DCIT, Bangalore V. Safina Hotels Ltd., Bangalore

ITA 682/BANG/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 8571 (ITAT-BANGALORE)
• Duration Of Justice: 7 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-02-2010
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 07-01-2010
• Assessment Year: 2001-2002
• Appeal Filed On: 03-07-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: JACINTA ZIMIK VASHAI
• Keywords: Business expenditure; Wrong claim; Commercial expediency; Revenue expenditure
• Section: 143(3); 147; 148; 132; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : BANGALORE BEFORE SHRI K.P.T. THANGAL, VICE PRESIDENT AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ITA NO. 682/BANG/2009 ASSESSMENT YEAR : 2001-02 THE DY. COMMISSIONER OF INCOME-TAX, CIRCLE 12(3), BANGALORE. : APPELLANT VS. M/S. SAFINA HOTELS LTD., NO.84/85, INFANTRY ROAD, BANGALORE. : RESPONDENT APPELLANT BY : SMT. JACINTA ZIMIK VASHAI RESPONDENT BY : SHRI SAI PRASAD O R D E R PER A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER THIS APPEAL OF THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE LD. CIT(A)-VI, BANGALORE IN ITA NO: 19/ACIT CC 2(3)/CIT (A)-VI/2007-08 DATED: 15.4.2009 [U/S 271(1)(C) OF THE ACT] IN THE CASE OF SAFINA HOTELS LIMITED, BANGALORE FOR THE ASSESSMENT YEAR 2001-02 . 2. THE REVENUE HAS RAISED SIX EXHAUSTIVE GROUNDS IN AN ILLUSTRATIVE AND NARRATIVE MANNER. HOWEVER, THE CRUX OF THE ISS UE IS THAT THE ITA NO. 682/BANG/09 PAGE 2 OF 14 LD.CIT(A) HAS ERRED IN DELETING THE PENALTY LEVIED U/S 271(1)(C) OF THE ACT WHICH IS OPPOSED TO LAW AND FACTS OF THE ISSUE. 3. THE ISSUE, IN BRIEF, IS THAT THE ASSESSEE A PR IVATE LIMITED COMPANY OWNS A HOTEL-CUM-COMMERCIAL COMPLEX AND THE MAIN ACTIVITIES WERE RUNNING THE HOTEL AS LODGING, LETTING OUT COMMERCIA L COMPLEX AND ALSO EARN COMMISSION WITH REGARD TO PROVIDING SPACE AND SERVI CES RENDERED. 3.1. CONSEQUENT ON AN ACTION U/S 132 OF THE ACT ON 25.2.2003, AN ORDER U/S 143(3) R.W.S.158BC WAS PASSED ON 25.2.05 AND WHILE COMPUTING THE INCOME OF THE ASSESSEE, IT WAS NOTICED THAT INTERES T OF RS.1438583/- TO KSSIDC WAS ALLOWED AT 100% SINCE THE INTEREST ON BO RROWED CAPITAL UTILIZED FOR CONSTRUCTION OF THE ASSET WAS ALLOWABL E BOTH UNDER THE HEAD BUSINESS AND HOUSE PROPERTY. CONSEQUENT TO RE-COMPUTATION, THE ADDITIONAL INCOME OVER AND ABOVE THE DECLARED W AS BROUGHT ON TAX NET AS UNDISCLOSED INCOME FOR THE BLOCK PERIO D FOR WHICH THE ASSESSEE HAD CONSENTED. FOR THE ASSESSMENT YEAR 2001-02, THE RETURN OF INCO ME FURNISHED BY THE ASSESSEE WAS PROCESSED U/S 143(1) OF THE ACT. WHIL E EXAMINING THE DETAILS OF FINANCIAL EXPENSES OF THE ASSESSEE, THE