M/S DE vs. ONS PVT LTDVS.COMMISSIONER OF INCOME TAX &

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REPORTED * IN THE HIGH COURT OF DELHI AT NEW DELHI

ITA No. 367/2004

M/s. Devsons Pvt. Ltd.

..... Appellant Through: Mr.O.S. Bajpai, Sr. Advocate, with Mr. V.N. Jha, Advocate.

versus

Commissioner of Income Tax and Ors.

..... Respondents Through: Mr. Sanjeev Sabharwal, Advocate.

AND

ITA No. 296/2006

Commissioner of Income Tax

..... Appellant Through: Mr. Sanjeev Sabharwal, Advocate.

versus

M/s. Devsons Logistics Pvt. Ltd.

(earlier known as M/s. Devsons Pvt. Ltd.) ..... Respondent Through: Mr.O.S. Bajpai, Sr. Advocate, with Mr. V.N. Jha, Advocate.

Date of Reserve : August 17, 2010 Date of Decision : November 19, 2010

CORAM: HON’BLE MR. JUSTICE A.K. SIKRI HON'BLE MS. JUSTICE REVA KHETRAPAL 1. Whether reporters of local papers may be allowed 2010:DHC:5593-DB

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to see the judgment?

: REVA KHETRAPAL, J.

ITA No. 296/2006 “1. Whether the ITAT was correct in law in deleting the penalty of ` 36,07,220/- imposed by the Assessing Officer under Section 271 (1) (c) of the Income Tax Act, 1961?” 2010:DHC:5593-DB

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the appellant. The Assessing Officer noted that the assessee had engaged the services of petty contractors for clearing the garbage in the city, but the payments to these contractors, though due, was not made ,but with respect to these petty contractors, the assessee had claimed deductions. The Assessing Officer issued notices under Section 133(6) of the Act to these parties, which were received back with the remark of “Incomplete address”. The Assessing Officer apprised the appellant of this position on March 17, 1988 and required the appellant to furnish confirmations from these trade creditors. Further opportunities were provided to the appellant to furnish the addresses of the aforesaid sundry creditors on 19th March, 1998 and 24th March, 1998. On 24th March, 1998, the assessee- company expressed its helplessness to furnish the information given the paucity of time. The Assessing Officer did not accept the credit standing in the names of the aforesaid persons and added the same to the income of the appellant to the extent of ` 36,17,979/-. 3. In first appeal, the Commissioner of Income Tax (Appeals) deleted the addition of ` 35,39,631/- and found that the appellant had 2010:DHC:5593-DB

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been maintaining the accounts of income receivable from JMC on the basis of the bills submitted and approved by JMC after making various deductions as per the contract. This system of accounting had been regularly followed by the appellant and accepted by the Department since 1990. The CIT(A) also observed that there was a dispute between the appellant and the JMC on account of the non- determination of the amounts due to the appellant and on the writ petition of the appellant such matter had gone up to the Rajasthan High Court, which eventually was decided against the appellant. On facts, the CIT(A) found that on an accrual basis the appellant had actually overstated rather than understated its income for the period under consideration. 4. On the second issue of the non-confirmation of the sundry creditors, the CIT(A) was pleased to delete the addition of ` 36,17,979/- on the basis that the factum of rendering of services by the sub-contractors was not in dispute and the appellant had meticulously maintained log books for each sub-contract, which were duly verified and authenticated by JMC. These log books were 2010:DHC:5593-DB

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shown to the A.O. during the assessment and produced before the C.I.T. The latter accordingly held that the onus that lay on the appellant had been discharged and therefore the addition of ` 36,17,979/- was totally unwarranted. 5. Against the order of the First Appellate Authority, the Department preferred an appeal before the Income Tax Appellate Tribunal (for short „ITAT‟). The ITAT reversed the order of the CIT(A) on both counts by its order dated 4th February, 2004. As regards the addition of ` 35,39,631/- the ITAT held that during the period under consideration, the appellant had changed its method of accounting and such change was not bonafide. The Tribunal found that the appellant, despite the fact that that he had been maintaining the accounts on mercantile system, had declared the receipts from the JMC on the basis of the amounts actually received. The Tribunal observed that though it is the prerogative of a party to maintain accounts in the manner it likes, but the assessee cannot be at liberty to change his system of accounting at the drop of the hat, at his whims and fancies. 2010:DHC:5593-DB

