Chhaya A. Raje v. ITO, 1(1), Bhopal
[Citation -2016-LL-1005-156]

Citation 2016-LL-1005-156
Appellant Name Chhaya A. Raje
Respondent Name ITO, 1(1), Bhopal
Court ITAT-Indore
Relevant Act Income-tax
Date of Order 05/10/2016
Assessment Year 2008-09
Judgment View Judgment
Keyword Tags initiation of penalty proceedings • income chargeable to tax • tax sought to be evaded • reasonable explanation • concealment of income • imposition of penalty • deeming provision • bona fide belief • loan transaction • deemed dividend • civil liability • deemed income • mutual fund • mens rea
Bot Summary: 2008-09 Smt.Chhaya A Raje, Shri Amit A. Raje Sh Anil Anant Raje Page 11 of 28 in the course of any proceedings under the Income Tax Act that any person has concealed particulars of his income or furnished inaccurate particulars of income. 2008-09 Smt.Chhaya A Raje, Shri Amit A. Raje Sh Anil Anant Raje Page 14 of 28 It is incumbent upon the assessing officer to state whether the penalty was being levied for concealment of particulars of income by the assessee or whether any inaccurate particulars of income had been furnished by the assessee. In the case of Commissioner of Income Tax V. Rajan and Co., 291 ITR 340, wherein it is held that the provision of section 271 of the Income Tax 1961 would require proper application of mind and recording of at least a bare minimum opinion on the part of AO that a case for initiation of penalty proceeding was made as there was concealment of income or that incorrect particulars had been I.T.A.NOs. In case of businessman, if a particular transaction of sale is not shown in the books, it would amount to concealment of particulars of income while sale is shown but at a lesser value, it would amount to furnishing of inaccurate particulars of income. Explanation 1 to section 271(1) cannot be applied where charge against the Assessee is furnishing of inaccurate particulars of income since it provides a deeming fiction qua concealment of particulars of income only and consequently cannot be extended to a case where charge against the Assessee is furnishing of inaccurate particulars of income. The AO as is apparent from the penalty orders has not satisfied about the concealment of particulars of income or furnishing of inaccurate particulars of income on the part of the assessee. There can be no dispute that everything would depend upon the return filed because that is the only document, where the assessee can furnish the particulars of his income.


IN INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE BEFORE SHRI D.T. GARASIA, JUDICIAL MEMBER AND SHRI O.P. MEENA, ACCOUNTANT MEMBER I.T.A. No.878/Ind/2016 Assessment Year: 2008-09 Smt. Chhaya A.Raje, ITO, E-2/57, Arera Colony, Vs. 1(1), Bhopal Bhopal.PAN: AAUPR8392Q Appellant Respondent I.T.A. No.879/Ind/2016 Assessment Year: 2008-09 Shri Amit A. Raje, ITO, E-2/57, Arera Colony, Vs. 1(1), Bhopal Bhopal. PAN: AASPR69061P Appellant Respondent I.T.A. No.880/Ind/2016 Assessment Year: 2008-09 Shri Anil Anat Raje, ITO, E-2/57, Arera Colony, Vs. 2(3), Bhopal Bhopal. PAN: AAUPR8628K I.T.A.NOs.878, 879 & 880/Ind/2016 A.Ys.2008-09 Smt.Chhaya Raje, Shri Amit A. Raje & Sh Anil Anant Raje Page 2 of 28 Appellant Respondent Appellant by Shri Hitesh Chimnani, C. A. Respondent by Shri Mohd. Javed, Sr. DR 05.10.2016 Date of hearing 05.10.2016 Date of pronouncement O R D E R PER O.P. MEENA, ACCOUTANT MEMEBR. These three appeals are filed by assessees of same group against separate orders of ld. Commissioner of Income-tax (Appeals)-I, Bhopal [hereinafter referred to as CIT(A)] all dated 30.06.2016 and pertain to assessment year 2008-09 as against imposition of penalty orders passed in case of respective assessees by ITO, 1(1), Bhopal. [hereinafter referred to as AO]. Since facts are common in all above cases, we, for sake of convenience, are disposing of all these appeals by this common order. 