The DCIT, 1(1), Indore V. M/s. Moira Steel Ltd., Indore

ITA 658/IND/2013

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 5767 (ITAT-INDORE)
• Duration Of Justice: 3 year(s) 4 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-03-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 02-03-2017
• Assessment Year: 2005-2006
• Appeal Filed On: 08-11-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MOHD JAVED
• Assessee Lawyers: C P RAWKA
• Keywords: Tax effect; Revenue expenditure
• Section: 148; 139

Judgement Text

DCIT VS. M/S.MOIRA STEEL LTD.,INDORE I.T.A.NO. 658/IND/2013 A.Y.2005-06 PAGE 1 OF 30 , , IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE .. , . . , # BEFORE SHRI C. M. GARG, JUDICIAL MEMBER AND SHRI O.P. MEENA, ACCOUNTANT MEMBER . . /. I.T.A. NO. 658/IND/2013 / ASSESSMENT YEAR: 2005-06 DY. CIT, 1(1), INDORE. VS. M/S. MOIRA STEEL LIMITED, SHANIVAR DARPAN PRESS COMPLEX, A.B. ROAD, INDORE / / / / APPELLANT / / / / RESPONDENT .../ PAN: AABCM2051K / / / / APPELLANT BY SHRI MOHD. JAVED, DR / / / / RESPONDENT BY SHRI C.P.RAWKA, C.A. / / / / DATE OF HEARING 02.03.2017 / / / / DATE OF PRONOUNCEMENT 14.03.2017 / / / / O R D E R PER O.P. MEENA, ACCOUTANT MEMEBR THIS APPEAL IS FILED BY THE REVENUE AGAINST THE OR DER OF LD. COMMISSIONER OF INCOME TAX (APPEALS)-I, INDORE,[HER EINAFTER DCIT VS. M/S.MOIRA STEEL LTD.,INDORE I.T.A.NO. 658/IND/2013 A.Y.2005-06 PAGE 2 OF 30 REFERRED TO AS THE CIT(A)] DATED 30.08.2013. THIS A PPEAL PERTAINS TO ASSESSMENT YEAR 2005-06 AS AGAINST APPE AL DECIDED IN RESPECT OF ASSESSMENT ORDER DATED 16.12. 2010 PASSED U/S. 143(3)/147 OF INCOME TAX ACT, 1961(HER EIN AFTER REFERRED TO AS 'THE ACT) BY THE DCIT, 1(1), INDORE [HEREINAFTER REFERRED TO AS THE AO]. 1.0 THE REVENUE HAS TAKEN FOLLOWING GROUNDS OF APPEAL :- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED IN CANCELLING THE PENALTY OF RS. 55,34 ,753/- ON THE GROUND THAT NO PENALTY COULD BE LEVIED ON ESTIMATED FIGURE OF INTEREST BECAUSE THE AMOUNT OF INTEREST WAIVED WAS WORKED OUT BY THE AO ON PRO-RAT A BASIS AS NO BREAK UP OF INTEREST WAS GIVEN BY THE ASSESSEE AND, THEREFORE, IT WAS NOT A CASE OF ESTIM ATION OF INTEREST WAIVED. 1.1 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LD. CIT(A) ERRED IN CANCELLING THE PENALTY OF RS. 55,34,753/- ON THE GROUND THAT THE ASSESSEE HAS DISCLOSED ENTIRE FACTS OF WAIVER OF INTEREST IN THE RETURN OF INCOME AND ACCORDINGLY THERE WAS NO CONCEALMENT OF INCOME BECAUSE WHILE HOLDING SO THE LD. CIT(A) FAIL ED TO APPRECIATE THE FACT THAT THE ASSESSEE HAD NOT DISCL OSED THE FULL FACTS RELATED TO THE WAIVER OF INTEREST IN THE RETURN OF INCOME. DCIT VS. M/S.MOIRA STEEL LTD.,INDORE I.T.A.NO. 658/IND/2013 A.Y.2005-06 PAGE 3 OF 30 1.1 1.1 SUCCINCTLY, FACTS AS CULLED OUT FROM THE ORDERS OF LOWER AUTHORITIES ARE THAT THE ASSESSEE HAS ENTERED INTO ONE TIME SETTLEMENT WITH THE BANK DURING THE SUBJECT YEAR. U NDER THE SAID SETTLEMENT, BANK WAIVED SUM OF RS.2,54,42,837/ -, WHICH INCLUDED PRINCIPAL AS WELL AS OVERDUE INTEREST. THE REFORE, THE ASSESSEE WAS ASKED TO SHOW CAUSE AS TO WHY THE SAME SHOULD NOT BE CHARGED U/S 41(1) OF THE ACT. IT WAS EXPLAIN ED BY THE ASSESSEE THAT THE ASSESSEE WAS HAVING CREDIT FACILI TY UNDER WHICH THE INTEREST DEBITED BY THE BANK WAS CLUBBED WITH THE PRINCIPAL AMOUNT, THEREBY GETTING A CHARACTER OF PR INCIPAL AMOUNT. ACCORDINGLY, IT WAS SUBMITTED THAT THE AMOU NT OF RS. 2.14 CRORES WAS PRINCIPAL AMOUNT AND REST AMOUNT OF RS. 40.22 LAKHS WAS CESSATION OF REVENUE LIABILITIES. HOWEVER , THE AO WAS NOT SATISFIED WITH THE EXPLANATION AND OBSERVED THA T, NO DOUBT, THE INTEREST IS CLUBBED WITH PRINCIPAL ON DAY TO DA Y BASIS, BUT THIS EXERCISE CARRIED OUT BY THE BANK FOR THE PURPO SE OF CHARGING INTEREST. THERE IS NOTHING TO ESTABLISH TH AT INTEREST COMPONENT IS CONVERTED INTO PRINCIPAL AMOUNT, BECAU SE THE DCIT VS. M/S.MOIRA STEEL LTD.,INDORE I.T.A.NO. 658/IND/2013 A.Y.2005-06 PAGE 4 OF 30 BANK ACCOUNTS FOR THE INTEREST ON DAY TO DAY BASIS BUT RECKONS IT PERIODICALLY FOR ACCOUNTING IN THEIR OWN BOOKS. THEREFORE, THE SUBMISSION MADE BY THE ASSESSEE WAS MIS-CONCEIVED. ACCORDINGLY, THE AO HAS APPORTIONED THE AMOUNT OF W AIVER IN THE RATIO OF PAYMENT MADE BY THE ASSESSEE AND THE F IGURES OF PRINCIPAL AND INTEREST OUTSTANDING AS ON THE DATE O F SETTLEMENT AND WORKED OUT THE INTEREST COMPONENT OF THE AMOUNT WAIVED AS UNDER :- RATIO OF INTEREST IN THE TOTAL