TMI Blog2014 (7) TMI 712X X X X Extracts X X X X X X X X Extracts X X X X ..... claim of deduction u/s 80IB - Write off of debit balance – additions were made since the advance given to a person which had no relation with sales - claim of deduction u/s 80IB out of such addition - Held that:- Once the amount of deduction u/s 80IB is deemed to have been already granted in computing the 'total income' for the purposes of Expl. 4(a), being the amount of addition representing concealment or furnishing of inaccurate particulars of income, then there can be no scope for inferring that the total income representing the amount of addition would be again eligible for deduction u/s 80-IB(8A), thereby reducing the total income to Nil - the amount of income representing such addition/disallowance would have assumed the character of 'gross total income' eligible for deductions under Chapter VI-A including sec. 80-IB(8A) of the Act - the legislature has chosen to treat the amount of such addition/disallowance as 'total income' in itself, there can be no logic in subjecting such income to further deductions under Chapter VI-A of the Act for computing the amount of tax sought to be evaded – thus, the contention is rejected and the penalty is upheld – D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Thereafter, the Assessing Officer imposed penalty qua the income of ₹ 16.19 lakh, which has been approved in the first appeal. The assessee is aggrieved against such confirmation of penalty. 3.2. We have heard the rival submissions and perused the relevant material on record. In so far as the trial run receipt are concerned, it can be seen from the assessee's Annual accounts, attached with the return of income, that the assessee capitalized pre-operative expenses incurred on such projects during the year which were incomplete, thereafter added the brought forward balance of pre-operative expenses pending allocation and then reduced trial run receipts of ₹ 16.19 lakh for working out the amount of work-in-progress capitalized in the balance sheet at ₹ 4.32 crore. This entire working of the computation of work-in-progress by reducing the amount of trial run receipts is part of Schedule E forming part of balance sheet, a copy of which is available on page 25 of the paper book. From such Schedule, it can be seen that the assessee promptly and categorically declared reduction of trial run receipts from the work-in-progress capitalized. The stand of the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terial to the computation of his total income have been disclosed by him, then, the amount added or disallowed in computing the total income of such person as a result thereof shall, for the purposes of clause (c) of this sub-section, be deemed to represent the income in respect of which particulars have been concealed. 3.5. A bare perusal of the clause (A) of the Explanation indicates that the amount added or disallowed in computing the total income of the assessee shall be deemed to represent the income in respect of which penalty will be leviable, if the assessee fails to offer an explanation or offers an explanation which is found by the Assessing Officer or the Commissioner (Appeals) or the Commissioner to be false. Adverting to the facts of the extant case, we find that the assessee did offer an explanation for treating the trial run receipts as not chargeable to tax, being the consistently followed and not rejected practice of reducing it from the capital work-in-progress for the earlier years and such view was not found to be false. This stand of the assessee is substantiated from the annual accounts of the company, a copy of which is available on record. Thus it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eliance Petro Products Pvt. Ltd. (2010) 322 ITR 158 (SC) has held that a mere making of a claim which is not sustainable in law by itself will not attract penalty under the section when the assessee furnishes all the necessary particulars in his return of income. In view of the foregoing discussion and respectfully following the judgment of the Hon'ble Summit Court, we hold that no penalty is sustainable in respect of the addition of ₹ 16,19,062/-. 4.1. The second addition on which penalty has been confirmed is a sum of ₹ 55,693/-. Briefly stated the factual matrix of this issue is that the assessee claimed deduction of ₹ 55,693/- by writing off some debit balance. On being called upon to justify the deduction, the assessee admitted that it was an advance given to a person which had no relation with sales. In the absence of any justification for the deduction, the A.O made addition for the said sum. The ld. CIT(A) upheld the addition. The assessee did not press this issue before the Tribunal. Thereafter, penalty was imposed u/s 271(1)(c) of the Act and confirmed in the first appeal. Now the assessee is before us against the upholding of penalty on this amou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such business became deductible u/s 80-IB(8A) of the Act for a period of ten consecutive assessment years beginning from the initial assessment year, being the immediately preceding year in the present case. In the light of this Explanation, it was contended that though the amount of the instant addition would constitute income but the same would reduce the total income to Nil because of the availability of deduction u/s 80-IB(8A) for the equal amount and resultantly no penalty would stand. 5.2. We are not convinced with this proposition put forth on behalf of the assessee. The main plank of his submission is based on the interpretation of Clause (a) of Explanation 4 to sec. 271(1)(c), which reads as under:- Explanation 4.-For the purposes of clause (iii) of this subsection, the expression the amount of tax sought to be evaded ,- (a) in any case where the amount of income in respect of which particulars have been concealed or inaccurate particulars have been furnished has the effect of reducing the loss declared in the return or converting that loss into income, means the tax that would have been chargeable on the income in respect of which particulars have been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -IB(8A). A conjoint reading of the above definitions brings to the fore that 'total income' in the present context means the gross total income as reduced by the amount of deductions under Chapter VI-A of the Act, including section 80IB(8A). Once the amount of deduction u/s 80IB is deemed to have been already granted in computing the 'total income' for the purposes of Expl. 4(a), being the amount of addition representing concealment or furnishing of inaccurate particulars of income, then there can be no scope for inferring that the total income representing the amount of addition would be again eligible for deduction u/s 80-IB(8A), thereby reducing the total income to Nil. The view canvassed by the ld. AR would have merited acceptance if the legislature had treated such addition/disallowance as 'gross total income' eligible for further deductions under Chapter VI-A of the Act. In that situation, the amount of income representing such addition/disallowance would have assumed the character of 'gross total income' eligible for deductions under Chapter VI-A including sec. 80-IB(8A) of the Act. Since, the legislature in its wisdom has chosen to treat the ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
