TMI Blog2013 (6) TMI 15X X X X Extracts X X X X X X X X Extracts X X X X ..... ainable under law should not lead to penalization, when the assessee had furnished full details in the return itself and the claim is a debatable, reasonably plausible or may well have been accepted. See CIT vs. Reliance Petro Product Pvt. Ltd. [2010 (3) TMI 80 - SUPREME COURT], CIT vs. Dharampal Premchand Ltd. [2010 (9) TMI 155 - DELHI HIGH COURT], CIT Versus SOCIETEX [2012 (7) TMI 664 - DELHI HIGH COURT], Price Water House Coopers Pvt. Ltd v. CIT [2012 (9) TMI 775 - SUPREME COURT] - decided in favour of assessee and held that penalty u/s 271(1)(c) is not justified. - I.T.A. 804 of 2011 - - - Dated:- 28-5-2013 - Sanjiv Khanna And Siddharth Mridul,JJ. For the Petitioner : Mr. Ajay Vohra and Ms. Kavita Jha, Advocates. For the Respondent : Mr. Kamal Sawhney, Advocate. JUDGMENT Sanjiv Khanna, J. This appeal by the assessee which relates to the assessment year 2001-02, in effect impugns order dated 26th March, 2010, passed by the Income Tax Appellate Tribunal(tribunal for short) confirming imposition of penalty under Section 271(1)(c) of the Income Tax Act, 1961 (Act, for short). By order dated 19th December, 2011, the following substantial question of law was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. It was observed that the losses claimed could not be justified before the Assessing Officer and the additions had been finally upheld by the Tribunal. Concealment penalty was upheld in the first appeal by the Commissioner of Income Tax (Appeals). It was observed that looking at the facts of the case, the Assessing Officer had imposed minimum penalty @ 100% of tax payable on the amount concealed and not @ 300%. 6. On second appeal before the Tribunal, case law on the subject was referred to and it was observed that loss of Rs.1,39,595/- suffered by the subsidiary company upon liquidation claimed in the hands of the assessee was untenable in law because the subsidiary company was a separate taxable entity. The assessee had accepted that this was an error or a mistake and it was pointed out that even in the quantum proceedings this claim was not pressed. However, the Tribunal observed, that this error cannot lead to quashing of the entire penalty. On the claim for donation, it was observed that the assessee had failed to file receipts of Delhi Fire Service for Rs.500/- and another/third receipt for Rs.4,995/-. Receipt of Rs.10,000/- issued by Hindustan Benevolent Trust was filed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has been held in these judgments that the assessee is not the owner of the assets created in the leased premises as it belongs to someone else. The assessee has only enduring business advantage and no advantage in the capital filed and therefore, the expenditure is to be allowed as revenue expenditure. On careful perusal, we find that both the judgments related to period prior to Assessment year 1988-89 when Explanation (1) to Section 32(1) was not on the statute. As per the said explanation, capital expenditure on leased premises has to be capitalized and depreciation is allowable treating the assessee as deemed owner. Therefore, from Assessment year 1988-89, the capital expenditure in leased premises will have to be treated as capital expenditure, which is entitled for depreciation and cannot be allowed as revenue expenditure. The expenditure is undisputedly, capital in nature because it has resulted into addition to the profit making apparatus of the assessee and resulted into a new source of profit as the new restaurant was a new source of income. Therefore, even considering the judgments of Hon‟ble Supreme Court in case of Empire Jute Co. (124 ITR 01) in which it has bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t came into existence. Reliance placed by the assessee on Empire Jute Company v. Commissioner of Income Tax, (1980) 124 ITR 01 was not accepted. 10. In the impugned order relating to penalty under Section 271(1)(c), the Tribunal has again adopted the said reasoning and has observed as under:- In the appeal of the revenue to the tribunal, the Tribunal has categorically given a finding that the write off under the revenue head was not permissible in view of the specific provision u/s 32(1)(iii) of the Act. The Tribunal has also categorically given a finding that the decision relied upon by the Ld. CIT(A) for deleting the disallowance relating to the period prior to the Assessment Year 1988-89 when the Explanation (1) to Section 32(1) was not on the statute. In the course of penalty proceedings, the assessee has mentioned that the claim was based upon some legal lines of reasoning and it cannot be said to be as absurd claim. When there is specific provision in the statute, and when the accounts of the assessee are under audit, non-application of a specific provision cannot give any leverage for bona fides to the assessee. Here even though the assessee has given an explanation in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 23;ble Jurisdictional High Court and the coordinate benches of this Tribunal would not come to the rescue of the assessee in so far as in all those cases, it has been held that where there is difference of opinion for allowing or disallowing the expenditure between the assessee and the A.O., it cannot be said that the assessee had intention to conceal its income. In all those cases, the assessee had given all the particulars of expenditure and the income and had disclosed all the facts to the A.O. In the present assessee‟s case, the facts itself are missing. In the course of assessment proceedings, the