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TMI Blog2014 (6) TMI 606X X X X Extracts X X X X X X X X Extracts X X X X ..... hus, of an inability to explain the same, so that there is by definition concealment and/or furnishing inaccurate particulars of income - a ‘mistake’ cannot be said to be deliberate, which a sine qua non of penalty - the assessee’s action in claiming the interest cannot be said to be a ‘mistake’ - the claim that it is the booking of the interest in accounts that led to the wrong claim in the return, is not correct - If the interest gets included as an organizational expense by ‘mistake’, the same would also likewise stand to be included in working the disallowance u/s14A – there was no justification by the assessee for the exclusion of interest on the ground that the same does not finance, either in whole or in part, the investments yieldi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as the assessee was managed by technocrats which had assigned this work to a firm of Chartered Accountants. In fact, they had committed an error by not reflecting the said sum in Form 3CD in reply to Q. No. 17(f), seeking disclosure of the amount disallowable u/s.40(a), resulting in a consequential error in the ROI. The same was found not satisfactory in-as-much as the firm of CA s was a reputed firm, so that the claim could not be considered to be a result of a bona fide mistake. Penalty was levied relying on the decisions in the case of Union of India v. Dharmendra Textile Processors [2008] 306 ITR 277 (SC) and CIT vs. Zoom Communication (P.) Ltd. [2010] 327 ITR 510 (Del.), and confirmed in appeal for the same reason, distinguishing the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... placed before us on the Guidance Note to the revised Schedule VI to the Companies Act, 1956, which advocates classification of the interest expense on the short fall in the payment of the advance income tax as a financial cost. We find it as of no moment. This is as firstly it is a new explanation, not before the authorities below and, thus, not considered by them. The same is thus not admissible. Reference in this context may be made to the decision by the apex court in Mak Data (P.) Ltd. vs. CIT [2013] 358 ITR 593 (SC). Secondly, the same is even otherwise defeative of the assessee s case in-as-much as it only shows that the reflection of the interest paid u/ss. 234A, 234B and 234C as an interest expense of the business was a deliberate, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... judged in the light of the accepted commercial practices and trading principles. The same cannot by any stretch of imagination be considered as incidental to trade or justified by commercial expediency. The matter is in fact no longer res integra, and toward which we may refer to the decisions in the case of Bharat Commerce and Industries Ltd vs. CIT [1998] 230 ITR 733 (SC), rendered following inter alia Padmavati Jaikrishna (Smt.) vs. Addl. CIT [1987] 166 ITR 176 (SC). 5.3 We, next, consider the assessee s case from the stand point that there has, in making the impugned claim of interest u/ss. 234A, 234B and 234C of the Act, occurred a mistake, albeit bona fide, so that the same would not attract penalty u/s.271(1)(c). Toward this, we f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 338 (Allahabad); CIT vs Sidhartha Enterprises [2010] 322 ITR 80 (P H). This can be thus said to be a judicial response to the proposition that reasonable cause saves penalty, which provision, mandated by law (section 273B) excludes penalty u/s.271(1)(c). The basis of the said decisions is that a mistake cannot be said to be deliberate, which is a sine qua non of penalty; the assessee thereby seeking to evade tax. However, we may hasten to add that the line of distinction between gross negligence or an unfounded statement on one hand, and mistake on the other, is very thin, with the law, per the rules of evidence, deeming concealment and/or furnishing of inaccurate particulars of income in the former case, implying deliberateness ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relating to the period of the default. Again, even so, the company s auditors and its tax counsel is the same and, thus, aware of the booking of the impugned interest as a finance cost for the year. As such, the claim that it is the booking of the said interest in accounts that led to the wrong claim in the return, is not correct. Further on, the assessee s stand in respect of its disallowance u/s.14A was that no expenditure, including on interest, stands incurred. How could that be? If the interest gets included as an organizational expense by mistake , the same would also likewise stand to be included in working the disallowance u/s.14A. We also do not find any justification by the assessee for the exclusion of interest on the ground th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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