TMI Blog2011 (1) TMI 1057X X X X Extracts X X X X X X X X Extracts X X X X ..... PER K.G. BANSAL: AM: The facts of the case are that the assessee company filed its return on 27.11.2000 declaring total income of Rs.1,43,40,680/-. The return was processed u/s 143(1) on 27.03.2002. Thereafter, a case was picked up for scrutiny by issuing notice u/s 143(2) on 27.11.2001. 1.1 The assessee is engaged in the business of advertising and financing. It was inter alia found that the assessee had deposited a sum of Rs. 50 lac as share application money with M/s Dimension Investments Securities Limited. No share was allotted to the assessee company and, therefore, it converted the share application into the loan. The aforesaid M/s Dimension Investments Securities Limited did not send any letter etc. to show that it agreed with the assessee and acknowledged the debt as loan in any manner whatsoever. The assessee wrote off this amount from the books as bad debt and claimed the sum as deduction against the business income. The assessee was required to explain as to how the amount is deductible in computing the income. The submissions of the assesse in this regard are reproduced below:- On 05.07.1997 we deposited Rs. 50 lacs on account of share application mone ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as bad debt with a bona fide belief that it is allowable as business expenditure. The Assessing Officer did not accept the explanation to be a bona fide explanation under Explanation 1 to 271 (1)(c). Thus, the penalty was levied. 1.3 Aggrieved by this order, the assessee moved an appeal before the CIT(A)-I, New Delhi, who disposed off the same on 30.10.2009 in Appeal No.13/08-09. He deleted the penalty by observing that the explanation tendered by the assessee is bona fide and all facts with regard to the transaction were duly disclosed in the return of income. On the other hand, the Assessing Officer has not brought any material on record to establish that it had made false claim or inflated claim. Therefore, it is a case of bona fide difference of opinion between the assessee and the Assessing Officer. 1.4 Aggrieved by this order, the revenue is in appeal before us. Three grounds have been taken in appeal. Ground No.2 projects the real grievance of the revenue that on the facts and in the circumstances of the case, the learned CIT(A) erred in deleting the penalty of Rs. 19.25 lacs imposed by the Assessing Officer. 2. Before us, the case of the learned DR is that conversion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o convert share application money into debt, the act was malafide and, therefore, the assessee is liable to be penalized u/s 271(1)(c). In order to support this case, reliance has been placed on the decision in the case of CIT Vs. Zoom Communication (P) Ltd. (2010) 327 ITR 510 (Delhi); CIT Vs. Escorts Finance Ltd. (2010) 328 ITR 44 (Delhi); CIT Vs. IFCI Ltd. (2010) 328 ITR 611 (Delhi); Devsons (P) Ltd. Vs. CIT (2010) 322 ITR 158 (Supreme Court). 4. In reply, the learned counsel for the assessee submitted that the Assessing Officer did not record any satisfaction while initiating the penalty proceedings, therefore, he did not properly assume jurisdiction to levy the penalty. In this connection, reliance has been placed on the decision of Hon ble Delhi High Court in the case of Ms. Madhushree Gupta (2009) 317 ITR 107. 4.1 It is also his case that all the facts had been disclosed before the Assessing Officer. The explanation of the assessee is bona fide. In this connection, he relied on the decision in the case of CIT Vs. Indersons Leather (P) Limited (2010) 328 ITR 167 (P H); CIT Vs. Shahabad Co-operative Sugar Mills Ltd. (2010) 322 ITR 73 (P H); and CIT Vs. Vijay Kumar Jain (201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsideration in the context of overall facts to find whether it is bona fide or not. 5.2 In the case of Escorts Finance Limited, the assessee had claimed deduction u/s 35D. The argument of the learned counsel for the revenue was that the explanation of the assessee is that the claim is based upon advise of the Chartered Accountant furnished at the time of the public issue. This advice could not be the basis for filing the return of income. The deduction u/s 35D is ex-facie inadmissible in the case of a finance company. The Hon ble court agreed with these contentions and while doing so, it took note of the decision of Hon ble Supreme Court in the case of Union of India Vs. Dharmendra Textile Processors, (2008) 306 ITR 277. The ratio of the case is that if the claim is ex facie bogus, the assessee makes himself liable for penalty. 5.3 Coming to the cases relied upon by the assessee, the facts in the case of Ms. Madhushree Gupta are that while completing the assessment, the Assessing Officer directed initiation of penalty proceedings. After hearing the assessee, penalty was levied. In the writ petition, the assessee challenged initiation of penalty proceedings. The Hon ble Court h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bts the full facts of which were not there in the return of income. 5.5 In the case of Devsons (P) Limited, the facts are that the assessee had declared receipts of Rs. 81,90,780/-. The Assessing Officer computed the receipts at Rs. 1,17,39,415/- by applying the method of accounting regularly employed by the assessee, i.e. mercantile method of accounting. Thus, addition was made to the total income. He had also added a further sum of Rs. 36,17,979/- on account of unconfirmed sundry creditors. Finally penalty of Rs. 33,07,220/- was levied. The Hon ble Court deleted the levy of the penalty. It has been mentioned that the Tribunal was not right in law in holding that there was a change in method of accounting introduced by the assessee without any justifiable reason. The further findings that there was no evidence regarding the payment of Rs. 36,17,980/- by the assessee to the sub-contractor is also perverse. In regard to the penalty, the finding of the Tribunal was upheld. The ratio which can be culled out is that penalty cannot be levied where there is a bona fide difference of opinion between the assessee and the Assessing Officer regarding method of accounting. In other words, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... debts and the nature thereof. Thus, at the time of filing the return and its processing, the nature of the amount of ₹ 50/- lacs was not known to the Assessing Officer. The assessee has relied on letter dated 23.02.1998 in which it intimated M/s Dimension Investments Securities Limited that the investment is recalled and requested it to pay the amount with interest of Rs. 22/-% per annum. There is no basis available on record for writing this letter and there is also no reply. The account prepared thereafter for confirmation has also not been signed by M/s Dimension Investments Securities Limited. In the explanation, the assessee has mentioned about the legal advice. Such advice has not been placed on record before the Assessing Officer, the learned CIT(A) or us. Therefore, the explanation is not supported by any fact on record. Accordingly, it is held that the conversion was in the nature of a device to make a claim of deduction, which was not otherwise admissible to the assessee. 6.3 The penalty can be levied when income is concealed. An example could be where a part of the income from a declared source is not shown in the return. Penalty can also be levied for furnis ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
