TMI Blog2012 (1) TMI 24X X X X Extracts X X X X X X X X Extracts X X X X ..... ulars furnished by the assessee were thus not complete, and were, therefore, inaccurate. Order of the Tribunal restoring the penalty is upheld. - Decided against the Assessee. - ITA No.944 of 2011 - - - Dated:- 13-1-2012 - MR. JUSTICE SANJIV KHANNA, MR. JUSTICE R.V. EASWAR, JJ. For Appellant: Mr.S.Krishnan, Advocate. For Respondent: Mr. N.P.Sahni, Standing Counsel R.V. EASWAR, J.: This is an appeal filed by the assessee under Section 260A of the Income Tax Act ( the Act , for short) against the order of the Tribunal dated 21st January, 2011 in ITA No.81/Delhi/2010 relevant to the assessment year 2000-01. 2. On 30th November, 2011, the following substantial question of law was framed:- Whether the Income Tax Appellate Tribunal was correct in upholding the order of penalty for concealment under Section 271(1)(c) of the Income Tax Act, 1961? 3. The facts leading up to the levy of penalty may be noticed in brief. The assessee is a domestic company. In respect of the year under appeal, it filed a return of income on 27th November, 2000 declaring income of Rs.1,43,40,680/-. The return was first processed under Section 143(1), but was thereafter selec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cs as bad debts in the account of M/s Dimension Investments and Securities Ltd. (DISL, for short). The amount was deposited by the assessee with the above company as share application money. However, no shares were allotted to the assessee and, therefore, the assessee chose to exercise the option of converting the share application money into loan. This option was exercised by the assessee by writing a letter on 6th July, 1998 to DISL stating that since the shares were not allotted, the assessee was exercising its option to convert the share application money into a loan bearing interest at 22% compounded quarterly, w.e.f. 23rd February, 1998. However, there was no response from DISL. It appears that the assessee company thereafter sought legal opinion from its advocate who stated that the assessee should make efforts to get an acknowledgement of the debt from DISL as to the non-allotment of the shares even after receiving share application monies. Thereafter the assessee wrote off the amount of Rs.50 lacs as DISL had not even acknowledged the amount as a debt and the assessee was left with no chance of recovery. 6. When these facts were brought to the notice of the Assessing Off ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... addition to the facts and documents filed at the time of the assessment proceedings, the assessee also filed the status report submitted by the Director to the assessee s Board of Directors, on the basis of which the amount in the account of DISL was written off, balance sheets etc and contended that its claim for allowance of the bad debt should be allowed. Reliance was also placed on the judgment of the Supreme Court in 84 ITR 48(sic) and that of the Patna High Court in 88 ITR 492(sic). 9. The CIT(Appeals), after considering the matter in some detail recorded the following findings:- (a) The investment by way of share application monies was made in DISL by application dated 8th September, 1997. (b) Since upto 23rd February, 1998 DISL did not allot the shares, the assessee wrote to DISL on 6th July, 1998 for conversion of the money into a loan. This was a measure of prudence, taken in order to earn interest on the amount till the shares are allotted. (c) Even after the letter dated 6th July, 1998, there was total silence on the part of the DISL and finding the position of the company unsound, the Director of the assessee recommended the write off of the amount which was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be satisfied as per Section 36(2)(i) of the Act in order to obtain deduction as a bad debt. (d) The deposit of Rs.50 lacs as share application money was made to acquire a capital asset and did not represent monies lent in the ordinary course of advertising, financing or money lending business. On the basis of the above findings, the Tribunal allowed the appeal filed by the revenue, reversing the order of the CIT(Appeals). 12. The assessee carried the matter in appeal before this Court in ITA No.1155/2008 which was disposed of by judgment dated 18th November, 2010, a copy of which has been filed before us. This Court affirmed the order of the Tribunal passed on 4th January, 2008. 