Trinity Touch (P) Ltd., New Delhi v. ITO, New Delhi

ITA 352/DEL/2010 | 2006-2007
Pronouncement Date: 21-01-2011 | Result: Dismissed

Appeal Details

RSA Number 35220114 RSA 2010
Bench Delhi
Appeal Number ITA 352/DEL/2010
Duration Of Justice 11 month(s) 27 day(s)
Appellant Trinity Touch (P) Ltd., New Delhi
Respondent ITO, New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 21-01-2011
Appeal Filed By Assessee
Order Result Dismissed
Bench Allotted H
Tribunal Order Date 21-01-2011
Date Of Final Hearing 23-12-2010
Next Hearing Date 23-12-2010
Assessment Year 2006-2007
Appeal Filed On 25-01-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH H DELHI BEFORE SHRI A.D. JAIN AND SHRI K.G. BANSAL ITA NO. 352(DEL)/2010 ASSESSMENT YEAR: 2006-07 TRINITY TOUCH PRIVATE LTD. INCOME-TAX OFFICER D-10 DEFENCE COLONY VS. WARD 16(4) NEW DELHI. NEW DELHI-110024. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI HARI MITTAR FCA RESPONDENT BY : SHRI AMARENDRA KUMAR SR. DR ORDER PER K.G. BANSAL : AM THE FACTS OF THE CASE ARE THAT THE ASSESSEE FI LED ITS RETURN ON 27.11.2006 DECLARING NIL INCOME. THE ASSESSMENT PROCEEDINGS WERE INITIATED BY SERVING NOTICE U/S 143(2) ON THE A SSESSEE. IN THE COURSE OF ASSESSMENT IT WAS INTER-ALIA FOUND THAT AN EXP ENDITURE OF RS.8 34 435/- WAS DEBITED ON ACCOUNT OF FEES PAID TO THE REGISTRAR OF COMPANIES FOR INCREASING THE AUTHORIZED SHARE CAPITAL. THE ASSESSEE WAS REQUIRED TO SHOW CAUSE WHY THIS AMOUNT MAY NOT BE DISALLOWED AS CAPITAL EXPENDITURE IN VIEW OF THE DECISION OF THE APEX C OURT IN THE CASE OF PUNJAB STATE INDUSTRIAL DEVELOPMENT CORPORATION LTD. VS. C IT 225 ITR 792. THE ASSESSEE SURRENDERED THE AMOUNT FOR TAXATION BUT REQUESTED THAT PENALTY ITA NO.352(DEL)/2010 2 PROCEEDINGS MAY NOT BE INITIATED. HOWEVER THE AO NOT ONLY DISALLOWED THE EXPENDITURE BUT ALSO INITIATED PENALTY PROC EEDINGS BY MENTIONING THAT THE ASSESSEE DID NOT VOLUNTARILY SURRENDER THE AMOUNT FOR TAXATION. THE PENALTY PROCEEDINGS WERE COMPLETED ON 26.6.200 9. THE DECISION IN THE CASE OF PUNJAB STATE INDUSTRIAL DEVELOPMENT CORPOR ATION LTD. WAS REFERRED TO. IT WAS HELD THAT THE ASSESSEE INTENTIONALL Y AND WILLFULLY SOUGHT TO EVADE TAX BY FURNISHING INACCURATE PARTICULARS OF INCOME. THEREFORE PENALTY OF RS. 2 80 870/- BEING THE MINIMUM PENA LTY WAS LEVIED. 2. VARIOUS SUBMISSIONS WERE MADE BEFORE THE CI T(APPEALS)-XXIX NEW DELHI. HE REFERRED TO A NUMBER OF JUDGMENT S INCLUDING IN THE CASE OF CIT VS. ESCORTS FINANCE LTD. 183 TAXMAN 45 3 (DEL) IN WHICH IT HAS BEEN HELD THAT A CLAIM MADE IN THE RETURN WHICH I S EX-FACIE BOGUS WOULD LEAD TO THE INFERENCE OF FURNISHING INACCURATE PARTICULARS OF INCOME. IN VIEW OF THIS DECISION THE APPEAL OF THE ASSESSEE WAS DISMISSED. 3. AGGRIEVED BY THIS ORDER THE ASSESSEE IS IN A PPEAL BEFORE US. FOLLOWING GROUNDS HAVE BEEN TAKEN IN THE APPEAL:- 1.1 THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT(A) HAS ERRED IN LAW IN CONFIRMING PENALTY OF RS. 2 80 870/- LEVIED U/S 271(1)(C) OF THE INCOME-TAX ACT 1961. ITA NO.352(DEL)/2010 3 1.2 THAT THE LD. CIT(A) HAS ERRED IN NOT APPRECI ATING THE FOLLOWING FACTS: A. THAT IT WAS NOT A FIT CASE FOR PENALTY AS THE RE WAS NO CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING