Tara Health Foods Limited, Sangrur V. DCIT, Ludhiana

ITA 62/CHANDI/2015

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 90186 (ITAT-CHANDIGARH)
• Duration Of Justice: 4 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-06-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 02-06-2015
• Assessment Year: 2011-2012
• Appeal Filed On: 13-01-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: YASH PAUL GOYAL
• Keywords: Wrong claim; Difference of opinion; Revenue expenditure; Capital expenditure
• Section: 143(3); 153A; 115JB; 32; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH B CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI T.R.SOOD, ACCOUNTANT MEMBER ITA NO. 62/CHD/2015 ASSESSMENT YEAR: 2011-12 TARA HEALTH FOODS LTD., VS THE DCIT, VILLAGE JITWAL KALAN, CENTRAL CIRCLE I, TEHSIL MALERKOTLA, LUDHIANA. DISTT. SANGRUR. PAN: AACCT3940R (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI YASH PAUL GO YAL RESPONDENT BY : SHRI R.K.GUPTA DATE OF HEARING : 02.06.2015 DATE OF PRONOUNCEMENT : 04.06.2015 O R D E R PER BHAVNESH SAINI,JM THIS APPEAL BY ASSESSEE IS DIRECTED AGAINST THE ORD ER OF LD. CIT(APPEALS)-I, LUDHIANA DATED 29.10.2014 FOR ASSES SMENT YEAR 2011-12 CHALLENGING THE LEVY OF PENALTY UNDER SECTI ON 271AAA OF THE INCOME TAX ACT. 2. BRIEFLY, THE FACTS OF THE CASE ARE THAT THE ASSE SSING OFFICER WHILE PASSING THE ASSESSMENT ORDER UNDER SECTION 14 3(3) READ WITH SECTION 153B(1)(B) AND 153A OF THE INCOME TAX ACT DATED 25.03.2013 MADE TWO ADDITIONS I.E. THE DISALLOWANCE UNDER SECTION 80IC STANDS REDUCED BY A SUM OF RS.1,39,86, 343/- AND ANOTHER DISALLOWANCE OF RS.7.50,000/-. THE ASSESSI NG OFFICER, ON THESE DISALLOWANCES LEVIED THE PENALTY OF RS. 14 ,73,634/- UNDER SECTION 271AAA OF THE ACT. 2 3. THE ASSESSEE AGGRIEVED AGAINST THE LEVY OF PENAL TY, CHALLENGED THE PENALTY ORDER BEFORE LD. CIT(APPEALS ). THE LD. CIT(APPEALS) NOTED IN THE IMPUGNED ORDER THAT THE A SSESSING OFFICER HAS BROUGHT ON RECORD THE FACT THAT SEARCH UNDER SECTION 132 OF INCOME TAX ACT, 1961 WAS CONDUCTED AT THE BU SINESS PREMISES OF ASSESSEE ON 12.10.2010 AND RETURN IN RE SPONSE TO NOTICE UNDER SECTION 153A WAS FILED AT RETURNED INC OME OF RS.29,83,39,450/-. THE ASSESSMENT HAD BEEN COMPLETE D ON A TOTAL INCOME OF RS.31,30,75,790/- ON ACCOUNT OF TWO ADDITIONS. THE ASSESSEE HAD CLAIMED DEDUCTION UNDER SECTION 80 IC AND THE CALCULATION THEREOF HAD BEEN CHALLENGED BY THE ASSE SSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS. THE AS SESSING OFFICER CONFRONTED THE METHOD OF ACCOUNTING OF ASSE SSEE WHEREIN VARIOUS EXPENSES LIKE GRATUITY, BONUS, LEAVE WITH W AGES, DIRECTOR'S REMUNERATION, FESTIVAL EXPENSES, PRINTIN G AND STATIONERY, TRAVELING, AUDIT FEES, FEES AND TAXES, IPO EXPENSES, PROFESSIONAL CHARGES, WEB SITE EXPENSES HAD BEEN DE BITED ONLY IN THE NON 80IC ELIGIBLE UNITS. THE ASSESSEE HAD SUBMI TTED BEFORE THE ASSESSING OFFICER THAT THE IMPUGNED EXPENSES DI D NOT PERTAIN TO THE