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October, 08th 2013
+                 INCOME TAX APPEAL NO. 71/2013

                                   Date of decision: 12th September, 2013.

                                                            ..... Appellant
                              Through Mr. Sanjeev Rajpal, Sr. Standing


                                                          ..... Respondent
                              Through Mr. Gaurav Mitra, Mr. Saurabh
                              Seth & Ms. Kanchan Yadav, Advocates.



        In this appeal, which pertains to Assessment Year 2003-04 and

arises out of order of the Income Tax Appellate Tribunal (tribunal, for

short) dated 29th June, 2012, on the last date of hearing the following

substantial question of law was framed:-

                         "Whether the tribunal was justified in
                  deleting penalty on additions made on account
                  of loss of sale of investment and vehicles,
                  which was wrongly claimed as business loss
                  and expenditure disallowed under Section 43B
                  of the Income Tax Act, 1961?"

ITA No. 71/2013                                                   Page 1 of 21
As is apparent from the question, tribunal has allowed the appeal of the

respondent assessee and deleted penalty under Section 271(1)(c) of the

Income Tax Act, 1961 (Act, for short)

2.      The respondent-assessee had filed its return of income declaring

loss of Rs.13,65,54,483/- duly supported by audited accounts and this

return was processed under Section 143(1) of the Act. Subsequently,

re-assessment notice was issued after noticing that the assessee had

claimed depreciation on plant and machinery though no manufacturing

activity was conducted during the year under consideration and had

wrongly claimed capital loss on sale of investments amounting to

Rs.59,15,000/- as business loss.

3.      In response to the notice under Section 148 of the Act, the

respondent-assessee filed a letter dated 9th August, 2007 stating that

their earlier return filed under Section 139 dated 31st October, 2002

should be treated as a return filed in response to the said notice. The

assessee on receipt of reasons for reopening, filed objections to the

initiation of the re-assessment proceedings and contested the notice

under Section 148 of the Act. The said objections of the assessee were

rejected vide order sheet entry dated 24th December, 2007.

4.      During the course of assessment proceedings, the assessee filed

a revised computation in which they accepted that Rs.59,15,000/- was

wrongly claimed as a revenue loss and was in fact capital loss. The

ITA No. 71/2013                                                Page 2 of 21
assessee also accepted that unpaid interest charges of Rs.4,46,13,877/-

should have been disallowed under Section 43B cannot be accounted

for in the profit and loss account.        Similarly, the respondent had

erroneously accounted Rs.12,610/- and Rs.4,715/-, due and payable on

account of provident fund and ESI in the profit and loss account,

although this was not permissible and was contrary to Section 43B of

the Act.          The Assessing Officer disallowed depreciation claim of

Rs.89,95,173/- and claim on account of loss on sale of vehicles, which

was treated by the respondent as revenue loss of Rs.1,27,930/-. This

loss it was observed was a capital loss. On account of the aforesaid

additions, total income of the assessee was assessed at loss of

Rs.7,66,79,891/-. Proceedings under Section 271(1)(c) of the Act were


5.      The Assessing Officer imposed penalty of Rs.2,13,75,229/- on

account of concealment and/or furnishing of inaccurate particulars. He

rejected the contention of the respondent that the claims/entries were

bona fide and lapse had occurred because the respondent was without

competent professional staff due to closure of running operations and

that the return was filed by a junior accountant, who was not well

versed with the tax laws.

6.      Commissioner of Income Tax (Appeals) upheld the order

imposing penalty.

ITA No. 71/2013                                                Page 3 of 21
7.      Tribunal by the impugned order has deleted penalty, inter alia,

recording that all details with regard to the loss suffered were filed

along with the return of income and the change of head of income

cannot be considered as concealment or furnishing inaccurate

particulars of income.         The legal claim made by the respondent-

assessee was not found to be allowable under the head "business loss"

but the same was allowed as a "capital loss". In order to appreciate the

contention of the Revenue, we would like to reproduce the exact words

and reasoning given by the tribunal to delete the penalty:-

                  "5. We have heard rival contentions and gone
                  through the relevant material available on
                  record. Apropos the issue of claim of
                  depreciation, penalty imposed under similar
                  facts and circumstances has been deleted by the
                  ITAT in preceding year, as reproduced above.
                  Respectfully following the same, the penalty
                  qua the claim of depreciation is deleted.

