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TMI Blog2014 (7) TMI 556X X X X Extracts X X X X X X X X Extracts X X X X ..... roducts Ltd. [2010]322 ITR 158 (SC), wherein the Apex Court has defined the meaning of term "Particulars". 6. Assessee craves for leave to add, omit or alter grounds of appeal on or before final hearing. " Though there are six grounds of appeal, but the effective ground of appeal deals with imposition of penalty for concealment u/s. 271(1)(c)of the Act. 2. Assessee-company, engaged in the business of letting out of immovable property filed its return of income on 26. 08. 2009 declaring income of Rs. 82, 17, 407/-. The assessment was completed u/s. 143(3) of the Act by the AO (AO)on 25. 10. 2011 determining the income of the assessee at 2, 02, 43, 923/-. During the Assessment proceedings he found that the assessee had sold immovable property;being Unit No:II admeasuring 1422 sq. ft and one stilt car park No. 75;in Raheja Centre Premise Co-operative Society Limited, Mumbai, the resultant long term capital gain(LTCG) arising out of the said sale was quantified at Rs. 1, 21, 82, 871 against which it claimed exemption u/s. 54 of the entire LTCG having invested 2, 63, 17, 760/-in acquiring new residential properties. He held that the assessee, being a company, was not entitled to clai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pecifically mentioned that everything depended upon return of income, that in the case under consideration the assessee had suppressed the taxable income in the return of income, that the decisions relied upon by the assessee i. e. Atul Mohan Bindal (317ITR1) and Reliance petro Products Pvt. ltd. (322 ITR158)were not applicable to the facts of the case. He relied upon the cases of Balakrishna Textiles (193 ITR 361), Nagin Chand Shiv Sahai(6 ITR 534), Vidya Sagar Oswal (108 ITR 861), Hoshairpur Express Transport Co. Ltd. (162ITR393), Electrical Agencies Corporation(253ITR 619), Dharmendra Textile Processors & Others(306 ITR 277), M V. Valliappan (170ITR 238), K. R. Hoganathan (174 ITR 658), Smt. Nayantara G. Agrawal (207 ITR 639). 4. Before us, Authorised Representative (AR) stated that the assessee had disclosed full facts, that there was statement of accounts before the AO, that the assessee had no intention evade any tax. He relied upon the judgment of the Hon'ble Supreme Court delivered in the case of Reliance Petro Products Private Limited (322ITR158). Departmental Representative (DR) argued that the assessee was not entitled to claim any deduction u/s. 54/54 F of the Act, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... doers is one of the precondition of smooth implementation of the provisions of law. Invoking penal provision and imposing exemplary penalty has become necessary as most of the returns filed by the assessee are being accepted by the department without scrutiny. A duty has been cast upon the citizens to make only and only legitimate claims. Courts are very liberal when any debatable or legitimate claim is made, but are very harsh when a claim is made that is not admissible at all. Penalty imposed by the AO. s in such cases have been invariably upheld. In the case of Sharma Alloys (India) Ltd. (357ITR379)Hon'ble Madras High Court found that machinery was not at all put to use during the year by the assessee and depreciation was claimed by it for that machinery, that the assessee had made claim for deduction towards fine and penalty section u/s. 37 of the Act. Deciding the matter against the assessee Hon'ble Court held that the claim for depreciation was a bogus claim, that claim made by the assessee on account of fine and penalty was not legally sustainable in terms of section 37, that levy of penalty for concealment of income was justified Now, we would like to mention the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Income-tax Officer under section 271(1)(c) of the Act. The findings given in assessment proceedings are relevant and have probative value. Where the assessee produces no fresh evidence or presents any additional or fresh circumstance in penalty proceedings, he would be deemed to have failed to discharge the onus placed on him and the levy of penalty could be justified. " It is said that the Explanations appended to section 271(1)(c) of the Act entirely indicate the element of strict liability on the assessee for concealment or for giving inaccurate particulars while filing return. Courts have held that the object behind enactment of section 271(1)(c) read with the Explanations indicate that the section has been enacted to provide for a remedy for loss of revenue, that the penalty under that provision is a civil liability, that 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. Here, it would be relevant to discuss the matter of Escorts Finance Ltd. , decided by the Hon'ble Delhi High Court(328ITR44). In that matter, during the assessment proceedings, the AO noticed that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ely because information in this behalf was made available in the tax audit report, would not absolve the assessee of the penalty proceedings when such a claim was ex facie bogus. She submitted that hardly 5 per cent. returns are taken up for scrutiny under section 143(2) of the Act and assessment is made under sub-section (3) of section 143 of the Act. Therefore, with the hope that his/her return may not come under scrutiny and may be assessed on the basis of "self-assessment", an assessee can venture to give wrong information. Therefore, merely because information was available in the tax audit report would not absolve the assessee. What was to be seen was that whether the claim made was bogus. We are inclined to agree with the aforesaid submission of learned counsel for the Revenue. Even if there is no concealment of income or furnishing of inaccurate particulars, but on the basis thereof the claim which is made is ex facie bogus, it may still attract penalty provision. (emphasis by us). . . . . . . . . . . we find that it is not a case where two opinions about the applicability of section 35D were possible. Therefore, it cannot be a case of a bona fide error on the part of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... computation of income. The FAA upheld the penalty imposed upon the assessee. The Tribunal accepted the contention of the assessee and deleted the penalty holding that all the relevant materials relating to that issue were duly disclosed by the assessee in the course of the assessment proceedings. (emphasis by us). On appeal to the High Court, Hon'ble Court held as under "As regards the amount claimed on account of unusable and discarded assets, the Tribunal, was entirely incorrect in taking the view that the deduction claimed by the assessee was admissible to it under section 32(1)(iii). . . . . Admittedly, the assessee-company