No disallowance for an exp. if its details are furnished and reasonableness is proved by assessee

IT: Where assessee produced complete details of purchase expenditure and further quantum of said expenditure was also reasonable, disallowance of expenditure could not be sustained

Customs clear gold at Mumbai airport: officials

The customs department has cleared more than a tonne of gold, part of which was owned by Bank of Nova Scotia(BNS.TO), the biggest gold importing bank, at the Mumbai airport after rule clarifications at a high-level meeting held last month, industry and bank officials said on Saturday.

Gold imports into India, the world's biggest buyer of the metal, had virtually stopped after a July 22 circular which tied domestic consumption to exports.

"More than one tonne of gold was stuck at Mumbai airport and everything has been released. People have taken delivery of gold and the festival season has started with a good news for exporters," Pankaj Kumar Parekh, vice chairman of the Gems and Jewellery Export Promotion Council told Reuters.

The resumption of imports after a two month gap is positive for exporters like Rajesh Exports(REXP.NS) and Shree Ganesh Jewellery(SHRG.NS) ahead of the peak Christmas season.

It is also positive for domestic jewellers in the run up to the festival season, which peaks with Dhanteras in November, the biggest gold buying festival.

"We were after the customs since two months and finally our consignment has been cleared. We will start processing our orders from Monday," said an official with a private bullion importing bank in Mumbai, who wished not to be named due to company policy.

India, battling with a record high trade deficit and a weak currency, is trying to curb imports of dollar-denominated gold, the most expensive non-essential item in its import bill.

India may import a total of 30 tonnes in October, half of the normal average, out of which 6 tonnes might go for exporters and 24 tonnes for the domestic market, Parekh said on October 1.

India imported 393.68 tonnes of the yellow metal from April to September 25, slightly higher than the normal average of 60 tonnes per month.

A finance ministry official estimated gold imports at between 750 and 800 tonnes in the fiscal year through March 2014.

Amended Reverse Mortgage norms; insurers included, grant period for them is residual life and 12 yea

IT : Reverse Mortgage (Amendment) Scheme, 2013 - Amendment in paragraphs 2, 3, 5 & 6

INCOME TAX APPELLATE TRIBUNAL:BANGALORE BENCHES:BANGALORE REVISED CONSTITUTION FOR THE WEEK FROM 07/10/2013 TO 10/10/2013

[unable to retrieve full-text content]INCOME TAX APPELLATE TRIBUNAL:BANGALORE BENCHES:BANGALORE REVISED CONSTITUTION FOR THE WEEK FROM 07/10/2013 TO 10/10/2013 {ad} For more information...

Value of SIM-cards is includible in value of telecommunication services

ST: Value of SIM cards is includible in value of telecommunication services provided by telecom operators

Directorship of shareholder not relevant for revival of the Company under the 1956 Act

CL: Where applicant was a major shareholder of a company which was under an order of being wound up, it was irrelevant whether he was not a director of such company in considering his eligibility to apply for revival under section 391