OUTSTANDING DUES RS. 2,23,18,945/RS. 3,75,42,837 INTEREST COMPONENT IN THE WAIVED AMOUNT [2,23,18,945/3,75,42,837]X 2,54,42,837 = RS. 1,51,25,582/- 1.1.1 IT IS SEEN THAT NO APPEAL WAS FILED BY THE ASSESSEE BEFORE CIT(A) AS AGAINST THE ADDITION OF RS. 1,51,2 5,582/- MADE BY THE AO. 1.1.2 DURING THE COURSE OF PENALTY PROCEEDINGS, IT WAS EXPLAINED BY THE ASSESSEE VIDE LETTER DATED 22.06.2 011 THAT THE BANK SETTLED THE TOTAL DUES OF RS. 121 LAKHS AS AGA INST OUTSTANDING BALANCES OF RS. 335 LAKHS. THE SAID AMO UNT DCIT VS. M/S.MOIRA STEEL LTD.,INDORE I.T.A.NO. 658/IND/2013 A.Y.2005-06 PAGE 5 OF 30 INCLUDES INTEREST COMPONENT AT RS. 40 LAKHS. HOWEVE R, THE AO MADE THE PRO-RATA BIFURCATION OF THE SETTLEMENT AMO UNT FOR TAXATION PURPOSES, PRINCIPAL AND INTEREST. CONSIDER ING THE NIL TAX EFFECT, THE ASSESSEE DID NOT FILE ANY APPEAL AG AINST THE RE- ASSESSMENT ORDER BEING PRO-RATA BIFURCATION. HOWEVE R, THE AO NOTED THAT THE ASSESSEE ENTERED INTO ONE TIME SETTL EMENT WITH STATE BANK OF INDIA AGAINST ITS OUTSTANDING BALANCE S OF RS. 3,75,42,837/- TO BE PAYABLE TO IT. THIS BALANCE WAS COMPRISED OF PRINCIPAL AMOUNT OF LOAN OF RS. 1,52,23,892/- AN D INTEREST OF RS. 2,23,18,945/-. FURTHER, AS PER THE SETTLEMENT T HE BANK HAD WAIVED THE ASSESSEES LIABILITY OF RS. 2,54,42,837/ - INCLUSIVE OF INTEREST. THUS, THE COMPONENT AND LIABILITY OF INTE REST WAS CEASED TO BE OPERATIVE AND, ACCORDINGLY, THE SAME W AS TO BE CONSIDERED AS INCOME U/S 41(1) OF THE ACT. HOWEVER, THE ASSESSEE HAS NOT OFFERED THE SAME AS ITS INCOME NOR THE BIFURCATION OF PRINCIPAL AMOUNT AND COMPONENT OF IN TEREST WAIVED, WAS FURNISHED. THEREFORE, ON PRO-RATA BASIS , THE COMPONENT OF INTEREST WAIVED WAS WORKED OUT AT RS. DCIT VS. M/S.MOIRA STEEL LTD.,INDORE I.T.A.NO. 658/IND/2013 A.Y.2005-06 PAGE 6 OF 30 1,51,25,582/- AND THE SAME WAS ADDED TO THE TOTAL I NCOME. THE AO FURTHER OBSERVED THAT THE ARGUMENTS OF THE A SSESSEE THAT BANK HAD NOT GIVEN THE BREAK UP OF THE PRINCIP AL AMOUNT AND INTEREST IN THE SETTLEMENT LETTER. THE AO NOTED THAT THE EXAMINATION OF THE PAST RECORDS SHOWS THAT THE ASSE SSEE HAD CLAIMED EXPENDITURE ON ACCOUNT OF INTEREST PAYABLE ON THE CASH CREDIT FACILITY PROVIDED BY THE BANK. THUS, THE CHA RACTER OF THE SAME WOULD ALWAYS REMAIN THE REVENUE EXPENDITURE FO R THE PURPOSE OF THE PROVISIONS OF SECTION 41(1) OF THE I NCOME-TAX ACT, 1961, IRRESPECTIVE OF THE FACT THAT THE SAME W AS CONSIDERED BY THE BANK OR BY THE ASSESSEE IN THE SUBSEQUENT P REVIOUS YEAR OF ITS ACCRUAL. AS PER THE PROVISIONS OF SECTI ON 41(1), ANY EXPENDITURE OR DEDUCTION CLAIMED IN ANY PREVIOUS YE AR AND WRITTEN OFF IN SUBSEQUENT YEAR NEEDS TO BE CONSIDER ED AS PROFIT FOR THE ASSESSMENT YEAR IN WHICH THE SAME HAS BEEN WRITTEN OFF. THEREFORE, IT FOLLOWS FROM THE ABOVE DISCUSSIO N THAT THE REMISSION OF INTEREST CLAIMED IN EARLIER YEARS AS E XPENDITURE IN PROFIT AND LOSS ACCOUNT WAS TO BE CONSIDERED AS ASS ESSEES DCIT VS. M/S.MOIRA STEEL LTD.,INDORE I.T.A.NO. 658/IND/2013 A.Y.2005-06 PAGE 7 OF 30 PROFIT IN THE ASSESSMENT YEAR UNDER CONSIDERATION. WITH REGARD TO THE NON-FILING OF THE APPEAL DUE TO NIL TAX EFFE CT, THE AO OBSERVED THAT IT IS ALWAYS PREROGATIVE OF THE ASSES SEE TO FILE THE APPEAL AND NOT TO FILE THE APPEAL. ACCORDINGLY, ASS ESSEES ARGUMENTS ON THIS ACCOUNT IN THE CONTEXT OF PENALTY PROCEEDINGS IS FOUND TO BE REDUNDANT. AS REGARDS NO N- FURNISHING OF INACCURATE PARTICULARS OF INCOME, THE AO OBSERVED THAT THE TOTAL AMOUNT WRITTEN OFF WAS MENTIONED IN THE PROFIT AND LOSS ACCOUNT. THEREFORE, IT WOULD SUFFICE TO SA Y THAT THE ASSESSEE HAD NOT FURNISHED ANY MATERIAL EVIDENCE TO ESTABLISH THAT OUT OF THE AFORESAID AMOUNT, A PARTICULAR PORT ION WAS PRINCIPAL AMOUNT. FURTHER, THE ASSESSEE ITSELF HAD CONSIDERED THE ENTIRE AMOUNT AS PRINCIPAL AMOUNT BY NOT GIVING ANY REASON IN THE DETAILS FURNISHED ALONGWITH RETURN. T HUS, CLAIMING THE ENTIRE LIABILITY AS CAPITAL IN NATURE, IS NOT A SELF- EVIDENT FACT AND INCORRECT. HENCE, THE ASSESSEES C LAIM TANTAMOUNTS TO FURNISHING OF INACCURATE PARTICULARS OF INCOME, ESPECIALLY IN VIEW OF THE PROVISIONS OF SECTION 41( 1) OF THE DCIT VS. M/S.MOIRA STEEL LTD.,INDORE I.T.A.NO. 658/IND/2013 A.Y.2005-06 PAGE 8 OF 30 INCOME-TAX ACT, 1961. AS REGARDS THE CLAIM OF ASSES SEE FOR NON- AVAILABILITY OF DETAILS OF BREAK UP OF PRINCIPAL AN D INTEREST FROM BANK, THE AO NOTED THAT THE BURDEN WAS ON THE ASSES SEE TO FURNISH THE REQUISITE INFORMATION