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of the Jaipur Municipality.” The mere filing of a log book, the Tribunal observed, was not sufficient to discharge the onus laid upon the appellant and, therefore, the CIT(A) had committed a serious mistake by deleting the additions made by the Assessing Officer. The Tribunal, therefore, set aside the order of the CIT(A) and restored the order of the Assessing Officer. 7. The appellant filed an appeal before this court sometime in January‟04 against the order of the ITAT which was dismissed for non-prosecution on 16th July, 2004. 8. By an order dated 30th September, 2004, passed under Section 271 (1) (c) read with Section 274 of the Income Tax Act, 1961, the Assessing Officer imposed a penalty of ` 33,07,220/- by invoking the provisions of Explanation 1 to Section 271 (1) (c) on the ground that the assessee had concealed the particulars of his income and furnished inaccurate particulars. The CIT(A) by an order dated 30th December, 2004 confirmed the penalty imposed by the Assessing Officer. However, on second appeal the ITAT by its order dated 29th July, 2005 deleted the penalty imposed by the Assessing Officer on 2010:DHC:5593-DB

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the ground that no “satisfaction” was recorded by the AO in the assessment order before initiating penalty proceedings. On facts, the ITAT held that the assessee could not be said to have concealed its income or furnished inaccurate particulars thereof. The assessee had itself placed the details of the total bills raised against the Jaipur Municipal Corporation, according to which the total receipts of the assessee company for the financial year 1994-95 was ` 11,73,945/-. The amount deducted from this amount by the JMC as not payable to the appellant was, however, not declared by the appellant as its income. The non-acceptance of these particulars stated by the AO did not amount to concealment of income. Regarding penalty in respect of the balance outstanding in favour of the sundry creditors, the ITAT observed that the addition was made by the AO on the ground that the appellant was not able to prove the same. However, the credit outstanding against the same creditors was accepted by the AO in subsequent years and therefore no penalty could be levied. Since the additions were made only on account of divergent views taken with regard to the material on record, it was unsafe to conclude 2010:DHC:5593-DB

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that the appellant was guilty of concealment of income or of furnishing inaccurate particulars thereof. 9. Argument at the Bar were addressed by Mr. O.S. Bajpai, the learned senior counsel on behalf of the appellant-M/s. Devsons Pvt. Ltd. and Mr. Sanjeev Sabharwal, the learned counsel for the respondent-Commissioner of Income-tax. 10. Mr. O.S. Bajpai, the learned Senior counsel appearing for the appellant, at the threshold assailed the findings of the Tribunal as set out in paragraph 12 of its order dated 4th February, 2004, wherein the ITAT observed that the appellant had without justification and at the drop of the hat changed its method of accounting from mercantile to cash, which was unacceptable. Mr. Bajpai contended that what the appellant did was to take credit for income in respect of the bills that were accepted by the JMC without any deductions and wherever there were deductions, it was only the balance amount, which was taken as credit for as income, on the footing that it was only the balance that had actually accrued to the appellant. This did not amount to following the cash system of accounting but only indicated the basis 2010:DHC:5593-DB

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on which the assessee considered income as having accrued. It only meant that the assessee did not consider the amounts, which were deducted by the JMC from its bills as having accrued to it. The ITAT, therefore, rightly observed in its order dated 29th July, 2005: “If this basis has been consistently followed as it appears to be, the assessee could not be said to have changed its method of accounting from mercantile to cash and cannot be charged with suppressing the receipts to the extent of `35,39,635/-.”

