TMI Blog2016 (11) TMI 441X X X X Extracts X X X X X X X X Extracts X X X X ..... . Let us make it clear that we do not want to mix ethics and penalty matters. What we are emphasising is that assessee availing professional services should not make claims that are prima facie inadmissible to avoid penal consequences. We would also like to mention that the cases relied upon by the assessee are distinguishable on facts. N.G. Technologies (2013 (7) TMI 451 - KARNATAKA HIGH COURT ) is useful in deciding the issue In that matter the assessee had pleaded that claim made by it was bonafide and all the facts were disclosed. The FAA, upholding the order of the AO, had held that mistake committed by the assessee could not be said to be bonafide. However, the Tribunal reversed the order of the FAA. The Hon’ble Apex Court [ 2016 (4) TMI 1152 - SUPREME COURT ] dismissed the SLP against High Court's ruling that where against basic principle of accountancy, assessee claimed capital loss on sale of fixed assets in profit and loss account and had not revised return voluntarily, penalty for concealment of income was justified - Decided against assessee - I.T.A./3139/Mum/2008, I.T.A./3140/Mum/2008, I.T.A./3141/Mum/2008 - - - Dated:- 30-9-2016 - Sh.Rajendra, Accountant Member ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mestic law would apply in the case of the assessee , that the claim made by it was on account of capital expenditure, for which deduction was not admissible. The AO also initiated penalty proceedings as per the provisions of section 271(1)(c) of the Act. In reply to penalty notice, the assessee filed its letter, dated 10.03.2007 and argued that it had not concealed its income nor did it furnish inaccurate particulars, that in terms of Article-7(3)of the Indo Mauritius DTAA Treaty it had claimed capital expenditure as a deductible item,that the expenditure was incurred wholly and exclusively for the purpose of business. 2.1. After considering the submission of the assessee, the AO held that the assessee, in addition to claiming 100% deduction on the capital expenditure, claimed depreciation on fixed assets, that it amounted to double deduction to the extent of depreciation claimed, that by making claim for deduction of capital expenditure, to which it was not eligible for, the assessee had furnished inaccurate particulars of its income, that it was the duty of the assessee to show the correct total income and pay taxes accordingly, that the claim of the assessee that disallow - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... siness income in a particular manner, that the Treaty provisions would override the provisions of general law i.e. the Act. The assessee referred to Circular No.333 dated 02.04.1982 issued by CBDT. It referred to certain case laws, further it was stated that expenditure in question was incurred wholly and exclusively for the purpose of earning business profit of the PE, that full facts were given in the return of income. The assessee further contended that the AO had neither been able to prove that it had furnished inaccurate particulars nor had been able to give any specific finding in that regard, that the assessment proceedings were separate from the penalty proceedings, that penalty could be levied if the assessee acted with a malafide intention. 3.1. After considering the assessment order, penalty order and submissions of the assessee, the FAA held that one of the issues to be decided was as to whether a disclosure made in the return of an expense being deductible against business profit suffice to save a tax payer from levy of penalty. He referred to the case of Vidyagauri Natwarlala (238ITR91) of the Hon ble Gujarat High Court and to the Explanation (1) to section 271 ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x Handbook of Internal Rev of the United Kingdom and book of K.Vogel on Double Taxation Conventions and held that the limitation under domestic law were taken into account for computation of profits of a PE under Article 7(3) of the India Mauritius Tax Treaty.Referring to provisions of section 37 of the Act, he held that capital expenditure could not be claimed as deduction while computing the income chargeable under profits and gains of business, that it was not clear as to how the assessee could derive the inference that capital expenses were allowable while computing the income under the head business profit, that there was over valuing national and international judicial precedence to the contrary, that the assessee had not adduced any evidence to support in its favour either by way of any judicial precedent or by production of any legal mandate. The FAA also took notice of the argument of the assessee that there was difference of opinion between the AO and the assessee about the interpretation of Article 7(3) of the DTAA, that the assessee had claimed the deduction under a bona fide understanding and belief that same was permissible as per the provisions of the DTAA.He held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... world over, that assessee had blatantly defrauded the Revenue, that it was the most appropriate case of furnishing inaccurate particulars of income. He referred to the case of Steel Ingots Ltd.(296ITR228),P.K. Narayanan (238ITR905), B.A Balasubramanium and Brothers Co.(236ITR997) and held that as a matter of policy the department was taking only 1-3% of cases for scrutiny, that as the case has not been selected for investigation, there would have been loss of revenue on account of erroneous and unsupported claim of the assessee, that the assessee had furnished inaccurate particulars of income. Finally the FAA upheld the order of the AO. 4. Before us, the Authorised Representative(AR)stated that the assessee had agitated the quantum addition upto the AY.1999-2000 before the Tribunal, that after that it did not challenge the additions made in quantum proceedings, that in earlier years the AO had not levied any penalty even after initiating the proceedings, that the assessee had made full disclosure of all the relevant facts. He referred to page No.91 and 104 of the PB. He further argued that it was debatable issue as per the order of the Tribunal (Pg-22 to 27 of the PB), that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of inaccurate particulars or concealing the particulars of income, or he offers the explanation which is found by the authorities to be false, or he offers explanation which he is not able to substantiate and fails to prove that such explanation is bona fide then penalty u/s.271(1)(c) of the Act can be imposed. We would also like to mention that the words particulars and inaccurate in the said section of the Act mean that particulars which are not accurate, not exact or correct or not according to truth or erroneous are to be considered inaccurate particulars. The facts of the instant case are that expenditure incurred on account of capital assets was claimed as revenue expenditure and depreciation was also claimed. In short, the assessee had claimed double deductions. It is not a case where the view taken by the assessee required consideration or it was a reasonably arguable case. There was no justification on part of the assessee to claim both the deductions. Depreciation, as per the established principles of tax jurisprudence, is an allowable deduction for wear and tear of assets. It was not a case where the assets purchased by the assessee were of the nature where 100% ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accept an interpretation against him even when a favourable view is credible and tenable. But, the facts of the case prove that no judgment or opinion was brought to notice of the revenue authorities indicating that the stand taken by the assessee was based on some reasonable basis. In our opinion, the claim made by it falls under the category of a fanciful claims under the garb of interpretation , and same is not bona fide. 5.3. We also want to mention that the confirmation of the order of the AO by the FAA and Tribunal in the quantum proceeding has any relevance in deciding the penalty proceedings before us. We hold that the assessment and penalty proceedings are separate and independent and the decision of levying or confirming the penalty should be taken on the basis of the explanation filed during the penal proceedings. In our opinion, if the claim itself is not bona fide-that it lacks good faith-then penalty has to be imposed for filing inaccurate particular. Information in the return was given to gain some tax advantage which was otherwise not due to the assessee and such an attempt has to be termed filing of inaccurate particulars. 5.4. Intention of the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X
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