A. K. GARODIA,
1. This appeal by the assessee is directed against the order of Ld. CIT(A) XV, New Delhi dated 22.03.2010 for that Assessment Year 1998-99. The grounds of appeal raised by the assessee are as under:
“1) That the CIT(A) erred on facts and in law in not deleting penalty of ‘ 5,75,60,132/- levied by the A.O. under section 271(1)(c) of the I. T. Act, 1961 (‘the Act’) vide order dated 31.01.2009 as being beyond jurisdiction, bad in law and void ab initio as no satisfaction as to concealment of income or furnishing of inaccurate particulars thereof was recorded in the assessment order.
1.1) That the CIT(A) erred on facts and in law in holding that pursuant to insertion of sub-section (1B) to section 271 of the Act, direction to initiate penalty constituted satisfaction of the A.O. for imposition of penalty.
2) That the CIT(A) erred on facts and in law in upholding the levy of penalty in respect of dis allowance of deduction of Rs. 16,42,77,522/- claimed under section 43B of the Act in respect of Modvat credit on components/CVD on inputs.
2.1) That the CIT(A) erred on facts and in law in sustaining penalty levied in respect of aforesaid dis allowance with out appreciating that
(i) no inaccurate particulars of income or incorrect facts in respects thereof were furnished by the appellant;
(ii) the said issue was debatable on which two views are possible;
(iii) the dis allowance was sustained simply on bonafide; and
(v) deduction therefore was, in any case, available in the succeeding y ear(s).
2.2) That the CIT(A) erred on facts and in law in not appreciating that since substantial question of law in respect of the aforesaid dis-allowance had already been admitted by the Honourable High Court penalty under section 271 (1)(c) of the Act, was even otherwise, not sustainable.
2.3) That the CIT(A) erred on facts and in law in alleging that the appellant had concealed income and furnished inaccurate particulars by making wrong claim of deduction under section 43B ofthe Act.
3) That the CIT(A) erred on facts and in law in not deleting penalty levied under section 271(1)(c) of the Act in respect of dis allowance of C 1,8O,OOO/- being the amount of deduction claimed in respect of provision for doubtful debts, debited in the books of account.
3.1) That the CIT(A) erred on facts New Delhi in law in upholding the action of the A. 0. in not appreciating that
(i) the impugned claim was made on the basis of legal position/judicial precedents prevalent at the time of filing of return of income;
(ii) no inaccurate particulars of income or incorrect facts in respect thereof were furnished by the appellant;
(iii) the impugned issued was debatable on which two views were possible;
(iv) the explanation offered by the appellant was bona fide; and
(v) all facts material to the claim were fully disclosed.
3.2) That the CIT(A) erred on facts and in law in alleging that the penalty under section 271(1)(c) was rightly imposed on dis allowance of provision for doubtful debts since same was accepted by the appellant and was not challenged in further appeal before /TAT.
3.3) That the CIT(A) erred on facts and in law in not appreciating that the dis allowance on account of provision for doubtful debts having been sustained on account of retrospective amendment in law, after the filing of return of income, the same would not constitute ground for levy of penalty u/s 271(1)(c) of the Act.”
2. The facts of the case in brief are that the return of income in this case was filed by the assessee on 3O.11.1998 declaring income of C78,48,97,250/-. The assessment was completed u/s 143(3) on 26.03.2001 at 95,14,41,756/-, inter alia making certain dis allowances on various grounds. Out of such dis allowances, two dis allowances made by the A.O. were on account of provision for doubtful debts and dis allowance u/s 43B and both had been confirmed at the Tribunal level. Dis allowance u/s 43B confirmed by the Tribunal is on account of modvat credit on components at 15,41,82,612/- and modvat credit from CVD at 1,00,94,910/- total 16,42,77,522/-. The A.O. had made one more dis allowance u/s 43B of 23,14,628/- on account of excise duty receivable but this dis allowance was deleted by CIT(A) and the order of CIT(A) was confirmed by the Tribunal. In addition to this dis allowance of 16,42,77,522/-, confirmed by the CIT(A) and by the Tribunal for dis allowance u/s 43B, one more dis allowance was made by the A.O. of 2.28 lacs on account of the provision for doubtful debts. On appeal, CIT(A) restricted the dis allowance on account of provision for doubtful debts to the extent of 1.80 lacs. The A.O. initiated penalty proceedings u/s 271(1)(c) for total dis allowance confirmed up to the Tribunal level of 16,44,57,522/-. The A.O. was not satisfied with the explanation of the assessee and he imposed penalty of 5,75,60,132/-. Being aggrieved, assessee carried the penalty matter in appeal before Ld. CIT(A) but without success and now, the assessee is in further appeal before us.
3. Regarding the penalty imposed by the A.O. on account of dis allowance of 1.80 lacs on account of provisions for doubtful debts, it was submitted by the Ld. counsel for the assessee that dis allowance is on the basis of explanation inserted in Section 36(1)(vii) of the I. T. Act. It is submitted that this explanation was inserted by the Finance Act 2001 with retrospective effect from 01.04.1989. It is submitted that since the return of income was filed by the assessee on 30.11.1998, at the time of filing of return of income, the claim of the assessee was justified and hence, for further dis allowance as per the amended provisions of the Act, penalty is not justified. Ld. D.R. supported the orders of authorities below on this aspect of matter.
