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TMI Blog2011 (1) TMI 1057X X X X Extracts X X X X X X X X Extracts X X X X ..... nner 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 money in M/s Dimension Investments and Securities Limited, New Delhi. Since even after about 9 months no shares were allotted in favour of our company, we took up the matter with the said company as per letter dated 6.7.98 (copy placed below) stating that in the event of non-allotment of the shares we had exercised the opinion for conversion of the share money into loan bearing interest @22% quarterly compounded. After several reminders over the phone and in person Shri Udey Dutt, Director of the company managing its affairs made a promise that the shares would be listed before June, 99 in prominent stock exchanges and there was a likelihood of shares fetching very high prices and that he would himself help us in the matter by disposing of all the shares. More than 8 months have passed, but the Director has n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 of deposit for allotment of shares into loan without concurrence of the aforesaid M/s Dimension Investments & Securities Limited was a device employed by the assessee to claim the deduction of Rs. 50/- lacs in computing the income. But for this, the assessee could not have claimed the deduction from the business income. Thus, it is a case of a deliberate false claim made by the assessee. In this connection, he referred to para No.13 of the order of the Tribunal in quantum appeal, in which the disallowance was upheld by following the decision of Hon'ble Supreme Court in the case of A.V. Thomas and Company Limited Vs. ACIT 48 ITR 67; CIT Vs. Abdullah Abdulkadar 41 ITR 445; and Amarchand Sobhachand Vs. CIT 82 ITR 591. This paragraph is reproduced below:- "Looking into the facts of the case in the light of decis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... R 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 (2010) 325 ITR 378 (Chhatisgarh). 5. We have considered the facts of the case and submissions made before us. The facts are that the assessee claimed a deduction of Rs. 50/- lac in computing the business income. This amount was the money advanced to M/s Dimension Investments & Securities Limited for allotment of shares. In the course of assessment proceedings, a copy of the letter addressed to the aforesaid M/s Dimension Investments & Securities Limited on 23.02.1998 was filed, in which it is mentioned that the assessee had given a sum of Rs. 50/- lacs to this company on 05.09.1997 at the rate of 22% per annum (quarter commodity basis) as share application money with an option to recall it before 31.03.1998. This option is being exercised. M/s Dimension Investments & Securities Limited was requested to return the fu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or 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 held that the position of law both pre and post amendment is similar, inasmuch as the Assessing Officer will have to arrive at a prima facie satisfaction during the course of assessment proceedings with regard to the assessee having concealed particulars of income or furnished inaccurate particulars, before he initiates penalty proceedings. This satisfaction should be discernible from the order passed during the course of the proceedings. The satisfaction need not reflect all items of addition or disallowance. However, the assessee would not be debarred from furnishing evidence to rebut the prima facie satisfaction of the Assessing Officer. It may be mentioned here that in rebuttal, the revenue relied on the decision of Hon'ble Delhi High Court in the case of CIT Vs. ECS Ltd. In this judgment, it has been held that the ne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g 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, the whole question turns on the bona fide of the explanation. 5.6 In the case of Vijay Kumar Jain, the Hon'ble Chhatisgarh High Court mentioned that it is not the case of the revenue that the assessee has concealed the particulars of income or any particular of income was found to be inaccurate by the Assessing Officer. It is merely a case of estimating the rate of profit. No penalty can be levied in such a case. The facts of this case are distinguishable inasmuch as the income of the assessee had been estimated, while in the case at hand we are dealing with exact quantification of income, in which a claim has been held to be made falsely. 5.7 In the case of Indersons Leather (P) Limited, decided by the Hon'ble (P&H) High Court, the question was-whether, rent received from house property was business income or prop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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 furnishing inaccurate particulars of income. This may be illustrated with the example where income is shown as agricultural income or gift. The charge of furnishing inaccurate particulars of income also arises under Explanation 1, where the explanation furnished by the assessee in respect of an addition made is not bona fide. There could be cases where there is a legitimate difference of opinion in respect of claim, if it is so shown, the case will go out of the ambit of the Explanation. However, where the explanation is not bona fide, the penalty can still be levied as held in the case of Dharmendra Textile Processers Limited. Further, the Hon'ble Delhi High Court has held that where the claim is ex-facie bogus, and explanation is not bona fide, the assessee makes himself liable to the penalty. Thus, penalty has been levied in respe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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