AO NOTICED THAT THE ASSESSEE HAD SHOWN RS.2840480/- AS LOSS ON INVESTME NT. THE EXPENDITURE BEING CAPITAL IN NATURE AND THUS NOT AL LOWABLE AS A DEDUCTION WHILE COMPUTING THE INCOME, THE AO WAS OF THE VIEW THAT BY CLAIMING THE SAME AS DEDUCTION, THE ASSESSEE HAD UNDER- STATED T HE INCOME. IN SPITE OF ISSUANCE OF NOTICE U/S 148 OF THE ACT AND ALSO SUBS EQUENT NOTICES U/S 143(2) AND 142(1), THE ASSESSEE HAD, PERHAPS, MAINT AINED A STEADY ITA NO. 682/BANG/09 PAGE 3 OF 14 SILENCE. AS THERE WAS NO COMPLIANCE TO THE NOTICE S REFERRED SUPRA AND ALSO THE DRAFT ASSESSMENT ORDER WHICH WAS SERVED ON THE ASSESSEE CALLING OF OBJECTIONS, IF ANY, THE ASSESSMENT WAS CONCLUDED U/S 144 R.W.S 147 OF THE ACT, DISALLOWING THE CLAIM OF LOSS ON INVESTMEN T OF RS.28.40 LAKHS AS REVENUE EXPENDITURE AND, SIMULTANEOUSLY INITIATED P ENAL PROCEEDINGS U/S 271(1)(C) OF THE ACT. 3.2. DURING THE COURSE OF PENAL PROCEEDINGS, THE AO , AFTER DUE CONSIDERATION OF THE ASSESSEES EXPLANATION, TOOK A VIEW THAT THE ASSESSEE HAS CONCEALED ITS INCOME AND HAS FILED INACCURATE P ARTICULARS. SINCE THE CLAIM MADE IN THE RETURN OF INCOME WAS NOT BONA FID E, THE ACCEPTANCE OF ADDITION DOES NOT ABSOLVE THE ASSESSEE OF CONCEALIN G THE INCOME AND, ACCORDINGLY, IMPOSED A PENALTY OF RS.1123409/- U/S 271(1) (C) OF THE ACT. 4. THE ASSESSEE TOOK UP THE ISSUE BEFORE THE CIT(A) FOR RELIEF. AFTER CONSIDERING THE RIVAL SUBMISSIONS, THE LD. CIT(A) H AS OBSERVED THUS 5I FIND NOWHERE IN THE ASSESSMENT ORDER, THE AO HAS POINTED OUT WHETHER HE TREATS THE SAME AS EITHER (I ) CONCEALMENT OF PARTICULARS OF INCOME; OR (II) FURNISHING OF INACCU RATE PARTICULARS OF INCOME; OR (III) BOTH. 6. NO SUCH FINDING OF FACT HAS ALSO BEEN ARRIVED AT IN THE ORDER PASSED U/S 271(1) OF THE ACT. HE WRITES THE FOLLO WING TO LEVY THE PENALTY THIS EXPLANATION OF THE ASSESSEE IS NOT ACCE PTABLE. THE ASSESSEE HAS CONCEALED ITS INCOME AND HAS FILED INA CCURATE PARTICULARS. SINCE THE CLAIM MADE IN THE RETURN OF INCOME WAS NOT BONA FIDE, THE ACCEPTANCE OF ADDITION DOES NOT ABSO LVE THE ASSESSEE OF CONCEALING THE INCOME. 7. IN FACT THIS IS A CONCLUSION WHERE PREMISES ARE MISSING. CONCEALMENT CAN ONLY BE OF FACTS AND NOT OF CONCLUS IONS. THE ITA NO. 682/BANG/09 PAGE 4 OF 14 OFFENCE OF CONCEALMENT IS A DIRECT ATTEMPT TO HIDE AN ITEM OF INCOME OR A PORTION THEREOF FROM THE KNOWLEDGE OF INCOME-T AX AUTHORITIES VIDE CIT V. PAWAN DALMIA (1987) 168 ITR 1(KER). TH IS IS A CASE WHEREIN ASSESSEE HAD NOT KEPT ANY DETAILS AWAY FROM THE DEPARTMENT AND, THEREFORE, THE SAME CANNOT BE TREAT ED AS CONCEALMENT. APPARENTLY, THE APPELLANT WAS UNDER B ONA-FIDE BELIEF THAT THE EXPENDITURE WAS REVENUE IN NATURE