Construction firms top service tax amnesty charts

If the applications for availing of the government’s service tax amnesty scheme are any indication, companies involved in construction and works contracts might well be among the biggest evaders of service tax. According to preliminary information with the finance ministry, these two sectors account for the bulk of the application; transportation and supply of manpower follow. The Service Tax Voluntary Compliance Encouragement Scheme (VCES), announced in Budget 2013-14, had drawn 3,681 applications declaring tax to the tune Rs 897 crore as on September 30. Of this, tax of Rs 58 crore had already been paid, while the rest was to be paid by December 31, when the scheme would close. The scheme is likely to bring to the exchequer about Rs 1,500 crore this year — 50 per cent more than the initial internal estimate of Rs 1,000 crore. A finance ministry official said some of these applications that didn’t meet the eligibility criteria might be rejected. But the exchequer might still get about Rs 1,500 crore. The worry, however, is that many taxpayers have stopped making regular payments and are applying under the scheme to avoid interest, penalty and prosecution on evasions since 2007. Moreover, under VCES, service tax defaulters can pay half their dues by December 2013 and the rest by June 2014. Generally, the service tax collected has to be paid to the government in a month. Payment defaults in tax collections exceeding Rs 50 lakh become non-bailable offence only after six months from the due date. The underreporting of services would be even higher. Services tax is levied at 12 per cent and at that rate the undisclosed amount would be Rs 7,475 crore. However, as abatement is allowed on many services, the value of total business that goes unreported would be higher. In case of flats, abatement is 70 per cent and the rate varies in other categories of construction, works contract, etc. Now, assuming an abatement rate of 70 per cent, this would mean services worth Rs 24,917 crore were not reported. “The trend emerging as of now is that a lot of taxpayers from the construction and works contracts are applying for the scheme,” said another finance ministry official. An addition of Rs 1,500 crore would be a major boost to service tax collections this year, pegged at Rs 1,80,141 crore; and, declaration of service tax dues could add only a bit to the country’s GDP. The underreporting of business worth Rs 24,917 crore would account for only 0.24 per cent of India’s GDP in 2012-13. However, the exercise would bring new taxpayers to the government and add to GDP in subsequent years. At present, the services sector contributes about 65 per cent to GDP, while service tax constitutes less than a third of total indirect tax collections. At present, of the 1.7 million registered assesses under service tax, only 700,00 are filing returns; some are exempted and some have turnovers of less than Rs 10 lakh. According to government estimates, service tax evaders deprived the exchequer of over Rs 9,872 crore during April-December 2012. During this period, 4,133 cases of service tax defaults were detected; over Rs 1,969 crore has been realised from these defaulters. A defaulter can avail of the one-time scheme on the condition that he files a truthful declaration of service tax dues since October 2007 and makes the payment in one or two instalments. This is for the first time that an amnesty scheme has been announced for service tax evaders. A Voluntary disclosure of income scheme had been launched by the finance ministry in 1997 and it had helped increase income-tax collections dramatically that year.

Share of profit from AOP is includible in book profits to determine MAT

IT: Share of profit from AOP is includible in book profits to determine MAT

Production Target Missed: Import Of Three Million Cotton Bales Expected

Pakistan is likely to import about 3 million bales of cotton worth $1.2 billion to meet the requirements of local industry, as production target of the crop will not be met, official sources revealed. Currently cotton prices in Pakistan are the lowest as compared to other countries of the region. Cotton price in Pakistan is 1.79 dollar per kg (Rs 190.07) against 3.38 dollar per kg (Rs 358.61) in China and 2.19 dollar per kg (Rs 232.35) in India, industry sources revealed to Business Recorder.



The Cotton Crop Assessment Committee (CCAC) has projected cotton production target for the current season (2013-14) at 11.95 million bales against the initial target of 13.22 million bales, while the local industry requirement is about 13 million bales. Sources further said that there is no restriction on import and export of cotton. Pakistan exports about 2.5-3 million bales every year and to date 1.5 million bales of cotton have so far been exported. The country is likely to produce 11.95 million bales, but due to shortage of fine quality and long staple cotton, Pakistan has to import it from India and China.



Textile industry stakeholders, while talking to Business Recorder, expressed serious concerns over the expected decline in cotton production, saying that the industry is likely to import about 3 million bales to meet the domestic requirements for the current year, which would result in huge burden on the industry. The decline in cotton production would not only result in price escalation and shortage of raw material, but would also result in negatively affecting value-added textile export, they maintained, adding that the expected decline in commodity production would also deprive the country of valuable foreign exchange earnings.



According to the officials, during 2013-14, cotton crop was sown on an area of 5.4 million acres in Punjab against the target of 6 million acres, showing 9% decrease in target and 5.2% decrease in the last year's sown area. Rain and floods further damaged 0.12 million acres; said official, adding that decrease in sowing was mainly attributed to low price of seed cotton during the last two-three years and farmers' preference to sow maize, sugarcane and rice crops due to monetary advantages over cotton. Moreover, rains have delayed harvesting of potato in Upper Punjab, which has also contributed to late / less sowing of cotton crop in those areas.