2. following grounds have been taken:- I.T.A.NOs.878, 879 & 880/Ind/2016 A.Ys.2008-09 Smt.Chhaya Raje, Shri Amit A. Raje & Sh Anil Anant Raje Page 3 of 28 I.T.A.No. 878/Ind/2016: That ld. CIT(A) erred in sustaining levy of penalty of Rs. 3,10,000/- u/s 271(1)(c) on account of addition made u/s 2(22)(e) of Income-tax Act, 1961, by ld. AO. I.T.A.No. 879/Ind/2016: That ld. CIT(A) erred in sustaining levy of penalty of Rs. 3,30,000/- u/s 271(1)(c) on account of addition made u/s 2(22)(e) of Income-tax Act, 1961, by ld. AO. I.T.A.No. 880/Ind/2016: That ld. CIT(A) erred in sustaining levy of penalty of Rs. 2,50,000/- u/s 271(1)(c) on account of addition made u/s 2(22)(e) of Income-tax Act, 1961, by ld. AO. 3. Since facts are common in all appeals, we for sake of brevity shall discuss facts in case of Smt. Chhaya A. Raje and decision shall be binding on other two assessees also. 4. Facts of case are that assessee had filed its income tax return for assessment year 2008-09 on 27.07.2008 declaring total income of Rs. 3,25,400/-. During I.T.A.NOs.878, 879 & 880/Ind/2016 A.Ys.2008-09 Smt.Chhaya Raje, Shri Amit A. Raje & Sh Anil Anant Raje Page 4 of 28 course of assessment proceedings, AO found that assessee received loan of Rs. 9,00,000/-. AO, therefore, made addition of Rs. 8,97,500/- as deemed dividend u/s 2(22)(e) of Act. Thereafter, AO initiated penalty proceedings u/s 271(1)(c) of Act on account of furnishing of inaccurate particulars. Since AO was not satisfied with explanation of assessee, he levied penalty u/s 271(1)(c) of Act of Rs. 3,10,000/-. 5. matter carried to ld. CIT(A) and ld. CIT(A) has confirmed penalty. 6. Ld. Counsel for assessee submitted written synopsis, which is on record. He contended that assessee has taken loan for repayment of her housing loan. At time of taking loan from company, she was not aware of technical provisions of Act. It is also submitted that in normal provision, loan taken from company cannot be income, it is only because of deeming provision that said loan has been taxed as income u/s 2(22)(e) of Act. As soon as assessee was made aware of this deeming I.T.A.NOs.878, 879 & 880/Ind/2016 A.Ys.2008-09 Smt.Chhaya Raje, Shri Amit A. Raje & Sh Anil Anant Raje Page 5 of 28 provision of Section 2(22)(e) of Act being applicable in her case. assessee accepted same and has also deposited tax along with interest due under Income Tax Act as raised. It is undisputed fact that Assessing Officer noticed about said loan transaction from Audited Balance Sheet of Aartech Solonics Limited. assessee is substantial shareholder of said company and if intention of assessee was concealment of income, she could have hidden said transaction but assessee had disclosed all particulars of transaction. tax laws in our Country are so complex and complicated that even person specializing in this field, including tax administrators, may not understand law in correct perspective or particular provision may go unnoticed because of number of amendments made to tax enactments from year to year. Under these circumstances, it would be travesty of truth and justice to hold that Assessee (not expert in tax laws) ought to have known correct law and comply therewith, even though she was not aware of provisions. assessee filed her Income Tax I.T.A.NOs.878, 879 & 880/Ind/2016 A.Ys.2008-09 Smt.Chhaya Raje, Shri Amit A. Raje & Sh Anil Anant Raje Page 6 of 28 Return with help of Tax Consultant and said (then) tax consultant did not advise properly about inclusion of loan received from Company as deemed dividend in her return. return cannot be said to be "false" unless there is element of deliberateness in it. But where assessee does not include particular item in taxable income under bona fide belief that she is not liable so to include it, it would not be right to condemn return as "false" return inviting imposition of penalty. Further, income was not actually accrued to appellant and only because of deeming provision it was treated as income and it is also submitted that in form of return there was no provision for disclosing deemed dividends under 2(22)(e) of Act. conspectus of Explanation to section 271(1)( c) makes it clear that statute visualized assessment proceedings and penalty proceedings to be wholly distinct and independent of each other. That deeming fiction as to "income" should not be extended to "concealment" also. That Part of Explanation