TMI Blog2017 (11) TMI 373X X X X Extracts X X X X X X X X Extracts X X X X ..... r of ld. CIT(A)-XV, New Delhi dated 21.07.2014 for the assessment year 2008-09 on the following ground : On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the penalty of ₹ 20,87,424/- imposed upon the assessee under section 271(1)(c) of the I.T. Act, 1961. 2. The brief facts of the case are that the assessee filed return of income on 28.08.2008 declaring total income of ₹ 13,21,76,480/-. The case was taken up for scrutiny. During the course of scrutiny proceedings, the Assessing Officer observed that the assessee has debited into the profit and loss account Date of Hearing 11.10.2017 Date of Pronouncement 12.10.2017 under the head renewals and replacement , out of which ₹ 20,34,723/- has been disallowed by the Assessing Officer on account of capitalization of repair and maintenance expenses and on further scrutiny of accounts, the Assessing Officer disallowed on account of expenses on payments made on behalf of the foreignship owners of ₹ 41,06,565/- on estimated basis of 2% of the total expenses of ₹ 20,53,28,258/-. On the above two additions, the ITAT confirmed the additions. Thereafter, the Asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ulars of such income. Further, after insertion of Explanation 1 to Section 271(l)(c), the onus is on the assessee to show that there was no intention of concealment and not on the revenue. Mens rea was considered to be a necessary ingredient for levy of penalty as laid down by the Supreme Court in CIT Vs Anwar Ali (1970) 76 ITR 696. But after the introduction of Explanation 1 to Section 271(1)(c), the Supreme Court held that the requirement of proof of Mens rea on the part of the Revenue, would no longer be necessary as held in Addl. CIT Vs Jeevan Lal Shah (1994) 205 ITR 244 (SC) and B.A. Balasubramaniam and Bros. Co. Vs CIT (1999) 236 ITR 977 (SC). The role of the Explanation, it was pointed out, was only to place the burden of proof squarely on the taxpayer. It is however observed that the Explanation has been often overworked by the Assessing officers, so as to justify penalty in each and every case of difference, even where an addition was merely on estimated basis of for bona fide omissions. 6.2 Additions disputed on interpretation of law were also invariably subjected to penalty by relying on the Explanation. The various High Courts in the country understood the e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not penalty/' Thus after the decision in the case of Dharamendra Textile Processor (Supra), Mens rea is not necessary to be proved by revenue for civil penalties/' 6.1.3 However with the recent decision of the Supreme Court in the case of CIT Vs Reliance Petro Products Pvt. Ltd (2010) (322 ITR 158) (SC), it is clear that the Supreme Court by giving the ruling in Dharmendra Textile Processor's Case (Supra) has not overruled their decision in Dilip N. Shroff's case except for its mention of Mens rea therein. 6.4 It is also pertinent to mention here that after the ruling of Dharamendra Textile Processor, the Supreme Court has come out with the ruling in 2 different case of CIT Vs Atul Mohan Bindal (2009) (317 ITR1) and UOI Vs Rajasthan Spinning Weaving Mills (2010) (1GSTR66) (SC) and have given a finding that that for applicability of Section 271(1)(c) the conditions stated therein must exist. Even in the recent, decision in the case of CIT(LTU) Vs. MTNL, ITA No.626/2011 dated 10.10.2011, the jurisdictional Delhi High Court has upheld the same view. 6.5 Thus from this it is very clear that for imposing penalty under Section 271(l)(c), the AO have to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... above the actual reimbursements. The Ld. AO however, was not satisfied with this explanation and observed that several payments were not supported by documentary evidence. The AO on one hand, had observed that the appellant's claims have been settled by its clients. Yet, he held that the genuineness of payments was not proved. It is thus, evident that the AO itself did not have any pointed evidence in hand to disallow any specific claim of the appellant in respect of which accusation of inaccurate filing of particulars could be held. The fact that the Ld. AO himself, despite making the above general adverse observation, preferred to make disallowance on estimated basis @2% of expenditure claimed on account of 3rd party, shows that the allegation of inaccurate particulars cannot be proved by the AO. Moreover, in view of the settled law, no penalty could be levied where the additions/disallowance is made on estimate basis, as such errors of estimation itself reflect the absence of any clinching evidence suggesting 'inaccurate filing of particulars'. In view of this, no penalty on this ground could be levied. 6.9 Regarding the first ground of addition relating to th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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