AND, THE REFORE, WHEN IT WAS POINTED OUT BY THE AO TO BE OTHERWISE, IT WAS A CCEPTED AND EVEN NO APPEAL WAS ALSO PREFERRED. HENCE, SUCH CANNOT B E EQUATED WITH FURNISHING OF INACCURATE PARTICULARS. IT IS A SETT LED PRINCIPLES OF LAW THAT PENALTY AND ASSESSMENT PROCEEDINGS ARE APART A ND INDEPENDENT OF EACH OTHER. THE DEGREE OF PROOF IN PENALTY PROC EEDINGS IS STRICT AND HIGHER THAN THAT OF USED IN ASSESSMENT PROCEEDI NGS. OPPORTUNITIES PROVIDED IN ASSESSMENT PROCEEDING AND NOT RESPONDED WELL IN ASSESSMENT PROCEEDINGS IS ALSO OF NO CONSEQ UENCE IN PENALTY PROCEEDING. POSITIVE DEFAULT OF FILING INACCURATE P ARTICULARS OF INCOME OR CONCEALMENT HAS TO BE PROVED BY THE REVEN UE BEFORE THE ASSESSEE IS HELD LIABLE FOR PENALTY. I FIND NOTHIN G OF THIS SORT IN THE PENALTY ORDER. HENCE, PENALTY IS DELETED 5. DISILLUSIONED WITH THE STAND OF THE CIT(A), THE REVENUE HAS COME UP BEFORE US WITH THE PRESENT APPEAL. THE LD. D R IN HER SPIRITED ARGUMENT HAD URGED THAT (I) THE CIT(A) ERRED IN CONCLUDING THAT POSITIVE DEFAUL T OF FILING INACCURATE PARTICULARS OF INCOME OR CONCEALMENT OF INCOME HAS NOT BEEN PROVED BY THE REVENUE BEFORE THE ASSESSEE IS HELD LIABLE FOR PENALTY; - THE ACTION OF THE ASSESSEE IN MAKING A CLAIM FOR IN ADMISSIBLE DEDUCTION DID AMOUNT TO CONCEALMENT OF PARTICULARS OF INCOME IN TERMS OF EXPLANATION 1 TO SUB-SECTION (1) OF S.271; - THE DISALLOWANCE MADE IN THE ASSESSMENT WAS WITH RE SPECT OF AN EXPENDITURE WHICH WAS CLEARLY INADMISSIBLE; AND THE ASSESSEE ALSO DID NOT OFFER ANY EXPLANATION DURING THE ASSES SMENT PROCEEDINGS, JUSTIFYING ITS CLAIM FOR DEDUCTION (II) THE EXPLANATION OF THE ASSESSEE DURING THE PENAL PR OCEEDINGS WAS NOT BONA FIDE AND THE ACCEPTANCE OF ADDITIONS MADE IN THE ASSESSMENT DID NOT ABSOLVE THE ASSESSEE OF CONCEALM ENT OF INCOME MAKING IT LIABLE FOR PENALTY; (III) RELIES ON THE CASE LAWS: (A) CIT V. MASTER SUNIL R KALRO (2007) 292 ITR 86 (KAR) ; ITA NO. 682/BANG/09 PAGE 5 OF 14 (B) KUTTOOKARAN MACHINE TOOLS V.ACIT & ANR. (2009) 313 ITR 413 (KER); (C) UNION OF INDIA & ORS V. DHARMENDRA TEXTILE PROCESS ORS & OTHERS (2008) 306 ITR 277 (SC) 5.1. ON HIS PART, THE LD. A R REITERATED MORE OR LE SS WHAT HAS BEEN URGED BEFORE THE FIRST APPELLATE AUTHORITY. IN FURTHERAN CE, IT WAS SUBMITTED THAT THE ENTIRE FINANCIAL MATTERS WERE HANDLED BY THEIR ERST WHILE CA (M.A.SRINIVAS) WHO EXPIRED ABRUPTLY IN THEIR PREMISES WHILE HAVING DISCUSSION ON THE FINANCIAL MATERS. HE WAS AWARE OF ALL THE TRANSACT IONS. DUE TO HIS DEMISE AND AS THE ASSESSEE DID NOT POSSESS THE REQUIRED PA PERS, THE ADDITION MADE WAS AGREED UPON AND NO APPEAL WAS PREFERRED ON SUCH ADDITION. IT WAS, FURTHER, CONTENDED THAT THE ADDITION MADE WAS OF GENUINE BUSINESS EXPENDITURE WHICH COULD NOT BE EXPLAINED AFTER A GA P OF ABOUT FIVE YEARS AND THAT THERE WAS NEITHER ANY DEFIANCE OF LAW NOR DELIBERATE VIOLATION OF LAW. IN THIS CONTEXT, THE FINDING OF THE HONBLE S UPREME COURT IN THE CASE OF AKBAR BADRUDDIN JIWANI V. COLLECTOR OF CUSTOMS, BOM BAY 1990 AIR 1579 WAS ALSO RELEVANT. 