TMI Blog2016 (10) TMI 1056X X X X Extracts X X X X X X X X Extracts X X X X ..... nalty under section 271(1)(c) - Decided in favour of assessee. - I.T.A. No.1618/Ahd/2010 - - - Dated:- 19-10-2016 - S. S. Godara (Judicial Member) And Pramod Kumar ( Accountant Member) For the Appellant : Sanjay R Shah For the Respondent : Satish Solanki ORDER Pramod Kumar ( Accountant Member) 1. The short question that we are required to adjudicate in this appeal is whether, on the facts and in the circumstances of the case, learned CIT(A) was justified in upholding the penalty of ₹ 95,55,000 imposed on the assessee under section 271(1)(c) of the Income Tax Act, 1961, for the assessment year 2003-04. The impugned order, passed by the CIT(A), is dated 19th January, 2010 and the related quantum assessment was framed under section 143(3) of the Income Tax Act, 1961. 2. The assessee is engaged in the business of, inter alia, trading in computer systems, telecom systems and installation thereof, development of computer software and maintenance of computer systems. During the course of scrutiny assessment proceedings, the Assessing Officer took note of a note appended to the computation of income which indicated that the amount of ₹ 2.6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laim of the company for exemption of ₹ 2.60 crores. After considering its submission, the addition was made in the assessment. Further, the Id. CIT [Appeals] had confirmed the addition after considering the submission made before him by the assessee. Therefore, no further discussion is made on this account. It was the next contention of the assessee that the assessee had made complete disclosure of the issue at hand in the return of income. There was no furnishing of inaccurate particulars. The addition was made only on account of difference of opinion and on such additions/disallowances penalty cannot be levied u/s.271(l)(c). It was further stated that penalty is not leviable on debatable issues. The contention of the assessee is not acceptable. In this case, the assessee has claimed the sum of ₹ 2.60 crores received from its associate concern GIPL on account of transfer of expertise and know-how in the business relating to GIS not liable to capital gains tax in view of the decision of the apex court in the case of B.C. Srinivasan Setty [Supra] thereby treating it as a capital receipt not chargeable to capital gains tax. Whereas in the assessment, the Assessing Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this case the assessee has returned a loss and the income was also finally assessed at loss after giving effect to the Id. CIT [appeals]'s order and, thus, there is motive to evade taxes by concealing the income or by furnishing inaccurate particulars of income. This is also not correct. As per Explanation 4[a], in any case where the amount of income in respect of which particulars have been concealed or inaccurate particulars have been furnished has the effect of reducing the loss declared in the return or convert in that loss into income, means the tax that would have been charge on the income in respect of which particulars have been concealed or inaccurate particulars have been furnished had such income been the total income. In view this explanation, penalty u/s. 271(l)(c) leviable even if the total income returned as well as finally assessed is a loss. Further, the Hon. Supreme Court in the case of Gold Coin Health Foods (Pvt.) Ltd. [218 CTR 559] has held that penalty is leviable even in a loss case. This contention of the assessee is also, therefore, rejected. Clause (c) of sub-section (1) of section 271 provides for penalty in case where the Assessing Officer is satisf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erial to the computation of his total income have been disclosed by him/ In these circumstances and that the assessee has failed to offer any plausible explanation, I am satisfied that the assessee has willfully, knowingly and without reasonable cause furnished inaccurate particulars of its income and, thus, tried to conceal the income so as to evade payment of tax thereon. Thus, Explanation 1 to section 271 of the Income-tax Act, 1961 is clearly applicable to the case of the assessee for furnishing inaccurate particulars of income and concealing the income for which it is liable to for penalty u/s.271(l)(c) of the Income-tax Act, 1961. I, therefore, levy a penalty of Rs,95,55,000 as against minimum penalty leviable at ₹ 95,55,000 and maximum penalty leviable at ₹ 2,86,65,000 in this case. 4. The stand so taken by the Assessing Officer was confirmed by the CIT(A). Apart from holding that the assessee s explanation, on merits, was wholly unacceptable, the CIT(A) also held that mere disclosure of related facts in the income tax return cannot come to the rescue of the assessee. On this point, his observations are as follows:- 5.2.10 However, certain obse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed hereunder as the scheme of Sec.271(1)(c) cannot be explained in a better way. The process of enquiry into the correctness, truthfulness or accuracy of particulars furnished by the assessee cannot be dosed at the threshold by looking at the return. That would negative and render otiose the very provisions of the statute. 