TMI Blog2003 (6) TMI 186X X X X Extracts X X X X X X X X Extracts X X X X ..... ng of inaccurate particulars of income by the appellant. 4. That the CIT(A) erred on facts and in law in alleging that the appellant intentionally made disproportionate/higher allocation of expenses towards the head office to claim higher deduction under s. 80-I, to defraud the Revenue and thus concealed/filed inaccurate particulars of income. 5. That the CIT(A) erred on facts and in law in not appreciating that the AO levied penalty under the substantive provisions of s. 271(1)(c) of the Act and the onus was upon the Revenue to prove that the appellant has concealed/filed inaccurate particulars of income which onus has not been discharged. 5.1 That the CIT(A) erred on facts and in law in invoking for the first time Expln. 1 to s. 271(1)(c) and alleging that 'the appellant has failed to prove that the explanation offered by it is bona fide and that the facts relating to the same and material to the computation of its total income were disclosed'." 3. In respect of the present appeals the CIT(A) has passed a consolidated order and it is an accepted position between the parties that the facts are identical for all the three assessment years under appeal and it is only the qua ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the sales of Rs. 99,89,510. It would mean that approx. 74 per cent of the total expenses have been booked inDelhihead office books, against the meagre sales of only 3.5 per cent of the total sales, while in factory a/c only 26 per cent of the total exenses have been booked against 96.5 per cent of the total sales. It clearly indicate that the factory profits were artificially inflated by diverting expenses from factory a/c to Delhi H.O. a/c. The entire amount of interest and bank charges amounting to Rs. 1,54,659 has been debited to Delhi H.O. a/c while the money borrowed has been utilized by the factory. Even the expenses like advertisement and commission, etc., which has got a direct connection with manufacturing and sales of cranes has been debited to Delhi H.O. books, instead of factory books. The motive for making such adjustments is very obvious. The assessee wanted to claim a higher deduction under s. 80-I by artificially jacking up its factory profits." 6. According to the AO the assessee had attempted to draw an artificial line of demarcation by preparing two separate P L a/cs in an arbitrary manner and this was nothing, but a mere device to defraud the Revenue by claimi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... business activities carried out at the head office at Delhi were a part of the activities carried out at the factory whereas the CIT(A) in her order had expressed an opinion to the contrary vis-a-vis para 9 of her order reproduced earlier. 10. Coming to the merits of the case the main submission was that separate books of accounts had been maintained atDelhiand Dundhahera and the expenditure debited in such separate books of accounts was the one which had actually been incurred. Considering the aforesaid main submissions as also the facts of the case the CIT(A) proceeded to discuss in para 11 onwards of his order the different items of expenditure for the various assessment years under consideration and directing their apportionment, some on the basis of turnover and others wholly or partly the latter, on percentage basis. A reading of the order of the CIT(A) would show that she has applied her mind in deciding the manner of apportionment and ultimately vide para 12 of his order she directed the AO to undertake necessary calculations vis-a-vis the Delhi office and the Dundhahera office. 11. As regards the assessee s plea for relief in accordance with the commercial profits and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccording to the learned Departmental Representative there was a deliberate attempt on the part of the assessee to allocate expenditure in a manner, which would make available a larger deduction under s. 80-I. The further submission was to the effect that no valid explanation had been given by the assessee to the AO at the penalty stage. Further, according to the learned Departmental Representative the CIT(A) had upheld the orders of the AO in respect of allocation of expenditure and the orders of the first appellate authority had not been challenged by the assessee before the Tribunal. 15. The learned Departmental Representative further submitted that the AO had clearly expressed an opinion in the assessment order with reference to the concealment and the test laid down by the judgment of the Hon ble Delhi High Court in (2000) 246 ITR 568 (Del) stood satisfied. The learned Departmental Representative thereafter proceeded to read out the relevant observations of the CIT(A) and lastly placed reliance on Prasanna Enterprises vs. CIT (2000) 159 CTR (Kar) 402 : (2000) 244 ITR 188 (Kar). 16. In reply the learned counsel for the assessee contended that the decision in (2000) 244 ITR 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expenses incurred atDelhiare apportioned in a reasonable manner. I have gone through the details of expenses incurred atDelhioffice and would direct that the said expenses be apportioned on the following basis to arrive at the profits derived from the industrial undertaking at Dundhahera: (i) On the basis of the staff strength inDelhi, I would direct that 1/3rd of the following expenses would pertain toDelhiand the balance 2/3rd to the factory at Dundhahera: Asst. yr. 1988-89 Asst. yr. 1989-90 Rs. Rs. Establishment expenses 1,65,997.30 8,26,165.96 Conveyance 30,295.30 80,979.70 Staff welfare expenses 23,224.67 43,088.99 General expenses 14,057.85 38,677.67 Business promotion 7,905.51 28,375.37 Car maintenance 46,725.99 84,994.00 Donations 5,350.00 4,605.00 Water electricity 12,417.50 19,535.20 Office maintenance 15,340.47 40,655.79 Postage telephones 63,280.60 1,74,599.35 Stationery 46,742.17 83 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and plausible. The CIT(A) has followed a different basis for different items of expenditure allocating some on the basis of the staff strength, others on the basis of turnover, yet others wholly, and some on the basis of percentage. In deciding the quantum appeal, the CIT(A) and thereafter the Tribunal has at no stage made any observation which would lead to the conclusion that the assessee had any calculated design to claim a higher deduction under s. 80-I by adopting foul means. 20. In the view that we have taken to delete the penalty on the aforesaid grounds, we do not find it necessary to deal with some of the other arguments advanced by the learned counsel and a specific reference may be made to the question of recording a satisfaction in the assessment order. In concluding, however, we must observe that the change in the basis of initiation and the ultimate levy of penalty is a relevant factor and which we on the facts of the present case have taken into account in deciding whether provisions of s. 271(1)(c) are attracted or not. The various decisions relied upon by the learned counsel have been taken into account in deciding the present appeals, but we have not felt it nec ..... X X X X Extracts X X X X X X X X Extracts X X X X
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