$~20.
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ INCOME TAX APPEAL NO. 71/2013
Date of decision: 12th September, 2013.
COMMISSIONER OF INCOME TAX-III
..... Appellant
Through Mr. Sanjeev Rajpal, Sr. Standing
Counsel.
versus
ARCOTECH LTD (FORMERLY SKS LTD.)
..... Respondent
Through Mr. Gaurav Mitra, Mr. Saurabh
Seth & Ms. Kanchan Yadav, Advocates.
CORAM:
HON'BLE MR. JUSTICE SANJIV KHANNA
HON'BLE MR. JUSTICE SANJEEV SACHDEVA
SANJIV KHANNA, J. (ORAL):
In this appeal, which pertains to Assessment Year 2003-04 and
arises out of order of the Income Tax Appellate Tribunal (tribunal, for
short) dated 29th June, 2012, on the last date of hearing the following
substantial question of law was framed:-
"Whether the tribunal was justified in
deleting penalty on additions made on account
of loss of sale of investment and vehicles,
which was wrongly claimed as business loss
and expenditure disallowed under Section 43B
of the Income Tax Act, 1961?"
ITA No. 71/2013 Page 1 of 21
As is apparent from the question, tribunal has allowed the appeal of the
respondent assessee and deleted penalty under Section 271(1)(c) of the
Income Tax Act, 1961 (Act, for short)
2. The respondent-assessee had filed its return of income declaring
loss of Rs.13,65,54,483/- duly supported by audited accounts and this
return was processed under Section 143(1) of the Act. Subsequently,
re-assessment notice was issued after noticing that the assessee had
claimed depreciation on plant and machinery though no manufacturing
activity was conducted during the year under consideration and had
wrongly claimed capital loss on sale of investments amounting to
Rs.59,15,000/- as business loss.
3. In response to the notice under Section 148 of the Act, the
respondent-assessee filed a letter dated 9th August, 2007 stating that
their earlier return filed under Section 139 dated 31st October, 2002
should be treated as a return filed in response to the said notice. The
assessee on receipt of reasons for reopening, filed objections to the
initiation of the re-assessment proceedings and contested the notice
under Section 148 of the Act. The said objections of the assessee were
rejected vide order sheet entry dated 24th December, 2007.
4. During the course of assessment proceedings, the assessee filed
a revised computation in which they accepted that Rs.59,15,000/- was
wrongly claimed as a revenue loss and was in fact capital loss. The
ITA No. 71/2013 Page 2 of 21
assessee also accepted that unpaid interest charges of Rs.4,46,13,877/-
should have been disallowed under Section 43B cannot be accounted
for in the profit and loss account. Similarly, the respondent had
erroneously accounted Rs.12,610/- and Rs.4,715/-, due and payable on
account of provident fund and ESI in the profit and loss account,
although this was not permissible and was contrary to Section 43B of
the Act. The Assessing Officer disallowed depreciation claim of
Rs.89,95,173/- and claim on account of loss on sale of vehicles, which
was treated by the respondent as revenue loss of Rs.1,27,930/-. This
loss it was observed was a capital loss. On account of the aforesaid
additions, total income of the assessee was assessed at loss of
Rs.7,66,79,891/-. Proceedings under Section 271(1)(c) of the Act were
initiated.
5. The Assessing Officer imposed penalty of Rs.2,13,75,229/- on
account of concealment and/or furnishing of inaccurate particulars. He
rejected the contention of the respondent that the claims/entries were
bona fide and lapse had occurred because the respondent was without
competent professional staff due to closure of running operations and
that the return was filed by a junior accountant, who was not well
versed with the tax laws.
6. Commissioner of Income Tax (Appeals) upheld the order
imposing penalty.
ITA No. 71/2013 Page 3 of 21
7. Tribunal by the impugned order has deleted penalty, inter alia,
recording that all details with regard to the loss suffered were filed
along with the return of income and the change of head of income
cannot be considered as concealment or furnishing inaccurate
particulars of income. The legal claim made by the respondent-
assessee was not found to be allowable under the head "business loss"
but the same was allowed as a "capital loss". In order to appreciate the
contention of the Revenue, we would like to reproduce the exact words
and reasoning given by the tribunal to delete the penalty:-
"5. We have heard rival contentions and gone
through the relevant material available on
record. Apropos the issue of claim of
depreciation, penalty imposed under similar
facts and circumstances has been deleted by the
ITAT in preceding year, as reproduced above.
Respectfully following the same, the penalty
qua the claim of depreciation is deleted.
