TMI Blog2008 (3) TMI 706X X X X Extracts X X X X X X X X Extracts X X X X ..... the claim of the assessee made in the return of income was patently wrong and devoid of bona fides would be a misnomer. It is indeed a different matter that such a claim has ultimately not been found to be strictly in accord with law but the factum of the assessee having disclosed full particulars and the claim made for bona fide considerations cannot be disputed. In fact we have perused the order of the Tribunal in the assessee's case, rendered in connection with the s. 263 proceedings, and find that the invoking of s. 263 by the CIT was entirely on the basis of the judgment of the Hon'ble Supreme Court in the case of Indian Hotels Co. Ltd.[ 2000 (8) TMI 5 - SUPREME COURT] , which, according to the CIT rendered the assessment as erroneous in view of the fact that the assessee was not eligible for s. 80-IA benefits. Therefore the plea of the Revenue that the claim of the assessee was wrong even without the help of the Supreme Court judgment in the case of Indian Hotel Co. Ltd. (supra) and therefore it constituted concealment, in our view, is neither the facet which is the basis of the disallowance and nor can it be investigated at this stage. Therefore having regard to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... G. S. Pannu (Accountant Member) And Joginder Singh (Judicial Member) For the Petitioner : P. K. Sidhu For the Respondent : Sudhir Sehgal, Ashok Goyal ORDER G. S. Pannu (Accountant Member) These two appeals are by the Revenue against the respective orders of the CIT(A) dt. 11th Sept., 2007 pertaining to the asst. yrs. 1997-98 and 1998-99. We find it expedient to dispose of the two appeals together as the issue involved is common. In both the appeals the Revenue is aggrieved with the decision of the CIT(A) in deleting the penalties imposed under s. 271(1)(c) of the IT Act, 1961 (in short 'the Act'). 2. In the asst. yr. 1997-98, the issue relates to the imposition of penalty under s. 271(1)(c) of the Act of a sum of ₹ 1,84,529. The factual position can be understood as follows. The respondent assessee is a company incorporated under the provisions of the Companies Act, 1956 and it filed a return of income for the asst. yr. 1997-98 declaring an income of ₹ 10,01,320, which inter alia included a claim of deduction under s. 80-IA of the Act amounting to ₹ 4,29,135. The assessee is engaged in the business of running of a banquet hall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ginally done on 20th Dec., 1999, the issue of allowance of s. 80-IA benefits to the nature of the business carried on the by the assessee was debatable. The assessee also pointed out that at the time of filing of return of income the assessee has disclosed complete particulars of deduction under s. 80-IA which was also accompanied by the prescribed audit report of a chartered accountant. In this connection reliance was placed on the decisions of the Hon'ble Punjab Haryana High Court in the cases of Manoj Ahuja (Minor) vs. IAC (1984) 43 CTR (P H) 229 : (1984) 150 ITR 696(P H) and CIT vs. Deep Tools (P) Ltd. (2004) 191 CTR (P H) 257 : (2005)274 ITR 603(P H). The CIT(A) has since upheld the contention of the assessee and deleted the penalty by making the following discussion : 6. I have carefully considered the contention of the learned counsel for the appellant and perused the relevant record. Though the AO has not accepted appellant's contention the fact remains that as at the time of filing the return for the assessment year under consideration and passing the original order on 20th Dec., 1999 there was diversion of opinion amongst different High Courts on the issue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alty under s. 271(1)(c) in this case is not sustainable. In view of the above discussion the levy of penalty under s. 271(1)(c) in this case cannot be held to be justified and the same is, therefore, deleted. 4. Against the aforesaid deletion the Revenue is in appeal before the Tribunal. The learned Departmental Representative has submitted that in the present case the provisions of s. 271(1)(c) have been rightly invoked by the AO. The plea advanced on behalf of the Revenue is that the claim of the assessee has not been merely denied on the basis of the decision of the Supreme Court in the case of Indian Hotels Co. Ltd. (supra) for the assessee was primarily engaged in the hiring of marriage palace and the activity of catering and manufacture of food was only incidental. According to her a major part of the business receipts consisted of rental charges for marriage palace etc. and therefore the business of running a banquet hall/marriage palace was held not constituting an industrial undertaking within the meaning of s. 80-IA of the Act. It is further submitted that the CIT(A) has erred in deleting the penalty by relying on the case law which are not applicable to the