Delhi high court in HCIL case on 271(1)(c) penalty detailed principles (rev fav order) i) onus on assessee to prove bonafide by tangible material ii) facrcical/dubious/fanciful claims attract penalty iii)Income tax law being most vexed legislation bonafide interpretation later rejected not ground for 271(1)(c) iv) absurd and illogical interpretations invite penalty Bombai high court in Reliance case on Leave Encasement AS-15 ICAI not sole justification for claim also no actuarial valuation required (some basis required); Limitation etc cannot be defeated to save Revenue leakages Held

* **IN THE HIGH COURT OF DELHI AT NEW DELHI **+ ITA 480/2012 *

* **CIT ..... Appellant Through Mr. Rohit Madan, Advocate. versus HCIL
KALINDEE ARSSPL *

* **Date of Decision: 29**th **July, 2013*

* *

*Penalty under Section 271(1)(c) of the Act is imposed when an assessee has
concealed his income or furnished inaccurate particulars. In terms of the
explanation quoted above, we have to examine whether the case falls within
sub-clause (A) or (B) and the effect thereof. Sub-clause (A) applies when
the assessee fails to furnish any explanation or when an explanation is
found to be false. In the present case, sub-clause (A) would not be
applicable as assessee has furnished an explanation, and the explanation
has not been found to be "factually" false. The assessee had made a wrong
claim for deduction under Section 80IA and, therefore, had furnished
inaccurate particulars as the claim was not admissible. Sub-clause (B) of
the explanation is, therefore, applicable and we have to examine the two
conditions whether: (1) The assessee has been able to show that the
explanation was bonafide; and (2) Facts and material relating to
computation of his income had been disclosed Onus of establishing that the
assessee satisfied the two conditions is on him i.e. the assessee*

*Merely because the assessee complies with the statutory procedural
requirement of filing the prescribed form and certificate of the Chartered
Accountant, cannot absolve the assessee of its liability if the act or
attempt in claiming the deduction was not bonafide.*

*To show and establish bonafides, the assessees had to show some more
"tangible material" or basis as to why a clear statutory provision which
excludes works contracts was ignored. 12. We are not stating or holding
that penalty for con can be imposed and is justified merely because
interpretation or claim of the assessee is rejected. For interpretation and
understanding tax laws assessees necessarily and do rely on professional or
expert opinion and they cannot be subjected to penalty when the assessee
discharges the onus that the claim was bonafide [see Devsons Logistics Pvt.
Ltd. vs. CIT (2010)329 ITR 483 (Del.) and decision of this court dated 28**th
**May, 2013 in ITA 804/2011 titled Shervani Hospitalities Ltd. vs. CIT].
The Act i.e. the Income Tax Act, 1961 is one of most vexed and complicated
legislation. It has been subjected to numerous amendments from time to
time. It requires highest degree of interpretative skills and divergent
views on interpretation of tax provisions have been subject matter of
plethora of judgments. It is not necessary that there should be uniformity
or consistency of opinion on aspects of law. Law does not postulate that an
assessee must accept an interpretation against him, even when a favourable
view is credible and tenable. Penalty of concealment cannot be imposed
because the assessee has taken a particular stand or had preferred an
interpretation which was plausible and reasonable, but has not been
accepted, unless the assessee had not disclosed facts before the
authorities. Such cases have to be distinguished from cases where the claim
of the assessee is farcical or farfetched. Dubious and fanciful claims
under the garb of interpretation, are a mere pretence and not bonafide. 13.
It is not the case of the respondent assessee that there were conflicting
decisions of High Court or there was a recent decision of the Supreme Court
which had escaped attention or was not understood or an appeal or review
etc. was pending before the Supreme Court. Absurd or illogical
interpretations cannot be pleaded and become pretence and excuses to escape
penalty. "Bonafides" have to be shown and cannot be assumed. In the present
case, the respondents have not been able to discharge the said onus and
establish that they had acted bonafidely. Order of the Tribunal deleting
penalty is held to be contrary to law. Penalty imposed is upheld.*

* *

*IN THE HIGH COURT OF JUDICATURE AT BOMBAY*

*ORDINARY ORIGINAL CIVIL JURISDICTION*

INCOME TAX APPEAL NO.4160 OF 2009 M/s.Reliance Industries Ltd *30 JULY 2013*

* *

*Having heard learned counsel for the parties and having gone through the
decision of the Supreme Court in Bharat Earth Movers v/s. CIT, 245 ITR
428(SC), we find some substance in the submission of Mr.Mistri, learned
senior counsel for the assessee that in Bharat Earth Movers's case the
Supreme Court held that provision made by an assessee for meeting the
liability incurred by it under the Leave Encashment Scheme is subject to
ceiling on accumulation as applicable on the relevant date. Therefore, the
assessee is entitled to make a provision in its Accounts. The liability is
not a contingent liability.*



