ANAHAITA NALIN SHAH, MUMBAI V. DCIT 4(1), MUMBAI

ITA 7973/MUM/2010

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 5100 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-11-2013
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 06-11-2013
• Assessment Year: 2004-2005
• Appeal Filed On: 18-11-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: K SINGH
• Assessee Lawyers: PROMOD KUMAR PARIDA
• Keywords: Business income; Depreciation; Principle of natural justice; Question of law; Wrong claim; Bad and doubtful debts; Difference of opinion

Judgement Text

, INCOME TAX APPELLATE TRIBUNAL,MUMBAI - A BENCH. . . , , BEFORE S/SH. B.R. MITTAL, JUDICIAL MEMBER & RAJENDR A, ACCOUNTANT MEMBER ./ ITA NO.7973/MUM/2010 , ! ! ! ! ' ' ' ' / ASSESSMENT YEAR-2004-05 ANAHAITA NALIN SHAH,1&1A, BIRLA MANSION, 3 RD FLOOR, 134, NAGINDAS MASTER ROAD, MUMBAI 400 023 DCIT 4(1) MUMBAI PAN: AANPS0303H ( #$ / APPELLANT) ( %&#$ / RESPONDENT) !'( !'( !'( !'( ) ) ) ) / APPELLANT BY : SHRI PROMOD KUMAR PARIDA * ) / REVENUE BY : SHRI K. SINGH ! ! ! ! * ** * (+ (+ (+ (+ / DATE OF HEARING : 06-11-2013 ,-' * (+ / DATE OF PRONOUNCEMENT : 20-11-2013 ! ! ! ! , 1961 * ** * 254 )1( (.( (.( (.( (.( / / / / ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA, AM: CHALLENGING THE ORDER DATED.27.06.2008 OF THE CIT(A )-8,MUMBAI,ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL : 1)THE LD.ASSESSING OFFICER HAS ERRED IN LEVYING PEN ALTY OF RS.1,24,048/- U/S.271(1)(C ) OF THE INCOME- TAX ACT,1961. 2)THE LD.CIT(A) HAS ERRED IN CONFIRMING THE ABOVE P ENALTY LEVIED BY THE AO VIDE HIS APPEAL NO.IT/ CIT (A) 8/CIR.4/54/08-09. 3) THE ORDER APPEALED AGAINST IS BAD IN LAW AND IS AGAINST THE PRINCIPLE OF NATURAL JUSTICE. 4) THE ORDER APPEALED AGAINST IS BASED ON SURMISES AND CONJECTURES 5) YOUR PETITIONER RESERVES THE RIGHT TO ADD, TO DE LETE AND/OR AMEND ANY OF THE FOREGOING GROUNDS. ASSESSEE,AN INDIVIDUAL,HAD FILED HER RETURN OF INCO ME ON 1.11.2004 DECLARING TOTAL INCOME AT RS. 77,43,490/-.THE ASSESSMENT U/S.143(3) WAS COMPLETED ON 4.12.06,BY THE ASSESSING OFFICER (AO), DETERMINING THE INCOME OF THE ASSESSEE AT RS.1,00, 76,850/-. 2. EFFECTIVE GROUND OF APPEAL IS ABOUT LEVY OF PENALTY U/S.271(1)OF THE ACT.DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS,AO FOUND THAT THE ASSESS EE HAD CLAIMED BAD DEBTS OF RS.3,75,902/-. HE ASKED THE ASSESSEE TO FURNISH THE DETAILS OF THE SAME SPECIFICALLY AS TO HOW IT FULFILLED THE CONDITIONS OF SEC. 36(L)(VII) R.W.S.36 (2)OF THE AC T.AS PER THE AO ASSESSEE DID NOT FURNISH ANY DETAIL IN THIS REGARD.HE HELD THAT FOR THE ALLOWABI LITY OF DEDUCTION OF BAD DEBTS THE ASSESSEE HAD TO PRIMARILY PROVE THAT THE DEBT HAS BECOME BAD AND IT HAD BEEN WRITTEN OFF IN THE BOOKS OF A/CS.,THAT THE ASSESSEE HAD FAILED TO PROVE THAT THE DEBT HAD BECOME BAD AND SHE HAD ALSO FAILED TO SHOW THAT THE SAME HAD BEEN ACTUALLY WRITTEN OFF IN THE BOOKS OF ACCOUNTS ,THAT THE CLAIM OF DEDUCTION OF BAD DEBTS OF RS.3,75,902/-WAS NOT ALLOWABLE.HE A DDED BACK THE AMOUNT