATE PARTICULARS OR CONCEALMENT OF INCOME ON THE PART OF THE ASSESSEE, PENALTY U/S 271(1)(C ) COULD NOT BE LEVIED. 186 TAXMAN 183 (DEL) CIT VS. M/S DEEKASHA HOLDING LTD. IN RESPECT OF FIRST ADDITION, EXPLANATION OF THE A SSESSEE WAS THAT THOUGH THE ASSESSEE HAD EXCLUDED RS. 2,69, 680/- UNDER THE HEAD? PROFIT AND SALE OF CARS? CAPITAL GAINS IN RESPECT OF SALE OF THESE CARS WAS NOT INCLUDED BY INADVERTENCE LIKEWISE IN RESPECT OF CLAIM OF DEDUCT ION OF EXPENSES UNDER THE HEAD? PROFESSIONAL DEVELOPMENT EXPENSES WAS THAT THE EXPENSES WERE IN FACT INCURRE D FOR SPONSORING ITS DIRECTOR FOR POST GRADUATION COURSE ETC. IN THE FIELD OF LAW AND IT WAS THE BONA FIDE CLAIM MAD E BY THE ASSESSEE. SAME WAS THE PLEA IN RESPECT OF ADVERTIS EMENT EXPENSES. WHERE THE ASSESSEE HAD DISCLOSED ALL THE FACTS BEFO RE THE AO AND THE AO, ON CONSIDERATION OF THE EVIDENCE FURNISHED BY THE ASSESSEE, COME TO THE CONCLUSION T HAT THE CLAIM HAS NOT BEEN SUBSTANTIATED WITH SUFFICIEN T EVIDENCE, DOES NOT AUTOMATICALLY RESULT IN LEVY OF PENALTY. WHERE THE ASSESSEE HAS DISCLOSED ALL MATERIAL FACTS IN REGARD TO THE CLAIM MADE THE ONUS PLACED UPON THE ASSESSEE STOOD DISCHARGED. IN THE INSTANT CASE, TH E ASSESSEE HAD DISCLOSED ALL MATERIAL FACTS IN REGARD TO THE CLAIM MADE, THE ONUS PLACED UPON THE ASSESSEE STOOD DISCHARGED. IN THE INSTANT CASE, THE ASSESSEE HAD DISCLOSED ALL THE PARTICULARS OF INCOME. HE AO DIS ALLOWED THE EXPENSES CLAIMED ON THE GROUND THAT THEY WERE N OT INCURRED FOR THE BUSINESS PURPOSE OF THE ASSESSEE A ND THAT THEY HAVE BEEN CLAIMED AGAINST EXEMPTED INCOME. TH US, IT ITA NO. 3628/D/2013 M/S CITI FINANCIAL CONSUMER I NDIA LTD. 17 CANNOT BE HELD THAT THE ASSESSEE HAS FILED INACCURA TE PARTICULARS OF INCOME OR HAD CONCEALED ITS INCOME. THUS, THE PENALTY CANNOT BE LEVIED FOR THIS REASON ALSO. WE ALSO OBSERVE THAT THE EXPENSES CLAIMED BY THE ASSESSEE H AVE NOT BEEN FOUND BY THE AO AS BOGUS OR FALSE. THUS THE GENUINENESS OF THE EXPENSES INCURRED BY THE ASSESSE E HAS NOT BEEN DOUBTED BY THE AO AND, THEREFORE, THE PENA LTY CANNOT BE LEVIED ON THE ASSESSEE STILL FURTHER, THE ASSESSEE EXPLAINED THAT IT WAS DUE TO GENUINE MISTAKE THAT I T OMITTED TO SHOW THAT THE CAPITAL GAIN OF RS. 1,47,9 01/- ON THE SALE OF SIX CARS AND THAT AS SOON AS IT WAS POI NTED OUT, THE SAME WAS ACCEPTED BY THE ASSESSEE. IN THIS CON TEXT, THE LD. AR OF THE ASSESSEE BY REFERRING TO THE ORDE R OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. SURESH CHAND MITTAL, 251 ITR 09, SUBMITTED THAT IT HAS BEE N HELD THAT