UNIT ELIGIBLE FOR DEDUCTION UNDER SE CTION 80IC AND HENCE HAD NOT BEEN DEBITED IN THAT UNITS PROFIT & L OSS ACCOUNT. IT WAS SUBMITTED THAT NO INTERFERENCE IN THE METHOD OF ACCOUNTING ADOPTED BY THE ASSESSEE TO WORK OUT ELIG IBLE PROFITS WAS CALLED FOR. THE ASSESSING OFFICER, HOWEVER HELD THAT THE EXPENSES LIKE GRATUITY, BONUS, LEAVE WITH WAGES, FE STIVAL EXPENSES, PRINTING AND STATIONERY, TRAVELING, AUDIT FEES, FEES AND TAXES, IPO EXPENSES, PROFESSIONAL CHARGES, WEB SITE EXPENSES WERE CLEARLY PERTAINING TO THE BUSINESS OF THE UNDE RTAKING AND 3 COULD NOT BE EXCLUSIVELY ATTRIBUTABLE TO NON ELIGIB LE 80IC UNITS AS THEY WERE CLEARLY COMMON IN NATURE AND THE BENEF ITS ARISING OUT OF SUCH EXPENSES HAD TO BE APPORTIONED AMONGST VARIOUS UNITS ON THE BASIS OF THEIR TURNOVER. THIS WAS TO E NSURE THAT CORRECT PROFITS IN RESPECT OF EACH UNIT OF BUSINESS UNDERTAKING COULD BE ARRIVED AT REGARDLESS OF THE FACT WHETHER THE SAID UNIT WAS ELIGIBLE FOR DEDUCTION UNDER SECTION 80IC OR NO T. THE CORRECT APPORTIONMENT/ALLOCATION OF SUCH EXPENSES LEAD TO R EDUCTION IN CLAIM OF 801C TO THE TUNE OF RS. 1,39,86,343/- WHIC H MEANT THAT TAXABLE INCOME GOT INCREASED BY THE SAME AMOUNT. SI MILARLY, THE ASSESSEE DEBITED RS.7,50,000/- UNDER THE HEAD FEES PAID TO REGISTRAR OF COMPANIES FOR INCREASE IN SHARE CAPITA L OF THE COMPANY AND SUCH EXPENDITURE HAD BEEN CLAIMED AS RE VENUE. EVEN THOUGH, IT WAS CLEARLY IN THE NATURE OF CAPITA L EXPENDITURE. THE ASSESSING OFFICER DURING THE COURSE OF APPELLA TE PROCEEDINGS CONFRONTED THE SAID ISSUE TO THE ASSESS EE VIDE NOTICE UNDER SECTION 271AAA READ WITH SECTION 274 DATED 25 .03.2013 BUT NO COMPLIANCE TO THE SAME WAS MADE. ANOTHER OPP ORTUNITY WAS GRANTED BY THE ASSESSING OFFICER VIDE SHOW CAUS E NOTICE DATED 31.07.2013 WHICH ALSO REMAINED UN-COMPLIED. T HE ASSESSEE FINALLY SUBMITTED HIS REPLY ON 04.09.2013 STATING THAT PENALTY PROCEEDINGS WERE NOT ATTRACTED IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 4. THE ASSESSEE WHILE CHALLENGING THE LEVY OF PENAL TY BEFORE LD. CIT(APPEALS) SUBMITTED THE FOLLOWING ARGUMENTS : 'A SEARCH HAS BEEN CARRIED OUT UNDER SECTION 132 OF INCOME TAX ACT 1961. ASSESSMENT PROCEEDINGS HAVE BEEN FINALIZED VIDE ORDER DATED 25.03.2013 UNDER SECTION 143(3) READ WI TH SECTION 153B (1) (B)/153A OF INCOME TAX ACT 1961. THE ASSES SEE 4 COMPANY DERIVED ITS INCOME FROM UNITS SITUATED IN S TATE OF PUNJAB AND UTTRAKHAND. THE BOOKS OF ACCOUNTS HAVE BEEN SEPARATELY MAINTAIN ED FOR THE UNITS OF PUNJAB AS WELL AS UTTRAKHAND. THE PURCHASE S AS WELL AS SALES AND EXPENSES MADE BY THE UNITS OF PUNJAB A S WELL AS UTTRAKHAND HAVE BEEN ACCOUNTED FOR IN THEIR RESPECT IVE BOOKS OF ACCOUNTS. THE ACCOUNTS OF PUNJAB AS WELL AS UTTRAKH AND UNITS HAVE BEEN AUDITED BY THE CHARTERED ACCOUNTANT. THE STATEMENTS OF ACCOUNTS OF UTTRAKHAND UNITS, DULY AUDITED BY TH E CHARTERED ACCOUNTANT, WERE FURNISHED AT THE TIME OF ASSESSMEN T PROCEEDINGS. THE ASSESSEE COMPANY CLAIMED