DCIT, CHENNAI v. Rattha Citadines Boulevard Chennai (P) Ltd., CHENNAI

ITA 243/CHNY/2015 | 2010-2011
Pronouncement Date: 31-07-2015 | Result: Dismissed

Appeal Details

RSA Number 24321714 RSA 2015
Assessee PAN AADCR4383D
Bench Chennai
Appeal Number ITA 243/CHNY/2015
Duration Of Justice 6 month(s) 3 day(s)
Appellant DCIT, CHENNAI
Respondent Rattha Citadines Boulevard Chennai (P) Ltd., CHENNAI
Appeal Type Income Tax Appeal
Pronouncement Date 31-07-2015
Appeal Filed By Department
Order Result Dismissed
Bench Allotted C
Tribunal Order Date 31-07-2015
Date Of Final Hearing 13-07-2015
Next Hearing Date 13-07-2015
Assessment Year 2010-2011
Appeal Filed On 27-01-2015
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : CHENNAI . . . ! ' #$ % [ BEFORE SHRI N.R.S. GANESAN JUDICIAL MEMBER AND SHRI CHANDRA POOJARI ACCOUNTANT MEMBER ] ./ I.T.A.NO.243/MDS/2015 / ASSESSMENT YEAR : 2010-2011 THE DEPUTY COMMISSIONER OF INCOME TAX CORPORATE CIRCLE 5(1) CHENNAI 600 034. VS. M/S. RATTHA CITADINES BOULEVARD CHENNAI (P) LTD NO.37 TTK ROAD ALWARPET CHENNAI 600 018. [PAN AADCR 4383D ] ( &' / APPELLANT) ( ()&' /RESPONDENT) / APPELLANT BY : SHRI. A.V. SREEKANTH IRS JCIT. /RESPONDENT BY : SHRI. K.M. MOHANDASS C.A. / DATE OF HEARING : 13-07-2015 / DATE OF PRONOUNCEMENT : 31-07-2015 / O R D E R PER CHANDRA POOJARI ACCOUNTANT MEMBER THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-V CHENNA I DATED 7.10.2014 FOR THE ASSESSMENT YEAR 2010-2011. ITA NO.243/MDS/2015 :- 2 -: 2. THE GROUND RAISED BY THE REVENUE IS WITH REGARD TO DELETION OF PENALTY BY THE COMMISSIONER OF INCOME TAX (APPEA LS) LEVIED BY THE ASSESSING OFFICER U/S.271(1)(C) OF THE INCOME TAX ACT 1961. 3. THE FACTS OF THE CASE ARE THAT THE ASSESSEE FILE D THE RETURN OF INCOME ON 14-10-2010 DECLARING NIL INCOME WHICH WAS REVISED SUBSEQUENTLY ON 18-03-2011 ADMITTING A LOSS OF C1 2 3 51 488/- AFTER ADJUSTING THE NOTIONAL INCOME OF C4 76 517/- COMPUT ED ON ACCOUNT OF RESTATEMENT OF FOREIGN CURRENCY LOAN LIABILITY. THE CASE WAS SELECTED FOR SCRUTINY AND THE ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) OF THE ACT DISALLOWING THE LOSS CLAIMED BY THE ASS ESSEE AND ASSESSED THE INCOME AT C4 76 517/-. THE ASSESSING OFFICER H AD RELIED UPON THE ORDER OF THE APEX COURT IN THE CASE OF TUTICORIN ALKALI & CHEMICALS FERTILIZERS LIMITED VS. CIT REPORTED IN 227 ITR 172 AND ARRIVED AT THE SAID CONCLUSION ON THE REASON THAT THE ASSESSEE HAS NOT COMMENCED ANY BUSINESS ACTIVITY DURING THE YEAR UNDER CONSIDE RATION. SUBSEQUENTLY NOTICE UNDER SECTION 274 READ WITH SE CTION 271(1)(C) WAS ISSUED BY THE ASSESSING OFFICER SHOWCAUSING TH E ASSESSEE AS TO WHY PENALTY UNDER SECTION 271(1)(C) OF THE ACT CANN OT BE LEVIED FOR FURNISHING INACCURATE PARTICULARS OF INCOME. THE AS SESSING OFFICER HAS NOT CONSIDERED THE SUBMISSION OF THE ASSESSEE AND L EVIED A PENALTY OF C39 63 854/- WHICH WAS 100% OF THE TAX SOUGHT TO BE EVADED HAD THE EXPENDITURE CLAIMED BY THE ASSESSEE IN THE REVISED RETURN OF INCOME ITA NO.243/MDS/2015 :- 3 -: BEEN ALLOWED. AGGRIEVED BY THE ORDER OF THE ASSESSI NG OFFICER MADE U/S.271(1)(C) OF THE ACT DATED 26.09.2013. AGAINST THIS THE ASSESSEE CARRIED THE APPEAL BEFORE THE COMMISSIONER OF INCOM E TAX (APPEALS). 4. THE COMMISSIONER OF INCOME TAX (APPEALS) PLACING RE LIANCE ON THE ORDER OF THE SUPREME COURT IN THE CASE OF CIT VS. RELIANCE PETRO PRODUCTS PVT. LTD 322 ITR 158 (SC ) DELETED THE PENALTY. AGAINST THIS THE ASSESSEE IS IN APPEAL BEFORE US. 5. THE LD. DEPARTMENTAL REPRESENTATIVE POINTED OUT TH AT THE ASSESSEE HAD FILED A REVISED RETURN OF INCOME AND I T WAS OBVIOUSLY AS PER THE PROVISIONS OF SUB SECTION (5) OF SECTION 139 WHICH READS AS UNDER: (5) IF ANY PERSON HAVING FURNISHED A RETURN UNDER SUB-SECTION (1) OR IN PURSUANCE OF A NOTICE ISSUED UNDER SUB-S ECTION (1) OF SECTION 142 DISCOVERS ANY OMISSION OR ANY WRONG STATEMENT THEREIN HE MAY FURNISH A REVISED RETURN AT ANY TIME BEFORE THE EXPIRY OF ONE YEAR FROM THE END OF THE R ELEVANT ASSESSMENT YEAR OR BEFORE THE COMPLETION OF THE ASS ESSMENT WHICHEVER IS EARLIER: PROVIDED THAT WHERE THE RETURN RELATES TO THE PREVI OUS YEAR RELEVANT TO THE ASSESSMENT YEAR COMMENCING ON THE 1 ST DAY OF APRIL 1988 OR ANY EARLIER ASSESSMENT YEAR THE RE FERENCE TO ONE YEAR AFORESAID SHALL BE CONSTRUED AS A REFERENC E TO TWO YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR THE ASSESSEE HAD ALREADY FILED THE ORIGINAL RETURN OF INCOME ON 14.10.2010 . THEREFORE WHEN THE