5.1. Apropos long term capital gain on sale of
investments and sale of vehicles, the fact that
the assessee was allowed the claim of loss is
not disputed. The only difference between
assessee's claim and the assessed loss is the
head of allowability of loss i.e. capital loss as
against assessee's claim of business loss. In our
view all the relevant details were filed by the
assessee along with the return of income and a
change in claim of head of income cannot be
considered as concealment of particulars of
income or furnishing inaccurate particulars of
such income. The assessee made a legal claim
which was not found to be allowable by the
Assessing Officer under the head business loss
but the same was allowed as long term capital
ITA No. 71/2013 Page 4 of 21
loss. In these facts and circumstances we are
not inclined to hold that the assessee concealed
any particulars or furnished inaccurate
particulars in this behalf.
5.2. In respect of PF and ESI also the
assessee had disclosed in its Chartered
Accountant's report that these amounts were
not deposited, therefore, assessee itself claimed
them to be exfacie not allowable. The only
mistake committed by the assessee is in not
giving proper effect to P&L A/c. With these
disclosure on record, the mistake can be held to
be of technical or venial in nature and cannot be
termed as amounting to concealing particulars
of income or furnishing inaccurate particulars
of such income.
5.3. Apropos 43B disallowance, assessee has
given satisfactory explanation that revised
return was prepared which was not filed by the
Chartered Accountant due to dispute on
payment of professional fees with the C.A are
the same is indicated by the record. In our
considered view the details having been
furnished along with the return of income, the
assessee's case is not liable to be visited with
penalty u/s 271(1)(c).
5.4. Apropos ld. DR's reliance of ITAT order
in the case of M/s Anand & Anand (supra), the
facts and circumstances in that case are
peculiarly different inasmuch as in this case
assessee had earlier paid advance tax on a
particular item of income and later on, in the
guise of legal opinion, the same was claimed to
be a capital receipt, it had no earlier history and
was a profit making organization. In the present
case, the facts are peculiarly different and it is a
case of continuous loss making concern since
past many years. Therefore, facts being
distinguishable the decision in the case of M/s
ITA No. 71/2013 Page 5 of 21
Anand & Anand cannot be applied to the facts
of the present case.
5.5. In case of reduction of assessed loss,
though technically penalty u/s 271(1)(c) is
leviable, but one cannot be oblivious of the
explanation and justification given by the
assessee. In our view, assessee's explanation
demonstrates justification for the stand taken in
the return of income and reassessment
proceedings. The explanation cannot be called
to be false or bogus, therefore, we delete the
penalty, keeping in view the judgment of
Hon'ble Supreme Court in the case of Reliance
Petroproducts (supra) and in the case of
Hindustan Steels 83 ITR 26(SC)."
(emphasis supplied)
8. Before we examine the aforesaid observations and the
contentions of the parties, for the sake of clarity, we would like to
mention that during the re-assessment proceedings the respondent's
loss was reduced by Rs.5,98,74,592/- on account of the following
additions/disallowances:-
1. Depreciation on plant & machinery Rs.89,95,173/-
2. Loss on sale of investments Rs.59,15,000/-
3. Loss on sale of vehicles Rs.1,27,900/-
4. Disallowance u/s 43B Rs.17,325/-
5. Disallowance u/s 43B Rs.4,48,19,194/-
9. We are in agreement with the learned counsel for the respondent
ITA No. 71/2013 Page 6 of 21
that as far as claim for depreciation of plant and machinery is
concerned. Claim of depreciation was a debatable issue. Passive use
entitles an assessee to claim depreciation (see CIT versus Geo Tech
Construction Corporation, [2000] 244 ITR 452 (Ker.) and
Commissioner of Income Tax versus Refrigeration and Allied
Industries Limited, [2001] 247 ITR 12). No manufacturing activities
were conducted during the assessment year in question but the assessee
had approached Board of Financial Reconstruction for rehabilitation of
the company under the provisions of Sick Industrial Companies
(Special Provisions) Act, 1985. We also notice that penalty imposed in
the last year for same reason was deleted by the tribunal. The real
contest is with regard to loss on sale of investments and sale of
vehicles of Rs.59,15,000/- and Rs.1,27,930/- respectively and
disallowance under Section 43B of Rs.4,48,19,194/- and Rs.17,325/-
on account of finance charges and PF/ESI dues respectively.
