TMI Blog2011 (1) TMI 480X X X X Extracts X X X X X X X X Extracts X X X X ..... ed on the following questions of law: 1.Whether on the facts and in the circumstances of the case, the Hon ble ITAT was right in holding that the provisions of explanation 1A to Section 271(1)(c) were not applicable as the Assessing Officer could not establish that the explanation given by the assessee during the assessment proceedings for reduction of value of stock was false? 2.Whether on the facts and in the circumstances of the case the Hon ble ITAT was right in holding that the provisions of explanation 1B to section 271(1)(c) were not applicable as the explanation given by the assessee during the assessment proceedings for reduction of value of stock was duly substantiated by the assessee even though the addition made at Rs.1,18,12,295/- on account of reduction in value of stock was duly upheld by the Hon ble ITAT holding that the explanation offered by the assessee in this respect was not correct? 2. Briefly stated the facts of the case are that the respondent Corporation is a Government owned Company. It is engaged in the business of extraction of timber and resin from forests. The assessment of the year 1987-88 was completed under Section 143(3) and 147. Duri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er this Act, is satisfied that any person (a) xxxxx (b) xxxxx (c) has concealed the particulars of his income or furnished inaccurate particulars of such income, or (d) xxxx (i) xxxx (ii) xxxx (iii) in the cases referred to in clause (c) or clause (d) in addition to tax, if any, payable by him, a sum which shall not be less than, but which shall not exceed three times, the amount of tax sought to be evaded by reason of the concealment of particulars of his income or fringe benefits or the furnishing of inaccurate particulars of such income or fringe benefits. Explanation 1. Where in respect of any facts material to the computation of the total income of any person under this Act, (A) such person fails to offer an explanation or offers an explanation which is found by the Assessing Officer or the [Commissioner (Appeals) or the Commissioner to be false, or (B) such person offers an explanation which he is not able to substantiate and fails to prove that such explanation is bona fide and that all the facts relating to the same and material to the computation of his total income have been disclosed by him, then, the amount added or disallowed in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch is presently valued at cost may not be having the same reliable value. The auditors had, therefore, recommended that the corporation studies the position in depth and prepare the status of such lots up to date. Accordingly, the corporation has conducted detailed study of such inventory and prepared the present status in consultation with the concern Divisional Managers and the field staff. On physical examination of such lots at random basis by the Divisional Managers/Field staff, it has been found that quality of certain lots has deteriorated considerably and such lots may fetch substantially low prices in the market when compared to the book values. The Divisional Managers have, therefore, recommended an overall reduction of 25% in Chamba division and 50% in Chopal Division in the value of such stock. We are, however, not in a position to determine the exact reliable value and have to rely on such estimation in the interest of proper and fair valuation of inventories in our balance sheet for the financial year 1986-87. We, therefore, recommend that the valuation of old lots lying in the forests at various stages under work in progress as on 31.3.1987 (but which still exist a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ribunal on the other hand vide a detailed judgment came to the conclusion that the assessee was unable to carry out actual inspection of the entire deteriorated stocks spread over several kilometers. The reduction was done on an estimate basis. The ITAT held that in fact if the assessee had been able to prepare the details as required by the Assessing Officer in penalty proceedings then in all probability the claim of the assessee for deduction itself would have been allowed. Because the assessee resorted to estimation in determining the value of the depreciated stocks that the claim was not accepted by the Revenue. In regard to the Resolution of the Board of Directors passed in the year 1990 the ITAT came to the conclusion that the Government Corporations move at their own pace and have to follow long procedures. It found that the decision of the Board of Directors would not personally benefit any of the Directors. It also came to the conclusion that the statutory Auditors had audited the accounts including the valuation in respect of the deteriorated stocks. It was also found that even the Comptroller and Auditor General of India had approved the accounts of the assessee in this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he reasonable cause for delay otherwise penalty could be imposed and it was not necessary to prove mens rea on the part of the assessee. 17. A Division Bench of the Rajasthan High Court in Commissioner of Income-Tax vs. Harshvardhan Chemicals and Mineral Ltd., (2003) 259 ITR 212, held as follows: The finding of the Tribunal that when the assessee has claimed some amount though that is debatable, in such cases, it cannot be said that the assessee has concealed any income or furnished inaccurate particulars for evasion of the tax. In view of the findings of the Tribunal, no case is made out for interference by this Court. 18. The question with regard to the interpretation of Section 271(1)(c) and the Explanation thereto, came up for consideration before the Apex Court in Commissioner of Income Tax, Ahmedabad vs. Gold Coin Health Food Private Ltd., (2008) 9 SCC 622, which is not relevant because the main question decided in that case was that even in a case where the assessee declared loss in income, if there is concealment of income, penalty can be imposed. 19. The Apex Court in Commissioner of Income Tax, Delhi vs. Atul Mohan Bindal, (2009) 9 SCC 589, after conside ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... parate items of an account. Therefore, the word "particulars" used in the Section 271(1)(c) would embrace the meaning of the details of the claim made . 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 arise. In Dilip N. Shroff Vs. Joint Commissioner of Income Tax, Mumbai Anr. [2007(6) SCC 329], this Court explained the terms "concealment of income" and "furnishing inaccurate particulars". The Court went on to hold therein that in order to attract the penalty under Section 271(1)(c), mens rea was necessary, as according to the Court, the word "inaccurate" signified a deliberate act or omission on behalf of the assessee. It went on to hold that Clause (iii) of Section 271(1) provided for a discretionary jurisdiction upon the Assessing Authority, inasmuch as the amount of penalty could not be less than the amount of tax sought to be evaded by reason of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... where the Court explained the meaning of the terms "conceal" and inaccurate". It was only the ultimate inference in Dilip N. Shroff Vs. Joint Commissioner of Income Tax, Mumbai Anr. (cited supra) 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 Vs. Joint Commissioner of Income Tax, Mumbai Anr. (cited supra) was overruled. 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 correct; not according to truth; erroneous; as an inaccurate statement, copy or 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. We must hasten to add here that in this case, there is no finding that any details supplied by the assessee in its Retu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... word inaccurate as used in the Act would mean something which is not accurate, not exact or not correct. Something which is untrue is inaccurate. The same facts can be given two interpretations. If the interpretation given is plausible though not accepted by the Assessing authority it cannot be said that the statement of particulars is so inaccurate or erroneous as to invite imposition of penalty. True it is, that mens rea is not required to be proved. When mens rea is proved it shows that the person had an intention of evading payment of tax by illegal means. Merely because a wrong interpretation to the same set of facts is given would not, in our opinion, mean that the assessee is liable to pay penalty also. We must remember that penalty is by its very nature penal and somebody is being punished for an act which is unjustified. The assessee in the present case has already been burdened with tax and interest on the amount added to his income. The moot question is whether the assessee should be made liable to pay penalty. 22. The Apex Court in Reliance Petro Products case (supra) has clearly laid down that merely because the assessee makes a claim which is not sustainable in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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