9911796707
TMI Blog2015 (3) TMI 704X X X X Extracts X X X X X X X X Extracts X X X X ..... n the hands of the assessee. Various courts have time and again laid down the principle that where the assessee has bona fide explanation of non-exclusion of receipts as its income or for claiming particular item of expenditure as deduction, even where claim of the assessee is rejected, no penalty for concealment of income or furnishing of inaccurate particulars of income could be levied under section 271(1)(c) of the Act. The assessee having declared complete facts with regard to expenditure of 225 crores and the claim of the assessee being bona fide, though not allowed as expenditure in the hands of the assessee, does not justify levy of penalty under section 271(1)(c) of the Act, much less penalty at the rate of 150 per cent. of the tax sought to be evaded. We thus hold that the assessee, in the present set of facts and circumstances, is not exigible to levy of penalty under section 271(1)(c) of the Act where the claim of the assessee vis-a-vis expenditure incurred on establishment of an international airport had been rejected. Accordingly, we delete the penalty levied under section 271(1)(c) of the Act and the Assessing Officer is directed to delete the same. - Decided in favou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9-10. The cross-appeals have been filed by the assessee and the Revenue against the order of the Commissioner of Income-tax (Appeals), dated February 7, 2013, against the levy of penalty under section 271(1)(c) of the Act relating to the assessment year 2008-09. 2. All these appeals relating to the same assessee on similar issue were heard together and are being disposed of by this consolidated order for the sake of convenience. 3. The assessee has raised the following grounds of appeal in I. T. A. No. 149/Chd/2012 : 1. That on the facts and in the circumstances of the case and in law, the worthy Commissioner of Income-tax (Appeals) through his order dated February 7, 2013, has erred in passing that order in contravention of provisions of section 250(6) of the Income-tax Act, 1961. (2)(i) That on the basis of facts and circumstances of the case, the worthy Commissioner of Income-tax (Appeals) has erred in confirming the action of the learned Assessing Officer, wherein he had erred in levying penalty of ₹ 1,04,28,75,000 on addition of ₹ 225 crores on account of expenditure incurred on the development of infrastructure in the form of setting up of an international a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... following grounds of appeal : 1. On the facts and in the circumstances of the case and in law, the learned Commissioner of Income-tax (Appeals) has erred in allowing appeal of the assessee without appreciating the facts of the case. 5. On the facts and circumstances of the case and in law, the learned Commissioner of Income-tax (Appeals), has erred in deleting the penalty under section 271(1)(c) on addition of ₹ 5,99,62,243 on account of instal ments received. 6. On the facts and circumstances of the case and in law, the learned Commissioner of Income-tax (Appeals), has erred in deleting the penalty under section 271(1)(c) on addition of ₹ 53,31,784 on account of instalments received pending adjustments. 7. On the facts and circumstances of the case and in law, the learned Commissioner of Income-tax (Appeals), has erred in deleting the penalty under section 271(1)(c) on addition of ₹ 6,78,007 on account of adjusted hire purchase debtors. 5. It is prayed that the order of the learned Commissioner of Income- tax (Appeals) be set aside and that of the Assessing officer may be restored. 6. The appellant craves leave to add or amend any grounds of appeal be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Income-tax (Appeals) has erred in allowing appeal of the assessee without appreciating the facts of the case. 2. On the facts and circumstances of the case and in law, the learned Commissioner of Income-tax (Appeals), has erred in deleting the penalty amounting to ₹ 14,26,215 which was levied by the Assessing Officer under section 271(1)(c) with respect to addition of ₹ 46,15,584 made on account of instalments received during the year on account for sale of houses/flats. 3. It is prayed that the order of the learned Commissioner of Income- tax (Appeals) be set aside and that of the Assessing Officer may be restored. 8. In I. T. A. No. 815/Chd/2013, the Revenue has raised the following grounds of appeal : 1. On the facts and in the circumstances of the case and in law, the learned Commissioner of Income-tax (Appeals) has erred in allowing appeal of the assessee without appreciating the facts of the case. 2. On the facts and circumstances of the case and in law, the learned Commissioner of Income-tax (Appeals), has erred in deleting the penalty under section 271(1)(c) on addition of ₹ 41,54,303 on account of instalments for sale of houses/flats received d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nature of the business activity carried on by the assessee was for the urban development of the State of Punjab and the activities included development of land and subsequent sale of residential as well as commercial properties. The Assessing Officer further observed that the Commissioner of Income-tax (Appeals) had considered the objections raised by the assessee in entirety and confirmed the addition. The Assessing Officer observed that, "Falsehood in accounts can take either of the two forms ; (i) an item of receipt may be suppressed fraudulently ; (ii) an item of expenditure may be falsely claimed or an exaggerated amount could be claimed and since attempts of both types reduces taxable income, both amount to concealment of particulars of one's income as well as to furnishing of inaccurate particulars of income. Since the assessee had claimed the expenditure knowing that it was incorrect, it amounts to concealment of income and furnishing inaccurate particulars of income." It was further held by the Assessing Officer, "If we take the view that such a claim which is wholly untenable in law and has absolutely no foundation on which it could be made, would not b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. of the tax sought to be evaded. 