TMI Blog2017 (8) TMI 330X X X X Extracts X X X X X X X X Extracts X X X X ..... ANT MEMBER For The Appellant : Sh. K.V.S.R. Krishna, CA For The Respondent : None(application rejected) ORDER Per L.P. Sahu, Accountant Member: This is an appeal filed by the assessee, M/s. Oriental Bank of Commerce (in the case of erstwhile M/s. Global Trust Bank Ltd. amalgamated with OBC on 14.08.2004) against the order of ld. CIT(A)-XVI, Delhi dated 16.08.2013 for the assessment year 2005-06 on the following grounds : 1. The Ld CIT(A) has erred in law and on facts in confirming the penalty u/s 271(1)(c) on claim of depreciation on Temporary Wooden structures like interiors, glow signs etc. taken over from Erstwhile GTB upon amalgamation pursuant to GOl notification, of ₹ 7,13,13,797/- @ 100%. The penalty levied is wrong and bad in law and has to be deleted. 2. The appellant contends that it had offered explanation which has not been found to be false nor unsubstantiated. The explanation is supported by facts and details as well as legal provisions for claim of depreciation in the case of amalgamation. Therefore, the allegation of the CIT(A) as well as AO that the assessee has furnished inaccurate particulars of income is wrong and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m as temporary wooden structure. The assessee was asked to explain as to why the depreciation on Furniture and Fixture should not be restricted to 15% as prescribed in the IT Act and as per the practice consistently followed by the erstwhile bank. In response, the assessee explained that 100% depreciation was claimed in respect of interiors which is purely temporary wooden structure which are considered under the block of 100% depreciable items. It was explained that the classification of such temporary wooden structure should have been made under building instead of furniture fixtures . The AO did not accept the explanation of the assessee and depreciation claimed @ 100% on Furniture Fixture was disallowed restricting the same to 15%, being part of the block Furniture Fixture . The assessee had apportioned the claim of depreciation with M/s. Oriental Bank of Commerce being amalgamated on 14.08.2004. Therefore, the AO disallowed proportionate sum of ₹ 7,13,13,797/- as excess depreciation claimed by the assessee and added the same to the total income of the assessee. This addition made by the AO stood confirmed by the ld. CIT(A) and Tribunal. 3. Thereafter, pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ./2013 for A.Y. 2003-04. 5. On the other hand, the ld. DR relied on the orders of the lower authorities and specifically pointed out that once, the Hon ble ITAT has confirmed the addition in quantum appeal of the assessee, the issue no more remains to be debatable. Therefore, the ld. Authorities below are quite justified to impose and sustain the penalty u/s. 271(1)(c) of the IT Act. 6. We have heard the rival submissions and have gone through the entire material available on record and we find that the ld. CIT(A) while deciding the appeal has made an elaborate discussion on the issue, which could not be properly rebutted on behalf of the appellant before us. For the sake of convenience, we reproduce the relevant portion of the impugned order as under : 4.1 T have carefully consideredJheJactS-of the-eas^-the findings jof the Adas well-as the submissions of the A/R of the appellant. All the grounds of appeal are directed against penalty of ₹ 2,60,95,501/- imposed upon the appellant by the AO u/s 271(l)(c) of the IT Act. The background of the case is that appellant company Erstwhile Global Trust Bank (EGTB) has been amalgamated with OBC by the Government of India vide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ditor's Report. On further appeal by the \ / appellant before the ITAT, Hon'blc ITAT has also confirmed the additions made by AO with the following observation : The first question before us is whether, the block of assets of Furniture Fixture of the GTB can now be broken up into interiors and Furniture Fixture . With the introduction of the concept of block of assets, an individual asset losses the identity as it gets subsumed once and for ail in the block of assets having same rate of depreciation. Therefore, we pre of the view tha the assessee could not have taken out certain assets from this bloc1' and reclassify them as interiors or temporary wooden structures, so as to claim 100% depreciation theron. Further, we find that there is no conclusive evidence on record that the erstwhile block of furniture and fixtures confined sssets which could be termed as temporary wooden structures. The assessee has relied on its auditor's report and the Id. CIT(A) has mentioned that against this there is also the auditor's report of earstwhile GTB under which depreciation was claimed @ 15%. Looking to these facts, we tend to agree with the Id. CIT(A) that the block ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expression'has concealed the particulars of income and has furnished inaccurate particulars of income' have not been defined either in section 271 or elsewhere in the Act. However, not withstanding the difference in the two circumstances, it is now well established that they lead to the same effect namely, keeping off a certain portion of the income from