The DCIT, Circle-2(2),, Baroda v. M/s. Raymon Gelatine, Baroda

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH 'A' (BEFORE S/SHRI T K SHARMA AND N S SAINI) ITA NOS.3035 3036 3037 3038 AND3299/AHD/2009 (ASST. YEARS:-1998-99 2000-01 2001-02. 2002-03 & 2003-04) THE DEPUTY COMMISSIONER OF INCOME-TAX CIRCLE-2(2) 4 TH FLOOR AAYAKAR BHAVAN RACE COURSE CIRCLE BARODA V/S M/S RAYMON GELATINE 51 HARIBHAKTI EXTENSION OLD PADRA ROAD VADODARA [APPELLANT] [RESPONDENT] APPELLANT BY :- SHRI GOVIND SINGHAL SENIOR DR RESPONDENT BY:- SHRI M K PATEL ADVOCATE O R D E R PER N S SAINI (ACCOUNTANT MEMBER): ALL THESE FIVE APPEALS ARE FILED BY THE REVENUE AGAINST FIVE SEPARATE ORDERS OF THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS)-II BARODA [TH E CIT(A)] FOR ASSESSMENT YEARS 1998-99 2000-01 2001-02. 2002-03 & 2003-04 WHEREBY THE LEARNED CIT(A) HAS DELETED THE PENALTY LEVIED U/S 271(1)(C) OF THE INCOME-TAX ACT 1961 [THE ACT]. SINCE FACT S AND ISSUE INVOLVED IN ALL THESE APPEALS ARE COMMON THEY ARE BEING CON SIDERED AND DECIDED TOGETHER FOR THE SAKE OF CONVENIENCE. 2 IN THE ASSESSMENT YEAR 1998-99 THE BRIEF FACTS ARE THAT THE LEARNED ASSESSING OFFICER OBSERVED THAT EXPENDITURE ON ACCOUNT OF REPAIRS TO PLANT AND MACHINERY OF RS.1 35 01 397/- WHEREAS THE BALANCE AMOUNT OF RS.14 64 340/- WAS CLAIMED BY THE ASSESSE E ON ACCOUNT OF REPAIRS TO OTHER MACHINERY ASSETS. THE LEARNED ASS ESSING OFFICER ALSO NOTED THAT A NEW PLANT WAS BEING SET UP DURING THE YEAR UNDER CONSIDERATION AND THE ASSESSEE HAD CAPITALIZED RS.3 22 78 661/-. THE LEARNED ASSESSING OFFICER NOTED THAT THE ASSESSEE C APITALIZED ITEMS 2 2 SUCH AS DIFFERENT DIMENSION OF PIPES DG SETS ETC. WHILE RELATED ITEMS I.E. ERECTION AND FABRICATION EXPENSES CONSUMABLES AND OTHER EXPENSES INCURRED ON ACCOUNT OF PURCHASE OF DG SETS M S PLA TS CHANNELS ANGLES ETC. WERE NOT CAPITALIZED. ON VERIFICATION OF BILLS THE LEARNED ASSESSING OFFICER CONCLUDED THAT EXCEPT FOR RS.17 6 0 185/- ALL OTHER EXPENSES CLAIMED WERE CAPITAL IN NATURE I.E. OUT OF RS.72 26 395/- DEBITED BY THE ASSESSEE UNDER THE HEAD REPAIRS TO PLANT AND MACHINERY RS.54 66 210/- WAS TREATED AS CAPITAL E XPENDITURE. THE LEARNED ASSESSING OFFICER TREATED 75.64% OF RS.62 7 5 002/- [13501397 7226395 ON THE BASIS OF RATIO OF 5466210/7226395] I.E. RS.47 46 411/- AS CAPITAL IN NATURE PROPORTIONATELY. THE LEARNED A SSESSING OFFICER HELD THAT RS.1 02 L2 161/- I.E. RS.47 46 411/- PLUS RS.5 4 66 210/- WAS CAPITAL EXPENDITURE DIRECTLY RELATABLE TO THE SETTI NG UP OF NEW PLANT. 