OF INACC URATE PARTICULARS OF INCOME. IN THE AUDITED PROFIT AND LOSS ACCOUN T FILED ALONG WITH THE RETURN THIS AMOUNT STOOD GLARINGLY DISCLOSED A ND DEBITED UNDER THE CLEAR HEAD FEE FOR CAPITAL INCREASE. THERE WAS NO CAMOUFLAGE TO HIDE THE NATURE OF THE EXPENSES OR TO MISLEAD THE ASSESSING OFFICER INTO ALLOWING THE EXPENSE AND NO MALAFI DE WERE INVOLVED THE PARTICULARS OF THE EXPENSE AND THE NATURE THEREOF HAVING BEEN DULY DISCLOSED IN THE INCOME-TAX RETURN. B. AS STATUTORILY REQUIRED UNDER SECTION 44AB OF T HE ACT THE ACCOUNTS WERE AUDITED BY CHARTERED ACCOUNTANTS WHO IN THE IR REPORT WHICH SPECIFICALLY REQUIRED THEM TO MENTION THE CAPITA L EXPENDITURE IF ANY DEBITED IN THE PROFIT AND LOSS ACCOUNT. IN THE TAX AUDIT REPORT THE TAX AUDITORS EXPECTED TO BE WELL CONVERSANT WITH LAW AND THE JUDICIAL DECISIONS DID NOT SPECIFY THIS EXPENSE AS OF CAPITAL NATURE. C. THAT THE PROVISIONS OF THE INCOME-TAX ACT ARE SO FREQUENTLY AMENDED THAT IT IS NOT POSSIBLE FOR NOT ONLY T HE TAX PAYER BUT ALSO FOR THE TAX EXPERTS TO KNOW OR TO CORRECTLY IN TERPRET THE VARIOUS PROVISIONS OF THE ACT AT ANY GIVEN DATE AND SO LO NG AS THE PARTICULARS OF EXPENSE HAVE CORRECTLY BEEN DIS CLOSED IN THE RETURN WITHOUT ANY MALAFIDE IT IS FOR THE ASSESSING OF FICER TO MAKE THE CORRECT ASSESSMENT UNDER THE INCOME-TAX ACT. 1.3 THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE THE OBSERVATIONS OF THE LD. CIT(A) THAT THERE WAS A DELIBERATE ATTEMPT ON THE PART OF THE APPELLANT TO DEFRAUD THE REV ENUE WERE TOTALLY UNWARRANTED AND BASED ON NO MATERIAL OR EVIDENC E OR LOGICAL INFERENCES. 4. BEFORE US THE LD. COUNSEL FOR THE ASSESSEE REFERRED TO PAGE NOS. 1 AND 2 OF THE PAPER BOOK WHICH ARE PROFIT AND LO SS ACCOUNT AND SCHEDULE 14 TO THE ACCOUNTS. IT IS SEEN THAT A SUM OF RS. 1 66 99 222/- HAS BEEN ITA NO.352(DEL)/2010 4 DEBITED TO THE PROFIT AND LOSS ACCOUNT AS ADM INISTRATION SELLING AND OTHER EXPENSES. THE BREAK-UP OF THE EXPENDITURE HAS BEEN GIVEN IN SCHEDULE 14 WHICH SHOWS INTER-ALIA AN EXPENDITURE OF RS. 8 34 435/- ON ACCOUNT OF FEES FOR INCREASE IN CAPITAL. THE CASE OF THE L D. COUNSEL IS THAT THE FACTS REGARDING THE CLAIM WERE FULLY DISCLOSED IN THE R ETURN OF INCOME. THE QUESTION OF LEVY OF PENALTY HAS TO BE SEEN FROM THE EXPLANATION TENDERED BY THE ASSESSEE. THE EXPLANATION IS THAT ALL FAC TS HAVE BEEN FULLY DISCLOSED. THIS EXPLANATION IS BONA FIDE. THEREFORE THE INFERENCE OF PENALTY CANNOT BE DRAWN IN SUCH A CASE. RELIANCE HAS BEEN PLA CED ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. RE LIANCE PETRO PRODUCTS (P) LTD. (2010) 322 ITR 158; HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. ZOOM COMMUNICATION (P) LTD. (2010) 327 ITR 510; CIT VS. IFCI LTD. (2010) 328 ITR 611; HONBLE CHATTISGARH HIGH COURT IN THE CASE OF CIT VS. VIJAY KUMAR JAIN (2010) 325 ITR 3 78; B BENCH OF MUMBAI TRIBUNAL IN THE CASE OF MIMOSA INVESTMEN T CO. (P) LTD. VS. ITO (2010) 6 ITR (TRIB.) 789; AND HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. SHAHABAD COOPERATIVE SUGAR MI LLS LTD. (2010) 322 ITR 73. IT IS ALSO SUBMITTED THAT STATUTORY A UDIT U/S 44AB OF THE ACT HAD BEEN CARRIED OUT BY AN INDEPENDENT AUDITOR IN COLUMN NO. 17(A) OF HIS REPORT NIL AMOUNT HAS BEEN MENTIONED AGAINST EXPENDITURE OF CAPITAL ITA NO.352(DEL)/2010 5 NATURE. THEREFORE IT IS ARGUED THAT THIS IS NOT A FIT CASE FOR LEVY OF PENALTY. WHEN QUESTIONED AS TO WHETHER ANY ACTIO N HAS BEEN TAKEN AGAINST THE AUDITOR NO REPLY HAS BEEN FURNISHED BY THE LD. COUNSEL. 