was not engaged in generation and for distribution of power, during the relevant year. Thus, the provisions, of clause (i) of sub-section (1) of section 32 would not apply in respect of the assets claimed to have become unusable and written off. Therefore, the assessee had no justification to claim this amount of Rs. 13, 24, 539 as a revenue expenditure. It was also not the case of the assessee that it was under a bona fide belief that these two amounts could be claimed as revenue expenditure. The assessee was a company which must be having professiona ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ake claims of this nature, actuated by a mala fide intention to evade tax otherwise payable by them would get away without paying the tax legally payable by them, if their cases are not picked up for scrutiny. This would take away the deterrent effect, which these penalty provisions in the Act have. " In the matter of Kuttookaran Machine Tools(313ITR413)it was found by the AO that the assessee had made bogus claims of investment allowance and depreciation in respect of machinery which was not purchased, installed or commissioned during the previous year. Penalty imposed by the AO for concealing the particulars of income was confirmed by both the appellate authorities. Before the Hon'ble Kerala High court it was pleaded the making a wrong claim was mistake on part of the auditor. Rejecting the appeal Hon'ble court held that though the returns were prepared by the auditor for the assessee, it was for the assessee to ensure that wrong claims were not made that imposition of penalty was valid. Matter of Sree Valliappa Textiles, (294 ITR 322), decided by the Hon'ble Karnataka High Court, also throws light on the issue being discussed by us. In that matter the assessee, a p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t be said that the assessee had concealed the particulars of his income or furnished inaccurate particulars of such income. When the matter travelled to the Hon'ble High Court, if framed the following question: "Whether, in the facts and circumstances of the case, solely on the ground that the assessee has disclosed receipts in Part III of the return filed by him, a conclusion can be reached that the assessee is not guilty of concealing particulars of his income or for furnishing inaccurate particulars ?" Deciding the appeal in favour of the Revenue, the Hon'ble Court held as under: "To us, it appears obvious that such a wide proposition as has been propounded by the Tribunal cannot be accepted as a matter of law. The word "concealment" inherently carries with it the element of mens rea. Therefore, the mere fact that some figure or some particulars have been dis- closed by itself, even if takes out the case from the purview of non-disclosure, it cannot by itself take out the case from the purview of furnishing inaccurate particulars. In any case, disclosure which has been made in any part of the return which is incorrect or false to the knowledge of the assessee and if t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment and in the third case, benefit of doubt will go in favour of the assessee. But in either case, inquiry must proceed from the stage the alleged disclosure has taken place and not stop at that stage and close the inquiry at the threshold on the abstract principle that mere rejection of explanation does not result into levy of penalty. The Tribunal has obviously erred in stopping at that stage and not considering the material before it on the basis of which the authority levying penalty has come to a positive finding as noticed by us. The Tribunal appears to have ignored that even where there is some disclosure penalty may still be imposed if disclosures in the return are inaccurate. In our opinion, the principle appears to be plain from the reading of the statute itself. Still, if any authority is needed, reference may be made to decisions of various High Courts : (1) Kantilal Manilal v. CIT [1981] 130 ITR 411 (Guj) ; (2) CIT v. Suleman Abdul Sattar [1983] 139 ITR 8 (Guj) ; (3) CIT v. Namlabhai Bhanabhai [1987] 163 ITR 189 (Guj) ; (4) CIT v. Vilasben Hasmukhlal Shah (Smt. ) [1991] 192 ITR 214 (Guj) ; and (5) CIT v. Abdulgafur Ahmed Wagmar [1993] 199 ITR 827 (Guj). Except the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . So, it can safely be said that whenever any material fact is not filed for correct computation of income or if filed is inaccurate, then penalty has to be imposed. Perusal of the provisions of Explanation 1 to the section provide that such penalty can be imposed only if the person fails to offer an explanation or offers an explanation which is found by them to be false or offers an explanation which assessee is not able to substantiate and fails to prove such explanation is bona fide and all the facts relating to the same and material to computation of total income have been disclosed by him. We are also of the opinion that bona fide belief of an assessee in making a claim has limited role for deciding the issue of penalty to be imposed u/s. 271(1)(c). Fact of the case decide whether such a belief could be treated as bona fide or not. In other words, it can safely be held that if an assessee, disregarding all the relevant facts and circumstances, interprets a section that suits its interest then such interpretation cannot be held bona fide belief. In the garb of the bona fide claim an assessee cannot escape levy of penalty. Now, we would like to discuss the facts of the case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nalty order in its entirety shows that the AO had been influenced by the consideration that the assessee had not only interpreted the law wrongly, but also did not furnish the details of STCG correctly. It was open to the assessee to show that claim made by it was sustainable in the quantum and as well as in penalty proceedings. However, no material was brought on record by it in the course of the penalty proceedings or in the course of the hearing before us to show that the stand taken by it was as per the provisions of section 54 of the Act. Therefore, AO was justified in holding that the particulars furnished by the assessee were not false and inaccurate. The assessee had not been able to disprove the fact, throughout the penalty proceedings, that the conclusions drawn by the AO and FAA were unsustainable. During the assessment and penalty proceedings assessee had not produced any positive evidence that particulars filed by it in the return were true. AO made investigation about the claim made by the assessee. He found that the claim was made in total disregard of the provisions of the Act. He issued a show cause notice and asked the assessee to prove the genuineness of the cla ..... X X X X Extracts X X X X X X X X Extracts X X X X
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