14. The Commissioner of Income-tax (Appeals) at pages 3 to 8 of the appellate order reproduced the submissions of the assessee and thereafter considered the issue of levy of penalty on the disallowance of expenditure of ₹ 225 crores. The Commissioner of Income-tax (Appeals) noted that the amount debited by the assessee was not an expenditure of the assessee at all, and it was purely a case of application of income for a purpose which had no direct or even indirect relation with the business of the assessee. The Commissioner of Income-tax (Appeals) further observed that in the quantum proceedings, it was held that even in the notings available on the file of PUDA, there was no mention of any benefit which was expected to accrue to PUDA, because of the establishment of an international airport. In relation to the levy of penalty under section 271(1)(c) of the Act, the Commissioner of Income-tax (Appeals) observed that where the assessee had a bona fide explanation for non-inclusion of receipt in its taxable income or for claiming particular item of expenditure as deduction from taxable income, even though the stand of the assessee was rejecte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r pointed out by the learned authorised representative for the assessee that the accounts of the assessee were audited by Comptroller and Auditor General of India who in-turn had not raised any objection against the said claim of the assessee. It was further pointed out by the learned authorised representative for the assessee that the Tribunal while disallowing the claim of the assessee had held that the said expenditure was made on the behest of directions of the State Government and was not business expenditure. The assessee, however at the time of filing the return of income had claimed the expenditure incurred for the development of airport as revenue expenditure, though the said expenditure was incurred at the directions of State Government. 18. The next plea of the learned authorised representative for the assessee was that the Tribunal while deciding the issue against the assessee in paragraph 215 had relied on the ratio laid down by the Hyderabad Bench of Tribunal in Andhra Pradesh Housing Board v. Deputy CIT in I. T. A. No.717/Hyd/2012, against which the hon'ble Andhra Pradesh High Court had admitted the appeal and hence the issue was debatable. The learned authorise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer while passing the assessment order had initiated the penalty both for concealment of income or furnishing of inaccurate particulars of income. However, while levying the penalty under section 271(1)(c) of the Act, the Assessing Officer levied penalty for furnishing of inaccurate particulars of income. 21. The last plea made by the learned authorised representative for the assessee was that there was no merit in levying the said penalty at the rate of 150 per cent. of the tax sought to be evaded. 22. The learned Departmental representative for the Revenue pointed out that the expenditure had not been incurred by the assessee in its own right, which is the prerequisite for allowing the expenditure under section 37 of the Act. The said expenditure was incurred at the behest of the State Government and the assessee was not even clear as to the nature of the expenditure, whether it was loan to the Government, share application or any other advance. The expenditure incurred by the assessee being purely contribution to purchase land on the directions of the Government of Punjab was held to be not allowable as a revenue expenditure in the hands of the assessee by the Tribunal in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of file of PUDA, the officers of the PUDA were against bearing the said financial burden and even against the same, the expenditure was not only incurred by the assessee but was further booked as revenue expenditure. 24. In the rejoinder, it was pointed out by the learned authorised representative for the assessee that the expenditure was incurred by the assessee on the directions of the Government and its disallowance could not attract levy of penalty for concealment under section 271(1)(c) of the Act. 25. We have heard the rival contentions and perused the records. Penalty for concealment is leviable under section 271(1)(c) of the Act in case any one of the two preconditions are satisfied. The preconditions for levy of penalty are either the assessee had concealed the particulars of its income or in the alternative, the assessee had furnished inaccurate particulars of income. Either of the two conditions needs to be fulfilled before levy of penalty under section 271(1)(c) of the Act. The provisions of the Act envisages an opportunity of hearing to be afforded to the assessee to prove its bona fide and where the assessee is able to prove the bona fide of his claim, with regard ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty including economic development of the land and also of the area in totality. The said