                  5.1. Apropos long term capital gain on sale of
                  investments and sale of vehicles, the fact that
                  the assessee was allowed the claim of loss is
                  not disputed. The only difference between
                  assessee's claim and the assessed loss is the
                  head of allowability of loss i.e. capital loss as
                  against assessee's claim of business loss. In our
                  view all the relevant details were filed by the
                  assessee along with the return of income and a
                  change in claim of head of income cannot be
                  considered as concealment of particulars of
                  income or furnishing inaccurate particulars of
                  such income. The assessee made a legal claim
                  which was not found to be allowable by the
                  Assessing Officer under the head business loss
                  but the same was allowed as long term capital

ITA No. 71/2013                                                       Page 4 of 21
                  loss. In these facts and circumstances we are
                  not inclined to hold that the assessee concealed
                  any particulars or furnished inaccurate
                  particulars in this behalf.

                  5.2. In respect of PF and ESI also the
                  assessee had disclosed in its Chartered
                  Accountant's report that these amounts were
                  not deposited, therefore, assessee itself claimed
                  them to be exfacie not allowable. The only
                  mistake committed by the assessee is in not
                  giving proper effect to P&L A/c. With these
                  disclosure on record, the mistake can be held to
                  be of technical or venial in nature and cannot be
                  termed as amounting to concealing particulars
                  of income or furnishing inaccurate particulars
                  of such income.

                  5.3. Apropos 43B disallowance, assessee has
                  given satisfactory explanation that revised
                  return was prepared which was not filed by the
                  Chartered Accountant due to dispute on
                  payment of professional fees with the C.A are
                  the same is indicated by the record. In our
                  considered view the details having been
                  furnished along with the return of income, the
                  assessee's case is not liable to be visited with
                  penalty u/s 271(1)(c).

                  5.4. Apropos ld. DR's reliance of ITAT order
                  in the case of M/s Anand & Anand (supra), the
                  facts and circumstances in that case are
                  peculiarly different inasmuch as in this case
                  assessee had earlier paid advance tax on a
                  particular item of income and later on, in the
                  guise of legal opinion, the same was claimed to
                  be a capital receipt, it had no earlier history and
                  was a profit making organization. In the present
                  case, the facts are peculiarly different and it is a
                  case of continuous loss making concern since
                  past many years.          Therefore, facts being
                  distinguishable the decision in the case of M/s

ITA No. 71/2013                                                          Page 5 of 21
                  Anand & Anand cannot be applied to the facts
                  of the present case.

                  5.5. In case of reduction of assessed loss,
                  though technically penalty u/s 271(1)(c) is
                  leviable, but one cannot be oblivious of the
                  explanation and justification given by the
                  assessee. In our view, assessee's explanation
                  demonstrates justification for the stand taken in
                  the return of income and reassessment
                  proceedings. The explanation cannot be called
                  to be false or bogus, therefore, we delete the
                  penalty, keeping in view the judgment of
                  Hon'ble Supreme Court in the case of Reliance
                  Petroproducts (supra) and in the case of
                  Hindustan Steels 83 ITR 26(SC)."
                                               (emphasis supplied)

