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2016 (8) TMI 740 - KERALA HIGH COURT

2016 (8) TMI 740 - KERALA HIGH COURT - TMI - Penalty levied on them under Section 271(1)(c)- Held that:- Assessing Officer has proceeded to levy the penalty on the basis that in the absence of an explanation submitted by the assessee he was satisfied that, these are cases fit for penalty under Section 271(1)(C). There is no finding that there are any concealment of any particulars of income or that the assessee has furnished inaccurate particulars of income to attract Section 271 (1)(c). That th .....

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as held by the Apex Court in Commissioner of Income Tax v Reliance Petro Products Pvt. Ltd. [2010 (3) TMI 80 - SUPREME COURT ] - . We may here reiterate that merely because of the assessee has made certain claims, which were not accepted or was not acceptable to the Revenue, that itself would not attract the penalty under Section 271(1)(c). If that is the interpretation accepted that in every return where the claim made is not accepted for some reason, the assessee will be inviting penalty .....

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espondent assessee, challenging the orders passed by the Commissioner of Income Tax (Appeals) confirming the penalty levied on them under Section 271(1)(c) of the Income Tax Act for the assessment years 1993-1994 to 1995-1996, was allowed. 2. We heard the Senior Counsel for the Revenue and the learned counsel appearing for the assessee. 3. On facts, briefly we may state that insofar as the assessment year 1993-1994 is concerned, the return of income was filed by the assessee declaring a total in .....

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ood enhanced to ₹ 21,32,000/-. 4. Insofar as the assessment year 1994-1995 is concerned, the assessee filed its return declaring the total income of 21,39,850/-. The case was taken up for scrutiny and in the assessment made under Section 143(3), the total income was fixed at ₹ 68,32,870/-. In the appeal filed before the CIT (Appeals), deduction of ₹ 50,000/- out of the additions made was allowed. In the further appeal filed before the Tribunal, addition of ₹ 15,44,350/- w .....

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,910/-. 6. It is based on the above orders that penalty proceedings under Section 271(1)(c) of the Act were initiated for the assessment years 1993-1994, 1994-1995 and 1995-1996. The penalty order passed for the assessment year 1993-1994 show that, according to the officer, in response to the notices that were issued though a representative of the assessee had appeared, he had not adduced any evidence either in writing or orally. On that factual basis, he reached the conclusion that this was a f .....

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d, the First Appellate Authority has, in paragraph 2 of its order, stated that he has verified the income tax records maintained by the Department and that in the records he saw a letter filed by the assessee on 22.4.1996 in response to the notice under Section 271(1)(c) issued by the Assessing Officer on 28.3.1996. Similarly, in the common order passed by the First Appellate Authority in the appeals arising out of the penalty levied for the assessment years 1994-1995 and 1995-1996 also, in para .....

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assessee on merits and confirmed the order passed by the primary authority. 8. It was aggrieved by the orders passed in appeals, the assessee had carried the matters in further appeals before the Tribunal in I.T.A.Nos.424 to 426/2005. By the impugned common order, the Tribunal held that in the facts and circumstances of the case, there was no justification to levy penalty in these cases. The reasoning of the Tribunal is reflected in paragraphs 7 and 8 of its order, which reads thus: 7. We heard .....

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additions made by the assessing authority by way of disallowances of expenditure will automatically attract the provisions of section 271(1)(c) of the Act so as to hold that the assessee is liable for concealment of income or furnishing of in accurate particulars of income. 8. In these cases, the Profit and Loss Accounts have been prepared by the assessee on the basis of the regular books of accounts maintained by it. The returns of income have been prepared and filed on the basis of those books .....

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evidences in a tax proceeding is also a matter of judgment. Any difference of opinion in such matters does not automatically make out a case that the opinion of the assessee was just blasphemous and the view of the Assessing Officer is so sacred that every addition or disallowance made by the Assessing Officer points towards concealment of income or furnishing of inaccurate particulars by the assessee. Penalty is a penal proceeding and can be resorted to only if the guilt is established against .....