Cotton on about 1.41 million acres was sown in Sindh against 1.6 million acres last year depicting 13% decrease, besides early sowing in Lower Sindh was attacked by Pink bollworm and Mealy bug and 5-10% of Kacha area was damaged by floods in Upper Sindh. According to the CCAC estimates, Punjab would produce 8.7 million bales against the initial projection of 9.6 million, Sindh 3.15 million bales against 3.5 million bales, Balochistan 0.108 against 0.18 million bales and Khyber Pakhtunkhwa 0.00043 million bales.

Source:- brecorder.com

India To Top Infrastructure Goods Imports By 2020: Report

08-Oct-2013

India will surpass the US as the biggest importer of goods needed for infrastructure projects by 2020, according to the latest trade forecast report released by Hongkong and Shanghai Banking Corp. Ltd (HSBC) on Tuesday.



India will continue to hold this position till 2030, as it builds civil infrastructure, bolstering demand for overseas goods, the report said. China is set to become the top importer of investment equipment (machinery required by businesses to boost production) by 2030 as it continues to invest in manufacturing productivity.



India is not featured in the top five list of largest exporters of infrastructure-related goods forecast in 2013, according to the report. China tops this list followed by the UAE, the US and Germany. However, according to the report, India is set to become the third-largest exporter of infrastructure-related goods by 2030 pushing the US to fourth place.



“Rising middle classes across Asia’s rapidly emerging markets, especially India and China, will drive significant infrastructure demand in the region. Aspirations of the new middle class and rapid urbanization will force India to upgrade its civil infrastructure, thus pushing up demand for overseas infrastructure-related goods,” said Sandeep Uppal, managing director and head of commercial banking at HSBC India.



Growing Asian economies will take an increasing share of infrastructure-related imports over time, with Malaysia, Korea and Vietnam moving up the rankings, the report said. Excluding the US, Mexico is the highest ranking non-Asian importer of total infrastructure goods, ahead of Brazil.



The report said that trade in investment equipment will increase more rapidly than trade in goods for infrastructure in the years to 2030, in part due to the pivot in China’s economic focus towards consumer-led growth and next generation technology.



“Asia is forecast to see the most rapid growth in merchandise trade in the decade to 2030 led by India, China and Vietnam at an average of more than 10% a year. Yet advanced European economies—such as the UK, France and Germany—are also forecast to expand their exports of goods at rates of 4-5% a year on average over this period, while average growth in US goods exports will be closer to 6%,” it said.



India has said it needs to invest Rs.1 trillion over the next five years in its decrepit infrastructure, which is seen as a drag on economic growth, and is looking to the private sector to share the burden.



The Indian economy grew at its slowest quarterly pace in four years at 4.4% in the three months ended 30 June, compared with 4.8% in the preceding quarter, belying hopes of the economy having bottomed out.



Source:- livemint.com

Export Of Soybean Meal Falls, Though Marginally

08-Oct-2013

During current oil year October 2012 to September 2013, exports of Soybean meal was 34,73,133 MT as against 36,22,909 MT last year, marginally decrease by 4.13%. Exports of Soybean meal during September, 2013 was 1,73,949 tones as compared to just 2,864 tons in September, 2012.



During the current oil year, Iran, Japan, Japan, France, Thailand, Vietnam, Indonesia and Korea are the major destinations for Indian Soybean meal exports, said the spokesman of Soybean Processors' Association of India (SOPA), Rajesh Agrawal, who is also the coordinator of SOPA.



On a financial year basis, the export during April 2013 to September 2013 was 8,76,294 MT as compared to 8,37,078 MT in the same period of previous year showing marginal increase of 4.68%, added Agrawal.



The data has been collected and compiled by SOPA based on the information received from the members, port authorities and other agencies. The data does not include exports to Pakistan, Nepal and Bangladesh by rail or road.



Iran has emerged as the largest importer of Soybean meal from India during the year. However, one can hope that the exports may be the its current level, in case it doesn't go up in future, said Agrawal.

Source:- http://timesofindia.indiatimes.com

Leather Sector Aims To Hit $6B Exports With 20% Growth

08-Oct-2013

The leather industry has expressed strong optimism over achieving a high double digit growth in exports this year and is aiming for total leather exports of $6 billion on the back of revival in Europe, stronger growth outlook in US and exporters’ penetration into more markets.



