THE PRINCIPAL COMMISSIONER OF INCOME TAX 1 vs. INTAS PHARMA LTD.

ORAL ORDER (PER : HONOURABLE MS. JUSTICE SONIA GOKANI ) 1) The revenue is before this Court aggrieved and dissatisfied by an order dated 02/03/2021 passed by the Income Tax Appellate Tribunal, Ahmedabad (“ the ITAT” for short) with the following substantial questions of law; (A) “Whether the Appellate Tribunal has erred in law and on facts in deleting the the penalty under Section 271(1)(c) of the At of Rs.6,13,84,278/- despite the fact that the assesses had made incorrect claim of additional depreciation and further erred in completely ignoring the Explanation I to Section271(1) (c) of the Act?” (B) “Whether the Appellate Tribunal has erred in law and on facts in not appreciating the ratio laid down by the Hon’ble Supreme Court in the case of reported in [2008] 166 Taxman 65 (SC)?” 2) The brief facts leading to the present appeal are as follow;

6) A challenged was made by the Revenue to the said order of the CIT Appeals before the Appellate Tribunal, which was dismissed by the ITAT, on the ground that the Assessing Officer had initiated the penalty for furnishing inaccurate particulars of income but ultimately levied the penalty for concealment of the income and also on the ground of that it was the case of disallowance, and therefore, also it is not the question of concealment of income. More particularly, when there was a full disclosure of the claim on the part of the assessee, penalty was not justified,when rejecting of the claim was on merit. 7) Aggrieved Revenue is before this Court. We have heard the learned Senior Advocate Mr. Manish Bhatt assisted by Mr.Munjal Bhatt has taken us through the orders of the Assessing Officer, CIT Appeals and that of the ITAT with an emphasis that the order of the ITAT is on a wrong premise as the word used in the proceedings under Section 271(1)(c) of the Act is of “concealment of the income” or “furnishing of the inaccurate particulars”, the initiation on the part of the Assessing Officer keep his own and results into its arriving at a conclusion for levying the penalty for other, that may not in any manner of its order under Section 271(1)(c). It is further urged that the reasoning given by the ITAT, holding that, if it is a case of disallowance of the claim of depreciation, there cannot be any question of concealment of income is also too broader. Principles laid down, which requires serious consideration on the part of the Court. It has further urged that the respondent when had been made aware and was conscious of the additional depreciation, which he was not entitled to claim, his wrong claim, has rightly held by the Assessing Officer, has resulted into the penalty under Section 271(1)(c) of the Act, and the appeal deserves consideration. 8)

We have considered the orders of the Assessing Officer, CIT Appeals and ITAT. We have also noticed that respondent had claimed the additional depreciation of Rs.18,47,95,000/- for plant and machinery under Section 32(1)(iia) of the Act, which has been disallowed by them on the ground that the production has been started in the current year by the respondent, and therefore, it cannot be said to have been already engaged in the business of manufacturing. This was construed as furnishing the inaccurate particulars and hence, the Assessing Officer had started the penalty proceedings. It would be to refer to Section 271(1)(c) of the Act at this stage. Section 271. (1) If the Assessing Officer or the Commissioner (Appeals) or the Commissioner in the course of any proceedings under this Act, is satisfied that any person- (c) has concealed the particulars of his income or furnished inaccurate particulars of such income.” 9) We may direct that the person shall pay by way of penalty, as provided under this clause. 10) We could notice that the CIT Appeals and ITAT have considered the disallowance of the claim of depreciation on the part of the authority to hold that the same is not a ground to hold that it is a concealment of income. While so holding, it noticed that the respondent had made a claim of depreciation on the strength of Tax Audit Report, and furthermore, there was a complete disclosure about its claim under Section 80HHC SUPPORTED BY THE CERTIFICATION ISSUED BY CHARTERED ACCOUNTANT. Therefore, it reached to the conclusion that merely because the claim on merit was not granted, the penalty could not be levied. 11) Its quite clear from the detailed discussion on the issue that assessee had not been alleged of not having disclosed any particulars, which it was required to do under the law. It had made a complete disclosure of the claim, which was also certified by the Chartered Accountant. Necessary declarations as required in the prescribed form were also made, therefore, both CIT Appeals and the ITAT were absolutely right in holding that non-allowance of any claim of the assessee would not make the penalty proceedings sustainable under the law. While so holding, ITAT relied upon the decision of the Apex Court rendered in the case of CIT v. Reliance Petroproducts (P) Ltd. [2010] 322 ITR 158 Taxman 322 (SC), wherein, the Apex Court held that making of incorrect claim would not amount to concealment of particulars. Here also, in absence of any furnishing of inaccurate particulars on the part of the respondent of any concealment on his part while making a claim, no proceedings could be initiated of penalty. It fails to understand that additional depreciation was not available to it under the law if claims before the authority concerned, by disclosing all particulars which, it was require to do and if the claim is disallowed, how could it become either the concealment or furnishing of inaccurate particulars. 12) The Apex Court in the case of Reliance Petroproducts (supra) has clearly held that there has to be a concealment of particulars of the income of the assessee or matter to be covered under Section 271(1)(C). Secondly, it must have furnished inaccurate particulars of his income. In the matter before Apex Court it was an admitted position that no information given in the written was found to be incorrect or inaccurate. It was not that any statement made or any details supplied it was found to be factually incorrect. The revenue had argued that submitting an incorrect claim in law for the expenditure or interest would amount to be inaccurate particulars of such income. The Court said that such cannot be the interpretation of the concerned words, the words are clean and simple and in order to expose the assessee to the penalty, unless the case is strictly covered by the Proviso, the penalty provision cannot be invoked and by no stage of imagination the incorrect claim in law can tantamount to furnishing of inaccurate particulars. “ 7. As against this, Learned Counsel appearing on behalf of the respondent pointed out that the language of Section 271(1)(c) had to be strictly construed, this being a taxing statute and more particularly the one providing for penalty. It was pointed out that unless the wording directly covered the assessee and the fact situation herein, there could not be any penalty under the Act. It was pointed out that there was no concealment or any inaccurate particulars regarding the income were submitted in the Return. Section 271(1)(c) is as under:- "271(1) If the Assessing Officer or the Commissioner (Appeals) or the Commissioner in the course of any proceedings under this Act, is satisfied that any person- (c) has concealed the particulars of his income or furnished inaccurate particulars of such income." 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 claim, or the separate items of an account. Therefore, the word "particulars" used in the Section 271(1)(c) would embrace the meaning of the details of the claim made. It is an admitted position in the present case that no information given in the Return was found to be incorrect or inaccurate. It is not as if any statement made or any detail supplied was found to be factually incorrect. Hence, at least, prima facie, the assessee cannot be held guilty of furnishing inaccurate particulars. The Learned Counsel argued that "submitting an incorrect claim in law for the expenditure on interest would amount to giving inaccurate particulars of such income". We do not think that Bindal [2009(9) SCC 589], where this Court was considering the same provision, the Court observed that the Assessing Officer has to be satisfied that a person has concealed the particulars of his income or furnished inaccurate particulars of such income. This Court referred to another decision of this Court in Union of India Vs. Dharamendra Textile Processors [2008(13) SCC 369], as also, the decision in Union of India Vs.Rajasthan Spg. & Wvg. Mills [2009(13) SCC 448] and reiterated in para 13 that:- "