TMI Blog2023 (3) TMI 861X X X X Extracts X X X X X X X X Extracts X X X X ..... ase in the matter of prosecution under Section 276-C. The submission of the appellant that only losses have been reported and thus penalty under Section 271(1)(c) of the Act is not warranted is an argument which has been rejected by the Hon'ble Supreme Court in Dharamendra Textile Processors [ 2008 (9) TMI 52 - SUPREME COURT ] - As a matter of fact an amendment has also been introduced to Section 271(1)(c) of the Act vide Explanation 4 to the said Section that income would also include losses and merely because an assessee had reported losses, it cannot be submitted that Section 271(1)(c) of the Act would not get attracted. The challenge to the levy of penalty is unsustainable. As Section 271(1)(c) of the Act provides for strict liability and in the present case, deduction have been claimed on the basis of false and non-existent facts, thus the order of the Tribunal restoring the order for levy of penalty is in order. Decided in favour of the revenue. - T. C. A. Nos. 32 and 311 of 2013 - - - Dated:- 29-8-2022 - THE HONOURABLE MR. JUSTICE R. MAHADEVAN AND THE HONOURABLE MR. JUSTICE MOHAMMED SHAFFIQ For the Appellant : Mr.R.Sivaraman in both Appeals For the R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent year nor was any business receipts declared. The appellant had however disclosed an expenditure of Rs.32,99,650/- under the Head Research and Development which resulted in business loss . The above expenditure was claimed to have been incurred in connection with Research and Development activity in the area of stem cell and tissue therapy. The Assessing Officer disallowed the claim of deduction of the above expenditure after finding that during the relevant period/ assessment year, the appellant had not carried on any business operation and all fixed assets were sold by the assessee during the preceding accounting year to its sister concern. Importantly, the assessing officer found that the claim of deduction has to be rejected as no evidence whatsoever was furnished by the appellant in support of its claim of the expenditure being made to carry out research and development. On the other hand, the fact that there was no business and the fixed assets were sold were indicative of the fact that no such Research or Development work was undertaken during the relevant assessment year and thus the claim of deduction in respect of the above expenditure ought to be rejected. 6. Ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntenable. In other words, the claim of research and development was found to be false and bogus. In such circumstances, the plea of the appellant that it was a mere erroneous claim or a claim not supported by evidence would not by itself warrant penalty under Section 271(1)(c) of the Act, is an argument which needs to be rejected for it may not apply to the facts of the present case inasmuch as the claim is not erroneous or incorrect but bogus and false. 10.2. Secondly, while dealing with the legality/ correctness of penalty under Section 271(1)(c) of the Act, we are not concerned with mens rea. The purpose behind Section 271(1)(c) of the Act is to penalise the assessee for (a) concealing particulars of income and/or (b) furnishing inaccurate particulars of such income. Thus, we have only to see as to whether as a matter of fact, the assessee has given inaccurate particulars. In Webster's Dictionary, the word inaccurate has been defined as: not accurate, not exact or correct; not according to truth; erroneous; as an inaccurate statement, copy or transcript. 10.3. To our mind there is no doubt that the claim of deduction towards expenditure on Research ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rejected by the Hon'ble Supreme Court. As a matter of fact an amendment has also been introduced to Section 271(1)(c) of the Act vide Explanation 4 to the said Section that income would also include losses and merely because an assessee had reported losses, it cannot be submitted that Section 271(1)(c) of the Act would not get attracted. 11.2. It thus appears that whether an assessee reports only loss or otherwise may have no bearing with regard to levy of penalty under Section 271(1)(c) of the Act. In this regard, it may be relevant to refer to the following judgment of the Hon'ble Supreme Court: CIT v.Gold Coin Health Food (P) Ltd., (2008) 9 SCC 622 14 A combined reading of the Committee's recommendations and the circular makes the position clear that Explanation 4(a) to Section 271(1)(c) intended to levy the penalty not only in a case where after addition of concealed income, a loss returned, after assessment becomes positive income but also in a case where addition of concealed income reduces the returned loss and finally the assessed income is also a loss or a minus figure. Therefore, even during the period between 1-4-1976 to 1- 4-2003 the position w ..... X X X X Extracts X X X X X X X X Extracts X X X X
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