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TMI Blog2009 (9) TMI 84X X X X Extracts X X X X X X X X Extracts X X X X ..... of Rs. 66,458 for the increase in authorized share capital. The filing fee for the increase in authorized capital was held to be capital expenditure by the Hon'ble Supreme Court in the case of Brooke Bond India Ltd. vs. CIT (1997) 140 CTR (SC) 598 : (1997) 225 ITR 798 (SC). The assessee was, therefore, asked to explain why the amount of filing fee of Rs. 9,80,500 and Rs. 66,458 on account of stamp duty for the same purpose may not be disallowed in view of the decision of the Supreme Court. 3. In response thereto, the assessee company submitted that the impugned amounts were spent for increase in the authorized capital, however, no explanation was offered before the AO as to why the same were to be treated as revenue expenditure as claimed by the assessee. In the absence of proper explanation, the AO disallowed the two amounts and added back the same to the income of the assessee and also initiated penalty proceedings against the assessee under s. 271(1)(c) for furnishing inaccurate particulars of income. 4. In response to notice under s. 271(1)(c), the assessee preferred no objection to levy of proposed penalty by the AO. Thereafter, the AO considered the case of the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d under the substantive provisions of s. 271(1)(c), it is for the Department to prove that the assessee had concealed the particulars of his income or furnished inaccurate particulars thereof to bring the case of the assessee within the mischief of the main provisions of s. 271(1)(c) of the Act. Mere rejection of assessee's claim would not be sufficient to hold the assessee to be guilty of concealment. If there is no evidence on record except the explanation of the assessee which Explanation is either found to be false or is unacceptable, it does not follow that concealment has been established. It is by virtue of Explanation only, that the AO has been given a right to raise a presumption to deem certain sum added to income or disallowed in computing the income of a person, to represent the income in respect of which particulars have been concealed, if the assessee did not furnish an explanation or when explanation furnished was found false; and also when such person offers an explanation which he is not able to substantiate and 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is a case of a private limited company, which is normally assisted by chartered accountants/advocates for obtaining legal opinions for showing the nature of income before filing the return for declaring their net taxable income/loss. 9. Undisputedly in the instant case, the assessee company debited to the P L a/c Rs. 9,80,500 towards filing fee paid to RoC and stamp duty of Rs. 66,458 for increase in the authorized capital of the assessee. 10. The return has been filed by the assessee on2nd Dec., 2003and the assessment was completed on6th March, 2006. Their Lordships of the apex Court in the case of Brooke Bond India Ltd. vs. CIT delivered on 27th Feb., 1997 and in an earlier decision delivered on 4th Dec., 1996 by a Full Bench of apex Court in the case of Punjab State Industrial Development Corporation Ltd. vs. CIT (1997) 140 CTR (SC) 594 : (1997) 225 ITR 792 (SC), have clearly held that expenditure incurred by a company in connection with issue of shares with a view to increase its share capital, is directly related to expansion of capital base of the company and is capital expenditure even though it may incidentally help in the business of the company and in the profit-mak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sdictional High Court of Delhi in an unreported case in CIT vs. Escorts Finance Ltd., delivered on 24 Aug., 2009 in IT Appeal 1005 of 2008 (copy supplied by the learned Departmental Representative for the Revenue) [reported at (2009) 28 DTR (Del) 293-Ed.] wherein their Lordships held that penalty under s. 271(1)(c) was leviable because the assessee's claim was not bona fide while observing in paras 13, 14 and 15 of their order as under: "13. We are inclined to agree with the aforesaid submission of learned counsel for the Revenue. 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 provision. Cases of bogus hundi loans or bogus sales or purchases have been treated as that of concealment or inaccuracy in particulars of income, by the judicial pronouncements [See Krishna Kumari Chamanlal Anr. vs. CIT Anr. (1995) 127 CTR (Bom) 458 : (1996) 217 ITR 645 (Bom), Rajaram Co. vs. CIT (1991) 99 CTR (Guj) 161 : (1992) 193 ITR 614 (Guj) and Beena Metals vs. (1999) 154 CTR (Ker) 150 : (1999) 240 ITR 222 (Ker)]. 14. In the present case, we have to examine as t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se, the same would attract penalty. We may also take note of the following observations of the Supreme Court in the case of Union of India Ors. vs. Dharamendra 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 their Lordships of Hon'ble apex Court laid down the law in the decision in the case of Brooke Bond India Ltd. and Punjab State Industrial Development Corporation Ltd. wherein the nature of similar expenditure claimed by the assessee was held to be capital. We fail to understand why the assessee still claimed the same by treating it as revenue expenditure in the return despite the apex Court in their decisions have clearly held the same to be capital in nature. The law was laid down by the apex Court much before the filing of the return of the assessee, hence, in our opinion the assessee now cannot absolve itself from levy of penalty under s. 271(1)(c) in view of Exp ..... X X X X Extracts X X X X X X X X Extracts X X X X
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