to section 271(1)(c) comes into operation when, if assesse I.T.A.NOs.878, 879 & 880/Ind/2016 A.Ys.2008-09 Smt.Chhaya Raje, Shri Amit A. Raje & Sh Anil Anant Raje Page 7 of 28 fails to offer explanation or offers explanation which is found by Assessing officer or Commissioner (Appeals) or Commissioner to be false then amount added or disallowed would be deemed to be concealed income. This Explanation can, therefore, be applied only where assessee has either not offered any explanation or where he has offered explanation, same is found to be false by AO. ITO must have some definite evidence to refuse assessee's claim or evidence or explanation. Assessing Officer cannot invoke provision of section 271(1)(c) on basis of routine and general presumptions. Assessing officer has not given any reasons regarding his satisfaction about concealment of particulars of income or furnishing inaccurate particulars of income. essence of part B of explanation is that person must provide explanation which is bona fide and he should substantiate that explanation by some evidence with him. If he fails to do so, his explanation may be treated as untenable. But when assessee is able to offer reasonable explanation based on some evidence, ITO cannot invoke I.T.A.NOs.878, 879 & 880/Ind/2016 A.Ys.2008-09 Smt.Chhaya Raje, Shri Amit A. Raje & Sh Anil Anant Raje Page 8 of 28 part B of explanation unless he has given finding based on some contradictory evidence to disapprove that explanation offered by assessee which assessee is not able to substantiate and fails to prove that such explanation is bona fide and that all facts relating to same and material to computation of his total income have been disclosed by him. Hence, assesse had disclosed all relevant material facts for purpose of Computation of total income. When assessee had furnished all material facts for purpose of computation of total income Assessing Officer was duty bound to calculate correct total income in accordance with law, which might have been different than total income calculated by assessee. Mere fact that Assessing Officer while discharging his duty was recalculating total income in accordance with law which was not same as calculated by assessee, it could not be held that assessee had concealed particulars of his income or had furnished inaccurate particulars of such income or there was deemed concealment in accordance with I.T.A.NOs.878, 879 & 880/Ind/2016 A.Ys.2008-09 Smt.Chhaya Raje, Shri Amit A. Raje & Sh Anil Anant Raje Page 9 of 28 Explanation I to section 271(1)(c). That from above facts, it is clearly established that assessee had no intention to conceal any particulars of her income or furnish inaccurate particulars thereof within meaning of section 271(1)(c) of Act. assessee also refuted finding of AO that there was any gross neglect on part of assessee in returning correct income as assessee had placed all facts without withholding any material from AO. Deemed Dividend is fiction created by law. It has held in case of CIT v. Baroda Tin Works [221 ITR 661 (Guj)] "that fiction of Deemed income is not acceptable to penalty proceedings so as to raise presumption about concealment of such income." initiation of penalty has been on count of furnishing of inaccurate particulars, but penalty has been levied on account of "concealment" and thus penalty so levied deserves to be deleted on this count alone. Ld. Counsel for assessee further placed reliance on following decisions :- I.T.A.NOs.878, 879 & 880/Ind/2016 A.Ys.2008-09 Smt.Chhaya Raje, Shri Amit A. Raje & Sh Anil Anant Raje Page 10 of 28 Sr. Name of case Citation No 1 ITO v Prakash Narain 2691/Delhi/2013 2 Sadana Brothers Sales (P.) 18 ITJ 547 (20ll)(Trib-Indore) 3 CIT v Sadana Brothers Sales 23 ITJ 260 (2014)(MP) 4 Gitanjali Ghate V DCIT 6560/Mum/2010 5 ITO v (Late) Dr. 564/Madras/20ll 6 CIT v Baroda Tin 2211TR 661 (Gujarat) 7 CIT v Reliance Petro products 322 ITR 158 (SC) 8 Laxmibai v CIT (1982) 11 Taxman 147 (MP) 9 Sunil Chandra Vohra 127 J 100 (Mumbai-Trib) 7. Ld. Counsel for assessee concluded his arguments and finally submitted that AO at stage of assessment initiated penalty proceedings on account of furnishing inaccurate particulars of income, while at time of completion of penalty order, he levied penalty on account of concealment of income, which is not justified and, therefore, prayed that penalty so levied may very kindly be deleted in all these appeals, as facts are identical. 