ASSESSEE FILED A REVISED RETURN IT SHOULD HAVE BEEN WARRANTED BY EITHER OF THE FOLLOWI NG TWO SITUATIONS: ITA NO.243/MDS/2015 :- 4 -: A) THE ASSESSEE DISCOVERS ANY OMISSION B) THE ASSESSEE DISCOVERS ANY WRONG STATEMENT THERE IN IN THE ORIGINAL RETURN OF INCOME THE ASSESSEE HAD FILED A 'NIL' INCOME WHEREAS IN THE REVISED RETURN OF INCOME THE ASSESS EE HAS CLAIMED A LOSS OF C1 25 30 730/-. THEREFORE IT CAN BE SAFEL Y STATED THAT THE OMISSION OR THE WRONG STATEMENT BASED ON WHICH THE ASSESSEE CHOSE TO REVISE BY FILING A REVISED RETURN IS THE CLAIM O F LOSS OF C1 25 30 730/- WHICH WAS IN TURN BASED ON THE EXPENDITURE. HOW WA S THE LOSS ARRIVED? IN THIS REGARD THE ASSESSEE SUBMITTED BEF ORE THE CIT (APPEALS) THAT IT FILED A REVISED RETURN CLAIMING L OSS ON ACCOUNT OF EXPENDITURE( ADMINISTRATIVE EXPENDITURE AND FINANCE CHARGES) UNDER THE BONAFIDE BELIEF THAT IT WAS 'REVENUE EXPENDITURE'. IF THAT B E SO THEN THE MOOT QUESTION IS THIS - DID THE ASSESSEE N OT BELIEVE THE VERY SAME EXPENDITURE TO BE 'REVENUE' WHEN IT FILED THE ORIGINAL RETURN OF INCOME ON 14.10.2010? IT FOLLOWED LOGICALLY THAT TH E ASSESSEE BELIEVED THAT THE EXPENDITURE CANNOT BE CLAIMED AS REVENUE W HEN IT FILED THE ORIGINAL RETURN OF INCOME. THAT WAS THE REASON WHY IT FILED A RETURN SHOWING 'NIL' INCOME. HOWEVER FOR REASONS BEST KNO WN TO IT THE ASSESSEE FILED A REVISED RETURN CLAIMING THE VERY S AME EXPENDITURE TO BE 'REVENUE'. 6. THE LD. DEPARTMENTAL REPRESENTATIVE FURTHER SUBMITT ED THAT THE ORIGINAL RETURN OF INCOME HAS BEEN FILED B Y THE ASSESSEE WITHIN ITA NO.243/MDS/2015 :- 5 -: THE TIME ALLOWED DUE DATE FOR FILING RETURN OF INCO ME UNDER SECTION 139(1) OF THE ACT. BY THAT TIME THE ACCOUNTS HAVE BEEN FINALIZED AND AUDIT OF THE ACCOUNTS WAS ALSO OVER. THEREFORE THE RE COULD BE NO CHANGE IN THE FACTS AND FIGURES BE IT THE PROFIT A ND LOSS ACCOUNT THE BALANCE SHEET OR THE AUDIT REPORT OR THE DIRECTOR'S REPORT. THE ORIGINAL RETURN OF INCOME HAS BEEN FILED BASED ON THESE FIGU RES AND FACTS. BY SIGNING THE VERIFICATION COLUMN IN THE RETURN OF IN COME THE ASSESSEE HAD DECLARED THAT THE INFORMATION IN THE RETURN AND THE SCHEDULES THERETO ARE CORRECT AND COMPLETE AND THE AMOUNT OF TOTAL INCOME AND OTHER PARTICULARS SHOWN THEREIN ARE TRULY STATED AN D ARE IN ACCORDANCE WITH THE PROVISIONS OF THE INCOME TAX ACT 1961. THE REFORE AT THE TIME OF FILING OF ORIGINAL RETURN OF INCOME THE ASSESSE E WAS FULLY AWARE OF THE CORRECTNESS AND COMPLETENESS OF THE INFORMATION FURNISHED IN THE RETURN OF INCOME. THE ASSESSEE CHOSE TO FILE A RE VISED RETURN OF INCOME BASED ON THE SAME SET OF FACTS AND FIGURES PROFIT AND LOSS ACCOUNT AND THE BALANCE SHEET AS DECLARED IN THE OR IGINAL RETURN OF INCOME BUT CLAIMING LOSS ON ACCOUNT OF EXPENDITUR E. THE VERY ACT OF FILING A REVISED RETURN OF INCOME CLAIMING LOSS AS AGAINST 'NIL' INCOME IN THE ORIGINAL RETURN BY ITSELF AMOUNTS TO FURNISHING OF INACCURATE PARTICULARS WARRANTING PENALTY U/S 271(1)(C). ASSU MING THAT THE CLAIM OF THE ASSESSEE THAT IT FILED THE REVISED RETURN OF INCOME ON THE BONAFIDE BELIEF THAT THE EXPENDITURE WAS REVENUE THE FACT T HAT THE ITA NO.243/MDS/2015 :- 6 -: ASSESSEE CHOSE TO MEEKLY ACCEPT THE DISALLOWANCE AN D DECIDE NOT TO CONTEST THE SAME IN APPEAL SUPPORT'S THE ARGUMENT O F THE REVENUE THAT THE ASSESSEE FILED THE REVISED RETURN CONSCIOUSLY A ND FULLY AWARE THAT THE CLAIM WAS WRONG AND SHOULD NOT HAVE BEEN MADE I N THE FIRST PLACE . 7. THE LD. DEPARTMENTAL REPRESENTATIVE FURTHER CONTEND ED THAT THE CIT(APPEALS) IN HIS ORDER REFERRED TO THE R ELIANCE OF THE LD. AUTHORISED REPRESENTATIVE FOR ASSESSEE ON THE DECI SION OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. M/S. GEM GRANITES (KARNATAKA) IN TAX CASE (APPEAL) NO.504 OF 2009 DAT ED 12.11.201 3 WHEREIN IT WAS HELD THAT FOR SUSTAINING PENALTY TH E BONAFIDE EXPLANATION OF THE ASSESSEE MUST BE LOOKED INTO SO THAT THE CONTUMACIOUS CONDUCT OF THE ASSESSEE FOR THE PURPOS E OF SUSTAINING THE PENALTY WOULD BE TAKEN AS A CONDITION THAT WAS THE MAIN REQUIREMENT UNDER SECTION 271(1)(C) OF THE ACT. A S POINTED OUT THE VERY ACT OF FILING A REVISED RETURN OF INCOME CLAIM ING LOSS AS AGAINST 'NIL' INCOME IN THE ORIGINAL RETURN BY ITSELF AMOUN TS TO FURNISHING OF INACCURATE PARTICULARS WARRANTING PENALTY U/S 271(1 )(C). THE CONTUMACIOUS CONDUCT OF THE ASSESSEE WAS ESTABLISHE D BECAUSE THE ASSESSEE MAKES A CLAIM OF LOSS IN THE REVISED RETUR N OF INCOME BASED ON THE VERY FACTS AND FIGURES WHICH WERE EXISTING W HEN THE ASSESSEE FILES THE ORIGINAL RETURN OF INCOME. CONSEQUENTLY IN THIS CASE ITA NO.243/MDS/2015 :- 7 -: PENALTY U/S 271(1)(C) WAS ATTRACTED AND IT WAS PRAY ED THAT THE ORDER OF THE ASSESSING OFFICER BE UPHELD. 