TMI Blog2013 (12) TMI 196X X X X Extracts X X X X X X X X Extracts X X X X ..... n law would not amount to giving inaccurate particulars of the income of the assessee, but it cannot be disputed that the claim made by the assessee needs to be bonafide - The assessee's claim for deduction at the earliest point of time for the assessment year 1998-99, cannot be stated to be lacking in bonafides or with the malafide intention with intent to conceal in particulars of income for the purpose of avoiding payment of Tax - Decided against Revenue. - Tax Case (Appeal) No. 403 of 2009 - - - Dated:- 5-11-2013 - Chitra Venkataraman And T. S. Sivagnanam,JJ. For the Petitioner : Mr. T. Ravikumar For the Respondent : Dr. Anita Sumanth ORDER (The Order of the Court was made by T. S. Sivagnanam, J.) This appeal by the Revenue is directed against the order passed by the Income Tax Appellate Tribunal (Tribunal) in I.T.A.No.2802/Mds/2005, for the assessment year 1998-99. The appeal has been admitted on the following substantial question of law:- Whether on the facts and circumstances of the case, the Tribunal was right in holding that no penalty under Section 271(1)(c) was leviable on the assessee who had claimed a deduction of the liquidated damages provide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... party had made no such claim. Further, it is contended that the Tribunal ought to have seen that the assessee chose to show the amount only in the year 2001-02, while claiming it as a deduction in the assessment year 1998-99, thereby choosing to offer to tax the amount in a year convenient to it and it was a clear case where penalty under Section 271(1)(c) is leviable. Learned counsel referred to the findings recorded by the first Appellate Authority and submitted that under the contract entered into between the assessee and M/s.Hyundai Motor India Ltd., (HMIL) the liquidated damages could be claimed only after 01.05.1998, whereas the assessee had calculated the alleged liquidated damages as on 31.03.1998 itself well before the liability accrue, which is sufficient to hold that the assessee is liable to penalty under Section 271(1)(c). Further, learned counsel submitted that the assessee has concealed its income and therefore, the order of the first Appellate Authority confirming the penalty, was perfectly justified. In this regard, reference was made to clause 10 of the Contract for Procurement, Supply and Erection entered into between the assessee and HMIL stating that HMIL shal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Appellate Authority while considering the quantum appeal in his order dated 27.05.2003. Further, it is submitted that the assessee never stated that HMIL had made a written claim for liquidated damages, however in view of the penal clause, clause 10.1 in the contract, the assessee bonafidely believed that it would be liable to liquidated damages and therefore, provided for the liability in its books of accounts, after computing the liability on delays upto 31.03.1998. Further, it is submitted that the delay in supply occurred due to the delay committed by the assessee in placement of orders, delay in approval of materials etc., and the sub-suppliers or sub-contractor were in no way responsible for the delay. It is further submitted that though HMIL could enforce the claim for liquidated damages under the contract only after 01.05.1998 as per clause 10.1, the liability to the assessee accrued as soon as the delay had occurred, though it is only after 01.05.1998, that the liability would be payable. It is further submitted that after it became clear that the provision for liquidated damages would not be payable, the assessee voluntarily had written back the provision in the books of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r day on the portion of the price of the equipment in question. However, the aggregate of the said penalties shall not exceed ten (10) percent of the contract price. Thus, in terms of clause 10.1, the owner namely, HMIL shall have the right to claim penalty, if the assessee fails to meet the delivery dates set forth in the contract. 7. It is an admitted case that there was delay in supply of material i.e., the delivery schedue as mentioned in clause 4.0 was not adhered to, since the materials were not supplied before 30th, July, 1997. It is further not in dispute that there was no delay insofar as installation as it was done within the date of final acceptance (i.e.,) 01.10.1998. The assessee's specific case is that the delay in supply occasioned due to the delay committed by them being delay in placement of orders, delay in approval material etc., and the sub-suppliers were no way responsible, liable or cause for the delay. Therefore, the assessee would state that there is no malafide intention of concealing the income and considering the terms of the contract that they would be liable for liquidated damages in terms of clause 10.1 of the contract, though such claim could be mad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Explanation 1 to Section 271(1)(c) of the Act, we may refer to the decision of the Hon'ble Supreme Court in the case of Union of India and Ors vs. Dharmendra Textiles Processors Ors., reported in [2008] 306 ITR 277 (SC), wherein the Hon'ble Supreme Court held that the explanations appended to Section 271(1)(c) of the Income Tax Act, indicate the element of strict liability on the assessee for concealment or for giving inaccurate particulars, while filing the return and the object of the said provision indicates that the Section has been enacted to provide for a remedy for loss of revenue. The penalty under the provision is a civil liability. Wilful concealment is not an essential ingredient for attracting civil liability as is the case in the matter of prosecution under Section 276C of the Act. The said decision in the case of Union of India and Ors vs. Dharmendra Textiles Processors Ors., (supra) was taken note of in a subsequent decision of the Hon'ble Supreme Court in the case of Commissioner of Income Tax vs. Reliance Petroproducts Pvt., Ltd., reported in [2010] 322 ITR 158 (SC), and the Hon'ble Supreme Court after referring to the decision in the case of Union of In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ove referred decisions are that penalty being a civil liability, the requirement of mens rea is not an essential element, but the claim of the assessee should be bonafide and mere submission of inaccurate particulars by itself cannot be held against the assessee under the provisions of Section 271(1)(c). In the background of the above case laws, the findings of the Tribunal as regards the bonafide as against the assessee has to be considered. The Tribunal held that the assessee had not concealed any particulars either in its accounts or in other particulars and the contract was made available before the Assessing Officer. The Tribunal noticed that the contract provided a clause by which HMIL could claim liquidated damages from the assessee for delay caused in executing the work and HMIL did not invoke the provision and the assessee was not put to any liability. But, the contract provided for such liability, which is otherwise enforceable in law. The Tribunal observed that the assessee took precaution and provided for the penalty, claimed the same as deduction at the earliest point of time being the assessment year 1998-99. Therefore, the Tribunal held that the precaution taken by t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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