DEDUCTION UNDER SECTIO N 80IC OF INCOME TAX ACT, 1961 IN RESPECT OF ITS PROFITS FROM UNIT IN THE STATE OF UTTRAKHAND ON THE BASIS OF FACTS AND FIGUR ES GIVEN IN THIS AUDIT REPORT IN FORM 19B BY THE CHARTERED ACCO UNTANT. THE ASSESSEE COMPANY FILED ITS RETURN OF INCOME AND PAID DUE TAX U/S 115JB OF INCOME TAX ACT, 1961. THE ASSESSMENT PROCEEDINGS HAVE BEEN FINALIZED VIDE ORDER DATED 25.03.2013. WHILE FINALIZING ASSESSMENT PROCEEDINGS, THE LEARNED ASSESSING OFFICER OBSERVE D IN THE ASSESSMENT ORDER THAT THERE SOME EXPENSES SUCH AS G RATUITY, BONUS, LEAVE WITH WAGES, FESTIVAL EXPENSES, PRINTI NG AND STATIONERY, TRAVELLING, AUDIT FEES, FEES AND TAXES, IPO EXPENSES, PROFESSIONAL CHARGES, WEB SITE EXPENSES WHICH HAVE BEEN DEBITED IN THE PROFIT AND LOSS ACCOUNT OF JITWAL-KA LAN UNIT (PUNJAB) BUT SHOULD HAVE BEEN PROPORTIONAT ELY REDUCED WITH A CORRESPONDING INCREASE IN EXPENSES IN THE PROFIT AND LOSS ACCOUNT OF SITARGANJ UNIT (UTTRAKHAND) AS A RE SULT OF WHICH THE CLAIM OF THE ASSESSEE COMPANY UNDER SECTIONS 80 IC SHALL STAND REDUCED TO THE EXTENT OF INCREASE IN EXPENSES . T HE ASSESSEE MADE SUBMISSIONS IN THE ASSESSMENT PROC EEDINGS THAT EXPENSE LIKE GRATUITY, BONUS, LEAVE WITH WAGES , FESTIVAL EXPENSES, PRINTING AND STATIONERY EXPENSES, TRAVELL ING EXPENSES, PROFESSIONAL CHARGES, DIRECTOR'S REMUNERA TION AND WEB SITE EXPENSES HAVE BEEN INCURRED AND BORNE BY T HE UNIT OF JITWAL KALAN (PUNJAB) AS A RESULT OF WHICH THESE AR E ALLOWABLE EXPENSES IN THE PROFIT AND LOSS ACCOUNT OF JITWAL K ALAN UNIT. THESE EXPENSES HAVE NOT BEEN INCURRED AND BORNE BY THE UNIT AT SITARGANJ (UTTRAKHAND). FURTHER IT WAS ALSO EXPL AINED THAT THE EXPENSES LIKE GRATUITY, BONUS, LEAVE WITH WAGES, FE STIVAL EXPENSES, PRINTING AND STATIONERY EXPENSES, PROFESS IONAL CHARGES, TRAVELLING EXPENSE ETC. ARE DIRECTLY RELAT ED TO THE BUSINESS ACTIVITIES OF THE UNITS IN PUNJAB. IT WAS FURTHER EXPLAINED THAT GRATUITY LEAVE WITH WAGES AND FESTIV AL EXPENSES 5 ARE THE BENEFITS WHICH HAVE BEEN GIVEN TO THE EMPLO YEES WORKING IN THE UNITS AT JITWAL KALAN. SIMILARLY THE PRINTING AND STATIONERY EXPENSES HAVE BEEN INCURRED IN RESPECT O F THE STATIONERY USED FOR AND BY THE UNITS AT JITWAL KALA N (PUNJAB). THEREFORE, THESE EXPENSES CANNOT BE TERMED AS COMMO N EXPENSES AND THUS SHOULD NOT BE PROPORTIONATELY RED UCED FROM THE PROFIT AND LOSS ACCOUNT EXPENSES OF UNITS AT JI TWAL KALAN AND THERE SHOULD NOT BE ANY CORRESPONDING INCREASE IN THE EXPENSES OF UNIT AT SITARGANJ (UTTRAKHAND) AND THER EBY THE DEDUCTION U/S 80IC SHOULD NOT BE REDUCED IN LIGHT O F THESE SUBMISSIONS. THE LEARNED ASSESSING OFFICER, HOWEVER, DID NOT ACCE PT THE SUBMISSIONS OF THE ASSESSEE COMPANY AND THUS REDUCE D THE EXEMPTION UNDER SECTION 80IC TO THE EXTENT OF EXPEN SES PROPORTIONATELY INCREASED IN THE PROFIT AND LOSS AC COUNT OF ITS UNIT AT SITARGANJ (UTTRAKHAND). THE LEARNED ASSESSING OFFICER, WHILE FINA LIZING ASSESSMENT PROCEEDINGS IN THE ABOVE NOTED CASE DISA