5.2. DURING THE COURSE OF HEARING, RELIANCE WAS PLA CED ON THE FOLLOWING CASE LAWS: (I) CIT V. GANESAN BUILDERS LTD. (2008) 299 ITR 403 (MA D) (II) CIT V. PHI SEEDS INDIA LTD. (2008) 301 ITR 13 (DELH I) (III) CIT V. NATH BROS. EXIM INTERNATIONAL LD. (2007)288 ITR 670 (DEL) ITA NO. 682/BANG/09 PAGE 6 OF 14 6. WE HAVE DULY CONSIDERED THE RIVAL SUBMISSIONS, PERUSED THE RELEVANT RECORDS AND ALSO THE CASE LAWS ON WHICH ST RONG RELIANCE WAS REPOSED BY EITHER PARTY. 6.1. ON A CAREFUL PERUSAL OF THE IMPUGNED ORDER UN DER DISPUTE, WE FIND THAT ADMITTEDLY THE LD. CIT(A) MADE A FAUX PAS IN MAKING A REMARK THAT I FIND NOWHERE IN THE ASSESSMENT ORDER, THE AO HA S POINTED OUT WHETHER HE TREAT THE SAME AS EITHER (I) CONCEALMENT OF PARTICULARS OF INCOME OR (II) FURNISHING OF INACCURATE PARTICULARS OF INC OME OR (III) BOTH. AS A MATTER OF FACT, THE AO HAD CONCLUDED THE ASSESSMENT ORDER WITH A SPECIFIC OBSERVATION PENALTIES U/S 271(1)(B) AND 271(1)(C) INITIATED SEPARATELY. THE SUBJECT MATTER FOR ADJUDICATION BEFORE THE CIT( A) WAS PENALTY ORDER PASSED U/S 271(1)(C) OF THE ACT WHEREIN, IT WAS CL EARLY MENTIONED ON PAGE 2 OF THE SAID ORDER THAT BY CLAIMING THE SAME AS DEDUCTION, THE ASSESSEE HAS UNDER-STATED THE INCOME. THEREFORE, THE AO HAD REA SON TO BELIEVE THAT THE INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT WIT HIN THE MEANING OF S.147 OF HE ACT AND YET AGAIN IN THE SAID ORDER, IT WAS MENTIONED T HAT THE ASSESSEE HAS CONCEALED ITS INCOME AND HAS FILE D INACCURATE PARTICULARS. THUS, THE OBSERVATION OF THE CIT (A) REFERRED SUP RA WAS MISCONCEIVED AND WANTING. 6.1.1. WE DRAW STRENGTH FROM THE RULING OF THE HON BLE KERALA HIGH COURT IN THE CASE OF CIT V. SARAF TRADING CORPORATION [1 987] 167 ITR 909, WHEREIN IT HAS BEEN HELD THAT . PENALTY PROCEEDINGS ARE DISTINCT AND DIFFERENT FROM ASSESSMENT PROCEEDINGS . THE FINDINGS IN THE ASSESSMENT PROCEEDINGS ARE NO T ITA NO. 682/BANG/09 PAGE 7 OF 14 CONCLUSIVE BUT ARE RELEVANT . THE ENTIRE MATERIALS AVAILABLE SHOULD BE CONSIDERED AFRESH BY THE AUTHORITIES BEFORE IMPOSIN G THE PENALTY .. 6.1.2. THUS, IN OUR CONSIDERED VIEW, THE FINDING O F THE CIT (A) WHICH, PERHAPS, PROMPTED HIM IN CANCELING THE PENALTY IMPO SED, IS LACKING CONVICTION. 