5. IN REPLY THE LD. DR SUBMITTED THAT THE ISS UE AS TO WHETHER FEES PAID TO THE REGISTRAR OF COMPANIES FOR INCREAS ING AUTHORIZED CAPITAL IS IN THE REVENUE OR CAPITAL FIELD HAS BEEN SETT LED LONG BACK BY THE APEX COURT IN THE CASE OF BROOK BOND INDIA LTD. ON 4.12.1996. THE ASSESSEE FILED ITS RETURN ON 27.11.2006 10 YEARS AFTER RENDERING OF THIS JUDGMENT. THE RETURN HAS ALSO NOT BEEN REVISED. THEREFORE IT IS A CASE OF PRIMA FACIE FALSE CLAIM. ACCORDINGLY IT IS ARGUED TH AT THIS IS A FIT CASE FOR LEVY OF PENALTY. RELIANCE HAS BEEN PLACED ON T HE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF ZOOM COMMUNICATI ON (P) LTD. (SUPRA); ESCORTS FINANCE LTD. (SUPRA); UNION OF INDIA VS. DHARMENDRA TEXTILE PROCESSOR (2008) 306 ITR 277 (SC); ORDER OF D BENCH OF DELHI TRIBUNAL IN THE CASE OF TEL ABRIDGE INTERNATIONAL LTD. 2010-TIOL-01-ITAT DATED 11.09.2009; PUNE BENCH IN THE CASE OF CAM BAY SOFTWARE INDIA (P) LTD. (2009) 31 SOT 153 AND DELHI BENCH A IN THE CASE OF ANAND & ANAND IN ITA NO. 25(DEL)/2010. ITA NO.352(DEL)/2010 6 6. IN THE REJOINDER THE LD. COUNSEL DISTINGUISHED THE FACTS OF THE CASE OF TEL ABRIDGE INTERNATIONAL LTD. ESCORTS FINANCE LT D. AND ANAND & ANAND (SUPRA). 7. WE HAVE CONSIDERED THE FACTS OF THE CASE AND SUBMISSIONS MADE BEFORE US. THE FACTS OF THE CASE ARE THAT THE ASSESSEE CLAIMED DEDUCTION OF EXPENDITURE AMOUNTING TO RS. 8 34 435/- IN RES PECT OF FEES PAID TO REGISTRAR OF COMPANIES FOR INCREASING THE AUTHORIZE D SHARE CAPITAL. THE ASSESSEE WAS REQUESTED TO STATE WHY THIS EXPEND ITURE SHOULD NOT BE DISALLOWED. THE ASSESSEE FILED A LETTER SURREN DERING THE AMOUNT FOR TAXATION. THE EXPENDITURE WAS DEBITED UNDER THE HEAD ADMINISTRATION SELLING AND OTHER EXPENSES. THE DETAILS OF THESE EXPENDITURE WERE AVAILABLE IN SCHEDULE 14 WHICH SHOWS THAT THE AMOUNT OF R S. 8 34 435/- WAS DEBITED UNDER THIS HEAD AS FEES FOR CAPITAL INCR EASE. THEREFORE THE FACTS IN REGARD TO CLAIM OF EXPENDITURE WERE DISCLOSED IN THE RETURN OF INCOME. HOWEVER THE TAX AUDIT REPORT DID NOT TREAT THIS EXPENDITURE AS CAPITAL EXPENDITURE. AN AFFIDAVIT HAS BEEN FILED FROM S HRI S.K. AGGARWAL CHARTERED ACCOUNTANT TO THE EFFECT THAT HE HAS B EEN COMPILING/SCRUTINIZING THE RETURNS OF THE ASSESSEE THE TAX AUDIT REPO RT WAS PREPARED BY M/S BANSAL & COMPANY A FIRM OF CHARTERED ACCOUNTANTS WHICH SHOWS NIL ITA NO.352(DEL)/2010 7 AMOUNT IN COLUMN 17(A) AND THIS AMOUNT ESCAPED HIS ATTENTION ALSO WHILE PREPARING THE RETURN OF INCOME. ON THESE FACTS THE QUESTION IS-WHETHER THE ASSESSEE IS LIABLE TO BE PENALIZED U/S 271(1 )(C)? 