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TMI Blog2010 (3) TMI 80X X X X Extracts X X X X X X X X Extracts X X X X ..... ate Tribunal (herein after referred to "the Tribunal") which confirmed the order of the Commissioner (Appeals) and dismissed the appeal filed by the Revenue. However, the Revenue challenged the said order before the High Court which confirmed the orders passed by the Commissioner (Appeals) and the Tribunal while dismissing the tax appeal filed by the Revenue. 3. A few facts would be relevant. 4. The assessee is a company and the relevant assessment year is 2001-02. The return was filed on January 31, 2001, declaring loss of Rs.26,54,554. This assessment was finalized under section 143(3) of the Act on November 25, 2003, whereby the total income was determined at Rs.2,22,688. In this assessment the addition in respect of interest expenditure was made. Simultaneously penalty proceedings under section 271(1)(c) of the Act were also initiated on account of concealment of income/furnishing of inaccurate particulars of income. The said expenditure was claimed by the assessee on the basis of expenditure made for paying the interest on the loans incurred by it by which amount the assessee purchased some IPL shares by way of its business policies. However, admittedly, the assessee did not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the High Court against the order of the Tribunal for the year 2000-01. According to the learned Additional Solicitor-General, even otherwise, the expenditure on interest could not have been claimed in law, as under section 36(1)(iii), only the amount of interest paid in respect of capital borrowed for the purposes of the business or profession could have been claimed and it was clear that the interest in the present case was not in respect of the capital borrowed. Our attention was also invited to section 14A of the Act, which provides that no deduction could be allowed in respect of the expenditure incurred by the assessee in relation to income which does not form part of the total income under this Act. The learned Additional Solicitor-General also invited our attention to the provision of section 10(33) to show that the income arising from the transfer of a capital asset could not be reckoned as an income which can form part of the total income. In short, the contention was that the assessee in this case had made a claim which was totally unacceptable in law and thereby had invited the provisions of section 271(1)(c) of the Act and had, therefore, exposed itself to the penalty u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion, making an incorrect claim in law cannot tantamount to furnishing inaccurate particulars. In CIT v. Atul Mohan Bindal [2009] 9 SCC 539 [2009] 317 ITR 1 (SC), where this court was considering the same provision, the court observed that the Assessing Officer has to be satisfied that a person has concealed the particulars of his income or furnished inaccurate particulars of such income. This court referred to another decision of this court in Union of India v. Dharamendra Textile Processors [2008] 13 SCC 369 [2008] 306 ITR (SC) as also, the decision in Union of India v. Rajasthan Spg. & Wvg. Mills [2009] 13 SCC 448 [2010] 1 GSTR 66 (SC) and reiterated in paragraph 13 that (page 13 of 317 ITR): "13. It goes without saying that for applicability of section 271 (1)(c), conditions stated therein must exist." 9. Therefore, it is obvious that it must be shown that the conditions under section 271(1)(c) must exist before the penalty is imposed. There can be no dispute that everything would depend upon the return filed because that is the only document, where the assessee can furnish the particulars of his income. When such particulars are found to be inaccurate, the liability would ari ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n in Dilip N. Shroff v. Joint CIT was overruled by this court in Union of India v. Dharamendra Textile Processors [2008] 306 ITR 277(SC), was that according to this court the effect and difference between section 271(1)(c) and section 276C of the Act was lost sight of in the case of Dilip N. Shroff v. Joint CIT [2007] 291 ITR 519 (SC). However, it must be pointed out that in Union of India v. Dharamendra Textile Processors [2008] 306 ITR (SC), no fault was found with the reasoning in the decision in Dilip N. Shroff v. Joint CIT [2007] 291 ITR 519 (SC) where the court explained the meaning of the terms "conceal" and "inaccurate", it was only the ultimate inference in Dilip N. Shroff v. Joint CIT [2007] 291 ITR 519 (SC) to the effect that mens rea was an essential ingredient for the penalty under section 271(1)(c) that the decision in Dilip N. Shroff v. Joint CIT [2007] 291 ITR 519 (SC)was overruled. 10. We are not concerned in the present case with the mens rea. However, we 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 c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 13. In this behalf the observations of this court made in Sree Krishna Electricals v. State of Tamil Nadu [2009] 23 VST 249 as regards the penalty are apposite. In the aforementioned decision which pertained to the penalty proceedings under the Tamil Nadu General Sales Tax Act, the court had found that the authorities below had found that there were some incorrect statements made in the return. However, the said transactions were reflected in the accounts of the assessee. This court, therefore, observed (page 251): "So far as the question of penalty is concerned the items which were not included in the turnover were found incorporated in the appellant's account books. Where certain items which are not included in the turnover are disclosed in the dealer's own account books and the assessing authorities includes these items in the dealer's turnover disallowing the exemption, penalty cannot be imposed. The penalty levied s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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