6.1.3. REVERTING BACK TO THE ISSUE ON HAND, THE ST RESS ON THE REVENUE IS THAT THE ASSESSEE IN MAKING A CLAIM FOR INADMISSIBLE DEDUCTION DID AMOUNT TO CONCEALMENT OF PARTICULARS OF INCOME IN TERMS OF EXPLANATION 1 TO SUB-SECTION (1) OF S.271 OF THE ACT. 6.1.4. TO GET FAMILIARIZED WITH, LET US HAVE A GLI MPSE OF EXPLN.1 TO SUB-SEC. (1) OF S.271. EXPLANATION 1.- WHEREIN IN RESPECT OF ANY FACTS MA TERIAL TO THE COMPUTATION OF THE TOTAL INCOME OF ANY PERSON UNDER THIS ACT,- (A) SUCH PERSON FAILS TO OFFER AN EXPLANATION OR OFF ERS AN EXPLANATION WHICH IS FOUND BY THE ASSESSING OFFICER OR THE COMM ISSIONER (APPEALS) OR THE COMMISSIONER TO BE FALSE, OR (B) SUCH PERSON OFFERS AN EXPLANATION WHICH HE IS NOT ABLE TO SUBSTANTIATE AND FAILS TO PROVE THAT SUCH EXPLANATI ON IS BONA FIDE AND THAT ALL THE FACTS RELATING TO THE SAME AND MAT ERIAL TO THE COMPUTATION OF HIS TOTAL INCOME HAVE BEEN DISCLOSED BY HIM THEN, THE AMOUNT ADDED OR DISALLOWED IN COM PUTING THE TOTAL INCOME OF SUCH PERSON AS A RESULT THEREOF SHALL, FOR THE P URPOSES OF (C) OF THIS SUB-SECTION, BE DEEMED TO REPRESENT THE INCOME IN RESPECT OF WHICH PARTICULARS HAVE BEEN CONCEALED. 6.1.5. THUS, THE ONUS WAS ON THE ASSESSEE TO OFFER AN EXPLANATION AND SUCH AN EXPLANATION WHICH THE ASSESSEE IS NOT A BLE TO SUBSTANTIATE AND FAILS TO PROVE THAT SUCH EXPLANATION IS BONA FIDE, THE ASSESSEE IS LIABLE TO BE PENALIZED U/S 271(1)(C) OF THE ACT. ITA NO. 682/BANG/09 PAGE 8 OF 14 IN THE PRESENT CASE, THE ASSE SSEE HAD CLAIMED LOSS ON INVESTMENT WHICH WAS CAPITAL IN NATURE UNDER THE HE AD FINANCIAL CHARGES IN THE P & L ACCOUNT WITH AN INTENTION TO REDUCE THE I NCOME EVEN THOUGH THIS LOSS ON INVESTMENT IS FOR THE PURPOSE OF THE BUSINE SS OF THE ASSESSEE AND IS ALSO CAPITAL IN NATURE. 6.1.6 DURING THE PENAL PROCEEDINGS, THE ASSESSEE V IDE ITS LETTER DATED 26.3.2007 ADDRESSED TO THE AO, WHEREIN, IT HA S SPECIFICALLY BEEN MENTIONED THAT .EVEN THIS MATTER OF FINANCIAL EXPENSES WAS FU LLY WITHIN HIS KNOWLEDGE. AS WE DID NOT HAVE FULL PAPERS AND AS OUR CHARTED ACCOUNTANT WHO WAS AWARE OF THE MATTER HAD EXPIRED AND IN ORDER TO BUY PEACE WE AGREED TO THE ADDITION AND HAVE NOT FILED ANY APPEAL AGAINST THE ADDITION. ACTUALLY THE ADDITIO N MADE OF GENUINE BUSINESS EXPENDITURE WHICH COULD NOT BE EXPLAINED A FTER A GAP OF ABOUT 5 YEARS . THERE IS NO DEFIANCE OF LAW. THERE IS NO DELIBE RATE VIOLATION OF LAW. 6.1.7. THE ABOVE ASSERTION OF THE ASSESSEE GOES WI THOUT SAYING THAT THE ASSESSEE HAD, IN FACT, FAILED TO FURNISH A VALI D EXPLANATION AND ALSO FAILED TO PROVE THAT THE EXPLANATION SO OFFERED IS BONA FIDE AND, THUS, THE ASSESSEE WAS AT FAULT IN DISCHARGING THE ONUS CAST ON HIM. THE ASSESSEES ASSERTION THAT THE ADDITION MADE OF GENUINE BUSINESS