8. We have gone through provisions of Sec. 271(1)(c). We noted that penalty u/s 271(1)(c) is leviable if AO is satisfied I.T.A.NOs.878, 879 & 880/Ind/2016 A.Ys.2008-09 Smt.Chhaya Raje, Shri Amit A. Raje & Sh Anil Anant Raje Page 11 of 28 in course of any proceedings under Income Tax Act that any person has concealed particulars of his income or furnished inaccurate particulars of income. From assessment order we noted that there is no indication which speaks of AO being satisfied during course of assessment that Assessee has committed default as stipulated u/s 271(1)(c). No doubt, legislature has inserted sub-section (1B) in Sec. 271 by Finance Act, 2008 w.e.f. 1.4.1989 provided that direction for initiation of penalty proceedings in order of assessment shall be deemed to constitute such satisfaction. In assessment we find that there is no such direction. Direction is given only to staff to issue AO, DN & Challan & Pen. Notice u/s 271(1)(c) . This, in our opinion, does not tantamount to direction for initiation of penalty proceedings u/s 271(1)(c) as AO has not uttered anything in assessment order in this regard. action of AO, in our opinion, is totally illegal and does not meet requirement of Sec. 271(1)(c) even after amendment made by Finance Act, 2008. In case of Ms. Madhushree I.T.A.NOs.878, 879 & 880/Ind/2016 A.Ys.2008-09 Smt.Chhaya Raje, Shri Amit A. Raje & Sh Anil Anant Raje Page 12 of 28 Gupta British Airways Plc vs. Union of India, 317 ITR 107 (Del), scope of amendment was explained by Hon'ble Delhi High Court as under : In our opinion, impugned provision only provides that order initiating penalty cannot be declared bad in law because it states penalty proceedings are initiated, if otherwise it is discernible from record that AO has arrived at prima facie satisfaction for initiation of penalty proceedings. issue is of discernibility of satisfaction arrived at by AO during course of proceeding before him. presence of prima facie satisfaction for initiation of penalty proceedings was and remains jurisdictional fact which cannot be wished away as provision stands even today, i.e. post amendment. I.T.A.NOs.878, 879 & 880/Ind/2016 A.Ys.2008-09 Smt.Chhaya Raje, Shri Amit A. Raje & Sh Anil Anant Raje Page 13 of 28 If there is no material to initiate penalty proceedings; assessee will be entitled to recourse to court of law. 9. This is settled law that penalty proceedings and assessment proceedings are different. penalty proceedings can be initiated on two charges i.e. i) concealment of particulars of income and ii) furnishing of inaccurate particulars of income. Both charges are entirely different. If proceedings are initiated on charge of concealment, then penalty cannot be levied on charge of furnishing of inaccurate particulars of income and vice versa. Thus, there must be clear finding about charge for which penalty is imposed or initiated. It is incumbent upon AO to state whether penalty was being levied for concealment of income or for furnishing of inaccurate particulars of income. In absence of such findings, order would be bad in law. case of New Sorathia Engineering Co. Ltd., 282 ITR 642, Hon ble Gujarat High Court has held as under: - I.T.A.NOs.878, 879 & 880/Ind/2016 A.Ys.2008-09 Smt.Chhaya Raje, Shri Amit A. Raje & Sh Anil Anant Raje Page 14 of 28 It is incumbent upon assessing officer to state whether penalty was being levied for concealment of particulars of income by assessee or whether any inaccurate particulars of income had been furnished by assessee. Held, that penalty order and order of Commissioner (Appeals) showed that no clear cut finding had been reached. Tribunal had failed to appreciate this legal issue. ration in CIT V. Manu Engineering Works 132 ITR 306 (Guj) was applicable and order of penalty could not be upheld by Tribunal. order was invalid. 