AND PROVIDE EVIDE NCE IN SUPPORT OF ITS CLAIM. THE AO FURTHER NOTED THAT AS PER DETAILS AVAILABLE ON RECORD, THE PRINCIPAL AMOUNT OF LOAN T AKEN BY THE ASSESSEE FROM THE BANK WAS RS. 1,52,23,892/-) AND T HE AMOUNT OF REMISSION WAS RS. 2,23,18,945/-. FROM THE SE DETAILS, THE REMISSION OF THE QUANTUM OF INTEREST W AS RS. 70,95,053/- (I.E. RS. 2,23,18,945/- (-) RS. 1,52,23 ,892/-.) THESE FACTS CLEARLY ESTABLISH THAT THE ASSESSEE HAD FURNISHED INACCURATE PARTICULARS OF ITS INCOME AS THE ASSESSE E HAS NOT GIVEN ANY PARTICULARS OF ITS INCOME U/S 41(1) OF TH E ACT, NEITHER IN THE RETURN FILED U/S 139(1) NOR IN THE RETURN FI LED U/S 148 OF THE INCOME-TAX ACT, 1961. IN THE BACK DROP OF THE A BOVE POSITION OF LAW AND FACTS, THE AO HELD THAT THE ASS ESSEE DID COMMIT A DEFAULT WITHIN AMENDMENT OF PROVISIONS OF SECTION 271(1)(C) OF THE ACT AND, THEREFORE, IT IS LIABLE F OR PENALTY IN DCIT VS. M/S.MOIRA STEEL LTD.,INDORE I.T.A.NO. 658/IND/2013 A.Y.2005-06 PAGE 9 OF 30 RESPECT OF CONCEALING THE CORRECT PARTICULARS AND F URNISHING INACCURATE PARTICULARS OF INCOME TO THE EXTENT OF R S. 1,55,21,582/- IN THE RETURN. ACCORDINGLY, THE AO LE VIED THE A MINIMUM AMOUNT OF PENALTY OF RS. 55,34,753/-. 1.2 BEING AGGRIEVED, THE ASSESSEE FILED AN APPEAL BEFOR E THE LD. CIT(A). THE LD. CIT(A) HAS OBSERVED THAT THE AO MAD E ADDITION BASED ON ONE TIME SETTLEMENT OF THE ASSESSEE WITH T HE STATE BANK OF INDIA AGAINST ITS OUTSTANDING DUES OF RS. 3 ,75,42,837/- . THIS BALANCE COMPRISED OF PRINCIPAL AMOUNT OF LOA N OF RS. 1,52,23,892/- AND INTEREST OF RS. 2,23,18,945/-. AS PER THE ONE TIME SETTLEMENT, THE ASSESSEE PAID RS. 1.21 CRORES TO THE BANK AND BALANCE OF RS. 2,54,42,837/- WAS WAIVED. THUS, THE AO CAME TO THE CONCLUSION THAT OUT OF THE AFORESAID AM OUNT THE PROPORTIONATE AMOUNT ALLOCABLE TO INTEREST IS RS. 1 ,51,25,582/- ON THE BASIS OF PROPORTION OF TOTAL AMOUNT OF INTER EST ( I.E. RS. 254 CRORES X 2.32 CRORES X 3.75 CRORES). THE REST O F THE AMOUNT OF RS. 1.03 CRORE WAS CONSIDERED AS WAIVER OF PRINC IPAL LOAN AMOUNT. THEREFORE, THIS WAIVER OF INTEREST APPORTIO NED OF RS. DCIT VS. M/S.MOIRA STEEL LTD.,INDORE I.T.A.NO. 658/IND/2013 A.Y.2005-06 PAGE 10 OF 30 1.51 CRORES WAS ADDED IN THE HANDS OF THE ASSESSEE U/S 41(1) OF THE ACT AS THE CESSATION OF LIABILITY. THE AO FO UND THIS APPROACH OF THE AO AS JUDICIOUS AND HENCE OBSERVED THAT THE SAME CANNOT BE DISTURBED AND EVEN THE ASSESSEE CANN OT RAISE ANY VALID OBJECTION IN SUCH ADDITION. HOWEVER, WITH REGARD TO LEVY OF PENALTY, THE LD. CIT(A) HAS OBSERVED THAT T HE ASSESSEE HAS FULLY DISCLOSED THE FACT THAT SBI HAS WAIVED TH E AMOUNT OF RS. 2.54 CRORES IN HIS PROFIT AND LOSS ACCOUNT AS I NCOME BELOW THE LINE AS INCOME RELATED TO PREVIOUS YEAR. THEREF ORE, THE ASSESSEE CONTENDED THAT NO FACTS WERE CONCEALED AND NO INACCURATE PARTICULARS WERE FURNISHED. THE ASSESSEE ALSO OFFERED THAT THE SAID AMOUNT OF INCOME AS THEY WERE IN BONA FIDE BELIEF THAT IT WAS A WAIVER OF PRINCIPAL AMOUN T. THE LD. CIT(A) NOTED THAT NO DUES CERTIFICATE ISSUED BY SBI DATED 08.08.2005 IN WHICH BANK HAS ONLY MENTIONED THAT LI ABILITY OF THE ASSESSEE STANDS DISCHARGED, BUT THE BANK HAS NO WHERE MENTIONED AS TO WHETHER THE PAYMENTS MADE BY THE AS SESSEE OF RS. 1.21 CRORES WAS ADJUSTED TOWARDS LOAN AMOUNT OR TOWARDS DCIT VS. M/S.MOIRA STEEL LTD.,INDORE I.T.A.NO. 658/IND/2013 A.Y.2005-06 PAGE 11 OF 30 INTEREST AMOUNT AND HENCE THERE IS NO CLARITY FROM SUCH LETTER AS TO WHICH AMOUNT WAS WAIVED. THEREFORE, THE LD. C IT(A) WAS OF THE VIEW THAT THE PRO RATA BIFURCATION OF THE AM OUNT OF WAIVER OF RS. 2.5 CRORES AS DONE BY THE AO IS ONLY AN ESTI MATION OF COMPONENT OF INTEREST FOR INVOKING SECTION 41(1) OF THE ACT. HENCE, SUCH ESTIMATION CANNOT BE GROUND FOR LEVY OF CONCEALMENT OF PENALTY U/S 271(1)(C) OF THE INCOME- TAX ACT, 1961. 