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receipts of the assessee company for the FY 1994-95 arrive at ` 1,17,39,415/-. When these facts have been placed before the AO by the assessee itself as income, the assessee can be said to have taken a legal stand on the facts disclosed by it and, if such a stand is not accepted by the AO, there is no question of concealment by the assessee. Reference may be made in this connection to the following judgments:

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services rendered by them during the relevant accounting year. The Tribunal observed that the appellant should have obtained the evidence of the persons who had executed the work or of the officers of the JMC to prove that the work was actually carried out and the amounts were payable. In the latter order, i.e. in the order in penalty proceedings dated 29th July, 2005, the ITAT after referring to page 33 of the Paper Book-II and the columnar statement filed by the appellant giving the names of the creditors (in dispute) and the balances outstanding to them as on 31st March, 1995 to 31st March, 1998 (at page 267 of the paper book) and also referring to the ledger accounts of the sundry creditors placed at pages 70-109 of paper book No.-I observed that “….the addition appears to have been made only because the assessee was unable to prove the balances in the manner required by the Department, though there were other material embedded in the record itself and accepted in the subsequent assessment proceedings, to the effect that the outstanding were genuine”. 2010:DHC:5593-DB

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whom the amount is payable have been filed and affidavits to the effect for the person concerned have been filed statement thereby the amounts receivable by them from M/s. Devsons Pvt. Ltd. (sic) The total amount of ` 58,55,005 consists of sundry creditors of ` 49,93,063 and other creditors for hire charges of ` 8,61,942. Thus, there has been a scrutiny of the amount outstanding towards these 8 persons in the subsequent years and at least in one of the assessment orders there is a finding that the amounts were actually due to them and that some of them have filed affidavits also to the effect that the amounts are due to them. At our instance, the learned counsel for the assessee pointed out to the ledger accounts of the sundry creditors placed at pages 70-109 of the paper book No.1. The account of Morari Lal to whom an amount of ` 4,71,658 is outstanding as on 31.3.95 is at pages 71A to 73A. The account shows that several payments were made during the year under appeal to this contractor and there has been no disallowance of the amounts so paid. This indicates that the AO has no objection to allowing the actual amounts paid to these persons, which could have been only on his being dissatisfied that such a person actually existed, that he has done work for the assessee company during the year and the payments was otherwise genuine and bonafide incurred for the purpose of the business. It is not, therefore, understood as to how the balance outstanding to such persons at the end of the year can be considered to be non genuine. The ledger account also shows that the assessee has deducted tax on the hire charges paid to Morari Lal. The ledger accounts of all the other 7 creditors have also been placed in the paper book and these also exhibit the same position.”

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Ved Prakash

4,40,758

Murari Lal

4,71,658

Nafai Singh

4, 41,005

Ashok Kumar

3,90,576

Gurdyal Singh

4,16,581

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Surjit Singh

5,15,866

Madan Lal

4,90,247

Bhule Ram

4,51,288

------------

36,17,979”

------------

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and receipt basis was unexplainable. Mr. Sabharwal, in this context, placed reliance upon the matching concept of accounting. 16. On the second issue it was contended by Mr. Sabharwal that with regard to the issue whether the sundry creditors were genuine or not, it was not open to a coordinate Bench of the Tribunal to set aside the findings of fact arrived at by an earlier Bench in quantum proceedings. Mr. Sabharwal was, however, not in a position to dispute that there was a total of 8 persons to whom the assessee owed ` 36,17,979/- from the year under appeal and that during subsequent years there had been a scrutiny of the amounts outstanding towards these 8 persons, and at least in one of the assessment orders there is a finding that the amounts were actually due to them and that some of them have filed affidavits also to the effect that the amounts were due to them. Mr. Sabharwal also did not dispute on behalf of the department, that in the subsequent assessment, the Assessing Officer has not made any addition of the balances despite the fact that the balances were outstanding in favour of the very same 8 creditors whose names appeared in the balance sheet as on 31st March, 1995. 2010:DHC:5593-DB