8.          Before we examine the aforesaid observations and the

contentions of the parties, for the sake of clarity, we would like to

mention that during the re-assessment proceedings the respondent's

loss was reduced by Rs.5,98,74,592/- on account of the following


1.       Depreciation on plant & machinery            Rs.89,95,173/-

2.       Loss on sale of investments                  Rs.59,15,000/-

3.       Loss on sale of vehicles                     Rs.1,27,900/-

4.       Disallowance u/s 43B                         Rs.17,325/-

5.       Disallowance u/s 43B                         Rs.4,48,19,194/-

9.      We are in agreement with the learned counsel for the respondent

ITA No. 71/2013                                                       Page 6 of 21
that as far as claim for depreciation of plant and machinery is

concerned. Claim of depreciation was a debatable issue. Passive use

entitles an assessee to claim depreciation (see CIT versus Geo Tech

Construction Corporation, [2000] 244 ITR 452 (Ker.) and

Commissioner of Income Tax versus Refrigeration and Allied

Industries Limited, [2001] 247 ITR 12). No manufacturing activities

were conducted during the assessment year in question but the assessee

had approached Board of Financial Reconstruction for rehabilitation of

the company under the provisions of Sick Industrial Companies

(Special Provisions) Act, 1985. We also notice that penalty imposed in

the last year for same reason was deleted by the tribunal. The real

contest is with regard to loss on sale of investments and sale of

vehicles of Rs.59,15,000/- and Rs.1,27,930/- respectively and

disallowance under Section 43B of Rs.4,48,19,194/- and Rs.17,325/-

on account of finance charges and PF/ESI dues respectively.

10.     In paragraph 5.1 of the impugned order, the tribunal has referred

and stated that details were furnished by the respondent along with the

return of income and observed change of head of income cannot be

considered as concealment of particulars or furnishing inaccurate

particulars of income. The said statement as a ratio is broad and wide

to be treated as universally true. It depends upon facts of a particular

case and whether the question was debatable or capable of only a

ITA No. 71/2013                                                 Page 7 of 21
singular view. We, therefore, cannot agree with the view expressed by

the tribunal that change of head under which income is to be assessed

per se would justify cancellation of penalty for concealment for the

reason that it is not a case of furnishing of inaccurate particulars.

Furnishing of inaccurate particulars of income can have different

connotations and may arise when income is enhanced, deduction

denied or when head of income, is changed resulting in a higher rate of

tax or increase in income.        The real question is application of

Explanation 1. Paragraphs 5.2 and 5.3 refer to the disallowance under

Section 43B and observe that ESI and PF deductions as claimed were a

mistake and a case of not giving proper effect to profit and loss

account. However, this cannot be read in isolation as the assessee had

not made disallowance under Section 43B even in respect of interest

payable but not paid, to the financial institutions.

11.     Paragraphs 5.4 and 5.5 record that the respondent was

continuously loss making concern for last many years and, therefore,

decision in another case was distinguishable.          Whether or not the

assessee makes loss is not the relevant criteria or factor to determine

whether penalty should be imposed under Section 271(1)(c) or not. Of

course, lack of or inability to engage a good professional tax consultant

is a different matter but there should be proof and basis to hold that the

losses incurred prevented an assessee from getting proper tax advice

ITA No. 71/2013                                                  Page 8 of 21
and the issue in question was complicated or required professional

advice of a highly expert nature. Further, this is not the correct way of

applying Explanation 1. In paragraph 5.5 it is recorded that one cannot

be oblivious to the explanation and justification given by the assesse.

Indeed one has to take into consideration the explanation and the

justification given by the assessee but it cannot be accepted as bona

fide and true on mere asking. Onus under Explanation 1 is on the

assessee to prove the reason as to why a particular claim or deduction

was made. The justification and cause shown should be bona fide and

acceptable.       Penalty cannot be deleted by merely recording the

explanation, though not proved and established.        It is not for the

Revenue to show that the explanation offered is not false or bogus.