8. ON THE OTHER HAND THE LD. AUTHORISED REPRESENTATIV E FOR ASSESSEE RELIED ON THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) AND SUBMITTED THAT THE EXPENDITURE CLAIM ED BY THE ASSESSEE WAS DISALLOWED ONLY ON ACCOUNT OF DIFFERENCE OF OP INION BETWEEN THE ASSESSEE AND THE ASSESSING OFFICER HENCE THE LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT WAS UNCALLED FOR. THE ASSESSEE HAD FURNISHED ALL THE DETAILS OF ITS EXPENDITURE AS WELL AS INCOME IN ITS RETURN OF INCOME WHICH DETAILS IN THEMSELVES WER E NOT FOUND TO BE INACCURATE NOR COULD BE VIEWED AS CONCEALMENT OF INCOME ON ITS PART. IT WAS UPTO THE ASSESSING OFFICER TO ACCEPT ITS CLA IM IN THE RETURN OR NOT. MERELY BECAUSE THE ASSESSEE HAD CLAIMED THE EX PENDITURE WHICH CLAIM WAS NOT ACCEPTED THAT BY ITSELF WOULD NOT ATT RACT PENALTY UNDER SECTION 271(1)(C) OF THE ACT. THE ASSESSEE HAD FILE D THE RETURN OF INCOME CLAIMING LOSS ON ACCOUNT OF EXPENDITURE INCURRED DURING THE YEAR AS REVENUE EXPENDITURE ALLOWABLE UNDER SECTION 30 TO 37 OF THE INCOME TAX ACT AS THE ASSESSEE HAS ALREADY TAKEN STEPS TO COMMENCE ITS ACTIVITIES AND ALSO THE EXPENSES ARE MAINLY COM PRISING OF INTEREST PAYMENT TO THE BANK OF C1 25 30 730/- ON THE LOAN BORROWED AND OTHER REGULAR ADMINISTRATIVE EXPENSES OF C2 97 275/ - WHICH WAS DISALLOWED BY THE ASSESSING OFFICER UNDER THE CONTE NTION THAT THE ITA NO.243/MDS/2015 :- 8 -: ASSESSEE HAS NOT COMMENCED ITS BUSINESS OPERATIONS HOLDS GOOD IN ASSESSING THE INCOME OF THE ASSESSEE BUT NOT FOR LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT. IT WAS HELD BY VARIOUS COURTS THAT LEVY OF PENALTY WAS NOT A NECESSARY CONCOMITANT OF ASSESSMENT PROCEEDINGS. BOTH THE PROCEEDINGS ARE DI FFERENT IN NATURE AND FINDINGS IN ASSESSMENT PROCEEDINGS ARE N OT CONCLUSIVE IN PENALTY PROCEEDINGS. THE BARE FACT THAT IT WAS H ELD IN ASSESSMENT PROCEEDINGS THAT THE ASSESSEE CONCEALED ITS INCOME CANNOT BE MADE THE BASIS OF THE CONCLUSION THAT HE HAD BEEN GUILTY OF DELIBERATELY CONCEALING PARTICULARS OF ITS INCOM E. BEFORE THE ASSESSEE IS HELD LIABLE FOR CONCEALING THE PARTICUL ARS OF INCOME OR FURNISHING INACCURATE PARTICULARS OF SUCH INCOME I T HAS TO BE INDEPENDENTLY FOUND IN PENALTY PROCEEDINGS THAT THE DISPUTED AMOUNT REPRESENTS HIS INCOME. 9. THE LD. AUTHORISED REPRESENTATIVE FOR ASSESSEE FURT HER SUBMITTED THAT THE SUPREME COURT IN THE CASE OF ANANTHRAMAN VEERASINGHAIAH & CO. VS. CIT 123 ITR 457 HAS HELD THAT THE FINDINGS IN THE ASSESSMENT PROCEEDINGS CANNOT BE RE GARDED AS CONCLUSIVE FOR THE PURPOSES OF THE PENALTY PROCEEDI NGS. IT WAS THEREFORE NECESSARY TO RE-APPRECIATE AND RECONSIDE R THE MATTER SO AS TO FIND OUT AS TO WHETHER THE ADDITION MADE IN T HE QUANTUM PROCEEDINGS ACTUALLY REPRESENTS THE CONCEALMENT ON THE PART OF THE ITA NO.243/MDS/2015 :- 9 -: ASSESSEE AS ENVISAGED IN SECTION 271(1)(C) OF THE A CT AND WHETHER IT WAS A FIT CASE TO IMPOSE THE PENALTY BY INVOKING THE SAID PROVISIONS. IT WAS SUBMITTED THAT IN THE INSTANT C ASE THERE WAS NO CONCEALMENT OF INCOME AS THE INCOME ASSESSED WAS ON LY A NOTIONAL INCOME COMPUTED BY RESTATING THE FOREIGN CURRENCY L IABILITY AT THE END OF THE YEAR IN COMPLIANCE WITH ACCOUNTING STAND ARDS WHICH CANNOT BY ANY STRETCH OF IMAGINATION CAN BE CALLED AS CONCEALMENT OF INCOME OR FURNISHING INACCURATE PARTICULARS OF S UCH INCOME. FURTHER THE EXPENDITURE CLAIMED BY THE ASSESSEE WA S UNDER BONAFIDE BELIEF THAT THE SAID EXPENDITURE WAS A REVENUE EXPENDITURE BASED ON THE AUDITED STATEMENTS OF ACCOUNT WHICH CA NNOT BE TERMED AS FURNISHING INACCURATE PARTICULARS OF SUCH INCOME H ENCE LEVY OF PENALTY UNDER SECTION 271(1)(C) IS UNCALLED FOR. IT WAS SUBMITTED THAT IN ORDER TO APPLY THE PROVISIONS OF SECTION 271(1 )(C) THERE HAS TO BE CONCEALMENT OF PARTICULARS OF THE INCOME OF THE ASSESSEE. SECONDLY THE ASSESSEE MUST HAVE FURNISHED INACCURATE PARTICULARS OF ITS I NCOME. IN THE PRESENT CASE IT WAS NOT THE CASE OF THE ASSESSING OFFICER THAT THE ASSESSEE HAS CONCEALED THE PARTICULARS OF ITS I NCOME. THE ASSESSING OFFICER HAS IMPOSED PENALTY ON THE GROUND THAT THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF ITS CLAIM OF EXPENDITURE. 