DIWAN RAHUL NANDA, MUMBAI V. DY.C.I.T.-8(3), MUMBAI

ITSSA 22/MUM/2009

• Counselvise Citation: [2010] 124 COUNSELVISE.COM (IT) 9107 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 28 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 18-06-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 18-03-2010
• Assessment Year: misc
• Appeal Filed On: 20-02-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: T T JACOB
• Assessee Lawyers: K SHIVRAM SHRI RAHUL HAKANI
• Keywords: Business expenditure; Search and seizure; Block assessment
• Section: 143(3); 263; 63

Judgement Text

``IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH D MUMBAI BEFORE SHRI R.S. SYAL (AM) AND SMT. ASHA VIJAYARAG HAVAN (JM) IT(SS)A NO. 22/MUM/2009 BLOCK PERIOD-1.4.1990 TO 4.8.2000 DIWAN RAHUL NANDA, 5, SUJATA BLDG., JUHU TARA ROAD, JUHU, MUMBAI-400 049 VS. THE DCIT, RANGE-8(3), 2 ND FLOOR, AAYAKAR BHAVAN, MUMBAI-400 020 (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI K. SHIVRAM SHRI RAHUL HAKANI RESPONDENT BY: SHRI T.T.JACOB O R D E R PER SMT. ASHA VIJAYARAGHAVAN (JM) THIS APPEAL PREFERRED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DT. 29.12.2008 PASSED BY THE LD. CIT(A)-XXVII, MUMB AI FOR THE BLOCK PERIOD 1.4.1990 TO 4.8.2000. 2. THE ASSESSEE IS A DIRECTOR OF M/S TOPS DETECTIVE & SECURITY SERVICES LTD. A SEARCH & SEIZURE OPERATION WAS CAR RIED OUT ON 4.8.2000 AT THE RESIDENCE PREMISES OF THE ASSESSEE. A NOTICE U/S 158BC WAS ISSUED TO THE ASSESSEE ON 5.1.2001 FOR FURNISHING T HE RETURN FOR THE BLOCK PERIOD FROM 1.4.1990 TO 4.8.2000. IN RESPONS E TO THE NOTICE ISSUED THE ASSESSEE HAD FILED THE RETURN OF INCOME FOR BLOCK PERIOD DISCLOSING UNDISCLOSED INCOME OF RS. NIL ON 14.2.20 01. SUBSEQUENTLY, THE ASSESSEE REVISED THE RETURN OF INCOME FOR BLOCK PERIOD ON 15.2.2001 AND DISCLOSED THE UNDISCLOSED INCOME OF RS.15,743/- . THE ASSESSMENT ORDER WAS PASSED ON 29.8.2002 U/S 158BC R.W.S.143(3 ) FOR THE BLOCK PERIOD FROM 1.4.1990 TO 4.8.2000 ASSESSING TOTAL UN DISCLOSED INCOME AT RS.7,54,654/-. THE ASSESSEE PREFERRED APPEAL BEFORE THE LD. CIT(A) IT(SS)A NO. 22/M/09 2 AGAINST THE BLOCK ASSESSMENT ORDER DATED 29.8.2002. THE CIT(A) VIDE ORDER NO.CIT(A) XXX DCIT 8(3)/IT-271/-02-03 DATED 2 8.4.2003 ALLOWED RELIEF TO THE ASSESSEE. THE ASSESSEES REVISED TOTA L INCOME WAS COMPUTED AT RS.15,743/- VIDE ORDER GIVING EFFECT TO CIT(A)S ORDER DATED 4.7.2003. 