IN QUESTION TO THE TOTAL INCOME OF THE ASSESSEE.IN THE APPELLATE PROCEEDINGS FIRST APPELLATE AUTHORITY(FAA) CONFIRMED THE ADDITION MADE BY THE AO.AT THE TIME OF ASSESSME NT,PENALTY NOTICE,U/S 271(1)(C),WAS ISSUED BY THE AO ON 04.12.2006.BUT,CONSIDERING THE FACT TH AT THE ASSESSEE HAS FILED AN APPEAL BEFORE THE FAA,PENALTY WAS KEPT IN ABEYANCE.AFTER RECEIPT OF T HE ORDER OF THE FAA,AO DECIDED TO ISSUE A FRESH PENALTY NOTICE ON 12.02.2008.IN RESPONSE TO T HE SAME ASSESSEE MADE HER SUBMISSION VIDE LETTER DTD.17.03.2008.AFTER CONSIDERING THE SUBMISS ION OF THE ASSESSEE,HE HELD THAT THE ASSESSEE HAD FAILED TO JUSTIFY THE SAME,THAT THE AMOUNT IN Q UESTION WAS NOT BAD DEBT BUT REPRESENTED BAD DELIVERIES OF SHARES HELD FOR MORE THAN ONE YEAR,TH AT SAME WAS CAPITAL LOSS BUT WAS WRITTEN OFF IN PROFIT AND LOSS ACCOUNT,THAT ASSESSEE HAD SUBMITTE D INACCURATE PARTICULARS OF INCOME.FINALLY,AO LEVIED A PENALTY OF RS.1,24,048/-U/S.271(1)(C) OF T HE ACT. 2.1. ASSESSEE PREFERRED AN APPEAL BEFORE THE FAA.AFTER C ONSIDERING HER SUBMISSIONS AND THE PENALTY ORDER,HE HELD THAT THERE WAS NO DISPUTE THA T SHE HAD MADE A CLAIM REGARDING WRITING OFF OF BAD DEBT,AMOUNTING TO RS.3,75,920/-,TO BE DEDUCTED FROM HER BUSINESS INCOME,THAT IN QUANTUM APPEAL FAA HAD FOUND THAT THE AMOUNT IN QUESTION WA S CAPITAL LOSS AND NOT BAD DEBT,THAT THE ASSESSEES CLAIM OF DEDUCTION ON ACCOUNT OF WRITE O FF OF BAD DEBT FROM ITS BUSINESS INCOME WAS WRONG, THAT SHE HAD NOT FULFILLED THE CONDITIONS LA ID DOWN BY SECTION 36(1)(VII) R.W.S.36(2),THAT SHE HAD FURNISHED INACCURATE PARTICULARS OF ITS IN COME , 2.2. BEFORE US, AUTHORISED REPRESENTATIVE(AR) SUBMITTED THAT NECESSARY PARTICULARS OF INCOME WERE FURNISHED BY THE ASSESSEE,THAT PARTICULARS OF INCOME WERE NOT CONCEALED,THAT LEVY OF PENALTY WAS NOT AUTOMATIC,THAT DISALLOWANCE OF CLAIM DID NO T MEAN THAT THE ASSESSEE HAD FILED INACCURATE PARTICULARS, THAT MERE ERRONEOUS CLAIM COULD NOT BE TREATED AS FILING OF INACCURATE PARTICULARS,THAT MATTER WAS RESTORED BACK BY THE TRIBUNAL,THAT BAD D ELIVERY RESULTED IN BAD DEBTS,THAT ASSESSEE HAD ADMITTED BEFORE THE FAA THAT LOSS SUFFERED BY THE A SSESSEE WAS INVESTMENT LOSS,THAT THE ASSESSEE HAD PAID TAXES ALSO FOR THE AMOUNT ADDED BY THE AO, THERE WAS NO LOSS TO REVENUE.HE RELIED UPON THE CASE OF RELIANCE PETRO PRODUCTS LTD.(322ITR158) .DEPARTMENTAL REPRESENTATIVE(DR)SUBMITT - ED THAT EXPL.1 TO THE SECTION 271(1)(C) WAS APPLICA BLE IN THE CASE UNDER CONSIDERATION. 2.3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.SECTION271(1)(C) OF THE ACT DEALS WITH IMPOSITION OF PENALTY FOR CONCEA LING PARTICULARS OF INCOME OR FOR FURNISHING INACCURATE PARTICULARS.COURTS ARE OF THE VIEW THAT PROVISIONS OF SEC.271(1)(C) HAVE TO BE STRICTLY APPLIED IN THE LARGER INTEREST OF DISCIPLINE IN FIL ING CORRECT RETURNS BY THE ASSESSEES AND THAT PROVISIONS OF THE SECTION CANNOT BE INVOKED AUTOMAT ICALLY. IT IS SAID THAT THE PROPER WAY TO CONSTRUE A TAXING STATUTE,WHILE CONSIDERING A DEVICE TO AVOID TAX, IS NOT TO ASK