TMI Blog2012 (12) TMI 480X X X X Extracts X X X X X X X X Extracts X X X X ..... ee in furnishing of inaccurate particulars of income and making false claim of deduction. The provisions of section 271(1)(c) are clearly attracted. In favour of revenue - ITA NO. 938/PN/2011 - - - Dated:- 23-7-2012 - Shri Shailendra Kumar Yadav and Shri R.K. Panda, JJ. Assessee by : Sri C.H. Naniwadekar Department by : Ms. Ann Kapthuama ORDER PER R.K. PANDA, AM : This appeal filed by the assessee is directed against the order dated 16-11- 2007 of the CIT(A)-I, Nashik relating to Assessment Year 2004-05. 2. The only effective ground raised by the assessee reads as under : The learned CIT (Appeals) erred on facts and in law in confirming the penalty of Rs. 73,71,366/- u/s. 271(1)(c) of the Act. He failed to take into account assessee s submissions and particularly the decision of Hon ble Supreme Court in CIT Vs. Reliance Petro Products Pvt. Ltd., (322 ITR 158) which was binding upon him . 3. This is the second round of litigation before the Tribunal. Facts of the case, in brief, are that the company filed its return of income on 25-10-2004 declaring total loss of Rs. 3,28,23,553/-. The assessment was completed u/s. 143(3) wherein the AO made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der : 9. We have heard the parties and perused the orders of the revenue as well as the judgment or decisions relied on the parties. The facts of the case and the explanation of the assessee have been perused. Regarding the excess claim of depreciation, we find that the explanations of the assessee mainly revolve around the defense that when there is full disclosure of relevant information in the return, even if the assessee makes an inaccurate claim of excess depreciation in violation of the provisions of section 43(6) read with section 32, the assessee should not be penalised u/s.271(a)(c) for the year wrong claim. Same is the position with regard to the other two disallowances relating to unpaid bonus disallowance 43B and exclusion of excise duty for the purpose of arriving at the closing stock in violation of section 145A. 10. On the other hand, the case of the revenue is that the assessee made an inaccurate claim of excess depreciation and said claim is clearly in violation of the express provisions of section 43(6), which provide for definition of written down value in respect of the assets acquired at different time as well as the block of assets. As per the revenue, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f such reduction does not exceed the written down value as so increased; Provisions of section 43(6)(c) provides for reduction of WDV only as per sub-clause (B) above only and it is only when any asset is sold or discarded or demolished or destroyed and these modes do not include the reduction of WDV by way of revaluation of block of assets for the purpose of reflecting the real value and there are no two views about it. At least, it is not the case of the assessee the issue is a debatable one. Further, it is an undisputed fact that the assessee has indeed relied on the wrong WDV figures and ultimately claimed wrong depreciation for obtaining the twin advantage of (i) projecting the real value and (ii) reducing the loses by making the false or wrong claim of depreciation. B. We have also perused the relevant provisions of section 43B(c) read with clause (ii) of 36(1) of the Act relating to bonus paid by the employer. Section 36(1)(ii) relating to other deductions and the bonus read that (ii) any sum paid to an employee as bonus . and the said bonus is allowable as per the provisions of section 43B(c) only and it is an accepted fact that the assessee claim the same as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see, making a patently wrong claim and patently impermissible claims, is deemed to represent income in respect of which particulars have been concealed and discussion given in relevant paragraphs 7 to 10 are relevant and the same are reproduced as under. 7. On having held that the claim is legally wrong, we proceed to examine if the claim is made under the bona fide belief at least. From the impugned order, we find that CIT (A) deleted the penalty holding that there nothing to suggest gross or wilful negligence or fraud by the assessee and relied on Apex court judgment in the case of Musadilal Rambharose (165 ITR 14)(SC) in this regard. Ld counsel also relied on various judgments to advance his please that the assessee is under the bona fide belief while making the said claim. In this regard, we have already examined whether there is any information in the order of the BIFR, the provision of and SICA and section 72A or section 32A of the Income-tax Act or any other provision under other statutes in favour of the assessee. There is no provision or order in favour of the assessee to suggest that the assessee is entitled to claim the said expired loss beyond eight years. Therefore, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... those cases other than such-false-explanation cases. These are identified by the following symptoms. They are: (i) such person does not able to substantiate the explanation offered; and (ii) such person not only fails to prove that such explanation is bona fide but disclosed all the facts relating to such explanation and material to the computation of his total income 10. On comparison, the assessee s case is found covered by the cases of group (B) above and the onus is on the assessee substantiate the explanation or prove the bona fide and also the responsibility of full disclosure of all the facts relating to the explanation and materials as stated above. Per contra, the AO is not under obligation to prove the wilful attempt of the assessee in matter of concealment or the explanation of the assessee in this regard is not bona fide. Thus, it is the assessee s responsibility to meet the above requirements. Wilful concealment is not an essential ingredient for attracting civil liability such a penalty u/s 271(1)(c). The above view is fortified by the apex court judgment in the case of Union of India vs Dharamendra Textiles Processors 306 ITR 277 (SC) or 174 Taxmann 571(SC). This ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eted by High Court following earlier decision which has been held to be not good law by the Supreme Court, matter remitted back to the High Court for fresh consideration in the light of decision in cases of Dharmendra Textile processors (supra) and the Rajasthan Spinning weaving Mills (supre). This is the case where the penalty was deleted by the Tribunal and High Court of Delhi where the penalty was levied applying the concepts of civil liability albeit the strict liability, non essentiality of mens rea and the element of strict liability on the assessee. 