7.1 IN SO FAR AS THE QUESTION OF ADMISSIBILITY OF THE EXPENDITURE IS CONCERNED THE SAME STANDS DECIDED AGAINST TH E ASSESSEE BY THE JUDGMENT OF HONBLE SUPREME COURT IN THE CASE OF PUNJAB STATE INDUSTRIAL DEVELOPMENT CORPORATION LTD. (SUPRA) DATED 4.12.1 996 WHICH MADE THE FOLLOWING OBSERVATIONS: WE DO NOT CONSIDER IT NECESSARY TO EXAMINE ALL THE DECISIONS IN EXTENSO BECAUSE WE ARE OF THE OPINION THAT TH E FEE PAID TO THE REGISTRAR FOR EXPANSION OF THE CAPITAL BASE OF THE COMPANY WAS DIRECTLY RELATED TO THE CAPITAL EX PENDITURE INCURRED BY THE COMPANY AND ALTHOUGH INCIDENTALLY THAT WOULD CERTAINLY HELP IN THE BUSINESS OF THE COMPANY AN D MAY ALSO HELP IN PROFIT-MAKING IT STILL RETAINS THE CHARA CTER OF A CAPITAL EXPENDITURE SINCE THE EXPENDITURE WAS DIRECTLY RELATED TO THE EXPANSION OF THE CAPITAL BASE OF THE COMPANY. W E ARE THEREFORE OF THE OPINION THAT THE VIEW TAKEN BY THE DIFFERENT HIGH COURTS IN FAVOUR OF THE REVENUE IN THIS BEH ALF IS THE PREFERABLE VIEW AS COMPARED TO THE VIEW BASED ON THE DECISION OF THE MADRAS HIGH COURT IN KISENCHAND CHELLARAMS CASE [1981] 130 ITR 385. 7.2 THE AFORESAID JUDGMENT HAS BEEN FOLLOWED CONS ISTENTLY IN A NUMBER OF OTHER DECISIONS OF THE APEX COURT AND THE HIG H COURTS. THE ASSESSEE FILED ITS RETURN OF INCOME ON 27.11.2006 MORE OR LESS 10 YEARS AFTER THE ITA NO.352(DEL)/2010 8 RENDERING OF THE AFORESAID DECISION BY THE APEX COURT. THEREFORE THE CLAIM IS EX-FACIE WRONG. 7.3 IN THE CASE OF RELIANCE PETRO PRODUCTS (P) LTD. (SUPRA) THE QUESTION BEFORE THE HONBLE SUPREME COURT WAS REGARDING L EVY OF PENALTY IN RESPECT OF DISALLOWANCE OF AN EXPENDITURE OF RS. 28 77 242/- U/S 14A. THE HONBLE COURT MENTIONED THAT IT IS NOT CONCERN ED WITH MENS REA. WHAT IS TO BE SEEN IS WHETHER AS A MATTER OF FACT THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS WHICH ACCORDING TO WEBSTERS DICTIONARY MEAN NOT ACCURATE NOT EXACT OR CORRECT; NOT AC CORDING TO TRUTH; ERRONEOUS; AS AN INACCURATE STATEMENT COPY OR TRANSCRIPT. THEREFORE WHERE THERE IS NO FINDING THAT ANY DETAIL SU PPLIED BY THE ASSESSEE IN THE RETURN IS INCORRECT OR ERRONEOUS OR FALSE IT C ANNOT BE SAID THAT THE ASSESSEE HAS COMMITTED THE DEFAULT OF FURNISHING INACCUR ATE PARTICULARS. THUS THE PENALTY WAS SET ASIDE. THE FACTS OF THE CASE ARE SOMEWHAT DISTINGUISHABLE. THE ASSESSEE HAS FURNISHED THE DETAILS REGARDING EXPENDITURE INCURRED BY WAY OF PAYMENT OF FEES TO REGISTRAR OF COMPANIES FOR ENHANCING ITS CAPITAL. THE EXPENDITURE HAS BEEN CLAIMED TO BE REVENUE EXPENDITURE A CLAIM WHICH IS EX-FACIE FALSE IN VIEW OF THE ITA NO.352(DEL)/2010 9 JUDGMENT OF HONBLE SUPREME COURT DELIVERED AS EARLY AS IN OCTOBER 1996. 7.4 IN THE CASE OF ZOOM COMMUNICATION P. LTD.(SUPR A) THE QUESTION WAS REGARDING ADMISSIBILITY OF THE DEDUCTION OF INCOME-TAX IN COMPUTING THE TOTAL INCOME. THE CLAIM IS PRIMA FACIE I NADMISSIBLE. THE CASE OF THE ASSESSEE WAS THAT THE MISTAKE OCCURRED DUE TO OVERSIGHT. THE HONBLE COURT MENTIONED THAT ONLY A SMALL PERCE NTAGE OF INCOME-TAX RETURNS ARE PICKED UP FOR SCRUTINY. IN SUCH A SITUATION IF THE ASSESSEE MAKES A CLAIM WHICH IS NOT ONLY INCORRECT IN LA W BUT IS ALSO WHOLLY WITHOUT ANY BASIS AND THE EXPLANATION FURNISHED BY HIM IS NOT FOUND TO BE BONA FIDE IT WOULD BE DIFFICULT TO SAY THAT HE WOULD STILL NOT BE LIABLE TO PENALTY. IF SUCH A VIEW IS TAKEN THAT A CLAI M WHICH IS WHOLLY UNTENABLE IN LAW AND HAS ABSOLUTELY NO FOUNDATION ON WHI CH IT COULD BE MADE THE ASSESSEE WOULD NOT BE LIABLE TO IMPOSITION OF PENALTY EVEN IF HE WAS NOT ACTING BONA FIDE WHILE MAKING THE CLAIM OF TH IS NATURE THAT WOULD GIVE A LICENSE TO UNSCRUPULOUS