Commissioner of Income Tax vs Airlines Financial Support Services (I) Ltd.

F.I. Rebello, J.—Revenue is in appeal on the following questions:

(a) Whether on the facts and in the circumstances of the case the Hon''ble Tribunal was right in deleting the penalty of Rs. 23,05,554 by holding that non-acceptance of the explanation of the assessee company by the assessing officer would not necessarily amount to the concealment of income on the part of the assessee company even though Expln. 1 to Section 271(1)(c) of the Income Tax Act places the entire burden of proof on the assessee to show that there was no concealment ?

(b) Whether on the facts and in the circumstances of the case the Hon''ble Tribunal was right in holding that since the assessed income is a loss no penalty can be levied even though the amendment of Sub-clause (a) of Expln. 4 to Section 271 of the Income Tax Act by Finance Act, 2002 is applicable to all assessment years and not only with effect from 1st April, 2003 as held by the Hon''ble Apex Court in the case of Gold Coin Health Food (P) Ltd., in Civil Appeal No. 5065 of 2008 ?

Insofar as question (a) is concerned, on behalf of the revenue, the learned Counsel submits that this will be a case of furnishing inaccurate particulars and consequently the Tribunal was not right in confirming the order of the Commissioner (Appeals) which set aside the penalty imposed on the assessee.

On the other hand on behalf of the assessee, the learned Counsel submits that that is not a case where the assessee furnished inaccurate particulars, but in fact it is submitted that the assessee had disclosed the same and claimed it as capital expenditure relying on the judgment of this Court in Nila Products Limited Vs. Commissioner of Income Tax, Bombay City-III, .

We have heard the learned Counsel. In the instant case, we find that the assessing officer in his order itself has observed as under:

I have gone through the case laws relied upon by the assessee and noticed that there is no direct judgment on the issue and the facts and the case are entirely different.

The assessing officer was pleased to distinguish the judgment in Nila Products Ltd. (supra). The appellant had taken on lease the premises for a period of five years. For the purpose of better enjoyment of the premises repair works had been carried out which the assessee had claimed as revenue expenditure. The stand of the assessing officer was that the renovation and improvement are very much in the nature of capital expenditure. This is how the matter proceeded before the assessing officer. The Commissioner (Appeals) on the facts confirmed the order of the assessing officer. The assessee did not take the case further. On this basis, the proceedings for penalty were initiated and penalty came to be imposed on the assessee.

The submission made on behalf of the assessee amongst others is that considering the various clauses in the lease agreement the work carried out in the building would ultimately belong to the owner/landlord and/or company. In the case of Nila Products Ltd. (supra), the learned Bench of this Court was considering the issue of expenditure incurred by the tenant who had also taken the premises on lease for a particular period at the end of which period, the assessee there had to remove the improvements. It was in that context that the learned Bench held that the construction were made exclusively for the purposes of proper utilization of the premises and cannot be said to bring into being any asset or benefit of an enduring nature. Another learned Bench of this Court in Commissioner of Income Tax Vs. Hede Consultancy Pvt. Ltd. and Another, was considering the case where the godown has been taken on lease by the assessee who spent moneys for converting the godown premises into the office by renovating it and incurring expenses. The learned Bench after considering various tests as to whether the particular expenditure is capital or revenue expenditure held that the expenditure incurred, considering the facts should be looked upon as revenue expenditure.

In the instant case, the appellant had not concealed the particulars of income. The appellant herein had disclosed the same. The bone of contention only was whether the assessee was right in claiming it as revenue expenditure. The assessing officer held that it was capital expenditure. In this context, in our opinion, the judgment of the Supreme Court in Sri T. Ashok Pai Vs. Commissioner of Income Tax, Bangalore, would have a great bearing. The Supreme Court in the context of expression "inaccurate" has been pleased to observe as under:

The word inaccurate in the context of levying penalty u/s 271(1)(c) signifies a deliberate omission on the part of the assessee. Such deliberate act must be either for the purpose of concealment of income or furnishing of inaccurate particulars."

Considering the facts in the present case, we find that the assessee had furnished the particulars. He had bona fide relied on the judgment of this Court which had taken a view that similar expenses has to be treated as revenue expenditure. In other words, there was no attempt to conceal or to furnish inaccurate particulars. In our opinion, therefore, considering the facts it cannot be said that the predicates of Section 271(1)(c) were satisfied for imposing the penalty. There was no deliberate omission on the part of the assessee either for the purpose of concealment of income or furnishing of inaccurate particulars. An assessee who bona fide relies on a judgment of a High Court within whose jurisdiction it carries on business cannot be said to be deliberately concealing. On the contrary he was following the law declared. The findings recorded by the Commissioner (Appeals) and as confirmed by the Tribunal cannot be said to suffer from any error of law or raise any substantial question of law. In the light of that, there is no merit in question (a) as framed.

Insofar as question (b) is concerned, the appeal to that extent will have to be allowed considering the judgment of the Supreme Court in Commnr. of Income Tax-I, Ahmedabad Vs. Gold Coin Health Food Pvt. Ltd., . In view of that question (b) is answered in favour of the revenue and against the assessee. The order of the Tribunal stands modified accordingly.