3 ON APPEAL BY THE ASSESSEE THE LEARNED COMMISSION ER OF INCOME-TAX (APPEALS) OBSERVED THAT ALTHOUGH NOT PRO VED BY DOCUMENTARY EVIDENCE THAT THE EXPENSES IN QUESTION WERE RELATING TO NEW PLANT HOWEVER EXTENSIVE OVERHAULING OF OLD PL ANT AND MACHINERY ALSO AMOUNTS TO CAPITAL EXPENDITURE. THUS THE LEA RNED COMMISSIONER OF INCOME-TAX (APPEALS) REDUCED THE ADDITION TO RS. 87 42 440/-. 4 IN THE ASSESSMENT YEAR 2000-01 SIMILARLY THE LEA RNED ASSESSING OFFICER HELD THAT RS.58 65 878/- WAS CAPI TAL EXPENDITURE RELATING TO SETTING UP OF NEW PLANT WHICH WAS CONFI RMED BY THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS). 5 SIMILARLY IN THE ASSESSMENT YEAR 20001-02 THE L EARNED ASSESSING OFFICER HELD THAT RS.34 84 607/- WAS CAPI TAL EXPENDITURE RELATING TO SETTING UP OF NEW PLANT WHICH WAS CONFI RMED BY THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS). 3 3 6 SIMILARLY IN THE ASSESSMENT YEAR 2002-03 THE LEA RNED ASSESSING OFFICER HELD THAT RS.43 58 925/- WAS CAPI TAL EXPENDITURE RELATING TO SETTING UP OF NEW PLANT AND MACHINERY W HICH WAS CONFIRMED BY THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) . 7 SIMILARLY IN THE ASSESSMENT YEAR 2003-04 THE LEA RNED ASSESSING OFFICER HELD THAT RS.47 27 751/- WAS CAPI TAL EXPENDITURE RELATING TO SETTING UP OF NEW PLANT AND MACHINERY W HICH WAS CONFIRMED BY THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) . 8 THEREAFTER THE LEARNED ASSESSING OFFICER INITIA TED PENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT AND LEVIED PEN ALTY OF RS.33 66 030/- IN ASSESSMENT YEAR 1998-99 RS.19 76 070/- IN ASSESSMENT YEAR 2000-01 RS.11 95 220/- IN ASSESSME NT YEAR 2001-02 RS.13 61 620/- IN ASSESSMENT YEAR 2002-03 AND RS.8 55 660/- IN ASSESSMENT YEAR 2003-04 FOR FURNISHING OF INACCURAT E PARTICULARS OF INCOME BY THE ASSESSEE. 9 IN APPEAL BEFORE THE LEARNED COMMISSIONER OF INC OME-TAX (APPEALS) THE LEARNED AUTHORIZED REPRESENTATIVE ST ATED THAT NO PENALTY CAN BE LEVIED ON ESTIMATED ADDITION WHICH HAS BEEN WORKED OUT ON PROPORTIONATE BASIS AND ON PREPONDERANCE OF PROBABI LITIES. THE PENALTY HAS BEEN LEVIED MERELY BECAUSE THERE IS A DIFFERENC E OF OPINION BETWEEN THE ASSESSING OFFICER AND THE APPELLANT. ALL THE EX PENSES DISALLOWED ARE IN THE NATURE OF CURRENT REPAIRS AND THEREFORE COVERED UNDER THE PROVISIONS OF SECTION 31 OF THE INCOME-TAX ACT. HE FURTHER SUBMITTED THAT MERELY ON THE BASIS OF A BALD STATEMENT WITHO UT BRINGING ON RECORD ANY FACTUAL FINDING THE ASSESSING OFFICER HAS CONC LUDED THAT PENALTY IS LEVIABLE. IN SUPPORT OF HIS CLAIM HE SUBMITTED THAT THE BOOKS ARE AUDITED AND AUDITORS HAVE SPECIFICALLY MENTIONED THAT NO CA PITAL EXPENDITURE IS DEBITED TO THE BOOKS OF