A.O. has asked for evidences, have not been produced nor has the assessee been able to substantiate its claim even in the penalty proceedings or in the appellate proceedings. The assessee has not been able to even explain the circumstances in which it has claimed the expenditure which have been disallowed by the A.O. In these circumstances, the bona fides of the assessee have not been proved and we are of the view that the decision of the Hon‟ble Jurisdictional High Court and the coordinate benches of this Tribunal has referred to by the assessee, do not help the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... examine whether the case falls within the two limbs viz. sub-clause (A) or (B) and the effect thereof. Clause A applies when an assessee fails to furnish any explanation or when an explanation is found to be false. In respect of the two additions being examined, the assessee had furnished an explanation and the explanation has not been found to be factually incorrect or false. The fact that the expenditure was incurred and spent by the assessee is not disputed or denied but the claim of the assesee that it should be treated as revenue expense has been held to be a wrong claim. It is a case where the assessee was not been able to substantiate the claim. The explanation given by him has not been accepted on legal grounds. Sub-clause (B) to the Explanation is applicable and we have to examine whether two conditions; (i) the assessee has been able to show his explanation was bona fide and (ii) he had furnished facts and material relating to the computation of his income had been disclosed. Onus on establishing that the assessee satisfies the two conditions is on him i.e. the assessee. We will examine the second condition first. 15. In the notes of accounts filed with the return, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee that the expenditure falling under the head current repairs‟ would be covered under the head revenue expenses‟. The tribunal had observed that Explanation 1 to Section 32 would come into play when the expenditure otherwise was capital in the nature and depreciation had been claimed. We are not required to go into the correctness of the said view in the present case, but only notice that two views on the question were possible even after introduction of Explanation 1 to Section 32. We have noticed above that the Tribunal in the quantum proceedings has observed that earlier ratio expounded in Madras Auto Service (supra) and Installment Supply Co. (supra) was in favour of the assessee. We note that in the case of EDC Electronic Data Pvt. Ltd. (supra), the appeal filed by the Revenue was dismissed observing that the Tribunal had observed that the assessing Officer had partly allowed and permitted deduction to the extent of Rs.70 lacs approximately under Section 37 of the Act. The Tribunal had remitted the matter to the lower authorities to the extent of Rs.2.75 crores for re-examination. Similarly in CIT vs. Citi Financial Consumer Finance (2011) 335 ITR 29 (Del.), ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 1 clearly stipulates that the penalty can be imposed when the details furnished by the assessee are found to be incorrect, erroneous and false. Merely making a claim which is held as not sustainable under law should not lead to penalization, when the assessee had furnished full details in the return itself and the claim is a debatable, reasonably plausible or may well have been accepted. (See CIT vs. Reliance Petro Product Pvt. Ltd. 2010 322 ITR 158 (SC), CIT vs. Dharampal Premchand Ltd. 2011 329 ITR 572 (Del.), CIT vs. Societex ITA No. 1190/2011 decided on 19.07.2012, by this Court). In Karan Raghav Exports vs. CIT (2012)349 ITR 112(Del.), it has been observed as under:- 14. On the second aspect, we record that a wrong deduction claimed can amount to furnishing of incorrect particulars. However, that is not the issue in question. The issue in question is whether the appellant has been able to discharge the onus under Explanation 1 to Section 271 and show that the claim made by them or the explanation offered with regard to the claim made was bona fide and that the facts relating to the same and material for computation of the total income had been disclosed. These are two ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... audit. It is not the case of the assessee that it was advised that the amount of income-tax paid by it could be claimed as arevenue expenditure. It is also not the case of the assessee that deduction of income-tax paid by it was a debatable issue. In fact, in view of the specific provisions contained in section 40(a)(ii) of the Act, no such advice could be given by an auditor or other tax expert. No such advice has been claimed by the assessee even with respect to the amount claimed as deduction on account of certain equipment having become useless and having been written off. As noticed earlier, the Tribunal was entirely wrong in saying that section 32(1)(iii) of the Act applies to such a deduction. It was not the contention before us that claiming of such a deduction under section 32(1)(iii) was a debatable issue on which there were two opinions prevailing at the relevant time. In fact, the assessee did not claim, either before the Assessing Officer or before the Commissioner of Income-tax (Appeals) that such a deduction was permissible under section 32(1)(iii) of the Act. No such contention on behalf of the assessee finds noted in the order of the Tribunal. Thus, it was the Tri ..... X X X X Extracts X X X X X X X X Extracts X X X X
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