WHETHER THE PROVISIONS SHOULD BE CONS TRUED LITERALLY OR LIBERALLY NOR WHETHER THE TRANSACTION IS NOT UNREAL AND NOT PROHIBITED BY THE STATUTE, BUT WHETHER THE TRANSACTION IS A DEVICE TO AVOID TAX AND WHETHER THE TRANSACTION IS SUCH TH AT THE JUDICIAL PROCESS MAY ACCORD ITS APPROVAL TO IT.THEREFORE, FOR LEVYING PENALTY U/S.271(1)(C) TWO FACTS SHOULD CO-EXIT-FIRST THAT AMOUNT IN QUESTION IS PART AND PARCEL OF THE INCOME OF THE AS SESSEE AND SECONDLY,THE ASSESSEE MUST HAVE FILED INACCURATE PARTICULARS OR HAS CONCEALED PARTI CULARS OF SUCH INCOME.HERE WE WOULD ALSO LIKE TO DISCUSS THE EXPLN.1TO SECTION.271(1)(C) OF THE A CT.A CAREFUL CIRCUMSPECTION OF THE SAID EXPLANATION DIVULGES THAT WHERE IN RESPECT OF ANY F ACTS MATERIAL TO THE COMPUTATION OF THE TOTAL INCOME OF ANY PERSON UNDER THIS ACT,SUCH PERSON FAI LS TO OFFER AN EXPLANATION OR OFFERS AN EXPLAN -ATION WHICH IS FOUND BY THE AO OR THE FAA TO BE FA LSE,OR SUCH PERSON OFFERS AN EXPLANATION WHICH HE IS NOT ABLE TO SUBSTANTIATE AND FAILS TO P ROVE THAT SUCH EXPLANATION IS BONA FIDE AND THAT ALL THE FACTS RELATING TO THE SAME AND MATERIAL TO THE COMPUTATION OF HIS TOTAL INCOME HAVE BEEN DISCLOSED BY HIM, THEN, THE AMOUNT ADDED OR DISALLO WED IN COMPUTING THE TOTAL INCOME OF SUCH PERSON AS A RESULT THEREOF SHALL, FOR THE PURPOSES OF CL.(C) OF THIS SUB-SECTION,BE DEEMED TO REPRESENT THE INCOME IN RESPECT OF WHICH PARTICULAR S HAVE BEEN CONCEALED.THE EFFECT OF THIS EXPLANATION IS THAT IF THE NECESSARY CRITERIA AS ST ATED HEREIN ARE SATISFIED, VIZ., (I)THE PERSON FAILS TO OFFER THE EXPLANATION, OR (II) HE OFFERS THE EXPLANATION WHICH IS FOUND BY TH E AUTHORITIES TO BE FALSE, OR (III)THE PERSON OFFERS EXPLANATION WHICH HE IS NOT ABLE TO SUBSTANTIATE AND FAILS TO PROVE THAT SUCH EXPLANATION IS BONA FIDE AND THAT ALL THE FACTS REL ATING TO THE SAME HAVE BEEN DISCLOSED BY HIM, THEN THE AMOUNT DISALLOWED IN COMPUTING THE TOTAL I NCOME SHALL FOR THE PURPOSES OF CL. (C) OF THIS SECTION, BE DEEMED TO REPRESENT THE INCOME IN RESPE CT OF WHICH THE PARTICULARS HAVE BEEN CONCEALED. IF THE CASE FALLS IN ANY OF THESE THREE CRITERIA, T HEN THE DEEMING PROVISION COMES INTO PLAY AND THE AMOUNT ADDED OR DISALLOWED IN COMPUTING THE TOTAL I NCOME IS CONSIDERED AS THE INCOME IN RESPECT OF WHICH PARTICULARS HAVE BEEN CONCEALED FOR THE PU RPOSES OF CL.(C) OF SEC.271(1) AND THE PENALTY FOLLOWS.BUT,IF THE ASSESSEE SUCCESSFULLY COMES OUT OF THE ABOVE THREE CRITERIA THEN IT CANNOT BE DEEMED THAT HE HAS CONCEALED THE PARTICULARS OF HIS INCOME WITH REFERENCE TO THE AMOUNT ADDED OR DISALLOWED IN COMPUTATION OF TOTAL INCOME.COURTS AR E OF THE VIEW THAT PENALTY U/S.271 (1)(C) IS ALWAYS THE OUTCOME OF CONCEALMENT OF INCOME OR FURN ISHING OF INACCURATE PARTICULARS OF INCOME. IT MAY BE A CASE OF CONCEALMENT OF INCOME,WHERE SOM E INCOME EARNED BY THE ASSESSEE IS TAKEN BACK AND NOT OFFERED FOR TAXATION OR IT MAY BE A CA SE OF FURNISHING OF INACCURATE PARTICULARS OF INCOME,WHERE THOUGH INCOME EARNED IS OFFERED,BUT SO ME OTHER MEANS