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correct profits cannot be deduced therefrom. However, it is also well settled that the Department should not ordinarily depart from its earlier decision, more so, where such departure would result in injustice to the assessee, and the Department is bound to treat the accounts of a continuing business in a consistent manner. Even in the mercantile system of accounting it is the real income which has accrued in a practical sense that is to be brought to tax. In CIT vs. Shoorji Vallabhdas and Company (1959) 36 ITR 25, the Bombay High Court held that the question whether the income accrued or not is not a mere matter of cogency of the entries made in the account books of the assessee, but is essentially one of substance and of the real nature of what happened. A mere book entry is not conclusive of the question whether the assessee had become entitled to the sums or not and whether the income is assessable. “Income-tax is a levy on income. No doubt, the Income-tax Act takes into account two points of time at which the liability to tax is attracted, viz., the accrual of the income or its receipt; but the substance of the matter is the income. If income does not result at all, there cannot be a tax, even though in book-keeping, an entry is made about 2010:DHC:5593-DB

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a ‘hypothetical income’, which does not materialize.”

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each year is a distinct self-contained unit, and the other that the income to be taxed is the real income of the assessee are not incompatible or irreconcilable : they permit of harmonious application.

The principle of real income is not to be so subordinated as to amount virtually to a negation of it when a surrender or concession or rebate in respect of managing agency commission is made, agreed to or given on grounds of commercial expediency, simply because it takes place some time after the close of an accounting year. In examining any transaction and situation of this nature the court would have more regard to the reality and specialty of the situation rather than the purely theoretical or doctrinaire aspect of it. It will lay greater emphasis on the business aspect of the matter viewed as a whole when that can be done without disregarding statutory language.”

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Commissioner of Income-tax (1971) 82 ITR 835, which was also a case where the mercantile system of accounting was being followed by the assessee, observed (89 ITR page 273) : “Hence it is clear that this court in Morvi Industries case did emphasise the fact that the real question for decision was whether the income had really accrued or not. It is not a hypothetical accrual of income that has got to be taken into consideration but the real accrual of the income.”

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regarding enhanced charges for the supply of electricity made to its consumers, no real income had accrued to the assessee-company in respect of those enhanced charges in view of the representative suits filed by the consumers which were decreed by the court and ultimately, after various proceedings which took place, the assessee- company had not been able to realize the enhanced charges. No real income having accrued, it was held, the amount due on enhancement was not assessable. 23. In a subsequent decision rendered in CIT vs. Bokaro Steel Limited (1999) 236 ITR 315, the Supreme Court, following its earlier decision in Godhara Electricity case (supra) affirmed the decision of the Patna High Court wherein it was held that the entry in the books of account shown as income from Hindustan Steel Ltd. for the 8 locomotives supplied by the assessee-company to them could not be brought to tax as income since this entry reflected „hypothetical income‟ and only the real income could be brought to tax. 24. This court in CIT V vs. Modi Rubber Ltd. (1998) 230 ITR 817, following the decisions of the Supreme Court in Godhara 2010:DHC:5593-DB

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Electricity Co.Ltd. (supra) and Shoorji Vallabhdas and Co. (supra), held that a mere unilateral act of the assessee debiting the books of accounts, the liability for payment whereof was not accepted or agreed to by the debtor, did not amount to income accrued to the assessee. 25. It may be noted at this juncture that the reliance placed by Mr.Sanjeev Sabharwal, the learned counsel for the Revenue on the decision of the Supreme Court in State Bank of Travancore vs. Commissioner of Income-Tax, Kerala (1986) 158 ITR 889 wherein the effect of the decision of State Bank of Travancore’s case (supra) was specifically considered and explained by the Court. 26. In our considered view, therefore, the Tribunal was not right in holding that there was a change in the method of accounting by the assessee company. The assessee company had submitted the details of all the bills to the Assessing Officer. The Assessing Officer as well as the Tribunal, in our view, erred in holding that the appellant had declared receipts on the basis of the amount actually received which was contrary to the system of accounting maintained by the 2010:DHC:5593-DB

