TMI Blog2014 (11) TMI 853X X X X Extracts X X X X X X X X Extracts X X X X ..... ts Pvt. Ltd., [2010 (3) TMI 80 - SUPREME COURT] there was no error in the orders passed by the Tribunal maintaining deletion of the penalty as was imposed by the AO - the act of the assessee was bonafide even though the assessee may have failed to substantiate its claim that the amount was capital receipt – Decided against revenue. - Tax Appeal No. 16/2011, Tax Appeal No. 16 of 2011 - - - Dated:- 24-11-2014 - A. V. Nirgude And A. I. S. Cheema,JJ. For the Appellant : Shri Alok Sharma, Assistant Solicitor General For the Respondent : Shri S. V. Adwant, Advocate JUDGMENT (Per A.I.S. Cheema, J.) : 1. (a) Vide order dated 27.3.2007, the Assistant Commissioner of Income Tax, Circle I, Aurangabad, imposed penalty of ₹ 61,55,775/- for furnishing inaccurate particulars under Section 271(1)(c) of the Income Tax Act, 1961 (hereinafter referred to as the Act for short) for assessment year 2003-04 against respondent Rucha Engineers Pvt. Ltd. (b) The respondent filed appeal to Commissioner of Income Tax (Appeals), Aurangabad vide Appeal No.ABD/CIT(A)- I/37/2007/08 and vide orders dated 17.3.2008, the penalty imposed was cancelled for reasons recorded. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hirumalaiswamy Naidu (supra). A.O. held that, there was blatant disregard or contempt to the provisions of law taking advantage of faith reposed by Government and the impugned order dated 27.3.2007 (Exhibit B) was passed. This order of A.O. was cancelled by C.I.T. (A) vide order dated 17.3.2008 mentioned above, holding that the conduct of assessee did not show intention was there to hide the facts or furnish inaccurate particulars and that there was no scope to levy penalty. Reliance was placed on the case of Deelip N. Shroff Vs. CIT [291 ITR 519 (SC) ]. The order dated 17.3.2008 is at Exhibit C. The appeal of the revenue was rejected by the appellate Tribunal vide order dated 28.7.2010 (Exhibit D), interalia holding that, even if the assessee s contention was not found correct on subsequent judicial scrutiny, it did not make the explanation unacceptable and the claim of the assessee that it was capital receipt, was not baseless. 3. In present appeal, it has been argued on behalf of the revenue, and grounds have been raised that the assessee had made wrong claim of deduction considering extinguished liability of sales tax deferral loan as a capital receipt. On the amount, assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es tax deferral scheme to the Sales Tax Deferral Loan. The amount of Sales Tax Deferral loan for the financial year 2000-2001 and 2001-2002 was worked out at ₹ 1,63,22,000/-. As per the package scheme of incentive, the repayment of sales tax deferral loan was to begin from the year 2010 and was to be repaid in five equal installments up to 2015. It is further submitted that, the Government of Maharashtra was in financial constraints and, pursuant to the amendment in Section 38(4) of the Bombay Sales Tax Act, it promulgated a scheme vide its Circular No.39T of 2000, dated 12.12.2000, giving option to the assessee to pay the net present value (premature payment) of the Sales Tax Deferral liability for 10 years and treat it as fully paid. 6. It is further submitted that, out of the sales tax deferral loan of ₹ 1,63,22,000/- (NPV as per the calculations prescribed in Rule 31-D of the Bombay Sales Tax Rules, 1959) payable by the assessee worked out to ₹ 51,22,000/- which was paid by the assessee as full and final payment of sales tax deferral loan under the scheme of the State, dated 12.12.2000, whereby the difference amount of ₹ 1,11,67,000/- has been taken a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enue is unsustainable in law, as is concluded by the Hon ble Supreme Court in the matter of Commissioner of Income tax, Ahmedabad Vs. Reliance Petro Products Pvt. Ltd., reported in [ (2010) 11 SCC Page 762. Therefore, the respondent prayed to dismiss the appeal. 7. In view of the above conflicting claims made by both sides, the appeal was admitted on 8.10.2014 on the following substantial questions of law : (i) Whether the Income Tax Appellate Tribunal erred in deleting the penalty amounting to ₹ 61,55,775/- imposed by the Assessing Officer u/s 271(1)(c) of the Income Tax Act, 1961 ? (ii) Whether on the facts and in the circumstances of the case, the Tribunal was justified in holding that the contention of the assessee is bonafide even though the assessee failed to substantiate its claim ? (iii) Whether the assessee's action disclosing certain particulars in the form of notes to statement of income and making wrong claim on the basis of such notes, amounts to furnishing of inaccurate particulars of income ? 