ACCOUNTS. HE FURTHER SUBMIT TED THAT ALL FACTS 4 4 REGARDING THE CLAIM MADE BY THE APPELLANT WERE PLAC ED BEFORE THE ASSESSING OFFICER AND THE CIT(A) HENCE IT IS NOT A CASE OF FURNISHING INACCURATE PARTICULARS OF INCOME NOR IT IS A CASE O F CONCEALMENT OF INCOME. RELIANCE WAS PLACED ON THE DECISION OF DELH I HIGH COURT IN THE CASE OF CIT V. HMA UDYOG (P) LTD. 211 CTR 543 (DEL) WHEREIN IT WAS HELD THAT WHERE THE QUESTION AS TO WHETHER EXPENDIT URE INCURRED BY ASSESSEE IS A REVENUE EXPENDITURE OR A CAPITAL EXPE NDITURE IS A DEBATABLE ISSUE AND EVEN IF IT IS ULTIMATELY DECIDED AGAINST ASSESSEE IT CANNOT BE SAID THAT ASSESSEE HAS ATTEMPTED TO CONCEAL PARTICU LARS OF HIS INCOME OR FURNISHED INACCURATE PARTICULARS SO AS TO ATTRACT P ENALTY U/S. 10 FURTHER THE ASSESSEE HAS GIVEN HIS SUBMISSIONS TO SUBSTANTIATE ITS CLAIM. THE SUBMISSIONS HAVE NEITHE R BEEN FOUND TO BE UNTRUE OR FALSE NOR A CONSCIOUS ATTEMPT TO CONCEAL ANY INCOME OR AVOID ANY TAX HAS BEEN MADE. THE LEARNED AUTHORIZED REPRE SENTATIVE SUBMITTED THAT CLAUSE (A) TO EXPLANATION-1 TO SECTI ON 271(L)(C) STATES THAT NO PENALTY CAN BE IMPOSED UNLESS THE APPELLANT FAILS TO OFFER AN EXPLANATION OR THE EXPLANATION OFFERED BY HIM IS FO UND TO BE FALSE BY THE ASSESSING OFFICER. SINCE THE APPELLANT HAD FURN ISHED FULL PARTICULARS OF THE INCOME TO THE ASSESSING OFFICER AND THE SAID EXPLANATIONS OFFERED WERE NOT FOUND TO BE FALSE BY THE ASSESSING OFFICER PENALTY IS NOT LEVIABLE. FURTHER CLAUSE (B) TO EXPLANATION-1 TO S ECTION 271(L)(C) STATES THAT NO PENALTY CAN BE IMPOSED UNLESS THE APPELLANT OFFERS AN EXPLANATION WHICH HE IS NOT ABLE TO SUBSTANTIATE AN D FAILS TO PROVE THAT SUCH EXPLANATION IS BONA FIDE AND THAT ALL THE FACTS RELATING TO THE SAME AND MATERIAL TO THE COMPUTATION OF HIS TOTAL INCOME HAVE BEEN DISCLOSED BY HIM. IT WAS ONLY AFTER THE PARTICULARS PROVIDED BY THE APPELLANT THAT THE ASSESSMENT WAS FINALIZED. AT NO STAGE OF ASSESS MENT PROCEEDINGS THE AO HAS POINTED OUT THAT THE INFORMATION PROVIDED BY THE APPELLANT IS FALSE OR IS INCOMPLETE OR IS MISLEADING. 5 5 11 THE AO HAS DISREGARDED THE EXPLANATIONS OF THE APPELLANT AND HAS INITIATED PENALTY PROCEEDINGS U/S 271(L)(C) OF THE INCOME TAX ACT 1961. HOWEVER THE AO HAS ERRED IN LAW BY TREA TING REJECTION OF EXPLANATIONS OFFERED BY APPELLANT AS A GROUND FOR I NITIATION OF PENALTY. WE MOST RESPECTFULLY SUBMIT THAT IF THE EXPLANATIONS OF THE APPELLANT WERE NOT FOUND SATISFACTORY THEN IT WOULD NOT AUTOM ATICALLY LEAD TO PENAL PROVISIONS. PENALTY PROCEEDINGS ARE QUASI JUD ICIAL AND SEPARATE FROM ASSESSMENT PROCEEDINGS. NON-SATISFACTION OF TH E AO IS