ARE ADOPTED FOR REDUCING TAX BURDEN,SUCH AS,WRONG CLAIM OF EXPENSES OR DEDUC TIONS OR EXEMPTIONS ETC. IT IS FUNDAMENTAL THAT BOTH THE CASES OF CONCEALMENT OF INCOME OR FUR NISHING OF INACCURATE PARTICULARS OF INCOME, EVENTUALLY LEAD TO EVASION OF TAX,WHICH IS INTENDED TO BE CURBED BY THE PENALTY PROVISION.EVERY CASE OF PENALTY PRESUPPOSES THAT THERE HAS BEEN THE REJECTION OF ASSESSEES STAND QUA SOME DISALLOWANCE OR ADDITION ETC. IN THE QUANTUM PROCEE DINGS.IF THE CLAIM ITSELF IS MALA FIDE,THAT IS, IT LACKS GOOD FAITH OR SOME SORT OF DECEPTION IS INHER ENT,THEN PENALTY WOULD BE JUSTIFIED.IT,THEREFORE, TRANSPIRES THAT IF INFORMATION GIVEN IN THE RETURN TURNS OUT TO BE INACCURATE AND INTENTIONALLY GIVEN TO GAIN SOME TAX ADVANTAGE, WHICH IS OTHERWISE NOT DUE, THEN THE ASSESSEE CANNOT BE SPARED FROM THE PENALTY. RECENTLY,(31.10.2013) IN THE MATTER OF MAK DATA PVT .LTD.HONBLE SUPREME COURT HAS DEALT WITH THE ISSUE OF IMPOSING PENALTY U/S.271(1)(C) OF THE ACT.IN THAT MATTER HONBLE APEX COURT HAS DISCUSSED THE SCOPE OF EXPL.1 TO THE SECTION IN FOL LOWING MANNER : THE TRIBUNAL HAS NOT PROPERLY UNDERSTOOD OR APPREC IATED THE SCOPE OF EXPLANATION 1 TO S. 271(1)(C).THE AO SHALL NOT BE CARRIED AWAY BY THE P LEA OF THE ASSESSEE LIKE VOLUNTARY DISCLOSURE,BUY PEACE,AVOID LITIGATION,AMICABL E SETTLEMENT,ETC. TO EXPLAIN AWAY ITS CONDUCT.THE QUESTION IS WHETHER THE ASSESSEE HAS OF FERED ANY EXPLANATION FOR CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING INACCURATE PART ICULARS OF INCOME. EXPLANATION TO SEC.271(1) RAISES A PRESUMPTION OF CONCEALMENT,WHEN A DIFFEREN CE IS NOTICED BY THE AO,BETWEEN REPORTED AND ASSESSED INCOME.THE BURDEN IS THEN ON THE ASSES SEE TO SHOW OTHERWISE,BY COGENT AND RELIABLE EVIDENCE.WHEN THE INITIAL ONUS PLACED BY THE EXPLAN ATION,HAS BEEN DISCHARGED BY HIM, THE ONUS SHIFTS ON THE REVENUE TO SHOW THAT THE AMOUNT IN QU ESTION CONSTITUTED THE INCOME AND NOT OTHERWISE; (II)THE ASSESSEE HAS ONLY STATED THAT HE HAD SURREN DERED THE ADDITIONAL SUM OF RS.40.74 LAKHS WITH A VIEW TO AVOID LITIGATION,BUY PEACE AND TO CH ANNELIZE THE ENERGY AND RESOURCES TOWARDS PRODUCTIVE WORK AND TO MAKE AMICABLE SETTLEMENT WIT H THE INCOME TAX DEPARTMENT.THE STATUTE DOES NOT RECOGNIZE THOSE TYPES OF DEFENCES UNDER EX PLANATION 1 TO S. 271(1)(C) OF THE ACT. BEFORE THE ABOVE REFERRED DECISION OF THE APEX COUR T.ON OCTOBER 1,2013 HONBLE HIGH COURT OF DELHI HAD ALSO DEALT WITH THE ISSUE OF FILING OF IN ACCURATE PARTICULARS OF INCOME/CONCEALING PARTICULARS OF INCOME.( 2013-TIOL-746-HC-DEL-IT ).IN THAT MATTER ASSESSEE HAD FILED ITS RETURN OF INCOME DECLARING LOSS AND THE RETURN WAS PROCESSED U/S 143 (1) OF THE ACT. SUBSEQUENTLY, RE- ASSESSMENT NOTICE WAS ISSUED AFTER NOTICING THAT TH E ASSESSEE HAD CLAIMED DEPRECIATION ON PLANT AND MACHINERY THOUGH NO MANUFACTURING ACTIVITY WAS CONDUCTED DURING THE YEAR UNDER CONSIDERATION AND HAD WRONGLY CLAIMED CAPITAL LOSS ON SALE OF INVESTMENTS AMOUNTING TO RS.59, 15,000/-AS BUSINESS LOSS.DURING THE COURSE OF ASSES