12.     Learned counsel for the respondent referred to paragraph 5.3 of

the impugned order and has stated that the revised return was prepared

by the Chartered Accountant but due to dispute with regard to payment

of professional fee with them, the same was not furnished.            This

explanation given by the assessee has been accepted by the tribunal but

is on the face of it contrary. In fact, the tribunal has not discussed the

facts or basis for the said conclusion. The assessee had filed original

return of income, as noticed above, on 31st October, 2002. Return was

supported by duly audited accounts. Copy of the said audited accounts,

auditor's report etc. have been filed on record before us by the

ITA No. 71/2013                                                 Page 9 of 21
respondent-assessee. The accounts were audited by a Chartered

Accountant and the audit was dated 30th August, 2002. Subsequently,

after re-assessment notice under Section 148 dated 7th July, 2008 was

issued, the respondent-assessee filed a letter dated 9th August, 2007,

nearly four years after the date of filing of the original return, that the

earlier return dated 31st October, 2002 should be treated as the return

filed pursuant to the reassessment notice. This was a chance given to

the respondent to file a rectified return in case of error or mistake

made. After the return of income was filed, the assessee was furnished

with copy of the reasons to believe, which as already noticed above,

recorded two reasons; (i) wrong claim of depreciation in spite of the

fact that no manufacturing activity was conducted during the year

under consideration and (ii) claim of loss on sale of investments was

wrongly claimed as business loss as it was a capital loss. The

respondent-assessee filed written objections dated 14th December, 2007

to the reopening and contested. The respondent-assessee tried to justify

the claims made and treatment given in the accounts. The assessment

order records that on 20th December, 2007, the assessee had tried to

justify the claim of loss of Rs.59,15,000/- as business loss stating as


                  "The investment was made out of surplus funds
                  available with the company. This was with a
                  view to earn profits from business. Business

ITA No. 71/2013                                                   Page 10 of 21
                  activity or transaction necessarily implies the
                  activity with an object to earn profit.
                  Uncertainty about the return to be received
                  from the investment and also the facing of
                  many imponderables and even the risk of losing
                  the amount invested are inherent in activity
                  called     business.        Risk,     uncertainty
                  foresignhedness(sic)     to     visualise     the
                  imponderables and capacity to over come the
                  unforeseen hurdles are the essential for business

        The objections were considered and rejected on 24th December,


13.     For the sake of clarity, we record that the aforesaid loss was loss

suffered on sale of shares held as investment or as a capital asset. The

assessee was not a trader in shares and the shares were not held as

stock-in-trade. They were not part of the closing stock. It is only

subsequently that the respondent-assessee filed a revised computation

and accepted that the said loss was capital loss and not revenue loss.

Revised computation was filed after contest and on being confronted

by the Assessing Officer. The aforesaid reasoning will equally apply

to the loss suffered on sale of vehicles.

14.     Section 271(1)(c) of the Act as applicable has been considered

and interpreted in several judgments of the Supreme Court and the

Delhi High Court. The said Section is invoked when an assessee

furnishes inaccurate particulars or conceals his income. Explanation 1

ITA No. 71/2013                                                       Page 11 of 21
can come to the rescue of the assessee in case he had offered an

explanation but was unable to substantiate it, provided he is able to

establish that the explanation offered was bona fide and the facts

relating to furnishing of inaccurate particulars and material for

computation of total income were duly disclosed by him.         In the

present case, the assessee had furnished inaccurate particulars of

income and this is established beyond doubt. Assessment order passed

under Section 143(3)/147 of the Act dated 28th December, 2007 was

accepted by the respondent-assessee in which the aforesaid

disallowance/additions were made. In fact, submission of the assessee

before us is that the aforesaid errors pointed out in the assessment

order were conceded to and accepted by the respondent-assessee

during the course of the assessment proceedings by filing a revised

computation. In these circumstances, the contradictory contention of

the respondent-assessee that they had not furnished inaccurate

particulars of their income is not acceptable. The moot question and

issue is whether the assessee has discharged the burden under

Explanation 1 to Section 271(1)(c) of the Act or rather more precisely

whether the tribunal has correctly applied the said Explanation as

mandated and required by the statute.

