Shri Vasu Dev Pahwa, New Delhi V. ACIT, New Delhi

ITA 463/DEL/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 65803 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 8 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-10-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: H
• Next Hearing Date: 09-10-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 27-01-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHUMANA SEN
• Keywords: Depreciation; Wrong claim
• Section: 143(3); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH `H : NEW DELHI) BEFORE SHRI U.B.S. BEDI, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER ITA NO.463/DEL./2011 (ASSESSMENT YEAR : 2005-06) VASU DEV PAHWA, VS. ACIT, CIRCLE 27(1), B-59, NARAINA INDL. AREA, PHASE-II, NEW DELHI. NEW DELHI. (PAN/GIR NO.AAKPP0764G) (APPLICANT) (RESPONDENT) ASSESSEE BY : SHRI K. SAMPATH, ADV. REVENUE BY : SMT. SHUMANA SEN, SR.DR ORDER PER U.B.S. BEDI, J.M. THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER PASSED BY THE CIT(A)- XIV, NEW DELHI, DATED 12.11.10, RELEVANT TO ASSESSM ENT YEAR 2005-06, WHEREBY CONFIRMATION OF PENALTY OF RS.6,12,610/-, IMPOSED U/S 271(1)(C) HAS BEEN CHALLENGED. 2. THE ASSESSMENT PROCEEDINGS IN THIS CASE WERE COM PLETED U/S 143(3) VIDE ORDER DATED 24.12.2007. ASSESSEE DECLARED INCOME OF RS.2 ,23,19,410 AS AGAINST THE RETURNED INCOME OF RS.2,00,40,973/- AFTER DISALLOWING DEPREC IATION ON LAND AND IMPORTED CAR. SIMULTANEOUSLY, ASSESSING OFFICER INITIATED PENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT AND AFTER DUE NOTICE AND CONSIDERING THE REPLY OF T HE ASSESSEE, PENALTY OF RS.6,12,612/- WAS IMPOSED. 3. AGAINST SUCH IMPOSITION OF PENALTY, ASSESSEE TOO K UP THE MATTER IN APPEAL AND SUBMITTED BEFORE FIRST APPELLATE AUTHORITY THAT MIS TAKE OF CLAIM OF DEPRECIATION IN RESPECT OF IMPORTED CAR AND LAND INCLUDED IN THE BLOCK OF B UILDINGS HAD COME TO THE NOTICE OF THE AUDITORS DURING THE AUDIT OF SUBSEQUENT YEAR I.E. Y EAR ENDED 31.3.2006 AND IN THE RETURN OF INCOME FILED FOR THE ASSESSMENT YEAR 2006-07, THE A SSESSEE HAD SUO MOTO REDUCED CLAIM OF DEPRECATION BY RS.18,20,000/- AND PAID ADDITIONA L TAX THEREON WHILE FILING THE RETURN I.T.A. NO.463/DEL./2011 (A.Y. : 2005-06) 2 FOR THE A.Y. 2006-07 WHICH CAME TO BE FILED ON 31.1 0.2006. THIS FACT WAS DULY BROUGHT TO THE NOTICE OF THE ASSESSING OFFICER DURING THE A SSESSMENT PROCEEDINGS FOR ASSESSMENT YEAR 2005-06 VIDE LETTER DATED 26.11.2007. DURING THE COURSE OF PENALTY PROCEEDINGS U/S 271(1)(C), IT WAS DULY EXPLAINED TO THE ASSESSING O FFICER VIDE LETTER DATED 16.6.2008 IN CONTINUATION TO EARLIER LETTER DATED 18.1.2008 THAT THE DEPRECIATION ON IMPORTED CAR WAS INADVERTENTLY CLAIMED AND DEPRECIATION OF RS.15 LAC S ON LAND WAS ALSO CLAIMED INADVERTENTLY. REGARDING DEPRECIATION ON LAND, THE ASSESSEE HAD DURING THE YEAR PURCHASED A BUILDING FOR RS.2,51,80,502/- (WHICH I NCLUDED LAND) AND WHILE FINALIZING THE ACCOUNT AS ON 31.3.2005, DEPRECIATION WAS TAKEN AS 10% OF ENTIRE PURCHASE PRICE OF THE BUILDING WITHOUT BIFURCATING PURCHASE PRICE BETWEEN BUILDING AND THE LAND UNDERNEATH PURCHASED BY THE ASSESSEE. BY PLACING THE COPIES O F THESE LETTERS DURING THE FIRST APPELLATE PROCEEDINGS, IT WAS PLEADED THAT ASSESSING OFFICER HAS UNJUSTIFIABLY REJECTED THE BONA FIDE EXPLANATIONS SUBMITTED BY THE ASSESSEE