TMI Blog2017 (11) TMI 727X X X X Extracts X X X X X X X X Extracts X X X X ..... ibunal has allowed the appeal of the department reversing the view taken by the CIT(A). 2. This Court while admitting the appeal on 20.12.2016, framed the following substantial question of law: Whether on the facts and in the circumstances of the case, in recording the finding of reversal, the ITAT acted on total misconception in ignoring the appellant s explanation made in quantum proceedings and the important materials on record and in applying wholly mistaken tests in sustaining the penalty u/s 271(1)(c) of the Act? 3. The facts of the case on the basis of synopsis submitted by appellant are that appellant partnership firm is engaged in the business of manufacturing processing and trading of various types of precious and semi-precious stones. The appellant has been maintaining complete books of accounts including stock register, quantity wise and weight wise separately for each type of stone. It has been valuing its closing stock of the stones consistently following the same system and method of valuation as accepted by the revenue in earlier years at cost or market price whichever is less. The value of the stone being subjective satisfaction of the buyer is depend ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in this case. 5. Against the assessment which was made, the representative of the assessee has replied on 13.12.2008, which reads as under:- The AR of the assessee vide reply dated 13.12.2008 submitted as under- The correct valuation of stock would come to ₹ 1,05,59,312/- instead of ₹ 92,24,226/- and G.P. Rate declared during the year is lower in compare to earlier year. After further mutual discussion and put an end to litigation as the assessee does not want to enter into unnecessary litigation and to purchase peace of mind the assessee is agreeable for an addition of ₹ 15 lacs in trading results.The assessee does not want to enhance in closing stock to cause of unnecessary carry forwarding and adjusting the value of closing stock. The assessee is agreeing to the addition to put an end to the matter and to purchase peace of mind as he does not want to enter into unnecessary litigation with the Department. I have considered the facts of the case and submission of the assessee. On the facts discussed above it is found that provisions of section 145(3) is clearly applicable in this case. Therefore, trading addition of ₹ 15 lakh is made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... view of the above, the penalty u/s 271(1)(c) is hereby cancelled. 7. He has also contended that the Tribunal has wrongly relied on the judgment of Mak Data P. Ltd. vs. Commissioner of Income Tax-II, (2013) 358 ITR 593 (SC) decided on 30.10.2013, which reads as under:- However, in the present case the appellant firm not only furnished the details and explanation during assessment proceedings justifying its valuation of closing stock of Emerald Cut (India) as mentioned Supre and in letter dated 20.10.2008 (Annexure-5) but also furnished its explanation in penalty proceeding by way of written submissions filed before the AO, CIT(A) and ITAT. The appellant categorically stated that the valuation of stock was as per cost and market price whichever less is. And further stated that the better quality of stones are purchased by the customers at first after assortment and only the inferior quality of stones remains in stock at the end of the year which in any way does not fetch the same cost price that of better quality of stones sold. The AO sought to value the closing stock as per historical cost method which is practicable not possible in this line of trade in view of the modu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated by the concerned authority in a reasonable and judicial manner on the basis of the facts and circumstances of the case available before him. In the instant case, the finding recorded by the learned Tribunal cannot be said to be perverse. No question of law for reference is made out. Consequently, the reference application under Section 256(2) of the Income Tax Act, 1961 is dismissed. 9. Counsel for the appellant has also relied upon in case of Commissioner of Income-Tax vs. Reliance Petroproducts Pvt. Ltd., [2010] 322 ITR 158 (SC), observed as under:- 8. A glance at this provision would suggest that in order to be covered, there has to be concealment of the particulars of the income of the assessee. Secondly, the assessee must have furnished inaccurate particulars of his income. Present is not the case of concealment of the income. That is not the case of the Revenue either. However, the Learned Counsel for Revenue suggested that by making incorrect claim for the expenditure on interest, the assessee has furnished inaccurate particulars of the income. As per Law Lexicon, the meaning of the word particular is a detail or details (in plural sense); the details of a c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Court went on to hold therein that in order to attract the penalty under Section 271(1) (c), mens rea was necessary, as according to the Court, the word inaccurate signified a deliberate act or omission on behalf of the assessee. It went on to hold that Clause (iii) of Section 271(1) provided for a discretionary jurisdiction upon the Assessing