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TMI Blog2017 (4) TMI 168X X X X Extracts X X X X X X X X Extracts X X X X ..... id in so many words, but it can also be inferred by the conduct of the higher authorities. Therefore it cannot be said that the deponent granted by the higher authorities without application of mind and is a nonspeaking order when same as been granted after perusal of the order as well as on verification of the records. Hence, we also reject the contention of the Ld. AR that the approval granted by the higher authority is by a nonspeaking order and without application of mind. Disallowance of interest u/s 234A and 234C applying provisions of section 40a (ii) - Held that:- While interpreting the provisions of section 2 (43) of the income tax act and has held that from a reading of Section 2(43) of the Act it is clear that tax under the Act does not include penalty and interest. Therefore it can be a plausible argument that the provisions of section 40a(ii) do not include the payment of interest under section 234B and 234C of the income tax act. Furthermore identical situation prevails under section 249 (4) (a) as well as provisions of section 221 of the income tax act. However, the courts have held that „tax dues‟ does not include interest and penalty. Therefore it can be p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... New Delhi on the following grounds: The Learned Assistant Commissioner of Income-tax erred in law well as on facts in levying penalty u/s 271(1)(c) on ₹ 3752043/-. The Commissioner (appeals) erred in confirming the same. 3. Appellant is a firm of chartered accountants. It filed its return of income on 31st of October 2006 declaring total loss of ₹ 53853703/ . The Ld. assessing officer passed assessment order under section 143 (3) of the act on 31st. December 2008 whereby disallowance of ₹ 3752043/ was made on account of interest on income tax. The assessment history of the disallowance was that assessee has debited to profit and loss account a sum of ₹ 3752043/ being interest paid on income tax. During the course of assessment proceedings, the Ld. assessing officer asked assessee to explain that why such interest paid on income tax shall not be disallowed. In response to this assessee submitted reply dated 22/10/2008 that it is an allowable expenditure contesting that provisions of section 40 a(ii) does not provide for the disallowance of interest paid on income tax and accordingly interest paid on income tax is an allowable expenditure. A fur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he claim of the interest on income tax was made, penalty is not leviable. It was further contested that mere making of a claim, which is not sustainable in law by itself, will not amount to furnishing of inaccurate particulars of concealment of income. The reliance was placed on the decision of the Hon‟ble Supreme Court in case of CIT versus Reliance Petro products (p) Ltd [322 ITR 158. In view of this, it was stated that assessee has neither furnished inaccurate particulars of income nor concealed income and hence, no penalty should be levied under section 271 (1) ( c) of the income tax act. 5. The Ld. assessing officer in penalty order stated that the first assessee tried to explain that the said expenditure is allowable, latter on retracted from its own statement when asked to show cause, and then offered the sum in question with a view to buy peace, avoid litigation and cooperate with the Department. Therefore he held that the assessee firm realizes that they have made a claim, which is not sustainable in law and therefore proposed for withdrawing the same when the act provides that the income tax is not an allowable expenses and therefore interest on such is not an al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted to the appellant and further the issue involved is debatable and therefore the penalty cannot be levied by the assessing officer on this disallowance. The Ld. first appellate authority vide order dated 27. 12 .2013 has held that the claim of the appellant for deduction of interest on income tax, which is not deductible as an expenditure under section 40 a (ii) is not bonafide. Therefore he held that the information furnished by the appellant in the return of income was factually incorrect and the appellant cannot escape the rigours of the provisions of section 271 (1) ( c) of the income tax act, 1961. He further quoted the decision of the Hon‟ble Delhi High Court in the case of CIT versus Escort finance Ltd 328 ITR 44 wherein it has been held that even if there is no concealment of income or furnishing of inaccurate particulars, but if the claim which is ex- facie bogus the same will still attract penalty provisions. He further relied upon the decision of the Hon‟ble Delhi High Court in the case of CIT versus Zoom Communications private limited that non sustainable claims cannot be said to be bona fide and therefore prima facie unsustainable claim made in the return ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion wherein the amount of tax due did not include penalty and interest or any other sum payable under the act, prior to the amendment inserted by the finance act 2013 w.e.f. 01/06/2013 and therefore, his submission was that wherever the amount of interest on tax required to be included, the law has made provision. According to him the provisions of section 2(43) refers to only the tax and therefore it implies that it does not include interest payable on such tax. He further referred to the provisions of section 40a(ii) which also refers to the tax levied on the profits and gains of the assessee. Therefore, his contention was that in the disallowance also there is no specific mention of the interest payable on the income tax. He further referred to the circular of the Central board of direct taxes of 2015 which provides that no appeal shall be filed by the revenue before the higher forum is unless the tax involved in that particular appeal is lower than a specified sum, in that circular also the amount of interest is to be separately considered. He relied upon the decision of the Hon‟ble high court of Allahbad in Pratima Garg versus CIT 264 CTR 520 which was rendered with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wance of the above sum, However, in penalty proceedings, it cannot be proved that assessee has furnished inaccurate particulars of income or concealed income. He stated that penalty proceedings and assessment proceedings are two different proceedings. f. He further referred that in the show cause notice issued by the Ld. assessing officer. He has framed twin charges that are that assessee has concealed income or furnished inaccurate particulars of such income and none of the alternatives has been struck off. He