4. Regarding the penalty imposed by the A.O. on account of dis allowance u/s 43B, it is submitted by Ld. Counsel for the assessee that allow ability of such claim was a debatable issue and full facts were disclosed by the assessee in its return of income filed by the assessee. Our attention was drawn to the computation of income as available on pages 45-46A of the Paper Book. It is pointed out that on page 45, it has been stated that deduction is claimed to the extent of 1666.52 lacs u/s 43B in respect of payments made during the year but not debited to the P & L account and the details and basis of the claim is enclosed. It is pointed out that such details and basis are given on page 46A of the Paper Book. It is pointed out that it has been explained that deduction of 15,41,82,612/- has been claimed in respect of modvat credit on components as per balance in RG-23A Part II and deduction of 1,00,94,910/- has been claimed in respect of modvat credit from CVD on the basis of balance as per ledger. It is also pointed out that a note has been given as per which, these two deductions u/s 43B had been claimed as per tribunal order rendered in the case of Modipon Ltd. Vs IAC as reported in 52 TTJ 471 (Del.). It was submitted that it was a legal claim made by the assessee on the basis of an existing order of Tribunal and there was no adverse order of any authority available at the time of filing of return of income by the assessee and hence, it has to be accepted that the claim of the assessee is a bona fide legal claim and even if such claim is not allowed, penalty is not justified. Reliance was placed on the Tribunal decision rendered in the case of Modipon Ltd. (supra). It is submitted that in that case, it was held by the Tribunal that excise duty paid as advance by way of deposit in personal ledger account cannot be disallowed u/s 43B. It is submitted that although the facts in the present case are slightly different because in the present case, deduction has been claimed by the assessee on account of modvat credit in addition to balance in PLA account and the claim of the assessee regarding balance in PLA account was allowed whereas the claim of the assessee regarding modvat credit was disallowed but since the money has gone out of the coffers of the assessee for modvat credit also, it has to be accepted that the claim of the assessee although not allowed is bona fide claim of the assessee and penalty is not justified.
a) CIT Vs Atul Mohan Bindal 317 ITR 01 (SC)
b) CIT Vs ECS Ltd., 2010-TIOL-287-H.C.-DEL-IT(Del.)
d) CIT Vs. Escorts Finance Ltd., 183 Taxman 453 (Del.)
e) CIT Vs Gurbachan Ltd. 250 ITR 157 (Del.)
f) CIT Vs Kishore Kumar Shamji 244 ITR 702 (Ker.)
9. He also submitted that page No.46A in the paper book filed by the assessee and which was pointed out by Ld. A.R. of the assessee to contend that this deduction u/s 43B was claimed by following the existing tribunal decision is not a correct copy and he submitted another copy of page 46A and pointed out that in fact, reliance on tribunal order rendered in the case of Modipon Ltd. (supra) was placed in the note for deduction on account of PLA balance and for Modvat credit balance, reliance was placed on the order of Ld. CIT(A) in the case of Maruti Udyog Ltd. He also submitted a copy of this order Ld. CIT(A).
12. We have considered the rival submissions, perused the records and have gone through the orders of authorities below and the judgements cited by both the sides. As per the copy of computation submitted by the assessee, deduction u/s 43B was claimed in respect of 3 amounts; one amount of 23,74,628/- is as per PLA and deduction for the same was allowed by CIT(A) and no penalty has been imposed on that account. In the note given by the assessee, the assessee has cited the tribunal decision rendered in the case of Modipon Ltd. (supra) for claiming this deduction in respect of PLA balance but for the remaining two amounts for which deduction has been claimed by the assessee in respect of Modvat credit on components and Modvat credit for CVD, this tribunal decision was not referred and it is stated by the assessee in the note as given in the computation that deduction is claimed as per the order of CIT(A) XV, in the case of Maruti Udyog Ltd. for Assessment Year 1994-95. This shows that assessee was also very much aware about the factual difference in these two amounts and this argument of the assessee does not hold good that all these three amounts are same and have been considered as same by the assessee. The assessee itself has given separate treatment to balance in PLA account for which the assessee has relied upon the tribunal decision in the case of Modipon Ltd. (supra) and for deduction in respect of Modvat credit, that tribunal decision was not relied upon and those deductions were claimed on the basis of the order of Ld. CIT(A) in the case of Maruti Udyog Ltd. (supra). In the Paper Book, the assessee has submitted a certified true copy of the computation at page 46A but this page is not a true copy of what was actually submitted by the assessee with the return of income. Correct copy has been brought on record before us by Ld. D.R. for the Revenue & Ld. Counsel of the assessee in his rejoinder has accepted that the copy filed by Ld. D.R. for the Revenue is the correct copy.