3. SUBSEQUENTLY, THE COMMISSIONER OF INCOME-TAX-VII I, MUMBAI PASSED AN ORDER U/S 263 OF THE I.T.ACT 1961 DATED 3 0.3.2004 SETTING ASIDE ORDER PASSED ON 29.8.2002 AND DIRECTED THE A. O. TO PASS A FRESH ORDER AS PER PROVISION OF LAW, AFTER ALLOWING OPPOR TUNITY TO THE ASSESSEE OF BEING HEARD. CONSEQUENT TO THE CITS ORDER U/S 2 63 OF THE I.T. ACT REASSESSMENT WAS COMPLETED ON 7.3.2005 U/S 158BC R. W.S. 263 & 143(3) OF THE I.T. ACT ASSESSING THE TOTAL UNDISCLOSED INC OME AT RS.64,70,915/- . THE ADDITIONS WHILE FRAMING THE AFORESAID ASSESSMEN T ORDER ARE THE FOLLOWS: I) RS. 40,85,172/- U/S. 2(24)(IV) II) RS. 23,70,000/- U/S. 2(22)(E) 4. THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD .CIT(A) AGAINST THE BLOCK ASSESSMENT ORDER PASSED DATED 7.3.2005. THE CIT(A) VIDE ORDER NO.CIT(A)XXIX/DCIT 8(3)/IT-2/2005-06 DATED 28.10.20 05 ALLOWED RELIEF FOR RS.23,70,000/- U/S 2(22)(E) BUT CONFIRMED ADDI TION IN RESPECT OF RS. 40,85,172/- MADE U/S. 2(24)(IV). THE ASSESSEE PREF ERRED APPEAL AGAINST THE ORDER OF THE CIT(A) BEFORE THE HONBLE TRIBUNAL AND THE TRIBUNAL VIDE ITS ORDER NO. IT(SS) A. NO. 02/M/06 DT. 13.3.2006 D ISMISSED THE APPEAL OF THE ASSESSEE. 5. THE PENALTY PROCEEDINGS U/S 158BFA(2) OF THE I.T . ACT WERE INITIATED DURING THE COURSE OF ASSESSMENT PROCEEDIN GS AND NOTICE U/S 158BFA(2) WAS ISSUED 7.3.2005 AND SERVED ON THE ASS ESSEE. IN RESPONSE TO THE NOTICE/LETTER ISSUED, NOBODY ATTENDED NOR FI LED ANY WRITTEN SUBMISSIONS. THE ASSESSING OFFICER FOUND THAT THE A SSESSEE PREFERRED IT(SS)A NO. 22/M/09 3 APPEAL BEFORE THE HONBLE ITAT AGAINST THE ORDER OF THE CIT(A) DATED 28.10.2005 ON MERITS. THE HONBLE ITAT VIDE ORDER NO. IT (SS)A NO.03/MUM/06 DATED 13.3.2006 DISMISSED THE APPEAL O F THE ASSESSEE. THE ASSESSING OFFICER CONCLUDED THAT THE ASSESSEE H AD KNOWN THAT RENOVATION EXPENSES WERE BEING INCURRED ON HIS RESI DENTIAL FLAT AND IT WOULD COME WITHIN THE EXPRESSION OF BENEFIT OR PERQ UISITE UNDER SECTION 2(24)(IV) OF THE ACT, BUT THE ASSESSEE DID NOT DIS CLOSE THE INCOME IN THE RETURN OF INCOME FILED. HENCE THE AO WAS SATISFIED THAT THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF HIS INCOME TO T HE EXTENT OF THE ADDITIONS CONFIRMED BY THE ITAT AND THE ASSESSEE HA D NOT BOTHERED TO RESPOND TO THE NOTICES ISSUED BY THE ASSESSING OFFI CER, HE LEVIED THE MINIMUM PENALTY OF RS. 27,06,600/- U/S 158BFA(2) O F THE I.T. ACT, 1961. 6. AGGRIEVED THE ASSESSEE PREFERRED AN APPEAL BEFOR E THE LD. CIT(A). 7. THE LD. CIT(A) HELD THAT THE PENALTY PROCEEDINGS ALREADY INITIATED BY THE AO U/S 158BFA(2) OF THE I.T. ACT WAS TAKEN U P BY THE AO AND NOTICE IN RESPECT OF THE SAME WAS ISSUED TO THE ASS ESSEE. VIDE LETTER 19.10.2006 THE AO ASKED THE APPELLANT TO SHOW CAUSE WHY AN ORDER IMPOSING PENALTY SHOULD NOT BE PASSED U/S 158BFA(2) OF THE I.T. ACT. HOWEVER, THE APPELLANT DID NOT RESPOND TO THE NOTIC E AVAILING THE OPPORTUNITIES GIVEN BY THE AO. THE AO OBSERVED THAT THE ADDITIONS MADE BY THE AO AND CONFIRMED BY THE CIT(A) AND HONBLE I TAT, MUMBAI PROVE THAT THE ASSESSEE HAD CONCEALED HIS INCOME AND FILE