15.      Mens rea is not required and necessary to impose penalty for

concealment. In Union of India vs. Dharmendra Textile Processors

ITA No. 71/2013                                              Page 12 of 21
[2008]306 ITR 277, the Supreme Court examined Section 271(1)(c) of

the Act and other provisions for imposition of penalty in different

statutory enactments. It was held that penalty in such cases imposed

for tax delinquency is a civil obligation, remedial and coercive in

nature and is far different from penalty for crime or a fine or forfeiture

as stipulated in criminal or penal laws.                 It refers to blameworthy

conduct for contravention of the Act and it equally applies to tax

delinquency cases. Mens rea or willful failure or conduct is not

required to be proved and established. Mens rea is essential or sine-

qua-non for criminal offences but is not an essential element for

imposing penalty for breach of civil obligations or liabilities. It was

accordingly observed as under:

                  "The Explanations appended to Section 272(1)(c) of the
                  Income Tax Act entirely indicate the element of strict
                  liability on the assessee for concealment or for giving
                  inaccurate particulars while filing the return. The
                  judgment in Dilip N. Shroff's case [2007] 8 Scale 304
                  (SC) (3) has not considered the effect and relevance of
                  Section 276C of the Income Tax Act. The object
                  behind the enactment of Section 271(1)(c) read with the
                  Explanations indicates that the said section has been
                  enacted to provide for a remedy for loss of revenue.
                  The penalty under that provision is a civil liability.
                  Wilful concealment is not an essential ingredient for
                  attracting civil liability as is the case in the matter of
                  prosecution under Section 276C of the Income Tax

16.     Thus, penalty under Section 271(1)(c) is imposed when an

assessee conceals his income or furnishes incorrect particulars. In

ITA No. 71/2013                                                                Page 13 of 21
terms of explanation I, we have to examine whether the case in

question falls within the two limbs viz. clause (A) and (B) i.e. which of

the two limbs and effect thereof. Clause (A) applies when an assessee

fails to furnish explanation or when an explanation is found to be false.

Clause (B) applies to cases where explanation is offered but the

assessee is not able to substantiate the explanation. In such cases, we

have to examine two conditions: (1) Whether the assessee has been

able to show that his explanation was bonafide; (2) whether the

assessee had furnished and disclosed facts and material relating to

computation of his income. Onus of establishing that the assessee

satisfies the two conditions is on the assessee. Both the conditions

have to be satisfied. In case the assessee satisfies the twin condition,

penalty should not be imposed.

17.     On the second aspect, which relates to addition on account of

disallowance under Section 43B of the Act, position remains the same.

In the audited accounts, there is no mention or reference to the said

Section or that in the profit and loss account expenditure which has to

be disallowed under Section 43B has been debited and claimed. The

fact that interest due and payable to the financial institution has not

been paid but was treated as expenditure in the profit and loss account

was not stated or adverted to.       Thus, full facts relating to the

assessment of income were not stated.

ITA No. 71/2013                                                Page 14 of 21
18.     In the present case, additions or disallowance has been made on

account of wrong claim of revenue loss, which was in fact capital loss

and disallowance under Section 43B. From the reasoning given by the

tribunal, it is not possible to decipher and hold that the explanation

given by the assessee shows as to why his claims were bona fide and

justified. The onus of establishing the reasons for the claim made is on

the assessee. Reference has been made to the judgment of the Supreme

Court in Hindustan Steel Limited versus State of Orissa, (1972) 83

ITR 26 (SC), which pertains to the earlier provision relating to penalty,

which was worded differently. Decision in the case of CIT versus

Reliance Petroproducts Private Limited, (2010) 11 SCC 762 is

relevant but would indicate that in the said case the assessee had given

an explanation in respect of disallowance of expenditure under Section

14A. Full details of expenditure had been given in the return but the

claim of the assessee was not accepted in view of the legal

interpretation given to the statutory provision. Thus, merely making a

claim, which was not sustainable in law should not result in

penalization under Section 271(1)(c). Penalty should not be imposed

provided the assessee has furnished full details with the return itself

and the claim made was debatable or reasonably plausible or may have

well been accepted. It is, in this context, that Delhi High Court deleted

penalty in Shervani Hospitalities Limited versus Commissioner of

ITA No. 71/2013                                                Page 15 of 21
Income Tax, (2011) 329 ITR 572 Delhi, Karan Raghav Exports