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assessee company, viz. the mercantile system. We are, therefore, of the view that the Tribunal in the penalty proceedings has rightly observed in its order dated 29th July, 2005 that the assessee could not be said to have changed its method of accounting from mercantile to cash and cannot be charged with suppressing the receipts to the extent of ` 35,39,631/-. 27. Adverting to the second issue, the finding recorded by the Tribunal is that there was no evidence regarding payment of ` 36,17,986/- by the assessee to the sub-contractors in connection with the execution of the garbage collection work and, as such, the deletion made by the C.I.T.(A) of the aforesaid sum of ` 36,17,980/- was unsustainable. We are of the view that the Tribunal failed to take note of three very vital aspects of the matter. The first was the finding of the CIT(A) that the factum of rendering of services by the sub-contractors was not in dispute as the appellant had meticulously maintained log books for each sub-contract, which were duly verified and authenticated by the JMC. The Tribunal casually brushed this aside by stating that mere filing of a log book was not sufficient to 2010:DHC:5593-DB

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discharge the onus laid upon the appellant. The log book was a contemporaneous document maintained by the assessee company on a day-to-day basis and it was on the basis of the said log book that the claims of the assessee-company were accepted and/or rejected by the JMC, whose officials were verifying and authenticating the log books. The second was that the Tribunal altogether lost sight of the fact that the appellant had duly deducted tax at source in respect of the entire amount credited in the favour of these parties. Thirdly, it is also not disputed by the Revenue that in the assessment order for the assessment year 1998-99, the list of these sundry creditors to whom the amount was payable had been filed and their affidavits to this effect had also been filed. It is also not in dispute that the entire payment has been made to all the 8 sub-contractors as on date. 28. Another contention of the learned counsel for the Revenue is that this issue whether the sundry creditors are genuine or not could not have been re-examined by a co-ordinate Bench of the Tribunal in penalty proceedings to arrive at a contrary conclusion by relying upon the assessment order of the 1998-99 passed under Section 143(3) of 2010:DHC:5593-DB

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the Act after scrutiny and in particular on the following observation made therein: “The assesse has shown in the balance sheet under the schedule-III as details of sundry creditors – hire charges of ` 58,55,005/- but during the course of hearing it was intimated by them that it was only the payments to be made to the contractors who were plying the trucks on behalf of the company and the company had hired them for the Jaipur Municipality for removing the garbage. The list of these creditors to whom the amount is payable have been filed and affidavit to the effect for the person concerned have been filed stating thereby the amounts receivable by them from M/s. Devsons Pvt. Ltd.

The total amount of ` 58,55,005/- consists of sundry creditors of ` 49,93,063/- and other creditors for higher charges of ` 8,61,942. Thus, there has been a scrutiny of the amount outstanding towards these 8 persons in the subsequent years and at least in one of the assessment orders there is a finding that the amounts were actually due to them and that some of them have filed affidavits also to the effect that the amounts are due to them. At our instance, the learned counsel for the assessee pointed out to the ledger accounts of the sundry creditors placed at pages 70-109 of paper book No.1. The account of Morari lal to whom an amount of ` 4,71,658 is outstanding as on 31.3.95 is at pages 71A to 73A. The account shows that several payments were made during the year under appeal to this contractor and there has been no disallowance of the amounts so paid. This indicates that the AO has no objection to allowing the actual amounts paid to these persons, which could have been only on his being satisfied that such a person actually existed, that he has done work for the assessee 2010:DHC:5593-DB

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company during the year and the payment was otherwise genuine and bonafide incurred for the purpose of the business. It is not, therefore, understood as to how the balance outstanding to such persons at the end of the year can be considered to be non-genuine. The ledger account also shows that the assessee has deducted tax on the higher charges paid to Morari Lal. The ledger accounts of all the other 7 creditors have also been placed in the paper book and these also exhibit the same position.”

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question arises as to whether the said findings of the Tribunal in assessment proceedings must be regarded as conclusive and binding on a coordinate bench of the Tribunal in penalty proceedings. The answer to the aforesaid must, in our considered opinion, be in the negative. The Supreme Court in the decisions referred to in the preceding paragraphs has categorically held that it is incumbent upon the Tribunal in penalty proceedings to independently examine the evidence and the material on record for the purpose of judging whether the penalty proceedings are justified on account of concealment of income or furnishing of inaccurate particulars thereof. This, we find is precisely what has been done by the tribunal in the instant case and we cannot therefore fault the Tribunal for doing so. Even otherwise, we are in agreement with the Tribunal that the assessee is not guilty of concealment of income. We say so for the following reasons: (i) The first page of the assessment order itself records that details of the total bills raised against the JMC were furnished by the assessee, according 2010:DHC:5593-DB

