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TMI Blog2015 (11) TMI 742X X X X Extracts X X X X X X X X Extracts X X X X ..... e Petro-products (2010 (3) TMI 80 - SUPREME COURT). We follow the same reasoning and affirms the CIT(A)’s order in Revenue’s appeal and reverse the lower appellate order under challenge to the extent of penalties corresponding to the additions of loss on account of sale of stores and spares and repairs/maintenance - Decided in favour of assessee. Short term capital gain addition - Held that:- We have given our thoughtful consideration to the assessee’s argument that its computation of short term capital gains is an arithmetic mistake. It has come on record that assessee sold its fixed assets in question, adjusted sale consideration thereof against WDV of the concerned block resulting in surplus which was further adjusted against WDV of the other block of assets. Needless to say, this latter course of action is nowhere prescribed in the Act. Therefore, we observe that the same is much more than an arithmetical mistake being in the nature of raising altogether a false claim. - Decided against assessee. Disallowance u/s 40A(2)(b) - Held that:- CIT(A)’s deleting section 40A(2)(b) disallowance by holding assessee’s sale made to its associate concern as under invoiced to the above ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be ₹ 46,57,824/-. The assessee submitted to have entered into distress sale of goods in stock, plant and machinery, spares, stores along with finished goods. The Assessing Officer observed in assessment order dated 30-03-2005 that the assessee s client base was regular since it was carrying out the very business for a long time. He rejected assessee s books, averaged its GP in preceding two assessment years @ 17% and added the same to its costs of goods; coming to ₹ 56,11,836/- resulting in addition of ₹ 19,39,768/- on account of suppression of sales. The second disallowance/addition made was on account of sale of store and spare on account sale of stores and spares. The Assessing Officer rejected assessee s plea to have sold stores and spares for scrap value in cash causing of ₹ 21,15,296/- on the ground of non filling of quantitative details except cash vouchers not verifiable. Thereafter the Assessing Officer proceeded further and disallowed yet another item of ₹ 3,03,815/- claimed under repair and maintenance to the rune of ₹ 3 lacs by holding it only a general entry without any details in support thereof. The case file further reveals ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ort term capital gains. In this backdrop of facts that the Revenue has filed its appeal and assessee prefers cross objection to the extent indicated in preceding paragraphs. 8. We have heard both the parties and perused the case file. The first three additions pertaining to this lis are of suppression of sales, sale of stores and spares and repairs and maintenance. The Assessing Officer himself observes in assessment order that the assessee-company carried out negligible production and sold its stock of goods available at the beginning of the year. He further discusses the fact that it has sold out its plant and machinery with same movable/immovable assets. This gives credence to assessee s plea of having entered into distress sale. Both the authorities below have proceeded on different criteria for making the first addition of suppression of sales (supra). The other disallowance/additions of loss arising from sale stores/spares and repair and maintenance have been made due to unverifiable cash vouchers and supportive evidence; respectively. There is no dispute about the trite proposition of law that quantum and penalty proceedings are on separate footing and each and every disa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able to explain as to under what circumstances and due to whose fault the short term capital game was not shown in the return of income. Under such circumstances, the levy of penalty by the AO on this amount is correct. 6.4.3 On the basis of above facts, it is evident that the appellant had not shown the correct short term capital gains by filing inaccurate particulars. The appellant has not filed any explanation as to why such types of claims were made by it in its return of income except claiming that it was a mistake. Hence, the penalty imposed by A.O. u/s 271(1)(c) is correct. This is as per the ratio laid down in the following decisions: (a) Decision of Hon'ble Delhi High Court in the case of Zoom Communication Pvt. Ltd. [191 Taxman 179(Delhi)] (b) Decision of ITAT, Ahmedabad in the case of Gujarat State Finance Corporation Ltd 39 SOT 570(AHD). In both the decisions, it has been held that when an appellant makes a legally untenable and wholly unsustainable claim in its return of income, then, penalty u/s 271(l)(c) can be imposed. 