5. The CIT(A) thus confirmed the impugned penalty. The assessee is not satisfied and is in further appeal before us. 6. We have heard the rival contentions, perused the material on record and duly considered facts of the case in the light of the applicable legal position. 7. We have noted that, as rightly pointed by Mr. Shah, the assessee has made a legal claim in a very fair and transparent manner, and the conduct of the assessee cannot be faulted. Whether a claim is acceptable in the quantum assessment proceedings or not is altogether a different matter but just because the claim of the assessee does not merit acceptance, such a fact alone cannot be decisive of whether or not penalty under section 271(1)(c) must also be imposed in respect of the disallowance of claim, or else the penalty proceedings, for all practical purpose, become a coro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the burden placed would be discharged and the presumption rebutted. The explanation offered by the assessee should be an acceptable explanation which essentially implies that the explanation should not be totally opposed to the human probabilities. 10. When in the light of this legal position, we turn to the explanation given by the assessee, we find that the explanation of the assessee cannot be rejected as improbable or wholly contrary to the law. Hon ble jurisdictional High Court has admitted an appeal and the matter is pending before Their Lordships. We have also noted that it is an admitted position that the agreement dated 8.8.2003 has not been considered by the authorities below at all, and that, the coordinate bench, vide order dated 28th February 2014, admitted this position and yet declined to remit the matter to the file of the Assessing Officer on the ground that the assessee could not point out any prejudice which was caused to the assessee by not considering the agreement dated 8.8.2003 . The assessee s claim that it has transferred certain intellectual properties, such as expertise and know how, in respect of GIS business, which were self generated and therefore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e cannot be a passive situation anyway; it implies that the person concealing the income is hiding, covering up or camouflaging an income - something which essentially requires a conscious effort. On the contrary, this is a situation in which the assessee has acted in very transparent and straightforward manner. There cannot be any concealment of income in such a situation. 61. The expression furnishing of inaccurate particulars of income has also not been defined in the Act. The expression inaccurate refers to not in conformity with the fact or truth and that is the meaning which, in our considered view, is relevant in the context of furnishing of inaccurate particulars . The expression particulars refers to facts, details, specifics, or information about someone or something . Therefore, the plain meaning of the expression furnishing of inaccurate particulars of income implies furnishing of details or information about incomes which are not in conformity with the facts or truth. The details or information about income deal with the factual details of income and this cannot be extended to areas which are su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is not the case here. As regards the CIT Vs Vidyagauri Natverlal Ors. [(1999] 238 ITR 91 (Guj)] relied upon by the learned CIT(A), that was a case in disclosure, on a factual aspect, was false to the knowledge of the assessee, and it was in this context that Their Lordships had observed that disclosure which has been made in any part of the return which is incorrect or false to the knowledge of the assessee and if that fact is established, such disclosure cannot take it out from the purview of the act of concealment of particulars for the purpose of levy of penalty . It is an exception to the rule that normally when the assessee makes a transparent claim that the penalty cannot be imposed. The facts of the present case do not fall in this category of exceptions. 14. In view of the above discussions, as also bearing in mind entirety of the case, we are of the considered view that the impugned penalty of ₹ 95,55,000/- deserves to be deleted as it was not a fit case for imposition of penalty under section 271(1)(c) of the Act. We, therefore, direct the Assessing Officer to delete the impugned penalty. 15. In the result, the appeal is allowed. Pronounced in the open cou ..... X X X X Extracts X X X X X X X X Extracts X X X X
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