TMI Blog2015 (3) TMI 704X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of non-exclusion of receipts as its income or for claiming particular item of expenditure as deduction, even where claim of the assessee is rejected, no penalty for concealment of income or furnishing of inaccurate particulars of income could be levied under section 271(1)(c) of the Act. The assessee having declared complete facts with regard to expenditure of ₹ 225 crores and the claim of the assessee being bona fide, though not allowed as expenditure in the hands of the assessee, does not justify levy of penalty under section 271(1)(c) of the Act, much less penalty at the rate of 150 per cent. of the tax sought to be evaded. We thus hold that the assessee, in the present set of facts and circumstances, is not exigible to levy of penalty under section 271(1)(c) of the Act where the claim of the assessee vis-a-vis expenditure incurred on establishment of an international airport had been rejected. Accordingly, we delete the penalty levied under section 271(1)(c) of the Act and the Assessing Officer is directed to delete the same. - Decided in favour of assessee. Penalty u/s 271(1)(c) - addition made on account of instalments received during the year on account of for s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have been filed by the assessee and the Revenue against the order of the Commissioner of Income-tax (Appeals), dated February 7, 2013, against the levy of penalty under section 271(1)(c) of the Act relating to the assessment year 2008-09. 2. All these appeals relating to the same assessee on similar issue were heard together and are being disposed of by this consolidated order for the sake of convenience. 3. The assessee has raised the following grounds of appeal in I. T. A. No. 149/Chd/2012 : 1. That on the facts and in the circumstances of the case and in law, the worthy Commissioner of Income-tax (Appeals) through his order dated February 7, 2013, has erred in passing that order in contravention of provisions of section 250(6) of the Income-tax Act, 1961. (2)(i) That on the basis of facts and circumstances of the case, the worthy Commissioner of Income-tax (Appeals) has erred in confirming the action of the learned Assessing Officer, wherein he had erred in levying penalty of ₹ 1,04,28,75,000 on addition of ₹ 225 crores on account of expenditure incurred on the development of infrastructure in the form of setting up of an internationa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... same. 4. In I. T. A. No. 26/Chd/2012, the Revenue has raised the following grounds of appeal : 1. On the facts and in the circumstances of the case and in law, the learned Commissioner of Income-tax (Appeals) has erred in allowing appeal of the assessee without appreciating the facts of the case. 5. On the facts and circumstances of the case and in law, the learned Commissioner of Income-tax (Appeals), has erred in deleting the penalty under section 271(1)(c) on addition of ₹ 5,99,62,243 on account of instal ments received. 6. On the facts and circumstances of the case and in law, the learned Commissioner of Income-tax (Appeals), has erred in deleting the penalty under section 271(1)(c) on addition of ₹ 53,31,784 on account of instalments received pending adjustments. 7. On the facts and circumstances of the case and in law, the learned Commissioner of Income-tax (Appeals), has erred in deleting the penalty under section 271(1)(c) on addition of ₹ 6,78,007 on account of adjusted hire purchase debtors. 5. It is prayed that the order of the learned Commissioner of Income- tax (Appeals) be set asid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of appeal before the appeal is heard or disposed of. 7. In I. T. A. No. 254/Chd/2013, the Revenue has raised the following grounds of appeal : 1. On the facts and in the circumstances of the case and in law, the learned Commissioner of Income-tax (Appeals) has erred in allowing appeal of the assessee without appreciating the facts of the case. 2. On the facts and circumstances of the case and in law, the learned Commissioner of Income-tax (Appeals), has erred in deleting the penalty amounting to ₹ 14,26,215 which was levied by the Assessing Officer under section 271(1)(c) with respect to addition of ₹ 46,15,584 made on account of instalments received during the year on account for sale of houses/flats. 3. It is prayed that the order of the learned Commissioner of Income- tax (Appeals) be set aside and that of the Assessing Officer may be restored. 8. In I. T. A. No. 815/Chd/2013, the Revenue has raised the following grounds of appeal : 1. On the facts and in the circumstances of the case and in law, the learned Commissioner of Income-tax (Appeals) has erred in allowing appeal of the assessee without appreciating ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 271(1)(c) of the Act. However, in respect of the addition of ₹ 225 crores being amount paid for development of the airport at Mohali, the Assessing Officer after considering the reply of the assessee on this issue which is incorporated at pages 5 to 10 of the order, levying penalty under section 271(1)(c) of the Act, held that the nature of the business activity carried on by the assessee was for the urban development of the State of Punjab and the activities included development of land and subsequent sale of residential as well as commercial properties. The Assessing Officer further observed that the Commissioner of Income-tax (Appeals) had considered the objections raised by the assessee in entirety and confirmed the addition. The Assessing Officer observed that, Falsehood in accounts can take either of the two forms ; (i) an item of receipt may be suppressed fraudulently ; (ii) an item of expenditure may be falsely claimed or an exaggerated amount could be claimed and since attempts of both types reduces taxable income, both amount to concealment of particulars of one's income as well as to furnishing of inaccurate particulars of income. Since the assessee had c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Assessing Officer held that the assessee had also furnished inaccurate particulars of income in respect of the addition made on account of instalment received during the year on account of sale of houses/flats. The Assessing Officer imposed penalty under section 271(1)(c) of the Act to the extent of 100 per cent. of the tax sought to be evaded. 