ASSESSEES TO MAKE W HOLLY UNTENABLE AND UNSUSTAINABLE CLAIMS. IT IS FURTHER MENTIONED T HAT IT IS NOT EXPLAINED AS TO WHO COMMITTED THE OVERSIGHT RESULTING IN FA ILURE TO ADD THIS AMOUNT AND UNDER WHAT CIRCUMSTANCES THE OVERSIGHT OCC URRED AND WHY IT WAS NOT DETECTED BY THOSE WHO CHECKED THE INCOME-TA X RETURN. THE REVENUE ITA NO.352(DEL)/2010 10 HAS PLACED HEAVY RELIANCE ON THIS CASE WHILE THE LD. COUNSEL HAS DISTINGUISHED THIS CASE BY MENTIONING THAT THE A SSESSEE HAS EXPLAINED THE CAUSE OF OVERSIGHT. IN THE AFFIDAVIT OF SHRI S .K. AGGARWAL IT IS MENTIONED THAT THE AUDITORS M/S BANSAL & COMPA NY DID NOT SHOW THIS AMOUNT AS DISALLOWABLE IN TAX AUDIT REPORT I N COLUMN 17(A) AND THIS MATTER ALSO ESCAPED HIS ATTENTION. NO AFFIDAV IT HAS BEEN FILED FROM M/S BANSAL & COMPANY. IN THE COURSE OF HEARING TH E ASSESSEE WAS REQUESTED TO STATE WHAT ACTION HAS BEEN TAKEN AGAINST M/S BANSAL & COMPANY OR SHRI S.K. AGGARWAL. THE LD. COUNSEL DI D NOT FURNISH ANY REPLY WHICH MEANS THAT NO ACTION HAS BEEN TAKE N. THESE VERY PERSONS CONTINUE TO BE AUDITORS AND TAX FILERS FOR THE ASSESSEE. IN VIEW OF THIS CIRCUMSTANCE WE ARE OF THE VIEW THAT THE AFFIDA VIT IS AN AFTERTHOUGHT AND IT CANNOT BE RELIED UPON. IN ANY CASE IT CAN NOT BE HELD AS A GENERAL PREPOSITION OF LAW THAT MISTAKE OF THE AUDITOR ABSOLVE THE ASSESSEE FROM ITS DEFAULT. ACCORDINGLY IT IS HELD THAT THE D ECISION OF THIS CASE IS IN FAVOUR OF THE REVENUE. 7.5 IN THE CASE OF ESCORTS FINANCE LTD. (SUPRA) THE QUESTION BEFORE THE COURT WAS REGARDING THE LEVY OF PENALTY IN RE SPECT OF CLAIM OF DEDUCTION U/S 35D WHICH WAS DENIED BY THE AO AS COND ITIONS FOR THE DEDUCTION ITA NO.352(DEL)/2010 11 DID NOT STAND SATISFIED. THE HONBLE COURT RE FERRED TO THE DECISION IN THE CASE OF DHARMENDRA TEXTILE PROCESSORS. IT IS MEN TIONED THAT A SUM OF RS. 21 02 228/- U/S 35D WAS DISALLOWED BY THE AO. ACCORDING TO THE ASSESSEE THE CLAIM WAS MADE ON THE BASIS OF OPINION GIVEN BY THE CHARTERED ACCOUNTANT WHICH IS CLEAR FROM THE PROSPECTUS OF THE PUBLIC ISSUE OF SHARES. THE CASE OF THE REVENUE WAS THAT MERELY BECAUSE INFORMATION IN THIS BEHALF WAS MADE AVAILABLE IN THE TAX AUDIT REPORT THAT WOULD NOT ABSOLVE THE ASSESSEE FROM LEVY OF PENALTY WHERE EX-FACIE BOGUS CLAIM IS MADE. IT WAS FURTHER SUBMITTE D THAT ONLY 5 % OF THE RETURNS ARE TAKEN UP FOR SCRUTINY. THEREFORE W ITH THE HOPE THAT RETURN MAY NOT COME UNDER SCRUTINY AND MAY BE ASSESSED O N THE BASIS OF SELF- ASSESSMENT AN ASSESSEE CAN VENTURE TO GIVE WRON G INFORMATION. THEREFORE IT WAS ARGUED THAT MERELY BECAUSE WR ONG INFORMATION WAS THERE IN THE TAX AUDIT REPORT WILL NOT ABSOLVE T HE ASSESSEE FROM LEVY OF PENALTY. WHAT IS TO BE SEEN IS WHETHER THE CLA IM IS BOGUS. THE HONBLE JURISDICTIONAL HIGH COURT CONCURRED WITH THIS LIN E OF ARGUMENT AND MENTIONED THAT EVEN IF THERE IS NO CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS BUT ON THE BASIS THEREOF THE CLAIM WHICH IS MADE IS EX-FACIE BOGUS IT MAY STILL ATTRACT PENALTY PR OVISIONS. WE HAVE ALREADY SEEN THAT THE CLAIM THAT THE ERROR WAS COMMITTE D BY THE CHARTERED ITA NO.352(DEL)/2010 12 ACCOUNTANT IS NOT ACCEPTABLE. HONBLE DELHI HIGH COURT HAS ACCEPTED THIS LINE OF ARGUMENT IN THE AFORESAID CASE. BEYOND