SMENT PROCEEDINGS,THE ASSESSEE FILED A REVISED COMPUTATION IN WHICH THEY ACCEPTED THAT RS.59,15,00 0/- WAS WRONGLY CLAIMED AS A REVENUE LOSS AND WAS IN FACT CAPITAL LOSS. AO DISALLOWED CLAIM O F DEPRECIATION AS WELL AS THE CLAIM MADE ON ACCOUNT OF LOSS ON SALE OF VEHICLES,WHICH WAS TREAT ED BY THE ASSESSEE AS REVENUE LOSS.AO OBSERVED THAT IT WAS A CAPITAL LOSS.PROCEEDINGS U/S 271(1)(C) OF THE ACT WERE INITIATED BY THE AO FOR THE SAID TWO ADDITIONS.FAA UPHELD THE ORDER IMP OSING PENALTY.TRIBUNAL DELETED THE PENALTY,HOLDING THAT ALL DETAILS WITH REGARD TO THE LOSS SUFFERED WERE FILED ALONG WITH THE RETURN OF INCOME AND THE CHANGE OF HEAD OF INCOME CANNOT BE C ONSIDERED AS CONCEALMENT OR FURNISHING INACCURATE PARTICULARS OF INCOME.THE LEGAL CLAIM MA DE BY THE ASSESSEE WAS NOT FOUND TO BE ALLOWABLE UNDER THE HEAD BUSINESS LOSS BUT THE SA ME WAS ALLOWED AS A CAPITAL LOSS.ON APPEAL BY THE REVENUE,HON;BLE HIGH COURT HELD AS UNDER : THE VIEW EXPRESSED BY THE TRIBUNAL CANNOT BE AGREE D THAT CHANGE OF HEAD UNDER WHICH INCOME IS TO BE ASSESSED PER SE WOULD JUSTIFY CANCELLATION OF PENALTY FOR CONCEALMENT FOR THE REASON THAT IT IS NOT A CASE OF FURNISHING OF INACCURATE PARTICULARS. FURNISHING OF INACCURATE PARTICULARS OF INCOME CAN HAVE DIFFERENT CONNOTATIONS AND MAY ARISE WHEN INCOME IS ENHANCED,DEDUCTION DENIED OR WHEN HEAD OF INCOME, IS CHANGED RESULTING IN A HIGH ER RATE OF TAX OR INCREASE IN INCOME.THE REAL QUESTION IS APPLICATION OF EXPLANATION1. ..WHETHER OR NOT THE ASSESSEE MAKES LOSS IS NOT THE RELEVANT CRITERIA OR FACTOR TO DETERMINE WHETHER PE NALTY SHOULD BE IMPOSED U/S 271(1)(C) OR NOT. FURTHER, THIS IS NOT THE CORRECT WAY OF APPLYING EXPLANATION 1. IN PARAGRAPH 5.5 OF THE TRIBUNAL ORDER IT IS RECORDED THAT ONE CANNOT BE OB LIVIOUS TO THE EXPLANATION AND JUSTIFICATION GIVEN BY THE ASSESSE. INDEED ONE HAS TO TAKE INTO C ONSIDERATION THE EXPLANATION AND THE JUSTIFICATION GIVEN BY THE ASSESSEE BUT IT CANNOT B E ACCEPTED AS BONA FIDE AND TRUE ON MERE ASKING. ONUS UNDER EXPLANATION 1 IS ON THE ASSESSEE TO PROV E THE REASON AS TO WHY A PARTICULAR CLAIM OR DEDUCTION WAS MADE. THE JUSTIFICATION AND CAUSE SHO WN SHOULD BE BONA FIDE AND ACCEPTABLE. PENALTY CANNOT BE DELETED BY MERELY RECORDING THE E XPLANATION, THOUGH NOT PROVED AND ESTABLISHED. IT IS NOT FOR THE REVENUE TO SHOW THAT THE EXPLANATION OFFERED IS NOT FALSE OR BOGUS..EXPLANATION 1 CAN COME TO THE RESCUE OF THE ASSESSEE IN CASE HE HAD OFFERED AN EXPLANATION BUT WAS UNABLE TO SUBSTANTIATE IT, PROV IDED HE IS ABLE TO ESTABLISH THAT THE EXPLANATION OFFERED WAS BONA FIDE AND THE FACTS RELATING TO FUR NISHING OF INACCURATE PARTICULARS AND MATERIAL FOR COMPUTATION OF TOTAL INCOME WERE DULY DISCLOSED BY HIM.THE MOOT QUESTION AND ISSUE IS WHETHER THE ASSESSEE HAS DISCHARGED THE BURDEN UNDE R EXPLANATION 1 TO SECTION 271(1)(C)OF THE ACT OR RATHER MORE PRECISELY WHETHER THE TRIBUNAL H AS CORRECTLY APPLIED THE SAID EXPLANATION AS MANDATED AND REQUIRED BY THE STATUTE;.. MENS REA I S NOT REQUIRED AND