EXPENDITURE WHICH COULD NOT BE EXPLAINED AFTER A GAP OF ABOUT 5 YEARS SHOWS ITS VOLTE-FACE. IN THE PRESENT CASE, THE ASSESSEE HAD CLAIMED LOSS ON INVESTMENT WHICH WAS CAPITAL IN NATURE UNDER THE HE AD FINANCIAL CHARGES IN THE P & L ACCOUNT WITH AN INTENTION TO REDUCE THE INCOME EVEN THOUGH THIS LOSS ON INVESTMENT IS FOR THE PURP OSE OF THE ITA NO. 682/BANG/09 PAGE 9 OF 14 BUSINESS OF THE ASSESSEE AND IS ALSO CAPITAL IN N ATURE. THIS CLEARLY SHOWS THAT THE ASSESSEE HAD FURNISHED INACCURATE PA RTICULARS OF ITS INCOME WITH AN INTENTION TO EVADE TAX BY WAY OF RED UCING THE INCOME. 6.1.8 WE SHALL NOW ANALYZE THE CASE LAWS ON WHICH THE RIVAL PARTIES HAVE REPOSED THEIR RELIANCE. BY THE REVENUE : (I) THE JURISDICTIONAL HONBLE HIGH COURT IN THE CA SE OF CIT V. MASTER SUNIL R. KALRO REFERRED SUPRA (A) HAS RULED THAT IT IS NOT NECESSARY TO ADDUCE EVIDENCE TO ESTABLISH CONCEALME NT TO THE HILT FOR THE PURPOSE OF LEVY OF PENALTY AND THE FINDING OF THE T RIBUNAL THAT THE DEPARTMENT HAS NOT DISCHARGED ITS BURDEN OF PROVING CONCEALMENT IS NOT CORRECT. WITH DUE RESPECTS, WE CONCUR WITH THE FINDING OF TH E HONBLE COURT ON THIS COUNT. (II) IN THE CASE OF KUTTOOKARAN MACHINE TOOLS V .ACIT & ANR. (2009) 313 ITR 413, THE HONBLE HIGH COURT OF KERALA WAS EMPHATIC IN ITS VIEW THAT THE CONTENTION OF THE ASSESSEE THAT THIS IS A MISTAKE COMMITTED BY THE AUDITOR AND IT IS NOT LIABLE TO BE SUBJECTED TO PENALTY HAS NO MERIT. THOUGH THE RETURN WAS PREPARED BY THE AUDITOR FOR THE ASSESSEE , IT WAS FOR THE ASSESSEE TO ENSURE THAT WRONG CLAIMS ARE NOT MADE BY THE PRA CTITIONER OR AUDITOR . THEREFORE, PENALTY UNDER S.271(1)(C) IS LEVIABLE. WITH RESPECTS, WE ARE IN TOTAL AGREEMENT WITH THE F INDING OF THE HONBLE JUDICIARY AS THE RATIO LAID DOWN IN THE ABOVE CASE FITS IN TO THE CASE ON HAND. ITA NO. 682/BANG/09 PAGE 10 OF 14 (III) THE HONBLE HIGHEST JUDICIARY OF THE LAND IN THE CASE OF UNION OF INDIA & ORS V. DHARMENDRA TEXTILE PROCESSORS & OTHERS (20 08) 306 ITR 277, WAS PLEASED TO RULE THAT THE OBJECT BEHIND ENACTMENT OF S.271(1)(C) R/W EXPLANATIONS INDICATE THAT THE SAID SECTION HAS BEE N ENACTED TO PROVIDE FOR A REMEDY FOR LOSS OF REVENUE. PENALTY UNDER THAT PRO VISION IS A CIVIL LIABILITY AND WILLFUL CONCEALMENT IS NOT AN ESSENTIAL INGREDI ENT FOR ATTRACTING CIVIL LIABILITY AS IS THE CASE IN MATTER OF PROSECUTION U NDER S.276C. MENS REA IS NOT AN ESSENTIAL INGREDIENT OF S.271(1)(C)AND THERE IS NO DISCRETION WITH THE AUTHORITY COMPETENT TO IMPOSE PENALTY TO LEVY PENAL TY BELOW THE PRESCRIBED MINIMUM. WE ARE IN TOTAL AGREEMENT WITH THE RATIO LAID BY TH E HONBLE APEX COURT IN THE ABOVE RULING WHICH IS APPLICABLE TO THE FACTS O F THE