AND IMPOSED THE HUGE PENALTY OF RS.6,12,610/- U/S 271(1)(C) OF THE ACT BY HOLDING THAT MISTAKE IN COM PUTATION OF INCOME FOR THE ASSESSMENT YEAR 2005-06 CAME TO LIGHT ONLY IN THE COURSE OF AS SESSMENT PROCEEDINGS AND IT IS NOT SUO MOTO ACTION OF ASSESSEE. BUT, THIS FINDING OF THE ASSESSING OFFICER IS INCORRECT AS THE RETURN FOR THE ASSESSMENT YEAR 2006-07, REVISING TH E CLAIM OF RS.18,20,000/- AND PAYING ADDITIONAL TAX, WAS FILED ON 31.10.2006 WHEREAS ASS ESSMENT FOR ASSESSMENT YEAR 2005-06 WAS CONCLUDED ONLY ON 24.12.2007 I.E. 1 YEAR 2 MONT HS AFTER PAYMENT OF ADDITIONAL TAX ON FILING OF RETURN AFTER REVISING THE DEPRECIATION CL AIM MADE IN ASSESSMENT YEAR 2005-0,6 INADVERTENTLY. BY PLACING RELIANCE ON VARIOUS CASE LAWS AS CITED BEFORE THE CIT(A) AND THE DECISIONS IN THE FOLLOWING CASES, IT WAS PLEADE D FOR DELETION OF PENALTY: 1. K.P. MADHUSUDANAN VS. CIT, 251 ITR 99; 2. CIT VS. K.R. SADAYAPPAN, 185 ITR 49 (SC); 3. B.A. BALASUBRANIUM & BROTHERS CO. VS. CIT, 236 I TR 977(SC); 4. ADDL.CIT VS. JEEVAN LAL SHAH (1994) 205 ITR 244 ; 5. CIT VS. RAHULJEE & CO., 250 ITR 225; 6. CIT VS. AJAIB SINGH & CO., 253 ITR 630 (P&H); 7. CIT VS. RITA MALHOTRA, 154 I.T.R. 550 (DEL.); 8. NUCHEM LTD. VS. DCIT (1993),47 ITD 487(DEL.); I.T.A. NO.463/DEL./2011 (A.Y. : 2005-06) 3 9. SHIV NARAIN KHANNA VS. CIT, PATIALA, 107 ITR 542 (P&H); 10. KEDAR NATH SANWAL DASS VS. CIT, 111 ITR 440 (P& H); 11. CIT VS. GURBACHAN LAL, 250 ITR 157; 12. ACIT VS. SUPREME INDUSTRIES LTD., (2009) (28 SO T 19); 13. UNION OF INDIA & OTHERS VS. DHARMENDRA TEXTILES PROCESSORS & OTHERS (306 ITR 277); 14. DILIP N. SHROFF (2007) 8 SCALE 304 (SC); 15. CIT VS. ESCORTS FINANCE LTD., 292 ITR 658; 16. CIT VS. MOSER BAER INDIA LTD., 184 TAXMAN 8; 17. CIT VS. RMP PLASTO (P) LTD., 184 TAXMAN 372; 18. CIT VS. ZOOM COMMUNICATION PVT. LTD. (2010)-TIO L-361-HC-DEL-IT; AND 19. CIT VS. RELIANCE PETRO PRODUCTS PVT. LTD., (201 0) 322 ITR 158 (SC) BUT, LD. CIT(A) HAS CONCLUDED TO CONFIRM THE ORDER OF ASSESSING OFFICER AS PER PARA.5 AT PAGE 12 OF HIS ORDER AS UNDER: IN FACTUAL CIRCUMSTANCES OF THIS CASE, I HAVE NO H ESITATION IN HOLDING THAT THE FACTUM OF CONCEALMENT OF INCOME HAD BEEN FULLY ESTABLISHED AN D THE LEVY OF PENALTY U/S 271(1)(C) WAS JUSTIFIED. I AM FORTIFIED IN THIS VIEW BY THE RATI OS DECIDENDI LAID DOWN IN THE CASES REPORTED AS WESTERN AUTOMOBILES (INDIA) VS. CIT (1978) 112 ITR 1048 (BOM.); DURGA TIMBER WORKS VS. CIT (1971) 79 ITR 63 (DEL.); ADDL.CIT VS. SMT. CHA NDRAKANTA & ANR. (1992) 205 ITR 607 (MP); S.S. RATANCHAND BHOLANATH VS. CIT (1994) 201 ITR 682 (MP); CIT VS. SREE KRISHNA TREADING CO. (2002) 253 ITR 645 (KER.); ELECTRICAL AGENCIES CORPORATION VS. CIT (2002) 253 ITR 619 (DEL.); K.P. MADHUSUDANAN VS. CIT (2001), 251 ITR 99 (SC) AND ESCORT FINANCE VS. CIT, 28 DTR 293. IN A NUTSHELL, THE CONCEALMEN T OF INCOME AND FURNISHING OF INACCURATE PARTICULARS IS ESTABLISHED IN RESPECT OF DISALLOWAN CE OF DEPRECIATION. IN VIEW OF THESE FACTS AND THE LEGAL POSITION CITED IN THE PRECEDING PARAS, I HEREBY UPHOLD THE ACTION OF THE ASSESSING OFFICER. THE PENALTY LEVIED IS THUS UPHELD. 