13. After the order passed by the Tribunal, proceedings for the imposition of the penalty under Section 271(1)(c) of the Act were initiated on the ground that the assessee furnished inaccurate particulars by claiming the deduction of Rs.50 lacs as a bad debt. It was represented before him that the deduction was claimed under the bonafide belief that it was allowable. This explanation was rejected and the Assessing Officer observed that having regard to the provisions of Section 36(1)(vii) of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut takes a legal contention or position that a particular receipt is not taxable as income or that a particular expenditure or loss is allowable as deduction, the mere fact that the Assessing Officer took a different view of the allowability of the expenditure or loss or the taxability of the receipt, without anything more and without unearthing any new material or fact kept back by the assessee, cannot invite penalty on the ground of furnishing inaccurate particulars of income. Reference in this connection may be made to the following judgments:- 1. Cement Marketing Co. of India Ltd. v. Asst. Commissioner of Sales Tax, (1980)124 ITR 15 (SC) 2. ITO v. Burmah Shell Oil Storage Distributing Co. of India Ltd. (1987)163 ITR 496 (Cal) 3. Delhi Cloth and General Mills Co. Ltd. v. Commissioner of Income Tax (1986)157 ITR 822 (Del) 4. CIT v. G.D.Naidu ( 1987) 165 ITR 63 (Madras) 17. In a series of judgments, this Court has affirmed the aforesaid legal position and these judgments are :- 1. CIT v. Bacardi Martini India Ltd. (2007) 288 ITR 585 2. CIT v. Nath Bros. Exim International (2007) 288 ITR 670 3. CIT v. International Audio Visual (2007) 288 ITR 570 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he would still not be liable to penalty under Section 271(1)(c) of the Act. If we take the view that a claim which is wholly untenable in law and has absolutely no foundation on which it could be made, the assessee would not be liable to imposition of penalty, even if he was not acting bonafide while making a claim of this nature, that would give a licence to unscrupulous assessees to make wholly untenable and unsustainable claims without there being any basis for making them, in the hope that their return would not be picked up for scrutiny and they would be assessed on the basis of self Assessment under Section 143(1) of the Act and even if their case is selected for scrutiny, they can get away merely by paying the tax, which in any case, was payable by them. The consequence would be that the persons who make claims of this nature, actuated by a malafide intention to evade tax otherwise payable by them would get away without paying the tax legally payable by them, if their cases are not picked up for scrutiny. This would take away the deterrent effect, which these penalty provisions in the Act have. 20. In the above case before this Court the assessee claimed deduction of inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had exercised the option to convert the share application money into a loan bearing interest at 22% compounded quarterly, no interest was charged from DISL. Since this letter was allegedly written on 6th July, 1998 stating that the option would be taken as exercised from 23rd February, 1998, the assessee was under a duty to point out to the Assessing Officer whether any interest was charged in accordance with the letter and included in the returns for the assessment years 1998-1999, 1999-2000 and 2000-2001. In case the assessee did not take into account the interest on accrual basis, despite following the mercantile system of accounting, the reason why it did not do so should also have been explained to the Assessing Officer. The assessee failed to do so. This creates a grave doubt about the genuineness of the intention of the assessee as expressed in its letter dated 6.7.1998. Thus the onus placed on the assessee to make full disclosure of all relevant facts remains undischarged. 22. The Tribunal in its order dated 4th January, 2008 recorded a finding in paragraph 9 to the following effect:- We also find that the amount has also not been taken into account in computing the inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irector s report, the actual write off, filing of balance sheets, memorandum and articles of association etc. have no relevance to the claim of the assessee. 24. All the relevant facts were within the knowledge of the assessee. Despite that it did not place the crucial fact before the departmental authorities. Not being able to convince them on the question of bad debt the assessee took an alternative plea that the write off of the debt should be allowed as a capital loss, presumably under Section 45. When the Assessing Officer called upon the assessee to spell out what was the capital asset involved and whether there was a transfer of the capital asset, the assessee could not put forth any convincing reply. Even the CIT(Appeals) did not accept the assessee s plea that it was a capital loss allowable under Section 45, against which the assessee did not file any appeal to the Tribunal. This only shows that the alternative plea was an act of despair. 25. The aforesaid discussion would show that even an independent appraisal of the entire material on record in the course of the penalty proceedings would establish that the assessee had furnished inaccurate particulars of income. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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