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2008 (12) TMI 232 - AT - Income TaxPenalty levied u/s. 271(1)(c) - assessee claimed set off of unabsorbed depreciation and investment allowance - whether there are provisions in the IT Act directly or indirectly through the mechanism of BIFR for the assessee to support the assessee s claim of the unabsorbed investment allowance of age of more than 8 years or not? HELD THAT - The period of limitation in respect of the brought forward investment allowance has lapsed in the AY 1996-97 itself as held by the AO and upheld by the Hon ble Tribunal and the assessee should not have claimed the expired brought forward investment allowance. In other words the assessee made a claim without any support of the law in existence or the order of the BIFR and also against the express provisions of s. 72A(3) or 32A(6) of the Act. Therefore we came to the conclusion that the assessee wrongly claimed the brought forwarded investment allowance after expiry of eight years in violation of the provisions of ss. 32A(6) and 72A(1). Further the assessee s explanation which basically revolves around the order of the BIFR and the provisions of s. 32 of SICA is neither substantiated nor proved bona fide. In fact the order of the BIFR does not contain any reference to the issue of the time limitation. Thus there are no two views on the subject. In the situations where the AO does not have to disprove the explanation or establish the mala fide in making such wrong and obviously impermissible claims the amount disallowed in computing the total income of the assessee is deemed to represent the income in respect of which the particulars have been concealed within the meaning of the Expln. 1 to s. 271(1)(c). In these circumstances assessee s dependence on the order of BIFR is of no use and resultantly the such explanation of the assessee is a mere formality. Therefore the belief of the assessee while claiming the said loss in the instant assessment year cannot be held arising out of the bona fide belief. Therefore this is fit case for levy of penalty. The order of the CIT(A) is reversed. Accordingly the Grounds the Revenue are allowed.
Issues Involved:
1. Deletion of penalty levied under Section 271(1)(c) of the Income Tax Act. 2. Validity of the assessee's claim of set-off for unabsorbed investment allowance. 3. Interpretation of the provisions of Section 32 of the Sick Industrial Companies Act (SICA) and Section 72A of the Income Tax Act. 4. Bona fide belief of the assessee regarding the period of 8 years for carrying forward losses. 5. Application of Explanation 1 to Section 271(1)(c) regarding deemed concealment of income. Issue-wise Detailed Analysis: 1. Deletion of Penalty Levied Under Section 271(1)(c) of the Income Tax Act: The primary issue is whether the penalty levied under Section 271(1)(c) for concealing income or furnishing inaccurate particulars was correctly deleted by the CIT(A). The Revenue appealed against the CIT(A)'s decision to delete the penalty of Rs. 59,11,936 levied by the AO. The AO had determined that the assessee claimed an expired investment allowance, thereby attracting penalty provisions. 2. Validity of the Assessee's Claim of Set-off for Unabsorbed Investment Allowance: The assessee had claimed a set-off of unabsorbed depreciation and investment allowance amounting to Rs. 7,97,26,616. The AO restricted the set-off to Rs. 2,84,38,390, asserting that the unabsorbed investment allowance of Rs. 1,38,56,714 had lapsed in the assessment year 1996-97. The Tribunal upheld the AO's view, stating that the period of 8 years for carrying forward losses did not begin from the year of amalgamation but from the year the loss was first computed. 3. Interpretation of the Provisions of Section 32 of SICA and Section 72A of the Income Tax Act: The assessee argued that the period of 8 years should be counted from the year of amalgamation (1st April 1991) based on the order of the BIFR. The Tribunal examined various provisions, including Section 32 of SICA and Section 72A of the Income Tax Act, and found no express provisions or directions in the BIFR order supporting the assessee's claim. The Tribunal concluded that the provisions of Section 72A(3) and Section 32A(6) of the Income Tax Act, which restrict the carry-forward period to 8 years, were applicable. 4. Bona Fide Belief of the Assessee Regarding the Period of 8 Years for Carrying Forward Losses: The assessee contended that it was under a bona fide belief that the period of 8 years commenced from the year of amalgamation. The CIT(A) accepted this argument, stating that there was no gross or willful negligence or fraud by the assessee. However, the Tribunal found that the claim was patently wrong and not supported by any provision or order, thereby rejecting the argument of bona fide belief. 5. Application of Explanation 1 to Section 271(1)(c) Regarding Deemed Concealment of Income: The Tribunal analyzed Explanation 1 to Section 271(1)(c), which deals with deemed concealment. It concluded that the assessee's case fell under the category where the explanation offered was not substantiated or proved bona fide. The Tribunal held that the assessee's claim of expired investment allowance was a false claim and attracted penalty provisions. The Tribunal referred to the Supreme Court judgment in Union of India vs. Dharamendra Textiles Processors, which stated that wilful concealment is not an essential ingredient for attracting civil liability for penalty under Section 271(1)(c). Conclusion: The Tribunal reversed the CIT(A)'s order and upheld the penalty levied by the AO, concluding that the assessee's claim was not bona fide and attracted penalty provisions under Section 271(1)(c). The Revenue's appeal was allowed.
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