Authority, inasmuch as the amount of penalty could not be less than the amount of tax sought to be evaded by reason of such concealment of particulars of income, but it may not exceed three times thereof. It was pointed out that the term inaccurate particulars was not defined anywhere in the Act and, therefore, it was held that furnishing of an assessment of the value of the property may not by itself be furnishing inaccurate particulars. It was further held that the assessee must be found to have failed to prove that his explanation is not only not bona fide but all the facts relating to the same and material to the computation of his income were not disclosed by him. It was then held that the explanation must be preceded by a finding as to how and in what manner, the assessee had furnished the particulars of his income. The Court u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccording to truth; erroneous; as an inaccurate statement, copy or transcript. 11. 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 inviting the penalty under Section 271(1)(c) of the Act. A mere making of the claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee. Such claim made in the Return cannot amount to the inaccurate particulars. 13. In this behalf the observations of this Court made in Sree Krishna Electricals v. State of Tamil Nadu and Anr. MANU/SC/0628/2009MANU/SC/0628/2009 : (2009) 23VST 249 (SC) as regards the penalty are apposite. In the aforementioned decision which pertained to the penalty proceedings in Tamil Nadu General Sales Tax Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ved.' The expressions 'proved' disproved' and 'not proved' has well known, distinct connotation in legal terminology, as may be apparent from the provisions of Indian Evidence Act. As per interpretation clause, a fact is said to be 'disproved' when after considering the matter before it, the court either believes that it does not exist or considers its non-existence so probable that a prudent man ought under the circumstances of the particular case, to act upon the supposition that it does not exist. In contrast, a fact is said to be 'proved' when after considering the mailer before it, the court either believes it to exist or considers its existence so probable that a prudent man ought under the circumstances in particular case, to act upon the supposition that it exists. In juxta position, the expression 'not proved' denotes a fact is said to be 'not proved' when it is neither proved nor disproved. With this, it is of significance that while with the addition of income or disallowance of expenses is attached, the presumption about non-disclosure or concealment of particulars of such additions or expenses, no such presu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat there must be concealment by the assessee of the particulars of his income or furnishing of inaccurate particulars of such income. The provisions of ass3essed on estimate basis and additions are made therein. It was held that when the addition had been made on the basis of estimate and not on account of any concrete evidence of concealment, then the penalty was not leviable. The similar view was also taken by this court in CIT v. Dhillon Rice Milles [2002] 256 ITR 447, where the addition was made by the Assessing Officer by estimating the yield of super phak as well as of chhilka and also the price of chhilka, that addition was reduced by the Commissioner of Income-tax (Appeals). However, the penalty levied by the Assessing Officer was deleted by the Commissioner of Income-tax (Appeals). The order of the Commissioner of Income-tax (Appeals) was confirmed by the ITAT and the appeal filed by the Revenue against the said order of the ITAT was dismissed by this court, on the ground that the Assessing Officer had made the additions on the basis of the estimate of the yield of phak and chhilka and an estimate of the price and that the estimate would not ipso facto lead to penalty. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed more than 10 months before the Assessee filed its return of income. Had it been the intention of the Assessee to make full and true disclosure of its income, it would have filed the return declaring an income inclusive of the amount which was surrendered later during the course of the assessment proceedings. Consequently, it is clear that the Assessee had no intention to declare its true income. It is the statutory duty of the Assessee to record all its transactions in the books of account, to explain the source of payments made by it and to declare its true income in the return of income filed by it from year to year. The AO, in our view, has recorded a categorical finding that he was satisfied that the Assessee had concealed true particulars of income and is liable for penalty proceedings Under Section 271 read with Section 274 of the Income Tax Act, 1961. 10. The AO has to satisfy whether the penalty proceedings be initiated or not during the course of the assessment proceedings and the AO is not required to record his satisfaction in a particular manner or reduce it into writing. The scope of Section 271(1)(c) has also been elaborately discussed by this Court in Union ..... X X X X Extracts X X X X X X X X Extracts X X X X
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