1.2.1 THE LD. CIT(A) FURTHER OBSERVED THAT THE ASSESSEE H AS RELIED IN THE CASE OF CIT, CENTRAL-III, MUMBAI VS. ADONIS EL ECTRONICS PVT. LTD., (2013) 35 TAXMNN.COM 236 (MUM) AND ALSO TRIBU NAL HELD THAT THE ASSESSEE SETTLED THE LIABILITY OF RS. 26.6 5 CRORES OF SALES TAX BY PAYING RS. 17.65 CRORES. THEREFORE, TH E ADDITION OF BALANCE AMOUNT OF SALES TAX OF RS. 9.03 CRORES WAS CORRECT INSTEAD OF RS. 5.65 CRORES SHOWN BY THE ASSESSEE, B UT TRIBUNAL CANCELLED LEVY OF PENALTY ON THIS ARGUMENT THAT THE ISSUE OF DETERMINATION OF EXACT INCOME OF THE ASSESSEE FROM ASSIGNMENT BUSINESS WAS NOT FREE FROM DOUBT ON WHICH DIFFERENT VIEWS WERE DCIT VS. M/S.MOIRA STEEL LTD.,INDORE I.T.A.NO. 658/IND/2013 A.Y.2005-06 PAGE 12 OF 30 POSSIBLE. HENCE, THE PENALTY CANNOT BE LEVIED BECAU SE THE ASSESSEE HAS DISCLOSED THE ACCOUNTING POLICY ADOPT ED BY IT IN DETERMINING PROFIT. THE HON'BLE BOMBAY HIGH COURT U PHELD THE DECISION OF TRIBUNAL BY STATING THAT ALL THE RELEVA NT PARTICULARS ABOUT THE INCOME RELATING TO ASSIGNMENT OF BUSINESS WERE FULLY FURNISHED AND EVEN ACCOUNTING POLICY ADOPTED FOR DE TERMINING THE SAID INCOME ARE DISCLOSED. THE LD. CIT(A) ALSO RELYING ON THE CASE LAWS OF NATIONAL TEXTILES, (2001) 249 ITR 125 (GUJ), WHEREIN IT WAS HELD THAT WHEN TWO VIEWS ARE POSSIB LE, NO PENALTY CAN BE IMPOSED AND THE AFORESAID DECISION O F HON'BLE MUMBAI HIGH COURT, HELD THAT THE LEVY OF PENALTY IS NOT JUSTIFIED IN THIS CASE. 1.2.2 BEING AGGRIEVED, THE REVENUE FILED THIS APPEAL BEFO RE THE TRIBUNAL. THE LD. DR SUBMITTED THAT THE ASSESSEE W AS HAVING ITS OUTSTANDING DUES OF RS. 3,75,42,837/- WITH STAT E BANK OF INDIA. THE ASSESSEE ENTERED INTO A SETTLEMENT WITH SBI BY WHICH THE ASSESSEE HAS PAID RS. 1.21 CRORES TO THE BANK AND BALANCE OF RS. 2.54 CRORES WAS WAIVED. THE OUTSTAND ING DCIT VS. M/S.MOIRA STEEL LTD.,INDORE I.T.A.NO. 658/IND/2013 A.Y.2005-06 PAGE 13 OF 30 AMOUNT OF RS. 3,75 CRORES WAS COMPRISING THE PRINCI PAL AMOUNT OF RS. 1.52 CRORES AND INTEREST OF RS. 2.23 CRORES. 1.2.3 THE LD. DR REFERRED THE FINDINGS OF THE AO AS RECO RDED IN PARA 4.3.2 OF THE PENALTY ORDER, WHEREIN THE AO NOTED TH AT REMISSION AMOUNT OF RS. 2,23,18,945/- WAS OF INCLUSIVE OF PRI NCIPAL AMOUNT OF RS. 1,52,23,892/-. HENCE, THE REMISSION O F THE QUANTUM OF INTEREST WAS ATLEAST OF RS. 70,95,053/- ( RS. 2,23,18,945/- (-) RS. 1,52,23,892/- ). THEREFORE, T HE LD. DR CONTENDED THAT WHEN THE PRINCIPAL AMOUNT ITSELF WAS LESS THAN THE AMOUNT WAIVED OF BY THE BANK, THE ASSESSEE WAS REQUIRED TO DISCLOSE THE SAID AMOUNT AS ITS INCOME IN THE PR OFIT AND LOSS ACCOUNT AS PER THE PROVISIONS OF SECTION 41(1) OF T HE ACT. THEREFORE, BY MENTIONING THAT THE AMOUNT OF RS. 2.5 4 CRORES IN THE PROFIT AND LOSS ACCOUNT AS ONE TIME SETTLEMENT DOES NOT ESTABLISH THAT THE ASSESSEE HAS FURNISHED FULL PART ICULARS OF ITS INCOME. THE LD. AUTHORIZED REPRESENTATIVE OF THE AS SESSEE ALSO SUBMITTED THAT THE ASSESSEE HAS BEEN CLAIMING DEDUC TION ON ACCOUNT OF INTEREST PAID TO THE BANK ON THE PRINCIP AL AMOUNT DCIT VS. M/S.MOIRA STEEL LTD.,INDORE I.T.A.NO. 658/IND/2013 A.Y.2005-06 PAGE 14 OF 30 AS APPEARING IN ITS ACCOUNTS. THEREFORE, THE ASSESS EE WAS WELL AWARE OF THE FACT THAT THE AMOUNT WAIVED, WHICH IS MORE THAN THE PRINCIPAL AMOUNT IS INCLUSIVE OF INTEREST. IT WAS ALSO SUBMITTED THAT THE ASSESSEE HAD NOT GIVEN ANY PARTI CULARS OF ITS INCOME U/S 141(1) NEITHER IN THE RETURN FILED U/S 1 39 NOR IN THE RETURN IN RESPONSE TO SECTION 148, WHEREAS IN T HE ORIGINAL RETURN FILED U/S 139 OF THE ACT, THE ASSESSEE HAS C LAIMED PAYMENT OF INTEREST TO BANK. THE LD. DR RELIED ON THE CASE OF JAMES FINLAY & CO.LTD. VS. CIT, (1983) 144 ITR 423 (CAL), WHEREIN IT WAS HELD THAT THE CORRESPONDENCE BETWEEN THE ASSESSEE AND WITH THE FIRM WITH REGARD TO RELEVANT PREVIOUS YEAR SHOWED THAT THE ASSESSEE HAS NOT WAIVED ANY CL AIM FOR INTEREST NOR WAS THERE ANY AGREEMENT FOR COMMUNICAT ION BETWEEN THE PARTIES FOR ANY SETTLEMENT OF PAYMENT O F INTEREST IN INSTALMENT. THE TRIBUNAL CONFIRMED THE ORDER OF PEN ALTY. THE HON'BLE HIGH COURT HAS HELD THAT THERE WAS NO CHANG E IN METHOD OF ACCOUNTING IN THE RELEVANT PREVIOUS YEAR AND NO AGREEMENT WHICH PREVENTED THE ACCRUAL OF INTEREST. THE DCIT VS. M/S.MOIRA STEEL LTD.,INDORE I.T.A.NO. 658/IND/2013 A.Y.2005-06 PAGE 15 OF 30 ASSESSEE HAD OFFERED NO LEGAL PLAUSIBLE OR POSSIBLE EXPLANATION FOR NOT INCLUDING THE INTEREST IN ITS INCOME AND MU ST, AS A MATTER OF FACT, BE HELD TO HAD DELIBERATELY CONCEAL ED THE PARTICULARS OF ITS INCOME. ACCORDINGLY, THE PENALTY U/S 271(1)(C) WAS IMPOSABLE ON THE ASSESSEE COMPANY. THE LD. DR ALSO RELIED IN THE CASE OF S.S.RATANCHAND BHOLANATH V. C IT, (1994) 210 ITR 682 (MP), WHEREIN IT WAS HELD THAT FINDING IN THE ASSESSMENT PROCEEDINGS ARE NOT CONCLUSIVE FOR LEVYI NG PENALTY AND CONSCIOUS CONCEALMENT MUST BE PROVED. HOWEVER, WHERE ASSESSMENT IS NOT CHALLENGED IN APPEAL, THE ORDER A S SUCH CANNOT BE COLLATERALLY CHALLENGED IN PENALTY PROCEE DINGS. THEREFORE, IT WAS CONTENDED THAT NON-FILING OF APPE AL BY THE ASSESSEE DOES