17. In our considered opinion, the judgement of Honourable Delhi High Court rendered in the case of Zoom Communication (Supra) is also not applicable in the present case because the facts are different. In that case, the decision against the assessee is on this basis that the claims of the assessee in that case were wholly untenable in law and had absolutely no Foundation on which it could be made. In the present case, in our considered opinion, it cannot be said that the view taken by the assessee is an impossible view although not accepted by the tribunal in assessee’s own case in quantum proceedings or by the special bench of the tribunal in the case of Glaxo Smithkline (Supra). Hence, this judgement of Honourable Delhi High Court is also of no help to the revenue in the present case.
18 SIimilarly the judgement of Honourable Delhi High Court rendered in the case of Escorts Finance Ltd. (Supra) is also of no help to revenue in the present case because the facts are different. In that case, in Para No. 15, it is observed by Honourable Delhi High Court that the claim made by the assessee for deduction u/s 35D was not a wrong claim but it is I clear case of a false claim. In the present case, it is no body’s case that the claim of the assessee is a false claim. Hence, this judgement is not applicable.
19. Now we consider the applicability of the judgement of Honourable Delhi High Court rendered in the case of CIT v. Gurbachan Ltd. (supra). In that case the facts are that the assessee filed a return of income showing an income of .5,000/-. A sum of .48,500/- was recovered in cash from his house during the search by the custom authorities. Regarding the nature and source of this sum, the assessee explained that he has obtained a loan of Rs. 15,000/- from one Shri Babu Ram and 10,000/- from one M/s Jain Bullion Co. Ltd. and an amount of Rs. 23,374/- was received by the assessee on account of sale proceeds of silver coins. The third item of sale proceeds of silver coin was accepted in quantum proceedings but the addition of Rs. 25,000/- regarding first two items being two loans were confirmed. In the course of penalty proceedings, the Tribunal deleted the penalty on this basis that there has to be some positive material or positive circumstance to suggest that the assessee has concealed his income. On the appeal of revenue against this Tribunal order, it was held by Hon’ble Delhi High Court that as per Explanation 1 to section 271(1) (c), the assessee has to either substantiate his explanation or he has to establish that the explanation offered was bona fide and all facts relating to the same and material for the computation of his income has been disclosed by the assessee. It was also observed by Hon’ble Delhi High Court that the explanation of the assessee should be acceptable explanation and it should not be fantastic and fanciful one. It is also observed by the Hon’ble Delhi High Court that the burden is on the assessee and if he fails to discharge that burden, the presumption that he has concealed the income or furnished inaccurate particulars thereof is available to be drawn. In that case, the assessee could neither substantiate his explanation nor could establish that the explanation was bona fide and under these facts the penalty was confirmed by Honourable Delhi High Court. In the present case, we have noted that the assessee has furnished full facts and particulars by way of giving a note in the computation of income. The explanation of the assessee was not found to be false. The stand taken by the assessee is supported by an existing order of Ld CIT(A) rendered in the case of Maruti Udyog Ltd. (supra) and also by a subsequent decision of the Tribunal rendered in the case of Honda Siel Power Products Ltd. (supra) and subsequent to that, a similar matter was referred to a Five Members Special Bench of the Tribunal in the case of DCIT v. Glaxo Smithkline Consumers Healthcare Ltd. (supra) and Special Bench of the Tribunal decided this issue against the assessee. Considering these facts, we are satisfied that the explanation of the assessee is bona fide and hence Explanation 1 to section 271(1) (c ) is not attracted and therefore, this decision of the Hon’ble Delhi High Court is also of no help to the revenue in the present case.
20. Now, we consider the applicability of another judgment cited by Ld DR of the revenue i.e. the judgement of Honourable Kerala High Court rendered in the case of CIT v. Kishore Kumar Shamji (supra). The facts of that case are that the assessee has filed a return of income showing an income of .86,740/- and the returned income was accepted. Subsequently, a search was conducted in the premises of the assessee and one of the documents seized was a bill regarding purchase of 500 qtls. of papers. It was found that in the bill, the rate originally recorded was .1975/- per qtl. But the same was corrected at .2975/- per qtl. and by this correction, there was increase in price of . 5 lakhs. After the search, the assessee filed a letter before the ITO enclosing a revised return and declaring an extra income of .5 lakhs on account of profit earned by inflated purchase bill and it was also stated that this amount of profit was omitted to be shown in the original return of income. Thereafter, the Assessing Officer initiated reassessment proceedings and made addition of . 5 lakhs and imposed a penalty on this extra income. The said penalty was however deleted by the Tribunal but Honourable Delhi High Court restored the penalty order of the Assessing Officer. In that case, there is a positive finding of concealment being incriminating document found in the course of search after completion of assessment proceedings. Hence, the facts of this case are entirely different and this judgement of Honourable Kerala High Court cannot be made applicable in the present case because in the present case, the claim of the assessee is a legal claim and in the computation of income itself, the assessee has disclosed full particulars and this legal claim of the assessee was not accepted by the revenue authorities and by this Tribunal in the quantum proceedings but this cannot be equated with a false claim by way of inflation of purchase price. Hence, in our considered opinion, this judgement of Honourable Kerala High Court is of no help of the revenue in the present case.
23. Order pronounced in open court on 27th day of May, 2011.