10. In case of Commissioner of Income Tax V. Rajan and Co., 291 ITR 340 (Del), wherein it is held that provision of section 271 (1) (c) of Income Tax 1961 would require proper application of mind and recording of at least bare minimum opinion on part of AO that case for initiation of penalty proceeding was made as there was concealment of income or that incorrect particulars had been I.T.A.NOs.878, 879 & 880/Ind/2016 A.Ys.2008-09 Smt.Chhaya Raje, Shri Amit A. Raje & Sh Anil Anant Raje Page 15 of 28 furnished by assessee with intention to avoid payment of taxes. This view is supported by various decisions of High Court therefore it is not necessary to discuss other judgment on issue. 11. AO has not made out any specific charge either of concealment of particulars of income or furnishing of inaccurate particulars of income. penalty u/s 271(1) (c) can be levied for either of charge. penalty order simply states that penalty is attracted on this addition as it is mandatory and automatic. It does not state for what default penalty is levied Sec. 271(1) (c) (iii) is expressly clear that penalty can be levied for concealment of particulars of income or furnishing of inaccurate particulars of income. It is particulars of income which is common subject matter of both charges. word conceal as per Webster s Dictionary means to hide, withdraw, or remove from observation; cover or keep from sight; to keep secret; to avoid disclosing or divulging. That means non disclosure of particulars of income. On other hand, where particulars I.T.A.NOs.878, 879 & 880/Ind/2016 A.Ys.2008-09 Smt.Chhaya Raje, Shri Amit A. Raje & Sh Anil Anant Raje Page 16 of 28 are disclosed but such disclosure is not correct, true or accurate, it would amount to furnishing of inaccurate particulars of income. For example, in case of businessman, if particular transaction of sale is not shown in books, it would amount to concealment of particulars of income while sale is shown but at lesser value, it would amount to furnishing of inaccurate particulars of income. 12. It is pertinent to note that thrust of legislature is upon particulars of income which are either concealed or furnished inaccurately by assessee. Therefore, one must understand meaning of words particulars of income . Income Tax Tribunal had to consider meaning of expression furnishing of inaccurate particulars of income appearing in section 271(1) (c) in case of Kanbay Software India (P) Ltd, 122 TTJ 721 (Pune). It was held that expression particular refers to facts, details, specifics or information about someone or something. Thus, details or information about income would deal with factual details of income and cannot be extended to areas which are I.T.A.NOs.878, 879 & 880/Ind/2016 A.Ys.2008-09 Smt.Chhaya Raje, Shri Amit A. Raje & Sh Anil Anant Raje Page 17 of 28 subjective such as status of taxability of income admissibility of deduction and interpretation of law. Accordingly, it was held that mere rejection of legal claim would not amount to furnishing of inaccurate particulars of income. This view is fortified by Supreme Court Judgment in case of Reliance Petroproducts, 322 ITR 158 SC. In this case, claim of Assessee u/s 36(1) (iii) was rejected by AO and order of AO was upheld by tribunal. As result thereof, penalty u/s 271(1) (c) was imposed on account of furnishing of inaccurate particulars of income. penalty was held to be illegally imposed by tribunal since factual details of income furnished by Assessee were found to be correct. matter ultimately reached SC and Hon ble court upheld view of Tribunal by holding that mere making of claim, which is not sustainable in law, by itself, will not amounting to furnishing inaccurate claim of furnishing inaccurate particulars regarding income of assessee. I.T.A.NOs.878, 879 & 880/Ind/2016 A.Ys.2008-09 Smt.Chhaya Raje, Shri Amit A. Raje & Sh Anil Anant Raje Page 18 of 28 13. Explanation 1 to section 271(1) (c) cannot be applied where charge against Assessee is furnishing of inaccurate particulars of income since it provides deeming fiction qua concealment of particulars of income only and consequently cannot be extended to case where charge against Assessee is furnishing of inaccurate particulars of income. 