TMI Blog2014 (12) TMI 517X X X X Extracts X X X X X X X X Extracts X X X X ..... y submitting complete facts - the explanation of the assessee was bonafide and under that facts and circumstances, section of 271(1)(c) is not applicable – thus, the AO was not justified in levying penalty u/s 271(1)(c) – relying upon CIT vs. Reliance Petro Product Pvt. Ltd. [2010 (3) TMI 80 - SUPREME COURT] - merely because the assessee claimed deduction of interest expenditure which has not been accepted by the Revenue, penalty u/s 271(1)(c) is not attracted - penalty is discretionary in nature, should not be imposed in each and every case – Decided in favour of assesse. - ITA No. 42/Agra/2014 Asstt. Year : 2004-05 - - - Dated:- 29-4-2014 - SHRI BHAVNESH SAINI AND SHRI PRAMOD KUMAR, JJ. For Appellant by :- Shri Rajendra Sharma, Advocate For Respondent by :- Smt. Anuradha, Jr. D.R. ORDER Per Bhavnesh Saini, J.M.: This appeal by the assessee is directed against the order of ld. CIT(A), Gwalior dated 19.12.2013 for the assessment year 2004-05, challenging the levy of penalty u/s. 271(1)(c) of the IT Act. 2. Briefly, the facts of the case are that the AO levied penalty of ₹ 17,000/- in respect of excess depreciation of ₹ 47,720/- claimed by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome. The expression used in clause (c) of section 271(1) is has concealed the particular of income or furnished inaccurate particulars of such income . The expression has concealed the particulars of income and has furnished inaccurate particular of such income have not been defined either in section 271(1)(c) of the Act or elsewhere in the Act. Under the circumstances, such cases are required to be decided considering the facts of the respective cases. 10. In the case under consideration, the CIT(A) heavily relied upon the judgement of Apex Court in the case of Dharmendra Textile Processors Others. However, subsequent to this judgment, the Hon ble Apex Court in the case of Reliance Petro Products Pvt. Ltd., 322 ITR 158 (SC) has considered the judgment in the case of Dharmendra Textiles. The fallout of the decision in UOI vs. Dharamendra Textile Processors (2008) 306 ITR 277 (SC) questioning the correctness of the decision in Dilip N. Shroff v. Joint CIT (2007) 291 ITR 519 (SC) has caused great uncertainty as to the penalty law for direct taxes. The decision in Dharamendra Textile Processors case (supra) has been explained by the Supreme Court itself in Union of India ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad been partly utilised for earning exempt income required disallowance of the proportionate part under section 14A. The claim of the assessee was that, being an investment company, the claim of interest need not be proportionately apportioned to exempt income from dividend, cannot justify penalty even if the disallowance itself was justified. This concurrent view of the Commissioner (Appeals), Tribunal and the High Court was upheld by the Supreme Court. 11. In view of the development of law at the stage of the Supreme Court in Reliance Petroproducts case (supra), one need not take the trouble of distinguishing Dilip N. Shroff s case, since it has not been overruled except for its mention of mens rea therein. Notwithstanding the ripple created by Dharamendra Textile Processors case (supra), the High Courts have followed the long-established law, that a bona fide omission cannot justify penalty in a number of decisions. Where an addition to an income was adjusted against the value of closing stock and explanation therefore was also found to be bona fide, penalty was found to have been rightly deleted in CIT vs. Hindustan Computers Ltd. (2010) 322 ITR 88 (All). 12. Cancellati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ommissioner (Appeals) who had directed that the penalty imposed under section 271(1)(c) of the Income-tax Act be cancelled and held that an addition would not automatically lead to levy of penalty unless concealment was established. : CIT v. SPENCER Co. : S.L.P. (C) No.10283 of 2009. 13. The A.O. has also invoked explanation 1 to section 271(1)(c) of the Act. Explanation 1 to section 271(1)(c) of the Act have two parts, Part-A of the Explanation to section 271(1)(c) provides that if the assessee fails to offer an explanation or offers an explanation which is found by the A.O. to be false, penalty under section 271(1)(c) will apply. This explanation can, therefore, be applied only where the assessee has either not offered any Explanation or where he has offered any Explanation, the same found to be false by A.O. In other words, where the assessee offers some explanation, it is only the proving by the A.O. that the explanation was false explanation, that part- A of the Explanation may be attracted. Mere non-existence of explanation offered by the assessee cannot form a basis for the satisfaction of the A.O. to the effect that the assessee has concealed particulars of his income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acts and circumstances, section of 271(1)(c) is not applicable. We are, therefore, of the considered view that under the facts and circumstances of the case, and in the light of the above discussion, the A.O. is not justified in levying penalty of ₹ 2,78,660/- under section 271(1)(c) of the Act. Therefore, the same is cancelled. As one of the grounds has been decided in favour of the assessee, as discussed above, therefore, other ground whether the return filed by the assessee was a voluntary return or not, we are not expressing any opinion on that ground/ issue. 16. In the result, appeal of the assessee is allowed. 4. The ld. counsel for the assessee also relied upon the decision of Hon ble Supreme Court in the case of CIT vs. Reliance Petro Product Pvt. Ltd., 322 ITR 158, in which it was held as under :- Merely because the assessee claimed deduction of interest expenditure which has not been accepted by the Revenue, penalty under s. 271(1)(c) is not attracted; mere making of the claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee. 5. Considering the facts of the case in t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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