NOT MEAN THAT IT HAS NOT CONCEALED TH E INCOME WHETHER IT AMOUNTS TO ADMISSION OF CONCEALMENT ON T HE PART OF THE ASSESSEE NON DISCLOSING THE PARTICULAR FACT. TH E LD. DR SUPPORTED HIS FURTHER VIEW BY PLACING RELIANCE ON T HE DECISION OF HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. ZOOM COMMUNICATION (P) LIMITED, (2010) 327 ITR 510 (DEL) , WHEREIN DCIT VS. M/S.MOIRA STEEL LTD.,INDORE I.T.A.NO. 658/IND/2013 A.Y.2005-06 PAGE 16 OF 30 IT WAS HELD THAT THE VIEW THAT A CLAIM WHICH IS WHO LLY UNTENABLE IN LAW AND HAS ABSOLUTELY NO FOUNDATION ON WHICH IT COULD BE MADE, THE ASSESSEE WOULD NOT BE LIABLE TO IMPOSITIO N OF PENALTY EVEN IF HE WAS NOT ACTING BONA FIDE WHILE MAKING A CLAIM OF THIS NATURE, THAT WOULD GIVE A LICENCE TO UNSCRUPULOUS A SSESSEES TO MAKE WHOLLY UNTENABLE AND UNSUSTAINABLE CLAIMS WITH OUT THERE BEING ANY BASIS FOR MAKING THEM ASSESSEE DI D NOT EXPLAIN EITHER TO THE IT AUTHORITIES OR TO THE TRIB UNAL AS TO IN WHAT CIRCUMSTANCES AND ON ACCOUNT OF WHOSE MISTAKE, THE AMOUNTS CLAIMED AS DEDUCTIONS WERE NOT ADDED WHILE COMPUTING THE INCOME OF THE ASSESSEE COMPANY AMOU NTS CLAIMED AS DEDUCTIONS WERE NOT ADDED WHILE COMPUTIN G THE INCOME OF THE ASSESSEE COMPANY - IF THE CLAIM BESI DES BEING INCORRECT IN LAW IS MALA FIDE, EXPLN. 1 TO SECTION. 271(1) WOULD COME INTO PLAY. THEREFORE, THE LD. DR FURTHER SUBM ITTED THAT THE DECISION RELIED UPON BY THE LD. AUTHORIZED REP RESENTATIVE OF THE ASSESSEE IN THE CASE OF NAVAL SINGH SAHKARI SHAKKAR KARKHANA MYDT. VS. ACIT, (2015) 25 ITJ 721 (MP) IS NOT DCIT VS. M/S.MOIRA STEEL LTD.,INDORE I.T.A.NO. 658/IND/2013 A.Y.2005-06 PAGE 17 OF 30 APPLICABLE TO THE FACTS OF THE CASE OF THE ASSESSEE AS IN THE SAID CASE, THE ASSESSEE WAS UNDER THE APPREHENSION THAT THEY HAD VIOLATED THE ONE TIME SETTLEMENT, THEREFORE, THEY A RE LIABLE TO PAY COMPOUND INTEREST AND LIQUIDITY DAMAGES. THE ST ATEMENT WAS MADE IN THE RETURN. HOWEVER, THE ANTICIPATION OF THE ASSESSEE AT THE TIME OF FILING OF RETURN WAS BECAUS E OF THE FACT THAT THEY HAVE VIOLATED THE ONE TIME SETTLEMENT, BU T IT WAS ONLY AFTER ASSESSMENT WAS OVER THAT ON 29.6.1994 AND ON 31.03.1995 THAT THE FACT ABOUT WAIVER OF INTEREST A ND LIQUIDITY DAMAGES BY THE FINANCIAL INSTITUTION WAS KNOWN TO BE INCORRECT. THEREFORE, THERE WAS BONA FIDE ERROR ON THE PART OF THE ASSESSEE IN MAKING THE CLAIM WHEREAS IN THE CAS E OF THE ASSESSEE IT WAS FULLY KNOWN THAT THE AMOUNT WAIVED OF RS. 3.23 CRORES WAS INCLUSIVE OF THE PRINCIPAL AMOUNT OF RS. 1.52 CRORES. THEREFORE, ATLEAST THE AMOUNT OF RS. 70 LAKHS WAS K NOWN TO THE ASSESSEE AND SAME WAS APPEARING IN THE BOOKS OF ACC OUNTS OF THE ASSESSEE. THEREFORE, THE CASE IS DISTINGUISHABL E ON FACTS AND CIRCUMSTANCES OF THE LAW. IN VIEW OF THIS, THE LD. DR DCIT VS. M/S.MOIRA STEEL LTD.,INDORE I.T.A.NO. 658/IND/2013 A.Y.2005-06 PAGE 18 OF 30 VEHEMENTLY CONTENDED THAT THE PENALTY DELETED BY TH E LD. CIT(A) DESERVES TO BE RESTORED. 1.4. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSESSEE CONTESTED THE ISSUE BEFORE THE CIT(A) UNSUCCESSFULL Y. THE LD. CIT(A) OBSERVED THAT THE AO HAS APPORTIONED THE PRI NCIPAL AND INTEREST COMPONENT WITHOUT APPRECIATING THAT THE PR INCIPAL AND INTEREST ARE ACCOUNTED FOR SEPARATELY ON OTHER TRAN SACTION ON DEBIT AND CREDIT IN BANK ACCOUNT. THE INTEREST CLUB BED WITH THE PRINCIPAL AND FURTHER INTEREST IS CHARGED ON AGGREG ATE OF TWO. THEREFORE, NO DISTINCTION CAN BE MADE IN THE PRINCI PAL AND INTEREST COMPONENT. THIS CLEARLY SUGGESTED THAT THE AO AS WELL AS CIT(A) ERRED IN MAKING ADDITION U/S41(1) AND CON FIRMED THE SAME RESPECTIVELY. 1.4.1. THE LD. AUTHORIZED REPRESENTATIVE OF THE ASSESSEE SUBMITTED THAT SECTION 41(1) HAS ONLY A MACHINERY S ECTION AND NOT CHARGING SECTION. THEREFORE, THE PENALTY WAS NO T LEVIABLE ON THE INCOME ASSESSED UNDER MACHINERY PROVISIONS AS H ELD BY THE HON'BLE HIGH COURT IN THE CASE OF K. V. MOOSA KOYA AND DCIT VS. M/S.MOIRA STEEL LTD.,INDORE I.T.A.NO. 658/IND/2013 A.Y.2005-06 PAGE 19 OF 30 CO. VS. ITO, 175 ITR 120 (KER). EVEN OTHERWISE INIT IATION AND LEVY OF PENALTY ON THE INCOME ASSESSED U/S 41(1) IS NOT JUSTIFIED LOOKING TO THE FACTS THAT IT IS NOT THE REAL INCOME RECEIVED BUT IT IS A SETTLEMENT BETWEEN DEBTOR AND CREDITOR. MOREOV ER, THE PENALTY COULD NOT BE INITIATED UNLESS THERE IS EVI DENCE OF CONCEALMENT OR FURNISHING INACCURATE PARTICULARS. T HE ASSESSEE HAS CLEARLY SHOWN IN THE RETURN AND ANNEXURE THAT O NE TIME