TMI Blog2014 (7) TMI 766X X X X Extracts X X X X X X X X Extracts X X X X ..... AA does not suffer from any legal infirmity. The decision in COMMISSIONER OF INCOME TAX Versus ZOOM COMMUNICATION PVT LTD [2010 (5) TMI 34 - DELHI HIGH COURT] followed - Mere submitting a claim which is incorrect in law would not amount to giving inaccurate particulars of the income of the assessee, but it cannot be disputed that the claim made by the assessee needs to be bona fide - If the claim besides being incorrect in law is mala fide, Explanation 1 to section 271(1)(c) would come into play and work to the dis-advantage of the assessee - If the assessee makes a claim which is not only incorrect in law but is also wholly without any basis and the explanation furnished by him for making such a claim is not found to be bona fide, it would be difficult to say that he would still not be liable to penalty under section 271(1)(c) of the Act. The persons who make claims of this nature, actuated by a mala fide 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 - the assessee had made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... business of the assessee, that the Motor Cars appeared as fixed assets in the accounts and not as stock-in-trade, that they were the capital assets, that the loss incurred by the assessee on disposal of the Motor Car could not be treated as trading loss, the loss was not allowable as business expenditure also, that the assessee had reduced the value of Cars sold from the block of assets, that the assessee had claimed depreciation on all the assets in the earlier years, that only for the year under consideration it had opted not to avail depreciation allowance. He further held that whether the assessee claimed depreciation or not, fixed assets were to be treated as capital asset, that any loss on account of sale of such assets was to be considered as per the provisions of the Act. Referring to the provisions of section 50 of the Act, he held that profit/loss on sale of depreciable asset was to be treated as Short Term Capital Gain/Loss in case entire block of asset had been sold, that loss on account of sale of part of the block could not be allowed as revenue expenditure. Finally, the claim of loss on account of sale of Motor Cars, amounting to ₹ 12. 38 lakhs, was disallowed. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laimed made by the assessee, that explanation 1 to section 271(1)(c) of the Act were applicable in the case under consideration. Finally, he uphold the order of the AO imposing penalty. 6. Before us, Authorised Representative (AR) stated that assessee had sold four Cars, that the loss suffered on sale of Car was debited to Profit Loss Account, that assessee did not offered loss in the return of income, that assessee had never claimed any depreciation on the said Cars, that the assessee was under the bonafide belief that as depreciation was not claimed, so it did not add back the amount, no incorrect particulars were filed by the assessee. He relied upon the decisions of Somany Evergree Knits Ltd. (352 ITR 592), Reliance Petroproducts Pvt. Ltd. (322 ITR 158)Nalin P. Shah(HUF)(ITA/49 of 2013 dt. 04. 03. 2013), and Amruta Organics Pvt. Ltd. (ITA1121/PN/11, AY- 2007-08dt. 22. 03. 2013). Departmental Representative(DR)contended that the assessee had claimed depreciation in earlier years, that it had made a patent in admissible claimed in the return of income, that the FAA had rightly invoked the explanation 1 to section 271(1)(c) of the Act, that there was no bonafide in the claim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n asset for being used for the purpose of assessee s business of amusement park. Since these cars was a business asset, the loss on its sale cannot be called to be a revenue loss. We, however, carefully examined the order of the lower authorities and we find that the issue was rightly adjudicated by them in the given facts and circumstances of the case and we find no infirmity in the order of the CIT(A). We, therefore, confirm the same. We further find that in the notes on account dated, 30. 8. 2001 in point No. 9 at page No. 3 and in point No. (e) at page No. 4 of the assessee s paper book it has been mentioned as under: No depreciation is charged on assets purchased for last 5 years. Depreciation on Asset are ₹ 9606324 as such loss is understated by ₹ 9606324 e) DEPRECIATION Depreciation of Fixed Asset has been provided on written down value method at the rates provided in Schedule XIV of the companies Act, 1956 (as amended). No Depreciation is charged on the new addition of fixed assets for last five years. On a combined reading of the above, we observe that nowhere it has been mentioned by the assessee that no depreciation was charged on cars from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any legal infirmity. Now, we would like to discuss the cases relied upon by the assessee. In the matter of Reliance Petro-products Pvt. Ltd. (supra) the assessee has duly disclosed about the claim of interest under section 36(1)(iii) and in earlier year claim was allowed. No statement or details supplied by the assessee had been found to be factually incorrect by the AO. Considering the facts of that case Hon ble Court had deleted the addition. But, in the case before us, a patently wrong claim was made and that also under the head Administrative and other expenses in the P L Account. Not only this during the assessment and penalty proceedings department had taken the stand that by making a falxe claim that assessee had concealed its income. Thus, the case cited by the AR is of no help. In the case of Somany Evergree Knits Ltd. (supra)a wrong claim of depreciation was made. But, the assessee realized its mistake during the assessment proceedings and pointed out to the AO. In the background of those facts Hon ble High Court had held that the assessee should not be visited by concealment proceedings. In the matter under appeal, the assessee is agitating the issue of claim of dep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come were disclosed by him If the explanation is neither substantiated nor shown to be bona fide, Explanation 1 to section 271(1)(c) would come in to play and the assessee will be liable to for the prescribed penalty. It is true that mere submitting a claim which is incorrect in law would not amount to giving inaccurate particulars of the income of the assessee, but it cannot be disputed that the claim made by the assessee needs to be bona fide. If the claim besides being incorrect in law is mala fide, Explanation 1 to section 271(1)(c) would come into play and work to the dis-advantage of the assessee. The court cannot overlook the fact that only a small percentage of the income-tax returns are picked up for scrutiny. If the assessee makes a claim which is not only incorrect in law but is also wholly without any basis and the explanation furnished by him for making such a claim is not found to be bona fide, it would be difficult to say that 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 i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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