D INACCURATE PARTICULARS OF INCOME. THE COMPANY M/S TOPS DETECTI VE & SECURITY SERVICES LTD HAD INCURRED RS.4086172/- AS EXPENDITU RE FOR THE RENOVATION OF THE FLAT ON BEHALF OF THE APPELLANT. THE EXPENDITURE WAS INCURRED BY THE COMPANY WHERE THE ASSESSEE IS DIREC TOR AND SUBSTANTIAL SHAREHOLDER OF THE COMPANY. THE PROVISIONS OF SEC. 2(24)(IV) OF THE ACT HAS, THEREFORE, BEEN ATTRACTED. THE ASSESSEE KNEW THE RENOVATION EXPENSES BEING INCURRED ON HIS RESIDENTIAL FLAT COM ES WITHIN THE IT(SS)A NO. 22/M/09 4 EXPRESSION OF BENEFIT OR PERQUISITE EMPLOYED IN SEC .2(24)(IV). BUT THE ASSESSEE DID NOT DISCLOSE THE INCOME IN THE RETURN OF INCOME FILED. THEREFORE, ON THE BASIS OF FACTS AND MATERIAL ON RE CORD, THE A.O. SATISFIED HIMSELF THAT THE APPELLANT HAS FURNISHED INACCURATE PARTICULARS OF HIS INCOME TO THE EXTENT OF THE ADDITIONS CONFIRMED BY THE ITAT AND TREATED ASSESSEES CASE A FIT CASE FOR LEVYING PENALTY FOR THE CONCEALMENT OF INCOME. ACCORDINGLY, THE AO IMPOSED MINIMUM PENALTY @ 100% WORKED OUT AT RS.27,06,600/- 8. BEFORE THE LD. CIT(A) THE ASSESSEE SUBMITTED AS FOLLOWS: THE VALUE OF ANY BENEFIT OR PERQUISITE, WHETHER CONVE RTIBLE INTO MONEY OR NOT, OBTAINED FROM A COMPANY EITHER BY A DIRECTOR OR B Y A PERSON WHO HAS A SUBSTANTIAL INTEREST IN THE COMPANY OR BY A RELA TIVE OF THE DIRECTOR OR SUCH PERSON, AND ANY SUM PAID BY ANY SUCH COMPAN Y IN RESPECT OF ANY OBLIGATION WHICH, BUT FOR SUCH PAYMENT, WOULD HAVE BEEN PAYABLE BY THE DIRECTOR OR OTHER PERSON AFORESAID. IT IS QUITE CLEAR THAT IT RELATES TO A BENEFIT OR PERQUIS ITE. ALSO, IF THE COMPANY HAD NOT INCURRED THE EXPENSE, OR SPENT A LESS ER AMOUNT THE ASSESSEE WAS NOT OBLIGED TO SPEND IT. THE SECTION HAS TO BE READ IN TOTALITY. THE FACT IS THAT THE MEMBERS OF THE ITAT ARE NOT CONSI DERING THE COMPANY AND THE ASSESSEE AS SEPARATE LEGAL ENTITIES. AS CAN BE SEEN FROM THE READING THEY ARE TREATING BOTH THE ENTITIES AS ONE AND THEREFORE, HAVE ARRIVED AT A MISLEADING CONCLUSION. THE MEMBERS STATE THAT NO PERQUISITE VALUE OF SUCH EX PENSES WERE BROUGHT TO THE NOTICE OF THE DEPARTMENT BY THE ASSESSEE I N HIS INDIVIDUAL CAPACITY. THIS IS FACTUALLY WRONG, AS THERE WAS STI LL TIME TO DISCLOSE THE PERQUISITE VALUE WHICH STARTED ON 1.4.2000 AND THERE FORE RETURN FOR A.Y. 2001-02 WAS DUE BY 31 ST AUGUST 2001. THE PENALTY HAS BEEN LEVIED ON THE BASIS OF DEEMING PROVISIONS WHICH CAN NEVER BE THE BASIS OF LEVY OF ANY PENALTY. THE FACT IS THAT EVEN IF IT IS PRESUMED THAT THE DEEMING PROVISIONS WERE APPLICABLE DURING THE F.Y.1.4.99 TO 31.3.2000, EVEN THEN THERE IS NO FACT W HICH HAS BEEN CONCEALED, SINCE THE ASSESSEE HAD TIME TO FILE RETUR N BY 31.8.2000 AND THE SEARCH TOOK PLACE ON 4.8.2000. IT IS A KNOWN FACT THAT PERQUISITES ARE