“The present financial year has been a good one. According to latest data, the export of leather and leather products during April–August period has reached $2,370.69 million, against $2,103.12 million during the same period last year, registering a growth of 12.72 per cent in dollar terms,” according to Rajendra K Jalan, chairman, Council for Leather Exports (CLE).



“Revival of European market, projected export growth of 18-20 per cent in US market and greater penetration in markets like Russia, Japan, South Africa, UAE and even China have given us hopes of registering an export growth of 20 per cent in FY14 and thereby achieving the export target of $6 billion,” he added.



After achieving a significant export growth of about 23 per cent at $4,868.71 million in 2011-12, Indian leather industry was hopeful of reaching $6 billion exports in 2012-13. However, the persistent crisis in the major markets of European Union led to a fall in exports for the first 10 months of 2012-13. Nevertheless, exports recovered in the last two months of 2012-13 and ended the year 2012-13 with total exports of $4.99 billion, recording a marginal growth of 2.53 per cent.



European Union, a major export destination for Indian leather industry occupying a share of 70 per cent in total exports, is passing through recession and hence the industry has been looking for the new avenues to enhance exports.



“The US market is on the up-swing. Our export of leather and leather products to USA during the first quarter has shown a significant growth of 14.47 per cent, compared with the year-ago period. As USA is the largest importer of leather and leather products in the world and our share in this important market is less than 1.4 per cent, it is necessary to undertake aggressive marketing efforts in this country to promote India’s brand image and enhance market share in the long run,” said R Ramesh Kumar, executive director, CLE.



China is the largest supplier of leather and leather products to the US, accounting a share of 72.21 per cent of USA’s total leather import trade. This is followed by Vietnam’s 6.77 per cent, Italy with 5.72 per cent, Indonesia’s 2.74 per cent, Brazil’s 1.73 per cent. India is the 7th largest supplier to USA accounting for a share of 1.31 per cent in the USA’s total leather import trade.



However, CLE pointed out that Indian leather industry needs to achieve considerable progress in key areas like capacity modernisation and augmentation, product and market diversification, infrastructure development, enhancing raw material availability and human resources development so as to achieve equitable and sustainable growth of the leather industry, both on the export and domestic fronts.

Source:- mydigitalfc.com

Bk Chaturvedi Panel On Surplus Coal Utilisation To Submit Report By Oct-End

08-Oct-2013

A panel headed by B K Chaturvedi to look into the possibility of utilisation of surplus coal from captive mines by power utilities, will submit its report to the Coal Ministry by the end of this month.



"We will submit the report by the end of this month," B K Chaturvedi told reporters here.



The panel is looking at utilising surplus coal by creating a bank or a common pool that will supply the fuel to the utilities.



"Coal India is also a member of the committee and will be consulted before finalising the report," he said, replying to the question of CIL's reservations on the proposed coal banking policy.



"When we submit the report, we will finalise it together with them," he added.



Coal imports by Indian companies had touched a record of 137.56 million tonnes last fiscal to meet the shortfall, despite meeting the 97 per cent domestic supply target at 557.70 million tonnes.



The fuel was mainly sourced by imports from countries such as Indonesia, South Africa and Australia.



Power companies have set a target of 82 million tonne for coal import during the current financial year (2013-14).



Coal India, which accounts for 81 per cent of the country's coal production, missed its target of 464 MT last fiscal. It had produced 452.2 MT.



The estimated coal production through CILBSE -1.05 % sources during the current fiscal is 492 MT. Out of this, 379 is earmarked for the power sector.

Source:- economictimes.indiatimes.com

India Turmeric, Jeera Rise On Export Demand

08-Oct-2013

Traders expect local demand to rise in the festive season.



Turmeric cultivation usually starts in the last week of May and continues until August. A lengthy harvesting process starts from January.



At 1013 GMT, the most-actively traded turmeric contract for November delivery was 2.09 percent higher at 5,090 rupees per 100 kg on the National Commodity and Derivatives Exchange (NCDEX).



"Export and domestic festive demand is expected to support prices in the short-term," said an analyst from Angel Commodities.



India will celebrate festivals such as Dussehra this month and Diwali in the first week of November.