WHERE THE DEPARTMENT HAS NOT DISCHARGED I TS BURDEN OF PROVING CONCEALMENT AND HAS SIMPLY RESTED ITS THE PENALTY COULD NOT BE IMPOSED . HENCE, FOR THE REASON GIVEN IN THE FOREGOING, WE SET ASIDE THE ORDER OF T HE CIT(A) AND THE AO AND DELETE THE PENALTY OF RS. 8,2 6,160/- [EMPHASIS SUPPLIED] 356 ITR 700 (MAD.) (HC) CIT VS. SHRIRAM PROPERTIES & CONSTRUCTIONS (CHENNAI) LTD. 214 TAXMAN 94 (MAG.) (GUJ.) (HC) CIT VS. SHREE RAM MULTI TECH LTD. 352 ITR 394 (MAG.) (P&H) (HC) CIT VS. AMTEK AUTO LTD. 18. KEEPING IN VIEW OF THE AFORESAID DISCUSSION, WE ARE OF THE VIEW THAT NO PENALTY U/S 271(1)(C) OF THE ACT CAN BE JUS TIFIABLY BE LEVIED ON THE FACTS PRESENT ASSESSEE. WE ALSO FOUND THAT THE CAS E OF THE ASSESSEE IS NOT THAT CASE WHERE THE REVENUE AUTHORITY HAS FOUND ANY FACTS HAD NOT BEEN DISCLOSED BY THE ASSESSEE. THE REVENUE AUTHOR ITY HAS ALSO FAILED TO ESTABLISH THAT IN THE RETURN OF INCOME THE ASSESSEE HAS EITHER BEEN SHOWN AS INCORRECT OR INACCURATE PARTICULARS OF ITS INCOM E. WE ARE OF THE VIEW THAT MERELY BECAUSE THE EXPENDITURE INCURRED HAS BE EN DISALLOWED DOES NOT LEAD TO AN INFERENCE THAT, IT IS A CASE OF FURN ISHING INACCURATE PARTICULARS OF INCOME. IF AN ASSESSEE HAS BEEN ABL E TO OFFER AN EXPLANATION, WHICH IS NOT FOUND BY THE REVENUE AUTH ORITIES TO BE FALSE, AND ASSESSEE HAS BEEN ABLE TO PROVE THAT SUCH EXPLA NATION IS BONAFIDE AND THAT ALL THE FACTS RELATING TO THE SAME HAVE BE EN DISCLOSED BY HIM, THE ITA NO. 3628/D/2013 M/S CITI FINANCIAL CONSUMER I NDIA LTD. 18 ASSESSEE SHALL BE OUT OF THE CLUTCHES OF EXPLANATIO N 1 TO SECTION 271(1)(C) OF THE ACT AND IN SUCH CASES NO PENALTY SHALL BE IM POSED. WE ARE OF THE VIEW THAT ASSESSEE HAS ESTABLISHED ITS CASE WITH TH E SUPPORT OF VARIOUS DOCUMENTARY EVIDENCE AS WELL AS THE PROVISION OF LA W AND THE DECISION RENDERED BY THE HONBLE SUPREME COURT OF INDIA AND THE HONBLE HIGH COURTS THAT ASSESSEE HAS DISCLOSED ALL THE TRUE AND CORRECT FACTS IN ITS RETURN AND HAS NOT FURNISHED ANY INACCURATE PARTICU LARS OF ITS INCOME. THEREFORE, IN OUR VIEW THE IMPUGNED ORDER IS NOT SU STAINABLE IN THE EYE OF LAW AND WE CANCEL THE IMPUGNED ORDER DATED 26/03/20 11 PASSED BY THE LD. CIT(A) BY ACCEPTING THE APPEAL FILED BY THE ASS ESSEE. 19. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 29/10/2014 SD/- SD/- (S.V. MEHROTRA) (H.S. SIDHU) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 29/10/2014 *KAVITA, P.S. COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR ITA NO. 3628/D/2013 M/S CITI FINANCIAL CONSUMER I NDIA LTD. 19