SETTLEMENT HAS BEEN REACHED WITH THE ASSESSEE AND H IS BANKERS. QUANTUM OF SETTLEMENT WAS ALSO SPECIFIC AN D CLEAR IN RETURN OF INCOME AND FINAL ACCOUNTS ANNEXED THERETO . THEREFORE, THE ASSESSEE HAS NOT SUPPRESSED ANY PART ICULARS OR FURNISHED ANY INACCURATE PARTICULARS. ON THE OTHER HAND, THE INCOME HAS BEEN ASSESSED BY THE AO BY APPLYING SELF DESIGNED FORMULA OF PRO-RATA BASIS. EVEN THE AO AND CIT(A) W ERE NOT FIRM ON THE QUESTION OF QUANTUM OF INTEREST PAID. T HEREFORE, THE AMOUNT OF RS. 1,51,25,582/- ASSESSED U/S 41(1) IS N OTHING BUT GUESS WORK ON THE PART OF THE AO. IT MAY ALSO BE SE EN THAT THE AO AS WELL AS CIT(A) HAVE ESTIMATED THE AMOUNT OF R S. DCIT VS. M/S.MOIRA STEEL LTD.,INDORE I.T.A.NO. 658/IND/2013 A.Y.2005-06 PAGE 20 OF 30 1,51,25,582/-. NO PENALTY U/S 271(1)(C) COULD BE LE VIED ON THE BASIS OF ESTIMATE AND, ACCORDINGLY, THE LD. CIT(A) HAS RIGHTLY DELETED THE PENALTY. THE LD. AUTHORIZED REPRESENTAT IVE OF THE ASSESSEE ALSO RELIED ON THE CASE OF NORTHLAND DEVEL OPMENT AND HOTEL CORPORATION VS. CIT, 349 ITR 363 ( S.C.), CIT VS. ADONIS ELECTRONICS P.LTD., 35 TAXMANN.COM 236 (BOM) AND NE W HOLLAND TRACTORS (I) P. LTD. VS. CIT, 275 CTR 291 ( DEL) IN SUPPORT OF HIS CONTENTION. THE LD. AUTHORIZED REPRE SENTATIVE OF THE ASSESSEE HAS ALSO PLACED RELIANCE IN SUPPORT OF HIS CONTENTION ON THE DECISION OF NAVAL SINGH SAHKARI S HAKKAR KARKHANA MYDT. VS. ACIT, (2015) 25 ITJ 721 (MP), CI T VS. IFCI LIMITED, (2010) 328 ITR 611 (DEL), CIT VS. M.PACHAM UTHU AND ANOTHER, 295 ITR 502 (MAD). 1.5 WE HAVE CONSIDERED THE FACTS, RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE PERU SAL OF THE ASSESSMENT ORDER REVEALS THAT THE AO HAS MADE ADDIT ION U/S 41(1) BY MAKING THE APPORTIONMENT OF THE AMOUNT WAI VED BY SBI ON THE BASIS OF CERTAIN FORMULA APPLIED BY HIM. THUS, THE DCIT VS. M/S.MOIRA STEEL LTD.,INDORE I.T.A.NO. 658/IND/2013 A.Y.2005-06 PAGE 21 OF 30 AO HAS MADE ESTIMATED BIFURCATION OF THE PRINCIPAL AMOUNT THAT INTEREST COMPONENT OUT OF TOTAL AMOUNT OF RS. 2.54 TOTAL AMOUNT OF RS. 2.54 CRORES WAIVED OFF BY THE BANK. WE FIND FROM THE RECORD AS WELL AS AUDITED PROFIT AND LOSS ACCOUNT PLACED AT PAGE 8 OF THE PAPER BOOK THAT THE ASSESSE E HAS MENTIONED THE WAIVER AMOUNT OF RS. 2,54,42,838/- IN THE PROFIT AND LOSS ACCOUNT BELOW MANDATORY FOR THE YEAR AS I NCOME RELATED TO PREVIOUS YEAR B-129. WE FURTHER FIND TH AT THIS FACT HAS ALSO DISCLOSED BY THE ASSESSEE IN COLUMN H OF SCHEDULE-P ANNEXED TO THE BALANCE SHEET, PROFIT AND LOSS ACCOU NT, WHICH IS APPEARING AT PAGE 11 OF PAPER BOOK, READS AS UNDER :- H) THE COMPANY HAS ENTERED INTO ONE TIME SETTLEME NT (OTS) WITH STATE BANK OF INDIA FOR A TOTAL AMOUNT O F RS. 121 LACS AGAINST THE TOTAL OUTSTANDING OF PRINCIPAL OF RS. 1,52,23,892/- & OVERDUE INTEREST OF RS. 2,23,18,945 /-. THE COMPANY HAS FULLY PAID THE OTS AMOUNT DURING TH E YEAR & RECEIVED THE NO DUES CERTIFICATE FROM THE SA ID BANK. 1.5.1 THUS, WE FIND THAT THE AO HAS MADE ADDITION O F APPORTIONMENT OF COMPOSITE WAIVER OF AMOUNT ON THE BASIS OF FACTS DISCLOSED BY THE ASSESSEE IN THE RETURN OF IN COME AND ALSO DCIT VS. M/S.MOIRA STEEL LTD.,INDORE I.T.A.NO. 658/IND/2013 A.Y.2005-06 PAGE 22 OF 30 DURING THE COURSE OF ASSESSMENT PROCEEDINGS. WE FUR THER NOTE THAT THE ADDITION SO MADE BY THE AO ON THE BASIS OF APPORTIONMENT AMOUNTS TO ESTIMATION ONLY FOR WHICH THE AO HAD A DIFFERENT OPINION FROM THE POINT OF VIEW OF T HE ASSESSEE. WE ALSO NOTE THAT THE BANK HAD NOT GIVEN THE BREAK UP OF THE PRINCIPAL AMOUNT AND INTEREST IN THE SETTLEMENT LET TER (COPY PLACED AT PAPER BOOK PAGE 15 DATED 30.06.2004 ). TH EREFORE, IT WAS NOT POSSIBLE FOR THE ASSESSEE TO BIFURCATE AS T O HOW MUCH AMOUNT IS PRINCIPAL AND HOW MUCH AMOUNT ON ACCOUNT OF INTEREST IS WAIVED OFF. LD. DR HAS CONTENDED THAT O UT OF TOTAL REMISSION AMOUNT OF RS. 2.23 CRORES, THE PRINCIPAL AMOUNT OF LOAN TAKEN BY THE ASSESSEE WAS AT RS. 1.52 CRORES, THEREFORE, RS. 70.95 LAKHS ( RS. 2.23 CRORES (-) RS. 1.52) AT LEAST INTEREST COMPONENT, THEREFORE, THE ASSESSEE IS ALLEGED TO HA VE FURNISHED INACCURATE PARTICULARS OF INCOME TO THIS EXTENT. HO WEVER, WE FIND THAT THE TOTAL AMOUNT OUTSTANDING WAS AT RS. 3 .75 CRORES AS AGAINST WHICH ONE TIME SETTLEMENT WAS REACHED SU BJECT TO PAYMENT OF RS. 1.21 CRORES TO THE BANK. FURTHER, TH AT NO DUES DCIT VS. M/S.MOIRA STEEL LTD.,INDORE I.T.A.NO. 658/IND/2013 A.Y.2005-06 PAGE 23 OF 30 CERTIFICATE ISSUED BY SBI DATED 