TMI Blog2007 (2) TMI 250X X X X Extracts X X X X X X X X Extracts X X X X ..... le completing the assessment, the AO also noticed that the assessee had claimed deduction under s. 80M at Rs. 1,53,38,560 against the dividend income of Rs. 158.83 lakhs. The AO referred to the assessments of the preceding years wherein it was held that the major part of the expenses, including interest paid, debited to the P L a/c related to the investment made by the assessee in the shares and dividend earned therefrom. He also referred to the asst. yr. 1995-96 in which it was held that the expenses incurred by the assessee were more than the dividend income, leaving no scope for deduction under s. 80M. On the ground that the facts for the instant year are the same., the AO held that the assessee was not eligible for the deduction. 4. The assessment was thus completed by disallowing a part of the depreciation and by denying the deduction under s. 80M. At the end of the assessment order, the AO observed that penalty proceedings under s. 271(1)(c) are separately initiated. 5. There was an appeal against the assessment to the CIT(A) who by order dt. 15th Dec., 1999 confirmed the disallowance of the depreciation and set aside the issue relating to s. 80M to the AO for fresh adjud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re the CIT(A) filed against the consequential order passed by the AO on 11th Aug., 2003, the part disallowance of the claim under s. 80M was not pressed. He also observed that the assessee did not maintain separate record for expenses Incurred against the dividend income and, therefore, an estimated allowance have to be made by the AO. As regards the purpose of the investment in the shares of Eicher Ltd. the AO stated that he has allocated the business expenses to the dividend income proportionately by treating the same at par with the business income. He also observed that the assessee's claim was not bona fide since in the asst. yrs. 1993-94 to 1995-96, the claim for deduction under s. 80M was the subject of litigation. For these reasons, the AO held that the assessee furnished inaccurate particulars of its income and accordingly levied a penalty of Rs. 45,41,242. 8. On appeal, the CIT(A) held that in the earlier years, the Tribunal has referred the question of law to the Hon'ble Delhi High Court on the issue whether the deduction under s. 80M is to be allowed on the gross or net dividend, whether the shares of Eicher Ltd. were held by the assessee as stock-in-trade or investme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... law the order dt. 20th Sept., 2004 passed by the AO levying penalty under s. 271(1)(c) of the IT Act, 1961 ('the Act'), is without jurisdiction, illegal, bad in law and void ab initio. 1.1 That on the facts and circumstances of the case and in law the impugned penalty order is without jurisdiction, illegal, bad in law and void ab initio since the same has been passed without there being a satisfaction in the assessment order that the appellant had furnished inaccurate particulars of income/loss, which is sine qua non for assumption of valid jurisdiction." It is submitted that the additional ground raises a purely legal issue in respect of which facts are already on record and no fresh investigation is required. It is also submitted that the additional ground is taken since the assessee was recently informed of the correct position of law and that the omission to raise the same in the memorandum of appeal was neither wilful nor unreasonable. Reliance is placed on the judgments of the Supreme Court in Jute Corporation of India vs. CIT (1990) 88 CTR (SC) 66 : (1991) 187 ITR 688 (SC) and National Thermal Corporation Ltd. vs. CIT (1999) 157 CTR (SC) 249 : (1998) 229 ITR 383 (SC). On ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) 194 CTR (Del) 384 : (2005) 277 ITR 337 (Del), the Hon'ble Delhi High Court observed that in the case of Angidi Chettiar, the Supreme Court have repeatedly emphasized the word "satisfaction" and the satisfaction is not to be merely in the mind of the AO but must be reflected from the record. It was further held that the element of satisfaction should be apparent from the order itself and it is not for the Courts to go into the minds of the authorities or trace the reasons from the files of such authorities. If we peruse the assessment order in the light of the above binding authorities, we are unable to find any satisfaction being recorded therein to the effect that the assessee concealed its income or furnished inaccurate particulars thereof. It may be clarified that the penalty has been levied not for concealment of income but for furnishing inaccurate particulars of income as can be seen from the closing paras of the penalty order. Therefore, the satisfaction of the AO must be that the assessee furnished inaccurate particulars of income. The disallowance of depreciation and the deduction under s. 80M are discussed in paras 6 and 7 respectively of the assessment order. So far as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claim can only be stated to be debatable or contentious and in all fairness to the assessee it must also be said to be supported by High Court judgments. Even before us, the learned counsel for the assessee cited several other judgments in support of its claim that despite the dividend income being assessed as income from other sources, the expenditure could be computed under the head business. In the light of the authorities which prima facie support the assessee, it is difficult to hold that the AO could have been satisfied that the assessee furnished inaccurate particulars of its income with regard to s. 80M. This is quite apart from the fact that there is no satisfaction recorded in para 7 of the assessment order. 16. We accordingly accept the additional ground and cancel the penalty sustained by the CIT(A). 17. In the appeal filed by the Department also, the assessee is entitled to succeed on the ground of non-recording of satisfaction as pointed out in the earlier paras. The assessee is entitled under r. 27 of the ITAT Rules, 1963 to support the decision of the CIT(A), which is appealed against by the Department, on the ground of non-recording of satisfaction, which groun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... obvious that the fact that the expenditure in question was capital expenditure in nature and was, therefore, liable to be added back to the income of the assessee is quite different from the fact as to whether, on the facts and in the circumstances of the case, the assessee could be under a bona fide belief that the expenditure in question was revenue expenditure and for that reason the same was not added back to its total income with the result that no penalty was exigible on that account, are two quite different facts. The aforesaid plea of the assessee regarding its bona fide belief about the nature of the expenditure was not duly considered by the Tribunal. The mere fact that the plea of the assessee that the expenditure in question was of revenue nature was not accepted upto the Tribunal. by itself did not mean that the assessee had furnished inaccurate particulars of its income by not adding that back to its total income...... Before we comment on the merits of the plea of the assessee, it may be stated here that it is a settled law that the mere fact that a claim of expenditure stands disallowed, does not by itself lead to the inference that the assessee had furnished inaccu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed on the earlier assessments without bringing out any material inaccuracy or falsity in the facts placed by the assessee. The issue is at best a debatable or contentious issue. In our view, the CIT(A) was, therefore, right in saying that the assessee did not furnish inaccurate particulars in relation to the claim for deduction under s. 80M. 20. For the above reasons, we hold that the assessee did not furnish inaccurate particulars of income either with regard to the claim for depreciation or with regard to the deduction under s. 80M. 21. In the course of the arguments in the assessee's appeal, the learned counsel for the assessee raised the contention that the penalty order is barred by limitation under s. 275(1)(a) of the Act. We are unable to agree with the contention. The order of the Tribunal in the appeal filed by the Department in ITA No. 1209/Del/2000, dt. 13th Jan., 2003 is stated to have been received in the office of the CIT-IV, Delhi, in the month of March, 2004. Even assuming that it was received on 31st March, 2004, the AO has six months time from that date to pass the penalty order. The penalty order was passed on 20th Sept., 2004, which is within time. We, there ..... X X X X Extracts X X X X X X X X Extracts X X X X
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