CASE ON HAND. BY THE ASSESSEE: (I) WE HAVE DULY CONSIDERED THE FINDING OF THE HONBLE MADRAS HIGH COURT IN CIT V. GANESAN BUILDERS LTD. (2008) 299 IT R 403 WHEREIN THE ISSUE WAS DIMINUTION IN VALUE OF SHARES ACQUIRED C LAIMED AS REVENUE LOSS AND THE SAME WAS HELD AS CAPITAL NATURE AND THE ASS ESSEE HAD SHOWN IN AUDIT STATEMENT AS WRITING OFF OF INVESTMENTS. OUR CONSIDERED VIEW IS THAT THE CASE RELIED ON IS D ISTINGUISHABLE AS THE ISSUE BEFORE THE HONBLE COURT WAS DIMINUTION IN VA LUE OF SHARES ACQUIRED AND CLAIMED AS REVENUE LOSS AND THE SAME WAS HELD A S CAPITAL NATURE. IN THE CASE ON HAND, THE ASSESSEE ITSELF HAD CLAIMED T HE EXPENSES OF LOSS ON ITA NO. 682/BANG/09 PAGE 11 OF 14 INVESTMENT UNDER THE HEAD FINANCIAL CHARGES AND, HENCE, IT IS DISTINGUISHABLE. (II) IN THE CASE OF CIT V. PHI SEEDS INDIA LTD. (2 008) 301 ITR 13 THE ISSUE BEFORE THE HONBLE HIGH COURT OF DELHI WAS THAT THE ASSESSEE WAS EARNING BY WAY OF INTEREST ON FIXED DEPOSITS RECEIPTS AMOUN TING TO RS.1207217 ASSESSABLE UNDER THE HEAD INCOME FROM OTHER SOURCE S, BUT THE ASSESSEE HAD INCORRECTLY DEDUCTED THERE-FROM A SUM OF RS.889 897/- BEING INTEREST PAID BY IT ON ITS OVERDRAFT ACCOUNT. THE ASSESSEE HAD IN THIS MANNER SHOWN ONLY SUM OFRS.317319/-AS INCOME FROM OTHER SOURCES. THE ASSESSING OFFICER HAD CALCULATED THE INCOME OF THE ASSESSEE B Y DEDUCTING THE INTEREST PAID BY IT ON ITS OVERDRAFT BORROWINGS FROM ITS AGRICULTURAL EARNINGS WHICH WERE EXEMPT FROM TA XATION. THE ENTIRE INTEREST EARNED FROM THE FDRS HAD BEEN TAXED AS INC OME FROM OTHER SOURCES.PENALTY WAS IMPOSED U/S 271(1)(C) BUT TH E TRIBUNAL ALLOWED THE ASSESSEES APPEAL AFTER NOTING ITS CONTENTION T HAT THE BORROWING OF FUNDS WAS MADE ON GROUNDS OF COMMERCIAL EXPEDIENCY AND THAT THE INTEREST PAID THEREON WAS NECESSARY FOR PRESERVING AND MAINTAINING THE SOURCE OF INCOME I.E., THE FDRS PLACED WITH BANKS A ND OTHERS; THAT THE ONLY ALTERATIVE OPEN TO THE ASSESSEE WAS TO LIQUIDATE TH E FDRS. ON AN APPEAL, THE HONBLE COURT HAS HELD THAT - THAT WHERE TWO OPTIONS POSSIBLE, ADOPTING ONE OF T HEM COULD SCARCELY BE VIEWED AS MALA FIDE, WITH AN INTENT TO EVADE PAYMEN T OF INCOME-TAX. RECOMPENSE HAD BEEN PROVIDED FOR IN SECTION 234 OF THE ACT BY WAY OF LEVY OF INTEREST, WHICH, IN THE PRESENT CASE, HAD BEEN P AID WITHOUT DEMUR. THE TRIBUNAL HAD FOUND AS A FACT THAT THERE WAS NO CONC EALMENT OF INCOME ITA NO. 682/BANG/09 PAGE 12 OF 14 WITH DUE REGARDS, WE ARE OF THE FIRM VIEW THAT THE ISSUE BEFORE THE HONBLE COURT REFERRED SUPRA WAS ON THE DIFFERENT FOOTING A ND ESPECIALLY THE SUBJECT MATTER WAS ENTIRELY DIFFERENT FROM THAT OF THE ISSU E ON HAND AND, THUS, THE ASSESSEE CANNOT TAKE SHELTER