expenditure was incurred because of commercial necessity and as it had not acquired any capital asset nor made any donation to any organisation, the same was duly claimed as wholly and exclusively laid out for the purpose of business. The assessee took a decision to contribute towards the development of international airport in the jurisdictional area authority, on the suggestions of the Punjab Government which in-turn would result into many fold increase in the rates of the land to be sold by the assessee to various perspective buyers. The Assessing Officer, however, disallowed the expenditure claimed by the assessee totalling ₹ 225 crores on the following issues : "(a) The joint venture company had been formed for the purpose of construction of airport at Mohali in which GMADA, HUDA and Airport Authority of India had their specific shares, but PUDA had no share holding in JVC and had nothing to do with the airport at Mohali and so it was not known as to in what capacity PUDA had booked the amount of ₹ 225 crores for acquisition of land for airport at Mohali. (b) The expendi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be joint venture com pany including land for city side development. The cost of land would be equally shared between the Governments of Punjab and Haryana and would be capitalised and shall count towards the equity contri bution of GMADA and HUDA. The AAI would be responsible for creating the terminal building and other airside facilities for the joint venture company without seeking any cash consideration form other joint venture partners which would be subsequently capitalised at a value to be determined by AAI at the time of transfer and shall count towards the equity contribution of AAI ; and The cost of land would be counted towards the 49 per cent. equity contribution of GMADA and HUDA and the cost of International Civil Air Terminal and other aeronautical assets to be built by AAI will be counted towards the 51 per cent. equity contribution of AAI as per the provisions in the shareholders agreement to be executed by the JV parties and the joint venture company.' As per recitation clause it is further agreed that same (JVC) is for the following purposes : 'to form a joint venture company which will undertake the opera tion and maintenance of Chandigarh Interna ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... zard for safely of aircraft operation from the approach path of extended runway and transitional area such as high tension/low tension power lines, canal, gas pipeline, structures, buildings, chimneys, trees etc. at their cost. 261. In clause 3.1 it has been specifically noted that JVC will be incorporated as a private limited company. Clause 3.2 deals with shareholders agreement which is as under : 'Shareholders' agreement A shareholders' agreement will be executed by and between AAI, GMADA, HUDA and the JVC, after the joint venture company is incorporated. Till such time the shareholders' agreement is executed and articles of association is approved by the parties, it is agreed by the parties that the Regulations contained in Table A in Schedule I to the Indian Companies Act, 1956, may be applied to the proposed JVC. In the event of any inconsistency between the provisions of this agreement and the memorandum of association or articles of association, the parties shall take all steps to alter or amend the memorandum of association and articles of association to make it consistent with the terms of this agreement.' 262. Clauses 4.2 and 4.3 deals with shar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . It is not clear in whose name the land has been registered from the documents produced before us. However, the fact remains that the contribution was made only in terms of land for which the Government of Punjab through GMADA would acquire shares to the tune of 24.5 per cent. This is clear because of capital contribution for starting a new business venture of running airport. It has further to be noted that name of PUDA does not appear in the joint venture agreement despite PUDA making the biggest chunk of the contribution, i.e., ₹ 225 crores out of ₹ 300 crores of total contribution. When the money has been spent only for acquisition of land that is for ultimately purchasing of land for the proposed airport, this cannot be called a revenue expenditure. It is clearly a case of capital expenditure which is not allowable under section 37 because it clearly provides that expenditure in the nature of capital is not allowable for the purpose of computing 'profits and gains of business or profession'. In view of above clauses, we hold that this expenditure, i.e., the contribution made by PUDA is not for the business purposes and it is in form of capital contribution ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was given to the Andhra Pradesh Housing Corporation on the directive of the Government and it was held by the Tribunal that the said would not amount to an expenditure incurred for the purpose of business. The said amount being transferred to Andhra Pradesh State Housing Corporation at the directive of the Government for implementing certain housing projects and the assessee being not in any way connected with the implementation of that project, it was held that the said expenditure could not be said to be an expenditure laid out wholly and exclusively for the purpose of business. The Tribunal, in the case of the assessee applying the said ratio held that as the facts were identical, the expenditure was not allowable in the hands of the assessee. In conclusion, the Tribunal held that the expenditure had not been incurred for the purpose of business and in any case, the expenditure was in the nature of capital expenditure and therefore, the same was not allowable. 