PART OF SALARY AND CAN BE DISCLOSED FROM THE DATE WHEN THE SAME ARE ENJOYED. TH E ASSESSEE ENJOYED THE PERQUISITE FORM 1.4.2000 A FACT NOT DISPU TED BY THE IT(SS)A NO. 22/M/09 5 DEPARTMENT AND THEREFORE WAS BOUND TO DISCLOSE ONLY FO R A.Y. 2001-02 AND THAT TOO BY 31.8.2001, THE LAST DATE FOR FILING RE TURN FOR A.Y.2001-02. NO VALUE OF PERQUISITE COULD BE DECLARED FOR THE PE RIOD 1.4.2000 TO 4.8.2000, SINCE THE PERQUISITES ARE PART AND PARCEL O F SALARY ON WHICH TDS IS MADE AND SUCH INCOMES ON WHICH TDS IS MADE, DO NOT FORM PART OF BLOCK INCOME AS PER DECISION OF RAJASTHAN HIGH C OURT JAIPUR BENCH IN THE CASE OF CIT VS ASHOK TAKSALI (257 ITR 352). THEREFORE UNDER NO CIRCUMSTANCES, THE VALUE OF REPAIR S OR PERQUISITES COULD BE DISCLOSED DURING THE BLOCK PERIOD, AS SUCH NO FACT WAS CONCEALED. IN VIEW OF THIS FACT, THE PROVISION OF SEC .158BFA(2) OF THE I.T. ACT 1961 CANNOT BE INVOKED. 9. THE ASSESSEE RELIED ON THE FOLLOWING DECISIONS:- ITO VS SMT. PRAMILA PRATAP SHAH (2006) 100 ITD 160 (MUM) NEMICHAND VS ASSTT. CIT (INV) (2005), 93 TTJ 564 (BANGALORE) 10. THE LD. CIT(A) CONFIRMED THE PENALTY LEVIED BY THE AO OBSERVING AS UNDER: I HAVE GONE THROUGH THE FACTS OF THE CASE, MATERIA L ON RECORD AND ALSO PERUSED THE ORDER OF PENALTY PASSED BY THE AO, ON REASONABLY CONSIDERATION OF FACTS, I HAVE NOTED THAT CONSEQUEN T TO THE SEARCH AND SEIZURE OPERATION CONDUCTED IN THE PREMISES OF M/S TOPS DETECTIVE SECURITY & SERVICES LTD ON 4.8.2000 AND C ONSEQUENT TO THAT THE SEARCH CONDUCTED IN THE APPELLANTS PREMIS ES REVEALED THAT CERTAIN INCRIMINATING DOCUMENTS WHICH WERE REQUIRED TO BE CONSIDERED IN THE ASSESSMENT PROCEEDINGS OF THE APP ELLANT WHICH WERE REQUIRED TO BE CONSIDERED IN THE ASSESSMENT PR OCEEDINGS OF THE APPELLANT WERE TAKEN UP U/S 158BC R.W.S. 143(3) OF THE I.T. ACT. THE ASSESSMENTS WERE FINALLY CONCLUDED BY MAKING ADDITI ON OF RS.40,85,172/- AS UNDISCLOSED INCOME OF THE APPELLA NT U/S 24(IV) OF THE I.T. ACT. PENALTY PROCEEDINGS U/S 158BFA(2) OF THE I.T. ACT WERE INITIATED TO IMPOSE PENALTY ON SUCH UNDISCLOSED INC OME MADE U/S 2(24)(IV) OF THE I. T. ACT. THE AO WHILE IMPOSING PENALTY U/S 158BFA(2) OF THE ACT OBSERVED THAT THE ADDITIONS MADE U/S 2(24) (IV) OF THE I.T. ACT HAVE BEEN CONFIRMED BY THE LD. CIT(A) AND HONBLE ITAT., LEAD ING TO THE FACT THAT THE APPELLANT HAD CONCEALED HIS INCOME AND FIL ED INACCURATE PARTICULARS OF HIS INCOME. THE FACT CLEARLY INDIC ATED THAT THE COMPANY M/S TOPS DETECTIVE SECURITY & SERVICES LTD WHEREIN THE APPELLANT IS THE MANAGING DIRECTOR AND HAVING SUB STANTIAL INTEREST, IT(SS)A NO. 22/M/09 6 HAD INCURRED RS.40,86,172/- AS EXPENDITURE FOR RENO VATION OF THE FLAT OWNED BY THE APPELLANT ON BEHALF OF THE APPELL ANT. THEREFORE THE PROVISIONS