14. On other hand, where charge against Assessee is furnishing inaccurate particulars of income, AO has to establish either that Assessee has not disclosed particulars of income under main provisions or case of Assessee falls within scope of deeming fictions created under Explanations. For example, Assessee might not disclose particular sales or dividend income or income from any source. Such instances would fall under main provisions itself. In such cases, burden is on AO to establish existence of charge on basis of material on record. 15. Explanation 1 to section 271(1) (c) states that amount added or disallowed in computing total income of I.T.A.NOs.878, 879 & 880/Ind/2016 A.Ys.2008-09 Smt.Chhaya Raje, Shri Amit A. Raje & Sh Anil Anant Raje Page 19 of 28 assessee shall be deemed to be income in respect of which particulars have been concealed. This deeming provision is not absolute one but is rebuttable one. It only shifts onus on assessee. Explanation 1 refers to two situations in which presumption of concealment of particulars of income is deemed. It is not applicable where charge against assessee is furnishing inaccurate particulars of income. first situation is where assessee in respect of any fact material to computation of his total income fails to offer explanation or offers explanation, which is found by AO or Commissioner to be false. second situation is where assessee in respect of any facts material to computation of his total income offers explanation, which, assessee is not able to substantiate and also fails to prove that such explanation was bona fide one and that all facts relating to computation of total income have been disclosed by him. presumption available under explanation to section 271(1) (c), cannot be I.T.A.NOs.878, 879 & 880/Ind/2016 A.Ys.2008-09 Smt.Chhaya Raje, Shri Amit A. Raje & Sh Anil Anant Raje Page 20 of 28 drawn unless case of assessee falls under either of clauses (a) or (b). 16. In present case, AO has not brought out any specific charge for which penalty has been imposed on assessee u/s 271(1) (c) of Act. He has not brought out whether assessee has concealed particulars of income or whether assessee has furnished inaccurate particulars of income. AO has not initiated proceedings for any particular charge. 17. AO initiated penalty without any mention of any particular default and levied same again without mentioning any specific charge. In CIT v. Atul Mohan Bindal (2009) 9 SCC 589, where Hon ble Supreme Court was considering same provision, it observed that assessing officer has to be satisfied that person has concealed particulars of his income or furnished inaccurate particulars of such income. Thus satisfaction of AO about concealment of particulars of income or furnishing of inaccurate particulars of such income is essential before I.T.A.NOs.878, 879 & 880/Ind/2016 A.Ys.2008-09 Smt.Chhaya Raje, Shri Amit A. Raje & Sh Anil Anant Raje Page 21 of 28 levying any penalty u/s 271(1)(c). AO as is apparent from penalty orders has not satisfied about concealment of particulars of income or furnishing of inaccurate particulars of income on part of assessee. On this basis itself penalty stand deleted. 18. ld. DR simply relied on decision of Union of India vs. Dharmendra Textile Processors 306 ITR 277 as well as Dilip N Shroff v JCIT 291 ITR 519 and pleaded that levy of penalty is automatic and mandatory, thus Assessing Officer was justified in imposition of penalty. We find that in case of Dharmendra Textiles Processors (supra), Hon ble Supreme court has held that penalty u/s 271(1) (c) is civil liability and that wilful concealment and men s rea are not essential ingredients for attracting civil liability as is case in matter of prosecution u/s 276 of Act. It has further been held in that case that mens rea is not essential ingredient for imposing penalty. Hon ble Supreme Court in this case nowhere held that if addition is made, penalty is automatic. Even in Union of India v. I.T.A.NOs.878, 879 & 880/Ind/2016 A.Ys.2008-09 Smt.Chhaya Raje, Shri Amit A. Raje & Sh Anil Anant Raje Page 22 of 28 Dharmendra Textile Processors reported in (2008) 306 ITR 277 (SC), Supreme Court has observed that finding as to suppression or inaccurate particulars in return are necessary for attracting penal provision under section 271(1) (c) of Income tax Act, 1961. This judgment does not overrule Explanations appended to section 271(1) (c). It even held that object behind enactment of section 271(1) (c) read with Explanations indicates that said section has been enacted to provide for remedy for loss of revenue. penalty under that provision is civil liability. Thus, ratio laid down in this judgment was confined to treating wilful concealment is not essential for imposing penalty u/s 271(1) (c) of Act. Where assessee genuinely makes claim for particular deduction by disclosing all necessary facts relating to same, that cannot be regarded to be concealment even if assessee s claim is rejected. This is settled law that penalty proceedings are distinct from assessment proceedings and, therefore, if any addition is made, it does not mean that I.T.A.NOs.878, 879 & 880/Ind/2016 A.Ys.2008-09 Smt.Chhaya Raje, Shri Amit A. Raje & Sh Anil Anant Raje Page 23 of 28 penalty will automatically be levied. In penalty proceedings assessee is given opportunity to explain his case if he successfully explains his position and is not trapped within parameters of section 271(1) (c) along with Explanations deeming concealment of income, penalty cannot be imposed. Section 271(1) (c) deals with two situations for imposing penalty; has concealed particulars of his income; or has furnished inaccurate particulars of such income. Explanation 1 is applicable only in case of first situation i.e. amount added or disallowed in total income be deemed to represent income in respect of which particulars have been concealed. Now question arises whether in this case can one say that assessee has filed inaccurate particulars of income. Inaccurate particulars means that particulars are incorrect or not accurate or not correct. That means, particulars have not been furnished in correct/exact manner as is required to be furnished to determine correct income chargeable to tax of assessee. I.T.A.NOs.878, 879 & 880/Ind/2016 A.Ys.2008-09 Smt.Chhaya Raje, Shri Amit A. Raje & Sh Anil Anant Raje Page 24 of 28 19. Hon ble Delhi High Court in case of CIT Vs M. S. Bindra & Sons P. Ltd 336 ITR 125 (Delhi) has observed as under in respect of Dharmendra Textiles Processor decision and Dilip N Shroff decision as relied by A.O. 20. In fact, section 271(1) (c) came to be interpreted by Apex Court in Dharmendra Textile Processors case (supra). three Judge Bench of Apex Court over-ruled decision in Dilip N. Shroff v. Jt. CIT (2007) 291 ITR 519 (SC) and approved decision in Chairman, SEBI v. Shriram Mutual Fund (2006) 5 SSC 361. In said case, Supreme Court held: - 27. Explanation appended to section 271(1) (c) of Income-tax Act entirely indicate element of strict liability on assessee for concealment or for giving inaccurate particulars while filing return. judgment in Dilip N. Shroffs case (2007) 8 SCALE 304 (SC) has not considered effect and relevance of section I.T.A.NOs.878, 879 & 880/Ind/2016 A.Ys.2008-09 Smt.Chhaya Raje, Shri Amit A. Raje & Sh Anil Anant Raje Page 25 of 28 276C of Income Tax Act. object behind enactment of section 271(1) (c) read with Explanations indicates that said section has been enacted to provide for remedy for loss of revenue. penalty under that provision is civil liability as is case in matter of prosecution under section 276C of Income- tax Act. 21. aforesaid decision has taken note of in CIT v. Reliance Petroproducts (P) Ltd. (2010) 322 ITR 158 (SC). While considering phrase concealment of particulars, Apex Court referred to section 271 and held as follows: - 9. Therefore, it is obvious that it must be shown that conditions under section 271(1)(c) must exist before penalty is imposed. There can be no dispute that everything would depend upon return filed because that is only document, where assessee can furnish particulars of his income. When such particulars are found to be inaccurate, liability