14. The Commissioner of Income-tax (Appeals) at pages 3 to 8 of the appellate order reproduced the submissions of the assessee and thereafter considered the issue of levy of penalty on the disallowance of expenditure of ₹ 225 crores. The Commissioner of Income-tax (Appeals) noted that the amount debited by the assessee was not an expenditure of the assessee at all, and it was purely a case of application of income for a purpose which had no direct or even indirect relation with the business of the assessee. The Commissioner of Income-tax (Appeals) further observed that in the quantum proceedings, it was held that even in the notings available on the file of PUDA, there was no mention of any benefit which was expected to accrue to PUDA, because of the establishment of an international airport. In relation to the levy of penalty u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Act on addition of ₹ 225 crores. It was pointed out by the learned authorised representative for the assessee that the said amount was debited to the profit and loss account and was claimed as an expenditure of revenue account. Even the tax auditors did not object to the said claim of revenue expenditure. It was further pointed out by the learned authorised representative for the assessee that the accounts of the assessee were audited by Comptroller and Auditor General of India who in-turn had not raised any objection against the said claim of the assessee. It was further pointed out by the learned authorised representative for the assessee that the Tribunal while disallowing the claim of the assessee had held that the said expenditure was made on the behest of directions of the State Government and was not business expenditure. The assessee, however at the time of filing the return of income had claimed the expenditure incurred for the development of airport as revenue expenditure, though the said expenditure was incurred at the directions of State Government. 18. The next plea of the learned authorised representative for the assessee was that the Tribunal while decidin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee was a Government organisation and the intent was to pay due taxes and in such circumstances lenient view needs to be taken. Reliance was placed on CIT v. H. P. State Forest Corporation Ltd. [2012] 340 ITR 204 (HP) in this regard. 20. The learned authorised representative for the assessee further submitted that the Assessing Officer while passing the assessment order had initiated the penalty both for concealment of income or furnishing of inaccurate particulars of income. However, while levying the penalty under section 271(1)(c) of the Act, the Assessing Officer levied penalty for furnishing of inaccurate particulars of income. 21. The last plea made by the learned authorised representative for the assessee was that there was no merit in levying the said penalty at the rate of 150 per cent. of the tax sought to be evaded. 22. The learned Departmental representative for the Revenue pointed out that the expenditure had not been incurred by the assessee in its own right, which is the prerequisite for allowing the expenditure under section 37 of the Act. The said expenditure was incurred at the behest of the State Government and the assessee was not even clear as to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Data P. Ltd. v. CIT [2013] 358 ITR 593 (SC). In the conclusion it was pointed out by the learned Departmental representative for the Revenue that the Commissioner of Income-tax (Appeals) while upholding the penalty under section 271(1)(c) of the Act at pages 2 and 3 of the appellate order has given a finding that from the notings of file of PUDA, the officers of the PUDA were against bearing the said financial burden and even against the same, the expenditure was not only incurred by the assessee but was further booked as revenue expenditure. 24. In the rejoinder, it was pointed out by the learned authorised representative for the assessee that the expenditure was incurred by the assessee on the directions of the Government and its disallowance could not attract levy of penalty for concealment under section 271(1)(c) of the Act. 25. We have heard the rival contentions and perused the records. Penalty for concealment is leviable under section 271(1)(c) of the Act in case any one of the two preconditions are satisfied. The preconditions for levy of penalty are either the assessee had concealed the particulars of its income or in the alternative, the assessee had furnished inacc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he vicinity of the area, which is under the control of the assessee authority, would result in higher profitability to the assessee vis-a-vis the increase in the