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TMI Blog2017 (5) TMI 709X X X X Extracts X X X X X X X X Extracts X X X X ..... s raised the jurisdictional issue that the penalty is not legally tenable as the expenses were not covered in the definition of undisclosed income prior to the amendment of undisclosed income in section 158B(b) of the Act by the Finance Act, 2002, retrospective from July 1, 1995. For this the assessee has raised the following grounds : "1. On the facts and in the circumstances of the case and in law, the learned Commissioner of Income-tax (Appeals) erred in confirming the penalty of Rs. 17,33,821 under section 158BFA(2) of the Income-tax Act, 1961 levied by the Assessing Officer as the same is not legally tenable inasmuch as the addition confirmed by the hon'ble Income-tax Appellate Tribunal relate to the expenses and expenses were not covered by the definition of 'undisclosed income' for levying penalty in the relevant years under consideration. 2. The learned Commissioner of Income-tax (Appeals) has erred in confirming the penalty considering the additions upheld by the hon'ble Income-tax Appellate Tribunal in the nature of expenses covered in the definition of 'undisclosed income' in the light of the retrospective amendment without considering the fac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Further, the expenditure of Rs. 2,07,182 was also disallowed because it was not claimed in the books of account. The Commissioner of Income-tax (Appeals) deleted the addition of bills considering the same as genuine amounting to Rs. 18,82,570 pertaining to the three items. The Commissioner of Income-tax (Appeals) confirmed the disallowance of expenses of Rs. 8,00,000 and Rs. 5.22 lakhs on the ground that the same was not claimed in the books of account. The Commissioner of Income-tax (Appeals) also allowed deduction for commission in respect of the assessee's claim of Rs. 2,07,182. The Revenue as well as the assessee contested the order of the Commissioner of Income-tax (Appeals) before the Income- tax Appellate Tribunal and the Income-tax Appellate Tribunal reversed the relief granted by the Commissioner of Income-tax (Appeals) in relation to accommodation bills of Rs. 18,82,570 and also confirmed the disallowance of expenditure claimed by the assessee of commission paid for procurement of bogus bills amounting to Rs. 2,07,182. However, the disallowance of expenditure of Rs. 8,00,000 and Rs. 5.22 lakhs in respect of payment to the local fishermen at Cuddalore Jetty and Dahej ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of taxes thereunder. The two cases are, thus, distinguishable on facts. The machineries were required to be transported partly by road and partly by barge, so that for the purpose of the latter a Ro-Ro jetty had to be erected. It was enquired from the learned authorised representative during hearing if the assessee had claimed the expenditure on the construction of the jetty in its regular books of account, to which he could not furnish any definite reply. The same would undeniably establish the commercial purpose for which the jetty was constructed. Also, in our view, there is no question of the assessee not claiming the expenditure on its construction ; the same forming part of the direct cost of the transportation contract with M/s. Nagarjuna Fertilisers and Chemicals Ltd. As such, subject to the assessee demonstrating the building up of the jetty on the basis of the expenditure on its construction per its regular books of account and/or other relevant records, so that the impugned expenditure of Rs. 8 lakhs gets established as being paid for the said purpose, the assessee is eligible for deduction in its respect. We decide accordingly, disposing, thus, the Revenue's groun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom July 1, 1995 under section 158B(b) of the Act and the block return in response to the notice under section 158BC of the Act was filed on June 7, 2000 for the relevant block period. According to us, it is therefore clear that when the block return was filed on June 7, 2000, the definition of undisclosed income did not include in item pertaining to expenses, deduction or allowance which is found to be false. He explained that use of all the terms in the highlighted expression is very important as inserted by the Finance Act, 2002 although with retrospective effect from July 1, 1995. The amount in accommodation bills is covered by the term deduction and the amount of money paid for procuring accommodation bill is an expense. According to the learned counsel, this item got included in the definition of undisclosed income only by the Finance Act, 2002 although the amendment was made with retrospective effect from July 1, 1995 but on the day the assessee filed its return of income as on June 7, 2000, the amended provision inserting these terms for making disallowance i.e. "or any expense, deduction or allowance claimed under this Act which is found to be false" did not exist. Accordi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rees or orders of courts and Tribunals or other authorities, which required to be neutralised by the validation clause. We can only assume that the judgments, decree or orders, etc., had, in fact, held that persons situate like the appellants were not liable as service providers. This is also clear from the Explanation to the valuation section which says that no act or acts on the part of any person shall be punishable as an offence which would not have been so punishable if the section had not come into force. The liability to pay interest would only arise on default and is really in the nature of a quasi-punishment. Such liability although created retrospectively could not entail the punishment of payment of interest with retrospective effect.' 20. The Supreme Court held that the liability to pay interest would only arise on default and is really in the nature of a quasi punishment. The liability to tax although credited retrospectively could not entail the punishment of payment of interest with retrospective effect. It is this principle which has been laid down which is followed by the Calcutta High Court. It is that principle relied upon by the Calcutta High Court which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... [2009] 317 ITR (AT) 161 (Mumbai), which is on the point of penalty under section 158BFA(2) of the Act, has considered the amendment and the relevant portion of the order reads as under (page 175) : "Section 158B(b), which defines 'undisclosed income', was subjected to change by insertion of the words 'or any expense, deduction or allowance claimed under this Act which is found to be false' with retrospective effect from July 1, 1995 by the Finance Act, 2002, after the wordings 'for the purpose of this Act'. The learned Judicial Member rightly noted that 'the words underlined (italicised in print) by us were included by the Finance Act, 2002 which shows that at the time when the return was filed, the disallowance of expenses was not within the ambit of the expression 'undisclosed income'. So at the time of filing the return, the assessee was not obliged to declare the same in its return particularly when no material or evidence was found relating to such expenses in the course of search carried out at the business premises of the group concerns." Similarly, in the present case before us also at the time of filing of the block return by the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X
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