THE COMMISSIONER OF INCOME TAX vs. M. S. BINDRA & SONS P. LTD

Whether the Reporters of local papers may be allowed to see the judgment?

To be referred to the Reporter or not?

Whether the judgment should be reported in the Digest?

The present appeal has been filed under Section 260A of Income Tax Act, 1961 (for brevity “Act”) challenging the order dated 20th July, 2009 passed by the Income Tax Appellate Tribunal (in short “Tribunal”) in ITA No. 504/Del/2009, for the Assessment Year 2001- 2002.

Mr. Sanjeev Sabharwal, learned counsel for the revenue submitted that the Tribunal had erred in law in dismissing the revenue‟s appeal whereby the penalty under Section 271(1)(c) of the Act amounting to ` 45,40,297/- imposed by the Assessing Officer (in short, “AO”) had been deleted. Mr. Sabharwal further relied upon a judgment 2010:DHC:4858-DB

In fact, Section 271(1)(c) came to be interpreted by the Apex Court in Union of India & Ors. vs. Dharamendra Textile Processors & Ors. (2008) 306 ITR 277 (SC). The three Judge Bench of the Apex Court over-ruled the decision in Dilip N. Shroff vs. Joint CIT (2007) 291 ITR 519 (SC) and approved the decision in Chairman, SEBI vs. Shriram Mutual Fund and Anr. (2006) 5SCC 361. In the said case, the Supreme Court held:- “27. The Explanations appended to section 272(1)(c) of the Income-tax Act entirely indicate the element of strict liability on the assessee for concealment or for giving inaccurate particulars while filing the return. The judgment in Dilip N. Shroff’s case [2007] 8 Scale 304 (SC) has not considered the effect and relevance of Section 276C of the Income-tax Act. The object behind the enactment of section 271(1)(c) read with the Explanations indicates that the said section has been enacted to provide for a remedy for loss of revenue. The penalty under that provision is a civil liability as is the case in the matter of prosecution under Section 276C of the Income-tax Act.”

The aforesaid decision was taken note of in Commissioner of Income Tax vs. Reliance Petroproducts Pvt. Ltd.(2010) 322 ITR 158 (SC). While considering the phrase „concealment of particulars‟, the Apex Court referred to Section 271 and held as follows:- “9.Therefore, it is obvious that it must be shown that the conditions under Section 271(1)(c) must exist before the penalty is imposed. 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. When such particulars are found to be inaccurate, the liability would arise. In Dilip N. Shroff v. 2010:DHC:4858-DB

In the present case, we find that both the Commissioner of Income Tax (Appeals) [in short, “CIT(A)”] and the Tribunal have given cogent reasons for setting aside the penalty levied under Section 271(1)(c) of the Act. The relevant portion of the impugned order of the Tribunal is reproduced hereinbelow:- “6. None appeared on behalf of the assessee. We, therefore, heard the learned DR and gone through the records. In view of the categorical finding of the CIT (Appeals) that the issue is contentious in nature and is debatable, therefore, it would not be a case of concealment of penalty. Otherwise also, the assessee having disclosed all the facts in the return of income filed with the department and having offered the amount under Section 41(1) in assessment year 2002-03 shows the bonafides of the assessee and, therefore, in this account also, it cannot be a ground for concealment to income or furnishing of inaccurate particulars thereof. It was held by the Tribunal in the case of Shobha Trading Company (P) Limited Vs. ITO (1995) 52 ITD 188 (Del.) that penalty for concealment cannot be levied merely because certain deductions, relief or benefits have been denied to the assessee. Accordingly, we do not find any reason to interfere with the order of the CIT (Appeals) and the same is upheld.”

From the aforesaid, it is apparent that the respondent-assessee had made full disclosure and there was neither any concealment of income nor furnishing of inaccurate particulars. In fact, both the CIT(A) and Tribunal have found that the justification furnished by the respondent-assessee was bonafide. Consequently, keeping in view the conclusion of facts arrived at by the Commissioner as well as by the Tribunal, the explanation offered by the respondent-assessee is bona fide and the respondent-assessee‟s case would fall within the ambit of Explanation 1 to Section 271 of Act.

Accordingly, the respondent-assessee is not liable to pay penalty under Section 271(1)(c) of Act and thus the present appeal being devoid of merits is dismissed in limine but with no order as to costs.