the return. According to Law Lexicon, the word conceal means: to hide or keep secret . It means to hide or withdraw from observation; to cover or keep from sight; to prevent Ihe discovery of; to withhold knowledge of. The offence of concealment is, thus, a direct atlumpl to hide an item of income or a portion thereof from the knowledge of the income-tax authorities. In Webster's Dictionary, inaccurate has been defined as : not accurate, not exact or correct; not according to truth; erroneous; as an inaccurate statement, copy or transcript. . The return of income has been filed by the appellant for the period upto 13.08.2004 for the AY 2005-06 pertaining to the transactions of Erstwhile Global Trust Bank from 01.04.2004 to 13.08.2004. In the depreciation schedule in the return filed fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r, explanation 1 to section 271(l)(c) of the Act mentions that where in respect of any facts material to the computation of the total income of any person under the Act, such person fails to offer an explanation or offers an explanation which is found by the AO or the C1T (Appeals) or the Commissiomr to be false, or 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 totai income have been disclosed by him, then the amount added or disallowed in computing the totai income of such person as a result thereof shall for the purpose of clause (c) of section 271(1), be deemed to represent the income in respect of which particulars have been concealed. 4.5 In this regard the appellant explained that since the amalgamation of erstwhile GTB took place vide Govt. of India Notification dated 14th Aug. 2004 with OBC, the written down value of the block of furniture and fixtures as on 3ist March 2004 was considered as the actual t-~-- - ^ costji/s 43(6) read with explanation 2. Jfoerefore, at the time of amalgamation, the written down ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... )... .............................. ...................................... ( b) by the amalgamating company to the amalgamated company in a scheme of amalgamation, and the amalgamated company is an Indian company, then, notwithstanding anything contained in clause (!}, the : actual_cpst.G_f the block of assets jn the case of the transferee-company or the amalgamated company, as the case may be, shall be the written down value of the block of assets as in the case of the transferor-company or the amalgamating company for the immediately preceding previous year as reduced by the amount of depreciation actually allowed in relation to the said preceding previous year. From the above provisions of sec 43(6) read with explanation (2) it is clear that where in any previous year, any block^o assets is transferred by the amalgama|:in^company to the amalgamated company, the actual costjrf the _biock_p_f assets in_.the case of the_ amalgamated company shall be the written down value of the block of assets as in the case of the amalgamating company for the immediately preceding previous year as reduced by the amount of depreciation actually allowed in relation to the said preceding pre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ibed rates as if the succession or the amalgamation or the demerger, as the case may be, had not taken place, and such deduction shall be apportioned between the predecessor and the successor, or the amalgamating company and the amalgamated company, or the demerged company and the resulting company, as the case may be, in the ratio of the number of days for which the assets were used by them. Explanation 2.-For the purposes of this sub-section written down value of the block of assets shall have the same meaning as in clause (c) of sub-section ( 6) of section 43. From the above it is clear that the aggregate deduction, in respect of depreciation allowable to the amalgamating company and the amalgamated company in the case of amalgamatioi^sjiaiiv not exceed in any previous year the deduction calculated at the pr^scnbed_j3tes_._as J the amalgamation had not taken place, and such deduction shall be apportioned between the amalgamating company and the amalgamated company, in the ratio of the number of days for which the assets were used by them. From the above also, it is clear that while allowing deduction of depreciation to the amalgamating company and the amalg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... omputation of total income have been disclosed. 4.10 On identical issue of exfacie in admissible claim made u/s 35D on the basis of certificate of auditors Hon'ble HIGH COURT OF DELHI in CIT vs. Escorts Finance Ltd. [2009] 183 TAXMAN 453 (DELHI) while upholding the penalty levied by the AO u/s 27 Kl)(c) held thai: In the present case, we have to examine as to whether the claim made under section 35D of the Act was bogus or it was a bona fide claim. The assessee pleaded bona fide, as according to it, it was based on the opinion of the Chartered Accountant. Learned counsel for the revenue, however, submitted that a bare reading of section 35D would reveal even to a layman that there was no scope for getting benefit of those provisions in respect of expenses incurred in connection with the public issue of shares such as underwriting commission, b'okerage and other charges etc., inasmuch as certain expenses are allowable only when they are incurred with the expansion of assessee's industrial undertakings or in connection with his setting up of a new industrial undertaking or infc-j . J :mit whereas the assessee k a finance company. We are in agreement wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITR 529 / 20 Taxman 2i5(Mad.), CIT v. Mussadilal Ram Bharose [1987] 165 ITR 14 /30 Taxman 546H; C1T v.K.R. Sadayappan [1990] 185 ITR 49 / 51 Taxman 304, Addl. CIT v. Jeevan Lal Sah[!994] 205 ITR 244 / 73 Taxman 182 (SC) and K.P. Madhusudanan v. CIT [2001] 251 ITR 997 118 Taxman 324 (SC), H i- .