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TMI Blog2009 (10) TMI 903X X X X Extracts X X X X X X X X Extracts X X X X ..... der the provisions of section 271(1)(c) of the Income-tax Act, 1961 (hereinafter referred to as the 'Act') has been deleted by the Tribunal. Penalty of ₹ 1,28,19,836 was imposed by the Assessing Officer (AO) vide his orders dated 27-2-2004 under the following circumstances :- 3. For the assessment year 1995-96, the assessee had filed the return declaring 'Nil' Income. During the assessment proceedings, the Assessing Officer found that the assessee had incurred expenditure in renovating the leasehold premises and claimed depreciation at the rate of 50 per cent thereon. The Assessing Officer held that the expenditure was of capital nature. The assessee himself had capitalized the same and depreciation at the rate of 10 per cent was available. Accordingly, he disallowed the amount of ₹ 22,86,485 representing 40 per cent of the expenses. The Assessing Officer further found that the assessee had claimed 1/10th of public issue expenses under section 35D of the Act. The Assessing Officer disallowed the same on the ground that the assessee was not an 'industrial undertaking' which is pre-condition for awarding the claim under section 35D of the Act. H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 1,07,22,031 Maximum penalty imposable @ 300% ₹ 3,21,66,094 Penalty imposed @ 100% ₹ 1,07,22,031 5. In appeal preferred by the assessee before the CIT(A), the CIT(A) deleted the penalty in respect of public issue expenses, which was claimed by the assessee as revenue expenditure, but treated as capital expenditure by the Assessing Officer. While doing so, the CIT(A) took note of the fact that the Tribunal in quantum appeal had restored this issue back to the file of the Assessing Officer to find out as to whether the said claim was allowable under any other head in the light of Circular No. 56, dated 19-3-1997 issued by the CBDT. According to the CIT(A), no doubt, on remand also when the case was reconsidered by the Assessing Officer, he opined that this claim cannot be allowed and maintained the addition, but this showed that the claim was not bogus, but bona fide. In this behalf, the CIT(A) observed as under :- It is observed that the appellant has not claimed the full amount as a deduction in the return filed and has only claimed 1/10th of the same. The T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee fell within the ambit of section 28. We accordingly dismiss this petition with costs.' 5.3.2 The case of the appellant is same and it is clear from Explanation to section 32 that only depreciation was allowable to the appellant on the expenditure incurred by it as per the Income-tax Rules. The excess depreciation claimed is definitely concealed income of the appellant as per the deeming provisions. For claiming excess depreciation, the appellant has not been able to give any bona fide explanation. Therefore, the penalty levied by the Assessing Officer on the above amount, i.e., ₹ 22,86,485 is confirmed. 7. Both the revenue as well as the assessee preferred appeals against the aforesaid judgment of the CIT(A). The revenue was aggrieved by the deletion of the penalty which was imposed on disallowing the claim under section 35D of the Act, whereas the assessee preferred the appeal on the penalty maintained in respect of the claim of depreciation. The Tribunal dismissed the appeal of the revenue and allowed the appeal of the assessee thereby deleting the entire penalty. Insofar as the appeal of the revenue is concerned, the Tribunal accepted the reasoning ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act. Expenses were incurred in connection with the public issue of shares such as underwriting commission, brokerage and other charges etc., which, as per the opinion of the Chartered Accountants, qualify for amortization over a period of 10 years under section 35D of the Act. Submission of the learned counsel for the revenue was that merely because information in this behalf was made available in the tax audit report, would not absolve the assessee of the penalty proceedings when such a claim was ex facie bogus. She submitted that hardly 5 per cent returns are taken up for scrutiny under section 143(2) of the Act and assessment is made under sub-section (3) of section 143 of the Act. Therefore, with the hope that his/her return may not come under scrutiny and may be assessed on the basis of 'self-assessment', an assessee can venture to give wrong information. Therefore, merely because information was available in the tax audit report would not absolve the assessee. What was to be seen was that whether the claim made was bogus. 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 fur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or on the part of the assessee. As has been pointed out above, the relief available under section 35D of the Act to a finance company is ex facie inadmissible as that is confined only to the existing industrial undertaking for their extension or for setting up a new industrial unit. It was, thus, not a 'wrong claim' preferred by the assessee, but is a clear case of 'false claim'. In CIT v. Vidyagauri Natverlal[1991] 238 ITR 91. Gujarat High Court made a distinction between wrong claim as opposed to false claim and held that if the claim is found to be false, 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 v. Dharamendra Textile Processors[2008] 306 ITR 277/ 174 Taxman 571. In such a case it is difficult to accept the plea that error was bona fide. [Emphasis supplied] (p. 460) 10. We, thus, are of the opinion that the view of the CIT(A) or the Tribunal on this aspect is not correct and is liable to be set aside. We, thus, answer second question in favour of the Revenue and against the assessee. 11. Insofar as the first question is concerned, we may note that by the amendmen ..... X X X X Extracts X X X X X X X X Extracts X X X X
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