versus CIT, (2012) 349 ITR 112 (Delhi), CIT versus Zoom

Communication Private Limited, (2010) 327 ITR 510(Delhi). One

cannot be oblivious to divergent views on legal interpretation of tax

provisions and that uniformity and consistency of opinion on aspects of

law may not be possible.       Therefore, penalty cannot be imposed

because an assessee has taken a particular legal stand. However, this

does not mean that the assessees can claim wrong deductions or claim

without any basis or foundation to justify the claim. False, spurious

and mendacious claims do not fall in this class.

19.     In the present case, the assessee is a company and the accounts

were audited by Chartered Accountant. Difference between "capital

loss" or "revenue loss" in some cases may be marginal and debatable,

but in the present case, the assessee a manufacturing company had sold

shares held by them as investment or as a capital asset. There was and

could not have been any debate or plausible claim that the loss was a

capital loss. Anyone remotely conversant with the provisions of the

Act or accounts would know that loss on the sale of the investments

cannot be booked and treated as a business loss, yet the respondent-

assessee had booked the said loss as a business loss instead of a capital

loss. This was contrary to elementary principles of accountancy and

something which is very basic. Learned counsel for the respondent has

ITA No. 71/2013                                                Page 16 of 21
emphasized that the figures, i.e., loss of Rs.59,15,000/- has not been

disputed. Therefore, full facts were on record. This is partly correct

but would not satisfy the requirements of Explanation 1. Explanation 1

has two stipulations; firstly, the assessee should have furnished facts

and material relating to computation of his income and secondly,

establish that the explanation furnished by him was bona fide.

Furnishing of figures or non-interference with the figures would show

only furnishing of facts and material but would not satisfy the second

requirement. Similarly, with regard to the disallowance made under

Section 43B, the law on the point and the provision in question is well

known and not capable of two interpretations. The assessee had not

paid interest amounting to Rs.4,48,19,194/- and had defaulted and not

paid PF/ESI instalment of Rs.17,325/-, but had claimed them as an

expenditure, contrary to the mandate of Section 43B. The audit report

was silent and this fact was not disclosed. Material and facts were not


20.     Learned counsel for the assessee has submitted that the

respondent company became sick and, therefore, did not have funds to

engage a proper accountant or tax consultant when the original return

was filed. The return was filed by a junior accountant. Firstly, we find

that this aspect has not been accepted by the tribunal. Secondly, the

two set of additions in question were clearly contrary to law. As

ITA No. 71/2013                                               Page 17 of 21
already noted above and are elementary and well-known, in the guise

of wrong or improper legal opinion, an assessee should not be

permitted and allowed to escape penalty when the accounts are audited

by a Chartered Accountant, when the provision and position in law is

well-known and well-understood. It is not a case of a debatable issue

or a legal provision which could have escaped or missed notice or

consideration of the Chartered Accountant or the accountant or the

directors of the company. We cannot stretch the plea that the issue was

debatable or there was wrong advice beyond the point to believe or

accept contentions when the claim itself is impossible to accept and is

contrary to fundamentals of tax or accountancy. Income tax returns are

mostly accepted without scrutiny or regular assessment. Self and due

compliance of tax provisions is required.     In the present case, the

original return filed by the respondent was accepted under Section

143(1) of the Act. Subsequently, noting discrepancies, notice under

Section 148 of the Act was issued. Even at that time, the respondent-

assessee did not accept the fault and in their letter dated 9th August,

2007 stated that the original return may be treated as filed in response

to the reassessment notice. Objections to re-opening were raised and

the stand and stance of the respondent-assessee changed when they

were repeatedly confronted. It is not a case where the assessee suo

motu on his own or on immediately noticing the wrong claim rectified

ITA No. 71/2013                                               Page 18 of 21
or corrected the purported errors and understatements. It is only when

the assessee was cornered and confronted by the Assessing Officer that

the revised computation was filed. The revised computation was filed

after the objections to the re-opening were dismissed by the Assessing


21.      At this stage, we would like to notice and refer to the judgments

relied by the counsel for the respondents in Commissioner of Income

Tax, Lucknow versus Hari Om Ashok Kumar Sugar Works, (2007)