-.-ell established that whenever there is difference be*-.-;:;^ the returned and assessed income, there is inference of concealment. The Explanation 1 to sec. 271(l)(c) of the Act raises a presumption that can be rebutted by the assessee with reference to facts of the case. Thus, the onus is on the assessee to rebut the inference of concealment. The onus laid down upon the assessee to rebut the presumption raised under Explanation 1 would not be discharged by any fantastic or fanciful explanation. It is not the law that any and every explanation has to be accepted, in CIT v. K.P. Madhusudanan [2000]246 ITR 2i8/[2002] 125 Taxman 265, Hon'ble Kerala High Court came to the conclusion that penalty was liable to be imposed in a case where the assessee could offer no acceptable explanation for the income not disclosed or the inaccurate particulars he had furnished in his return. 4.13 Hon& ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ture, actuated by a mala fide intention to evade tax otherwise payable by them, would get away without paying the tax legally payable by them, if their cases are not picked up for scrutiny. This would take away the deterrent effect, which these penalty provisions in the Act have. [Para 20] 4.15 In a-recent decision dt. 29/07/2013 in the case of CIT vs. HCIL Kalindee ARSSPL in ITA Nos.480/2012 and in the case of CIT vs. HCIL ARSSPL Triveni (JV) in ITA Nos. 481/2012 Hon'ble Delhi High Court has upheld the penalty u/s 271(l)(c) imposed by the AO where inadmissible deduction claimed u/s 80IA was disallowed and added to the income of the assessee. In these cases also the appellant claimed that the deduction u/s 801A of the Act were claimed on the basis of certificate of Charted Accountant. While upholding the penalty imposed by the AO, the Hon'ble Jurisdictional High Court have held as under: Penalty provisions are not criminal and do not require culpable ntens tea. Whether or not the assessee had acted malafidely is not the relevant question to be asked and answered. The relevant question to be asked and answered is whether the assessee has discharged the onus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lity if the act cr attempt in claiming the deduction was not honafide. 11. Two reasons were given by the Assessing Officer why the claim for deduction under Section SOiA of the Act was rejected and should be denied. The first reason was that the respondent assessees were involved in works contracts and Explanation to Section SOIA (13) stipulates that benefit under the said Section was/is not available to a contractor carrying on works contract. The said clarificatory explanation was inserted by the Finance Act, 2007 with retrospective effect from 01.04.2000. The CIT (Appeals) in the first appellate order has specifically mentioned that the^Finance Act, 2007 received the Presidential assent on 11.05.2007 [(2007) 291 ITR (St.) 1]. The returns of income were filed by M/s. HCIL Kalindee ARSSPL (JV) and M/s. HCIL ARSSPL Triveni (JV) on 01.11.2007. An amendment of this nature invariably attracts attention and is seldom missed. Such amendments become topic of discussion and conversation in the professional circles. To show and establish bonafides, the assessees had to show some more tangible material or basis as to why a clear statutory provision which excludes works contracts w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as held that penalty was not imposable because there was no finding that the assessee has furnished inaccurate particulars of income. In the case of CIT v. Saraya Industries ltd. [2008] 1 DTR 434 (Del)(HC) and Hero Honda Motors ltd. v. DCIT [2012] 014 ITR (Trib) 161 (Del) penalty was held not imposable because view taken by the assessee was a plausible view which the A0:fdid^^agree with. In the case of Metal Rolling Works ltd. v. CIT [2011] mot impost ble because the AO himself was not iacoine was to be taxed. Therefore, it was held that it concealed the income or furnished inaccurate particulars of f mi i ^T- M e p:-J~ ~ J Sonspvt. ltd. [2011] 336 ITR 125 (Del)(HC), fa-** aoc agin riill because the issue was debatable. In the case of CIT v. Rubber fcL [2011] 335 ITR 558 (P H) (HC) penalty was held not imposable dam was made in a bona fide way for setting off carry forward business loss f^r~=- --^ :^-^rne arising on sale of business assets. In the instant appeal it is clearly . . -ai ;he appellant has furnished inaccurate particulars of income, the explanation of 1*,^ appellant was not bonafV. ird the claim of complete disclosure is false. Further, h '^HS not a case where two ..... X X X X Extracts X X X X X X X X Extracts X X X X
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