further referred to page No. 86 of the paper book, which is the copy of the assessment order under section 143 (3) of the income tax act where the assessing officer has mentioned that he is satisfied that the assessee has furnished inaccurate particulars of income thereby concealing its income and rendering itself liable for initiation of penalty proceedings. He further referred to the penalty order wherein the Ld. assessing officer in Para number 5.1.2 of his order has confirmed the penalty for furnishing inaccurate particulars of income. For this proposition he relied upon the order of the coordinate bench in Navinbhai M Patel 27 ITD 411 and decision of the Hon‟bl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that it is neither cogent not reliable. He further stated that in that particular case the assessee did not offer any explanation and therefore the penalty was upheld by the Hon‟ble high court. He submitted that in the present case the appellant has offered the explanation as to how and why interest paid on income tax, shall be allowed. 8. Ld. departmental representative vehemently countered the argument placed by the Ld. authorized representative and submitted that the show cause notice issued by the Ld. and assessing officer is part of a legal form and therefore the argument of the Ld. Authorized representative about striking of the any of the alternative is not proper. He further submitted that the red assessing officer has stated in the assessment order that unquestioned by the Ld. assessing officer the assessee has come out with the surrender of the above amount. Therefore, the claim of the assessee that it has surrendered this above amount voluntarily is devoid of any merit. He further submitted that it is, patently wrong claim made by the assessee and therefore it is not a claim, which is unsustainable in law, or which, is having 2 interpretation. He therefore relie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 60. Clause (c) deals with two specific offences, that is to say, concealing particulars of income or furnishing inaccurate particulars of income. No doubt, the facts of some cases may attract both the offences and in some cases there may be overlapping of the two offences but in such cases the initiation of the penalty proceedings also must be for both the offences. But drawing up penalty proceedings for one offence and finding the assessee guilty of another offence or finding him guilty for either the one or the other cannot be sustained in law. In view of this we reject the contention of the Ld. authorised representative regarding the issue of the show cause notice on the twin charges. 11. Coming to the issue of this approval granted by the Ld. at joint Commissioner of income tax. Wide letter dated 28/03/2012. It was the contention of the Ld. that they are that the order granting approval is not a speaking order and therefore it cannot be considered as an approval and it is a non-application of the mind of the approving authority. We have carefully considered the contention of the Ld. that they are and also perused the letter dated 28/03/2012 issued by the joint Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch profit or gains. Hon‟ble Allahabad High Court in case of Pratibha Garg versus Commissioner of income tax 42 Taxmann.com 284 has considered the provisions of section 2 (43 of the income tax act in para No. 13 and 14 and has held as under:- 13. The words tax due has not been defined under the Act. However, we find that the word tax has been defined under Section 2 (43) of the Act as under : ' tax in relation to the assessment year commencing on the 1st day of April, 1965, and any subsequent assessment year means income-tax chargeable under the provisions of this Act, and in relation to any other assessment year income-tax and super-tax chargeable under the provisions of this Act prior to the aforesaid date and in relation to the assessment year commencing on the 1st day of April, 2006, and any subsequent assessment year includes the fringe benefit tax payable under Section 115 WA.' 14. From a reading of Section 2(43) of the Act it is clear that tax under the Act does not include penalty and interest. For the purposes of notice of demand, Section 156 specifically authorises the Assessing Officer to issue it for any tax, interest, penalty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gh the Hon‟ble high court was dealing with the provisions of section 179 of the income tax act but has also held while interpreting the provisions of section 2 (43) of the income tax act and has held that from a reading of Section 2(43) of the Act it is clear that tax under the Act does not include penalty and interest. Therefore it can be a plausible argument that the provisions of section 40a(ii) do not include the payment of interest under section 234B and 234C of the income tax act. Furthermore identical situation prevails under section 249 (4) (a) as well as provisions of section 221 of the income tax act. However, the courts have held that tax dues‟ does not include interest and penalty. Therefore it can be possibly argued that if the tax dues‟ does not include interest and penalty then how the word tax‟ can include the interest and penalty. The above, you can also be examined with respect to the provisions of section 209 of the income tax act. It provides for the payment of advance tax and after that there are other specific provisions that if the advance tax is not paid in accordance with the scheme of the act then assessee are liable for payment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ypes attempt to reduce the taxable income and, therefore, both types amount to concealment of particulars of one's income as well as furnishing of inaccurate particulars of income. We do not agree, as 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 be inaccurate nor could be viewed as the concealment of income on its part. It was up to the authorities to accept its claim in the Return or not. Merely because the assessee had claimed the expenditure, which claim was not accepted or was not acceptable to the revenue, that by itself would not, in our opinion, attract the penalty under section 271(1)(c). If we accept the contention of the revenue then in case of every Return where the claim made is not accepted by Assessing Officer for any reason, the assessee will invite penalty under section 271(1)(c). That is clearly not the intendment of the Legislature. 11. In this behalf the observations of this Court made in Sree Krishna Electricals v. State of Tamil Nadu[2009] 23 VST 249 as regards the penalty are apposite. In the aforementioned decision which pertained to the penalty pro ..... X X X X Extracts X X X X X X X X Extracts X X X X
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