4. STILL AGGRIEVED, ASSESSEE HAS COME UP IN FURTHER APPEAL AND WHILE REITERATING THE SUBMISSIONS AS MADE BEFORE THE ASSESSING OFFICER AND BEFORE LD. CIT(A), THE ASSESSEE HAS ALSO RELIED UPON THE FOLLOWING DECISIONS: 1. B.A. BALASUBRAMANIAM AND BROS. & CO. VS. CIT, 23 6 ITR 977 (SC); 2. ACIT VS. JASUBHAI BUSINESS SERVICE (P) LTD. (200 6) 5 SOT 36 (MUM.); 3. K.P. MADHUSUDHANAN VS. CIT, 251 ITR 99; I.T.A. NO.463/DEL./2011 (A.Y. : 2005-06) 4 4. CIT VS. JEEVAN LAL SHAH (1994), 205 ITR 244; 5. CIT VS. GURBACHAN LAL, 250 ITR 157; 6. ACIT VS. SUPREME INDUSTRIES LTD. (2009) (28 SOT 19); 7. UNION OF INDIA & OTHERS VS. DHARMENDRA TEXTILES PROCESSORS & OTHERS (306 ITR 277); 8. CIT VS. ESCORTS FINANCE LTD., (183 TAXMAN 453) ( DEL.), 292 ITR 658; 9. CIT VS. RMP PLASTO (P) LTD., 184 TAXMAN 372; 10. CIT VS. ZOOM COMMUNICATION PVT. LTD. (2010)-TIO L-361-HC-DEL-IT; TO PLEAD FOR DELETION OF THE PENALTY IMPOSED BY THE ASSESSING OFFICER AND CONFIRMED BY THE CIT(A). 5. LD.COUNSEL FOR THE ASSESSEE WHILE DISTINGUISHING THE DECISION IN THE CASE OF ZOOM COMMUNICATION PVT. LTD. (SUPRA) HAS FURTHER PLEADE D THAT THERE IS NO MALA FIDE INVOLVED AS ASSESSEE DID NOT HAVE INTENTION OF EVADING TAX WHICH IS CLEA RLY EVIDENT FROM THE FACT THAT TAX ON EXCESS DEPRECIATION CLAIMED IN THE YEAR UNDER CONSIDERATIO N HAS BEEN PAID BY REDUCING THE EXCESS CLAIM FROM DEPRECIATION CLAIMED IN ASSESSMENT YEAR 2006-07 SUO MOTO AND VOLUNTARILY BY THE ASSESSEE THROUGH RETURN FOR ASSESSMENT YEAR 2006-07 FILED ON 30.10.2 006 I.E. 1 YEAR 2 MONTHS BEFORE ASSESSMENT PROCEEDINGS FOR ASSESSMENT YEAR 2005-06 WERE COMPLE TED. MOREOVER, AS REGARDS THE CLAIM OF DEPRECATION, SAME WAS MADE AS PER PERCENTAGE OF DEP RECIATION PRESCRIBED UNDER APPENDIX I TO THE I.T. RULES, 1962 AT 20% ON THE CAR (BLOCK A) AS PER PA RA.III(2), PART A THERETO AND 10% ON THE BUILDING (BLOCK E) AS PER PARA.I (2), PART A THERETO. SIN CE, THE CLAIM WAS NOT MADE WITHOUT FOUNDATION AND WAS BASED ON RATES OF DEPRECIATION AS PRESCRIBED BY LAW. DEPRECIATION ON BUILDING WAS CLAIMED ON PURCHASE PRICE OF THE BUILDING AND COST OF ADDITION AL CONSTRUCTION, TOTALING RS.2,51,80,502/-. SINCE, THE ASSESSEE HAS PURCHASED AN EXISTING BUILDING OF FACTORY PREMISES, THE DEPRECIATION WAS CLAIMED ON ENTIRE PURCHASE VALUE AND IT WAS REALISED LATER ON DURING THE COURSE OF FINALIZATION OF THE ACCOUNTS O F THE NEXT YEAR THAT PURCHASE PRICE OF THE BUILDING O F RS.180 LAKHS INCLUDED RS.150 LAKHS TOWARDS LAND. HENCE, THE ORIGINAL CLAIM WAS ONLY DUE TO MIS-CONCE PTION OF FACTS. MOREOVER, THE NORMAL RATES OF DEPRECATION OF CAR HAD BEEN APPLIED WHILE COMPLETIN G DEPRECIATION CHART AS THE DEPRECIATION WAS CLAIMED ON THE BASIS OF MERE MIS-CONCEPTION OF FACT S AND THERE WAS NO MALA-FIDE INVOLVED. IN THE CASE OF ZOOM COMMUNICATION PVT. LTD. (SUPRA), CONSI DERATION WAS COMPLETELY DIFFERENT AND SINCE THERE IS NO MALA FIDE INVOLVED IN THIS CASE AND PRI NCIPLE LAID DOWN BY THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. RELIANCE PETRO PRODUCTS PVT. LT D. (SUPRA), IS FULLY APPLICABLE, SO, IN VIEW OF THE SAME, IT WAS SUBMITTED THAT PENALTY IMPOSED U/S 271 (1)(C) AND CONFIRMED IS UNJUSTIFIED AND MAY BE DELETED. FURTHER, RELIANCE WAS PLACED ON CIT VS. G LOW TECH STEELS (P) LTD., 280 ITR 133 (GUJ.), 277 I.T.A. NO.463/DEL./2011 (A.Y. : 2005-06) 5 ITR 335 (MP), AND CONCORD OF INDIA INSURANCE CO. LT D. VS. SMT. NIRMALA DEVI & OTHERS, 118 ITR 507 TO PLEAD FOR DELETION OF THE IMPUGNED PENALTY. 