LLOWED EXPENSES WORTH RS. 750000.00 DEBITED UNDER THE HEAD FEES AND TAXES BY TREATING THE SAME AS CAPITAL EXPENDIT URE. THESE TWO DISALLOWANCES HAVE BEEN MADE THE BASIS FO R LEVY OF PENALTY PROCEEDINGS UNDER SECTION 271AAA OF INCOME TAX ACT, 1961. THE APPELLANT ASSESSEE RESPECTFULLY SUBMITS THAT PE NALTY PROCEEDINGS ARE NOT ATTRACTED IN THE FACTS AND CIRC UMSTANCES OF THE CASE. SECTION 271AAA LAYS DOWN CERTAIN PRE-CONDIT IONS FOR LEVY OF PENALTY. THE PROVISIONS OF SECTION 271AAA HAV E BEEN REPRODUCED HEREUNDER. IT IS RESPECTFULLY SUBMITTED THAT THE PROVISIONS ARE APPLICABLE ON UNDISCLOSED INCOME OF TH E SPECIFIED PREVIOUS YEAR. UNDISCLOSED INCOME IS THE CONDITION PRECEDENT FOR INITIATION OF PROVISIONS OF SECTION 271AAA. THE WORD ' UNDISCLOSED INCOME' IS DEFINED IN EXPLANATION TO SUB SECTION (4) O F SECTION 271AAA. AS PER THIS DEFINITION UNDISCLOSED INCOME MEAN S : (I) ANY INCOME OF THE SPECIFIED PREVIOUS YEAR REPRE SENTED, EITHER WHOLLY OR PARTLY, BY ANY MONEY, BULLION, JEWELLERY OR OTHER VALUEABLE ARTICLE OR THING OR ANY ENTRY IN THE BOOK S OF ACCOUNTS OR OTHER DOCUMENTS OR TRANSACTIONS FOUND IN THE COURSE OF A SEARCH U/S 132, (A) WHICH HAS NOT BEEN RECORDED ON OR BEFORE THE DATE OF SEARCH IN THE BOOKS OF ACCOUNTS OR OTHER DOCUMEN TS MAINTAINED IN THE NORMAL COURSE RELATING TO SUCH PREV IOUS YEAR OR (B) OTHERWISE NOT BEEN DISCLOSED TO THE CHIEF 6 COMMISSIONER OR COMMISSIONER BEFORE THE DATE OF SEA RCH (II) ANY INCOME OF THE SPECIFIED PREVIOUS YEAR RE PRESENTED, EITHER WHOLLY OR PARTLY, BY AN ENTRY IN RESPECT OF AN EXPE NSE RECORDED IN THE BOOKS OF ACCOUNT OR OTHER DOCUMENTS MAINTAINED IN THE NORMAL COURSE RELATING TO THE SPECI FIED PREVIOUS YEAR WHICH IS FOUND TO BE FALSE AND WOULD NO T HAVE BEEN FOUND TO BE SO HAD THE SEARCH NOT BEEN CONDUCED; SIR, THE PROVISIONS 271AAA IS NOT ATTRACTED IN THE FACTS AND CIRCUMSTANCES OF THE CASE. IN THE COURSE OF SEARCH, FIRSTLY NO MONEY, BULLION, JEWELLERY OR OTHER VALUE ABLE ARTICLE OR OT HER VALUE ABLE ARTICLE OR THING OR ANY ENTRY IN THE BOOKS OF AC COUNTS OR OTHER DOCUMENTS OR TRANSACTIONS HAVE BEEN FOUND WHICH HAS N OT BEEN RECORDED ON OR BEFORE THE DATE OF SEARCH IN TH E BOOKS OF ACCOUNTS OR OTHER DOCUMENTS MAINTAINED IN THE NORMA L COURSE RELATING TO SUCH PREVIOUS YEAR OR OTHERWISE NOT BEEN DISCLOSED TO THE CHIEF COMMISSIONER OR COMMISSIONER BEFORE THE DATE OF SEARCH. SECONDLY, NO FALSE ENTRY IN RESPECT OF AN EXPENSE RECORDED IN THE BOOKS OF ACCOUNT OR OTHER DOCUMENTS MAINTAINED IN THE NORMAL COURSE RELATING TO THE SPE CIFIED PREVIOUS YEAR HAS BEEN FOUND IN THE COURSE OF SEARC H MERE DISALLOWANCE OF AN EXPENDITURE ON ESTIMATE BAS IS DOES NOT ATTRACT PROVISIONS OF SECTION 271AAA. THE ASSES SEE, THEREFORE, RESPECTFULLY PRAYS THAT THE DISALLOWANCE OF EXPENDITURE OF EXPENDITURE OF RS. 750000.00 AS WELL AS REDUCTION OF CLAIM OF DEDUCTION UNDER SECTION 80IC OF INCOME TAX ACT, 1961 DOES NOT COME WITHIN THE PREVIEW OF 'UNDISCLOSED INCOME' DEFINED IN EXPLANATION TO SUB S ECTION 4 OF SECTION 271AAA. IT IS THEREFORE PRAYED THAT PENA LTY PROCEEDINGS U/S 271AAA ARE NOT ATTRACTED AND THEREF ORE THE SAME DESERVES TO BE DELETED. 