price of the land/houses sold by the assessee. The assessee claimed that the said expenditure was made in furtherance of development object of the authority including economic development of the land and also of the area in totality. The said expenditure was incurred because of commercial necessity and as it had not acquired any capital asset nor made any donation to any organisation, the same was duly claimed as wholly and exclusively laid out for the purpose of business. The assessee took a decision to contribute towards the development of international airport in the jurisdictional area authority, on the suggestions of the Punjab Government which in-turn would result into many fold increase in the rates of the land to be sold by the assessee to various perspective buyers. The Assessing Officer, however, disallowed the expenditure claimed by the assessee totalling ₹ 225 crores on the following issues : (a) The joint venture company had been formed for the purpose of construction of airport at Mohali in which GM ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e company (JVC) would be formed with 51 per cent. equity stake of AAI and 24.5 per cent. equity stake each of GMADA and HUDA to operate and maintain the Chandigarh International Airport (CIA) at Chandigarh to be built by AAI ; Punjab Government would transfer the required land located at Mohali, Punjab of 300 acres approximately to be joint venture com pany including land for city side development. The cost of land would be equally shared between the Governments of Punjab and Haryana and would be capitalised and shall count towards the equity contri bution of GMADA and HUDA. The AAI would be responsible for creating the terminal building and other airside facilities for the joint venture company without seeking any cash consideration form other joint venture partners which would be subsequently capitalised at a value to be determined by AAI at the time of transfer and shall count towards the equity contribution of AAI ; and The cost of land would be counted towards the 49 per cent. equity contribution of GMADA and HUDA and the cost of International Civil Air Terminal and other aeronautical assets to be built by AAI will be counted towards the 51 per cent. equity contributi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exemptions will be jointly reviewed by GMADA and AAI at the end of the ten year period. The GMADA will acquire the land and develop four-lane approach road to civil air terminal with lighting, horticulture, signages etc. and the cost of the same shall be equally shared between GMADA and HUDA. The GMADA shall remove the identified obstacles, if any, hazard for safely of aircraft operation from the approach path of extended runway and transitional area such as high tension/low tension power lines, canal, gas pipeline, structures, buildings, chimneys, trees etc. at their cost. 261. In clause 3.1 it has been specifically noted that JVC will be incorporated as a private limited company. Clause 3.2 deals with shareholders agreement which is as under : 'Shareholders' agreement A shareholders' agreement will be executed by and between AAI, GMADA, HUDA and the JVC, after the joint venture company is incorporated. Till such time the shareholders' agreement is executed and articles of association is approved by the parties, it is agreed by the parties that the Regulations contained in Table A in Schedule I to the Indian Companies Act, 1956, may be applied ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... timately be run as business venture by floating private limited company. Therefore, it becomes very clear that what has been contributed by the assessee, is only land. It seems that the land has been acquired by the Government of Punjab and since Government of Punjab did not have money, there fore, the assessee authority has been roped into make contribution to make the payment for acquisition of land. It is not clear in whose name the land has been registered from the documents produced before us. However, the fact remains that the contribution was made only in terms of land for which the Government of Punjab through GMADA would acquire shares to the tune of 24.5 per cent. This is clear because of capital contribution for starting a new business venture of running airport. It has further to be noted that name of PUDA does not appear in the joint venture agreement despite PUDA making the biggest chunk of the contribution, i.e., ₹ 225 crores out of ₹ 300 crores of total contribution. When the money has been spent only for acquisition of land that is for ultimately purchasing of land for the proposed airport, this cannot be called a revenue expenditure. It is clearly a ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ill not allowable unless the same has been incurred for the purpose of business. 