would arise. In Dilip N. Shroff v. Joint CIT (2007) 6 SSC 329, this Court explained terms concealment of income and furnishing inaccurate particulars. Court went on to hold therein that in order to attract penalty under section 271(1) (c), mens rea I.T.A.NOs.878, 879 & 880/Ind/2016 A.Ys.2008-09 Smt.Chhaya Raje, Shri Amit A. Raje & Sh Anil Anant Raje Page 26 of 28 was necessary, as according to Court, word inaccurate signified deliberate act or omission on behalf of assessee. It went on to hold that clause (iii) of section 271(1) (c) provided for discretionary jurisdiction upon assessing authority, inasmuch as amount of penalty could not be less than 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 term inaccurate particulars was not defined anywhere in Act and, therefore, it was held that furnishing of assessment of value of property may not by itself be furnishing inaccurate particulars, It was further held that AO must be found to have failed to prove that his explanation is not only not bona fide but all facts relating to same and material to computation of his income were not disclosed by him. It was then held that explanation must be preceded by finding as to how and in what manner, assessee had furnished particulars of his income. Court ultimately went on to hold that element of mens rea was essential. It was only on point of mens rea that judgment in Dilip N. Shroff v. Joint CIT was upset. In Union of India v. Dharmendra Textile Processors after quoting from section 271 extensively and also considering section 271(1) (c), Court came to conclusion that since section 271(1) (c) indicated element of strict liability on assessee for concealment or for giving inaccurate particulars while filing return, there was not necessity of mens rea. 271(1) (c) read with Explanations indicated with said section was for providing remedy for loss of revenue and such penalty was I.T.A.NOs.878, 879 & 880/Ind/2016 A.Ys.2008-09 Smt.Chhaya Raje, Shri Amit A. Raje & Sh Anil Anant Raje Page 27 of 28 civil liability and, therefore, willful concealment is not essential ingredient for attracting civil liability as was case in matter of prosecution under section 276C of Act. basic reason why decision in Dilip N Shroff v. Joint CIT was overruled by this Court in Union of India v. Dharmendra Textile Processors was that according to this Court effect and difference between section 271(1) (c) and section 276C of Act was lost sight of in case of Dilip N Shroff v. Joint CIT. However, it must be pointed out that in Union of India v. Dharmendra Textile processors, no fault was found with reasoning in decision in Dilip N. Shroff v. Joint CIT, where court explained meaning of terms conceal and inaccurate. It was only ultimate inference in Dilip N. Shroff v. Joint CIT to effect that mens rea was essential ingredient for penalty under section 271(1) (c) that decision in Dilip N. Shroff v. Joint CIT was overruled. 22. From perusal of aforesaid decisions, it is apparent that in none of decision of Hon ble Supreme Court as relied by ld. DR, it has been held that penalty u/s 271 (1) (c) is mandatory or automatic wherever addition or disallowances are made by AO. assessing officer merely observed that penalty is mandatory as he was fully aware of that no charge as specified u/s 271 (1) (c) was leviable against assessee. On this basis also, I.T.A.NOs.878, 879 & 880/Ind/2016 A.Ys.2008-09 Smt.Chhaya Raje, Shri Amit A. Raje & Sh Anil Anant Raje Page 28 of 28 penalty was wrongly levied just for purpose of levying penalty. We, accordingly reverse order of ld. CIT(A) and consequently, delete penalty order passed by Assessing Officer u/s 271(1)(c). 23. In result, all appeals filed by assessees are allowed. order has been pronounced in open court on 5th October, 2016. Sd/- Sd/- (D.T.GARASIA) (O.P.MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated : 5th October, 2016. CPU* Copy of order forwarded to : Assessee PCIT- Indore/ CIT(A)-I, Indore, AO DR- Indore Bench/ Guard file By order Assistant Registrar of ITAT, Indore Bench Chhaya A. Raje v. ITO, 1(1), Bhopal
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