10. THE LD. AUTHORISED REPRESENTATIVE FOR ASSESSEE PLA CED RELIANCE ON THE JUDGMENT OF THE SUPREME COURT IN TH E CASE OF CIT VS. ITA NO.243/MDS/2015 :- 10 -: RELIANCE PETROPRODUCTS (P.) LTD. (CITED SUPRA ) WHEREIN IT WAS OBSERVED AS UNDER (PAGE 164 OF THE REPORT): IN ORDER TO EXPOSE THE ASSESSEE TO THE PENALTY UNLESS THE CASE IS STRICTLY COVERED BY THE PROVISION THE PENALTY PROVISION CANNOT BE INVOKED. BY ANY STRETCH OF IMAG INATION MAKING AN INCORRECT CLAIM IN LAW CANNOT TANTAMOUNT TO FURNISHING INACCURATE PARTICULARS. IN COMMISSIONER OF INCOME-TAX DELHI V. ATUL MOHAN BINDAL [2009] 9 SCC 589 WHERE THIS COURT WAS CONSIDERING THE SAME PROVISION THE COURT OBSERVED THAT THE ASSESSING OFFICER HAS TO BE SATISFIED THAT A PERSON HAS CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHED INACCURATE PARTICULARS OF SUCH INCOME. THIS COURT REFERRED TO ANOTHER DECISION OF THIS COURT IN UNION OF INDIA VS. DHARAMENDRA TEXTILE PROCESSORS [2008] 13 SCC 369 AS ALSO THE DECISION IN UNION OF INDIA V. RAJASTHAN SPG. & WVG. MILLS [2009] 13 SCC 448 AND REITERATED IN PARA 13 THAT (PAGE 13 OF 317 ITR ): '13. IT GOES WITHOUT SAYING THAT FOR APPLICABILITY OF SECTION 271 (1)(C) CONDITIONS STATED THEREIN MUST EXIST. '' THEIR LORDSHIPS AFTER CONSIDERING VARIOUS DECISION S INCLUDING DILIP N. SHROFF V. JT. CIT [2007] 291 ITR 51 9 (SC) AND DHARAMENDRA TEXTILE PROCESSORS' CASE (SUPRA) HAVE OBSERVED AND HELD (PAGE 158 HEADNOTES) AS UNDER: 'A GLANCE AT THE PROVISIONS OF SECTION 271(1)(C) OF THE INCOME-TAX ACT 1961 SUGGESTS THAT IN ORDER TO BE COVERED BY IT THERE HAS TO BE CONC E ALMENT OF THE PARTICULARS OF THE INCOME OF THE ASSESSEE. SECONDLY THE ASSESS EE MUST HAVE FURNISHED INACCURATE PARTICULARS OF HIS INCOME . THE MEANING OF THE WORD 'PARTICULARS' USED IN SECTION 2 71(1)(C) WOULD EMBRACE THE DETAILS OF THE CLAIM MADE. WHERE NO INFORMATION GIVEN IN THE RETURN IS FOUND TO BE INCO RRECT OR INACCURATE THE ASSESSEE CANNOT BE HELD GUILTY OF F URNISHING INACCURATE PARTICULARS. IN ORDER TO EXPOSE THE ASSE SSEE TO PENALTY UNLESS THE CASE IS STRICTLY COVERED BY THE PROVISION THE PENALTY PROVISION CANNOT BE INVOKED. BY NO STRETCH OF IMAGINATION CAN MAKING AN INCORRECT CLAIM TANTAMOUN T TO FURNISHING INACCURATE PARTICULARS. THERE CAN BE NO DISPUTE THAT EVERYTHING WOULD DEPEND UPON THE RETURN FILED BY THE ASSESSEE BECAUSE THAT IS THE ONLY DOCUMENT WHERE T HE ASSESSEE CAN FURNISH THE PARTICULARS OF HIS INCOME. WHEN SUCH PARTICULARS ARE FOUND TO BE INACCURATE THE LI ABILITY WOULD ARISE. TO ATTRACT PENALTY THE DETAILS SUPPLI ED IN THE RETURN MUST NOT BE ACCURATE NOT EXACT OR CORRECT NOT ITA NO.243/MDS/2015 :- 11 -: ACCORDING TO THE TRUTH OR ERRONEOUS. WHERE THERE IS NO FINDING THAT ANY DETAILS SUPPLIED BY THE ASSESSEE IN ITS RETURN ARE FOUND TO BE INCORRECT OR ERRONEOUS OR FALSE THERE IS NO QUESTION OF INVITING THE PENAL TY UNDER SECTION 271(1)(C). A MERE MAKING OF A CLAIM WHICH IS NOT SUSTAINABLE IN LAW BY ITSELF WILL NOT AMOUNT TO F URNISHING INACCURATE PARTICULARS REGARDING THE INCOME OF THE ASSESSEE. SUCH A CLAIM MADE IN THE RETURN CANNOT AMOUNT TO FURNISHIN G INACCURATE PARTICULARS. ' 11. THE LD. AUTHORISED REPRESENTATIVE FURTHER PLACED R ELIANCE ON THE ORDER OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. M/S. GEM GRANITES (CITED SUPRA) WHEREIN IT WAS OBSERVED THAT FOR SUSTAINING PENALTY THE BONAFIDE EXPLANATION OF THE ASSESSEE MUST BE LOOKED AT SO THAT THE CONTUMACIOUS CONDUCT OF THE ASSESSEE FOR T HE PURPOSES OF SUSTAINING THE PENALTY WOULD BE TAKEN AS CONDITION THAT IS THE MAIN REQUIREMENT UNDER SECTION 271 (1) (C) OF THE ACT. THIS VIEW ALSO FINDS SUPPORT FROM THE DECISION IN CIT VS. SIDHADHA ENTERPRISES (2010) 322 ITR 80 (P&H) AND CIT VS. SHAHABAD CO- OP SUGAR MILLS LTD (2010) 322 ITR 73 (P&H ). IN THE INSTANT CASE THE ASSESSEE HAS CLAIMED EXPENDITURE INCURRED DURING THE PERIOD OF P RE-COMMENCEMENT OF BUSINESS AS REVENUE EXPENDITURE BASED ON THE AUDITED STATEMENTS OF ACCOUNT UNDER BONA FIDE BELIEF HENCE TREATING T HE SAID CLAIM AS 'FURNISHING INACCURATE PARTICULARS' AND INVOKING TH E PROVISIONS OF SECTION 271 (1 )(C) OF THE ACT IS AGAINST THE PROVISIONS O F THE ACT. THE LD. AUTHORISED REPRESENTATIVE FOR ASSESSEE HAS ALSO PLE ADED DURING THE COURSE OF APPELLATE PROCEEDINGS THAT THE PENALTY PR OCEEDINGS ARE ITA NO.243/MDS/2015 :- 12 -: INDEPENDENT OF THE ASSESSMENT PROCEEDINGS. HE HAS A LSO RELIED ON THE DECISION OF THE SUPREME COURT IN THE CASE OF ANANTHRAMAN VEERASINGHAIAH & CO. VS. CIT (CITED SUPRA ) WHEREIN IT WAS HELD THAT THE FINDINGS IN THE