TMI Blog2012 (5) TMI 365X X X X Extracts X X X X X X X X Extracts X X X X ..... if a claim is patently wrong, as in the case before us, then merely because such claim has been made through books of accounts cannot be said that assessee has disclosed full and true particulars of income - Decided against the assessee - ITA No. 2642/Mum/2010 - - - Dated:- 24-11-2011 - D. Manmohan, T.R. Sood, JJ. Farookh Irani for the Appellant C.G.K. Nair for the Respondent ORDER T.R. Sood: In this appeal various grounds have been raised by the assessee but the only dispute is regarding confirmation of penalty u/s.271(1)(c). 2. After hearing both the parties we find that during the assessment proceedings AO noticed that assessee had debited a sum of Rs.99,46,023/- in the profit and loss account under the head "Sundry Balances Written Off" which included debits of the following parties: (i) Rajpurohit India Ltd. Rs. 22,66,337/- (ii) Rajpurohit Accessories Rs. 27,00,000/- (iii) GMP India Ltd. Rs. 2,33,415/- (iv) Rajpurohit GMP India Ltd. Rs. 18,84,069/- Total Rs. 70,83,821/- It was further noticed that all these four concerns were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ounts represented amounts advanced to sister concerns which had become irrecoverable as the sister concerns had suffered heavy losses and were not in a position to repay the amounts and assessee has no option but to write off the same. It was also stated that there was no law to prevent a parent company to advance sums to its sister concern and once these concerns were not in a position to repay them the write off of the amounts as irrecoverable was justified. Merely disallowance of claim does not warrant levy of penalty. The AO after examining these submissions did not find force in them and observed that these facts emerged only because the return was selected for scrutiny. Had the return not taken up for scrutiny, these facts could not have been revealed. Thereafter, AO discussed various case laws including the decision of the Hon'ble Supreme Court in the case of UOI v. Dharmendra Textile Processors and Ors. [306 ITR 277] and accordingly minimum penalty @ 100% of the tax sought to evaded amounting to Rs.23,84,414/- was levied. 5. Before the Ld. CIT[A] similar contentions were reiterated and it was stated that assessee has not preferred an appeal just to buy peace and not to li ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f inaccurate particulars. The appellant also argued that in absence of mens rea the penalty could not have been levied. In my considered opinion, the act of claiming such a patently inadmissible claim shows the presence of appellant's mens rea also. The AO correctly held that it was only after appellant return was taken under scrutiny that AO found that it had claimed the deduction not allowable under law. Had it not come under scrutiny, the facts would have never been revealed and the appellant's attempt of claiming a false claim would have succeeded. The appellant also argued that the penalty could not have been levied on mere disallowance of claim or addition without any proper evidences. It is true that on mere disallowance penalty cannot be levied, but such disallowance should be of debatable nature on which two opinions could have been possible. However, in the case of appellant, it was neither debatable nor there could have been more opinion thereon as the same was not at all allowable under the provisions of the Act. There are various decisions of courts/tribunals supporting the view that the 'penalty u/s 271(1)(c) is leviable where the claim was patently inadmissible as in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the concept of men's rea required in penalty proceedings. In this regard he referred to the decision of Hon'ble Supreme Court in the case of CIT vs. Reliance Petro Products Pvt. Ltd. [322 ITR 158] wherein at placitum-9 it has been clarified that the above observation still holds good. 7. The Ld. Counsel for the assessee further contended that in any case assessee had made all the disclosure regarding the bad debts and the amounts given to its sister concerns, therefore, it cannot be said that assessee has failed to disclose all the particulars and, therefore, in view of the decision of the Hon'ble Supreme Court in the case of CIT vs. Reliance Petro Products Pvt. Ltd. [supra], the penalty is not leviable. In this regard he also referred and furnished a copy of the decision in the case of Sree Krishna Electricals v. State of Tamil Nadu [2009] 23 Law Suit (S.C) 635. He carried us through the judgment of Sree Krishna Electricals v. State of Tamil Nadu [supra] and pointed out that in that case issue was regarding levy of penalty under Tamil Nadu General Sales Tax Act 1959. The assessee had purchased parts required to be put together to form a wet-grinder and what has been sold by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed, this amendment was brought in statute with retrospective effect from 1-4-1989 by Finance Act, 2008 to over come various decisions of the Tribunal and some High Courts where penalty proceedings were set aside because no proper satisfaction has been recorded. Since assessee has not challenged the penalty proceedings on the basis of satisfaction, therefore, this contention has no relevance to the issue raised before us. He submitted that as far as decision of Hon'ble Delhi High Court in the case of CIT vs. Zoom Communication P. Ltd. [supra] is concerned, the same has to be treated as limited to its own facts and has to be read in the light of the decision of the Hon'ble apex court in the case of CIT vs. Reliance Petro Products Pvt. Ltd. [supra]. However, in response to a query by the Bench that for what purpose the advances were given to the sister concern, he showed his inability to give any details. 