Paharpur Cooling Towers Ltd. v. Commissioner of Income-tax, Kolkata-IV
[Citation -2015-LL-1119-21]

Citation 2015-LL-1119-21
Appellant Name Paharpur Cooling Towers Ltd.
Respondent Name Commissioner of Income-tax, Kolkata-IV
Court HIGH COURT OF CALCUTTA
Relevant Act Income-tax
Date of Order 19/11/2015
Assessment Year 1993-94
Judgment View Judgment
Keyword Tags capital receipt • computation of income • concealment of income • exchange fluctuation • foreign currency • foreign currency loan • foreign exchange • forward contract • imposition of penalty • plant and machinery • quantum appeal • revenue receipt • trading receipt
Bot Summary: A.M.Shah Co. Vs- C.I.T. 1999 238 ITR 415 In this case the assessee claimed deduction of the amount from its taxable income in the computation though treating the same as revenue receipt in P L A/c. In case the Additions are made and the explanation submitted by the assessee is not satisfactory, the income should be treated as deemed concealment. In the instant case, as the sum claimed as deduction is undisputed, it cannot be said that the assessee had furnished inaccurate particulars of income. Since there is no finding that the factual details furnished by the assessee in its return were inaccurate or erroneous or false and as the assessee had claimed the deduction of an expenditure treating it be capital in nature, it is appropriate to refer to the law laid down by the Supreme Court in CIT vs. Reliance Petroproducts supra, wherein it has been held as under: ...Such not being the case, there would be no question of inviting the penalty under section 271(1)(c) of the Act. A mere making of the claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee. We do not agree, as the assessee had furnished all the details of its expenditure as well as income in its return, which details, in themselves, were not found to be inaccurate nor could be viewed as the concealment of income on its part. Merely because the assessee had claimed the expenditure, which claim was not accepted or was not acceptable to the Revenue, that by itself would not, in our opinion, attract the penalty under section 271(1)(c).


ORDER SHEET IN HIGH COURT AT CALCUTTA Special Jurisdiction [Income Tax] ORIGINAL SIDE ITA 42 of 2006 PAHARPUR COOLING TOWERS LTD. VERSUS COMMISSIONER OF INCOME TAX, KOLKATA-IV BEFORE: Hon'ble JUSTICE SOUMITRA PAL Hon'ble JUSTICE MIR DARA SHEKO Date : 19th November, 2015. Mr. J. P. Khaitan, Senior Advocate. Agnibesh Sengupta, Advocate. Mr. P. K. Bhowmick, Advocate. Soumitra Pal, J:- This Income Tax Appeal, pertaining to assessment year 1993-94, was admitted on following substantial question of law: Whether on true and proper interpretation of section 271(1)(c) of Income Tax Act, 1961 and, in particular, Explanation 1 thereto, any penalty can be imposed upon appellant for making claim that exchange gain made upon cancellation of forward contract made in connection with acquisition of plant and machinery being imported for setting up new factory was capital receipt and purported findings of Tribunal upholding imposition of penalty and reversing order of Commissioner of Income Tax (Appeals) are arbitrary, unreasonable perverse? 2 fact of case is that assessee filed its return showing total income of Rs.9,81,75,426/-. case was assessed under Section 143(3) on total income of Rs.11,32,19,669/-. In assessment order, addition of Rs.52,90,499/- was made by treating profits on cancellation of forward foreign exchange contract as trading receipt instead of capital receipt. Assessing Officer issued direction to initiate proceedings under Section 271(1)(c). It appears that assessee in its profit and loss account had shown said receipt as revenue receipt. Aggrieved, assessee preferred appeal before CIT(A) which was dismissed. Still aggrieved, assessee preferred appeal before Income Tax Appellate Tribunal, which according to Mr. J. P. Khaitan, learned senior advocate for appellant, went unattended so far as assessee is concerned and there was no decision on merits. Incidentally in meantime, Assessing Officer had passed order under Section 271(1)(c) imposing penalty of Rs.30,43,036 by holding as under: words inaccurate particulars would cover both falsity in final figure as also constituent element, which are inaccurate in some specific or definite respect, whether in constituent or subordinate items of income or end result. Therefore, any concealment or inaccuracy in particulars of income in return occurring at any stage upto and inclusive of ultimate stage of working out of total income, would attract penalty provisions of Sec.271(1)(c). A.M.Shah & Co. Vs- C.I.T. [1999] 238 ITR 415 (Guj) In this case assessee claimed deduction of amount from its taxable income in computation though treating same as revenue receipt in P & L A/c. There is no doubt that assessee was having any doubt regarding nature of this receipt as revenue receipt. This is proved by intention of assessee to adjust income with revenue expenses and to debit net revenue expenses. Had it been case of capital receipt in mind of assessee, it could have not been adjusted with revenue item. Had this case not been scrutinized u/s. 143(3), assessee could have taken benefit and such deduction could have been allowed. This to conclude, assessee furnished inaccurate particulars and concealed particulars of its income by claiming wrong and false deduction in computation knowing very well that amount earned by it was revenue receipt. 