31. In view of the above said findings of the Tribunal in the assessee's case under which the expenditure claimed at ₹ 225 crores incurred for the establishment of international airport at Mohali being disallow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... culars of his income or furnished inaccurate particulars of such income, or (d) has concealed the particulars of the fringe benefits or furnished inaccurate particulars of such fringe benefits, he may direct that such person shall pay by way of penalty,- . . . (ii) in the cases referred to in clause (b), in addition to tax, if any, payable by him, a sum of ten thousand rupees for each such failure ; (iii) in the cases referred to in clause (c) or clause (d), in addition to tax, if any, payable by him, a sum which shall not be less than, but which shall not exceed three times, the amount of tax sought 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." 33. Explanation 1 under section 271(1) reads as under : "Explanation 1.-Where in respect of any facts material to the computation of the total income of any person under this Act,- (A) such person fails to offer an explanation or offers an explanation which is found by the Assessing Officer or the Commissioner (Appeals) or the Commissioner to be false, or (B) such person offers an explanation which he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act. It was also laid down by the court that the intendment of the Legislature is not to levy penalty under section 271(1)(c) of the Act in case of every non-acceptance of claim made by the assessee in the return of income. 36. The hon'ble Supreme Court in CIT v. Reliance Petroproducts P. Ltd. [2010] 322 ITR 158 (SC) further held as under : "Reading the words 'inaccurate' and 'particulars' in conjunction, they must mean the details supplied in the return, which are not accurate, not exact or correct, not according to truth or erroneous. In this case, there is no finding that any details supplied by the assessee in its return were found to be incorrect or erroneous or false. Such not being the case, there would be no question of inviting the penalty under section 271(1)(c). A mere making of the claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee. Such claim made in the return cannot amount to the inaccurate particulars. The assessee had furnished all the details of its expenditure as well as income in its return, which details, in themselves, were not found to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... v. Dharamendra Textile Processors [2008] 306 ITR 277 (SC) cannot be read as laying down that in every case where particulars of income are inaccurate, penalty must follow. What has been laid down is that qualitative difference between criminal liability under section 276C and penalty under section 271(1)(c) had to be kept in mind and approach adopted to the trial of a criminal case need not be adopted while considering the levy of penalty. Even so, concept of penalty has not undergone change by virtue of the said judgment. Penalty is imposed only when there is some element of deliberate default and not a mere mistake. This being the position, the finding having been recorded on facts that the furnishing of inaccurate particulars was simply a mistake and not a deliberate attempt to evade tax, the view taken by the Tribunal cannot be held to be perverse". 39. Similar ratio has been laid down by the hon'ble Punjab and Haryana High Court in CIT v. Shahabad Co-op. Sugar Mills Ltd. [2010] 322 ITR 73 (P&H), wherein it has been observed that making wrong claim for deduction, does not amount to concealment or giving of inaccurate particulars within the meaning of section 271(1)(c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e false evidence. The claim made by the assessee may not have been accepted by the Revenue but it cannot be said that the assessee furnished inaccurate particulars to such an extent that penalty should be imposed upon it. There does not appear to be falsehood in the accounts though the system of calculating the depreciation may have been improper. We also cannot lose sight of the fact that the assessee is a Government corporation. Its accounts are duly audited and even the Comptroller and Auditor General has gone through and approved the accounts of the corporation. In such circumstances, we are of the view that merely because the assessee had claimed depreciation which claim was not accepted by the Revenue that by itself would not, in our opinion, attract penalty under section 271(1)(c) of the Act." 41. The second aspect in relation to the levy of penalty is to be considered in view of the Explanation 1 clause (A) under section 271(1) of the Act. The said Explanation under section 271(1) of the Act lays out that in cases where any person under this Act fails to offer an explanation or offers an explanation which is found by the Assessing Officer or the Commissioner of Income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he facts of the present case the assessee had claimed foreign travel expenses of wife of the director who had accompanied her husband on foreign travel. The said expenditure was disallowed being not relatable to the business of the assessee-company. Merely because an expenditure has been disallowed in the hands of the assessee does not automatically make the assessee exigible to levy of penalty under section 271(1)(c). In any case, mere disallowance of expenditure does not attract the levy of penalty under section 271(1)(c). There is no merit in the levy of penalty on disallowance of expenses holding the same to be non-business expenses. Further, estimated disallowance of personal expenses totalling ₹ 33,135 does not warrant levy of penalty under section 271(1)(c) in the facts of the case where no evidence has been found to establish that the assessee had either concealed its income or furnished inaccurate particulars of income. The order of the Commissioner of Income-tax (Appeals) deleting penalty under section 271(1)(c) on account of disallowance of foreign travelling expenses is upheld." 