THAT IT IS CLEAR THAT THE CLAIM IS EX-FACIE BOGUS. THEREFORE THE RATIO O F THIS CASE IS ALSO APPLICABLE TO THE FACTS OF THE CASE. 7.6 IN THE CASE OF VIJAY KUMAR JAIN (SUPRA) TH E FACTS ARE THAT THE AO REJECTED THE BOOK RESULTS AND MADE AN ADDITION OF RS. 1 70 920/- BY ESTIMATING THE NET PROFIT AT 10% OF THE RECEIPTS AGAINST 6.36% SHOWN BY THE ASSESSEE. THE HONBLE COURT CONSIDERED INTER -ALIA THE DECISION IN THE CASE OF DHARMENDRA TEXTILE PROCESSOR. IT HAS BEE N MENTIONED THAT IT IS NOT THE CASE OF THE REVENUE THAT THE ASSESSEE CONCEAL ED THE PARTICULARS OF HIS INCOME OR ANY PARTICULAR OF INCOME FURNISHED B Y HIM WAS FOUND TO BE INACCURATE BY THE AO. THEREFORE THE PENALTY WAS CANCELLED. THE FACTS OF THIS CASE ARE CLEARLY DISTINGUISHABLE BECAUSE THAT CASE DID NOT INVOLVE ANY EX-FACIE BOGUS OR FALSE CLAIM. 7.7 IN THE CASE OF MIMOSA INVESTMENT CO. P. LTD. ( SUPRA) THE QUESTION BEFORE THE TRIBUNAL WAS IN REGARD TO LEVY OF PENAL TY IN RESPECT OF DISALLOWANCE OF RS. 38 31 322/- U/S 14A OF THE ACT . THE TRIBUNAL CONSIDERED THE MEANING OF THE WORD CONCEALED A S MENTIONED IN ITA NO.352(DEL)/2010 13 WEBSTERS NEW INTERNATIONAL DICTIONARY THE F ORM OF RETURN AND THE STATUTORY PROVISIONS. FINALLY THE PENALTY WAS DELETED BY MENTIONING THAT ALL RELEVANT MATERIAL FACTS HAD BEEN DISCLOSED. THE ASSESSEE OFFERED AN EXPLANATION WHICH WAS NOT FOUND TO BE FALSE. TH E AO MAY NOT AGREE WITH THE ASSESSEE WHILE COMPUTING INCOME ON THE SAME FACTS. THAT HOWEVER DOES NOT LEAD TO THE INFERENCE OF CONCEALMENT OF INCOME OR FURNISHING INACCURATE PARTICULARS OF INCOME. WE HAVE ALRE ADY SEEN THAT THE HONBLE DELHI HIGH COURT HAS TAKEN A TOTALLY DIFFE RENT VIEW IN THIS MATTER IN THE CASE OF ZOOM COMMUNICATION P. LTD. AND ESCO RTS FINANCE LTD. IN WHICH IT HAS BEEN HELD THAT AN EX-FACIE BOGUS CLAIM IN A SCENARIO WHERE FACTS HAVE BEEN CORRECTLY SUBMITTED WILL LEAD TO LEVY OF PENALTY. THEREFORE WE CHOSE TO FOLLOW THE DECISION OF JURISDICTIONAL HIGH COURT IN PREFERENCE TO THE AFORESAID DECISION OF M UMBAI TRIBUNAL. 7.8 IN THE CASE OF SHAHBAD COOPERATIVE SUGAR MIL LS LTD. (SUPRA) THE QUESTION WAS REGARDING LEVY OF PENALTY IN RESPECT OF PROFIT EARNED ON MANUFACTURING OF ARTICLES. THE HONBLE COURT INTER-ALIA REFERRED TO THE DECISION IN THE CASE OF HINDUSTAN STEEL LTD. VS. STATE OF ORISSA (1972) 83 ITR 26 AND MENTIONED THAT FROM THE ORDER OF THE TRIBUNAL WE DO NOT FIND ANY SUCH POINT HAVING BEEN RAISED BY THE REV ENUE. IN ANY CASE THE REASONING WHICH HAS BEEN APPLIED FOR SETTING A SIDE PENALTY IN RESPECT OF ITA NO.352(DEL)/2010 14 WRONG CLAIM U/S 80P OF THE ACT WILL ALSO APPLY T O WRONG CLAIM UNDER THE HEAD DEPRECIATION. MAKING OF WRONG CLAIM IS NOT AT PAR WITH CONCEALMENT OR FURNISHING INACCURATE PARTICULARS OF INCOME. IT MAY BE MENTIONED THAT THE DECISION WAS RENDERED BY P UNJAB & HARYANA HIGH COURT NOT BEING THE JURISDICTIONAL HIGH COURT. NO PLEA OF EX-FACIE BOGUS CLAIM WAS RAISED IN THIS CASE. THUS THE CASE WAS ONLY OF A WRONG CLAIM AS AGAINST A FALSE CLAIM. THE LATTER SITUATION IS COVERED BY THE TWO DECISIONS OF HONBLE DELHI HIGH COURT WHICH HAVE BEEN DECIDED IN FAVOUR OF THE REVENUE. 