OF SEC 2(24)(IV) OF THE I.T. ACT ARE ATT RACTED. IT IS IN THE KNOWLEDGE OF THE APPELLANT THAT THE RENOVATION EXPE NSES ARE BEING INCURRED ON HIS RESIDENTIAL FLAT BY THE COMPANY WIT HIN THE EXPRESSION OF BENEFIT OR PERQUISITE EMPLOYED IN SEC 2 ( 24) (I V) OF THE I.T ACT. BUT THE APPELLANT DID NOT DISCLOSE SUCH BENEFIT IN THE RETURN OF INCOME FILED. THESE FACTS WOULD NOT HAVE COME TO FOCUS HA D THERE BEEN NO SEARCH AND SEIZURE OPERATION CONDUCTED BY THE DEPAR TMENT IN THE PREMISES OF THE COMPANY AS WELL AS THE APPELLANT BE ING DIRECTOR. SUCH OBSERVATION HAS ALSO BEEN MADE BY THE HONBLE ITAT MUMBAI IN ITS ORDER IN IT(SS) NOS. 3 AND 361 (MUM) OF 2003 CO NOS. 395 AND 396 (MUM) OF 2006. 157 AND 158(MUM) OF 2007 DATED 2 3.6.2008 (2008) 25 SOT 454 (MUM). FROM SUCH FACTS ON RECORD, THERE IS A CLEAR INDICA TION THAT APPELLANT WOULD NOT HAVE DISCLOSED SUCH BENEFIT RECEIVED BY H IM FROM HIS COMPANY, HAD THE SAME NOT BEEN DETECTED DURING THE COURSE OF SEARCH OPERATION CONDUCTED ON 4.8.2000 AT THE APPEL LANTS AND COMPANYS PREMISES. EVEN THOUGH SUCH EXPENDITURE I N TERMS OF BENEFIT RENDERED TO THE APPELLANT WAS RECORDED IN T HE BOOKS OF ACCOUNTS OF THE COMPANY, THE APPELLANT DID NOT DISC LOSE SUCH BENEFIT IN HIS RETURN OF INCOME. THE FACTS ON RECORD ALSO INDICATED THAT SUCH BENEFIT WOULD NOT HAVE BEEN DISCLOSED BY THE APPELL ANT AT ANY POINT OF TIME. ON GOING THROUGH THE ABOVE FACTS, I DO NOT HAVE ANY HESITATION TO STATE THAT BY NOT DISCLOSING SUCH BENEFIT/PERQUISIT E BY THE APPELLANT IN HIS RETURN OF INCOME THE APPELLANT HAS CONCEALED HIS INCOME BY NOT FURNISHING ACCURATE PARTICULARS TO THE EXTENT O F HIS INCOME. THE HONBLE SUPREME COURT IN THE CASE OF UNION OF INDIA AND OTHERS VS DHARMENDRA TEXTILE PROCESSORS AND OTHERS (306 ITR 2 77) HELD THAT FOR CONCEALING OR GIVING INACCURATE PARTICULARS WIL LFUL CONCEALMENT NOT ESSENTIAL FOR ATTRACTING CIVIL LIABILITY OF PEN ALTY. THE EXPLANATIONS APPENDED TO SECTION 27(1)(C) O F THE INCOME TAX ACT, 1961 INDICATE THE ELEMENT OF STRICT LIABILITY ON THE ASSESSEE FOR CONCEALMENT OR FOR GIVING INACCURATE PARTICULARS WH ILE FILING THE RETURN, THE OBJECT BEHIND THE ENACTMENT OF SECTION 271(1)(C) READ WITH EXPLANATIONS INDICATES THAT THE SECTION HAS BE EN ENACTED TO PROVIDE FOR A REMEDY FOR LOSS OF REVENUE. THE PENA LTY UNDER THAT PROVISION IS A CIVIL LIABILITY. WILLFUL CONCEALMEN T IS NOT AN ESSENTIAL INGREDIENT FOR ATTRACTING CIVIL LIABILITY AS IS THE CASE IN THE MATTER OF PROSECUTION UNDER SECTION 276C. IT(SS)A NO. 22/M/09 7 IN VIEW OF THE ABOVE DISCUSSION AND FINDING, I FIND THE AO IS JUSTIFIED IN IMPOSING PENALTY ON THE APPELLANT U/S 158BFA(2) OF THE I.T. ACT. THE ORDER OF PENALTY IS THEREFORE CONFIRMED. 