5. THE LD. CIT(APPEALS), HOWEVER, DID NOT AGREE WIT H SUBMISSION OF THE ASSESSEE AND DISMISSED APPEAL OF THE ASSESSEE. HIS FINDINGS IN PARA 5 & 6 OF THE APPELL ATE ORDER ARE REPRODUCED AS UNDER : 5. I HAVE CONSIDERED THE BASIS OF PENALTY IMPOSED BY THE ASSESSING OFFICER AND THE ARGUMENTS OF THE AR ON TH E ISSUE. THE MAIN ARGUMENT OF THE APPELLANT IS THAT THE ADDI TION MADE BY THE ASSESSING OFFICER DOES NOT FALL UNDER THE CAT EGORY OF UNACCOUNTED/UNDISCLOSED INCOME AS DEFINED IN EXPLAN ATION TO 7 SUB SECTION 4 OF SECTION 271AAA. THE AR HAS HIGHLIG HTED THE FOLLOWING CLAUSE AS UNDER:- 'ANY INCOME OF THE SPECIFIED PREVIOUS YEAR REPRESEN TED, EITHER WHOLLY OR PARTLY, BY AN ENTRY IN RESPECT OF AN EXPENSE RECORDED IN THE BOOKS OF ACCOUNT OR OTHER DOCUMENTS MAINTAINED IN THE NORMAL COURSE RELATING TO THE SPECIFIED PREVIOUS YEAR WHICH IS FOUND TO BE FA LSE AND NOT HAVE BEEN FOUND TO BE SO HAD THE SEA RCH NOT BEEN CONDUCED. 6. I DO NOT AGREE WITH THE SUBMISSION OF THE APPELL ANT ON THE ISSUE WORD 'FALSE ENTRY' RECORDED IN THE BOOKS OF A CCOUNTS HAD BEEN CLEARLY ESTABLISHED BY THE ASSESSING OFFIC ER IN RE- ALLOCATING THE EXPENSES ATTRIBUTABLE TO ELIGIBLE/N ON ELIGIBLE UNITS OF UNDERTAKING U/S 80IC. THE ASSESSEE WHILE F ILING ITS RETURN OF INCOME WAS REQUIRED TO WORK OUT THE CORRECT INCOME ATTRIBUTABLE TO ELIGIBLE/INELIGIBLE UN DERTAKING UNDER SECTION 80IC. THE NON ALLOCATION OF COMMON EXPENSES TO THE TUNE OF RS. 1,39,86,343/- TO THE EL IGIBLE UNIT CANNOT BE SAID TO BE ON ACCOUNT OF A BONAFIDE MISTA KE ON THE PART OF THE APPELLANT AND TO THAT EXTENT THE ENTRIE S MADE IN THE PROFIT & LOSS ACCOUNT IN THE ELIGIBLE UNIT HAVE TO BE TERMED AS FALSE/UNTRUE. IT IS NOT A CASE OF MERE DISALLOWANCE OF AN EXPENSE WHICH WAS DEBATABLE IN NATURE BUT A POSITIV E INTERVENTION AFTER DETAILED EXAMINATION OF ACCOUNTS BY THE ASSESSING OFFICER THAT THE IMPUGNED ADDITION HAD BEE N MADE. THE ENTRIES WITH REGARD TO THE ALLOCATION OF EXPENS ES TO ELIGIBLE UNIT AS WELL AS INELIGIBLE UNIT HAVE BEEN FOUND TO BE FALSE AND HAVE COME TO THE FOCUS ON ACCOUNT OF SEARCH UNDERTA KEN IN CASE OF APPELLANT LEADING TO CONSEQUENTIAL ASSESSMENT UN DER SECTION 153A. SECONDLY, THE DISALLOWANCE OF EXPENDITURE OF RS.7,5 0,000/- WHICH WAS CLEARLY AND UNDOUBTEDLY IN THE NATURE OF CAPITAL EXPENDITURE AS HELD BY VARIOUS COURTS AND IS A SETT LED ISSUE ALSO FALLS IN THE SAME CATEGORY. AS SUCH THE ACTION OF THE ASSESSING OFFICER IN IMPOSING THE PENALTY UNDER SEC TION 271AAA IS CONFIRMED. IN THE RESULT, APPEAL IS DISMISSED. 