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2009 (8) TMI 44

..... valid satisfaction for initiating penalty proceedings under Section 271(1)(c) of the Act. High Court has held that from the reading of the assessment order, it was not discernible as to why the Assessing Officer chose to initiate proceedings against the assessee and under which part of Section 271(1)(c). The High Court, therefore, accepted the view of the Tribunal and CIT (Appeals) and dismissed the appeal of the Revenue with cost of ₹ 5,000/-. Held that - Having thoughtfully considered the matter, in our judgment, the matter needs to be reconsidered by the High Court in the light of the decisions of this Court in Dharamendra Textiles and Rajasthan Spinning and Weaving Mills. – Revenue appeal accepted, matter remanded back to HC - 5769 OF 2009 - 24-8-2009 - Tarun Chatterjee and R. M. Lodha JJ. CIVIL APPEAL NO. 5769 OF 2009 (Arising out of SLP(C) No. 31192/2008) JUDGEMENT R. M. Lodha, J. - Delay condoned. 2. Leave granted. 3. The revenue has come up in appeal by special leave aggrieved by the judgement of the High Court of Delhi whereby the High Court dismissed their appeal under Section 260A of the Income Tax act, 1961 (for short, the Act ) on January 25, 2008 and upheld the .....

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..... (appeals) held that the assessee has neither concealed the particulars of his income nor he furnished any inaccurate particulars thereof. This is what the CIT (Appeals) held: ... I believe that this is a case of unintentional and inadvertent omission and therefore, it is not a fit case for levy of penalty u/s. 271(1)(c) of the Act as the assessee has not concealed the particulars of his income; nor has he furnished any inaccurate particulars thereof. As can be seen from a perusal of the impugned order, the penalty has been levied with reference to firstly, the addition disallowing the claim of Retrenchment compensation of Rs.5,00,000/- made u/s 10(10B) of the Act, secondly, the salary received in Singapore for services rendered outside India from December to March 2002 amounting to Rs. 17,81,952/- offered by the appellant in the course of assessment proceedings and thirdly the interest income of Rs. 22,812/- also offered for tax in the revised return filed during the course of assessment proceedings. As regards the former, the AO appears to be completely satisfied as regard the genuineness of the reasons that necessitated the revision. As regard the second, the issue involved diff .....

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..... enefits of doubt to him because the moment he was informed by the Assessing Officer that is not the correct legal position, the assessee included the salary in the total income. Further, there is no dispute that the assessee was eligible to get credit for the taxes paid in Singapore. In fact, the Assessing Officer has acknowledge the same in the assessment order itself. As regards the claim for exemption of the retrenchment compensation received by the assessee, the CIT Appeals) is right in saying that the claim was on account of the opinion bona fide and honestly entertained by the assessee that he is a workman and, therefore, the exemption is available. The assessee s claim that he is a workman was disputed by the Assessing Officer and he referred to the definition of the workman as per the Industrial Dispute act, 1947 to reject the assessee s claim. Here also, it is a case of a difference of opinion as regards the interpretation of the work workman for which no penalty is imposable. At best, it can only be said that the assessee did not take pains to study the Industrial Disputes act and to find out how the work workman is defined therein. Lastly, with regard to the claim of int .....

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..... to any tax payable by him, a sum which shall not be less than, but which shall not exceed (three times), the amount of tax sought to be evaded by reason of the concealment of particulars of his income or the furnishing of inaccurate particulars of such income. (***) (Explanation 1. Where in respect of any facts material to the computation of the total income of any person under this Act. (A) such person fails to offer an explanation or offers an explanation which is found by the Assessing Officer or the (**) (Commissioner (Appeals) to be false, or (B) such person offers an explanation which he is not able to substantiate ( and fails to prove that such explanation is bona fide and that all the facts relating to the same and material to the computation of his total income have been disclosed by him), then, the amount added or disallowed in computing the total income of such person as a result thereof shall, for the purposes of clause (c) of this sub- section, be deemed to represent the income in respect of which particulars have been concealed. ............................................ 11. A close look at Section 271(1) (c) and Explanation (1) appended thereto would show that in t .....

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..... jasthan Spinning & Weaving Mills (2009) 8 SCALE 231 thus: 20. At this stage, we need to examine the recent decision of this court in Dharmendra Textile (supra). In almost every case relating to penalty, the decision is referred to on behalf of the Revenue as if it laid down that in every case of non-payment or short payment of duty the penalty clause would automatically get attracted and the authority had no discretion in the matter. One of us (Aftab Alam, J.) was a party to the decision in Dharamendra Textiles and we see no reason to understand or read that decision in that manner. In Dharmendra Textile the Court framed the five issues before it, in paragraph 2 of the decision as follows: 2. A Division Bench of this Court has referred the controversy involved in these appeals to a larger Bench doubting the correctness of the view expressed in Dilip N. Shroff vs. Joint Commissioner of Income Tax, Mumbai and Another [(2007) 8 SCALE 304]. The question which arises for determination in all these appeals is whether Section 11AC of the Central Excise Act, 1944 (in short the Act ) inserted by Finance Act 1996 with the intention of imposing mandatory penalty on persons who evaded paym .....

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..... nditions expressly mentioned in the section for its application. 22. There is another very strong reason for holding that Dharamendra Textile could not have interpreted Section 11AC in the manner as suggested because in that case that was not even the stand of the revenue. In paragraph 5 of the decision the court noted the submission made on behalf of the revenue as follows: 5. Mr. Chandrashekharan, Additional Solicitor General submitted that in Rules 96ZQ and 96ZO there is no reference to any mens rea as in Section 11 AC where mens rea is prescribed statutorily. This is clear from the extended period of limitation permissible under section 11A of the Act. It is in essence submitted that the penalty is for statutory offence. It is pointed out that the proviso to Section 11A deals with the time for initiation of action. Section 11AC is only a mechanism for computation and the quantum of penalty. It is stated that the consequences of fraud etc. relate to the extended period of limitation and the onus is on the revenue to establish that the extended period of limitation is applicable. Once that hurdle is crossed by the revenue, the assessee is exposed to penalty and the quantum of pen .....

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