6. LD.DR RELIED UPON THE ORDERS OF AUTHORITIES BELO W, HAS PLEADED FOR CONFIRMATION OF THE IMPUGNED ORDER. IT WAS FURTHER SUBMITTED THAT ALL THE CASE LAWS BEING CITED HEREBEFORE THIS BENCH WAS CITED BEFORE CIT(A), WHO, WHILE CONSIDERING THE FAC TS OF THE CASE AS WELL AS CASE LAWS AND BY DISCUSSING THE ISSUE ELABORATELY IN DETAIL AND PLAC ING RELIANCE ON THE CASE LAWS CITED IN THE ORDER PASSED BY THE CIT(A) HAS RIGHTLY CONCLUDED TO CONFI RM THE ACTION OF THE ASSESSING OFFICER BY GIVING ELABORATE REASONS. MOREOVER, THE RECTIFICATION OF CLAIM IN SUBSEQUENT YEAR CANNOT CURE WRONG CLAIM MADE IN THE EARLIER YEAR, IF IT HAS NOT BEEN WITHDR AWN DURING THE ASSESSMENT PROCEEDINGS, IT WAS THUS PLEADED FOR CONFIRMATION OF THE IMPUGNED ORDER. 7. WE HAVE HEARD BOTH THE SIDES, CONSIDERED THE MAT ERIAL ON RECORD AS WELL AS CASE LAWS CITED AND FIND THAT SO FAR AS FACTS OF THE CASE ARE CONCE RNED, THERE IS NO DISPUTE THAT THE ASSESSEE HAS CLA IMED DEPRECATION ON IMPORTED CAR AS WELL AS DEPRECIATION ON LAND AND IT IS THE MAIN CONTENTION OF THE ASSESSEES LD.COUNSEL THAT SINCE BEFORE COMPLETION OF THE ASSESSMENT FOR THE YEAR UNDER CONSIDERATION, ASSESSEE HAS SUO MOTO MADE CORRECTIO N IN CLAIM OF DEPRECIATION IN THE RETURN FOR THE SUBSEQUENT YEAR WHICH WAS FILED 1 YEAR AND 2 MONTHS BEFORE THE CONCLUSION OF THE ASSESSMENT PROCEEDINGS FOR THE YEAR UNDER CONSIDERATION. SO, ACTION OF THE ASSESSEE IS BONA FIDE AND THERE IS NO ELEMENT OF MALA FIDE INVOLVED IN THE SAME. 8. AFTER CONSIDERING THE RIVAL SUBMISSIONS IN THE LIGHT OF CASE LAWS CITED BY BOTH THE SIDES, WE FIND THAT NOT EVEN A WHISPER HAS BEEN MADE I N THE PENALTY ORDER AS TO WHICH SPECIFIC PARTICULARS WERE FURNISHED INACCURATE OR WERE CONCEALED. THE EXPRESSION 'HAS CONCEALED TH E PARTICULARS OF INCOME' AND 'HAS FURNISHED IN ACCURATE PARTICULARS OF INCOME' HAVE NOT B EEN DEFINED EITHER IN SECT ION 271 OR ELSEWHERE I N THE ACT . HOWEVER, NOT WITHSTANDING THE DIFFERENCE IN THE TWO CIRCUMSTANCES, IT IS NOW WELL ESTABLISHED THAT THEY LEAD TO THE SAME EFFECT NAMELY, KEEPING OF A CERTAIN PORTION OF THE INCOME FROM THE RETURN. ACCORDING TO L AW LEXICON, THE WORD 'CONCEAL' MEANS: 'TO HIDE OR KEEP SECRET . THE WORD 'CONCEAL ' IS CON+CELARE WHICH IMPLIES TO HIDE. IT MEANS TO HIDE OR WITH DRAW FROM OBSERVATION; TO COVER OR KEEP FROM SIGHT ; TO PREVENT THE DISCOVERY OF ; TO WITHHOLD KNOWLEDGE OF . THE OFFENCE OF CONCEALMENT I S, THUS, A DIRECT AT TEMPT TO HIDE AN ITEM OF INCOME OR A PORTION THEREOF FROM THE KNOWLEDGE OF THE INCOME-TAX AUTHORITIES.' IN WEBSTER'S DICTIONARY, ' INACCURATE' HAS BEEN DE FINED AS : I.T.A. NO.463/DEL./2011 (A.Y. : 2005-06) 6 'NOT ACCURATE, NOT EXACT OR CORRECT ; NOT AC CORDING TO TRUTH; ERRONEOUS; AS AN INACCURATE STATEMENT , COPY OR TRANSCRIPT .'. 9. THE PENALTY U/S 271(1)(C) OF THE ACT IS LEVIABLE IF THE AO IS SATISFIED IN TH E COURSE OF ANY PROCEEDINGS UNDER THIS ACT T HAT ANY PERSON HAS CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHED INACCURATE PARTICULARS OF SUCH INCOME. IT IS SETTLED POSITION THAT ASSESSMENT PROCEEDINGS AND PENALTY PROCEEDINGS ARE SEPARATE AND DISTINCT AND AS HELD BY HON'BLE SUPREME COURT IN THE CASE OF ANANTH RAMAN VEERASINGHAIAH & CO. VS. CIT, 123 ITR 457, THE FINDINGS IN THE ASSESSMENT PRO CEEDINGS CANNOT BE REGARDED AS CONCLUSIVE FOR THE PURPOSES OF THE PENALTY PROCEEDINGS. IT IS ALSO WELL SETTLED THAT THE CRITERION AND YARDSTICKS FOR THE PURPOSE OF IMPOSING PENALT Y U/S 271(1) (C) OF THE