6. WE HAVE HEARD LD. REPRESENTATIVES OF BOTH THE PA RTIES. THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISS IONS MADE BEFORE AUTHORITIES BELOW AND SUBMITTED THAT ASSESSE E MADE 8 CLAIM UNDER SECTION 80IC ON THE BASIS OF THE REPORT OF THE CHARTERED ACCOUNTANT. COPY OF THE AUDIT REPORT IS F ILED ON RECORD. HE HAS RELIED UPON DECISION OF THE HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS DEEP TOOLS PVT. LTD. 274 ITR 603 IN WHICH IT WAS HELD AS UNDER : HELD, DISMISSING THE APPEAL THAT THERE WAS NOTHING TO SHOW THAT THE MISTAKE BY THE CHARTERED ACCOUNTANT WAS NO T BONA FIDE AND MERE FACT THAT THE CERTIFICATE ISSUED BY T HE CHARTERED ACCOUNTANT WAS NOT IN ACCORDANCE WITH S. 80HHC(4) OF THE ACT, WAS NOT ENOUGH TO HOLD THAT THE MISTAKE WAS NOT BONA FIDE. AT ANY RATE, AS FAR AS THE ASSESSEE WAS CONCERNED, NO MALA FIDES COULD BE ATTRIBUTED TO IT AS THE CLAIM FOR DEDUCTION WAS BASED ON THE CE RTIFICATE OF THE CHARTERED ACCOUNTANT WITH WHOM NO COLLUSION H AD BEEN PROVED. IN VIEW OF THE FINDINGS RECORDED BY THE TRIBUNAL THAT THE ERROR OF THE CHARTERED ACCOUNTANT WAS INAD VERTENT AND DID NOT LACK BONA FIDES, CANCELLATION OF THE OR DER OF PENALTY WAS CLEARLY JUSTIFIED. 7. HE HAS ALSO RELIED UPON DECISION OF THE DELHI HI GH COURT IN THE CASE OF CIT VS HINDUSTAN TIMES LTD. 275 ITR 203 . HOWEVER, THIS JUDGEMENT IS NOT ON THE POINT IN ISSUE. 8. ON THE OTHER HAND, LD. DR RELIED UPON ORDERS OF THE AUTHORITIES BELOW. 9. WE HAVE CONSIDERED RIVAL SUBMISSIONS. THE LD. C OUNSEL FOR THE ASSESSEE REFERRED TO EXPLANATION TO SECTION 271 AAA(4) SUB- CLAUSE (A)(II) AND SUBMITTED THAT THE EXPENSES CLAI MED FOR DEDUCTION UNDER SECTION 80IC WERE PROPERLY RECORDED IN THE BOOKS OF ACCOUNT AND COULD NOT BE TERMED AS FALSE. HE HAS, THEREFORE, SUBMITTED THAT SINCE THE SAME COULD NOT FALL WITHIN DEFINITION OF UNDISCLOSED INCOME, THEREFORE, NO P ENALTY UNDER SECTION 271AAA OF THE ACT IS LEVIABLE. WE FIND FRO M THE ASSESSMENT ORDER THAT ASSESSING OFFICER HAS RECORDE D THAT PLEA 9 OF ASSESSEE CANNOT BE ACCEPTED THAT THERE ARE NO CO MMON EXPENSES AND CERTAIN EXPENSES HAVE TO BE CONSIDERED FOR CALCULATION UNDER SECTION 80IC ON PROPORTIONATE BAS IS. THE ASSESSING OFFICER, ACCORDINGLY, DIVIDED THESE EXPEN SES IN THE RATIO OF THE TURNOVER OF UNITS. THE ASSESSING OFFI CER, ACCORDINGLY, MADE DISALLOWANCE BY REDUCING THE DEDU CTION UNDER SECTION 80IC BY RS.1,39,86,343/-. THESE FACTS WOUL D THEREFORE, SHOW THAT ASSESSING OFFICER ON ESTIMATED BASIS AND FOLLOWING RATIO OF THE TURNOVER OF UNITS, PROPORTIONATELY MAD E THE ADDITION BY REDUCING THE DEDUCTION UNDER SECTION 80IC OF THE ACT. NO FURTHER FINDINGS HAVE BEEN GIVEN AGAINST THE ASSESS EE. THE ASSESSEE, HOWEVER, MAINTAINED THAT IMPUGNED EXPENSE S DID NOT PERTAIN TO THE UNIT ELIGIBLE FOR DEDUCTION UNDER SE CTION 80IC AND HENCE, HAD NOT BEEN DEBITED IN THAT UNITS PROFIT & LOSS ACCOUNT. THEREFORE, IT MAY BE A DIFFERENCE IN OPINION OF THE ASSESSING OFFICER AS WELL AS THE ASSESSEE AND THE CLAIM OF TH E ASSESSEE COULD NOT BE HELD TO BE FALSE SO AS TO LEVY THE PEN ALTY UNDER SECTION 271AAA OF THE ACT. THEREFORE, ON MERE DISA LLOWANCE OF EXPENDITURE FOR REDUCING THE DEDUCTION UNDER SECTIO N 80IC, IN OUR VIEW, PENALTY MAY NOT BE LEVIABLE AGAINST THE A SSESSEE. WE, THEREFORE, SET ASIDE THE ORDERS OF AUTHORITIES BELO W TO THE EXTENT THAT PENALTY SHALL NOT BE LEVIABLE ON THE ADDITION OF RS. 1,39,86,343/-. THE APPEAL OF ASSESSEE TO THAT EXTE NT STANDS ALLOWED. 