ASSESSMENT PROCEEDINGS CANNOT BE RE GARDED AS CONCLUSIVE FOR THE PURPOSE OF THE PENALTY PROCEEDIN GS. JUST BECAUSE A CLAIM OF DEDUCTION HAS BEEN DISALLOWED AND THE ASSE SSEE HAS NOT PREFERRED ANY APPEAL AGAINST THE ASSESSMENT ORDER W OULD NOT MEAN THAT THE ASSESSEE HAS INTENDED TO EVADE THE TAXES. IT IS THE DUTY OF THE ASSESSING OFFICER TO CONSIDER THE FACTS OF THE CASE AND THE SUBMISSIONS AFRESH AND MAKE A DETERMINATION AS WHETHER AN ASSES SEE HAS CONCEALED THE INCOME OR FURNISHED INACCURATE PARTIC ULARS OF SUCH INCOME. FOR A PENALTY TO SUSTAIN THE ASSESSEE SHOU LD HAVE A MALAFIDE INTENTION TO EVADE THE PAYMENT OF TAXES. THE ASSES SEE IN THE PRESENT CASE HAS OFFERED THE INCOME OF C.4 76 517/- WHICH WAS COMPUTED ON ACCOUNT OF RESTATEMENT OF FOREIGN CURRENCY LOAN LIA BILITY. SUCH AN INCOME WAS NOTIONAL IN NATURE AND NOT ACTUAL INCOME EARNED BY THE ASSESSEE AND HAS BEEN RECOGNIZED AS INCOME ONLY IN COMPLIANCE WITH THE ACCOUNTING STANDARDS ISSUED BY ICAI. HOWEVER T HE ASSESSEE HAS OFFERED SUCH INCOME TO TAX AND SETOFF SUCH INCOME A GAINST THE PRE- COMMENCEMENT OF BUSINESS EXPENSES INCURRED BY THE A SSESSEE IN THE NATURE OF INTEREST PAYMENT OF C1 25 30 730/- AND OT HER REGULAR ADMINISTRATIVE EXPENSES OF C2 97 275/-. THE AO HAS FOLLOWED THE ITA NO.243/MDS/2015 :- 13 -: DECISION OF APEX COURT IN THE CASE OF TUTICORIN ALKALI CHEMICALS & FERTILIZERS LIMITED VS. CIT (CITED SUPRA) AND DISALLOWED THE SETOFF OF CLAIM OF THE INCOME AGAINST THE BUSINESS PRE-COMMENCEMENT EXPENSES INCURRED DURING THE YEAR. THE ASSESSEE'S A R IN HIS WRITTEN SUBMISSIONS HAS QUOTED THE DECISION OF THE APEX CO URT IN THE CASE OF TUTICORIN ALKALI CHEMICALS & FERTILIZERS LIMITED (CITED SU PRA) AND DISTINGUISHED THE FACTS OF THE ASSESSEE'S CASE WITH THAT OF THE FACTS IN THE CASE OF TUTICORIN ALKALI CHEMICALS & FERTILIZERS LIMITED. THE SUPREME COURT IN THAT CASE HAS HELD THAT ANY INCOME EARNED BY AN ASSESSEE DURING THE COURSE OF PRE- PRODUCTION PHASE IS REVENUE IN NATURE AND HAS TO BE OFFERED TO TAX AND SHOULD NOT TO BE OFFSET AGAINST THE PRE-PRODUCTION EXPENSES. ON THE CONTRAR Y THE FACTS IN THE ASSESSEE'S CASE ARE DIFFERENT AS THE INCOME COM PUTED BY THE ASSESSEE IS ONLY A NOTIONAL INCOME AND NOT AN ACTUA L INCOME EARNED. THE NOTIONAL INCOME WAS COMPUTED TO RESTATE THE FOREIGN CURRENCY LOAN LIABILITY AT THE PREVALENT EXCHANGE R ATE AS AT THE END OF THE FINANCIAL YEAR ADHERING TO THE ACCOUNTING S TANDARDS ISSUED BY THE ICAI. 12. THE LD. AUTHORISED REPRESENTATIVE FOR ASSESSEE FURT HER SUBMITTED THAT THE INDIAN INCOME TAX ACT DOES NOT C ONTEMPLATE TO TAX THE NOTIONAL GAINS BUT THE ACTUAL GAINS. HENCE IN THE PRESENT CASE THOUGH THE INCOME COMPUTED AS A RESULT OF RES TATEMENT OF ITA NO.243/MDS/2015 :- 14 -: FOREIGN CURRENCY LOAN LIABILITY WAS NOTIONAL IN NAT URE THE ASSESSEE HAS STILL OFFERED SUCH INCOME TO TAX AND OFFSET AGA INST THE PRE- COMMENCEMENT EXPENSES INCURRED BY THE ASSESSEE. THE AO HAS DISALLOWED THE CLAIM OF THE ASSESSEE AND ASSESSED T HE INCOME OF THE ASSESSEE BY ASSESSING THE NOTIONAL INCOME UNDER THE HEAD 'INCOME FROM OTHER SOURCES' AND DISALLOWED THE RESU LTANT LOSS CLAIMED. THE ASSESSEE WITH A VIEW NOT TO HAVE PROTR ACTED LITIGATION WITH THE INCOME TAX AUTHORITIES HAS ACCEPTED THE IN COME ASSESSED AND PAID THE TAX DUE THEREON EVEN WITHOUT DISPUTING THE DISALLOWANCE OF CLAIM OF EXPENDITURE. THE AO HAS DI SALLOWED THE ASSESSEE'S CLAIM OF LOSS FOR THE ASSESSMENT YEAR UN DER CONSIDERATION AND INVOKED THE PROVISIONS OF SECTION 271(1)(C) ALLEGING THAT THE ASSESSEE HAD FURNISHED INACCURATE PARTICULARS FOR CLAIM OF LOSS AND COMPUTED THE QUANTUM OF PENALTY O N THE BASIS OF TAX SOUGHT TO BE EVADED. 13. WE HAVE HEARD BOTH THE SIDES AND PERUSED THE MATERI AL ON RECORD. WE CONSIDER IT APPROPRIATE TO REPRODUCE EX PLANATION 1 TO SECTION 271(1)(C) WHICH DEALS WITH PENALTY FOR CON CEALMENT OF INCOME AND FOR FURNISHING OF INACCURATE PARTICULARS AS FO LLOWS WHERE IN RESPECT OF ANY FACTS MATERIAL TO THE COMPU TATION OF THE TOTAL INCOME OF ANY PERSON UNDER THIS ACT ' ITA NO.243/MDS/2015 :- 15 -: (A)SUCH PERSON FAILS TO OFFER AN EXPLANATION OR OFF ERS AN EXPLANATION WHICH IS FOUND BY THE ASSESSING OFFICER OR THE COMMISSIONER (APPEALS) OR THE COMMISSIONER TO BE FA LSE OR (B)SUCH PERSON OFFERS AN EXPLANATION WHICH HE IS NO T ABLE TO SUBSTANTIATE AND FAILS TO PROVE THAT SUCH EXPLANATI ON IS BONA FIDE AND THAT ALL THE FACTS RELATING TO THE SAME AN D MATERIAL TO THE COMPUTATION OF HIS TOTAL INCOME HAVE BEEN DI SCLOSED BY HIM THEN THE AMOUNT ADDED OR DISALLOWED IN COMP UTING THE TOTAL INCOME OF SUCH PERSON AS A RESULT THEREOF SHALL FOR THE PURPOSES OF CLAUSE (C) OF THIS SUB-SECTION BE DEEMED TO REPRESENT THE INCOME IN RESPECT OF WHICH PARTICULAR S HAVE BEEN CONCEALED. 