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to which, the total receipts of the assessee company for the assessment year in question, i.e., the financial year 1994-95 was ` 1,17,39,415. After disclosing the total receipts a particular legal stand was taken by the assessee. The contention of the assessee was that whatever had been deducted by the JMC as not payable to the assessee was not and could not be taken as income accruing to the assessee. This stand was not accepted by the Assessing Officer and, in our opinion, incorrectly so. Assuming however that the Assessing Officer was justified in not accepting the aforesaid legal stand taken up by the assessee, when all the facts were placed before the Assessing Officer by the assessee itself, by no stretch of imagination it can be said that the assessee had concealed the same. 2010:DHC:5593-DB

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(ii) As regards the addition in respect of the balance outstanding to the sundry creditors for hire charges, the addition, as held by the Tribunal, appears to have been made only because the assessee was unable to prove the balances in the manner called upon by the department, possibly due to paucity of time, but there was ample material embedded in the record itself which was accepted by the department in subsequent assessment proceedings, to the effect that the outstandings were genuine. (iii) Divergent views amongst departmental authorities in respect of both the additions positively indicate that it would be unsafe to infer that the assessee was guilty of concealment of income or furnishing of inaccurate particulars thereof. It is trite law that where divergent views exist either within the department itself or such divergent views are 2010:DHC:5593-DB

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expressed by different High Courts and there is no uniformity or consensus of opinion of any aspect of law, the assessee cannot be faulted for taking a particular stand. The caveat, of course, is that the assessee must have placed all his cards on the table by disclosing each and every fact to the departmental authorities or the court concerned. If the assessee does so then merely because the departmental authorities concerned or the High Court concerned does not concur with the legal stand adopted by the assessee will not be reason enough to hold that the assessee is guilty of concealment of income or of furnishing inaccurate details. Thus, the questioner whether the assessee has invited upon himself the penalty sought to be imposed on him by the authority concerned is really a question of fact and has to be 2010:DHC:5593-DB

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decided keeping in mind the entire gamut of events and circumstances.

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(c) would embrace the meaning of the details of the claim made. It is an admitted position in the present case that no information given in the return was found to be incorrect or inaccurate. It is not as if any statement made or any detail supplied was found to be factually incorrect. Hence, at least, prima facie, the 2010:DHC:5593-DB

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assessee cannot be held guilty of furnishing inaccurate particulars. The learned counsel argued that “submitting an incorrect claim in law for the expenditure on interest would amount to giving inaccurate particulars of such income.” We do not think that such can be the interpretation of the concerned words. The words are plain and simple. In order to expose the assessee to the penalty unless the case is strictly covered by the provision, the penalty provision cannot be invoked. By any stretch of imagination, making an incorrect claim in law cannot tantamount to furnishing inaccurate particulars. In CIT vs. Atul Mohan Bindal (2009) 9 SCC 589, where this court was considering the same provision, the court observed that the Assessing Officer has to be satisfied that a person has concealed the particulars of his income or furnished inaccurate particulars of such income. This court referred to another decision of this court in Union of India vs. Dharamendra Textile Processors [2008] 13 SCC 369 as also, the decision in Union of India vs. Rajasthan Spg. & Wvg. Mills [2009] 13 SCC 448 and reiterated in paragraph 13 that (page 13 of 317 ITR):

“13. It goes without saying that for applicability of section 271(1)(c), conditions stated therein must exist.”