12. The provisions of section 43(6)(c) provides for meaning of WDV or block assets, the assessee is expressly provided with the meaning and procedure as to how to block of assets should be adjusted for claim of the depreciation u/s 32 of the Act. So are the provisions of section 145A with regard to excise duty treatment and the provisions of section 43B with regard to claim of unpaid bonus. Thus, the claim of excess depreciation is made in violation of express provisions of section 43(6) read with section 32, manner of arriving at the closing stock without adjusting with regard to excise duty component is violation of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the explanation that such claim of express depreciation was made in order to present the real value of the fixed assets of the company cannot be held bona fide. Therefore, such explanation referred to above, which is in contravention of the provisions of the statute, is not a bona fide one. Regarding the other claims, there is no justifiable reasons which are demonstrated with evidence by the assessee that the claims are made under bona fide belief. In any case, the real value requirement - oriented explanations is not the explanation the said Explanation 1 of section 271()(c) refers. That explanation refers to the phrase where in respect of any facts material to the computation of the total income of which should be read in the context of the present issues of disallowance of extra depreciation, unpaid bonus, non inclusion of excise duty in closing stock and the explanation of the assessee is that it is an error. Thus, in the instant case involving making patently wrong claims with disclosure of relevant information, such disclosures without bona fide explanation, shall not grant immunity to the assessee from the penal provisions. Secondly, regarding the explanation of n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the decision of the Hon ble Supreme Court in the case of Goldcoin Health Products Pvt.Ltd. reported in 304 ITR 308. He further observed that this issue was neither raised by the assessee before the CIT(A) in the first innings or before the Tribunal. Therefore, the observation of the Tribunal are obiter dicta and is an incidental remark and therefore not legally binding as a precedent. He noted that even in a case where assessee s income was reduced to NIL after setting off of carry forward loss of earlier years, penalty could be imposed u/s. 271(1)(c) of the I.T. Act in view of the decision of Hon ble Supreme Court reported in 313 ITR 397. He accordingly confirmed the penalty levied by the AO. Aggrieved with such order of the CIT(A), the assessee is in appeal before us. 7. The learned counsel for the assessee submitted that the issue is decided in favour of the assessee by the decision of the Hon ble Supreme Court in the case of CIT Vs. Reliance Petro Products Pvt. Ltd. wherein it has been held that when there is no finding that any details supplied by the assessee in its return are incorrect or false, there would be no question of inviting penalty u/s.271(1)(c) of the I.T. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Book filed on behalf of the assessee. We have also considered the decisions cited before us. There is no dispute to the fact that penalty has been levied by the AO on account of excess claim of depreciation of Rs. 2,00,00968/-, addition of Rs. 2,68,423/- on account of non-application of provisions of section 145A towards valuation of closing stock and addition of Rs. 1,60,474/- u/s.43B on account of unpaid bonus. We find in appeal the learned CIT(A) deleted the penalty on account of the above 3 additions and on further appeal by the Revenue the Tribunal restored the issue to the file of the CIT(A) for deciding the issue afresh with certain directions. We find the learned CIT(A) in such setting aside proceedings upheld the penalty levied by the AO on the ground that it is a case of deliberately misleading of facts and furnishing of inaccurate particulars of income by making false claim of deductions. Therefore, the AO was justified in levying penalty u/s.271(1)(c) of the I.T. Act. It is the submission of the learned counsel for the assessee that in view of the decision of the Hon ble Supreme Court in the case of Reliance Petro Products Pvt. Ltd. (Supra) no penalty is leviable u/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the word particulars in the earlier part of this judgment. Reading the words in conjunction, they must mean the details supplied in the return, which are not accurate, not exact or correct, not according to truth or erroneous. We must hasten to add here that in this case, there is no finding that any details supplied by the assessee in its return were found to be incorrect or erroneous or false. Such not being the case, there would be no question of inviting the penalty u/s.271(1)(c) of the Act. A mere making of the claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee. Such claim made in the return cannot amount to the inaccurate particulars. 10. It was tried to be suggested that s.14A of the Act specifically excluded the deductions in respect of the expenditure incurred by the assessee in relation to income which does not form part of the total income under the Act. It was further pointed out that the dividends from the shares did not form the part of the total income. It was, therefore, reiterated before us that the AO had correctly reached the conclusion that since the assessee had cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that ratio of Reliance Petro Products Pvt. Ltd (supra) is not applicable to the facts of the present case. In that case the Hon ble Supreme Court has observed that the assessee had furnished all the details of its expenditure as well as income in its return, which details, in themselves, were not found to be inaccurate nor could be viewed as the concealment of income on its part. It was up to the authorities to accept its claim in the return or not. However, in the instant case, the Auditor appointed by the assessee itself had pointed out that the excess depreciation claim on certain items of plant and machinery is not in conformity with the concept of block of assets. Inspite of such comments of the auditors the assessee did not reduce the excess depreciation claim while computing the total loss/income. Similarly while arriving at the closing stock no adjustment with regard to excise duty was made which is a deliberate violation of the provisions of section 145A. The assessee has deliberately violated the provisions by not disallowing the unpaid bonus u/s. 43B of the I.T. Act. Therefore, we are of the considered opinion, that this is a deliberate attempt on the part of the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X
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