CA Sandeep Kanoi
The assessee claimed the expenses of Rs. 3,89,78,000/- being the amount payable to M/s. APR Limited for the services provided to the assessee. This amount was debited with debit notes received from M/s. APR Limited and the expenditure were pertaining to salary and wages of Rs. 1,65,99,000/-, communication & telephone expenses of Rs.38,90,000/-, traveling & conveyance expenses of Rs.75,60,000/- and other expenses of Rs.1,09,29,000/- totaling Rs.3,89,78,000/-.
The assessee claimed that M/s. APR Limited has provided services to the assessee and this was a genuine expenditure debited to the books of accounts of the assessee which has been settled by way of issuing the shares and this fact has been accepted by the ITAT in its quantum order which the revenue has not denied. Sharing of administrative expenses with M/s. APR Limited in a pool arrangement was disallowed by the Assessing Officer for the reason that assessee has not got any benefit out of these expenses and assessee failed to establish whether the expenses were wholly and exclusively for the purpose of the business of the assessee. The assessee has failed to advance the argument with regard to the benefit of waiver of loan came due to these expenses. Further, we also agree with the pleadings of the ld. AR that the quantum additions in penalty proceedings are two separate and distinct proceedings. Penalty cannot be levied for every disallowance made in the assessment order. The assessee has submitted the agreement, debit note for these expenses, ledger account of M/s. APR Limited to whom the payments were made. Further, the confirmation from M/s. APR Limited was also filed in penalty proceedings. The revenue authorities have not brought anything on record which could prove the non-genuineness of these documents. The facts with regard to these claims were clearly mentioned and disclosed in the return of income. The expenses payable to M/s. APR Limited were shown separately by the assessee in the profit and loss account and the same has been also discussed by the auditor in the audit report which is evident form pages 50 & 51 of the paper book. Thus, we find that assessee has made a claim which was transparent and bona fide. Assessee has not concealed anything in this regard. Therefore, it cannot be a case of concealment of facts. As far as the filing of inaccurate particulars of income is concerned, we hold that assessee was having huge carry forward losses and depreciation and the return was filed at nil income. In our considered view, there cannot be a motive or incentive for the assessee to make any bogus claim in the return of income. These facts show that whatever claim made by the assessee was under good faith and with the advice of the auditors and the employees. The assessee has furnished an explanation which has not been found false.
Therefore, in our considered view, the assessee’ s case falls in category of cases which are covered by the decision of Hon’ble Supreme Court in the case of Reliance Petroproducts Pvt. Ltd., cited supra. The relevant portion of the aforesaid judgment of Hon’ble Supreme Court is reproduced as under :-
“ A glance at the provisions of section 271 (l)(c) of the Income-tax Act, 1961, suggests that in order to be covered by it, there has to be concealment of the particulars of the income of the assessee. Secondly, the assessee must have furnished inaccurate particulars of his income. The meaning of the word “particulars” used in section 271(l)(c) would embrace the details of the claim made. Where no information given in the return is found to be incorrect or inaccurate, the assessee cannot be held guilty of furnishing inaccurate particulars. In order to expose the assessee to penalty, unless the case is strictly covered by the provision, the penalty provision cannot be invoked. By no stretch of imagination can making an incorrect claim tantamount to furnishing inaccurate particulars. There can be no dispute that everything would depend upon the return filed by the assessee, because that is the only document where the assessee can furnish the particulars of his income. When such particulars are found to be inaccurate, the liability would arise. To attract penalty, the details supplied in the return must not be accurate, not exact or correct, not according to the truth or erroneous.
Where there is no finding that any details supplied by the assessee in its return are found to be incorrect or erroneous or false there is no question of inviting the penalty under section 271(1)(c). A mere making of a claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee. Such a claim made in the return cannot amount to furnishing inaccurate particulars.”
Further, with regard to the penalty levied on stock written off, we find that assessee has made a genuine claim of write off with regard to the obsolete items. This fact has been disclosed in the return of income. Simply, the assessee has failed to obtain approval from the excise authorities shall not make assessee’ s claim as bogus. It was a bonafide claim and no penalty u/s 271(1)(c) can be levied on the bonafide claim made in the return of income. Similarly, with regard to the dis allowance of Rs. 72,794/- out of the unpaid amount, we hold that this claim was also not false claim. The assessee is following mercantile system of accounting where principle of accrual of expenses is allowable. Simply by stating that liability was unascertained, no penalty can be levied on the assessee on this ground. Considering all the facts, we find that there is no concealment of income or filing of any inaccurate particulars of income which could bring the assessee under the provisions of section 271(1)(c) of the Act. The assessee has huge accumulated losses and depreciation which further strengthen our view that there was no incentive for assessee to make such claims for the benefit of tax.