10. In paragraph 5.1 of the impugned order, the tribunal has referred
and stated that details were furnished by the respondent along with the
return of income and observed change of head of income cannot be
considered as concealment of particulars or furnishing inaccurate
particulars of income. The said statement as a ratio is broad and wide
to be treated as universally true. It depends upon facts of a particular
case and whether the question was debatable or capable of only a
ITA No. 71/2013 Page 7 of 21
singular view. We, therefore, cannot agree with the view expressed by
the tribunal that change of head under which income is to be assessed
per se would justify cancellation of penalty for concealment for the
reason that it is not a case of furnishing of inaccurate particulars.
Furnishing of inaccurate particulars of income can have different
connotations and may arise when income is enhanced, deduction
denied or when head of income, is changed resulting in a higher rate of
tax or increase in income. The real question is application of
Explanation 1. Paragraphs 5.2 and 5.3 refer to the disallowance under
Section 43B and observe that ESI and PF deductions as claimed were a
mistake and a case of not giving proper effect to profit and loss
account. However, this cannot be read in isolation as the assessee had
not made disallowance under Section 43B even in respect of interest
payable but not paid, to the financial institutions.
11. Paragraphs 5.4 and 5.5 record that the respondent was
continuously loss making concern for last many years and, therefore,
decision in another case was distinguishable. Whether or not the
assessee makes loss is not the relevant criteria or factor to determine
whether penalty should be imposed under Section 271(1)(c) or not. Of
course, lack of or inability to engage a good professional tax consultant
is a different matter but there should be proof and basis to hold that the
losses incurred prevented an assessee from getting proper tax advice
ITA No. 71/2013 Page 8 of 21
and the issue in question was complicated or required professional
advice of a highly expert nature. Further, this is not the correct way of
applying Explanation 1. In paragraph 5.5 it is recorded that one cannot
be oblivious to the explanation and justification given by the assesse.
Indeed one has to take into consideration the explanation and the
justification given by the assessee but it cannot be accepted as bona
fide and true on mere asking. Onus under Explanation 1 is on the
assessee to prove the reason as to why a particular claim or deduction
was made. The justification and cause shown should be bona fide and
acceptable. Penalty cannot be deleted by merely recording the
explanation, though not proved and established. It is not for the
Revenue to show that the explanation offered is not false or bogus.
12. Learned counsel for the respondent referred to paragraph 5.3 of
the impugned order and has stated that the revised return was prepared
by the Chartered Accountant but due to dispute with regard to payment
of professional fee with them, the same was not furnished. This
explanation given by the assessee has been accepted by the tribunal but
is on the face of it contrary. In fact, the tribunal has not discussed the
facts or basis for the said conclusion. The assessee had filed original
return of income, as noticed above, on 31st October, 2002. Return was
supported by duly audited accounts. Copy of the said audited accounts,
auditor's report etc. have been filed on record before us by the
ITA No. 71/2013 Page 9 of 21
respondent-assessee. The accounts were audited by a Chartered
Accountant and the audit was dated 30th August, 2002. Subsequently,
after re-assessment notice under Section 148 dated 7th July, 2008 was
issued, the respondent-assessee filed a letter dated 9th August, 2007,
nearly four years after the date of filing of the original return, that the
earlier return dated 31st October, 2002 should be treated as the return
filed pursuant to the reassessment notice. This was a chance given to
the respondent to file a rectified return in case of error or mistake
made. After the return of income was filed, the assessee was furnished
with copy of the reasons to believe, which as already noticed above,
recorded two reasons; (i) wrong claim of depreciation in spite of the
fact that no manufacturing activity was conducted during the year
under consideration and (ii) claim of loss on sale of investments was
wrongly claimed as business loss as it was a capital loss. The
respondent-assessee filed written objections dated 14th December, 2007
to the reopening and contested. The respondent-assessee tried to justify
the claims made and treatment given in the accounts. The assessment
order records that on 20th December, 2007, the assessee had tried to
justify the claim of loss of Rs.59,15,000/- as business loss stating as
under:-
"The investment was made out of surplus funds
available with the company. This was with a
view to earn profits from business. Business
ITA No. 71/2013 Page 10 of 21
activity or transaction necessarily implies the
activity with an object to earn profit.
Uncertainty about the return to be received
from the investment and also the facing of
many imponderables and even the risk of losing
the amount invested are inherent in activity
called business. Risk, uncertainty
foresignhedness(sic) to visualise the
imponderables and capacity to over come the
unforeseen hurdles are the essential for business
activity."
The objections were considered and rejected on 24th December,
2007.