We find considerable substance in the submission made by learned counsel
for the assessee that the reference made by the Supreme Court in the said
decision to the judgment in Metal Box Co. of India Ltd. v/s. Their workmen
(1969) 73 ITR 53 (SC), does not mean that the Supreme Court directed that
principles of actuarial valuation which are applicable for

estimating liability to calculate gratuity were applicable to estimate
liability to pay leave encashment also. In fact the Supreme Court in the
case of Metal Box (supra) was dealing with gratuity schemes on the basis of
actuarial valuation. Gratuity is payable upon resignation, death or
retirement of an employee and therefore there is an element of uncertainty
in making estimate for gratuity to be paid, as the liability is spread over
a number of years. Principles for estimating gratuity, therefore, may not
apply

to principles for estimating leave encashment. Even while holding

that the Tribunal was, therefore, right in disturbing the order of the CIT
(Appeals), as quoted herein above, we also find some substance in the
submission made by the learned counsel for the appellantrevenue

that the assessee was required to give some basis for quantification of the
provision for leave encashment at Rs.3,38,98,000/.

Merely because the assessee contends that such provision is in line with
Accounting Standard15 would not be sufficient and the allocation of this
amount should be explained to the Assessing Officer.

8. Learned counsel for the respondentassessee fairly submits that the
assessee has no objection to explaining the basis for quantification of the
provision for leave encashment for the assessment year 199697

before the Assessing Officer. 9. In view of the above, as far as question
(C) is concerned, we remit the matter back to the Assessing Officer, who
will take on record the basis for quantification of leave encashment, which
the assessee will submit before the Assessing Officer within six weeks from
today.



*IN THE HIGH COURT OF JUDICATURE AT BOMBAY*

*ORDINARY ORIGINAL CIVIL JURISDICTION*

INCOME TAX APPEAL NO.2426 OF 2011 The Commissioner of Income vs.

M/s.Lark Chemicals *Pronounced on 6 Aug. 2013*

* *

*The submission of Mr. Chandrapal, learned Counsel for the Revenue is that
in case of bogus bills and non genuine purchases i. e. where the State is
being defrauded the limitation as provided under Section 263 of the Act be
ignored, cannot be accepted. This is for the reason that neither the*

*Tribunal or we in our appellate jurisdiction can ignore the mandate of
limitation provided under the Act. This is an issue which would*

*fall within the domain of the Parliament so as to make suitable*

*amendment to the law after considering the various competing*

*interests. So far as the submission of Mr. Chandrapal learned*

*Counsel for the revenue with regard to the decision of the Supreme*

*Court in Alagendran Finance Ltd. (supra) and of this Court Ashoka*

*Buildcon Ltd. (supra) being inapplicable merely on the ground that*

*they do not deal with the issues of bogus bills or non genuine*

*purchases is in fact no distinction. The principle laid down in the*

*aforesaid decisions is that a notice under Section 263 of the Act*

*cannot be issued beyond the period of two years from the date*

*when the order sought to be revised is passed. The case law relied*

*upon in the impugned order are clearly applicable to the present*

*facts.***

* *

* **Section*

*263(2) of the Act provides that no order would be made in exercise*

*of jurisdiction under Section 263(1) of the Act after the expiry of*

*two years from the end of the financial year in which the order*

*sought to be revised was passed. It is an admitted position that the*

*Commissioner of Income Tax has not exercised revisional*

*jurisdiction in respect of order/intimation passed Section 143(1) of*

*the Act within two years of it being passed. Therefore, exercise of*

*jurisdiction on those issues under Section 263 of the Act is time*

*barred as held by this Court in CIT vs. Anderson Marine & Sons (P)*

*Ltd. 266 ITR 694. Moreover, in view of the decision of the Apex*

*Court in the matter of Alagendran Finance Ltd. as well as our Court*

*in the matter of Ashoka Buildcon Ltd.(supra) jurisdiction under*

*Section 263 of the Act cannot be exercised on issues which were not*

*subject matter of consideration while passing the order of*

*reassessment under Section 143(3) /147 of the Act but a part of an*

*assessment done earlier under the Act.*