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Income-tax Officer Versus M/s. Lexus India Ltd.

2015 (5) TMI 41 - ITAT DELHI

Penalty u/s 271(1)(c) of Income Tax Act, 1961 - Concealment of particulars of income or furnished inaccurate particulars of income - Claim of non-allowable expenses - Held that:- We have noted that so far as disallowance of long-term capital loss is concerned, the only basis for the said disallowance is an Inspector’s report, but then the Inspector’s report, prima facie, by itself cannot be a reason enough to disregard the sale consideration on the basis of documents on record. While we refrain .....

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as quite justified in deleting the impugned penalty so far as long term capital loss is concerned.

As regards the disallowance of expenditure in respect of car hire charges, it is an undisputed position that the assessee did produce Memorandum of Understanding in support of the claim of expenditure but then the Assessing Officer was swayed by other considerations such as non deduction of tax at source which was wholly irrelevant so far as assessment year 2004-05 was concerned since th .....

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of this quantum disallowance.

Finally as regards the partial disallowance of depreciation on software, it is an undisputed position that all the relevant facts were before the Assessing Officer and incorrectness of the claim, even if that be so, cannot by itself lead to or result in imposition of penalty u/s. 271(1)(c). In view of these observations and also bearing in mind entirety of the case, we are not inclined to disturb the well reasoned findings of the CIT(A). We confirm the sa .....

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the following grounds :- 1. The order of the learned CIT(Appeals) is erroneous & contrary to facts & law. 2. On the facts and in the circumstances of the case and in law, the learned CIT(Appeals) has erred in deleting the penalty ₹ 08,30,865/- levied by the A.O. u/s 271(1)(c) of the I.T. Act. 2.1. The Ld. CIT(A) ignored the fact that the assessee furnished inaccurate particulars of its income and concealed taxable income by claiming non-allowable expenses revenue expenses i.e., los .....

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setting up pharmaceutical project, but as the assessee subsequently also acquired land in Dehradun Industrial Area in excise free zone, it was decided to set up the project in Dehradun and dispose of the plot in question. As far as the reasoning for sale of plot below the purchase price is concerned, the assessee explained that in accordance with the guidelines of UPSIDC, i.e., authority allotting the aforesaid plot, the project was to be completed within the specific time, failing which the la .....

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e Assessing Officer proceeded to reject the capital loss of ₹ 19,80,000/-. It was taken at nil. The Assessing Officer also noticed that the assessee has paid car hire charges of ₹ 1,80,000/- and ₹ 36,000/- but the relevant agreement with car owner, the details of tax deduction at source and other vouchers for payment etc. were not available. Accordingly he disallowed the same. The Assessing Officer also disallowed ₹ 1,20,000/- being depreciation on purchase of software fr .....

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basis even for disallowance in question and at no stage, assessee was confronted with Inspector s report which in any event cannot be a good basis for disallowing long term capital loss. It was also pointed out that the payment of hire charges was duly supported as per the Memorandum of Understanding which has been taken note of by the Assessing Officer himself and that in any event the fact of hire charges has not been in dispute. It was also pointed out that payment of car hire charges was dul .....

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271(1)(c). The learned CIT(A) upheld the contentions so advanced by the assessee and deleted the impugned penalty by observing, inter alia, as follows : 4.1 I have carefully considered the written submission made on behalf of the appellant, the findings of the Assessing Officer in the assessment order as well as in the penalty order and the facts on record. There is no dispute to the well-settled legal proposition that the penalty proceedings are distinct and different from assessment proceedin .....

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presumption arising in certain cases. The assessee can discharge the onus either by direct evidence or circumstantial evidence or by both. The cumulative effect of all facts should be taken into consideration. During the course of penalty proceedings, the assessee is entitled to show and establish by the material and relevant facts, which may go to affect and having direct bearing on the liability for penalty. Whether there is a concealment to make the penalty exercisable is normally a question .....

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and the judgment of the Hon'ble Allahabad High Court in the case of Banaras Texturium Vs. CIT [1988] 169 ITR 782 and also the judgments of the Hon'ble Delhi High Court in the case of CIT Vs. Chetandan Lachhmandas [1995] 214 IIR 726 and CIT v. J.K. Synthetics Ltd. [1996] 219 ITR 267 (Delhi). 4.2 The considerations in penalty proceedings are different from those in quantum proceedings. It is trite law that merely because an addition has been made and confirmed in the appeal, levy of penalt .....

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or furnish inaccurate particulars of income. 4.3. If section 271(1)( c ) is read in the light of the judicial pronouncements without the Explanations inserted w.e.f. 01.04.1976, it would be easy to hold that the burden which lies upon the assessee to support the claim in the assessment proceedings is not extended in relation to the penalty proceedings. In order to justify the levy of penalty, two factors must co-exist, (i) there must be some material or circumstances leading to the reasonable co .....

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ment of particulars of income, if in respect of any facts material to the computation to the total income any person has failed to offer an explanation or the explanation has found to be false or where such person has offered an explanation which he is unable to substantiate. Wherein an explanation is furnished which the assessee is unable to substantiate but the assessee establishes that the explanation furnished was bona fide and all the facts relating to the same and material to the computati .....

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the total income of any person under this Act,- (A) such person fails to offer an explanation or offers an explanation which is found by the Assessing Officer or the Commissioner (Appeals) or the Commissioner to be false, or (B) such person offers an explanation which he is not able to substantiate and fails to prove that such explanation is bona fide and that all the facts relating to the same and material to the computation of his total income have been disclosed by him, then, the amount added .....

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ting the total income of the assessee represents the income in respect of which particulars have been concealed. Part A of the Explanation would be applicable in circumstances - (i) where a person fails to offer an explanation; (ii) where a person offers an explanation which is found by the Assessing Officer or by the Commissioner of Income-tax (Appeals) to be false. Part B of the Explanation would be applicable - (i) where a person offers an explanation but he is unable to substantiate his expl .....

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issues. If an assessee gives an explanation which is unproved but not disproved i.e., it is not accepted but circumstances do not lead to the reasonable and positive inference that the assessee's case is false, the Explanation cannot help the AO because there will be no material to show that the amount in question was concealed by the assessee or inaccurate particulars of the said amount were furnished by the assessee. Therefore, the assessee's case does not fall within the ambit of Part .....

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rticulars furnished by the assessee were wrong. It was held that mere disallowance of expenses per se cannot mean that assessee has furnished inaccurate particulars of its income. It is repeatedly held by the Courts that the penalty on the ground of concealment of particulars or non-disclosure of full particulars can be levied only when in the accounts/return an item has been suppressed dishonestly or the item has been claimed fraudulently or a bogus claim has been made. When the facts are clear .....

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vt. Ltd.(2010) 322 ITR 158. 4.6 From the decisions cited above and the case laws relied upon by the appellant, it can be concluded that mere disallowance or addition will not be sufficient for levy of penalty u/s 271 (1)(c). In view of the above and after taking into consideration the fact that the appellant had disclosed all material facts cannot amount to furnishing of inaccurate particulars of income, I hold that there is no case of concealment or furnishing of inaccurate particulars of its i .....

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ssee. We have perused the material on record and duly considered facts of the case in the light of the applicable legal position. 5. We have noted that so far as disallowance of long-term capital loss is concerned, the only basis for the said disallowance is an Inspector s report, but then the Inspector s report, prima facie, by itself cannot be a reason enough to disregard the sale consideration on the basis of documents on record. While we refrain from making any observation on merits, it is s .....

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