TMI Blog2010 (3) TMI 80X X X X Extracts X X X X X X X X Extracts X X X X ..... India (Arijit Prasad, Varun Sarin and B. V. Balaram Das, Advocates, with him) for the appellant. Santosh Agarwal, R. Chandrachud and K. B. Sasiprabbu, Advocates, for the respondent. JUDGMENT 1. V. S. SIRPURKAR J. Leave granted. 2. The only question in this appeal which has been filed by the Commissioner of Income-tax-III is as to whether the respondent-assessee is liable to pay the penalty amounting to Rs.11,37,949 under section 271(1)(c) of the Income-tax Act, 1961 (hereinafter referred to as "the Act") ordered by the assessing authority. The Commissioner of Income-tax (Appeals), however, deleted the said penalty. The order of the Commissioner (Appeals) was appealed against before the Income-tax Appellate 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 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompany. 6. Shri Bhattacharya, learned Additional Solicitor-General submits that the Commissioner (Appeals), the Tribunal as well as the High Court have ignored the positive language of section 271(1)(c) of the Act. He pointed out that the claim of the interest expenditure was totally without legal basis and was made with the mala fide intentions. It was further pointed out that the claim made for the interest expenditure was not accepted by the assessing authority nor by the Commissioner (Appeals) and, therefore, it was obvious that the claim for the interest expenditure did not have any basis. He further pointed out that the contention about the earlier claims being finalized was also not coned as the appeal was pending before 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... position in the present case that no information given in the return was found to be incorrect or inaccurate. It is not as if any statement made or any detail supplied was found to be factually incorrect. Hence, at least, prima facie, the assessee cannot be held guilty of furnishing inaccurate particulars. The learned counsel argued that "submitting an incorrect claim in law for the expenditure on interest would amount to giving inaccurate particulars of such income". We do not think that such can be the interpretation of the concerned words. The words are plain and simple. In order to expose the assessee to the penalty unless the case is strictly covered by the provision, the penalty provision cannot be invoked. By any stretch of imagination, 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 Un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7 (SC), after quoting from section 271 extensively and also considering section 271(1)(c), the court came to the conclusion that since section 271(1)(c) indicated the element of strict liability on the assessee for the concealment or for giving inaccurate particulars while filing return, there was no necessity of mens rea. The court went on to hold that the objective behind the enactment of section 271(1)(c) read with Explanations indicated with the said section was for providing remedy for loss of revenue and such a penalty was a civil liability and, therefore, wilful concealment is not an essential ingredient for attracting civil liability as was the case in the matter of prosecution under section 276C of the Act. The basic reason why decision 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) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... falsely (or in an exaggerated amount) claimed, and both types attempt to reduce the taxable income and, therefore, both types amount to concealment of particulars of one's income as well as furnishing of inaccurate particulars of income. 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. It was up to the authorities to accept its claim in the return or not. 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. 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 afore ..... X X X X Extracts X X X X X X X X Extracts X X X X
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