Spot turmeric prices rose 60 rupees to 4,970 rupees per 100 kg at Nizamabad, a key market in Andhra Pradesh.



Indian jeera futures rose on demand from overseas buyers, though higher supplies in local markets and prospects of better sowing weighed on sentiment.



Jeera, or cumin seed, is a winter crop sown from October. Farmers mainly depend on rains to moisten the land for sowing.



The actively traded jeera contract for November delivery was up 0.61 percent at 13,100 rupees per 100 kg on the NCDEX. It hit a contract low of 12,800 rupees on Oct. 4.



"Export demand has picked up at lower prices and this is supporting the upside," said Jayesh Patel, a trader from Unjha, a key market in Gujarat. "The upside would be restricted because sowing prospects are good."



At Unjha, supplies were 6,000-7,000 bags of 60 kg each against expected 3,000-4,000 bags.



Traders expect jeera sowing to be better this season because of ample rains in the top producer Gujarat.



Spot jeera fell 29 rupees to 13,300 rupees per 100 kg in Unjha.

Source:- in.reuters.com

Patna region of income tax department achieves highest growth in tax collection

Patna region of the income tax department comprising Bihar and Jharkhand has achieved 27.9% net growth in tax collection in the first half of 2013-14 compared to the corresponding period in the last financial year.

It is the highest growth among the regions and substantially higher than the mean national growth of 12% in tax collection. The total revenue collection by Patna region increased to Rs 3,585.85 crore in H1 of 2013-14 against Rs 2,802.5 crore in the corresponding period in 2012-13.

Chairperson of Central Board of Direct Taxes (CBDT), New Delhi, Sudha Sharma on Tuesday congratulated Debashish Dasgupta, chief commissioner, I-T (cadre controlling authority), Bihar and Jharkhand, and the Patna region staff for the stupendous success.

Sharma, through a videoconference, reviewed the performance of Patna region which has maintained consistent growth in tax collection, said an I-T official pleading anonymity.

Member (revenue) of CBDT, Parvinder S Behuria, emphasized the need for constant team efforts by the I-T officials for collection of arrear. She also elaborated on non-filer management system (NMS) which is a special computer system developed to generate a list of non-filers of I-T returns and generates and issues notices to each of them.

Direct tax collection up 10.66% in Apr-Sept at Rs 3 lakh crore

Amid a slowing economy, the gross direct tax collections rose only 10.66 per cent to Rs 3.01 lakh crore during the April-September period of 2013-14 fiscal. The collections totalled Rs 2.72 lakh crore in the same period of 2012-13 fiscal. The government has fixed direct tax collection target of over Rs 6.68 lakh crore for the current fiscal, envisaging a growth of 19 per cent, as against Rs 5.65 lakh crore in 2012-13. Gross collection of corporate taxes increased 7.93 per cent to Rs 1,92,308 crore during April-September, from Rs 1,78,173 crore in the year-ago period, the Finance Ministry said in a statement today. Gross collection of personal income tax was up by 16.15 per cent to Rs 1,06,231 crore in the first six months of this fiscal, from Rs 91,463 crore in the year-ago period. Net direct tax collections rose 10.72 per cent to Rs 2,50,953 crore during April-September, as against Rs 2,26,653 crore in the year-ago period, according to the statement. Securities Transaction Tax or STT mop-up stands at Rs 2,210 crore. Wealth tax collection posted a growth of 5.27 per cent to Rs 499 crore, from Rs 474 crore.

Gems, Jewellery Exports Drop 10.25% In August

08-Oct-2013

India's gems and jewellery exports dropped 10.25% year-on-year to $2.8 billion in August, due to inadequate availability of gold.



In August last year, these exports stood at $3.1 billion, according to the data provided by Gems and Jewellery Export Promotion Council (GJEPC).



"The fall in exports of gems and jewellery exports is mainly because of shortage of raw-material for jewellery manufacturing. This was because the government had taken various steps to curb gold imports," GJEPC Chairman Vipul Shah told PTI.



India is the largest importer of gold, which is mainly utilised to meet the demands of the jewellery industry.