NOT A VALID GROUND FOR LEVY OF PENALTY. IT MAY BE MENTIONED THA T THERE IS NO PROVISION U/S 271(L)(C) FOR INITIATION OF PENALTY I F THE EXPLANATIONS OFFERED BY THE APPELLANT ARE REJECTED BY THE ASSESS ING OFFICER. THE EXPLANATIONS OFFERED ARE WELL SUBSTANTIATED BY THE APPELLANT AND ARE ALSO NOT FALSE. THUS NONE OF THE CRITERIA MENTIONED IN EXPLANATION-1 TO SECTION 271(L)(C) ARE FULFILLED FOR INITIATION OF P ENALTY UNDER THE SAID PROVISIONS. 12 IN CIT V. KERALA SPINNERS LTD. 247 ITR 541 (KER.) THE HC POINTED OUT THAT THE EXPLANATION ITSELF PROVIDES THAT WHERE ALL THE FACTS RELATING TO THE ADDITION HAD BEEN DISCLOSED B Y THE APPELLANT AND THE EXPLANATION IN RESPECT OF ENTRIES IN THE BOOKS ARE BONA FIDE IT IS ONLY A CASE OF APPELLANT'S FAILURE TO ESTABLISH HIS CASE IT IS NOT A CASE FOR PENALTY FOLLOWING THE RATIONALE OF THE DECISIO N IN CIT V. MUSSADILAL RAM BHAROSE 165 ITR 14 (SC) FOR ITS CONCLUSION. 13 ATTENTION WAS DRAWN TO THE DECISION OF THE AHME DABAD TRIBUNAL IN THE CASE OF ADVANCE CONSTRUCTION CO. PV T. LTD. V. ACIT. INCOME-TAX ACT 1961 NO.5033/AHD/1994 FOR THE ASST. YEAR 1983-84. IN THIS CASE THE ASSESSEE HAD ACCEPTED DEPOSITS FROM V ARIOUS PERSONS AND THE SAID PERSONS HAD GIVEN THEIR CONFIRMATIONS OF T HE DEPOSITS PLACED. HOWEVER THE ASSESSING OFFICER REJECTED THE EXPLANA TIONS GIVEN BY THE APPELLANT AND MADE THE ADDITION U/S 68 FOR THE SAID DEPOSITS. THE SAID 6 6 ADDITIONS WERE CONFIRMED BY THE ITAT. THEREAFTER T HE ASSESSING OFFICER ALSO IMPOSED THE PENALTY FOR CONCEALMENT OF INCOME ON THE SAID AMOUNTS. IN THIS CONNECTION AND ON THESE FACTS IT WAS HELD THAT WHERE REVENUE DID NOT ACCEPT THE CREDITS EXPLAINED BY THE ASSESSEE AND THE EXPLANATION OF THE ASSESSEE WAS BONA FIDE THERE MAY BE SEVERAL CONSIDERATIONS FOR WHICH THE EXPLANATION ADDUCED BY THE ASSESSEE WITH REGARD TO THE CREDITS WERE NOT ACCEPTED BUT THAT IP SO FACTO CANNOT BE A GROUND FOR LEVY OF PENALTY U/S 271(1)(C). 14 THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS ) AFTER CONSIDERING THE SUBMISSIONS OF THE LEARNED AUTHORIS ED REPRESENTATIVE OF THE ASSESSEE DELETED THE LEVY OF PENALTY IN ALL THE YEARS UNDER CONSIDERATION. 15 THE LEARNED AUTHORISED REPRESENTATIVE OF THE AS SESSEE SUBMITTED BEFORE US THAT IN ALL THE YEARS UNDER CON SIDERATION THE LEARNED ASSESSING OFFICER HAS TREATED THE EXPENDITU RE AS CAPITAL EXPENDITURE RELATING TO SETTING UP OF NEW PLANT AND HAS ALLOWED DEPRECIATION TO THE ASSESSEE ON THE SAME. THUS THE GENUINENESS OF THE EXPENDITURE WAS NOT IN DISPUTE. THE ADDITION WAS MA DE ONLY ON ACCOUNT OF THE DIFFERENCE OF OPINION BETWEEN THE ASSESSEE A ND THE LEARNED ASSESSING OFFICER THAT THE EXPENDITURE IN QUESTION WAS REVENUE OR CAPITAL IN NATURE. ALL THE FACTS ABOUT INCURRING OF THE EXPENDITURE WERE DISCLOSED IN THE RETURNS OF INCOME FILED. THEREFORE THE ASSESSEE WAS NOT EXIGIBLE TO LEVY OF PENALTY U/S 271(1)(C) OF THE AC T. 16 THE LEARNED DEPARTMENTAL REPRESENTATIVE RELIED ON THE ORDER OF THE LEARNED ASSESSING OFFICER. 