TMI Blog2011 (8) TMI 21X X X X Extracts X X X X X X X X Extracts X X X X ..... monstrate that the assessee had not concealed the particulars of his income nor it is a case where the assessee deliberately furnished inaccurate particulars of such income. This would also demonstrate that two views were possible and the claim of the assessee was bona fide - There would be no question of inviting the penalty under Section 271(1)(c) of the Act. - Decided in favour of assessee. - ITA No.1266/2009 - - - Dated:- 3-8-2011 - MR. JUSTICE A.K. SIKRI, MR. JUSTICE SURESH KAIT, JJ. Appellant Through: Mr. Sanjeev Sabharwal, Sr. Standing Counsel with Mr. Utpal Saha, Advocates Respondent Through: Mr.M.S.Syali, Sr. Advocate with Mr. Mahua Kalra, Mr.Mayank Nagi and Mr. Sumit K. Singh, Advocate SURESH KAIT, J. 1. The Assessee is a private limited company engaged in the business of providing service in connection with obtaining orders from Government Departments and has carried on the same business during the year under consideration as in the past besides acting as a liaison and service agent of M/s Daewoo Motors (India) Limited. The assessee filed its return of income declaring loss of Rs.5,38,2000/- for the assessment year 1998-99 in question, on 30.11.199 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of the penalty amount and issue fresh demand notice and challan. 6. This order of CIT (A) was challenged by the assessee and vide order dated 31.05.1998, ITAT has allowed the appeal against the order in penalty proceeding under Section 271 (1)(c) and set aside the order of CIT (Appeals). The Revenue/Department has preferred to challenge the order dated 31.03.2008 of ITAT resulting in the instant appeal. 7. The substantial question of law arises before us as we have admitted vide order dated 02.11.2010 as under:- Whether the ITAT erred in deleting the penalty under Section 271 (1)(c) on tax sought to be evaded by assessee declaring its income as refundable security deposits under liability? 8. For convenience Section 271(1)(c) of the Tax is re-produced as under:- 271 Failure to furnish returns, comply with notice, concealment of income, etc., (1) If the Income-tax Officer or the Appellate Assistant Commissioner, in the course of any proceedings under this Act, is satisfied that any person- (c)has concealed the particulars of his income or deliberately furnished inaccurate particulars of such income, He may direct that such person shall pay by way of penalty,-- (iii) in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der any circumstances and was not conditional upon any future rendering of services. It was, therefore, an income flowing from a commercial transaction assessable on receipt. 12. It was argued that keeping the MOU into the view, the assessee was engaged to act as the representative of DMIL and a sum of Rs.3 crores was received by the assessee on 02.03.1998 as per clause 10 above which was its income. However, in the return filed by the assessee for the considering year, the assessee did not show the amount as its income. The amount was shown in the balance sheet as on 31.03.1998 under the trade deposits‟ in the liabilities side. Therefore, it was a clear case of concealment of income and penalty was rightly imposed. 13. As against the above, Mr. Syali, learned Senior Advocate appearing for the respondent, reiterated his arguments which were advanced before the Tribunal and accepted by the Tribunal thereby deleting the penalty imposed by the CIT(A). Mr. Syali also submitted that in the facts and circumstances of this case, the Tribunal rightly held that there was no concealment of any particulars of income by the assessee; the assessee had disclosed all the particulars of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from exhibitors which was to be adjusted against receipts by way of ticket sales. This is not the case where. For the same reason the decision in Commissioner of Income-Tax v. T.V. Sundram Iyengar and Sons Ltd., [1996] 222 ITR 344 is not of any advantage to the Appellant. The question there was at what stage would a deposit of a capital nature become an income in the hands of the assessee. On our reading of the Agreement between the Appellant and DMIL, the amount of Rs.3 crores had already been accrued to them as income in the year in which it was received by the appellant. No substantial question of law arises. 15. So far so good. However, in the penalty proceedings it is open to the assessee to still demonstrate that no case for imposition of penalty is made out as there was no concealment on its part and that the claim made was bona fide. Legal position is abundantly clear by a series of judgments that quantum proceedings are independent proceedings and only when the ingredients of Section 271(1)(c) are satisfied, penalty can be imposed. When we look into the matter from this angle, we find that these ingredients have not been satisfied in this case. 16. In the first instanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... servations of the ITAT occurring in paras 19 to 22. However, still in view of the position explained by us in the foregoing paras, we are inclined to accept the conclusion of the Tribunal that the claim of the assessee about the amount in question being security deposit was bona fide as it was based on the possible interpretation of relevant clauses of the MOU. This is more so when the amount of Rs.3 crores in question paid to the assessee was not treated as income even by M/s. DMIL and this position was found to be correct by the Assessing Officer on inquiry made on M/s. DMIL. It may be that the claim of the assessee was not found to be acceptable in quantum proceedings on merits. However, as it was not a case of concealment, the provisions of Section 271(1)(c) attracting levy of penalty would not be applicable more so when all material facts relevant to the said claim were duly furnished by the assessee before the Assessing Officer. 19. We may usefully refer to the judgment of the Apex Court in Commissioner of Income Tax v. Reliance Petroproducts Pvt. Ltd., [2010] 322 ITR 158 (SC). After taking note of various earlier pronouncements on the subject and reiterating that for imp ..... X X X X Extracts X X X X X X X X Extracts X X X X
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