TMI Blog2016 (8) TMI 1042X X X X Extracts X X X X X X X X Extracts X X X X ..... nce or some circumstance to show that the omission was attributable to an intention or desire on the part of the assessee to conceal the income so as to avoid imposition of tax thereon. Thus, jurisdiction u/s 271(1)(c ) of the Act cannot be assumed. In the present case, we are of the view that the impugned orders passed by the Tribunal as well as CIT(A) are erroneous with regard to levy of penalty u/s 271(1)(c) of the Act. - Decided in favour of assessee - TAX APPEAL NO. 2393 of 2010 With TAX APPEAL NO. 601 of 2013 - - - Dated:- 12-8-2016 - MR. KS JHAVERI AND MR. G.R.UDHWANI, JJ. FOR THE APPELLANT : MR MANISH J SHAH, ADVOCATE FOR THE OPPONENT : MR MANISH R BHATT, SENIOR COUNSEL WITH MRS MAUNA M BHATT, ADVOCATE, MR KM PARIKH, ADVOCATE ORAL JUDGMENT (PER : HONOURABLE MR.JUSTICE KS JHAVERI) 1. Being aggrieved and dissatisfied with the impugned judgment and orders passed by the Income Tax Appellate Tribunal, Ahmedabad Bench (hereinafter referred to as the Tribunal ) dated 31.05.2010 30.03.2012 in ITA No. 2078/Ahd/2006 2887/Ahd/2011 for the Assessment Year 2001-02 2005-06 respectively, the revenue has preferred the present Tax Appeals for consideratio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad furnished inaccurate particulars of income. Drawing attention to the provision of Section 45Q of the Reserve Bank of India Act, he submitted that the Tribunal failed to appreciate that section 45Q provided that the provision of Chapter IIIB of the said Act overrides the provisions of all other Acts naturally including the Income Tax Act, that in the understanding of the assessee, the prudential norms and directions of the Reserve Bank of India, which were issued under that Chapter, were therefore, binding on the assessee and overriding the provisions of the Income Tax Act, that there was judicial opinion by way of Tribunal decisions supporting the stand of the assessee, and the assessee had disclosed right in the computation of income as stated above that it was making the claim of bad debts and diminution in value of assets in accordance with the above norms. He has placed reliance on a decision of the Apex Court in the case of Commissioner of Income Tax vs. Reliance Petroproducts (P) Ltd reported in [2010] 322 ITR 158 and submitted that even otherwise no penalty could have been imposed. He submitted that the Tribunal failed to appreciate that the ratio of Apex Court is that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claim made by the assessee on which two views could be possible. He has relied upon the decision of the Apex Court in the case of T. Ashok Pai vs. Commissioner of Income Tax reported in [2007] 292 ITR 11 (SC) , wherein the Apex Court has held as under: 16. The term 'inaccurate particulars' is not defined. Furnishing of an assessment of value of the property may not by itself be furnishing of inaccurate particulars. Even if the explanations are taken recourse to, a finding has to be arrived at having regard clause (a) of Explanation 1 that the Assessing Officer is required to arrive at a finding that the explanation offered by an assessee, in the event, he offers one was false. He must be found to have failed to prove that such explanation is not only not bona fide but all the facts relating to the same and material to the income were not disclosed by him. Thus, apart from his explanation being not bona fide, it should be found as of fact that he has not disclosed all the facts which was material to the computation of his income. 17. The explanation having regard to the decision of this Court must be preceded by a finding as to how and as to in what manner he furnish ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erein this court has held as under: 24. Applying the aforesaid principles to the facts of the case, it is apparent that the assessee's contention that it had no malafide intention or mens rea has not been found to be untrue by any of the authorities. The finding by the Tribunal in this context that the assessee had made separate claim in the profit and loss account for deduction of gratuity on the basis of actual payment to non-suit the assessee as regards the explanation offered is based on a misconception of facts and law. It was never the assessee's case that, out of the amount received from the Insurance Company, such amount was actually paid out and claimed as a deduction. In fact, this becomes clear when one reads the assessment order and the penalty order wherein the assessing officer has stated that the assessee cannot claim the sum of ₹ 68,332/- as a deduction on due basis. The assessee has never claimed any deduction qua this amount. The deduction claimed is qua a separate amount, and that too, on actual payment basis. There is no claim for deduction on due basis. The entire premise, therefore, is incorrect. 25. Once there is absence of mens rea, mere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he contents of the Tax Audit Report. 19. The contents of the Tax Audit Report suggest that there is no question of the assessee concealing its income. There is also no question of the assessee furnishing any inaccurate particulars. It appears to us that all that has happened in the present case is that through a bona fide and inadvertent error, the assessee while submitting its return, failed to add the provision for gratuity to its total income. This can only be described as a human error which we are all prone to make. The calibre and expertise of the assessee has little or nothing to do with the inadvertent error. That the assessee should have been careful cannot be doubted, but the absence of due care, in a case such as the present, does not mean that the assessee is guilty of either furnishing inaccurate particulars or attempting to conceal its income. 