13. For the sake of clarity, we record that the aforesaid loss was loss
suffered on sale of shares held as investment or as a capital asset. The
assessee was not a trader in shares and the shares were not held as
stock-in-trade. They were not part of the closing stock. It is only
subsequently that the respondent-assessee filed a revised computation
and accepted that the said loss was capital loss and not revenue loss.
Revised computation was filed after contest and on being confronted
by the Assessing Officer. The aforesaid reasoning will equally apply
to the loss suffered on sale of vehicles.
14. Section 271(1)(c) of the Act as applicable has been considered
and interpreted in several judgments of the Supreme Court and the
Delhi High Court. The said Section is invoked when an assessee
furnishes inaccurate particulars or conceals his income. Explanation 1
ITA No. 71/2013 Page 11 of 21
can come to the rescue of the assessee in case he had offered an
explanation but was unable to substantiate it, provided he is able to
establish that the explanation offered was bona fide and the facts
relating to furnishing of inaccurate particulars and material for
computation of total income were duly disclosed by him. In the
present case, the assessee had furnished inaccurate particulars of
income and this is established beyond doubt. Assessment order passed
under Section 143(3)/147 of the Act dated 28th December, 2007 was
accepted by the respondent-assessee in which the aforesaid
disallowance/additions were made. In fact, submission of the assessee
before us is that the aforesaid errors pointed out in the assessment
order were conceded to and accepted by the respondent-assessee
during the course of the assessment proceedings by filing a revised
computation. In these circumstances, the contradictory contention of
the respondent-assessee that they had not furnished inaccurate
particulars of their income is not acceptable. The moot question and
issue is whether the assessee has discharged the burden under
Explanation 1 to Section 271(1)(c) of the Act or rather more precisely
whether the tribunal has correctly applied the said Explanation as
mandated and required by the statute.
15. Mens rea is not required and necessary to impose penalty for
concealment. In Union of India vs. Dharmendra Textile Processors
ITA No. 71/2013 Page 12 of 21
[2008]306 ITR 277, the Supreme Court examined Section 271(1)(c) of
the Act and other provisions for imposition of penalty in different
statutory enactments. It was held that penalty in such cases imposed
for tax delinquency is a civil obligation, remedial and coercive in
nature and is far different from penalty for crime or a fine or forfeiture
as stipulated in criminal or penal laws. It refers to blameworthy
conduct for contravention of the Act and it equally applies to tax
delinquency cases. Mens rea or willful failure or conduct is not
required to be proved and established. Mens rea is essential or sine-
qua-non for criminal offences but is not an essential element for
imposing penalty for breach of civil obligations or liabilities. It was
accordingly observed as under:
"The Explanations appended to Section 272(1)(c) of the
Income Tax Act entirely indicate the element of strict
liability on the assessee for concealment or for giving
inaccurate particulars while filing the return. The
judgment in Dilip N. Shroff's case [2007] 8 Scale 304
(SC) (3) has not considered the effect and relevance of
Section 276C of the Income Tax Act. The object
behind the enactment of Section 271(1)(c) read with the
Explanations indicates that the said section has been
enacted to provide for a remedy for loss of revenue.
The penalty under that provision is a civil liability.
Wilful concealment is not an essential ingredient for
attracting civil liability as is the case in the matter of
prosecution under Section 276C of the Income Tax
Act."
16. Thus, penalty under Section 271(1)(c) is imposed when an
assessee conceals his income or furnishes incorrect particulars. In
ITA No. 71/2013 Page 13 of 21
terms of explanation I, we have to examine whether the case in
question falls within the two limbs viz. clause (A) and (B) i.e. which of
the two limbs and effect thereof. Clause (A) applies when an assessee
fails to furnish explanation or when an explanation is found to be false.
Clause (B) applies to cases where explanation is offered but the
assessee is not able to substantiate the explanation. In such cases, we
have to examine two conditions: (1) Whether the assessee has been
able to show that his explanation was bonafide; (2) whether the
assessee had furnished and disclosed facts and material relating to
computation of his income. Onus of establishing that the assessee
satisfies the two conditions is on the assessee. Both the conditions
have to be satisfied. In case the assessee satisfies the twin condition,
penalty should not be imposed.
17. On the second aspect, which relates to addition on account of
disallowance under Section 43B of the Act, position remains the same.
In the audited accounts, there is no mention or reference to the said
Section or that in the profit and loss account expenditure which has to
be disallowed under Section 43B has been debited and claimed. The
fact that interest due and payable to the financial institution has not
been paid but was treated as expenditure in the profit and loss account
was not stated or adverted to. Thus, full facts relating to the
assessment of income were not stated.