ON THIS CASE LAW. (III) YET AN ANOTHER CASE - CIT V. NATH BROS. EXIM INTERNATIONAL LD. (2007)288 ITR 670 THE ISSUE BEFORE THE HONBLE DELHI HIGH COURT WA S THAT THE ASSESSEE HAD CLAIMED DIVIDEND INCOME AS HIS BUSINES S INCOME AND ACCORDING TO THE ASSESSEE IT WAS ENTITLED TO A DEDUCTION UNDE R CLAUSE (BAA) OF THE EXPLANATION TO S.80HHC(4C) OF THE I.T.ACT. THE AO DISALLOWED THE CLAIM AND IMPOSED PENALTY. THE TRIBUNAL CAME TO THE CONC LUSION THAT THE ASSESSEE HAD DISCLOSED ALL THE FACTS, AND THEREFORE EVEN THO UGH IT HAD MADE AN ERRONEOUS CLAIM WHICH COULD NOT BE JUSTIFIED IN LAW , THAT BY ITSELF DID NOT ATTRACT THE PENAL PROVISIONS OF THE ACT. ON APPEAL , THE HONBLE COURT HAD HELD THAT THERE WAS FULL DISCLOSURE OF ALL RELEVANT MATERIAL. IT COULD NOT BE SAID THAT THE CONDUCT OF THE ASSESSEE ATTRACTED THE PROVISIONS OF S.271(1)(C) OF THE ACT. WITH RESPECTS, WE WOULD LIKE TO POINT OUT THAT THE PRESENT ASSESSEE HAD NOT DISCLOSED ALL THE RELEVANT MATERIALS (AS THE ASSESS EE, IN ITS LETTER DATED 26.3.2007 ADDRESSED TO THE AO, HAD CONCEDED THUS, AS WE DID NOT HAVE FULL PAPERS AND AS OUR CHARTERED ACCOUNTANT, WHO WA S AWARE OF THE MATTER HAD EXPIRED AND IN ORDER TO BUY PEACE WE AGREED TO THE ADDITION AND HAVE NOT FILED ANY APPEAL AGAINST THE ADDITION. ACTUALL Y THE ADDITION MADE IS OF GENUINE BUSINESS EXPENDITURE WHICH COULD NOT BE EXPLAINED AFTER A GA P OF ITA NO. 682/BANG/09 PAGE 13 OF 14 ABOUT 5 YEARS .). WE ARE, THEREFORE, OF THE FIRM VIEW THAT THE ASSESS EE CANNOT TAKE SANCTUARY ON THE FINDING OF THE DELHI C OURT CITED ABOVE TO GO SCOT-FREE. 7. IN AN OVERALL CONSIDERATION OF THE FACTS AND CI RCUMSTANCES OF THE ISSUE AS DELIBERATED UPON IN THE FORE-GOING PAR AGRAPHS AND ALSO THE FACT THE ASSESSEE HAD CLAIMED LOSS ON INVESTMENT OF RS.28,40,480/- WHICH IS OF CAPITAL IN NATURE UNDER THE HEAD FINANCIAL C HARGES DELIBERATELY WITH AN INTENTION TO EVADE TAX WHICH CONSTITUTES FURNISHING OF INACCURATE PARTICULARS OF ITS INCOME WHICH CLEARLY ATTRACTS THE PROVISIONS OF S. 271(1)(C) OF THE ACT AND RESPECTFULLY FOLLOWING THE FINDINGS OF THE JURI SDICTIONAL HIGH COURT AND THE HONBLE APEX COURT CITED SUPRA, THE LD. CIT(A) WAS NOT JUSTIFIED IN CANCELING THE PENALTY IMPOSED BY THE AO U/S 271(1)( C) OF THE ACT. IT IS ORDERED ACCORDINGLY. 8. IN THE RESULT, THE REVENUES APPEAL IS ALLOWED. PRONOUNCED IN THE OPEN COURT ON THIS 16 TH DAY OF FEBRUARY, 2010. SD/- SD/- ( K.P.T. THANGAL ) (A. MOHAN ALANKAMONY ) VICE PRESIDENT ACCOUNTANT MEMBER BANGALORE, DATED, THE 16 TH FEBRUARY, 2010. DS/- ITA NO. 682/BANG/09 PAGE 14 OF 14 COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE (1+1) BY ORDER ASSISTANT REGISTRAR ITAT, BANGALORE.