20. We are of the opinion, given the peculiar facts of this case, that the imposition of penalty on the assessee is not justified. We are satisfied that the assessee had committed an inadvertent and bona fide error and had not intended to or attempted to either conceal its income or furnish inaccurate particulars. (V) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ently, in the circumstances of the case, the expenditure was revenue expenditure within S. 10(2)(xv). (VI) Decision rendered by this Court in Tax Appeal No. 531 of 2015 on 05.08.2016 wherein this Court has considered the provisions of Section 45Q of the Income Tax Act. (VII) Commissioner of Income Tax vs. Corporation Bank Ltd. reported in 2002 (254) 791 wherein the Apex Court has held as under: 7. Turning attention to the first question as regards the provisions under Section 147(a) be it noted and as the facts depict, there is no failure on the part of the assessee in furnishing the particulars pertaining to the above noted sum as not recoverable for the relevant accounting year and the statements filed along with the original return disclosed the full details of the aforesaid account. There is, therefore, no failure on the part of the assessee to disclose fully and truly the material facts necessary for the assessment years for the respective years and as such Section 147(a) has no manner of application and is not attracted in the facts of the matter under consideration. The High Court on consideration of the facts came to the conclusion that the Tribunal was justi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... question whether in a given case the explanation offered by the assessed is acceptable or not is essentially one of fact giving rise to no question of law. We find that the forums below have analysed the case of the assessed and the explanation offered by him and concluded that the source of the loan allegedly obtained was not properly explained. This conclusion is also one of fact. That being the position, no question of law arises out of the order of the Tribunal. Therefore, we decline to answer the question referred. 5. Mr. K.M. Parikh, learned advocate appearing for the revenue in Tax Appeal No. 601 of 2013 has also supported the impugned orders passed by the authorities below and submitted that the same having been passed in accordance with law does not call for interference by this Court. He submitted that in view of the wrong claim made by the assessee inspite of knowing fully well the provisions of law, the Tribunal is justified in passing the impugned order. 6. The sole question in both these appeals is with regard to levy of penalty u/s 271(1)(c). The assessee in one of the appeals is a government company engaged in the business of providing loans, leasing and hire ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s revoked, the same continues to be in force and the same having been issued to mitigate the hardships caused to the class of assessees covered by the circular, such assessees would be entitled to the benefit thereof. Merely because by virtue of the provisions of section 43D of the Act, a certain class of assessees is given benefit under the provisions of the Act would not mean that the same would override the circular. 29. On behalf of the appellant it has been contended that section 43D of the Act itself recognises recognition of taxability of such interest and that when a specific provision in the nature of section 43D of the Act has been made, and entities like the assessee are excluded from the purview thereof, the assessee cannot indirectly claim benefit which would amount to a benefit similar to that under section 43D of the Act. In this regard, it may be noted that the benefit claimed by the assessee is not under any provision of the Income Tax Act, 1961. The assessee being bound by the RBI Guidelines which are issued under the provisions of the RBI Act has not shown the interest on NPA as income. By virtue of the provisions of section 45Q of the RBI Act, the provisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs. In Commissioner of Income Tax, Delhi Vs. Atul Mohan Bindal [2009(9) SCC 589], where this Court was considering the same provision, the Court observed that the Assessing Officer has to be satisfied that a person has concealed the particulars of his income or furnished inaccurate particulars of such income. This Court referred to another decision of this Court in Union of India Vs. Dharamendra Textile Processors [2008(13) SCC 369], as also, the decision in Union of India Vs.Rajasthan Spg. Wvg. Mills [2009(13) SCC 448] and reiterated in para 13 that:- 13. It goes without saying that for applicability of Section 271(1)(c), conditions stated therein must exist. 9. Therefore, it is obvious that it must be shown that the conditions under Section 271(1)(c) must exist before the penalty is imposed. There can be no dispute that everything would depend upon the Return filed because that is the only document, where the assessee can furnish the particulars of his income. When such particulars are found to be inaccurate, the liability would arise. In Dilip N. Shroff Vs. Joint Commissioner of Income Tax, Mumbai Anr. [2007(6) SCC 329], this Court explained the terms concealment of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Vs. Dharamendra Textile Processors (cited supra), was that according to this Court the effect and difference between Section 271(1)(c) and Section 276-C of the Act was lost sight of in case of Dilip N. Shroff Vs. Joint Commissioner of Income Tax, Mumbai Anr. (cited supra). However, it must be pointed out that in Union of India Vs. Dharamendra Textile Processors (cited supra), no fault was found with the reasoning in the decision in Dilip N. Shroff Vs. Joint Commissioner of Income Tax, Mumbai Anr. (cited supra), where the Court explained the meaning of the terms conceal and inaccurate . It was only the ultimate inference in Dilip N. Shroff Vs. Joint Commissioner of Income Tax, Mumbai Anr. (cited supra) to the effect that mens rea was an essential ingredient for the penalty under Section 271(1)(c) that the decision in Dilip N. Shroff Vs. Joint Commissioner of Income Tax, Mumbai Anr. (cited supra) was overruled. 10. We are not concerned in the present case with the mens rea. However, we have to only see as to whether in this case, as a matter of fact, the assessee has given inaccurate particulars. In Webster's Dictionary, the word inaccurate has been defined as:- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is some evidence or some circumstances to show that the omission was attributable to an intention or desire on part of the assessee to conceal the income so as to avoid imposition of tax thereon. In the present case, the assessee is a cooperative society managed through a governing board and as stated by the society, there is no personal interest involved. The omission has occurred not with an intention but due to oversight. As held by this Court, absence of proof acceptable to the department cannot be equated with fraud or willful default. The circumstances must show that there was a conscious act of concealment or furnishing of inaccurate particulars on part of the assessee. There is nothing on record to show that any particular individual has any personal interest in committing the act of omission of showing the amount received from Insurance Company as income of the assessee, a cooperative society. In fact, the entries in the books of account reflect that the assessee had credited the said sum to the fund account directly and the said entry appeared in the balance sheet without going through the profit and loss account. 7.2 Thus, we are of the view that the contention raise ..... X X X X Extracts X X X X X X X X Extracts X X X X
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