ITA No. 71/2013 Page 14 of 21
18. In the present case, additions or disallowance has been made on
account of wrong claim of revenue loss, which was in fact capital loss
and disallowance under Section 43B. From the reasoning given by the
tribunal, it is not possible to decipher and hold that the explanation
given by the assessee shows as to why his claims were bona fide and
justified. The onus of establishing the reasons for the claim made is on
the assessee. Reference has been made to the judgment of the Supreme
Court in Hindustan Steel Limited versus State of Orissa, (1972) 83
ITR 26 (SC), which pertains to the earlier provision relating to penalty,
which was worded differently. Decision in the case of CIT versus
Reliance Petroproducts Private Limited, (2010) 11 SCC 762 is
relevant but would indicate that in the said case the assessee had given
an explanation in respect of disallowance of expenditure under Section
14A. Full details of expenditure had been given in the return but the
claim of the assessee was not accepted in view of the legal
interpretation given to the statutory provision. Thus, merely making a
claim, which was not sustainable in law should not result in
penalization under Section 271(1)(c). Penalty should not be imposed
provided the assessee has furnished full details with the return itself
and the claim made was debatable or reasonably plausible or may have
well been accepted. It is, in this context, that Delhi High Court deleted
penalty in Shervani Hospitalities Limited versus Commissioner of
ITA No. 71/2013 Page 15 of 21
Income Tax, (2011) 329 ITR 572 Delhi, Karan Raghav Exports
versus CIT, (2012) 349 ITR 112 (Delhi), CIT versus Zoom
Communication Private Limited, (2010) 327 ITR 510(Delhi). One
cannot be oblivious to divergent views on legal interpretation of tax
provisions and that uniformity and consistency of opinion on aspects of
law may not be possible. Therefore, penalty cannot be imposed
because an assessee has taken a particular legal stand. However, this
does not mean that the assessees can claim wrong deductions or claim
without any basis or foundation to justify the claim. False, spurious
and mendacious claims do not fall in this class.
19. In the present case, the assessee is a company and the accounts
were audited by Chartered Accountant. Difference between "capital
loss" or "revenue loss" in some cases may be marginal and debatable,
but in the present case, the assessee a manufacturing company had sold
shares held by them as investment or as a capital asset. There was and
could not have been any debate or plausible claim that the loss was a
capital loss. Anyone remotely conversant with the provisions of the
Act or accounts would know that loss on the sale of the investments
cannot be booked and treated as a business loss, yet the respondent-
assessee had booked the said loss as a business loss instead of a capital
loss. This was contrary to elementary principles of accountancy and
something which is very basic. Learned counsel for the respondent has
ITA No. 71/2013 Page 16 of 21
emphasized that the figures, i.e., loss of Rs.59,15,000/- has not been
disputed. Therefore, full facts were on record. This is partly correct
but would not satisfy the requirements of Explanation 1. Explanation 1
has two stipulations; firstly, the assessee should have furnished facts
and material relating to computation of his income and secondly,
establish that the explanation furnished by him was bona fide.
Furnishing of figures or non-interference with the figures would show
only furnishing of facts and material but would not satisfy the second
requirement. Similarly, with regard to the disallowance made under
Section 43B, the law on the point and the provision in question is well
known and not capable of two interpretations. The assessee had not
paid interest amounting to Rs.4,48,19,194/- and had defaulted and not
paid PF/ESI instalment of Rs.17,325/-, but had claimed them as an
expenditure, contrary to the mandate of Section 43B. The audit report
was silent and this fact was not disclosed. Material and facts were not
stated.
