9911796707
TMI Blog1993 (9) TMI 162X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 40A(7) being provision for payment of contribution towards approved gratuity fund to LIC. (4) Disallowance of share issue expenses and survey expenses amounting to Rs. 6,92,805 (Rs. 6,02,805 + Rs. 90,000). (5) Expenses relating to earlier years amounting to Rs. 4,38,912. On the basis of Appellate Tribunal's order wherein the above additions/disallowances were confirmed, the Assessing Officer initiated penalty proceedings under section 271(1)(c). In reply to show-cause notice, the assessee submitted various letters, finally letter dated20-11-1992wherein it was pleaded that imposition of penalty under section 271(1)(c) would be unjustified. Pointwise additions/disallowances considered by the Assessing Officer are as under:--- (1) The assessee incurred an expenditure of Rs. 1,12,48,100 on the purchase of following plant & machinery:--- (a) Horizontal Boring Drilling & Milling machine. & ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... diture. The Assessing Officer was of the view that the assessee has furnished inaccurate particulars of its income in its return. So far as the claim of expenditure on purchase of this plant & machinery is concerned, he has claimed the expenditure as revenue in nature whereas it is capital in nature. (2) The assessee claimed deduction in respect of interest accrued on FDRs amounting to Rs. 31,86,320. The claim of the assessee was that this amount should not be taxed as original amount on which this interest has accrued, is still a matter subjudice before the Hon'ble Delhi High Court and in view of the contingency that if the matter is decided against it, the assessee had to pay the entire amount along with interest, this amount does not belong to the assessee. The assessee is manufacturing UF/MF moulding, UF Prescol Glues, Formaldehyde and Hexamine. A dispute arose between the assessee and the Central Excise authority about the payment of excise duty on certain articles manufactured by the assessee. The assessee filed writ petition before the Hon'ble High Court of Delhi to restrain the Excise Department from enforcing the demand of excise duty. The Hon'ble High Court ordered the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cer was of the view that the assessee has furnished inaccurate particulars in respect of this issue and the amount is treated as assessee's concealed income in respect of which inaccurate particulars have been furnished by the assessee. (4) The assessee had claimed expenses on issue of shares Rs. 6,02,805 and market survey expenses of Rs. 90,000 as revenue expenditure. While the Assessing Officer held it capital in nature relying on the decision of Andhra Pradesh High Court in the case of Vazir Sultan Tobacco Co. Ltd. v. CIT [1988] 174 ITR 689 in which decision of Hon'ble Supreme Court in the case of India Cements Ltd. v. CIT [1966] 60 ITR 52 has been considered. On similar ground survey expenses have been disallowed as they were stated to have been incurred for the purpose of raising capital structure of the company. The Appellate Tribunal held that the expenditure incurred was in regard to raising further fresh capital thereby resulting in augmenting the base of the company. Therefore, it held the expenditure as capital in nature and did not allow any deduction. The Assessing Officer was of the view that the assessee was aware of the fact that this is not a revenue expenditure a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expenditure as revenue in nature. However, the authorities have taken a view that the expenditure incurred was capital in nature, the question to be considered is whether such explanation was false or whether it was a case where the assessee though held to be not substantiated the explanation, also failed to prove that such explanation was bona fide and that all the facts relating to the same and material to the computation of his total income had not been disclosed by him? The Assessing Officer applied Explanation 1 to section 271(1)(c) in respect of this addition/disallowance. By this he is trying to establish that Explanation 1 to section 271(1)(c) is attracted because all the additions/disallowances are attributed to suppression of material facts. It was submitted that none of the appellate authority has held that the material facts relating to the computation of income have been suppressed by the assessee. Neither they have held that the explanation given by the assessee is false nor there is a finding that the explanation remained unsubstantiated. It is pertinent to mention here that the Tribunal has discussed the facts and law applicable on this item of addition/disallowance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce was also placed on the decision of Calcutta High Court in the case of Burmah-Shell Oil Storage & Distributing Co. of India Ltd. v. ITO [1978] 112 ITR 592 for the proposition that where the assessee has disclosed full and detailed particulars with all relevant materials and after furnishing all necessary particulars of income, the assessee raised the legal contentions before the Income-tax Officer and it was not accepted, it cannot be assumed that the petitioner has concealed the particulars of income or furnished inaccurate particulars of income. Reliance was also placed on the following orders of the Appellate Tribunal for similar proposition:--- (1) Maharaj Prithviraj (Indl.) v. Dy. CIT [1993] 115 Taxation 26 (Delhi)(Trib.); where one of us was a party; (2) Harshvardhan Chemicals & Minerals Ltd. v. Dy. CIT [1991] 39 TTJ (JP) 212. It was pointed out that while disallowing the claim of the assessee as revenue expenditure, the Hon'ble Bench has relied on the observations of the Hon'ble Supreme Court in the case of India Cements Ltd. and of the Andhra Pradesh High Court in the case of Vazir Sultan Tobacco Co. Ltd. In fact the Supreme Court in India Cements Ltd.'s case was not c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... particulars of his income. In the present case we find that in respect of item Nos. 1 to 3, the facts, circumstances and arguments are same/identical as they were taken before the Bench of the Appellate Tribunal in assessee's own case for assessment years 1984-85 and 1985-86. Therefore, the reasoning given by the Appellate Tribunal in the said assessment years pertaining to item Nos. 1 to 3 is squarely applicable to the facts of the present case. Therefore, our conclusion is that where certain additions/disallowances which were confirmed upto the stage of Appellate Tribunal are concerned, unless there is a finding that the explanation of the assessee is false, the claim of the assessee cannot be treated as mala fide. The assessee has disclosed all material particulars pertaining to the computation of income and they were not found false by any authority, it cannot be said that in the given facts and circumstances, the assessee's claim was not bona fide. Further, it cannot be concluded that the assessee had concealed either particulars of income or furnished inaccurate particulars of income. 7. With regard to 4th item, where the assessee has claimed the expenditure incurred on shar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n this point. In such a situation where the assessee has raised a legal contention bona fide and this issue was not settled by the Hon'ble Supreme Court, whether it is ultimately accepted or rejected, will not generally be an act of concealment of particulars of income, fraud or gross or wilful negligence on the part of the assessee or furnishing of inaccurate particulars of income. Therefore, provision contained in Explanation to section 271(1)(c) cannot be attracted even if it can be said that the said Explanation applies because of the discrepancy between the income returned by the petitioner and the income assessed by the Income-tax Officer. In the case of Burmah-Shell Oil Storage & Distributing Co. of India Ltd., the Hon'ble Calcutta High Court has taken this view. 8. Explanation 1 to section 271(1)(c) envisages a number of situations. We have to analyse whether that situation existed in this case or not. In this case the assessee had offered an explanation for claiming higher deduction. The question to be considered is whether such explanation was false or whether it was a case where the assessee though held to be not able to substantiate the explanation had also failed to p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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