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TMI Blog2010 (8) TMI 40X X X X Extracts X X X X X X X X Extracts X X X X ..... iation to the extent of Rs.32,51,906/-. b. The addition towards the provident fund of Rs.3,030/- treating the same as income, was also made on the ground that this contribution was made belatedly by the assessee. c. The Assessing Officer also disallowed deduction under Section 80HHC of the Act on the ground that the assessee had not adjusted the loss incurred on manufactured and traded goods exported out of India against incentives and had claimed deduction under Section 80HHC of the Act on 90% of the incentives. 2. These additions were upheld by the CIT (A) as well. 3. While drawing the assessment order, the Assessing Officer also directed that the penalty proceedings be initiated against the assessee by issuing a show cause notice under Section 271 (1) (c) of the Act. The show cause notice was thus given to the respondent-assessee, who submitted its reply thereto. However, the Assessing Officer was not convinced with the reply and thus, passed the order dated 28th September, 2007 imposing a penalty of Rs. 90,97,415/- in respect of the aforesaid three additions holding that the assessee had furnished inaccurate particulars of the income which fell within the purview of the Sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st March, 2001. When the Assessing Officer took note of the aforesaid fact, he put a specific query to the assessee to explain as whether these machineries were put to use for business purposes during the year under consideration, and a show cause notice was also issued as to why the claim of depreciation on the said plant and machinery be not rejected as these assets were not put to use for business purpose during the year under consideration. The assessee had replied that all the assets were put to use and hence the depreciation on all these assets be allowed in full. The assessment order further reveals that during the course of hearing the assessee was specifically asked to produce the supporting evidence including records etc. to prove their claim. However, the assessee could not produce any evidence. From this, the Assessing Officer concluded that the machineries, which were shown to have been brought on record on 31st March, 1997 only, had not put to use at all during the relevant assessment year. For this reason, the claim of depreciation on this machinery was not allowable. It was under these circumstances, the Assessing Officer had disallowed the depreciation to the exte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th the stores consumption. However, in this year no such record was produced. On the contrary, submitted the learned counsel, in so far as this assessment year is concerned, the order of the Assessing Officer would clearly reveal that it was a case of plant and machinery which was, as per books of accounts, bought on 31st March, 2001 and there could not have been any question of using the said machinery in that year. She further argued that the depreciation was disallowed on the specific ground that the assessee could not produce any evidence of its user during the year. She argued that this aspect has not been dealt with by the CIT (A) at all in the impugned order. Likewise, Ms. Bansal pointed out that the Income Tax Appellate Tribunal has also totally ignored the aforesaid aspect. The ITAT has simply noted the contention of the assessee that the machinery was not purchased on the last date but it was issued from the stores and was accounted for on the last date of the financial year, and that there was no dispute about the purchase of the machinery, and on that basis the ITAT observed that it was not the case of the Revenue that bogus claim of depreciation was made by the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ought to be evaded by reason of the concealment of particulars of his income or fringe benefits or the furnishing of inaccurate particulars of such income or fringe benefits. xxx xxx xxx Explanation 4- For the purposes of clause (iii) of this sub-section, the expression "the amount of tax sought to be evaded"- (a) In any case where the amount of income in respect of particulars have been concealed or inaccurate particulars have been furnished has the effect of reducing the loss declared in the return or converting that loss into income, means the tax that would have been chargeable on the income in respect of which particulars have been concealed or inaccurate particulars have been furnished had such income been the total income; (b) In any case to which Explanation 3 applies, means the tax on the total income assessed as reduced by the amount of advance tax, tax deducted at source, tax collected at source and self-assessment tax paid before the issue of notice under Section 148; (c) In any other case, means the difference between the tax on the total income assessed and the tax that would have been chargeable had such total income been reduced by the amount of income in respe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther more, when the income tax is paid on the 'book profits' by a legal fiction, such legal fiction has to be taken to its logical conclusion. He referred to the following decisions in support of his submissions:- (i) A.S. Glittre Vs. CIT, 225 ITR 739 @ 744 (ii) M. Venugoal Vs. Divisional Manager, LIC of India, AIR 1994 SC 1343, 1347-48 (iii) UOI Vs. Jalyan Udyog, AIR 1994 SC 88, 96-97 (iv) Builders Association of India Vs. UOI, 73 STC 370 at 400 (SC) 17. Ms. Bansal countered the aforesaid arguments of Mr. Vohra by submitting that the Supreme Court had now made it clear in CIT Vs. Gold Coin Health Care Limited that even where the assessed income and returned income both are at loss, penalty can be levied under Section 271 (1) (c) of the Act. Her submission was that no restricted meaning can be given to the term "amount of tax sought to be evaded". Where the loss has been determined by the AO at a figure less than the returned income then it would amount to concealment of income and the tax on the said amount would be treated as the amount of tax sought to be evaded. 18. Ms. Bansal justified the penalty by arguing that as per the provisions of Section 115 JB of the Act where t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urn or converting that loss into income. It is in this context that in Gold Coins (supra) the Supreme Court explained the legal position as under:- "Reference to the Department Circular No. 204 dated 24.7.1976 reported in 1977 (110) ITR 21 (St.) has also substantial relevance. Same reads as follows:- New Explanation 4 defined 'the amount of tax sought to be evaded. According to the definition, this expression will ordinarily mean the difference between the tax on the total income assessed and the tax that would have been chargeable had such total income been reduced by the amount of income in respect of which particulars have been concealed. In a case, however, where on setting off the concealed income, against any loss incurred by the assessee under other head of income or brought forward from earlier years, the 'total income is reduced to a figure lower than the concealed income or even to a minus figure,;the tax sought to be evaded' will mean the tax chargeable on the concealed income as if it were the total income. Another exception to the general definition of the expression „tax sought to be evaded‟ given earlier is a case to which Explanation 3 applies. Here, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the present case, the income computed as per the normal procedure was less than the income determined by legal fiction namely 'book profits' under Section 115 JB of the Act. On the basis of normal provision, the income was assessed in the negative i.e. at a loss of Rs. 369521018. On the other hand, assessment under Section 115 JB of the Act resulted in calculation of profits at Rs. 40163180. 23. In view thereof, in conclusion, the assessment order records as follows:- "Assessed at Rs. 40163180 u/s 115 JB, being higher of two. Interest u/s 234B and 234C has been charged as per the provisions of Income Tax Act, 1961. Penalty proceedings u/s 271 (1) (c) of the Income Tax Act, 1961 have been initiated. Issue necessary forms." 24. The income of the assessee was thus assessed under Section 115 JB and not under the normal provisions. It is in this context that we have to see and examine the application of Explanation 4. 25. Judgment in the case of Gold Coins (supra), obviously, does not deal with such a situation. What is held by the Supreme Court in that case is that even if in the income tax return filed by the assessee losses are shown, penalty can still be imposed in a case where ..... X X X X Extracts X X X X X X X X Extracts X X X X
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