ACT ARE DIFFEREN T THAN THOSE APPL IED FOR MAKING OR CONFIRMING THE ADDITIONS. IT IS, THEREFORE, NECESSARY TO RE-APPRECIATE AND RECONSIDER THE MATTER SO AS TO FIND OUT AS TO WHETHER THE ADDITION OR DISALLOWANCE MADE IN THE QUANTUM PROC EEDINGS ACTUALLY REPRESENTS THE CONCEALMENT ON THE PART OF THE ASSESSEE AS ENVISAGED IN SEC. 271(1)(C) OF THE ACT, AND WHETHER IT IS A FIT CASE TO IMPOSE THE PENALTY BY INVOKING THE SAI D PROVISIONS. THE PROVISIONS OF SECTION 271(1)(C) OF THE ACT STIPULATE THAT IF T HE ASSESSING OFFICER OR THE CIT(APPEALS) OR T HE COMMISSIONER, IN THE COURSE OF PROCEEDINGS U NDER THIS ACT, IS SATISFIED THAT ANY PERSO N HAS CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHED INACCURATE PARTICULARS THEREOF, HE M AY DIRECT THAT SUCH PERSON SHALL PAY BY WAY OF PENALTY A SUM WHICH SHALL NOT BE L ESS THAN BUT WHICH SHALL NOT EXCEED THREE TIMES TH E AMOUNT OF TAX SOUGHT TO BE EVADED BY A REASON OF THE CONCEALMENT OF PARTICULARS O F HIS INCOME. EXPLANATION 1 TO SECTION 271(1 )(C) OF THE ACT MENTIONS THAT WHERE IN RESPECT OF ANY FACTS MATERIAL TO THE COMPUTATION OF THE TOTAL INCOME OF ANY PERSON UNDER THE ACT , SUCH PERSON FAILS TO OFFER AN EXPLANATION OR OFFERS AN EXPLANATION WHICH IS FOUND BY THE AO O R THE CIT (APPEALS) OR THE COMMISSIONER TO BE FALSE, OR SUCH PERSON OFFERS AN EXPLANATI ON WHICH HE IS NOT ABLE TO SUBSTANTIATE AND FAILS TO PROVE THAT SUCH EXPLANATION IS BONA FIDE AND THAT ALL THE FACTS RELATING TO THE SA ME AND MATERIAL TO THE COMPUTATION OF HIS TOTAL INCOME HAVE BEEN DISCLOSED BY HIM, THEN THE AMOUNT ADDED OR DISALLOWED IN COMPUTING THE TOTAL INCOME OF SUCH PERSON AS A RESULT THEREOF SHALL FOR THE PURPOSE OF CLAUSE (C) OF SECTION 271(1), BE DEEMED TO REPRESE NT THE INCOME IN RESPECT OF WHICH PARTICULARS HAVE BEEN CONCEALED. IN OTHER WORDS, THE NECES SARY INGREDIENTS FOR ATTRACTING EXPLANATION 1 TO SECT ION 271(1)(C) ARE THAT (I) THE PERSON FAILS TO OFFER THE EXPLANATION, OR (II) HE OFFERS THE EXPLAN ATION WHICH IS FOUND BY THE AO OR THE CIT (APPEALS) OR THE COMMISSIONER TO BE FALSE, OR (III) THE PERSON OFFERS EXPLANATION WHICH HE IS I.T.A. NO.463/DEL./2011 (A.Y. : 2005-06) 7 NOT ABLE TO SUBSTANTIATE AND FAILS TO PROVE THAT SUCH EXPLANATION IS BONA FIDE AND THAT A LL THE FACTS RELATING TO THE SAME HAVE BEEN DISCLOSED BY HIM. 10. IF THE CASE OF ANY ASSESSEE FALLS IN ANY OF THESE THREE CATEGORIES, THEN THE DEE MING PROVISION PROVIDED IN EXPLANATION 1 TO SECTION 271(1)(C) COMES INTO PLAY, AND THE AMOUNT ADDED OR DISALLOWED IN COMPUTING THE TOTAL I NCOME SHALL BE CONSIDERED AS THE INCOME IN RESPECT OF WHICH PARTICULARS HAVE BEEN CONCE ALED, FOR THE PURPOSES OF CLAUSE (C) OF SECTIO N 271(1), AND THE PENALTY FOLLOWS. ON THE OTHER HAND, IF THE ASSESSEE IS ABLE TO OFFER AN EXPLANATION, WHICH IS NOT FOUND BY THE AUTH ORITIES TO BE FALSE, AND ASSESSEE HAS BEEN ABLE TO PROVE THAT SUCH EXPLANATION IS BONA FIDE AN D THAT ALL THE FACTS RELATING TO THE SAME HAVE BEEN DISCLOSED BY HIM, THE ASSESSEE SHALL B E OUT OF THE CLUTCHES OF EXPLANATION 1 T O SECTION 271(1) (C) OF THE ACT , AND IN THAT CASE, THE PENALTY SHALL NOT BE IMPOSED. IN THE INSTANT CASE, THE ASSESSEE DISCHARGED THE O NUS CAST ON IT IN TERMS OF EXPLANATION 1 TO SEC. 271(1)(C) OF THE ACT. HONBLE SUPREME COUR T IN THE CASE OF DILIP N. SHROFF V. J T . CIT [2007] 210 CTR (SC) 228 : [2007] 291 ITR 519 (SC) WHILE CONSIDERING THE SCOPE OF THESE PROVISIONS U/S 271(1)(C) OF THE ACT OBSE RVED IN THE FOLLOWING TERMS: THE LEGAL HISTORY OF SECT ION 271(1) (C) O F THE ACT TRACED FROM THE 1922 ACT PRIMA FACIE SHOWS THAT THE EXPLAN ATIONS WERE APPLICABLE TO BOTH THE PARTS. HOWEVER, EACH CASE MUST BE CONS IDERED ON ITS OWN FACTS. THE ROLE OF THE EXPLANATION HAVING REGARD TO THE PRINCIPLE OF STATUTORY INTERPRETATION MUST BE BORNE IN MIN D BEFORE INTERPRETING THE AFOREMENTIONED PROVISIONS. CLAUSE (C) OF SUB- SECT ION (1) OF SECTION 271 CATEGORICALLY STATES THAT THE PENALTY WOU LD BE LEVIABLE IF THE ASSESSEE CONCEALS THE PARTICULARS OF HIS INC OME OR FURNISHES INACCURATE PARTICULARS THEREOF . BY REASON OF SUCH CONC EALMENT OR FURNISHING OF INACCURATE PARTICULARS ALONE, THE ASSESSEE DOE S NOT IPSO FACTO BECOME LIABLE FOR PENALTY. IMPOSITION OF PENALTY IS NOT AUTOMATIC. LEVY OF PENALTY IS NOT ONLY DISCRETIONARY IN NATURE BUT SUCH DISCRETION IS REQUIRED TO BE EXERCISED ON THE PART OF THE ASSESSING OFFICER KEEPING THE RELEVANT FACTORS IN MIND. SOME OF THOS E FACTORS APART FROM BEING INHERENT IN THE NATURE OF PENALTY PROCEEDIN GS AS HAS BEEN NOT ICED IN SOME OF THE DECISIONS OF THIS COURT , INHERES ON THE FACE OF THE STATUTORY PROVISIONS. PENALTY PROCEEDINGS ARE NOT TO BE INITIATED, AS HAS BEEN NOTICED BY THE WANCHOO COMMITTEE, O NLY TO HARASS THE ASSESSEE. THE APPROACH OF THE ASSESSING OFFIC ER IN THIS BEHALF MUST BE FAIR AND OBJECTIVE. THE TERM ' INACCURATE PARTICULARS' IS NOT DE FINED. FURNISHING OF AN ASSESSMENT OF VALUE OF THE PROPERTY MAY N OT BY ITSELF BE I.T.A. NO.463/DEL./2011 (A.Y. : 2005-06) 8 FURNISHING OF INACCURATE PARTICULARS. EVEN, IF THE EXPLANATIONS ARE TAKEN RECOURSE TO, A FINDING HAS TO BE ARRI VED AT HAVING REGARD TO CLAUSE (A) OF EXPLANATION 1 THAT THE ASSES SING OFFICER IS REQUIRED TO ARRIVE AT A FINDING THAT THE EXPLANATIO N OFFERED BY AN ASSESSEE, IN THE EVENT HE OFFERS ONE, WAS FALSE. HE MUST BE FOUND TO HAVE FAILED TO PROVE THAT SUCH EXPLANATION IS NOT ONLY NOT BONA FIDE BUT AL L THE FACTS RELATING TO THE SAME AND MAT ERIAL TO THE INCOME WERE NOT DISCLOSED BY HIM. THUS, APART FROM HIS EXPLANATION BEING NOT BONA FIDE, IT SHOULD HAVE BEEN FOUND AS OF FACT THAT HE HAS NOT DISCLOSED ALL THE FACTS WHICH WAS MATERIAL TO THE COMPUTATION OF HIS INCOME. 11. IN THE LIGHT OF AFORESAID OBSERVATIONS OF THE HONBLE APEX COURT, WHAT IS TO BE S EEN IN THE INSTANT CASE, IS WHETHER THE CLAIM FOR DEDUCTION OF DEPRECIATION WAS MADE BY THE ASSESSEE WAS BONA-FIDE AND WHETHER AT ALL THE MATERIAL FACTS RELEVANT THERETO HAVE BEEN FURNISHED AND ONCE IT IS SO ESTABLISHED, THE A SSESSEE CANNOT BE HELD LIABLE FOR CONCEALMENT PENALTY U/S 271(L)(C) OF THE ACT . THE ASSE SSING OFFICER HAS NOT BEEN ABLE TO ESTABLIS H THAT THE CLAIM OF THE ASSESSEE FOR CLAIM OF DEPREC AITION00 WAS NOT BONA FIDE OR THAT ANY SPEC IFIC PARTICULARS WERE CONCEALED OR FURNISHED INACCUR ATE. A MERE REJECTION OF THE CLAIM OF TH E ASSESSEE BY RELYING ON DIFFERENT INTERPRETATI ONS DOES NOT AMOUNT TO CONCEALMENT OF THE PARTICULARS OF INCOME OR FURNISHING INACCURAT E PARTICULARS THEREOF BY THE ASSESSEE. HON'BLE APEX COURT IN CIT V. RELIANCE PETRO PRODUCTS (P.) LTD. [2010] 322 ITR 158, AFTER CONSIDERING VARIOUS DECISIONS INCLUDING DILIP N. SHROFF V. JT. C IT [2007] 291 ITR 519/ 161 TAXMAN 