11. AGGRIEVED THE ASSESSEE IS ON APPEAL BEFORE US. 12. WE HEARD BOTH THE PARTIES. 13. ON APPEAL THE ITAT IN ASSESSEES OWN CASE, IN I TA (SS) NO 03/M/06 DATED 13.3.06 HAS HELD THAT THE SUM OF RS. 40,86,172/- UNDISCLOSED INCOME BEING BENEFIT OR PERQUISITE U/S 2(24)(IV) . HOWEVER THIS ORDER WAS RECALLED FOR TECHNICAL REASONS AND I N THE RECALLED ORDER ITA (SS) NO 03/M/06 DT. 23.6.2008 (REPORTED IN 25 SOT 454) CONFIRMED THE ADDITION. NOW THE ISSUE BEFORE US IS WHETHER THE S AID ADDITION WOULD WARRANT LEVY OF PENALTY U/S 158 BFA(2). 14. THE LD. DEPARTMENTAL REPRESENTATIVE CONTENDED T HAT THE ASSESSEE WAS AWARE THAT THE COMPANY WAS GOING TO SPEND HUGE AMOUNT IN REPAIRING AND RENOVATING HIS FLAT. HE HAS OBTAINED CONSIDERABLE BENEFIT FROM THE SAME AND HENCE IS AWARE THAT THE SAID AMOU NT WOULD CONSTITUTE INCOME IN HIS HANDS BY WAY BENEFIT OR PERQUISITE U/ S 2(24)(IV). HE HAS NOT DISCLOSED THE SAME AND THE ADDITION HAS BEEN CO NFIRMED BY THE ITAT. HENCE HE HAS DISCLOSED INACCURATE PARTICULARS ABOUT HIS INCOME AND THEREFORE THE PENALTY WAS PROPERLY LEVIED. 15. THE LD. COUNSEL FOR THE ASSESSEE CONTENDED THAT THE REPAIRS CARRIED OUT BY THE COMPANY IS ON LEASED PREMISES AN D HENCE IT IS BUSINESS EXPENDITURE OF THE COMPANY. THE EXPENDITUR E HAS ALSO BEEN ALLOWED AS A DEDUCTIBLE EXPENDITURE. FURTHER HE SUB MITTED THE FACT THAT THE REPAIRS WERE CARRIED OUT WERE NOT BROUGHT OUT B Y THE SEARCH OPERATIONS. IT WAS ALREADY INCORPORATED IN THE BOOK S OF THE COMPANY AND CLAIMED AS DEDUCTION IN THEIR RETURN AND ACCEPTED B Y THE DEPARTMENT. HENCE THERE IS NO CONCEALMENT BY THE ASSESSEE. IT(SS)A NO. 22/M/09 8 16. THE LD. COUNSEL RELIED ON THE DECISION OF THE M UMBAI TRIBUNAL IN THE CASE OF ITO V SMT. PRAMILA PRATAP SHAH (2006) 1 00 ITD 160, WHEREIN IT HAS BEEN HELD THAT THERE IS AN INBUILT MECHANISM IN THE PROVISIONS OF SEC 158 BFA(2) TO THE EFFECT THAT PENALTY MAY NOT B E LEVIED IF THE FACTS AND CIRCUMSTANCES OF THE CASE JUSTIFY THE BONAFIDES OF THE ASSESSEE IN NOT RETURNING THE INCOME. HENCE LEVY OF PENALTY U/S 158 BFA(2) IS NOT JUSTIFIED. 17. THE LD. COUNSEL FURTHER SUBMITTED THAT THIS ADD ITION WAS NOT MADE IN THE REGULAR BLOCK ASSESSMENT BUT ONLY BY THE VIR TUE OF CIT REVISING THE ASSESSMENT ORDER EXERCISING HIS JURISDICTION U/S 26 3. THE CIT(A) IN THE ORDER IN THE CASE OF THE OTHER DIRECTOR HAS HELD TH AT THE AMOUNT OF REPAIRS DOES NOT FORM BENEFIT OR PERQUISITE U/S 2(2 4)(IV). ACCRUAL OF INCOME U/S 2(24)(IV) DEPENDS ON THE INTERPRETATION OF THE WORDS `BENEFIT AND PERQUISITE CONTAINED IN THAT SECTION. 18. WE FIND THAT THE AO HAS RELIED ON THE DECISION OF THE ITAT IN IT (SS)A NO 03/MUM/06 DATED 13.3.06. BUT THIS ORDER WA S RECALLED AND THE ITAT PASSED A FRESH ORDER ON 23.6.2008. EVENTHOUGH THE ORIGINAL ORDER WAS RECALLED, IN THE SECOND ORDER DATED 23.6.2008 ( REPORTED IN 25 SOT 454) ALSO THE ITAT HAS CONFIRMED THE ADDITION OF RS . 