facts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation in view of a Supreme Court decision would not render the claim as representing any concealment or furnishing of inaccurate particulars of such income within the meaning of s. 271(1)(c) of the Act. The learned counsel has relied upon the following decisions : (i) CIT vs. Carborandum Universal Ltd. (2008) 1 DTR (Mad) 158; (ii) Vinay Kumar Gupta vs. ITO (ITA No. 316/Chd/2006, dt. 24th Aug., 2007); (iii) Supreme Yaran Ltd. vs. Asstt. CIT (ITA No. 649/Chd/2007, dt. 20th Dec., 2007); (iv) Parveen Sood vs. Asstt. CIT (ITA No. 67/Chd/2007, dt. 19th Sept., 2007); (v) Sigma Cartons (P) Ltd. vs. ITO (ITA No. 313/Chd/2006, dt. 29th Dec., 2006); (vi) Dilip N. Shroff vs. Jt. CIT (2007) 210 CTR (SC) 228: (2007) 291 ITR 519(SC). 6. We have carefully considered the rival submissions. The facts leading upto the present proceedings have been sufficiently noted in the earlier paras. In the original return of income the assessee claimed deduction under s. 80-IA of the Act amounting to ₹ 4,29,135. It was restricted to ₹ 3,59,100 in the assessment proceedings under s. 143(3) dt. 20th Dec., 1999 by denying the benefit in relation to miscellaneous income, etc. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Expln. 1 that the AO is required to arrive at a finding that the explanation offered by an assessee, in the event he offers one, was false. He must be found to have failed to prove that such explanation is not only not bona fide but all the facts relating to the same and material to the income were not disclosed by him. Thus, apart from his explanation being not bona fide, it should have been found as of fact that he has not disclosed all the facts which was material to the computation of his income. The explanation having regard to the decisions of this Court, must be preceded by a finding as to how and in what manner he furnished the particulars of his income. It is beyond any doubt or dispute that for the said purpose of ITO must arrive at a satisfaction in this behalf. 7. Before we proceed further it would be of relevance to examine whether the claim of the assessee made in the return of income was bona fide or not ? In this regard the AO has noted that the assessee did not make such claim in respect of asst. yr. 1993-94 on its own and therefore the assessee was in the knowledge that its business of running of banquet hall/marriage palace did not qualify for d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore the plea of the Revenue that the claim of the assessee was wrong even without the help of the Supreme Court judgment in the case of Indian Hotel Co. Ltd. (supra) and therefore it constituted concealment, in our view, is neither the facet which is the basis of the disallowance and nor can it be investigated at this stage. Therefore having regard to the manner in which the claim of the assessee has been denied, we do not find that the bona fides of the assessee can be doubted. The claim was based on the judgment of a High Court, although it is undeniable that a contrary view was possible. So however in such a situation when there is a divergence of opinion amongst the High Courts and in the absence of a decision of the jurisdictional High Court or the Supreme Court on such issue, the claim of the assessee made in the return of income cannot be labelled as non-bona fide. The denial of deduction on account of a subsequent judgment of the Supreme Court would not constitute concealment or furnishing of inaccurate particulars within the meaning of s. 271(1)(c) of the Act. In the result following the ratio of the judgment of the Supreme Court in the case of Dilip N. Shroff (supra) we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the asst. yr. 1997-98 (supra) squarely applies herein also. 13. Insofar as the second disallowance is concerned the same is of a sum of ₹ 1,88,303. The fact situation is that the assessee was found to have incurred expenditure on foreign travel of its director amounting to ₹ 1,88,303. The assessee had also spent a sum of ₹ 8,11,022 on academic pursuits of the son of the director abroad. Both expenditures were disallowed on the ground that the same were incurred for non-business considerations. The Tribunal deleted the addition of ₹ 8,11,022 on the ground that the son of the director was under a contractual obligation to serve with the assessee company after completing his studies abroad and therefore the expending of money by the assessee for the studies undertaken abroad by the soil of the director was for business purposes. The claim of ₹ 1,88,303 was that the director of the company travelled abroad to explore various avenues of studies to be carried out by his son abroad. The said disallowance has since been sustained by the Tribunal. Penalty under s. 271(1)(c) has also been imposed with respect to such disallowance, which is in dispute befor ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