NECESSARY TO IMPOSE PENALTY FOR CONCEALMENT. IN UNION OF INDIA VS. DHAR MENDRA TEXTILE PROCESSORS ( 2008-TIOL-192- SC-CX-LB ) , THE SUPREME COURT EXAMINED SECTION 271(1)(C) OF T HE ACT AND OTHER PROVISIONS FOR IMPOSITION OF PENALTY IN DIFFERENT STATUTORY ENACTM ENTS.IT WAS HELD THAT PENALTY IN SUCH CASES IMPOSED FOR TAX DELINQUENCY IS A CIVIL OBLIGATION,R EMEDIAL AND COERCIVE IN NATURE AND IS FAR DIFFERENT FROM PENALTY FOR CRIME OR A FINE OR FORFE ITURE AS STIPULATED IN CRIMINAL OR PENAL LAWS. IT REFERS TO BLAMEWORTHY CONDUCT FOR CONTRAVENTION OF THE ACT AND IT EQUALLY APPLIES TO TAX DELINQUENCY CASESPENALTY U/S 271(1)(C) IS IMPOSED WHEN AN ASSESSEE CONCEALS HIS INCOME OR FURNISHES INCORRECT PARTICULARS.IN TERMS OF EXPLANA TION I, WE HAVE TO EXAMINE WHETHER THE CASE IN QUESTION FALLS WITHIN THE TWO LIMBS VIZ. CLAUSE (A) AND (B) I.E. WHICH OF THE TWO LIMBS AND EFFECT THEREOF.CLAUSE (A) APPLIES WHEN AN ASSESSEE FAILS T O FURNISH EXPLANATION OR WHEN AN EXPLANATION IS FOUND TO BE FALSE. CLAUSE (B) APPLIES TO CASES W HERE EXPLANATION IS OFFERED BUT THE ASSESSEE IS NOT ABLE TO SUBSTANTIATE THE EXPLANATION.IN SUCH CA SES,WE HAVE TO EXAMINE TWO CONDITIONS: (1) WHETHER THE ASSESSEE HAS BEEN ABLE TO SHOW THAT HIS EXPLANATION WAS BONAFIDE; (2) WHETHER THE ASSESSEE HAD FURNISHED AND DISCLOSED FACTS AND MATE RIAL RELATING TO COMPUTATION OF HIS INCOME. ONUS OF ESTABLISHING THAT THE ASSESSEE SATISFIES TH E TWO CONDITIONS IS ON THE ASSESSEE. BOTH THE CONDITIONS HAVE TO BE SATISFIED. IN CASE THE ASSESS EE SATISFIES THE TWIN CONDITION, PENALTY SHOULD NOT BE IMPOSEDIN THE PRESENT CASE, ADDITIONS OR D ISALLOWANCE HAS BEEN MADE ON ACCOUNT OF WRONG CLAIM OF REVENUE LOSS, WHICH WAS IN FACT CAPI TAL LOSS AND DISALLOWANCE U/S 43B. FROM THE REASONING GIVEN BY THE TRIBUNAL, IT IS NOT POSSIBLE TO DECIPHER AND HOLD THAT THE EXPLANATION GIVEN BY THE ASSESSEE SHOWS AS TO WHY HIS CLAIMS WERE BON A FIDE AND JUSTIFIED. THE ONUS OF ESTABLISHING THE REASONS FOR THE CLAIM MADE IS ON THE ASSESSEE. PENALTY CANNOT BE IMPOSED BECAUSE AN ASSESSEE HAS TAKEN A PARTICULAR LEGAL STAND.HOWEVER , THIS DOES NOT MEAN THAT THE ASSESSEES CAN CLAIM WRONG DEDUCTIONS OR CLAIM WITHOUT ANY BASIS O R FOUNDATION TO JUSTIFY THE CLAIM. FALSE, SPURIOUS AND MENDACIOUS CLAIMS DO NOT FALL IN THIS CLASSIN THE GUISE OF WRONG OR IMPROPER LEGAL OPINION,AN ASSESSEE SHOULD NOT BE PERMITTED A ND ALLOWED TO ESCAPE PENALTY WHEN THE ACCOUNTS ARE AUDITED BY A CHARTERED ACCOUNTANT, WHE N THE PROVISION AND POSITION IN LAW IS WELL- KNOWN AND WELL-UNDERSTOOD. IT IS NOT A CASE OF A DE BATABLE ISSUE OR A LEGAL PROVISION WHICH COULD HAVE ESCAPED OR MISSED NOTICE OR CONSIDERATION OF T HE CHARTERED ACCOUNTANT OR THE ACCOUNTANT OR THE DIRECTORS OF THE COMPANY.WHETHER AN ASSESSEE H AD OFFERED AN EXPLANATION AND WHETHER THE EXPLANATION WAS BONA FIDE WHEN DISCUSSED AND EXAMIN ED AS STIPULATED IN EXPLANATION 1,IS A QUESTION OF FACT AND DEPENDS UPON SEVERAL FACTORS, INCLUDING WHETHER THE ASSESSEE IS AN INDIVIDUAL OR CORPORATE