08.08.2005 IN WHICH BANK HAS ONLY MENTIONED THAT LIABILITY OF THE ASSESSEE STAND S DISCHARGED, BUT THE BANK HAS NOWHERE MENTIONED AS TO WHETHER TH E PAYMENT MADE BY THE ASSESSEE OF RS. 1.21 CRORES WAS ADJUSTED TOWARDS LOAN AMOUNT OR TOWARDS INTEREST AMOUNT. HEN CE, THERE WAS NO CLARITY FROM THE SAID LETTER AS TO WHICH AMO UNT WAS WAIVED. THEREFORE, WE ARE OF THE CONSIDERED OPINION THAT THE PRO-RATA BIFURCATION OF THE AMOUNT OF WAIVER OF RS. 2.54 CRORES AS DONE BY THE AO IS FILED WITH AN ESTIMATION OF CO MPONENT OF INTEREST FOR INVOKING OF SECTION 41(1) OF THE INCOM E-TAX ACT, 1961. HENCE, SUCH ESTIMATION CANNOT BE A GROUND FOR THE LEVY OF CONCEALMENT OF PENALTY U/S 271(1)(C) OF THE ACT. FURTHER, THIS VIEW IS SUPPORTED BY THE DECISION RELIED ON BY THE LD. AUTHORIZED REPRESENTATIVE OF THE ASSESSEE IN THE CA SE OF K. V. MOOSA KOYA AND CO. VS. ITO, 175 ITR 120 (KER), ACCO RDING TO WHICH SECTION 41(1) IS ONLY MACHINERY SECTION AND N OT CHARGING SECTION. THEREFORE, THE PENALTY WAS NOT LEVIABLE ON THE INCOME ASSESSED UNDER MACHINERY PROVISIONS. IT IS TRITE LA W THAT DCIT VS. M/S.MOIRA STEEL LTD.,INDORE I.T.A.NO. 658/IND/2013 A.Y.2005-06 PAGE 24 OF 30 PENALTY PROCEEDINGS ARE DISTINCT AND SEPARATE PROCE EDINGS FROM THE ASSESSMENT PROCEEDINGS. THE FINDINGS RECORDED I N THE ASSESSMENT ORDER IS NOT CONCLUSIVE FOR DECIDING THE IMPOSITION OF PENALTY. IT ONLY HAS A PERSUASIVE VALUE. ANY FIN DING RECORDED IN THE ASSESSMENT ORDER DOES NOT MEAN THAT THE PENA LTY HAS TO BE IMPOSED AUTOMATICALLY. TO APPRECIATE THE PROVISI ONS OF SECTION 271(1)(C) IN PROPER PERSPECTIVE, WE WOULD L IKE TO REPRODUCE THE PROVISIONS OF SECTION 271(1)(C) AS UN DER:- FAILURE TO FURNISH RETURNS, COMPLY WITH NOTICES, CONCEALMENT OF INCOME, ETC. 271. (1) IF THE [ASSESSING] OFFICER OR THE [***] [COMMISSIONER (APPEALS)] [OR THE COMMISSIONER] IN T HE COURSE OF ANY PROCEEDINGS UNDER THIS ACT, IS SATISF IED THAT ANY PERSON (A) [* * *] (B) XXX XXX XXX (C) HAS CONCEALED THE PARTICULARS OF HIS INCOME OR [* * *] FURNISHED INACCURATE PARTICULARS OF [SUCH INCOME, O R] (D) XXX XXX XXX HE MAY DIRECT THAT SUCH PERSON SHALL PAY BY WAY OF PENALTY, (I) [* * *] DCIT VS. M/S.MOIRA STEEL LTD.,INDORE I.T.A.NO. 658/IND/2013 A.Y.2005-06 PAGE 25 OF 30 [(II) IN THE CASES REFERRED TO IN CLAUSE (B), [IN A DDITION TO TAX, IF ANY, PAYABLE] BY HIM, [A SUM OF TEN THOUSAN D RUPEES] FOR EACH SUCH FAILURE ;] [(III) IN THE CASES REFERRED TO IN CLAUSE (C) [OR C LAUSE (D)], [IN ADDITION TO TAX, IF ANY, PAYABLE] BY HIM, A SUM WHICH SHALL NOT BE LESS THAN, BUT WHICH SHALL NOT EXCEED [ THREE TIMES], THE AMOUNT OF TAX SOUGHT TO BE EVADED BY RE ASON OF THE CONCEALMENT OF PARTICULARS OF HIS INCOME [OR FRINGE BENEFITS] OR THE FURNISHING OF INACCURATE PARTICULA RS OF SUCH INCOME [OR FRINGE BENEFITS]. [* * *] [EXPLANATION 1.WHERE IN RESPECT OF ANY FACTS MATER IAL TO THE COMPUTATION OF THE TOTAL INCOME OF ANY PERSON U NDER THIS ACT, (A) SUCH PERSON FAILS TO OFFER AN EXPLANATION OR OF FERS AN EXPLANATION WHICH IS FOUND BY THE [ASSESSING] OFFICE R OR THE [***] [COMMISSIONER (APPEALS)] [OR THE COMMISSI ONER] TO BE FALSE, OR 1.5.2 THUS, EXPLANATION 1 TO SECTION 271(1)(C) PROV IDES THAT PENALTY WOULD BE DEEMED TO ATTRACT WHERE IN RE SPECT OF THE FACT MATERIAL TO THE COMPUTATION OF INCOME EITHER N O EXPLANATION IS OFFERED OR EXPLANATION OFFERED FOUND TO BE FALSE. IN THE CASE OF THE ASSESSEE, WE FIND THAT THE AO HA S MADE ADDITION BY APPLYING DEEMING PROVISIONS OF SECTION 41(1) AND MAKING PRO-RATA BIFURCATION OF THE AMOUNT WAIVED BY THE BANK INTO PRINCIPAL AND INTEREST COMPONENT. THESE FACTS FOUND DCIT VS. M/S.MOIRA STEEL LTD.,INDORE I.T.A.NO. 658/IND/2013 A.Y.2005-06 PAGE 26 OF 30 DISCLOSED BY THE ASSESSEE IN THE PROFIT AND LOSS AC COUNT AS WELL AS NOTES IN ACCOUNT OF CLAUSE H OF SCHEDULE P APP EARING AT PAGE 11 OF THE PAPER BOOK. THE AO HAS NOT DOUBTED T HE AMOUNT DISCLOSED IN THE PROFIT AND LOSS ACCOUNT. TH E ASSESSEE HAS FURNISHED ALL RELEVANT FACTS AND MERELY BECAUSE THAT IT WAS NOT FOUND ACCEPTABLE BY THE AO DOES NOT MEAN THAT T HE PENALTY IS AUTOMATIC. THUS, THE ASSESSEE HAS OFFERED EXPLAN ATION, WHICH WAS NOT FOUND TO BE FALSE AND, ACCORDINGLY, C LAUSE A OF EXPLANATION 1 TO SECTION 271(1)(C) DOES NOT COVER T HE CASE UNDER CONSIDERATION. 