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2010 (4) TMI 1144 - ITAT INDORE

2010 (4) TMI 1144 - ITAT INDORE - TMI - ITA No. 74/Ind/2010 - Dated:- 6-4-2010 - SHRI JOGINDER SINGH, JUDICIAL MEMBER Appellant by : Shri S.S. Deshpande Respondent by : Smt. Aparna Karan, Sr. DR O R D E R This appeal is by the assessees against the order of the learned CIT(A) dated 16.11.2009 on the ground that the ld. first appellate authority erred in maintaining the penalty of ₹ 4,50,000/- u/s 271(1)(c) of the Act. 2. During hearing of this appeal, I have heard Shri S.S. Deshpande, ld. .....

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ee was under a genuine belief that the loss incurred by the assessee, during the course of business, is allowable against other income. It was pleaded that the assessee neither concealed its income nor furnished inaccurate particulars of income as the facts were truly disclosed to the department in the return and the claim of deduction has been made on account of interpretation of law. It was further claimed that nothing was divulged by the assessee and these were the mere allegation of the firm .....

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v. Rajasthan Spinning & Weaving Mills; (2009) 13 ITJ 109 (SC) On the other hand, the learned Senior DR defended the impugned order by contending that firstly the Tribunal has affirmed the decision of the the learned Commissioner of Income Tax (Appeals) on quantum proceedings and secondly the onus is on the assessee to prove its claim. The penalty was strongly defended. The learned Sr. DR contended that the cases relied upon by the assessee are not applicable to the facts of the present appea .....

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lleged breach of terms of partnership agreement. In its return the assessee showed net loss of ₹ 12,72,152/-. The assessee was a partner in the said firm for the last so many years and the remaining partners alleged that the assessee became a director in a competitive company i.e. M/s Neet Engg. Pvt. Ltd., Mumbai, and also was a partner in M/s Sai Enterprises, Indore, and divulged the information about the working and designs of machinery and manufacturing process. Thus, the company debite .....

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usion, I am reproducing hereunder the relevant provisions of the Act :- 271. (1) If the 5[Assessing] Officer or the 6[***] 7[Commissioner (Appeals)] 8[or the Commissioner] in the course of any proceedings under this Act, is satisfied that any person- xx xx (c) has concealed the particulars of his income or 13[* * *] furnished inaccurate particulars of 14[such income, or]15 If the aforesaid section is analysed, it can be said that for imposing penalty u/s 271(1) (c) of the Act, either there shoul .....

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lf may not be a good ground for imposing penalty on the assessee because for that separate legal remedy is available with the firm/remaining partners and unless and until the allegations are affirmed by the competent court, which is having a jurisdiction to deal with that matter, suo moto, these cannot be made a ground for imposing penalty. In the present appeal, the learned Assessing Officer has levied the penalty on account of disallowance of loss of ₹ 15,40,818/-, claimed by the assesse .....

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as been shown as civil damages. In its profit and loss account ended on 31st March, 2004 (page 10 of the paper book) filed by M/s Modern Paper Products ₹ 15 lacs have been debited as charges debited to a partner. The crux of discussion is that the assessee claimed it as business loss whereas the revenue treated it as capital loss. Now the question arises whether the penalty can be imposed u/s 271(1)(c) of the Act on the assessee. The obvious reply is no because it is merely the interpretat .....

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ct proceedings and the present appeal has to be decided in the light of violation, if any, of section u/s 271(1)(c) of the Act. 4. If this issue is analysed with the help of judicial decisions, the ratio laid down in the cases cited above, supports the case of the assessee as well as my view. In the case of Shivanand Steels Limited (supra), the claim was made for depreciation and investment allowance on newly installed machinery. The claim was based on High Court decision that user of machinery .....

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. In the case of HMA Udyog Pvt. Ltd.(supra) the question was whether the expenditure incurred by the assessee is a revenue expenditure or capital expenditure is a debatable issue even if it is ultimately decided against the assessee, it cannot be said that the assessee concealed the particulars of income or furnished inaccurate particulars. The Hon ble Delhi High Court held that the provisions of section 271(1)(c) are not attracted. The Hon ble jurisdictional High Court in the case of SPK Steels .....

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ELT 721; Continental Foundation Joint Venture v. CCE; (2007) (216) ELT 177 (SC); Dilip and Shroff v. JCIT (2007); 291ITR 519; 210 CTR 228 (SC) and Chairman SEBI v. Shriram Mutual Fund & Others (2006) 5 SCC 361 (para 20) decided in favour of the assessee. As far as the reliance of the learned Sr. DR upon the decision in Dharmendra Textiles (supra) is concerned, the Hon ble Court in para 23 held as under :- 23. The decision inDharamendra Textile (supra) must, therefore, be understood to mean t .....

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ger Bench doubting the correctness of the view expressed in Dilip & Shroff v. JCIT and others. The question which arose for determination was whether section 11AC of the Central Excise Act, 1944, inserted by the Finance Act, 1966, with the intention of imposing mandatory penalty on persons who evaded payment of tax, should be read to contain mens rea as an essential ingredient and whether there is a scope for levying penalty below the prescribed minimum. Before the Division Bench, the stand .....

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e Assessing Officer not to impose any penalty. The Hon ble Division Bench made reference to R. 96ZQ and R. 96ZO of the Central Excise Rules, 1944 and a decision in Chairman SEBI v. Shriram Mutual Fund & Others (supra) and was of the view that the basic scheme for imposing penalty u/s 271(1) (c) of the Income-tax Act and section 11 of the Central Excise Act is common. According to Division Bench, the correct position was laid down in Chairman SEBI s case (supra) and not in Dilip & Shroff .....

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proviso to section 11A of the Central Excise Act accompanied by very strong words as fraud or collusion and, therefore, has to be construed strictly. Mere omission to give correct information may not be said to be suppression of facts unless it was deliberate to stop the payment of duty. An incorrect statement cannot be equated with a willful mis-statement. The latter implies making of an incorrect statement with the knowledge that the statement was not correct. The Hon ble jurisdictional High C .....

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s and the Assessing Officer treated the same as capital loss and also the fact that the impugned amount was debited by the firm itself, therefore, it cannot be said to be a case of either concealment of income or furnishing of inaccurate particulars. Therefore, the decision in DDIT v. Chirag Metal Rolling Mills (supra), relied upon by the learned Sr. DR, may not help the revenue because vide order dated 31st March, 2006 the Hon ble Court decided the issue on the basis of mens rea where the incom .....

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of the Act (pages 16 and 17 of the paper book), is analysed, the total income has been computed as under :- Total income as per return (-) 12,72,190 Deduct debited by the firm in the capital a/c (+) 15,00,000 Deduct interest paid to firm (+) 40,818 Total = (+) 2,68,628/- If the aforesaid computation made by the Assessing Officer is analysed itself says that the amount of ₹ 15 lacs was debited by the firm in the capital account and not by the assessee. Even otherwise, it was a case of loss .....

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