In August 2013, the exports of gold medallions and coins and gold jewellery have witnessed a sharp decline of 99% and about 47%, respectively.



However, exports of coloured gemstones saw a robust growth of 101.4% and silver jewellery about 68% during the period under review.



The major markets for India's jewellery exports are the US, Europe, Middle-East, Hong Kong and Japan.



During April-August 2013, the gems and jewellery exports declined 13.4% year-on-year to $13.8 billion.



Seeking to reduce the import of gold, the Reserve Bank had prohibited inward shipment of gold coins, medallions and dores without license.



The government had said that from now onwards, import of gold in the form of coins and medallions is prohibited and henceforth all import of gold in any form or purity shall be subject to a licence issued by DGFT prescribing 20-80 scheme.



Also, on July 13, customs duty on gold, silver and platinum was hiked to 10%.



The government had raised the duty on gold with a view to contain its non-essential imports, mainly responsible for spurt in Current Account Deficit (CAD) which touched at a record high of 4.8% in 2012-13.

Source:- www.business-standard.com

Indian Rupee Ends Flat At 61.79 Against Us Dollar

The Indian rupee ended flat at 61.79 against the US dollar on alternate bouts of demand and supply for the Greenback, amid the central bank's steps to increase liquidity in the system.



The Reserve Bank of India (RBI) on Monday made a surprise announcement to improve liquidity conditions in the banking system by reducing in the marginal standing facility (MSF) rate by 50 basis points to 9 per cent with immediate effect.



At the Interbank Foreign Exchange (Forex) market, the domestic unit resumed higher at 61.68 a dollar from previous close of 61.79 and moved in a range between 61.60 and 61.91 before settling at its overnight closing level of 61.79.



The dollar demand from importers matched the supply from exporters, resulting the rupee to end stable.



"Despite yesterday's announcement regarding cut in the MSF, rupee was not seen gaining today. The rupee was seen sustaining above its support level of 61.40 for the third straight session. The overall international markets were also seen trading flat. The consistent break of these levels could only welcome further gains," Abhishek Goenka, Founder and CEO, India Forex Advisors, said.



The dollar index was up by 0.07 per cent against a basket of six major global currencies.



Meanwhile, the BSE Sensex on Tuesday pared its initial gains, still closing 88.51 points higher. According to data available with the stock exchange, foreign funds bought shares worth Rs 494.13 crore on Monday.

Source:- businesstoday.intoday.in

CUP method to be preferred over TNMM for determination of ALP of commission paid to AEs

IT/ILT : For computing arm's length price of commission paid to associated enterprise, CUP method is most appropriate

Customs Circular No 39/2013 dated 01-10-2013

Government of India

Ministry of Finance

Department of Revenue

Central Board of Excise & Customs

******

Circular No. 39/2013-Customs

New Delhi, the 01 October, 2013

To

All Chief Commissioners of Customs/Customs (Preventive)

All Chief Commissioners of Customs and Central Excise

All Commissioners of Customs / Customs (Preventive)

All Commissioners of Central Excise and Customs

All Directors General under CBEC.

Subject: Clarification on the commencement of the interest free period of 90 days under Section 61 of the Customs Act, 1962 – Reg.

Madam/Sir,

A reference is invited to Sub-section 2 (ii) of Section 61 of the Customs Act, 1962, which provides that where any warehoused goods specified in sub-clause (b) of sub-section (1) of Section 61 remain in a warehouse beyond a period of ninety days, interest shall be payable at such rate, as may be fixed by the Board, on the amount of duty payable at the time of clearance of the goods in accordance with the provisions of section 15 on the warehoused goods, for the period from the expiry of the said ninety days till the date of payment of duty on the warehoused goods. A doubt has been raised as to when the period of ninety days would commence.

2. In this regard, the term ‘warehoused goods’ is defined under Section 2 (44) of the Customs Act, 1962 as ‘goods deposited in a warehouse’. Section 61 further indicates that the warehoused goods have to remain in the warehouse beyond a period of ninety days, for the interest to be chargeable.