14. IT IS THUS CLEAR THAT THE ONUS IS ON THE ASSESSEE T O PROVE INTER ALIA THAT SUCH EXPLANATION IS GIVEN BY THE A SSESSEE IS BONAFIDE. IN THE PRESENT CASE THE ASSESSEE'S EXPLANATION FOR MAKING THIS CLAIM FOR DEDUCTION IN RESPECT OF ENTIRE AMOUNT INCURRED TOWARDS ADMINISTRATIVE AND FINANCE CHARGES IS THAT THIS AD MITTEDLY ERRONEOUS CLAIM WAS MADE BECAUSE OF THE AUDITORS REPORT FOR T HE ASSESSMENT YEAR CONCERNED AND AS SUCH IT WAS A BONAFIDE MISTA KE ON THE PART OF THE ASSESSEE TO HAVE CLAIMED THE DEDUCTION . 15. IN THE CASE OF CIT V. NATHULAL AGARWALA & SONS (145 ITR 292) FULL BENCH OF PATNA HIGH COURT HAS OBSERVED AS FO LLOWS: 'AS TO THE NATURE OF EXPLANATION OFFERED BY THE AS SESSEE IT SEEMS PLAIN ON PRINCIPLE THAT IT IS NOT THE LAW THA T THE MOMENT ANY FANTASTIC OR UNACCEPTABLE EXPLANATION IS GIVEN THE BURDEN PLACED ON HIM WILL BE DISCHARGED AND PRESUMPTION RE BUTTED. IT IS NOT THE LAW AND PERHAPS HARDLY CAN BE THAT ANY AN D EVERY EXPLANATION OF THE ASSESSEE MUST BE ACCEPTED. IN MY VIEW THE EXPLANATION OF THE ASSESSEE FOR AVOIDANCE OF PENALT Y MUST BE AN ACCEPTABLE EXPLANATION. HE MAY NOT PROVE WHAT HE AS SERTS TO THE ITA NO.243/MDS/2015 :- 16 -: HILT POSITIVELY BUT AT LEAST MATERIAL BROUGHT ON R ECORD MUST SHOW THAT WHAT HE SAYS IS REASONABLY VALID.' 16. THE ABOVE VIEWS WERE APPROVED BY THE SUPREME COU RT IN THE CASE OF CIT V. MUSSADILAL RAM BHAROSE (165 ITR 14). REFERRING THE JUDGMENT OF HON'BLE PATNA HIGH COURT THEIR LORDSHI PS HAVE OBSERVED AS FOLLOWS : 'THE PATNA HIGH COURT EMPHASIZED THAT AS TO THE NAT URE OF EXPLANATION TO BE RENDERED BY THE ASSESSEE IT WAS PLAIN ON PRINCIPLE THAT IT IS NOT THE LAW THAT THE MOMENT AN Y FANTASTIC OR UNACCEPTABLE EXPLANATION IS GIVEN THE BURDEN PLACE D ON HIM WILL BE DISCHARGED AND PRESUMPTION REBUTTED. WE AGREE. W E FURTHER AGREE THAT IT IS NOT THE LAW THAT EACH AND EVERY EX PLANATION BY THE ASSESSEE MUST BE ACCEPTED. IT MUST BE ACCEPTABL E EXPLANATION ACCEPTABLE TO A FACT FINDING BODY.' 17. VIEWED IN THIS PERSPECTIVE JUST BECAUSE ASSESSE E HAS AN EXPLANATION- WHATEVER BE ITS WORTH AND CREDIBILITY IT DOES NOT CEASE TO BE A CASE IN WHICH NO PENALTY CAN BE LEVIED. THE EX PLANATION OF THE ASSESSEE HAS TO BE CONSIDERED ON MERITS AND ONE HAS TO EXAMINE AS TO WHETHER THE EXPLANATION SO GIVEN BY THE ASSESSEE CA N BE TREATED AS AN ACCEPTABLE EXPLANATION OR NOT. 18. A PLAIN LOOK AT THE PROFIT AND LOSS ACCOUNT SHOWS THAT STATUTORY AUDITOR HAS OPINED THAT THE ASSESSEE HAS INCURRED LOSS FOR THE YEAR ENDED ON 31.03.2010. THERE CANNOT INDEED B E ANY QUARREL WITH THIS PROPOSITION BUT THEN THIS AUDITORS REPOR T DOES NOT DEAL WITH THE PROVISIONS OF INCOME TAX ACT. AS PER INCOME TA X ACT EXPENDITURE ITA NO.243/MDS/2015 :- 17 -: INCURRED DURING PRE-COMMENCEMENT PERIOD CANNOT BE ALLOWED AS DEDUCTION WHILE COMPUTING THE INCOME OF THE ASSESSE E. THERE WAS THUS NO REASON FOR ASSESSEE TO DEVIATE FROM THE PROVISIO NS OF INCOME TAX ACT WHEN ADMITTEDLY THE ASSESSEE HAS NOT COMMENCED ITS BUSINESS ACTIVITIES IN THE ASSESSMENT YEAR UNDER CONSIDERATI ON. THE ONUS IS ON THE ASSESSEE TO PROVE THAT THE EXPLANATION IS BONAF IDE BUT THERE IS NOTHING FROM THE ASSESSEE TO EVEN INDICATE LEAVE A SIDE PROVING THAT THERE WAS ANY REASON TO BELIEVE THAT THE EXPENDITUR E IS ALLOWABLE. THE AUDITORS REPORT DID NOT DEAL WITH THIS ASPECT AT A LL. ONE CAN PERHAPS EVEN UNDERSTAND IGNORANCE ABOUT A LEGAL PROVISION BUT ONCE THE ASSESSEE IS ON RECORD NOT ONLY BEING AWARE ABOUT TH IS PROVISION BUT ALSO PREPARING THE INCOME TAX RETURN IN THE LIGHT O F THE SAID PROVISION THERE CANNOT BE ANY JUSTIFICATION ABOUT ASSESSEE IG NORING THE CLEAR MANDATE OF THE PROVISION. SUCH AN ACTION ON THE PA RT OF THE ASSESSEE IN OUR CONSIDERED OPINION CANNOT BE SAID TO BE BON AFIDE. IN OUR HUMBLE UNDERSTANDING THE EXPLANATION OF THE ASSESS EE IS NOT ACCEPTABLE AND WE REJECT THE SAME. IN ANY CASE A UDITORS REPORT OBTAINED BY THE ASSESSEE CANNOT OVERRIDE INCOME TAX PROVISIONS AND JUST BECAUSE THE ASSESSEE'S CLAIM IS SUPPORTED BY A CHARTERED ACCOUNTANT'S OPINION THIS FACT PER SE CANNOT ABSOL VE THE ASSESSEE FROM PENALTY UNDER SECTION 271(1)(C). ITA NO.243/MDS/2015 :- 18 -: 19. AS REGARDS LEARNED COUNSEL'S