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hat he has maintained books of accounts and deficiencies have been pointed out only in respect of certain expenses claimed by way of expenditure. Penalty cannot be levied on such flexible grounds. 9. It is aggrieved by the order that is passed by the Tribunal, these appeals are filed, and the main question of law raised is whether in the facts and circumstances of the case, the Tribunal was justified in setting aside the penalty levied under Section 271 (1)(c). According to us, this question of .....

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. . . . . . . (c) has concealed the particulars of his income or furnished inaccurate particulars of such income (d) . . . . . . . . . . . . . . . he may direct that such person shall pay by way of penalty, - . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .....

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acts relating to the same and material to the computation of his total income have been disclosed by him, then, the amount added or disallowed in computing the total income of such person as a result thereof shall, for the purposes of clause (c) of this subsection, be deemed to represent the income in respect of which particulars have been concealed. 10. Reading of the above provision shows that if any one of the officers mentioned therein are satisfied that any person has concealed the particul .....

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r offers an explanation and the officer concerned has found it to be false, or (B) such person offers an explanation which he is unable to substantiate and fails to prove that such explanation is bonafide and that all the facts relating to the same and material to the computation of his total income have been disclosed by him. Once these provisions of Clauses (A) or (B) are satisfied, then, the amount added or disallowed in computing the total income of such person as a result thereof shall, for .....

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s failed to prove that such explanation offered by him is bona fide and the third part is that the assessee has failed to prove that all the facts relating to the same and material to the computation of his total income have been disclosed by him. 12. Turning now to the precedents that are relevant, we find that Section 271(1)(c) was considered by the Apex Court in its judgment in Commissioner of Income Tax v. Reliance Petroproducts Pvt. Ltd. [2010] 322 ITR 158(SC). In that judgment, after extra .....

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us: We have already seen the meaning of the word particulars in the earlier part of this judgment. Reading the words in conjunction, they must mean the details supplied in the return, which are not accurate, not exact or correct, not according to truth or erroneous. We must hasten to add here that in this case, there is no finding that any details supplied by the assessee in its return were found to be incorrect or erroneous or false. Such not being the case, there would be no question of inviti .....

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come under the Act. It was further pointed out that the dividends from the shares did not form the part of the total income. It was, therefore, reiterated before us that the Assessing Officer had correctly reached the conclusion that since the assessee had claimed excessive deductions knowing that they are incorrect; it amounted to concealment of income. It was tried to be argued that the falsehood in accounts can take either of the two forms; (i) an item of receipt may be suppressed fraudulentl .....

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on its part. It was up to the authorities to accept its claim in the return or not. Merely because the assessee had claimed the expenditure, which claim was not accepted or was not acceptable to the Revenue, that by itself would not, in our opinion, attract the penalty under Section 271(1)(c). If we accept the contention of the Revenue then in case of every return where the claim made is not accepted by the Assessing Officer for any reason, the assessee will invite penalty under Section 271 (1) .....

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has not been declared at all or is not even recorded in the books of accounts or in a particular case, the concealment of the particulars of income may be from the books of account as well as from the return furnished. In the judgment in New Sorathia Engineering Co. v. Commissioner of Income Tax [2006] 282 ITR 642 (Guj), the Gujarath High Court has taken the view that it was incumbent upon the Assessing Officer to come to a positive finding as to whether there was concealment of income by the as .....

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ust be accepted and that the explanation submitted by the assessee must be an acceptable explanation, acceptable to a fact-finding body. 15. Bearing the above principles in mind, we may now proceed to examine the correctness of the impugned orders. As we have already stated, in order to attract Section 271(1)(C) read with clause B of Explanation (1), there must be a positive finding that in the explanation has been offered, the three elements noticed above have been established. Insofar as these .....

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