3 Aggrieved by order of penalty, assessee preferred appeal which was allowed by CIT(A) by holding as under: Perusal of appellant s computation of income clearly indicates that receipt of Rs.52,90,499/- had been claimed as deductible item. AO has also mentioned very clearly in his assessment order claim of appellant that said receipt was capital receipt and not revenue income. These facts indicate that receipt of Rs.52,90,499/- had not been hidden from Department. It is therefore cannot be said that such amount was concealed or hidden from Department. claim made by appellant that such receipt is capital receipt and not revenue receipt is always claim and such claim may be correct or incorrect. To conclude that having made claim, such claim is concealment or submission of inaccurate particulars of income would be wrong conclusion. Accordingly, after carefully considering facts and circumstances of case, I am of opinion that claim cannot be defined or interpreted as concealment or filing inaccurate particulars of income. In this view of matter, penalty levied by AO stands cancelled. Department, being aggrieved by said deletion of order of penalty, preferred appeal before Tribunal. Tribunal while allowing said appeal held as under: We have examined rival submissions. We find that facts stated by A.O. in his penalty order are correct. assessee has shown aforesaid receipts as revenue receipts and adjusted this amount with bank charges, and only net bank charges had been debited. quantum appeal has been decided against assessee. We are of view that after insertion of Explanation I to Section 271 (1)(c), requirement that department should establish that there has been conscious concealment of particulars of income or deliberate failure to furnish accurate particulars, is no longer necessary. In case Additions are made and explanation submitted by assessee is not satisfactory, income should be treated as deemed concealment. According to us words inaccurate particulars would cover both falsity in final figure as also in constitution adamants which are inaccurate in some specific or definite respect. In this case assessee claimed Deduction of amount from its taxable income in computation by treating same as revenue receipt. This is proved by intention of assessee to adjust income with revenue expenses and to debit net revenue expenses. Had it been case of capital receipt in mind of assessee it should not have been adjusted with revenue item. Had this case not been scrutinized u/s 4 143(3) assessee could have taken benefit and such deduction would have been allowed. We, therefore, conclude that assessee furnished inaccurate particulars and concealed particulars of its income by claiming wrong and false deduction in computation knowing that amount earned by it was revenue receipt. We, therefore, set aside order of CIT(A) and restore order of A.O. order passed by Tribunal is subject matter of this instant appeal. Mr. Khaitan, relying on computation of income, annexed to paper book, submits that amount of Rs.52,90,499/- is part of claim. There was no falsity in figures mentioned. Referring to Section 271(1)(c) of Act, it has been submitted that since there was no concealment of particulars of income and when materials to computation of income were disclosed, Tribunal erred in setting aside order passed by CIT(A). Submission is, had there been failure to explain facts, Section 271(1)(c) could have been attracted which is not case in hand. Mr. Khaitan has relied on judgement of Supreme Court in C.I.T. vs. Reliance Petroproducts Pvt. Ltd. : 322 ITR 158(SC) and on unreported judgment of this Court passed on 9th April, 2015 in ITA 820 of 2008 [C.I.T., Central-II, Kol. Vs. M/s. M.K. Shah Exports Ltd.] wherein judgement in CIT vs. Reliance Petroproducts Pvt. Ltd.[supra] has been relied on. Mr. Bhowmick, learned advocate appearing for respondent, relying on judgment in CIT vs. Bijay Iron Stores : 252 ITR 408 [Cal.] submits that as assessee had shown receipts attributable as revenue receipt and as there was no proper explanation, Tribunal was justified in passing order under challenge. It is evident that in computation of income sum of Rs.52,90,499/- has been shown as deduction being Receipts attributable to foreign exchange fluctuation in forward contract in respect of foreign currency loan liability against capital equipment excluded being in nature. As noted, assessee had mentioned figure, claimed as deduction, with said explanation. Since figure is undisputed, it was upto income tax 5 authorities to accept or not to accept explanation. Tribunal did not accept explanation in support of claim. question is whether non-acceptance of claim can be said to be concealment. In case where claim is made it is for authorities to decide. It may or may not accept claim. In instant case, as sum claimed as deduction is undisputed, it cannot be said that assessee had furnished inaccurate particulars of income. Since there is no finding that factual details furnished by assessee in its return were inaccurate or erroneous or false and as assessee had claimed deduction of expenditure treating it be capital in nature, it is appropriate to refer to law laid down by Supreme Court in CIT vs. Reliance Petroproducts [supra], wherein it has been held as under: ...Such not being case, there would be no question of inviting penalty under section 271(1)(c) of Act. mere making of claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding income of assessee. Such claim made in return cannot amount to inaccurate particulars. We do not agree, as assessee had furnished all details of its expenditure as well as income in its return, which details, in themselves, were not found to be inaccurate nor could be viewed as concealment of income on its part. It was up to authorities to accept its claim in return or not. Merely because assessee had claimed expenditure, which claim was not accepted or was not acceptable to Revenue, that by itself would not, in our opinion, attract penalty under section 271(1)(c). If we accept contention of Revenue then in case of every return where claim made is not accepted by Assessing Officer for any reason, assessee will invite penalty under section 271(1)(c). That is clearly not intendment of Legislature. Since respondent does not dispute figure furnished by assessee in its return, in view of law laid down by Supreme Court in CIT vs. Reliance Petroproducts [supra], followed by High Court in CIT Central II, Kolkata v. M/s. M.K. Shah Exports Ltd., contention of respondent cannot be accepted. So far as judgment relied on by 6 respondent is concerned, in our view, it is not applicable to case in hand as therein son, being one of partners, had admitted that he had authored some of papers which were found at time of search. Therefore, for reasons aforesaid, order of Tribunal cannot be sustained and is thus set aside and quashed. Accordingly, we hold that income tax authorities erred in imposing penalty and Tribunal was not justified in upholding imposition of penalty. appeal is allowed. No order as to costs. (SOUMITRA PAL, J.) I agree. (MIR DARA SHEKO, J.) sm Paharpur Cooling Towers Ltd. v. Commissioner of Income-tax, Kolkata-IV
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