RELIANCE ON SUPR EME COURT JUDGMENT IN THE CASE OF RELIANCE PETROPRODUCTS LTD. (SUPRA) WE HAVE NOTICED THAT IT WAS A CASE IN WHICH THEIR LORDSHIPS WERE ONLY CONCERNED WITH THE QUESTION WHETHER 'IN THIS CASE AS A MATTER OF FACT THE ASSESSEE HAS GIVEN INACCURATE PARTICULARS'. THE IR LORDSHIPS NOTED THAT 'IN THIS CASE THERE IS NO FINDING THAT ANY DE TAILS SUPPLIED BY THE ASSESSEE IN ITS RETURN WERE FOUND TO BE INCORRECT O R ERRONEOUS OR FALSE' AND ADD THAT 'SUCH BEING THE CASE THERE WOULD BE N O QUESTION OF INVITING THE PENALTY UNDER SECTION 271(1)(C) OF THE ACT' AND THAT 'A MERE MAKING OF THE CLAIM WHICH IS NOT SUSTAINABLE IN LAW BY ITSELF WILL NOT AMOUNT TO FURNISHING INACCURATE PARTICULARS REG ARDING INCOME OF THE ASSESSEE. 20. HOWEVER THIS IS NOT THE END OF THE MATTER. NOT ONLY THAT THE PENALTY PROVISIONS COVER THE SITUATIONS IN WHICH TH E ASSESSEE HAS CONCEALED INCOME OR FURNISHED THE INACCURATE PARTIC ULARS IN CERTAIN SITUATION EVEN WITHOUT THERE BEING ANYTHING TO IND ICATE SO STATUTORY DEEMING FICTION FOR INCOME IN RESPECT OF WHICH 'PAR TICULARS HAVE BEEN CONCEALED'. IN ADDITION TO NORMAL CONNOTATIONS OF ' CONCEALMENT' THUS A DEEMING FICTION IS ALSO IMPLICIT IN THE SCHEME OF P ENALTY PROVISIONS. THIS DEEMING FICTION BY WAY OF EXPLANATION 1 TO SECTION 271(1)(C) ENVISAGES TWO SITUATIONS (A) FIRST WHERE IN RESPEC T OF ANY FACTS MATERIAL TO THE COMPUTATION OF TOTAL INCOME UNDER T HE PROVISIONS OF THE ITA NO.243/MDS/2015 :- 19 -: ACT THE ASSESSEE FAILS TO OFFER AN EXPLANATION OR THE EXPLANATION OFFERED BY THE ASSESSEE IS FOUND TO BE FALSE BY THE ASSESSING OFFICER OR THE CIT(A); AND (B) SECOND WHERE IN RESPECT OF AN Y FACTS MATERIAL TO THE COMPUTATION OF TOTAL INCOME UNDER THE PROVISION S OF THIS ACT THE ASSESSEE IS NOT ABLE TO SUBSTANTIATE THE EXPLANATIO N AND THE ASSESSEE FAILS TO PROVE THAT SUCH EXPLANATION IS BONA FIDE A ND THAT THE ASSESSEE HAD DISCLOSED ALL THE FACTS RELATING TO THE SAME AN D MATERIAL TO THE COMPUTATION OF TOTAL INCOME. IN THE FIRST SITUATION THE DEEMING FICTION IS TRIGGERED BY THE INACTION OF THE ASSESSEE BY HIS NOT GIVING THE EXPLANATION WITH RESPECT TO ANY FACT MATERIAL TO TH E COMPUTATION OF TOTAL INCOME OR BY ACTION OF THE ASSESSING OFFICER BY GIVING CATEGORICAL FINDING TO THE EFFECT THAT THE EXPLANATION GIVEN BY THE ASSESSEE IS FALSE. IN THE SECOND SITUATION THE DEEMING FICTION IS TRIGGERED BY THE FAILURE OF THE ASSESSEE LEADING TO SATISFACTION OF CONDITIONS LAID DOWN IN CLAUSE B OF EXPLANATION 1 T O SECTION 271(1)(C) VIZ THE ASSESSEE IS NOT ABLE TO SUBSTANTIATE AN EXP LANATION IN RESPECT OF ANY FACT MATERIAL TO THE COMPUTATION OF TOTAL INCOM E AND IN ADDITION TO THIS THE ASSESSEE IS ALSO NOT ABLE TO PROVE THA T SUCH GIVEN EXPLANATION WAS BONA FIDE AND ALL THE FACTS RELATI NG TO THE SAME AND MATERIAL TO THE COMPUTATION OF TOTAL INCOME HAVE BE EN DISCLOSED BY THE ASSESSEE. WHEN THIS DEEMING FICTION COMES INTO PLAY THE RELATED ADDITION OR DISALLOWANCE IN COMPUTING THE TOTAL INC OME OF THE ASSESSEE ITA NO.243/MDS/2015 :- 20 -: FOR THE PURPOSES OF SECTION 271(1)(C) IS DEEMED TO REPRESENT THE INCOME IN RESPECT OF WHICH INACCURATE PARTICULARS H AVE BEEN FURNISHED BUT THEN THE LEVY OF PENALTY HINGES ON ASSESSEE'S S UBSTANTIATING THE EXPLANATION PROVING THAT IT IS BONA FIDES AND THAT ALL THE MATERIAL FACTS ARE DISCLOSED. 21. ON THE FACTS OF THE PRESENT CASE WE ARE DEALING WITH NOT ONLY AN INADMISSIBLE CLAIM OF DEDUCTION BUT A CLAIM OF D EDUCTION WHICH IS CONTRARY TO THE PLAIN WORDS OF THE STATUTE AND ON W HICH NO TWO OPINIONS ARE POSSIBLE. THIS SITUATION CANNOT BE EQU ATED WITH A CLAIM OF DEDUCTION UNDER SECTION 14 A IN RESPECT OF WHICH A S SUPREME COURT HAD OBSERVED IN THE CASE OF RELIANCE PETROPRODUCTS (SUPRA ) THE ASSESSEE'S PLEA WAS THAT 'THAT THE DISALLOWANCE MAD E BY THE ASSESSING AUTHORITY IN THE ASSESSMENT ORDER UNDER SECTION 143 (3) OF THE ACT WERE SOLELY ON ACCOUNT OF DIFFERENT VIEWS TAKEN ON THE S AME SET OF FACTS AND THEREFORE THEY COULD AT THE MOST BE TERMED AS DI FFERENCE OF OPINION BUT NOTHING TO DO WITH THE CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF SUCH INCOME'. IN THE PRES ENT CASE RELATED QUANTUM ADDITION IS NOT ON ACCOUNT OF DIFFERENT VIE WS BEING TAKEN ON THE SAME SET OF FACTS BUT ON ACCOUNT OF PLAIN WORDS OF THE STATUTE WHICH ADMIT NO AMBIGUITY. THE ASSESSEE DOES NOT TH EREFORE DERIVE ANY HELP FROM SUPREME COURT'S JUDGMENT IN THE CASE OF RELIANCE PETROPRODUCTS (SUPRA ) EITHER. WE REJECT THE