218 (SC) AN D UNION OF INDIA V. DHARMENDRA TEXTILE PROCESSORS [ 2008] 306 ITR 277 / 174 TAXMAN 571 (SC) CONCLUDED THAT A MERE MAKING OF A CLAIM, WHICH IS NOT SUSTAINABLE IN LAW, BY ITSELF, WILL NOT AMOUNT TO FURNISHING INACCURATE PARTICULARS REGARDING THE INCOME OF THE ASSESSEE. SUCH A CLAIM MA DE IN THE RETURN CANNOT AMOUNT TO FURNISHING INACCUR ATE PARTICULARS. IN THE CASE UNDER CONSIDERAT ION, THERE IS NOTHING TO SUGGEST THAT THE ASSES SEE FURNISHED ANY INACCURATE PARTICULARS OR CONCEALED THE PARTICULARS. ADMITTEDLY, THE CLAI M FOR DEPRECIATION WAS THERE IN THE DOCUMENTS FORWARDED WITH THE RETURN. IN THIS VIEW OF T HE MATTER, NO FAULT CAN BE FOUND WITH THE CLAI M OF THE ASSESSEE THAT IT HAD CLAIMED THE DEDUCT IO N IN A BONA FIDE MANNER. 12. IN THE CASE UNDER CONSIDERATION, IT IS NOTED THAT THE ASSESSEE HAD GIVEN ALL THE PARTICULARS OF INCOME AND HAD DISCLOSED ALL FACTS TO THE AO IN RELATION TO CLAIM OF DEPRECIATIO N. MERE DISALLOWANCE OF A CLAIM WILL NOT AMOUNT TO FILING OF INACCURATE PARTICULARS OF INCOME. IT CAN AT BEST BE A WRONG CLAIM NOT A FALSE CLAI M. IN SUCH CIRCUMSTANCES, HONBLE DELHI HIG H COURT HELD IN THE CASE OF COMMISSIONER OF IN COME-TAX VS. BACARDI MARTINI INDIA LIMITED., 288 I.T.A. NO.463/DEL./2011 (A.Y. : 2005-06) 9 ITR 585(DEL) THAT NO PENALTY WAS LEVIABLE. IN CIT VS. HARSHVARDHAN CHEMICALS & MINERALS LTD. (259 ITR 212) (RAJ), HONBLE RAJASTHAN HIGH COURT UPHELD THE FINDING OF THE TRIBUNAL THAT WHEN THE ASSESSEE HAS CLAIMED SOME AMOUNT THOUGH THAT IS DEBATABLE, IN SUCH CASES, IT CANNOT BE SAI D THAT THE ASSESSEE HAS CONCEALED ANY INCOME OR FUR NISHED INACCURATE PARTICULARS FOR EVASION OF THE TAX. RECENTLY, HONBLE APEX COURT IN RELIANCE P ETRO PRODUCTS(SUPRA) HELD THAT A MERE MAKING OF THE CLAIM, WHICH IS NOT SUSTAINABLE IN LAW, BY ITSE LF, WILL NOT AMOUNT TO FURNISHING INACCURATE PARTICULARS REGARDING THE INCOME OF THE ASSES SEE. THUS, MERELY BECAUSE THE ASSESSEE HAD CLAIME D THE DEPRECIATION, WHICH CLAIM WAS NOT ACCEPTED OR WAS NOT ACCEPTABLE TO THE REVENUE, THAT BY ITSELF WOULD NOT, ATTRACT THE PENALTY U/S 271(1)(C) OF THE ACT. IN THE PRESENT CASE, WE ARE OF THE OPINION THAT THE DISALLOWANCE OF CLAIM FOR DEP RECIATION, IN VIEW OF FACTS AND CIRCUMSTANCES, CANNOT BE CONSIDERED AS CONCEALMENT OF INCOME OR FURNISHING INACCURATE PARTICULARS THEREOF, ESPECIALLY WHEN ALL THE RELEVANT PARTICULARS WE RE DISCLOSED BEFORE THE AO. THE FOLLOWING OBSERVATIONS MADE BY THE HONBLE APEX COURT IN THE AFORESAID CASE OF M/S RELIANCE PETRO PRODUCTS(SUPRA) ARE RELEVANT: 10. IT WAS TRIED TO BE SUGGESTED THAT SECT ION 14A OF THE ACT SPECIFICALLY EXCLUDED THE DEDUCTIONS IN RESPECT O F THE EXPENDITURE INCURRED BY THE ASSESSEE IN RELATION TO INCOME WHI CH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE ACT. IT WAS FURTHER POIN TED OUT THAT THE DIVIDENDS FROM THE SHARES DID NOT FORM THE PART OF THE TOTAL INCOME. IT WAS, THEREFORE, REITERATED BEFORE US THAT THE ASSESSING OFFICER HAD CORRECTLY REACHED THE CONCLUSION THAT SINCE THE ASSESSE E HAD CLAIMED EXCESSIVE DEDUCTIONS KNOWING THAT THEY ARE INCORRECT; I T AMOUNTED TO CONCEALMENT OF INCOME. IT WAS TRIED TO BE ARGUED TH AT THE FALSEHOOD IN ACCOUNTS CAN TAKE EITHER OF THE TWO FORMS; ( I) AN ITEM OF RECEIPT MAY BE SUPPRESSED FRAUDULENTLY; (II) AN ITEM OF EXPENDITURE MAY BE FALSELY (OR IN AN AGGREGATED