Case Law Details
Chadha Sugars Pvt. Ltd Vs. ACIT (ITAT Delhi) – The facts are that the assessee claimed an expenditure of Rs. 7,80,500/-, being the fees paid to Registrar of Companies for raising authorized capital. It is the admitted position of law that the expenditure is not revenue in nature and, therefore, it is not deductible in computing the total income. It is also the admitted fact that two decisions of the Supreme Court, adverse to the assessee, held field when the return was filed.
This means that the claim is patently dis allowable. It is also a fact that the claim is not discernible on the face of the record and the details of expenses have to be gone into in order to decipher the claim. The assessee’ s explanation is that it had taken an expert opinion from M/s Bajaj & Arora, who opined that the expenditure is revenue in nature. The assessee does not have expertise in taxation matters, therefore, relying on the opinion, the claim was made. In this connection, we may further look into the opinion furnished by M/s Bajaj & Arora. The opinion is that there should be no problem with the assessee in claiming expenditure as revenue in the financial statements. Thus, the opinion was not furnished for the purpose of claiming the expenditure as revenue expenditure for computing the total income but for accounting the expenditure in financial statements. An accountant’s view is not really material for deciding the deductibility or otherwise of an expenditure. Therefore, it follows that the claim, which was not discernible on plain reading of the accounts, was sought to be strengthened on the basis of an opinion which was merely given for preparing financial statements. In other words, the assessee knew about the problem at the time of filing of return, but the claim was still made in the face of two decisions of Hon’ble Supreme Court. Not only this, the claim was pursued even up to the level of first appellate authority in gross disregard for the decision of the Supreme Court, which the assessee came to know at least after receiving the assessment order. Therefore, it can be held that the claim was not only wrong but also false and it was persisted with for some time.
The assessee has not furnished any satisfactory explanation as to why a prima facie inadmissible claim was made in the return, more so when even for accounting purpose the opinion of M/s Bajaj & Arora was some what tentative. Accordingly, it is held that no satisfactory explanation has been furnished in respect of a patently false claim and, therefore, the assessee has made itself liable for levy of penalty.
INCOME TAX APPELLATE TRIBUNAL, DELHI
ITA No. 1773(Del)/2010 -Assessment year: 2003- 04
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