SAME. ITA NO.243/MDS/2015 :- 21 -: 22. LEARNED COUNSEL FOR THE ASSESSEE HAS ALSO LAID A LO T OF EMPHASIS ON THE FACT THAT THE ASSESSEE'S EXPLANATIO N HAS NOT BEEN FOUND 'FALSE' BUT THEN THIS PLEA OVERLOOKS THE FACT THAT WHEN AN ASSESSEE'S EXPLANATION IS FOUND 'FALSE' THIS CASE FALLS IN CATEGORY (A) OF EXPLANATION 1 TO SECTION 271(1)(C) WHEREAS THE PRES ENT CASE IS IN CATEGORY (B) THEREOF AND IT COVERS A SITUATION WHEN ASSESSEE OFFERS AN EXPLANATION AND NOT ABLE TO PROVE ITS BONAFIDES. TH ESE TWO SITUATIONS ARE MUTUALLY EXCLUSIVE SITUATION AND JUST BECAUSE C ONDITIONS IN PART (A) OF EXPLANATION 1 ARE NOT SATISFIED THE REVENUE'S C ASE IN (B) ALSO DOES NOT COME TO AN END. THE PLEA OF THE ASSESSEE DOES N OT THEREFORE ACCEPTABLE. 23. FURTHER WE ALSO PLACE RELIANCE ON THE JUDGMEN T OF SUPREME COURT IN THE CASE OF MAK DATA (PVT) LTD. VS. CIT 358 ITR 593 WHEREIN IT WAS HELD THAT THE ASSESSEE HAD ONLY STATED THAT IT HAD SURREND ERED THE ADDITIONAL SUM OF 40 74 000 TO AVOID LITIGATION BUY PEACE AND TO CHANNELIZE THE ENERGY AND RESOURCES TOWARDS PRODUCTIVE WORK AND TO MAKE AMICABLE SETTLEMENT WIT H THE INCOME-TAX DEPARTMENT. THE STATUTE DID NOT RECOGNIZ E THOSE TYPES OF DEFENCES UNDER EXPLANATION 1 TO SECTION 27 1(1)(C) OF THE ACT. THE SURRENDER OF INCOME IN THIS CASE WA S NOT VOLUNTARY IN THE SENSE THAT THE OFFER OF SURRENDER WAS MADE IN VIEW OF DETECTION BY THE ASSESSING OFFICER IN TH E SEARCH CONDUCTED IN THE SISTER CONCERN OF THE ASSESSEE. TH E SURVEY WAS CONDUCTED MORE THAN 10 MONTHS BEFORE THE ASSESS EE FILED ITS RETURN OF INCOME. HAD IT BEEN THE INTENTI ON OF THE ASSESSEE TO MAKE FULL AND TRUE DISCLOSURE OF ITS IN COME IT WOULD HAVE FILED THE RETURN DECLARING AN INCOME INC LUSIVE OF THE AMOUNT WHICH WAS SURRENDERED LATER DURING THE C OURSE OF THE ASSESSMENT PROCEEDINGS. CONSEQUENTLY IT WAS CLEAR ITA NO.243/MDS/2015 :- 22 -: THAT THE ASSESSEE HAD NO INTENTION TO DECLARE ITS T RUE INCOME. IT IS THE STATUTORY DUTY OF THE ASSESSEE TO RECORD ALL ITS TRANSACTIONS IN THE BOOKS OF ACCOUNT TO EXPLAIN TH E SOURCE OF PAYMENTS MADE BY IT AND TO DECLARE ITS TRUE INCO ME IN THE RETURN OF INCOME FILED BY IT FROM YEAR TO YEAR. THE ASSESSING OFFICER HAD RECORDED A CATEGORICAL FINDING THAT HE WAS SATISFIED THAT THE ASSESSEE HAD CONCEALED THE TRUE PARTICULARS OF INCOME AND WAS LIABLE FOR PENALTY PROCEEDINGS UNDER SECTION 271 READ WITH SECTION 274 OF THE ACT. THERE WAS NO ILLEGALITY IN THE DEPARTMENT INIT IATING PENALTY PROCEEDINGS 24. THUS IN THE PRESENT CASE CLAIM OF THE ASSESS EE TOWARDS ADMINISTRATIVE EXPENDITURE AT C2 97 275/- AND FINAN CE CHARGES AT C1 25 30 730/- AS BUSINESS EXPENDITURE IS NOT AT AL L ADMISSIBLE AS THE ASSESSEE HAS NOT COMMENCED BUSINESS DURING THE RELE VANT FINANCIAL YEAR UNDER CONSIDERATION. THE ASSESSING OFFICER IS OF THE VIEW THAT THE EXPENDITURE IS NOT BASED ON ANY SOUND REASON AS THE ASSESSEE WAS FULLY AWARE OF THE FACTS THAT IT IS NOT REVENUE EXP ENDITURE WHEN IT HAD FILED ITS ORIGINAL RETURN OF INCOME. THEREFORE IT CANNOT BE SAID THAT THE ASSESSEE DISCOVERED ANY OMISSION OR WRONG STATEMENT SUBSEQUENT OF FILING OF ORIGINAL RETURN OF INCOME ON 14.10.2010. BEING SO IT CANNOT BE BELIEVED THAT THE ASSESSEE CHOSE TO REVISE ITS EARL IER RETURN CONSEQUENT UPON KNOWING THAT THERE ARE OMISSIONS OR WRONG STAT EMENTS IN THE ORIGINAL RETURN OF INCOME. THE ASSESSEE IS HAVING FULL KNOWLEDGE ABOUT THE WRONG CLAIM MADE BY IT AND THEREFORE IT CAN NOT TAKE A PLEA THAT THE ERROR IS BONAFIDE AND IT IS TO BE CONDONED. ITA NO.243/MDS/2015 :- 23 -: 25. BEING SO IN THE PRESENT CASE THE IMPUGNED PEN ALTY IS NOT IN RESPECT OF A BOGUS CLAIM BUT IN RESPECT OF MAKING A CLAIM WHICH IS PATENTLY INADMISSIBLE. IN SUCH A SITUATION IT IS D IFFICULT TO UNDERSTAND MUCH LESS APPROVE THIS PLEA OF THE ASSESSEE THAT T HE ASSESSEE AS BONAFIDE IN CLAIMING THE EXPENDITURE. IN OUR OPINI ON LEVY OF PENALTY BY ASSESSING OFFICER U/S 271(1)(C) OF THE ACT IS JUSTI FIED AND ACCORDINGLY WE REVERSE THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) AND RESTORE THAT OF THE ASSESSING OFFICER. 26. IN THE RESULT THE APPEAL OF THE REVENUE IN ITA NO.243/MDS/2015 IS ALLOWED. ORDER PRONOUNCED ON FRIDAY THE 31ST DAY OF JULY 20 15 AT CHENNAI. SD/- SD/- ( . . . ! ) (N.R.S. GANESAN) / JUDICIAL MEMBER ( ! ) (CHANDRA POOJARI) ' / ACCOUNTANT MEMBER '# / CHENNAI $% / DATED:31.07.2015 KV %&'' ()'*) / COPY TO: ' 1 . / APPELLANT 3. ' +' ! / CIT(A) 5. )-.' / / DR 2. / RESPONDENT 4. ' + / CIT 6. .0'1 / GF