7 7 17 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIALS AVAILABL E ON RECORD. IN THE INSTANT CASE THE LEARNED ASSESSING OFFICER LEVIED P ENALTY OF RS.33 66 030/- IN ASSESSMENT YEAR 1998-99 RS.19 76 070/- IN ASSESSMENT YEAR 2000-01 RS.11 95 220/- IN ASSESSME NT YEAR 2001-02 RS.13 61 620/- IN ASSESSMENT YEAR 2002-03 AND RS.8 55 660/- IN ASSESSMENT YEAR 2003-04 UNDER SECTION 271(1)(C) OF THE ACT. THE ABOVE PENALTIES WERE LEVIED BECAUSE THE EXPENDITURE ON REPAIRS ON PLANT AND MACHINERY WERE CLAIMED BY THE ASSESSEE AS REVEN UE EXPENDITURE WAS TREATED BY THE LEARNED ASSESSING OFFICER AS CAPITAL EXPENDITURE. ON APPEAL THE LEARNED COMMISSIONER OF INCOME TAX(APPEA LS) DELETED THE AFORESAID LEVY OF PENALTY BY OBSERVING AS UNDER: 2.3. I HAVE CONSIDERED THE SUBMISSIONS OF THE APPE LLANT AUTHORIZED REPRESENTATIVE OF THE APPELLANT COMPANY AND THE PENALTY ORDER VERY CAREFULLY. THE PENALTY HAS BEEN LEVIED UNDER CLAUSE (C) OF SUB-SECTION (1) OF SECTION 271 WHICH PROVIDES FOR PENALTY IN CASES WHERE THE ASSESSING OFFICER IS SAT ISFIED THAT ANY PERSON 'HAS CONCEALED PARTICULARS OF HIS INCOME OR FURNISH ED INACCURATE PARTICULARS OF SUCH INCOME'. FOR IMPOSING THE PENALTY IT IS NECESSARY THAT THERE SHOULD BE EITHER CONCEAL MENT OF PARTICULARS OF INCOME OR FURNISHING OF INACCURATE P ARTICULARS OF SUCH INCOME. THE POSITION WITH REGARD TO THE ONUS O F ESTABLISHING CONCEALMENT/FURNISHING OF INACCURATE PARTICULARS HA S UNDERGONE CHANGES. BY THE OMISSION WITH EFFECT FROM 01.04.19 64 OF THE WORD 'DELIBERATELY' THE ELEMENT OF MENS REA HAS BEEN EXCLUDED FROM THE PENALTY PROCEEDINGS BY WAY OF THE DEEMING PROVISIONS IN EXPLANATION 1 TO SUB-SECTION 1 THE AMOUNT ADDED OR DISALLOWED IN COMPUTING THE TOTAL INCOME SHALL BE DEEMED TO RE PRESENT THE INCOME IN RESPECT OF WHICH PARTICULARS HAVE BEEN CO NCEALED. THUS ANY VARIATION BETWEEN THE RETURNED AND ASSESSED INC OME SHALL BE DEEMED TO BE THE RESULT OF CONCEALMENT/FURNISHING O F INACCURATE PARTICULARS OF INCOME. THE JUDICIAL DECISIONS HAVE REFLECTED THIS CHANGE. THE EARLIER LEGAL POSITION AS ENUNCIATED B Y THE SUPREME COURT IN CIT VS. ANWAR ALI 76 ITR 696 WAS THAT IT WAS FOR THE REVENUE TO POSITIVELY PROVE CONCEALMENT BEFORE LEVY OF PENALTY WAS POSSIBLE. HOWEVER