295 ITR 507 (Allahabad), Commissioner of Income Tax versus

Sidhartha Enterprises, (2010) 322 ITR 80 (P&H), Commissioner of

Income Tax versus Somany Evergree Knits Limited, (2013) 352 ITR

592 (Bombay) and Commissioner of Income Tax versus Sania Mirza,

(2013) 259 CTR (AP) 386 and Price Waterhouse Coopers Private

Limited versus Commissioner of Income Tax, (2012) 11 SCC 316 .

22.     At the very outset, we observe that whether an assessee had

offered an explanation and whether the explanation was bona fide

when discussed and examined as stipulated in Explanation 1, is a

question of fact and depends upon several factors, including whether

the assessee is an individual or corporate assessee, literate or illiterate,

the nature, character and quantum of the deduction, his past conduct

relating to the same claim/deduction, the provision or section

applicable etc. (Failure to apply Explanation 1, as per law would make

ITA No. 71/2013                                                   Page 19 of 21
it, mixed question of law and fact) It is not one fact but several factors

which have to be taken into consideration to determine whether or not

the claim or explanation of an assessee is bona fide. For example, in

the case of Hari Om Ashok Kumar Sugar Works (supra) income

taxable under Section 41(2) of the Act was made subject matter of

penalty. In the said case, tribunal also accepted the contention that the

assessee was under the belief that profit on sale of machinery etc. being

capital goods was not taxable. He was ignorant about provisions of

law. In the case of Sania Mirza (supra), awards received from the

Government or other institutions were not included in her income and

were disclosed in the return as a capital receipt. The amount received,

on re-opening was voluntarily surrendered. In Somany Evergree Knits

Limited (supra) the factual finding recorded was that the assessee had

committed a mistake and they withdrew the claim of loss shown as

revenue expenditure in the profit and loss account in the

second/revised return of income. It was a case of bona fide mistake.

In the case of Price Waterhouse Coopers Private Limited (supra),

there was variation between the tax audit report and the income tax

return.      In the computation sheet with the income tax return

disallowance under Section 40(a)(7) was not reflected. The Supreme

Court observed that this was a clear case of error made by the assessee,

who by mistake had overlooked the contents of the tax audit report. It

ITA No. 71/2013                                                 Page 20 of 21
was held that the inadvertent error was a bona fide mistake. In the

present case, we do not think any of the aforesaid decisions are

applicable rather it is one wherein the assessee had wrongly shown loss

on sale of shares held as investments as business loss and had wrongly

not excluded from expenditure/profit and loss account, interest which

had not been to the financial institutions or PF/ESI amounts not paid

contrary to Section 43B of the Act. The quantum of amount involved

was Rs.4,48,19,194/-

23.     In view of the aforesaid discussion, we answer the question of

law in favour of the Revenue and against the respondent-assessee and

uphold levy of penalty u/s 271(1)(c) of the Act in respect of loss on

account of investments, vehicle and disallowance under Section 43B.

The claims were ex facie wrong being contrary to fundamental/basic

principles of accounts and Act, would not have escaped notice or

missed. However, we do not think penalty was justified and proper on

the wrong claim for depreciation of plant and machinery as the legal

position on the said claim was debatable.

        The appeal is disposed of. There will be no order as to costs.

                                        SANJIV KHANNA, J.

                                        SANJEEV SACHDEVA, J.
SEPTEMBER 12, 2013
ITA No. 71/2013                                                 Page 21 of 21
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