30. Further, vide paragraph 215 the decision in Andhra Pradesh Housing Board v. Deputy CIT in I. T. A. No. 717/Hyd./2012 was considered by the Tribunal and it was observed that the facts of the said case were identical to the facts of this case. In the case before the Hyderabad Bench, sum of ₹ 1,180 crores was given to the Andhra Pradesh Housing Corporation on the directive of the Government and it was held by the Tribunal that the said would not amount to an expenditure incurred for the purpose of business. The said amount being transferred to Andhra Pradesh State Housing Corporation at the directive of the Government for implementing certain housing projects and the assessee being not in any way connected with the implementation of that project, it was held that the said expenditure could not be said to be an expenditure laid out wholly and exclusively for the purpose of business. The Tribunal, in the case of the assessee applying the said ratio held that as the facts were identical, the expenditure was not allowable in the hands of the assessee. In conclusion, the Tribunal held that the ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Commissioner in the course of any proceedings under this Act, is satisfied that any person- . . . (b) has failed to comply with a notice under sub-section (2) of section 115WD or under sub-section (2) of section 115WE or under sub-section (1) of section 142 or sub-section (2) of section 143 or fails to comply with a direction issued under sub-section (2A) of section 142, or (c) has concealed the particulars of his income or furnished inaccurate particulars of such income, or (d) has concealed the particulars of the fringe benefits or furnished inaccurate particulars of such fringe benefits, he may direct that such person shall pay by way of penalty,- . . . (ii) in the cases referred to in clause (b), in addition to tax, if any, payable by him, a sum of ten thousand rupees for each such failure ; (iii) in the cases referred to in clause (c) or clause (d), in addition to tax, if any, payable by him, a sum which shall not be less than, but which shall not exceed three times, the amount of tax sought to be evaded by reason of the concealment of particulars of his income or fringe benefits or the furnishing of inaccurate particulars of such income or fringe benefits. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ails supplied by the assessee in its return of income were not incorrect or erroneous or false nor any statement made or any details supplied was found to be factually incorrect. The court thus held that merely because the assessee had claimed the expenditure, which was not accepted or was not acceptable to the Revenue, that by itself would not, attract penalty under section 271(1)(c) of the Act. It was also laid down by the court that the intendment of the Legislature is not to levy penalty under section 271(1)(c) of the Act in case of every non-acceptance of claim made by the assessee in the return of income. 36. The hon'ble Supreme Court in CIT v. Reliance Petroproducts P. Ltd. [2010] 322 ITR 158 (SC) further held as under : Reading the words 'inaccurate' and 'particulars' 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. 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 under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the assessee has claimed the expenditure to be revenue will not render the assessee liable to penalty proceedings. The order passed by the Tribunal does not give rise to the questions of law sought by the Revenue. 38. The hon'ble Punjab and Haryana High Court in CIT v. Sidhartha Enterprises [2010] 322 ITR 80 (P H) held that (page 82) the judgment of the hon'ble Supreme Court in Union of India v. Dharamendra Textile Processors [2008] 306 ITR 277 (SC) cannot be read as laying down that in every case where particulars of income are inaccurate, penalty must follow. What has been laid down is that qualitative difference between criminal liability under section 276C and penalty under section 271(1)(c) had to be kept in mind and approach adopted to the trial of a criminal case need not be adopted while considering the levy of penalty. Even so, concept of penalty has not undergone change by virtue of the said judgment. Penalty is imposed only when there is some element of deliberate default and not a mere mistake. This being the position, the finding having been recorded on facts that the furnishing of inaccurate particulars was simply a mistake and not a deliberate attempt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... poration. This estimation was not accepted mainly on the ground that the reports were made and the resolution passed by the board after the assessment year was over and, therefore, they could not be given retrospective benefit. It has not been found that the claim of the assessee that the wood had rotted and deteriorated is false. It is nobody's case that the assessee fudged the amounts, the books of account or tried to create false evidence. The claim made by the assessee may not have been accepted by the Revenue but it cannot be said that the assessee furnished inaccurate particulars to such an extent that penalty should be imposed upon it. There does not appear to be falsehood in the accounts though the system of calculating the depreciation may have been improper. We also cannot lose sight of the fact that the assessee is a Government corporation. Its accounts are duly audited and even the Comptroller and Auditor General has gone through and approved the accounts of the corporation. In such circumstances, we are of the view that merely because the assessee had claimed depreciation which claim was not accepted by the Revenue that by itself would not, in our opinion, attract ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Chandigarh Bench of the Tribunal in Asst. CIT v. T. R. B. Exports (P.) Ltd. [2010] 134 TTJ (Chd.) 49 had, on the issue of penalty under section 271(1)(c) of the Act and whether the same was leviable where an expenditure had been disallowed in the hands of the assessee, had held as under : Penalty under section 271(1)(c) is attracted in case the assessee has concealed its income or furnished inaccurate particulars of income. In the facts of the present case the assessee had claimed foreign travel expenses of wife of the director who had