3. Thus, a harmonious reading of the wording of Sub-section 2 (ii) of Section 61 and the definition of the term ‘warehoused goods’ indicates that when the goods deposited in a warehouse remain warehoused beyond a period of ninety days, then the interest starts accruing. In other words, the relevant date when the period of 90 days would commence would be the date of depositing the goods in the warehouse.


4. It is thus clarified that the period of 90 days, under Section 61 (2) (ii) of the Customs Act, 1962, would commence from the date of deposit of goods in the warehouse.


5. Any difficulty faced in the implementation of this circular may be brought to the notice of the Board.


6. Please acknowledge receipt.


7. Hindi version follows.

Yours faithfully,

(M. Satish Kumar Reddy)

Director (ICD)

F. No. 473/1/2012-LC

Income from activities carried out outside India as a part of divisible contract isn't taxable in In

IT/ILT: In case of divisible contract of construction of offshore platform, activities carried out outside India much before date of arrival of structure would not be taxable in India

No sec. 68 addition if payers were regularly assessed to tax and lower authorities affirmed authenti

IT: Addition as cash credit was not sustainable where assessee-developer received amounts from allottees, who were regularly assessed to tax

Mere agony of loss doesn't rule out application of unjust enrichment

ST/ECJ : Even where charge of tax is wholly incorporated in price, taxable person may suffer as a result of a fall in volume of his sales/revenue; therefore, mere suffering of loss does not rule out unjust enrichment

Additions made by SetCom couldn't be interfered with if assessee didn't make true disclosure of inco

IT: Where Settlement Commission made addition over and above amount offered, as one partner's statement did not tally with records submitted, order could not be interfered with