ASSESSEE, LITERATE OR ILLITERATE, THE NATURE, CHARACTER AND QUANTUM OF THE DEDUCTION, HIS PAST CONDUCT RELATING TO THE SAME CLAIM/DEDUCTI ON, THE PROVISION OR SECTION APPLICABLE ETC.IT IS NOT ONE FACT BUT SEVERAL FACTORS WHICH HAVE TO BE T AKEN INTO CONSIDERATION TO DETERMINE WHETHER OR NOT THE CLAIM OR EXPLANATION OF AN ASSESSEE IS BONA FIDE.. IN VIEW OF THE AFORESAID DISCUSSION, THE QUESTION OF LAW IN FAVOUR OF THE REVENUE AND AG AINST THE ASSESSEE AND UPHOLD LEVY OF PENALTY U/S 271(1)(C) OF THE ACT IN RESPECT OF LOSS ON ACCO UNT OF INVESTMENTS, VEHICLE AND DISALLOWANCE U/S 43B. THE CLAIMS WERE EX FACIE WRONG BEING CONTRARY TO FUNDAMENTAL/BASIC PRINCIPLES OF ACCOUNTS AND ACT,WOULD NOT HAVE ESCAPED NOTICE OR MISSED. WE FIND THAT IN BOTH ABOVE REFERRED CASES IT HAS BE EN HELD THAT PROVISIONS OF EXPL.1TO THE SECTION 271(1)(C)HAVE TO BE APPLIED PROPERLY.IF THE FACTS O F THE CASE UNDER CONSIDERATION ARE DELIBERATED UPON IT BECOMES CLEAR THAT THE ASSESSE HAD CLAIMED A DEDUCTION UNDER THE HEAD BUSINESS-INCOME IN RESPECT OF A DEBT WHICH IS NOT A BUSINESS DEBT.T HOUGH THE ASSESSEE HAD CLAIMED BAD DEBTS OF RS.3.75 LAKHS,BUT SHE DID NOT FURNISH THE DETAILS A S TO HOW THE CLAIM MADE BY HER FULFILLED THE CONDITIONS ENVISAGED BY THE PROVISIONS OF SEC.36(L) (VII) R.W.S.36 (2)OF THE ACT.IT IS FOUND THAT ASSESSEE ALSO DID NOT FURNISH ANY DETAILS IN THIS R EGARD.IF A CLAIM IS MADE BY AN ASSESSE ABOUT BAD DEBTS,HE HAS TO PROVE THAT THE DEBT HAD BECOME BAD AND IT HAS TO BE WRITTEN OFF IN THE BOOKS OF A/CS.IN THE PRESENT CASE THE ASSESSEE HAD FAILED TO PROVE BOTH THE CONDITIONS EXISTED.CLAIM MADE BY THE ASSESSEE ABOUT THE BAD DEBTS WAS EX FACIE WR ONG BEING CONTRARY TO FUNDAMENTAL/BASIC PRINCIPLES OF ACCOUNTS AND ACT.ASSESSEE HAD ADMITTE D THAT THE CLAIM RELATED TO BAD DELIVERY OF SHARES HELD AS INVESTMENT.CLEARLY,CLAIM COULD NOT H AVE BEEN MADE BY THE ASSESSEE UNDER THE HEAD INCOME FROM BUSINESS OR PROFESSION.IN OUR OPINION,C LAIM MADE BY HER FALLS UNDER THE CATEGORY OF FURNISHING OF INACCURATE PARTICULARS OF INCOME.THER EFORE,WE DO NOT FIND ANY LEGAL INFIRMITY IN THE ORDER OF THE FAA. HERE,WE WOULD LIKE TO MENTION THAT FACTS OF THE CAS E OF RELIANCE PETRO PRODUCTS LTD.(SUPRA) ARE NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE.IN THAT MATTER ASSESSEE HAD FILED ITS RETURN ON DECLARING LOSS OF RS. 26,54,554 AND ASSESSMENT WAS FINALISED DETERMINING THE TOTAL INCOME AT RS. 2,22,688.DURING THE ASSESSMENT PROCEEDINGS AN ADDIT ION IN RESPECT OF INTEREST EXPENDITURE WAS MADE.THE SAID EXPENDITURE WAS CLAIMED BY THE ASSESS EE ON THE BASIS OF EXPENDITURE MADE FOR PAYING THE INTEREST ON THE LOANS INCURRED BY IT BY WHICH AMOUNT THE ASSESSEE PURCHASED SOME IPL SHARES BY WAY OF ITS BUSINESS POLICIES.HOWEVER,THE ASSESSEE DID NOT EARN ANY INCOME BY WAY OF DIVIDEND FROM THOSE SHARES.MEANWHILE,PENALTY PROCEE DINGS UNDER SECTION 271(1)(C) OF THE ACT WERE ALSO INITIATED,BY THE AO,ON ACCOUNT OF CONCEAL MENT OF INCOME/FURNISHING OF INACCURATE PARTICULARS OF INCOME.BY WAY OF RESPONSE