THIS VIEW NO LONGER HOLDS GO OD AFTER THE INTRODUCTION OF THE SAID EXPLANATION. THE PRESENT P OSITION AS ENUNCIATED BY THE APEX COURT IN V.A. BALASUBRAMANIU M & BROS & CO. VS CIT 236 ITR 977 FOLLOWING ITS OWN DECISI ONS IN CIT VS MUSSADILAL RAM BHAROSE 165 ITR 14 CIT VS V.K. R. SADAYAPPAN 185 ITR 49 AND ADDL. CIT VS JIVANLAL SH AH 205 ITR 8 8 244 IS THAT IT IS FOR THE ASSESSEE TO REBUT THE PRE SUMPTION REGARDING CONCEALMENT RAISED AGAINST HIM BY THE EXP LANATION. TO SUMMARIZE EXPLANATION 1 STATES A RULE OF LAW THAT IN EVERY CASE OF ADDITION TO THE RETURNED INCOME THERE IS PRESUM PTION OF CONCEALMENT. THIS PRESUMPTION IS REBUTTABLE. THE ON US OF REBUTTING SUCH PRESUMPTION IS ON THE TAX PAYER. THE PRESUMPTION CAN BE REBUTTED BY OFFERING A PLAUSIBLE EXPLANATION . WHERE NO EXPLANATION IS OFFERED THE ASSESSEE WOULD BE LIABL E FOR PENALTY. WHERE OFFERED THE EXPLANATION SHOULD NOT BE FOUND TO BE FALSE. HOWEVER WHERE THE ASSESSEE IS NOT ABLE TO SUBSTANT IATE ITS EXPLANATION PENALTY MAY NOT BE EXIGIBLE IF SUCH E XPLANATION IS BONA FIDE AND AIL THE FACTS RELATING TO THE SAME AN D MATERIAL TO THE COMPUTATION OF ITS TOTAL INCOME HAVE BEEN DISCLOSED . 2.4. IT IS A WELL SETTLED PROPOSITION THAT PENALTY PROCEEDINGS AND ASSESSMENT PROCEEDINGS ARE DISTINCT. JUDICIAL OPINI ON IS UNANIMOUS THAT WHERE ALL THE FACTS RELATING TO THE ADDITION HAVE BEEN DISCLOSED BY THE ASSESSEE IT WOULD NOT BE A F IT CASE FOR PENALTY. MERE DIFFERENCE OF OPINION REGARDING THE M EANING AND SCOPE OF A PROVISION OF LAW MAY RESULT IN YIELD OF ADDITIONAL QUANTUM OF TAX ON ASSESSMENT BUT MAY NOT JUSTIFY O R WARRANT THE IMPOSITION OF PENALTY. 2.5. THE PARTICULAR FACTS OF THE CASE HAVE TO BE VI EWED AGAINST THE BACKGROUND OF THE ABOVE STATED LEGAL POSITION. THE ONLY ISSUE INVOLVED IS WHETHER PENALTY IS EXIGIBLE ON THE GROU ND THAT INACCURATE PARTICULARS HAVE BEEN FURNISHED. IT HAS BEEN HELD THAT EVEN A MISCONCEIVED OR WRONG CLAIM FOR DEDUCTION OR EXEMPTION DOES NOT MERIT PENALTY IF THE FACTS RELATING TO TH E SAME HAVE BEEN DISCLOSED. IN THIS CASE ALL THE FACTS WERE DISCLOSE D. THE MERE FACT THAT THE AMOUNT CAN BE CONSIDERED TO BE TAXABLE BY THE ASSESSING OFFICER IN NO WAY MAKES IT LEVIABLE FOR LEVYING PEN ALTY U/S. 271(L)(C) OF THE ACT. A READING OF THE ASSESSMENT O RDER SHOWS THAT ALL BILLS AND VOUCHERS RELATING TO REPAIRS AND MAIN TENANCE OF PLANT AND MACHINERY WERE FILED. ALL BILLS AND VOUCHERS RE LATING TO SETTING UP OF A NEW PLANT WAS ALSO FILED. THE AUDIT ORS ALSO STATED THAT NO CAPITAL EXPENDITURE HAS BEEN DEBITED TO THE PROFIT AND LOSS ACCOUNT. THE ASSESSING OFFICER'S SUSPICION THAT REP AIRS AND MAINTENANCE EXPENSES PERTAIN TO SETTING UP OF A NEW PLANT ALSO GETS DILUTED SINCE IN THE REMAND REPORT HE STATES THAT THERE IS NO DOCUMENTARY EVIDENCE OF ITEMS CATEGORISED AS REPAIR S AND MAINTENANCE HAVING BEEN USED FOR SETTING UP OF PLAN T AND MACHINERY. 