7.9 IN THE CASE OF IFCI LTD. (SUPRA) THE QUEST ION BEFORE THE HONBLE JURISDICTIONAL HIGH COURT WAS REGARDING LEVY OF PENALTY IN RESPECT OF INVESTMENTS WRITTEN OFF. THE CASE OF THE ASSE SSEE WAS THAT ALL PARTICULARS WERE FURNISHED IN THE RETURN OF INCO ME AND THE LOSS WAS ACTUALLY INCURRED. THE TRIBUNAL AFTER ANALYZING THE FACTUAL MATRIX EXPRESSED THE VIEW THAT THERE HAS BEEN NO FU RNISHING OF INACCURATE PARTICULARS AND IT IS A CASE WHERE A CLAIM OF LOSS WAS NOT ACCEPTED. THAT WOULD NOT PER SE AMOUNT TO FURNISHING ANY KIND OF INACCURATE PARTICULARS. THE HONBLE COURT CONCURRED WITH THIS FINDING AN D MENTIONED THAT IT DOES NOT PERCEIVE ANY MERIT IN THE APPEAL. THE SAME WAS DISMISSED AT THE ITA NO.352(DEL)/2010 15 STAGE OF ADMISSION. FROM THIS DECISION IT TRANSPIRES THAT THE MATERIAL ISSUE IS WHETHER THE CLAIM IS EX-FACIE FALSE AN D WHETHER EXPLANATION FURNISHED BY THE ASSESSEE IS BONA FIDE? IT IS A FACT THAT THE CLAIM IS EX- FACIE FALSE. THE PLEA OF BONA FIDE CANNOT BE ACCEPTED BECAUSE THE CIRCUMSTANCES IN WHICH AUDITORS COMMITTED THE ERRORS HAVE NOT BEEN EXPLAINED. THEREFORE WE ARE OF THE VIEW THAT THE LOWER AUTHORITIES WERE RIGHT IN LEVYING THE PENALTY. 7.10 IN THE CASE OF TEL ABRIDGE INTERNATIONAL LT D. THE DELHI TRIBUNAL WAS CONCERNED WITH THE CASE OF LEVY OF PENALTY IN RESPECT OF EXPENDITURE INCURRED TO INCREASE THE SHARE CAPITAL. THE PEN ALTY WAS CONFIRMED BY MAKING THE FOLLOWING OBSERVATIONS: WE ARE IN AGREEMENT WITH THE AFORESAID SUBMISS ION OF LEARNED COUNSEL FOR THE REVENUE. WE FAIL TO UN DERSTAND AS TO HOW THE CHARTERED ACCOUNTANTS WHO ARE SUPPOSED TO BE EXPERT IN TAX LAWS COULD GIVE SUCH AN OPINION HAVING REGARD TO THE PLAIN LANGUAGE OF S. 35D OF THE ACT. IT WOULD BE IMPORTANT TO NOTE THAT ASSESSEE HAS NOWHERE PL EADED THAT RETURN WAS FILED CLAIMING BENEFIT OF S. 35D OF TH E ACT ON THE BASIS OF THE SAID OPINION. WHAT WAS STATED W AS THAT IN THE PROSPECTUS IT WAS MENTIONED THAT AS PER THE OP INION GIVEN BY THE CHARTERED ACCOUNTANTS THE COMPANY WOULD BE ENTITLED FOR RELIEF UNDER S. 35D OF THE ACT. THEREFOR E IT IS NOT THE CASE OF THE ASSESSEE THAT WHILE FILING THE RETURN IT GOT ASSISTANCE FROM THE CHARTERED ACCOUNTANTS WHO O PINED THAT THE AFORESAID EXPENSES QUALIFY FOR AMORTIZATIO N OVER A PERIOD OF 10 YEARS UNDER S. 35D OF THE ACT. TH AT APART WHEN WE FIND THAT IT IS NOT A CASE WHERE TWO OPINIONS ABOUT THE ITA NO.352(DEL)/2010 16 APPLICABILITY OF S. 35D WERE POSSIBLE THEREFOR E IT CANNOT BE A CASE OF A BONA FIDE ERROR ON THE PART OF TH E ASSESSEE. AS HAS BEEN POINTED OUT ABOVE THE RELIEF AVAILAB LE UNDER S. 35D OF THE ACT TO A FINANCE COMPANY IS EX FACI E INADMISSIBLE AS THAT IS CONFINED ONLY TO THE EXISTING INDUSTR IAL UNDERTAKING FOR THEIR EXTENSION OR FOR SETTING UP A NEW IN DUSTRIAL UNIT. IT WAS THUS NOT A WRONG CLAIM PREFERRED BY T HE ASSESSEE BUT IS A CLEAR CASE OF FALSE CLAIM. IN C IT VS. VIDYAGAURI NATVERLAL & ORS. (1999) 153 CTR (GUJ.) 546: (19 99) 238 ITR 91 (GU.) GUJARAT HIGH COURT MADE A DISTIN CTION BETWEEN WRONG CLAIM AS OPPOSED TO FALSE CLAIM AN D HELD THAT IF THE CLAIM IS FOUND TO BE FALSE THE SAME WO ULD ATTRACT PENALTY. WE MAY ALSO TAKE NOTE OF THE FOLLOWING OBSERVATIONS OF THE SUPREME COURT IN THE CASE OF UNION OF IND IA & ORS. VS. DHARMENDRA TEXTILE PROCESSORS & ORS. (2008) 219 CTR (SC) 617: (2008) 