45. The hon'ble Punjab and Haryana High Court in CIT v. Tek Ram (HUF) [2008] ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the view of the Assessing Officer but the Tribunal deleted the penalty with the following observations : 'Thus, prima facie, it indicates that this issue was a debatable one.. .' 4. In view of the factual finding of the Tribunal, it cannot be disputed that the issue was debatable and deduction claimed by the assessee did not lack bona fide. In such a situation, penalty under section 271(1)(c) of the Act was not attracted. In a recent judgment of the hon'ble Supreme Court in CIT v. Reliance Petroproducts P. Ltd. [2010] 322 ITR 158 (SC) ; [2010] 230 CTR 320, the legal position to this effect has been reiterated. If the assessee has made full disclosure in the return, the claim for deduction cannot be held to be giving of inaccurate particulars. The view taken by the Tribunal is, thus, a possible view." 48. Another aspect of the appeal before us, as pointed out by the learned authorised representative for the assessee was that the present appeal was dismissed against the assessee in view of the ratio laid down in Andhra Pradesh Housing Board v. Deputy CIT against which an appeal has been admitted by the hon'ble Andhra Pradesh High Court in I. T. Appeal No.611 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 271(1)(c) of the Act as held by various courts and further, where such claim of the assessee is a debatable issue then, there is no merit in any levy of penalty under section 271(1)(c) of the Act, which proposition has also been held by various courts as referred to by us in the paragraphs hereinabove. 52. Now coming to the facts of the present case, the issue arising in the present appeal is whether the assessee is liable to levy of penalty under section 271(1)(c) of the Act. The hon'ble Supreme Court in CIT v. Reliance Petroproducts P. Ltd. [2010] 322 ITR 158 (SC) have laid down the proposition that "A mere making of the claim, which is not sustainable in law, by itself will not amount to furnishing inaccurate particulars regarding the income of the assessee". 53. The hon'ble Punjab and Haryana High Court in CIT v. Gurdaspur Cooperative Sugar Mills Ltd. [2013] 354 ITR 27 (P&H) on the issue whether the amount of grant-in-aid was capital receipt or revenue receipt being debatable issue held that the penalty under section 271(1)(c) of the Act was not imposable. The relevant findings of the hon'ble Punjab and Haryana High Court in CIT v. Gurdaspur Co-operative ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... boost urban development of the State of Punjab and boost the activities undertaken by it, resulting in higher profits to the assessee. Explanation 1 to section 271(1) does provide a legal fiction under which the onus is upon the assessee to establish that all facts relating to the claim and material facts relating to the computation of income had been disclosed in the return of income and also that deduction or expenditure was allowable in its hands and merely because the addition or disallowance has been made to its total income, does not establish concealment in the hands of the assessee. Hence, where there is no finding that any of the details supplied by the assessee in return of income were found to be incorrect or erroneous or false, the assessee is not liable for levy of penalty for concealment under section 271(1)(c) of the Act. 55. The assessee in present case having paid for the establishment of an International Airport at Mohali was under the bona fide belief that the expenditure is duly allowable as revenue expenditure and same was so claimed in the profit and loss account. The said expenditure has been held by the Tribunal not to have been incurred for the purpose of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o 2009-10 58. In all the appeals, the Revenue has raised identical grounds of appeal. Therefore, the grounds of appeal as raised in I. T. A. No. 254/Chd/2013 read as under : "1. The facts and in the circumstances of the case and in law, the learned Commissioner of Income-tax (Appeals) has erred in allowing appeal of the assessee without appreciating the facts of the case. 2. On the facts and circumstances of the case an in law, the (sic) 3. The learned Commissioner of Income-tax (Appeals), has erred in deleting the penalty amounting to ₹ 14,26,215 which was levied by the Assessing Officer under section 271(1)(c) with respect to addition of ₹ 46,15,584 made on account of instalments received during the year on account of for sale of houses/flats." 59. Identical issue has been raised by the Revenue in all the appeals and we proceed to decide the same after hearing both authorised representatives by way of this consolidated order for the sake of convenience. 60. The Revenue is in appeal against the deletion of penalty on the issue of addition made on account of instalment received on sale of houses/flats. 61. The brief facts relating to the issue are th ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