2.6. THE ASSESSING OFFICER RELIED ON THE SUPREME COURT DECISION IN THE CASE OF CIT VS MUSADDILAL RAM BHAROSE 165 ITR 14 20(SC) AND OTHER JUDGMENTS AND HELD THAT TH E ONUS CAST 9 9 UPON THE APPELLANT BY VIRTUE OF EXPLANATION-1 OF SE CTION 271 OF THE INCOME-TAX ACT HAS NOT BEEN DISCHARGED BY THE APPELLANT. THIS CONTENTION OF THE ASSESSING OFFICER CANNOT BE SUPPORTED WHEN THE FACTS ON RECORD ARE SEEN. RECENTLY THE DEC ISION OF THE SUPREME COURT IN THE CASE OF RAJASTHAN SPINNING AND WEAVING MILLS (SUPRA) THE SUPREME COURT HAS REVISITED ITS DECISI ON IN THE CASE OF DHARMENDRA TEXTILES PROCESSORS AND CLARIFIED THAT IT MERELY REITERATES THE EARLIER EXISTING POSITION I. E. PENALTY CAN BE LEVIED ONLY IN A CASE WHERE THERE HAS BEEN EITHER C ONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF I NCOME. WHETHER THERE HAS BEEN CONCEALMENT OR FURNISHING OF INACCUR ATE PARTICULARS WOULD BE DECIDED ONLY AFTER ANY OF THE THREE FOLLOW ING CONDITIONS ARE SATISFIED :- (I) WHERE NO EXPLANATION IS OFFERED (II) WHERE THE EXPLANATION OFFERED IS FOUND TO BE F ALSE OR (III) WHERE THE EXPLANATION IS UNSUBSTANTIATED. ALL MATERIAL FACTS WERE AVAILABLE WITH THE ASSESSIN G OFFICER FROM THE TIME THE RETURN OF INCOME WAS FILED. THE ASSESS EE OFFERED AN EXPLANATION WHICH WAS NEITHER FALSE NOR UNSUBSTANTI ATED. THERE WAS NO ATTEMPT BY THE APPELLANT TO CONCEAL THE PART ICULARS OF INCOME. WHETHER THE AMOUNT IS TO BE TREATED AS INC OME OR NOT CAN BE AN ISSUE FOR THE PURPOSE OF LEVY OF TAX BUT IT I S A WELL SETTLED PRINCIPLE THAT CIRCUMSTANCES WHICH MAY RESULT IN LE VY OF TAX NEED NOT NECESSARILY RESULT IN PENALTY. NEITHER HAS IT B EEN ESTABLISHED THAT THE .APPELLANT FILED INACCURATE PARTICULARS OF INCOME NOR DID HE TRY TO CONCEAL THE PARTICULARS OF HIS INCOME TH E DELHI ITAT IN IMPULSE INDIA (P) LTD. VS ITO 40 ITD 36 HELD THAT W HERE THE EXPLANATION MADE BY THE ASSESSEE WAS NOT ACCEPTED B Y THE ASSESSING OFFICER AS WELL AS THE CIT(A) IT DOES NOT MEAN THAT THE ASSESSEE COULD NOT MAKE A CLAIM OR THE ASSESSEE'S C LAIM WAS BASED ON THE FALSE PREMISES. WHERE THE ASSESSEE HAD A BON A FIDE BELIEF THAT IT WAS ENTITLED TO A PARTICULAR CLAIM IT COUL D NOT BE SAID TO BE A BOGUS OR FALSE CLAIM OR THERE WAS AN ATTEMPT TO CONCEAL INCOME. IN VIEW OF THE ABOVE I HOLD THAT THE ASSESSING OFF ICER WAS NOT JUSTIFIED IN LEVYING PENALTY U/S. 271(L)(C) OF THE INCOME-TAX ACT. THEREFORE PENALTY OF RS.30 66 030/- LEVIED BY THE ASSESSING OFFICER IS DELETED. 