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imposed, it has to be proved that assessed has consciously made the concealment or furnished inaccurate particulars of his income. 14. It is clear from the law laid down by the Supreme Court that concealment must be accompanied with the intention of the assessed to evade his tax liability. The assessed in this case had uniformly claimed expenditure against four heads in three assessment years. When the appeal against the order of Assessing Officer before CIT (A) in respect of assessment order 1998-1999 failed the assessed instead of preferring appeal considered it proper not to litigate further as it was running into heavy losses and even if the appeal had been allowed, the assessed would not have paid any tax. The assessed in any case would have remained in heavy losses. The assessed therefore thought it proper not to prefer an appeal and after receipt of order, assessed made an application on 4.2.2003 to correct the income returns of subsequent years in accordance with order of CIT for the year 1998-1999. The assessed, therefore, filed revised returns deleting the expenses which were disallowed by the CIT (A). In the relevant year assessed had also claimed expenses of ` 2 crores paid by the assessed in terms of the agreement entered into by the assessed with the leasing Lesser. The assessed claimed the entire amount of ` 2 crores as deduction since the assessed had paid this amount of ` 2 Crores to the Lesser. There is no dispute that the assessed had disclosed all particulars. It was only difference of opinion between the assessed and the Assessing Officer and the assessed accepted the opinion of 2010:DHC:5593-DB

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the Assessing Officer instead of preferring an appeal. 15. It is not a case where assessed had not been able to explain any expenditure or had failed to give any details and the Assessing Officer had added the same into the income. In Durga Timber v. CIT 197 ITR 63, relied upon by the appellant, during the course of the assessment proceedings the Income Tax Officer had noticed cash credits and investments shown in the books of account and asked the assessed to give Explanationn. The assessed could not give Explanationn of entires nor could explain the source of income and admitted that the two amounts be treated as his concealment. Under these circumstances court observed that there was concealment of income and penalty was justified. In the present case assessed had explained all the expenditure and had actually incurred the expenditure but the expenditures were disallowed because of difference of opinion between the assessed and the Assessing Officer. This is not a case where revised return was filed as a result of discovery of some facts by the Assessing Officer or inability of the assessed to explain the expenditure. The revised return was filed because some of the expenditure were disallowed by the CIT (A) appeal for year 1998- 99 although the expenditure were not doubted. There are cases where an expenditure is disallowed by the Assessing Officer and it is allowed by the CIT (A). It is again disallowed by the ITAT and in appeal allowed by the High Court and may be disallowed by the Supreme Court. Merely because there is difference of 2010:DHC:5593-DB

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opinion for allowing or disallowing the expenditure between the assessed and Assessing Officer, it cannot be said that assessed had intention to conceal the income. The filing of the revised return excluding some of the disallowed expenditure and claiming expenditure of ` 2 crores which was actually spent by the assessed in the relevant assessment year as deduction, does not amount to concealment or furnishing inaccurate particulars. The assessed had given all particulars of expenditure and income and had disclosed all facts to the Assessing Officer. It is not the case of the Assessing Officer or the appellant that in reply to the questionnaire of the Assessing Officer, some new facts were discovered or Assessing Officer had dug out some information which was not furnished by the assessed.”

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that by itself is not a ground to invoke the penalty provision of the statute. 6. Learned Counsel for the Revenue relied upon CIT v. Vidyagauri Natverlal and Ors. [1999] 238 ITR 91(Guj). In that case the question that arose was of unexplained cash credit. The Gujarat High Court made a distinction between a wrong claim as opposed to a false claim. In that case, the AO needed to make an enquiry as to whether the claim of the assessed was right or not. Insofar as the present case is concerned, the decision cited by learned Counsel for the Revenue is clearly distinguishable.” 7. We find that there was full disclosure of all relevant material. It cannot be said that the conduct of the (assessed) attracted the provisions of Section 271(1)(c) of the Act.”

ITA No.367/2004 & 296/2006 Page 42 of 42

Questions no.1 and 2 in ITA No. 367/2004 are accordingly decided in favour of the assessee. 36. In so far as the penalty proceedings are also concerned, we find that the ITAT was correct in law in upholding the deletion of the penalty imposed by the Assessing Officer under Section 271(1) (c) of the Act and we accordingly answer the question of law framed in ITA No. 296/2006 in the affirmative, i.e. in favour of the assessee and against the Revenue. 37. ITAs No. 367/2004 and 296/2006 stand disposed of accordingly.

REVA KHETRAPAL (JUDGE)

A.K. SIKRI

(JUDGE) November 19, 2010 sk

2010:DHC:5593-DB