TO THE SHO W-CAUSE NOTICE REGARDING THE PENALTY ASSESSEE CLAIMED THAT ALL THE DETAILS GIVEN IN THE RETURN WERE CORRECT,THAT THERE WAS NO CONCEALMENT OF INCOME NOR WERE ANY INACCURATE PARTI CULARS OF SUCH INCOME FURNISHED. IT WAS FURTHER SUBMITTED THAT THE DISALLOWANCE MADE BY THE AO IN THE ASSESSMENT ORDER WAS SOLELY ON ACCOUNT OF DIFFERENT VIEWS TAKEN ON THE SAME SET OF FACTS AND, THEREFORE, THEY COULD, AT THE MOST, BE TERMED AS DIFFERENCE OF OPINION BUT NOTHING TO D O WITH THE CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF SUCH INCOME . AFTER CONSIDERING THE RIVAL SUBMISSIONS,HONBLE APE X COURT HELD AS UNDER: IT IS AN ADMITTED POSITION IN THE PRESENT CASE THA T NO INFORMATION GIVEN IN THE RETURN WAS FOUND TO BE INCORRECT OR INACCURATE. IT IS NOT AS IF ANY STATEMENT MADE OR ANY DETAIL SUPPLIED WAS FOUND TO BE FACTUALLY INCORRECT.HENCE, AT LEAST, PRIMA FA CIE, THE ASSESSEE CANNOT BE HELD GUILTY OF FURNISHING INACCURATE PARTICULARS. THE LEARNED COUN SEL ARGUED THAT 'SUBMITTING AN INCORRECT CLAIM IN LAW FOR THE EXPENDITURE ON INTEREST WOULD AMOUNT TO GIVING INACCURATE PARTICULARS OF SUCH INCOME'. WE DO NOT THINK THAT SUCH CAN BE THE INTERPRETATION OF THE CONCERNED WORDS. THE WORDS ARE PLAIN AND SIMPLE. IN ORDER TO EXPOSE THE ASSESSEE TO THE PENALTY UNLESS THE CASE IS STRICTLY COVERED BY THE PROVISION, THE PENALTY PROV ISION CANNOT BE INVOKED. BY ANY STRETCH OF IMAGINATION,MAKING AN INCORRECT CLAIM IN LAW CANNOT TANTAMOUNT TO FUR-NISHING INACCURATE PARTICULARS .. THE ASSESSEE HAD FURNISHED ALL THE DETAILS OF ITS E XPENDITURE AS WELL AS INCOME IN ITS RETURN,WHICH DETAILS, IN THEMSELVES, WERE NOT FOUND TO BE INACCURATE NOR COULD BEVIEWED AS THE CONCEALMENT OF INCOME ON ITS PART. IT WAS UP TO THE AUTHORITIES TO ACCEPT ITS CLAIM IN THE RETURN OR NOT. MERELY BECAUSE THE ASSESSEEHAD CLAIMED THE EXP ENDITURE, WHICH CLAIM WAS NOT ACCEPTED OR WAS NOTACCEPTABLE TO THE REVENUE, THAT BY ITSELF WO ULD NOT, IN OUR OPINION, ATTRACTTHE PENALTY UNDER SECTION 271(1)(C). IN THAT CASE IN EARLIER YEAR INTEREST EXPENDITURE D ISALLOWED BY THE AO WAS ALLOWED BY THE FAA AND THE TRIBUNAL AND ON THAT BASIS ASSEESSEE HAD MA DE A CLAIM FOR THE YEAR UNDER CONSIDERATION.IN OUR OPINION FACTS OF BOTH THE CASES ARE TOTALLY DIF FERENT.THEREFORE,UPHOLDING THE ORDER OF THE FAA WE DECIDE EFFECTIVE GROUND OF APPEAL AGAINST THE AS SESSEE. AS A RESULT, `APPEAL FILED BY THE ASSESSEE STANDS DISMISSED. !'( 0 2 * . ' * ( 34. ORDER PRONOUNCED IN THE OPEN C OURT ON 20 TH NOVEMBER,2013 . / * ,-' 6 7! 20 UOA UOAUOA UOA , 2013 - * . 8 SD/- SD/- ( . 9 9 9 9 . . B.R.MITTAL) ( / RAJENDRA) / JUDICIAL MEMBER /ACCOUNTANT MEMBER / MUMBAI, 7! /DATE: 20.11 . 2013 / / / / * ** * %(: %(: %(: %(: ;:'( ;:'( ;:'( ;:'( / COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE / #$ 2. RESPONDENT / %&#$ 3. THE CONCERNED CIT (A) / < = 4. THE CONCERNED CIT / < = 5. DR B BENCH, ITAT, MUMBAI / :>. %(! , . . . 6. GUARD FILE/ . ? &:( %( //TRUE COPY// /! / BY ORDER, @ / 3 DY./ASST. REGISTRAR , /ITAT, MUMBAI