AMOUNT) CLAIMED, AND BOTH TYPES ATTEMPT TO REDUCE THE TAXABLE INCOME AND, THEREFORE, BOTH TYPES AMOUNT TO CONCEALMENT OF PARTICULARS OF ONE'S INCOME AS WELL AS FURNISHING OF INACCURATE PARTICULARS OF INCOME. WE DO NOT AGREE, AS THE ASSESSEE HAD FURNISHED ALL THE DETAILS OF ITS EXPENDITURE AS WEL L AS INCOME IN ITS RETURN, WHICH DETAILS, IN THEMSELVES, WERE NOT FOUND TO BE INACCURATE NOR COULD BE VIEWED AS THE CONCEALMENT OF INCOME ON ITS PAR T. IT WAS UP TO THE AUTHORITIES TO ACCEPT ITS CLAIM IN THE RETURN OR NOT. MERELY BECAUSE THE ASSESSEE HAD CLAIMED THE EXPENDITURE, WHICH C LAIM WAS NOT ACCEPTED OR WAS NOT ACCEPTABLE TO THE REVENUE, THAT BY IT SELF WOULD NOT, IN OUR OPINION, ATTRACT THE PENALTY UNDER SECTION 271 (1)(C). IF WE ACCEPT THE CONTENTION OF THE REVENUE THEN IN CASE OF VERY RETURN WHERE THE CLAIM MADE IS NOT ACCEPTED BY ASSESSING OFFICER FOR ANY REASON, THE ASSESSEE WILL INVITE PENALTY UNDER SECTION 271(1)(C). THAT IS CLEARLY NOT THE INTENDMENT OF THE LEGISLAT URE. I.T.A. NO.463/DEL./2011 (A.Y. : 2005-06) 10 11. IN THIS BEHALF THE OBSERVATIONS OF THIS COURT M ADE IN SREE KRISHNA ELECTRICAL V. STATE OF TAMIL NADU & ANR. [(2009) 2 3VST 249 (SC)] AS REGARDS THE PENALTY ARE APPOSITE. IN THE AFORE MENTIONED DECISION WHICH PERTAINED TO THE PENALTY PROCEEDINGS IN T AMIL NADU GENERAL SALES TAX ACT, THE COURT HAD FOUND THAT THE AUTHORI TIES BELOW HAD FOUND THAT THERE WERE SOME INCORRECT STATEMENTS MADE I N THE RETURN. HOWEVER, THE SAID TRANSACTIONS WERE REFLECTED IN THE ACCOUNT S OF THE ASSESSEE. THIS COURT, THEREFORE, OBSERVED: 'SO FAR AS THE QUESTION OF PENALTY IS CONCE RNED THE ITEMS WHICH WERE NOT INCLUDED IN THE TURNOVER WERE FOUND INCORPORATED IN THE APPELLANT'S ACCOUNT BOOKS. WHERE CERTAIN ITEMS WHICH ARE NOT INCLUDED IN THE TURNOVER ARE DISCLOSED IN THE DEALER'S OWN ACCOUNT BOOKS AND THE ASSESSING AUTHORITIES IN CLUDE THESE ITEMS IN THE DEALER'S TURNOVER DISALLOWING TH E EXEMPTION, PENALTY CANNOT BE IMPOSED. THE PENALTY LEVIED STAND S SET ASIDE.' THE SITUATION IN THE PRESENT CASE IS STILL BETTER A S NO FAULT HAS BEEN FOUND WITH THE PARTICULARS SUBMITTED BY THE ASSESSEE IN I TS RETURN. 13. IN VIEW OF THE FOREGOING, WE ARE OF THE OPI NION THAT MERE ERRONEOUS CLAIM IN THE ABSENCE OF ANY CONCEALMENT OR FURNISHING OF INACCURAT E PARTICULARS, IS NO GROUND FOR LEVYING PENALT Y, ESPECIALLY WHEN THERE IS NOTHING ON RECORD TO SHOW THAT THE EXPLANATION OFFERED BY THE ASSESSE E WAS NOT BONA FIDE OR ANY MATERIAL PARTICULARS WERE CONCEALED OR FURNISHED INACCURATE . IN THESE CIRCUMSTANCES, WE HAVE NO HESITATION IN OBSERVIN G THAT NO PENALTY IS EXIGIBLE IN RELATION TO CLA IM FOR DEDUCTION OF DEPRECIATION IN THIS CASE. THERE FORE, ACTION OF LD.CIT(A) TO HOLD THAT PENALTY IS IMPOSABLE IN THIS CASE IS FOUND TO BE NOT JUSTIFIED OR PROPER. AS SUCH, WE, WHILE ACCEPTING THE APPEA L OF THE ASSESSEE, DIRECT TO DELETE THE PENALTY IMPOS ED BY ASSESSING OFFICER AND CONFIRMED BY THE LD.CIT(A). 14. AS A RESULT, THE APPEAL OF THE ASSESSEE GETS ACCEPTED. ORDER PRONOUNCED IN OPEN COURT ON 26.10.2012. SD/- SD/- (SHAMIM YAHYA) ACCOUNTANT MEMBER (U.B.S. BEDI ) JUDICIAL MEMBER DATED : OCT. , 2012 SKB I.T.A. NO.463/DEL./2011 (A.Y. : 2005-06) 11 COPY OF THE ORDER FORWARDED TO:- 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A)-XXIV, NEW DELHI. 5. CIT(ITAT) DEPUTY REGISTRAR, ITAT