8. The appeal has been finally heard with consent of both sides. We have carefully gone through the matter. Portions relevant of section 271 of the Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act of furnishing inaccurate particulars was deliberate or otherwise, is immaterial. What is material is that, it will have to be seen if the particulars of the income were inaccurate . If it cannot be shown, the revenue would not have a case. It is for such reasons, we are not impressed by the submissions made by the learned counsel for the appellant that the assessee took a chance with law knowing that only few returns are taken up for scrutiny and so, the assessee was taking a chance to get away with the wrong explanation. The A.O., in impugned order dated 27.3.2007 (Exhibit B), was given explanation by assessee regarding particulars of income shown in the returns. The A.O. reproduced the same as follows : (i) In the audited accounts the amount has been credited to Capital Reserve and in para 2.6 in notes to accounts, detailed note has been given as why and how amount is credited to Capital Reserve. (ii) In the statement of total income Company has added Waiver of Sales Tax Deferral Loan from Government of Maharashtra , and under the same caption the same has been deducted from computation as capital receipt not taxable. While for the deduction Company has given ref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Thirumaliaswamy. In the case of the respondent, sales tax liability was converted into a loan and issue under consideration was whether the relationship between Government and respondent was of borrower and depositor. The issue was whether repayment of loan at discounted value constituted a taxable event or not. It was found in the first appeal that it could not be said that the issue was not debatable at all. It was found that, in the earlier proceedings, the A.O. and the C.I.T. (Appeal) had come to the conclusion that the amount was revenue receipt after great deliberation and after analyzing various provisions. In such situation, it has been found that the respondent s claim that it was under bonafide belief regarding taxability of the amount, could not be brushed aside. It has been observed in the first appeal (Exhibit C) as under : It is also an admitted position that appellant has furnished detailed note in respect of aforesaid claim with the computation of income. Apart from note furnished along with computation income, the appellant has also attached enclosure in this regard at following places in the enclosures of return of income; a) In a note to accounts with a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n is a capital receipt. The assessee s claim was based on certain judicial pronouncements and some legal analysis, which was subsequently, not found correct. However, merely the fact that assessee s contention was not found correct on subsequent judicial scrutiny did not make it unacceptable explanation. The assessee s claim cannot therefore be said to be without any basis. In view of this, the claim of the assessee that amount is a capital receipt may or may not be acceptable in the course of assessment or further judicial scrutiny but rejection of such claim by itself does not make a claim liable to be visited with penalty under Section 271(1)(c) of the Act. 12. The appellate Tribunal found that, without prejudice to the above, the assessee still had furnished detailed notes in respect of the claim with the computation of the income. It has been also found that, the assessee was under bonaifde belief that the waiver of the sales tax was not liable to tax in view of the same being capital receipt in nature. It found that, the assessee had not concealed any particulars of the income and the conduct of the assessee was not deliberate, in defiance of relevant provisions of law. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rst appeal as well as the orders of the tribunal that the amount claimed by the assessee was debatable and when the assessee had given all the necessary particulars, it could not be construed as concealing the income or furnishing inaccurate particulars for evasion of tax. The issue whether prepayment of loan at a discounted value constitutes taxable event or not, is debatable and we agree with the judgment in the first appeal and the judgment of the Tribunal that the facts of the case of Thirumaliaswamy , there was scope to distinguish. A legal contention raised bonafide by the respondent- assessee claiming the amounts to be capital receipt, only because the same was not accepted, by itself cannot be said to be act of fraud or gross or willful negligence. Record shows that, the respondent- assessee was relying on decisions of various Courts to support its claim. Merely because the claim was rejected, the same cannot be branded as concealment. Before proceeding to the explanation below Section 271 and putting the responsibility on the assessee, it is necessary for the A.O. to first demonstrate that the explanation of the assessee or the conduct of the assessee was not reasonable o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have to only see as to whether in this case, as a matter of fact, the assessee has given inaccurate particulars. In Webster's Dictionary, the word inaccurate has been defined as : not accurate, not exact or correct: not according to truth; erroneous, as an inaccurate statement, copy of transcript. We have already seen the meaning of the word particulars in the earlier part of this judgment. Reading the words in conjunction, they must mean the details supplied in the return, which are not accurate, not exact or correct, not according to truth or erroneous. 20. . . . . 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). If we accept the contention of the Revenue then in case of every return where the claim made is not accepted by the assessing officer for any reason, the assessee will invite penalty under Section 271(1)(c). That is clearly not the intendment of the legislature. 16. For reasons mentioned above, we do not find any error in the orders passed by the appellate Tribunal maintaining deletion of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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