TMI Blog2011 (6) TMI 332X X X X Extracts X X X X X X X X Extracts X X X X ..... Sunilchandra Vohra's case (2009 (6) TMI 682 - ITAT MUMBAI), it was held that bona fide ignorance of the law regarding applicability of provisions of the Act and the CA having not drawn the attention of the assessee to the relevant provisions of law, is a valid ground for not imposing penalty for concealment. Also see Reliance Petroproducts (P.) Ltd. case [2010 (3) TMI 80 - SUPREME COURT] - Decided in favour of assessee. - 2295 AND 2296 (AHD.) OF 2009 - - - Dated:- 30-6-2011 - D.K. TYAGI, A.N. PAHUJA, JJ. M.R. Chaudhry for the Appellant. D.K. Parikh for the Respondent. ORDER A.N. Pahuja, Accountant Member. These two appeals by the Revenue against two separate orders dated 13-1-2009 of the ld. CIT (Appeals)-IV, Ahmedabad, for the assessment year 2005-06, raise the following common grounds:- "(1) On the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in deleting the penalty levied under section 271(1)(c) of Rs. 5,63,200 on disclosure of interest income of Rs. 19,63,940 by Shri Ajay Kumarlal Tehalyani and Rs. 5,78,000 on disclosure of interest income of Rs. 20,13,264 by Smt. Radhaben K Tehalyani, in the return filed in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the original return filed under section 139(1) of the Act. The assessee disclosed additional interest income of Rs. 20,13,264 earned on FCNR FDRs in the said return. The assessment was completed under section 153A(b) of the Act on 20-9-2007 on the returned income of Rs. 20,21,850. inter alia, penalty proceedings under section 271(1)(c) of the Act were initiated on account of concealment of income of Rs. 20,13,264. 3. Subsequently, in response to a show cause notice dated 20-9-2007 and 3-3-2008, the assessee Shri Ajay Kumarlal Tehalyani replied as under:- "2. Before coming to the issue of concealment of income as inferred by your honour, the assessee considers it appropriate to place certain facts on the record. The assessee's family including assessee shifted to U.A.E. under a permanent residential permit since Government of the U.A.E. and the assessee also continuously stayed in U.A.E. in all the financial years as per the suitability convenience of the business affairs/family affairs of the assessee. The assessee group operated one limited liability company at U.A.E. and due to certain family problems, it was compulsion for the assessee group to start a firm in India, whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... subsequent to assessment year 2003-04. Besides, in India, there are two Acts which determines the residential status, etc. i.e. FEMA and Income-tax Act. All such complexities of laws, amendments, etc. were therefore beyond the level of understanding either by the assessee or her Advocates especially in a small town like Nadiad. Therefore, your honour will appreciate that, the non-incorporation of the interest income in the original return of income filed under section 139 of the Act was a bona fide belief under ignorance of law and especially the subsequent amendment being brought in law. All the deposits were in Banking channels and all the accounts were duly being reflected and shown. Subsequent to the search proceedings, the assessee look opinion and guidance from the senior lawyers of Ahmedabad Mumbai and as soon as it was found that, the FCNR interest income was left to be incorporated in the returns of income pertaining to assessment year 2004-05 onwards, the assessee voluntarily offered the same into the return filed under section 153A of the Act. All the taxes with interest have also duly been paid and the detailed clarification was submitted during the course of the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... liged, either acted deliberately in defiance of law or was guilty of conduct, contumacious or dishonest or acted in conscience disregard of its obligations. Penalty will not also be imposed merely because it is lawful to do so. Whether penalty should be imposed for failure to perform a statutory obligation is a matter of discretion of the authority to be exercised judicially on a consideration of all the relevant circumstances. Even if a minimum penalty is prescribed, the authority competent to impose the penalty when there is a technical or venial breach of the provisions of the Act or where the breach of the provisions of the Act or where the breach flows from the belief that, the offender is not liable to act in the manner prescribed by the statute [Hindustan Steel Ltd. v. State of Orissa 83 ITR 23 (SC)] 5. If your honour will apply the above referred legal doctrines on the facts of the case of the assessee as discussed (supra), it is crystal clear that there was ignorance about amendment in the law, which in itself is a complex position for a layman to understand and even for the Advocates in a town like; Nadiad, and therefore, there is no conscious effort on the part of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... response to the notice issued under section 153A. Further, the sources of making investment in the relevant FCNR account were explained which were not doubted by the Assessing Officer. The disclosed asset was held by the appellant, there cannot be any intention not to disclose the interest accrued on Foreign Currency Non-Resident (FCNR) FDRs. However, it was not declared in the Return filed under section 139(1) under the bona fide belief that the same continued to be exempt from tax under section 10(15)(iv)(fa) of Income-tax Act, 1961. The Hon'ble Supreme Court in case of CIT v. Sureshchandra Mittal (251 ITR 009) has held that in this case, revised return showing higher income after search was filed to purchase peace and avoid litigation. The Tribunal held that burden of proving concealment is not discharged and penalty cannot be levied. The Apex Court upheld above findings of ITAT. However, the Hon'ble Supreme Court in Union of India v. Dharmendra Textiles Processors [2008] has held that the penalty under section 271(1)(c) is Civil Liability and the wilful concealment is not an essential ingredient for attracting civil liability as is the case in the matter of prosecution under se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ngs of the learned CIT(A) in these two appeals. The learned DR supported the order of Assessing Officer, levying penalty while the ld. AR on behalf of the assessee supported the findings of the learned CIT(A) and further contended that these assessees in their respective original returns for the assessment year 2005-06 filed under section 139(1) of the Act had bona fidely shown status as Resident But Not Ordinarily Resident (RBNOR) and consequently, the income from deposits under FCNR was bona fidely believed to be exempt in terms of provisions of section 10(15)(iv)(fa) of the Act, providing for exemption of interest on FCNR deposits in the hands of a non-resident or a person who is Not Ordinarily Resident within the meaning of section 6(6) of the Act. However, from the assessment year 2004-05, there was an amendment in section 6(6) and these assessees ceased to be Resident But Not Ordinarily Resident and became R O R. Since the bona fide explanation of the assessee that the change in the provisions of section 6(6) escaped attention of the assessee and the return preparers who filed original returns and that it was honestly believed at the time of original return based on bank br ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 271(1)(c) of the Act. It is not the case of the Revenue that these assessees were not under the bona fide belief or the explanation offered by the assessee was found to be false or untrue. We are of the view that making a wrong claim is not at par with concealment or giving of inaccurate information, which may call for levy of penalty under section 271(1)(c) of the Act. Hon'ble Apex Court in Reliance Petroproducts (P.) Ltd. (supra), after considering various decisions including Dilip N. Shroff's case (supra) and Union of India v. Dharamendra Textile Processors [2008] 306 ITR 277/174 Taxman 571 (SC) concluded that a mere making of a claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars of regarding the income of the assessee. Such a claim made in the return cannot amount to furnishing inaccurate particulars. Similar view was taken in CIT v. Sidhartha Enterprises [2010] 322 ITR 80/[2009] 184 Taxman 460 (Punj. Har.) and CIT v. Shahabad Co-op. Sugar Mills Ltd. [2010] 322 ITR 73 (Punj. Har.). Hon'ble Supreme Court in the case of Motilal Padampat Sugar Mills Co. Ltd. v. State of Uttar Pradesh [1979] 118 ITR 326 held that ther ..... X X X X Extracts X X X X X X X X Extracts X X X X
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