14 DTR (SC) 114: (2008) 306 ITR 277 (SC): (2008) 13 SCC 369. IN SUCH A CASE IT IS DIFFICULT TO ACCEPT THE PLEA THAT ERROR WAS BONA FIDE. 15. NOW REVERTING TO THE FACTS OF THE INSTANT CASE WE FIND THAT THE ASSESSEE HAS NOT EXPLAINED AS TO WHY IT MADE THE CLAIM FOR THE EXPENDITURE IN THE RETURN WHEN T HEIR LORDSHIPS OF HONBLE APEX COURT LAID DOWN THE LAW IN T HE DECISION IN THE CASE OF BROOKE BOND INDIA LTD. (SUPRA) AND PUNJAB STATE INDUSTRIAL DEVELOPMENT CORPORATION LTD. (SUPRA) W HEREIN THE NATURE OF SIMILAR EXPENDITURE CLAIMED BY THE AS SESSEE WAS HELD TO BE CAPITAL. WE FAIL TO UNDERSTAND WHY T HE ASSESSEE STILL CLAIMED THE SAME BY TREATING IT AS REV ENUE EXPENDITURE IN THE RETURN DESPITE THE APEX COURT IN THEIR DECISIONS (SUPRA) HAVE CLEARLY HELD THE SAME TO BE CAPITAL IN N ATURE. THE LAW WAS LAID DOWN BY THE APEX COURT (SUPRA) MUCH BEFORE THE FILING OF THE RETURN OF THE ASSESSEE HENCE I N OUR OPINION THE ASSESSEE NOW CANNOT ABSOLVE ITSELF FROM LEV Y OF PENALTY UNDER S. 271(1)(C) IN VIEW OF EXPLANATION 1 TO S. 271(1)(C) BY GIVING AN EXPLANATION DURING THE ASSESSMENT PROCEEDINGS THAT IT DISCLOSED ALL PARTICULARS BEFORE THE AO OR THAT THE CLAIM MADE BY THE ASSESSEE WAS DUE TO A BO NA FIDE ERROR. IN OUR OPINION IN THE FACTS ALREADY NARRATED IN DETAIL BY US THE CLAIM OF EXPENDITURE MADE BY THE ASSESSEE EVEN AGAINST THE LAW LAID DOWN BY THE APEX COURT CAN BE C ALLED TO BE EX- ITA NO.352(DEL)/2010 17 FACIE BOGUS AND HENCE CANNOT BE CALLED BONA F IDE. THEREFORE THE ASSESSEES CASE COMES WITHIN THE PURVIEW OF EXPLANATION 1 TO S. 271(1)(C) FOR LEVY OF PENALT Y FOR FURNISHING INACCURATE PARTICULARS BY THE ASSESS EE. IN THIS VIEW WE FIND SUPPORT FROM THE RECENT DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT OF DELHI IN THE CASE O F ESCORT FINANCE LTD. (SUPRA) WHEREIN IN IDENTICAL FACT S THEIR LORDSHIPS HELD SUCH A CLAIM MADE BY THE ASSES SEE TO BE NOT DUE TO A BONA FIDE ERROR BECAUSE EX-FACIE THE CLAIM MADE BY THE ASSESSEE WAS BOGUS. THEREFORE IN OUR OPIN ION THE CIT(A) BY RELYING UPON VARIOUS DECISIONS WHILE COMING TO A CONCLUSION THAT NO PENALTY UNDER S. 271(1)(C) W AS LEVIABLE BECAUSE THE CLAIM OF THE ASSESSEE WAS ON ACCO UNT OF A BONA FIDE ERROR WAS MISPLACED BECAUSE OF IMPROPER A PPRECIATION OF THE FACTS AS WELL AS IMPROPER APPLICATION OF THE CASE LAW TO THE FACTS OF THE INSTANT CASE OF THE ASSESSEE. ACCORDINGLY THE ORDER OF CIT(A) IN DELETING THE IMPUGNED PE NALTY AMOUNT LEVIED UNDER S. 271(1)(C) BY THE AO IS SET ASID E AND THE ORDER OF THE AO IN LEVYING THE IMPUGNED PENALTY AMOUN T OF RS. 3 84 757/- UNDER S. 271(1)(C) OF THE ACT IS UPHELD. CONSEQUENTLY THE GROUND OF APPEAL TAKEN BY TH E REVENUE IS ALLOWED. 7.11 THE FACTS OF THE TWO CASES ARE IN PARI M ATERIA. 7.12 THEREFORE IT IS HELD THAT THE LOWER AUTHORI TIES WERE RIGHT IN LEVYING THE PENALTY. 8. IN THE RESULT THE APPEAL IS DISMISSED. THIS ORDER WAS PRONOUNCED IN THE OPEN COURT ON 21 JANUARY 2011. SD/- SD/- (A.D. JAIN) (K.G.BANSAL) JUDICIAL MEMBER ACCOUNTANT MEMBER DATE OF ORDER: 21ST JANUARY 2011. SP SATIA ITA NO.352(DEL)/2010 18 COPY OF THE ORDER FORWARDED TO:- TRINITY TOUCH PVT. LTD. NEW DELHI. ITO WARD 16(4) NEW DELHI. CIT(A) CIT THE DR ITAT NEW DELHI. ASSISTANT REGISTRAR.