Carona Limited Vs DCIT (Bombay High Court)
AO passed 143(3) order by adding back inter-alia the amount of ad-hoc bonus of Rs.22,21,123/- which was not offered by the Assessee for taxation, recording a finding that the case was fit for attracting the provisions of Sec 271(1)(c for imposition of penalty on account of explanation of the Assessee in respect of the bonus amount not being found bonafide. The penalty was later levied. On appeal, CIT(A), set aside the penalty by allowing, inter-alia, holing that the explanation offered by the Assessee for not offering ad-hoc bonus amount for taxation was plausible & the case did not fit into the purview of Sec 271(1)(c). Tribunal however allowed the Appeal preferred by the Revenue & has set aside CIT (A)’s order of by upholding the order of AO.
Before the High Court, Assessee submitted that they made bonafide claim & there is no finding in the orders passed by AO or the Tribunal that the claim was made by the Asssessee with malafide intentions. Mere making of claim by an Assessee, which is ultimately found to be unacceptable, cannot ipso-facto amount to either concealment of income or furnishing of inaccurate particulars. Assessee bonafidely believed that under the mercantile accounting system, a business liability can be allowed for deduction for the year in which it has arisen & accrued; & not when it is actually paid by the Assessee. Liability for bonus in the present case had arisen during the Accounting Year & that therefore the Assessee bonafidely believed that it was entitled to claim the said liability which had crystallised in the relevant Accounting Year. Mere actual payment towards such liability in subsequent Accounting Year does not disentitle the Assessee from claiming such liability in the year in which the same had got crystalized. Reliance was placed on Bharat Earth Movers V. CIT (2000) 6 SCC 645. Relying on PCIT vs Torque Pharmaceuticals 2016 SCC OnLine P&H 7150, Assesee argued that penalty u/s 271(1)(c) cannot be imposed unless AO arrives at a conclusion that there is concealment of income or particulars of income with malafide intention. Relying on CIT vs Reliance Petroproducts (2010) 11 SCC 762 , Assessee argued that in absence of fulfillment of strict requirement u/s 271(1)(c), penalty cannot be imposed.