accompanied her husband on foreign travel. The said expenditure was disallowed being not relatable to the business of the assessee-company. Merely because an expenditure has been disallowed in the hands of the assessee does not automatically make the assessee exigible to levy of penalty under section 271(1)(c). In any case, mere disallowance of expenditure does not attract the levy of penalty under section 271(1)(c). There is no merit in the levy of penalty on disallowance of expenses holding the same to be non-business expenses. Further, estimated disallowance of personal expenses totalling ₹ 33,135 does not warrant levy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ufacturer and derived income from exports. The assessee claimed deduction under section 80-IB of the Act in respect of income from duty drawback. The Assessing Officer disallowed the said claim on the ground that the income derived from duty drawback was not income derived from the industrial undertaking, as held by the hon'ble Supreme Court in CIT v. Sterling Foods [1999] 237 ITR 579 (SC). Penalty was also levied. The Commissioner of Income-tax (Appeals) upheld the view of the Assessing Officer but the Tribunal deleted the penalty with the following observations : 'Thus, prima facie, it indicates that this issue was a debatable one.. .' 4. In view of the factual finding of the Tribunal, it cannot be disputed that the issue was debatable and deduction claimed by the assessee did not lack bona fide. In such a situation, penalty under section 271(1)(c) of the Act was not attracted. In a recent judgment of the hon'ble Supreme Court in CIT v. Reliance Petroproducts P. Ltd. [2010] 322 ITR 158 (SC) ; [2010] 230 CTR 320, the legal position to this effect has been reiterated. If the assessee has made full disclosure in the return, the claim for deduction ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 71(1)(c) of the Act is civil liability and the same proposition has been upheld by the later decision of the hon'ble Supreme Court. However, in each case, where an addition has been made in the hands of the assessee, the issue to be considered is whether the claim of the assessee was bona fide and complete information in this regard was furnished in the return of income. The issue having been decided against the assessee per se does not attract the levy of penalty under section 271(1)(c) of the Act as held by various courts and further, where such claim of the assessee is a debatable issue then, there is no merit in any levy of penalty under section 271(1)(c) of the Act, which proposition has also been held by various courts as referred to by us in the paragraphs hereinabove. 52. Now coming to the facts of the present case, the issue arising in the present appeal is whether the assessee is liable to levy of penalty under section 271(1)(c) of the Act. The hon'ble Supreme Court in CIT v. Reliance Petroproducts P. Ltd. [2010] 322 ITR 158 (SC) have laid down the proposition that A mere making of the claim, which is not sustainable in law, by itself will not amount to furnis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der of the Tribunal gives rise to any substantial question of law for the opinion of this court. 54. In view of the above, it is to be seen whether claim of the assessee was bona fide or mala fide with an intention to evade taxes. Admittedly, the assessee had acted on the advice of State Government and paid ₹ 225 crores for the development of international airport at Mohali, with the aim that such establishment of international airport in the region would provide better infrastructural facilities, which in turn would boost urban development of the State of Punjab and boost the activities undertaken by it, resulting in higher profits to the assessee. Explanation 1 to section 271(1) does provide a legal fiction under which the onus is upon the assessee to establish that all facts relating to the claim and material facts relating to the computation of income had been disclosed in the return of income and also that deduction or expenditure was allowable in its hands and merely because the addition or disallowance has been made to its total income, does not establish concealment in the hands of the assessee. Hence, where there is no finding that any of the details supplied by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , is not exigible to levy of penalty under section 271(1)(c) of the Act where the claim of the assessee vis-a-vis expenditure incurred on establishment of an international airport had been rejected. Accordingly, we delete the penalty levied under section 271(1)(c) of the Act and the Assessing Officer is directed to delete the same. The grounds of appeal raised by the assessee are allowed. I. T. A. Nos. 26, 27/Chd/2012 and I. T. A. Nos. 814, 254 and 815/Chd/ 2013 Revenue's appeals (assessment years : 2004-05, 2005-06, 2007-08 to 2009-10 58. In all the appeals, the Revenue has raised identical grounds of appeal. Therefore, the grounds of appeal as raised in I. T. A. No. 254/Chd/2013 read as under : 1. The facts and in the circumstances of the case and in law, the learned Commissioner of Income-tax (Appeals) has erred in allowing appeal of the assessee without appreciating the facts of the case. 2. On the facts and circumstances of the case an in law, the (sic) 3. The learned Commissioner of Income-tax (Appeals), has erred in deleting the penalty amounting to ₹ 14,26,215 which was levied by the Assessing Officer under s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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