10. We have considered the rival submissions carefully in the light of the material on record as well as the decisions cited by the parties. The main thrust of the argument by the Ld. Counsel of the assessee is that penalty is required to be knocked down simply on the basis that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amount 80 fixed for the sale of property was wholly inadequate. The authorities also do not show that what are the inaccurate particulars furnished by the appellant. They also do not state that what should have been the accepted principles of valuation. We, therefore, do not accept the submissions of the learned Additional Solicitor General that concealment or furnishing of inaccurate particulars would overlap with each other, the same would not mean that they do not represent different concepts. Had they not been so, Parliament would not have used the different terminologies. "We have noticed hereinbefore that even the Wanchoo Committee laid 81 emphasis on the fact that Explanation appended to subsection (1) of section 271 should be inserted to clarify that where a tax payer's explanation in respect of any receipt, deposit, outgoing or investment is found to be false, the amount represented by such receipt, etc., shall be deemed to be income in respect of which particulars have been concealed or inaccurate particulars have been furnished. What was, therefore, necessary to be found out in respect whereof the Assessing Officer was required to arrive at a satisfaction was "falsit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ulars. The concluding para of the appellate order reads as under: "In the facts and circumstances, I am of the considered opinion that the appellant concealed the particulars of its income by furnishing inaccurate particulars of such income by claiming a patently inadmissible claim of bad debt u/s 36(1)(vii) or u/s 37(1) of the Act. The penalty levied by AU u/s 271(1)(c) is therefore confirmed." The above further confirms that penalty has been confirmed by the ld. CIT(A) on the basis that assessee has furnished inaccurate particulars of a particular item. 11. The second major submission was that assessee has disclosed all the particulars and, therefore, penalty was not leviable in view of the decision of the decision of Hon'ble Supreme Court in the case of CIT vs. Reliance Petro Products Pvt. Ltd. [supra]. The Hon'ble Hon'ble Supreme Court highlighted that whether it is a concealment or filing of inaccurate particulars, though both involve a common element of "particulars". The court also referred to the definition of "particulars" in the law lexicon which means the details of a claim, or the separate items of an account. Thus, it is clear that assessee is required to giv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... products P. Ltd. [2010] 322 ITR 158, it was contended by the learned counsel for the respondent that since the factual information in respect of the amounts wrongly included in schedule 9 to the profit and loss account was disclosed by the assessee, this was not a case where penalty could be imposed under section 271(1)(c) of the Act. In the case before the Supreme Court, the assessee had claimed interest under section 36(1)(iii) of the Act. The interest was paid on the loan which the assessee had utilized for pur-chasing some IPL shares by way of its business policies. However, the assessee did not earn any income by way of dividend from those shares. It was submitted before the Supreme Court that the assessee-company was an investment company and that in its own case for the assessment year 2000-01 the Commissioner (Appeals) had deleted the disallowance of interest made by the Assessing Officer and the Tribunal had also confirmed the stand of the Commissioner (Appeals) for that year and it was on the basis of this that the expenditure was claimed. The Income-tax Appellate Tribunal had, however, restored the issue back to the Assessing Officer. In the appeal arising out of penalty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ement or details supplied by the assessee had been found to be factually incorrect. The court rejected the contention that submitting an incorrect claim in law for the expenditure on interest would amount to giving inaccurate particulars of such income. The court was of the view that by any stretch of imagination, making an incorrect claim in law cannot tantamount to furnishing inaccurate particulars. After considering the meaning of "inaccurate" given in Webster's Dictionary, the court was of the view that inaccurate particulars would mean the details supplied in the return which are not accurate, not exact or correct, not according to truth, or erroneous. It was held that making a claim which is not sustainable in law, cannot, by itself, amount to giving inaccurate particulars. It was contended before the Supreme Court that since the assessee had claimed deduction knowing that they were incorrect, it amounted to concealment of income since the falsehood in accounts can take either of the two forms ; (i) an item of receipt may be suppressed fraudulently ; (ii) an Item of expenditure may be falsely claimed or an exaggerated amount could be claimed and since attempts of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Hon'ble Supreme Court in the case of CIT vs. Reliance Petro Products Pvt. Ltd. [supra], that the meaning of the word "particular" is a detail or details [in plural sense]; the details of a claim, or the separate items of an account. Therefore, the word "particulars" used in sec.271[1][c] would embrace the meaning of the details of the claim made. 12. Now in the case before us the assessee has written off certain amounts given as interest free advances to its sister concerns as bad debts. Nowhere in the return it is disclosed that such written off amounts were merely interest free advances to the sister concerns. The following explanations have been given which were extracted earlier also: "The following parties are group concerns to whom advances have been made and as they have suffered heavy losses, the business activities of these companies have been closed down and they have no capacity to repay the amount, hence the same have been written off' and the assessee furnished copy of their Final Accounts to establish that these companies have suffered losses and are not in a position to repay the loans. Hence, the amounts were written off as not recoverable. The amount a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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