6.4.4 Hon'ble Delhi High Court in the case of Zoom Communications Pvt Ltd. reported in 191 Taxman 179 (Delhi) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gislature has not used the words 'concealed his income'. From this it would be apparent that penal provision would operate when there is a failure to disclose fully or truly all the particulars. The words 'particulars of income' refer to the facts which lead to the correct computation of income in accordance with the provisions of the Act. So when any fact material to the determination of an item as income or material to the correct computation is not filed or that which is filed is not accurate^ then the appellant would be liable to penalty under section 271(1)(c) of the Act. In the instant case, the Id, CIT(A) upheld the levy of penalty under section 271(1)(c) of the Act since the appellant furnished inaccurate particulars of the income by claiming provision for bad debts and provision for diminution of investments in violation of provisions of the Act. Rather the provisions of the Act expressly debar deduction of such provision for bad debts and provision for diminution of investments. The expression 'has concealed the particulars of income' and 'has furnished inaccurate particulars of income' have not been defined either in section 271 or elsew ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not been found to be incorrect, he will not be liable to imposition of penalty under section 271(1)(c) of the Act, even if the claim made by him is not sustainable in law, provided that he either substantiates the explanation offered by him or the explanation, even 'if not substantiated, is found to be bona fide. If the explanation is neither substantiated nor shown to be bona fide, Explanation 1 to section 271(1)(c) would come into play and the appellant will be liable to for the prescribed penalty. It is true that mere submitting a claim which is incorrect in law would not amount to giving inaccurate particulars of the income of the appellant, but it cannot be disputed that the claim made by the appellant needs to be bona fide. If the claim besides being incorrect in law is mala fide, Explanation 1 to section 271(1) comes into play and work to the disadvantage of the appellant. In the present case, despite the fact that provision for bad and doubtful debts was expressly made not deductible in is of the relevant provisions of section 36(1)(vii) of the Act, the appellant claimed the deduction, even when the amount had not been written off. We cannot overlook the fact that only ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the penalty proceedings has not been substantiated nor found to be bona fide and there is no material before us to take a different view in the matter, we are of the opinion that the Id, CIT(A) was justified in upholding the levy of penalty on account of furnishing of inaccurate particulars of income in relation to provision for bad and doubtful debts and provision for diminution in the value of investments. In terms of provisions of section 271(1)(c) of the Act read with Explanation 1 thereto and the judicial pronouncements in the case of B.A, Balasubramaniam Bros. Co. v. CIT [1999] 236 ITR 977 (SC), CIT v. B.A. Balasubramaniam Bros. Co. [1985] 152 ITR 529 (Mad.), CIT v. Mussadilal Ram Bharose [1987] 165 ITR 14 (SC); CIT v. K.R. Sadayappan [1990] 185 ITR 49 (SC); Add/. CIT v. Jeevan Lal Sah [1994] 205 ITR 244 (SC) and K.P. Madhusudanan v. CIT [2001] 251 ITR 99 (SC), it is well established that whenever there is difference between the returned and assessed income, there is inference of concealment. The Explanation 1 to section 271(1)(c) of the Act raises a presumption that can be rebutted by the appellant with reference to facts of the case. Thus, the onus is on the appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, we observe that the same is much more than an arithmetical mistake being in the nature of raising altogether a false claim. We accordingly agree with the CIT(A) s findings relying upon hon ble Delhi High Court decision in case of Zoon Communication and that of the tribunal in Gujarat State Finance Corporation Ltd (supra). The assessee s third substantive ground in its cross objection fails accordingly. The Revenue s appeal ITA 48/Ahd/2012 is dismissed and assessee s CO 60/Ahd/2012 is partly allowed. 11. We come to assessment year 2005-06 involving Revenue s appeal ITA 455/Ahd/2012 challenging the CIT(A) s deleting section 40A(2)(b) disallowance of ₹ 27,74,371/- by holding assessee s sale made to its associate concern as under invoiced to the above stated extent. It is held in the lower appellate order that this statutory provision applies to an expenditure claim and not that of an income as held in the case law of United Exports vs. CIT (2010) 229 CTR 93 (Del) and ACIT vs. Grand Prix Fab Pvt Ltd. (2010) 128 TTJ 60 (Del). The Revenue fails to controvert this legal proposition in the course of hearing. Its sole substantive ground is accordingly rejected. 12. These Reve ..... X X X X Extracts X X X X X X X X Extracts X X X X
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