20. Learned counsel for the assessee has submitted that the
respondent company became sick and, therefore, did not have funds to
engage a proper accountant or tax consultant when the original return
was filed. The return was filed by a junior accountant. Firstly, we find
that this aspect has not been accepted by the tribunal. Secondly, the
two set of additions in question were clearly contrary to law. As
ITA No. 71/2013 Page 17 of 21
already noted above and are elementary and well-known, in the guise
of wrong or improper legal opinion, an assessee should not be
permitted and allowed to escape penalty when the accounts are audited
by a Chartered Accountant, when the provision and position in law is
well-known and well-understood. It is not a case of a debatable issue
or a legal provision which could have escaped or missed notice or
consideration of the Chartered Accountant or the accountant or the
directors of the company. We cannot stretch the plea that the issue was
debatable or there was wrong advice beyond the point to believe or
accept contentions when the claim itself is impossible to accept and is
contrary to fundamentals of tax or accountancy. Income tax returns are
mostly accepted without scrutiny or regular assessment. Self and due
compliance of tax provisions is required. In the present case, the
original return filed by the respondent was accepted under Section
143(1) of the Act. Subsequently, noting discrepancies, notice under
Section 148 of the Act was issued. Even at that time, the respondent-
assessee did not accept the fault and in their letter dated 9th August,
2007 stated that the original return may be treated as filed in response
to the reassessment notice. Objections to re-opening were raised and
the stand and stance of the respondent-assessee changed when they
were repeatedly confronted. It is not a case where the assessee suo
motu on his own or on immediately noticing the wrong claim rectified
ITA No. 71/2013 Page 18 of 21
or corrected the purported errors and understatements. It is only when
the assessee was cornered and confronted by the Assessing Officer that
the revised computation was filed. The revised computation was filed
after the objections to the re-opening were dismissed by the Assessing
Officer.
21. At this stage, we would like to notice and refer to the judgments
relied by the counsel for the respondents in Commissioner of Income
Tax, Lucknow versus Hari Om Ashok Kumar Sugar Works, (2007)
295 ITR 507 (Allahabad), Commissioner of Income Tax versus
Sidhartha Enterprises, (2010) 322 ITR 80 (P&H), Commissioner of
Income Tax versus Somany Evergree Knits Limited, (2013) 352 ITR
592 (Bombay) and Commissioner of Income Tax versus Sania Mirza,
(2013) 259 CTR (AP) 386 and Price Waterhouse Coopers Private
Limited versus Commissioner of Income Tax, (2012) 11 SCC 316 .
22. At the very outset, we observe that whether an assessee had
offered an explanation and whether the explanation was bona fide
when discussed and examined as stipulated in Explanation 1, is a
question of fact and depends upon several factors, including whether
the assessee is an individual or corporate assessee, literate or illiterate,
the nature, character and quantum of the deduction, his past conduct
relating to the same claim/deduction, the provision or section
applicable etc. (Failure to apply Explanation 1, as per law would make
ITA No. 71/2013 Page 19 of 21
it, mixed question of law and fact) It is not one fact but several factors
which have to be taken into consideration to determine whether or not
the claim or explanation of an assessee is bona fide. For example, in
the case of Hari Om Ashok Kumar Sugar Works (supra) income
taxable under Section 41(2) of the Act was made subject matter of
penalty. In the said case, tribunal also accepted the contention that the
assessee was under the belief that profit on sale of machinery etc. being
capital goods was not taxable. He was ignorant about provisions of
law. In the case of Sania Mirza (supra), awards received from the
Government or other institutions were not included in her income and
were disclosed in the return as a capital receipt. The amount received,
on re-opening was voluntarily surrendered. In Somany Evergree Knits
Limited (supra) the factual finding recorded was that the assessee had
committed a mistake and they withdrew the claim of loss shown as
revenue expenditure in the profit and loss account in the
second/revised return of income. It was a case of bona fide mistake.
In the case of Price Waterhouse Coopers Private Limited (supra),
there was variation between the tax audit report and the income tax
return. In the computation sheet with the income tax return
disallowance under Section 40(a)(7) was not reflected. The Supreme
Court observed that this was a clear case of error made by the assessee,
who by mistake had overlooked the contents of the tax audit report. It
ITA No. 71/2013 Page 20 of 21
was held that the inadvertent error was a bona fide mistake. In the
present case, we do not think any of the aforesaid decisions are
applicable rather it is one wherein the assessee had wrongly shown loss
on sale of shares held as investments as business loss and had wrongly
not excluded from expenditure/profit and loss account, interest which
had not been to the financial institutions or PF/ESI amounts not paid
contrary to Section 43B of the Act. The quantum of amount involved
was Rs.4,48,19,194/-
23. In view of the aforesaid discussion, we answer the question of
law in favour of the Revenue and against the respondent-assessee and
uphold levy of penalty u/s 271(1)(c) of the Act in respect of loss on
account of investments, vehicle and disallowance under Section 43B.
The claims were ex facie wrong being contrary to fundamental/basic
principles of accounts and Act, would not have escaped notice or
missed. However, we do not think penalty was justified and proper on
the wrong claim for depreciation of plant and machinery as the legal
position on the said claim was debatable.
The appeal is disposed of. There will be no order as to costs.
SANJIV KHANNA, J.
SANJEEV SACHDEVA, J.
SEPTEMBER 12, 2013
VKR
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