40,86,172/- U/S 2(224)(IV) FOR IDENTICAL REASONS. HOWEVER, THE ISSU E FOR CONSIDERATION IS WHETHER THE NON DISCLOSURE OF THIS INCOME WOULD WA RRANT LEVY OF PENALTY EVEN THOUGH THE ADDITION HAS BEEN CONFIRMED IN THE QUANTUM APPEAL. 19. THE COMPANY HAS INCURRED EXPENDITURE IN RESPECT OF RESIDENCES THEY HAVE TAKEN ON LEASE. EVEN AFTER THE SEARCH, TH E EXPENDITURE HAS NOT BEEN DISALLOWED IN THE HANDS OF THE COMPANY. EXCEPT FOR STATING THAT EXPENDITURE WAS HUGE, THERE WAS NO ATTEMPT TO EXAMI NE THE NATURE OR CHARACTER OF THE EXPENDITURE INCURRED. WITHOUT SUCH AN EXAMINATION, IT IT(SS)A NO. 22/M/09 9 WILL BE DIFFICULT TO REJECT THE CONTENTION OF THE A SSESSEE THAT THEY WERE UNDER THE BONA FIDE IMPRESSION THAT THE REPAIRS DID NOT RESULT IN ANY BENEFIT OR PERQUISITE TO THE ASSESSEE. 20. ASSESSEE BONA FIDE BELIEVED THAT THE REPAIRS TO BUILDINGS CARRIED OUT BY THE COMPANY CANNOT BE ASSESSED AS BENEFIT OR PERQUISITE IN THE HANDS OF THE ASSESSEE. 21. THE SUPREME COURT IN THE CASE OF CIT VS RELIANC E PETRO PRODUCTS P LTD 2010-TIOL-21-SC-IT HAS HELD THAT MERELY BECAU SE THE ASSESSEE HAD CLAIMED THE EXPENDITURE, WHICH CLAIM WAS NOT ACCEPT ED OR WAS NOT ACCEPTABLE TO THE REVENUE, THAT BY ITSELF WOULD NOT , ATTRACT THE PENALTY UNDER SECTION 271(1) (C). MAKING AN INCORRECT CLAIM IN LAW CANNOT TANTAMOUNT TO FURNISHING INACCURATE PARTICULARS. TH E CONDITIONS UNDER SECTION 271(1)(C) MUST EXIST BEFORE THE PENALTY IS IMPOSED. MERELY BECAUSE THE ASSESSEE HAD CLAIMED THE EXPENDITURE, W HICH CLAIM WAS NOT ACCEPTED BY THE REVENUE, THAT BY ITSELF WOULD NOT, ATTRACT THE PENALTY UNDER SECTION 271(1) (C). HENCE WE DELETE THE PENAL TY. 22. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON THIS 18 TH DAY OF JUNE, 2010 SD/- SD/- (R.S. SYAL) (ASHA VIJAYARAGHAVAN) ACCOUNTANT MEMBER JUDI CIAL MEMBER MUMBAI, DATED 18 TH JUNE, 2010 RJ IT(SS)A NO. 22/M/09 10 COPY TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT-CONCERNED 4. THE CIT(A)-CONCERNED 5. THE DR D BENCH TRUE COPY BY ORDER ASSTT. REGISTRAR, I.T.A.T, MUMBAI DATE INITIALS 1 DRAFT DICTATED ON: 14.6.2010 SR. PS/PS 2. DRAFT PLACED BEFORE AUTHOR: 16. 6 .2010 ______ SR. PS/PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER: _________ ______ JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER: _________ ______ JM/AM 5. APPROVED DRAFT COMES TO THE SR. PS/PS: _________ ______ SR. PS/PS 6. KEPT FOR PRONOUNCEMENT ON: _________ ______ SR. PS/ PS 7. FILE SENT TO THE BENCH CLERK: _________ ______ SR. PS/PS 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK: _________ ______ 9. DATE OF DISPATCH OF ORDER: _________ ______