18 WE FIND THAT IN THE INSTANT CASE GENUINENESS O F THE EXPENDITURE WAS NOT IN DOUBT. THE LEARNED ASSESSIN G OFFICER HIMSELF ALLOWED DEPRECIATION ON TREATING THE EXPENDITURE IN QUESTION AS CAPITAL EXPENDITURE. ON THE ABOVE FACTS WE FIND THAT THE ORDER OF THE LEARNED 10 10 COMMISSIONER OF INCOME TAX(APPEALS) FINDS SUPPORT F ROM THE DECISION OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT V. HMA UDYOG (P) LTD. (2007) 211 CTR 543 (DEL) WHEREIN IT WAS HELD THAT 2.INSOFAR AS THE PENALTY PROCEEDINGS ARE CONCERNED THE MATTER ULTIMATELY CAME UP BEFORE THE TRIBUNAL AND BY THE I MPUGNED ORDER THE TRIBUNAL WAS OF THE VIEW THAT THE QUESTI ON WHETHER THE EXPENDITURE INCURRED BY THE ASSESSEE WAS A REVENUE EXPENDITURE OR A CAPITAL EXPENDITURE WAS A DEBATABLE ISSUE AND EVEN IF IT WAS ULTIMATELY DECIDED AGAINST THE ASSESSEE IT COULD N OT BE SAID THAT THE ASSESSEE HAD ATTEMPTED TO CONCEAL THE PARTICULA RS OF HIS INCOME OR FURNISHED INACCURATE PARTICULARS SO AS TO ATTRACT THE PENAL PROVISIONS OF S. 271(1)(C). 3. AFTER HEARING LEARNED COUNSEL FOR THE PARTIES W E ARE OF THE VIEW THAT THERE IS NO QUESTION OF THE ASSESSEE HAVI NG ATTEMPTED TO CONCEAL THE PARTICULARS OF HIS INCOME WHICH IS NOT EVEN IN THE CASE OF THE REVENUE. SO FAR AS FURNISHING OF INACCU RATE PARTICULARS ARE CONCERNED IT IS QUITE CLEAR THAT T HE ASSESSEE HAD FURNISHED ALL RELEVANT PARTICULARS OF HIS INCOME BU T ONLY CLAIMED IT TO BE A REVENUE EXPENDITURE WHILE ACCORDING TO T HE DEPARTMENT THE EXPENDITURE INCURRED WAS OF A CAPITAL NATURE. T HIS WAS AS RIGHTLY HELD BY THE TRIBUNAL A DEBATABLE ISSUE AND WOULD NOT AMOUNT TO FURNISHING OF INACCURATE PARTICULARS SO A S TO ATTRACT PENALTY PROCEEDINGS. 4. UNDER THE CIRCUMSTANCES WE ARE OF THE VIEW THAT NO SUBSTANTIAL QUESTION OF LAW ARISES FOR OUR CONSIDERATION. DISMI SSED. 19 WE THEREFORE DO NOT FIND ANY GOOD REASON TO IN TERFERE WITH THE ORDERS OF THE LEARNED COMMISSIONER OF INCOME TA X(APPEALS). THEREFORE APPEALS OF THE REVENUE ARE DISMISSED. ORDER SIGNED DATED AND PRONOUNCED IN THE COURT ON 22-01-2010 SD/- SD/- (T K SHARMA) JUDICIAL MEMBER (N S SAINI) ACCOUNTANT MEMBER DATE : 22-01-2010 11 11 COPY OF THE ORDER FORWARDED TO : 1. M/S RAYMON GELATINE 51 HARIBHAKTI EXTENSION OLD PADRA ROAD VADODARA 2. THE DEPUTY COMMISSIONER OF INCOME-TAX CIRCLE-2( 2) 4 TH FLOOR AAYAKAR BHAVAN RACE COURSE CIRCLE BARODA 3. CIT CONCERNED 4. CIT(A)-II 5. THE DR ITAT AHMEDABAD 6. GUARD FILE BY ORDER DEPUTY REGISTRAR ASSISTANT REGISTRAR ITAT AHMEDABA