COMMISSIONER OF INCOME TAX, DELHI-I Vs. M/S SAMTEL INDIA LIMITED

$~Part-IIB (R-40) * IN THE HIGH COURT OF DELHI AT NEW DELHI + INCOME TAX APPEAL NO. 130/2000 Date of decision: 26th September, 2013 COMMISSIONER OF INCOME TAX, Delhi-I ..... Appellant Through Mr. N.P. Sahni, Sr. Standing Counsel & Mr. Ruchesh Sinha, Advocate. versus M/S SAMTEL INDIA LIMITED ..... Respondent Through Nemo. CORAM: HON'BLE MR. JUSTICE SANJIV KHANNA HON'BLE MR. JUSTICE SANJEEV SACHDEVA SANJIV KHANNA, J. (ORAL): This appeal by the Revenue, which pertains to Assessment Year 1995-96, was admitted for hearing vide order dated 30th January, 2001 on the following substantial questions of law:- "(i) Whether ITAT was justified in not deciding the issue which was before it namely whether Rs.3,95,11,874/- being the excise duty on raw material consumed during the year is allowable u/s. 37(1) as claimed by the respondent before A.O.? ITA No. 130/2000 Page 1 of 6 (ii) Whether the assessee is entitled to MODVAT credit on account of excess of excise duty/additional customs duty, paid by it on purchase of raw material, over the duty payable on finished goods, in the year of accrual i.e. when the raw material is purchased or in the year of receipt, when the assessee is maintaining accounts on mercantile system of accounting?" 2. The assessment order records that there was accumulation of unutilised input MODVAT credit of Rs.3.95 crores. The assessee had claimed this as a deduction in the computation of income. This claim was made in the revised return. Assessee premised that they had paid excise duty and additional customs duty and this constitutes an expense under Section 37(1) of the Income Tax Act, 1961 (Act, for short). The claim was rejected by the Assessing Officer observing that the MODVAT credit had not been utilised and could have been utilised in the next year. 3. Commissioner of Income Tax (Appeals) recorded the statement of the assessee that excise duty and additional customs duty paid on the raw material formed part of the cost of the raw material and had to be allowed when the raw material has been consumed. Under the excise rules, additional customs duty and excise duty paid on raw material formed part of MODVAT credit, which was utilised at the time of clearance of goods, subject to fulfilling conditions. The CIT ITA No. 130/2000 Page 2 of 6 (Appeals) observed that the assessee had received refund of MODVAT credit in the subsequent assessment year 1996-97, but it could not be ascertained whether the refund was against the MODVAT credit available as on 31st March, 1995. He also observed that while valuing the closing stock on 31st March, 1995, excise duty paid on input and utilised in the finished goods was not taken into consideration and as per note No. 4 of the accounting policy and note on accounts, excise duty payable on finished goods was accounted for at the time of removal of goods. He observed that whether the cost of raw material utilised for manufacture of finished goods included customs duty or not was not very clear. He further held that the respondent-assessee had got refund and the addition should be confirmed. 4. Income Tax Appellate Tribunal by the impugned order accepted the appeal of the assessee. It was noted that during the relevant previous year the respondent-assessee had consumed raw material of Rs. 146.03 crores, which included MODVAT amount of Rs.24.02 crores. Out of this, the assessee had utilised MODVAT credit of Rs.19.46 crores and the balance Rs.3.95 crores was claimed as a deduction under Section 37(1) of the Act as it was forming part of raw material. The Assessing Officer held that credit in respect of ITA No. 130/2000 Page 3 of 6 MODVAT had accrued and was still available and, therefore, deduction under Section 37(1) was rejected. It was noticed that the refund received from the excise department of Rs.7.16 crores was offered for taxation in the Assessment Year 1996-97 by the respondent-assessee and was accordingly taxed. The tribunal observed that as payment of excise and additional customs duties had been made, it was to be allowed as a deduction under Section 37(1) of the Act. Unutilised MODVAT credit remained on the credit side and was refunded in the next assessment year, i.e., Assessment Year 1996-97, when income of the assessee to the tune of Rs.7.16 crores was taxed on account of refund. This would amount to double taxation of the same amount in the two years. It was also stated that the claim for refund had to be examined by the excise department and there was substantial reduction from the refund claim as made. It was observed that to get the refund the assessee had to make application and only then refund was possible. 5. The issue in question is covered by the decision of the Supreme Court in CIT versus Indo Nippon Chemicals Company Limited , (2003) 11 SCC 452 wherein it was observed that the Assessing Officer/Revenue was not correct in holding that MODVAT credit was irreversible credit available to the manufacturers upon purchase of ITA No. 130/2000 Page 4 of 6 duty paid raw material and it should amount to income, which is liable to be taxed under the Act. However, in the said case it was also noticed that the assessee had uniformly applied the net method, namely, valuing the raw material at purchase price minus MODVAT credit and the order of the Assessing Officer/Revenue was adversely commented upon because they had adopted "gross method" which included the MODVAT credit at the time of purchase and "net method" at the time of valuation of stock in trade. This practice was depreciated. This decision was followed by the Supreme Court in Commissioner of Income Tax versus Shriram Honda Power Equipment Limited, (2013) 352 ITR 481 and in the case of the respondent-assessee in Civil Appeal No. 6449/2012. 6. The facts stated by Commissioner of Income Tax (Appeals) create some doubt and suspicion whether net method was followed by the assessee, but the Assessing Officer has not commented adversely about the same in the assessment order. Findings of the Commissioner of Income Tax (Appeals) are tentative and not firm. In the income tax appeal and the grounds taken, there is no allegation or averment that the respondent-assessee was following "gross method" and not the "net method" or was following two different methods at the time of purchase/opening stock and valuation of the ITA No. 130/2000 Page 5 of 6 stock in hand. As noted above, SLP preferred by the Revenue in the case of the respondent was admitted as Civil Appeal No. 6449/2012 but has been dismissed. 7. In view of the aforesaid position and also noticing the fact that the MODVAT credit paid was brought to tax in the next year, we do not see any ground or reason to interfere with the order of the tribunal. Questions of law are accordingly answered against the Revenue and in favour of the respondent-assessee. The appeal is disposed of. No costs. SANJIV KHANNA, J. SANJEEV SACHDEVA, J. SEPTEMBER 26, 2013 VKR ITA No. 130/2000 Page 6 of 6

COMMISSIONER OF INCOME TAX-III Vs. ARCOTECH LTD (FORMERLY SKS LTD.)

$~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 ITA No. 71/2013 Page 21 of 21

COMMISSIONER OF INCOME TAX-III Vs. ARCOTECH LTD (FORMERLY SKS LTD.)

$~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 ITA No. 71/2013 Page 21 of 21