10. HOWEVER, WITH REGARD TO THE ADDITION OF RS. 7,5 0,000/- IS CONCERNED, IT IS NOTICED BY THE ASSESSING OFFICER T HAT ASSESSEE HAD DEBITED THIS AMOUNT UNDER THE HEAD FEES & TAX WHICH HAS BEEN PAID TO REGISTRAR OF COMPANIES FOR INCREASING IN SHARE 10 CAPITAL OF THE COMPANY. THE ASSESSING OFFICER, THE REFORE, FOUND THIS EXPENDITURE TO BE CAPITAL IN NATURE AND MADE T HE ADDITION ON WHICH PENALTY WAS ALSO LEVIED. 11. THE LD. CIT(APPEALS) ALSO HELD THAT THE EXPENDI TURE IS UNDOUBTEDLY IN THE NATURE OF CAPITAL EXPENDITURE AS IS HELD BY THE VARIOUS COURTS. THE ASSESSEE IS SITUATED IN TH E STATE OF PUNJAB. THE HON'BLE SUPREME COURT IN THE CASE OF P UNJAB STATE INDUSTRIAL DEVELOPMENT CORPORATION LTD. V CIT 225 I TR 792 VIDE JUDGEMENT DATED 04.12.1996 IN THE CASE OF COMPANY S ITUATED IN PUNJAB HELD THAT THE FEES PAID TO REGISTRAR OF COMPANIES FOR ENHANCEMENT OF THE CAPITAL IS CAPITAL EXPENDITURE. SIMILARLY, HON'BLE SUPREME COURT IN ANOTHER JUDGEMENT IN THE C ASE OF BROOKE BOND INDIA LTD. V CIT 225 ITR 798 VIDE JUDG EMENT DATED 27.02.1997 HELD THAT, EXPENDITURE IN CONNECTION WITH ADDITIONAL ISSUE OF SHARES- EXPENDITURE DIRECTLY RELATED TO EX PANSION OF CAPITAL BASE IS CAPITAL EXPENDITURE. 12. THE ABOVE JUDGEMENTS OF THE APEX COURT CLEARLY HELD THAT THE FEES PAID TO REGISTRAR OF COMPANIES FOR ENHANCE MENT OF CAPITAL IS CAPITAL EXPENDITURE AND ONE OF THE CASE OF PUNJAB STATE INDUSTRIAL DEVELOPMENT CORPORATION LTD. (SUPR A) PERTAINED TO THE STATE OF PUNJAB AS OF THE CASE OF THE ASSESS EE. THEREFORE, THERE IS NO QUESTION OF BELIEVING THE REPORT OF THE CHARTERED ACCOUNTANT AS IS CONTENDED BY LD. COUNSEL FOR THE A SSESSEE. THE LAW IS SETTLED ON THIS ISSUE, THEREFORE, THE ENTRIE S IN THE BOOKS OF ACCOUNT OF THE ASSESSEE ARE FALSE AS WELL AS THE AU DIT REPORT OF THE CHARTERED ACCOUNTANT IS FALSE CERTIFYING THE CL AIM OF DEDUCTION UNDER SECTION 80IC OF THE ACT ON THE ENTI RE AMOUNT. THERE HAS BEEN, THUS NO BASIS FOR THE ASSESSEE TO R ELY UPON THE 11 REPORT OF THE CHARTERED ACCOUNTANT SHRI JITENDER KU MAR FOR M/S JITENDER KUMAR & CO. CHARTERED ACCOUNTANTS. THE CL AIM OF ASSESSEE OR ITS CHARTERED ACCOUNTANT THUS, COULD NO T BE TREATED AS BONAFIDE AND IT IS WHOLLY INTENTIONAL AND WITH M ALAFIDE INTENTIONS WHEN FALSE AUDIT REPORT IS PREPARED TO M AKE A CLAIM OF DEDUCTION UNDER SECTION 80IC OF THE ACT AGAINST THE JUDGEMENT OF THE HON'BLE SUPREME COURT REFERRED TO ABOVE. THUS, THERE WERE NO BASIS FOR THE ASSESSEE TO CONTE ND THAT THE ASSESSEE BONAFIDELY BELIEVED THE REPORT OF THE CHAR TERED ACCOUNTANT. THE CLAIM OF ASSESSEE IS THUS, REJECTE D AND THE CASE OF THE ASSESSEE IS SQUARELY FALL WITHIN THE DEFINIT ION OF UNDISCLOSED INCOME AS IS PROVIDED IN EXPLANATION (A)(II) OF SECTION 271AAA(4) OF THE ACT. IN CASE THE SEARCH I S NOT CONDUCTED IN THE CASE OF ASSESSEE, THE ABOVE FALSE ENTRY AND FALSE CLAIM OF THE ASSESSEE COULD NOT HAVE BEEN FOU ND BY THE REVENUE AUTHORITIES. THE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. ZOOM COMMUNICATION P. LTD. 327 ITR 510 H ELD AS UNDER : HELD, THAT ADMITTEDLY, IN VIEW OF THE PROVIS IONS CONTAINED IN SECTION 40(A)(II) OF THE ACT, THE AMOUNT OF INCOME- TAX COULD NOT HAVE BEEN CLAIMED AS A DEDUCTION WHILE COMPUTIN G INCOME OF THE ASSESSEE. AS REGARDS THE AMOUNT CLAIM ED ON ACCOUNT OF UNUSABLE AND DISCARDED ASSETS, THE TRIBU NAL, WAS ENTIRELY INCORRECT IN TAKING THE VIEW THAT THE DEDUCTION CLAIMED BY THE ASSESSEE WAS ADMISSIBLE TO IT UNDER SECTION 32(L)(III). CLAUSE (I) OF SUB-SECTION (1) OF SECTIO N 32 RELATES TO ASSETS OF AN UNDERTAKING ENGAGED IN GENERATION AND/ OR DISTRIBUTION OF POWER. ADMITTEDLY, THE ASSESSEE-COM PANY WAS NOT ENGAGED IN GENERATION AND FOR DISTRIBUTION OF POWER, DURING THE RELEVANT YEAR. THUS, THE PROVISIONS OF C LAUSE (I) OF SUB-SECTION (1) OF SECTION 32 WOULD NOT APPLY IN RE SPECT OF THE ASSETS CLAIMED TO HAVE BECOME UNUSABLE AND WRITTEN O FF. THEREFORE, THE ASSESSEE HAD NO JUSTIFICATION TO CLAIM THIS AMOUNT OF RS. 13,24,539/- AS A REVENUE EXPENDITURE. IN FACT, T HE ASSESSEE DID NOT CLAIM, EITHER BEFORE THE ASSESSING OFFICER OR BEFORE THE COMMISSIONER (APPEALS) THAT SUCH A DEDUCTIO N WAS PERMISSIBLE UNDER SECTION 32(L)(III). IT WAS ALSO NOT THE CASE OF 12 THE ASSESSEE THAT IT WAS UNDER A BONA FIDE BELIEF TH AT THESE TWO AMOUNTS COULD BE CLAIMED AS REVENUE EXPENDITURE. THE ASSESSEE WAS A COMPANY WHICH MUST BE HAVING PROFESSIONAL ASSIS TANCE IN COMPUTATION OF ITS INCOME, AND ITS ACCOUNTS WERE COMPULSORILY SUBJECTED TO AUDIT. THE TRIBUNAL ERRED IN LAW IN DELETI NG THE PENALTY IN RESPECT OF THE AMOUNT OF RS. 1 LAKH CLAIM ED AS DEDUCTION ON ACCOUNT OF PAYMENT OF INCOME-TAX AND THE AMOUNT OF RS. 13,24,539 DEBITED UNDER THE HEAD 'EQU IPMENT WRITTEN OFF', IN THE PROFIT AND LOSS ACCOUNT OF THE ASSESS EE. 13. CONSIDERING THE ABOVE DISCUSSION AND THE FACTS OF THE CASE, IT IS CLEAR THAT THE DECISION IN THE CASE OF CIT VS DEEP TOOLS PVT. LTD. (SUPRA) WOULD NOT SUPPORT THE CASE OF THE ASSE SSEE. 14. CONSIDERING THE FACTS OF THE CASE IN THE LIGHT OF THE ABOVE DISCUSSION, IT IS CLEAR THAT PENALTY IS LEVIABLE UN DER SECTION 271AAA OF THE ACT ON THE ADDITION OF RS. 7,50,000/- . THE ORDERS OF THE AUTHORITIES BELOW ARE THUS, MAINTAINED AND A SSESSING OFFICER IS DIRECTED TO RE-CALCULATE THE PENALTY ON THE AFORESAID ADDITION. 15. IN THE RESULT, PART OF THE APPEAL OF THE ASSESS EE ON THIS ADDITION IS DISMISSED. 16. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 4 TH JUNE,2015. SD/- SD/- (T.R.SOOD) (BHAVNESH SAINI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 4 TH JUNE,2015. POONAM COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT(A), THE CIT, DR ASSISTANT REGISTRAR, ITAT CHANDIGARH