1.5.3 CLAUSE (B) OF EXPLANATION 1 TO SECTION 271(1) (C) PROVIDES THAT WHERE THE ASSESSEE IS NOT ABLE TO SUB STANTIATE ITS EXPLANATION AND FAILS TO PROVE THAT SUCH EXPLANATIO N IS BONA FIDE AND ALL THE FACTS RELATING TO THE SAME HAVE BE EN DISCLOSED, PENALTY IS LEVIABLE. WE FIND THAT THE ASSESSEE HAS DISCLOSED ALL THE FACTS AND SUBSTANTIATED THE SAME WITH THE LETTE R ISSUED BY THE BANK ON 30.06.2004 AND 08.08.2005, WHEREIN THE BANK HAS GIVEN DETAILS OF AMOUNT WAIVED WITHOUT ANY BIFU RCATION OF DCIT VS. M/S.MOIRA STEEL LTD.,INDORE I.T.A.NO. 658/IND/2013 A.Y.2005-06 PAGE 27 OF 30 INTEREST AND PRINCIPAL AMOUNT. THEREFORE, THE ADDIT ION MADE ON THE BASIS OF DEEMING PROVISIONS OF SECTION 41(1) OF THE ACT DOES NOT ATTRACT PENALTY U/S 271(1)(C) AND ITS CASE IS N OT COVERED BY EXPLANATION CLAUSE B TO SECTION 271(1)(C) AS THE ASSESSEE HAS SUBSTANTIATED ITS EXPLANATION THAT IT WAS BONA FIDE AND ALL THE FACTS RELATING TO THE SAME HAVE BEEN DISCLOSED AND AS APPEARING FROM THE PROFIT AND LOSS ACCOUNT AND BALANCE SHEET. BASED ON THE ABOVE FACTS OF THE CASE, IT CAN BE HELD THAT TH E ASSESSEE HAS MADE ALL THE NECESSARY DISCLOSURE ON A BONA FIDE BE LIEF WHICH IS NOT AGREEABLE TO THE AO, WHICH DOES NOT AUTOMATICAL LY LEAD TO THE CASE FOR PENALTY U/S 271(1)(C) OF THE ACT, WHIC H IS ALSO SUPPORTED BY THE DECISION OF HON'BLE JURISDICTIONA L HIGH COURT IN THE CASE OF NAVAL SINGH SAHKARI SHAKKAR KARKHANA MYDT. VS. ACIT, (2015) 25 ITJ 721 (MP), WHEREIN THE FACTS WERE THAT THE AMOUNT OF SETTLEMENT WAS NOT KNOWN TO THE ASSES SEE AT THE TIME OF FILING OF THE RETURN OF INCOME. THEREFORE, THERE WAS BONA FIDE ERROR ON THE PART OF THE ASSESSEE IN MAKING TH E CLAIM. SIMILARLY, IN THE CASE OF THE ASSESSEE, THE ASSESSE E WAS NOT DCIT VS. M/S.MOIRA STEEL LTD.,INDORE I.T.A.NO. 658/IND/2013 A.Y.2005-06 PAGE 28 OF 30 AWARE REGARDING THE FACT THAT THE AMOUNT WAIVED AT RS. 2.54 CRORES WAS INCLUSIVE OF INTEREST AMOUNT. THE LD. CI T(A) HAS ALSO RELIED IN THE CASE OF CIT VS. ADONIS ELECTRONICS PR IVATE LIMITED, 35 TAXMANN.COM 236 (BOM), WHICH ALSO SUPPORTS THE CONTENTION OF THE ASSESSEE. THE LD. AUTHORIZED REPR ESENTATIVE OF THE ASSESSEE ALSO RELIED IN THE CASE OF CIT VS. IFC I LIMITED, (2010) 328 ITR 611 (DEL), WHEREIN IT WAS HELD AS UN DER :- HELD, DISMISSING THE APPEAL, THAT THE ASSESSEE HAD FILED THE RETURN AND FURNISHED ALL PARTICULARS. THE ASSESSEE HAD EXPLAINED DURING THE PENALTY PROCEEDINGS THAT THE INVESTMENTS WERE WRITTEN OFF I N THE BOOKS OF ACCOUNT AND WERE CLAIMED AS DEDUCTION ON ACCOUNT OF LOSS WHICH OCCURRED TO THE ASSESSEE I N THE COMPUTATION OF TOTAL INCOME. THE TRIBUNAL ANALYSING THE FACTS HAD EXPRESSED THE VIEW THAT THE RE HAD BEEN NO FURNISHING OF INACCURATE PARTICULARS OF SUCH INCOME AND THE ASSESSEE HAD DECLARED THE ENTIR E MATERIAL. IT WAS A CASE WHERE A CLAIM PUT FORTH BY THE ASSESSEE AS REGARDS THE LOSS WAS NOT ACCEPTED BUT THAT WOULD NOT PER SE TANTAMOUNT TO FURNISHING ANY KIND OF INACCURATE PARTICULARS. THUS, THERE HAD BEE N NO CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE DCIT VS. M/S.MOIRA STEEL LTD.,INDORE I.T.A.NO. 658/IND/2013 A.Y.2005-06 PAGE 29 OF 30 PARTICULARS. HENCE, THE CANCELLATION OF PENALTY WAS VALID. 1.5.4 THUS, THE ASSESSEES CASE IS COVERED BY THE ABOVE DECISION ALSO. FURTHER, IT IS RELEVANT TO MENTION T HAT THE ASSESSEE IS A SICK COMPANY AND HAS BROUGHT FORWARD BUSINESS LOSSES FROM THE EARLIER YEARS AND AFTER MAKING DISA LLOWANCE ON ACCOUNT OF INTEREST ALSO, THE INCOME COMES TO LOSS FIGURE LEAVING FURTHER SET OFF FOR BROUGHT FORWARD LOSSES. THEREFO RE, THERE APPEARS NO MOTIVE TO REDUCE THE TAX LIABILITY BY NO T SHOWING INTEREST AMOUNT. WE ARE, THEREFORE, OF THE CONSIDER ED VIEW THAT THE PENALTY IS NOT SUSTAINABLE IN LAW. MOREOVER, IN THE LIGHT OF THE DECISION OF HON'BLE SUPREME COURT IN THE CASE O F CIT VS. RELIANCE PETRO PRODUCTS LIMITED, 322 ITR 158 ( S.C. ), WHEREIN IT WAS HELD THAT MERELY BECAUSE THE ASSESSEE HAS CLAIM ED EXPENDITURE, WHICH CLAIM WAS NOT ACCEPTED OR WAS NO T FOUND ACCEPTABLE BY THE REVENUE, PENALTY U/S 271(1)(C) C ANNOT BE ATTRACTED. IN THE LIGHT OF THESE FACTS, WE DO NOT F IND ANY INFIRMITY IN THE ORDER OF THE ORDER OF LD. CIT(A). ACCORDINGLY, THE DCIT VS. M/S.MOIRA STEEL LTD.,INDORE I.T.A.NO. 658/IND/2013 A.Y.2005-06 PAGE 30 OF 30 SAME IS UPHELD. THEREFORE, THE GROUNDS OF APPEAL OF REVENUE ARE DISMISSED. 1.6 IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. THE ORDER PRONOUNCED IN THE OPEN COURT ON 14.03.2017. SD/- SD/- ( .. ) (C.M.GARG) JUDICIAL MEMBER (..) (O.P.MEENA) ACCOUNTANT MEMBER / DATED : 14 TH MARCH, 2017 2.3