KEMIA INDUSTRIES LIMITED,CHENNAI vs. ITO, CHENNAI

आदेश / O R D E R

Manoj Kumar Aggarwal (Accountant Member)

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29.09.2015. The assessment for the year was framed by Ld. Assessing Officer [AO] 143(3) of the Act on 31.03.2015. The grounds raised by the assessee read as under: - 1. The Commissioner of Income Tax (Appeals) erred in summarily dismissing the appeal by relying on the observations of the Assessing Officer. 2. The commissioner of Income Tax (Appeals) ought to have quashed the penalty Order as the show cause notice issued by the Assessing Officer does not bring out the exact charge against the Appellant. 3. The Commissioner of Income Tax (Appeals) erred in not considering that the advance sale consideration received of Rs.25 Crores is duly disclosed in the balance sheet as on 31.03.2010 itself and also disclosed the gains in this year's balance sheet. 4. The Commissioner of Income Tax (Appeals) erred in not considering the fact that any document filed by the assessee either with the Return or thereafter was found to be inaccurate.Nowhere in the assessment order or in the penalty order, the Assessing Officer found as a fact that any document has been concealed or suppressed by the assessee, and hence the Commissioner of Income Tax (Appeals) ought to have cancelled the penalty. 5. The Learned Commissioner of Income Tax (Appeals) failed to note that before levying penalty, it is the duty of the Assessing Officer to bring incriminating fact/cogent material or evidence from which it could be inferred that the appellant has concealed / deliberately furnished inaccurate particulars of its income. 6. The Commissioner of Income Tax (Appeals) erred in not noticing that the Appellant bonafide believed that transfer of agricultural land is exempt and hence no capital gains was offered for taxation; as such there is neither concealment of income nor furnishing of inaccurate particulars of income. As evident the assessee is aggrieved by confirmation of certain penalty u/s 271(1)(c). In the grounds of appeal, the assessee has assailed the penalty on legal grounds as well as on merits. 2. The Ld. AR, drawing attention to the assessment order, assailed the penalty and placed reliance on various judicial pronouncements. The copies of the decisions have been placed on record. The Ld. AR also submitted that in the absence of specific charge framed in the notice, the penalty is not sustainable in law. For the same, the copies of show- cause notices as issued during the course of penalty proceedings have been placed on record.

ITA No.1276/Chny/2017 - 3 - The Ld. CIT-DR, on the other hand, drawing attention to the penalty order as well as impugned order, justified the penalty by submitting that factual matrix would reveal that the assessee furnished inaccurate particulars of income. 3. Having heard rival submissions and after considering the ratio of various judicial pronouncements, our adjudication would be as given in succeeding paragraphs. Assessment Proceedings 4.1 The facts leading to imposition of penalty are that the assessee being resident corporate assessee is stated to be engaged in real estate activities. The return of income filed by the assessee at loss of Rs.44.64 Lacs was subjected to scrutiny assessment. In the return of income, the assessee reflected agricultural income of Rs.1602.25 Lacs and claimed the same to be exempt from tax. It transpired that 5.82 acres of land was stated to be purchased by the assessee during the year 1995 and the assessee incurred development expenditure from time to time. The assessee held a view that the land falls within the meaning of rural agricultural land in India and therefore, the resultant gains were exempt from tax. The assessee was carrying out agricultural activities on the said land. It was also mentioned in the deed of purchase that the nature of land being bought by the assessee was purely agricultural which was evident from the purchase documents as furnished during the course of assessment proceedings. It was further stated that the assessee initially planted fodder and seasonal crops and later wanted to carry out modern agricultural activity. But due to non-viability of the project, the assessee, in the year 2007, planted mango trees and coconut trees. The assessee also submitted that the land was sold as agricultural land only and it was

ITA No.1276/Chny/2017 - 4 - buyer who had applied for various approvals etc. for conversion of land. The assessee contended that the land was located outside the limits of local municipality and it could not be considered as ‘Capital Asset’ within the meaning of Sec. 2(14) of the Act. 4.2 However, it was noted by Ld. AO that the assessee entered into Joint Development Agreement (JDA) with M/s Akshaya Private Limited (Developer) on 14.12.2009 for the development of said land and constructing residential flats on the land. As per the agreement, the assessee was to provide the land for which 20% of the built-up area was to vest in the assessee. It was opined by Ld. AO that the nature of land automatically changes from agricultural to non-agricultural, once the joint venture agreement is entered into with the developers as held in various judicial decisions. It was also noted by Ld. AO that DTPC (appropriate authority) approval was also obtained in respect of the land on 23/12/2010 for conversion of land into vacant saleable land. The sale deed mentions the fact that land sold was vacant land only at the time of transfer. Therefore, the land was capital asset and income arising from sale thereof would be chargeable to capital gains tax. 4.3 The assessee defended its stand, inter-alia, by submitting that the assessee had transferred agricultural land only. All the approvals and permits were in the name of developer only. However, to avoid any further delay in settling the issue, the assessee pleaded Ld. AO to consider the entire sale proceeds as capital gains and tax the same in this year. Considering the same, Ld. AO bifurcated the sale consideration into ‘business income’ and ‘capital gains’ and re- determined the assessee’s income. As per submissions made before us,

ITA No.1276/Chny/2017 - 5 - the assessment has attained finality and the assessee has paid the outstanding tax demand. 4.4 Consequently, penalty proceedings were initiated by Ld. AO in the body of assessment order as follows: - This amount of demand should be paid within one month and penalty proceedings u/s 271(1)(c) are initiated separately.

Penalty Proceedings 5.1 During penalty proceedings, show-cause notice dated 31.03.2015 proposing levy of penalty was issued to the assessee and the case was posted for hearing from time to time. In letter dated 18.09.2015, the assessee opposed levy of penalty by drawing attention to the factual matrix. The assessee submitted that there was no suppression of facts in the return of income and the assessee fully co-operated with the authorities and submitted revised computation at the insistence of Ld. AO, though the issue was contestable in appeal. The assessee also contended that it acted on certain facts honestly believing it to be sustainable in law and had co-operated with the department in every respect and there was no mala-fide intention to conceal the particulars of income or furnishing of inaccurate particulars of income and therefore, the penalty proceedings were to be dropped. 5.2 The Ld. AO noted that the agricultural income was shown as exempt and but for scrutiny notice, the assessee would not have come forward to file a revised working of its income It was also noticed that the activities spready over to the subsequent years also and though the assessee has accepted the position of law, it has not so far filed any revised return of income. The assessee was getting professional advices

ITA No.1276/Chny/2017 - 6 - and it could not be a case that the assessee did not know the difference between the sale of land as such and sale through joint venture. Therefore, claiming the taxable income to be agricultural income clearly denotes furnishing of inaccurate particulars of income within the meaning of Section 271(1)(c) of the Act. The case laws being relied upon by the assessee including the decision in CIT V/s Reliance Petro Products Private Ltd. (322 ITR 158) were held to be distinguishable. Rather the decision of Hon’ble Apex Court in CIT V/s Mak Data Private Ltd. (38 Taxmann.com 448) was held to be applicable where the penalty was upheld. Finally, penalty was levied for furnishing of inaccurate particulars of income and the same was quantified at Rs.372 Lacs. Appellate Proceedings 6.1 During appellate proceedings, the assessee assailed the penalty on legal grounds and submitted that the show-cause notice issued by Ld. AO did not bring out exact charge against the assessee. The provisions of Sec.271(1)(c) comprises of two parts i.e., concealment of income and furnishing of inaccurate particulars of income. The show-cause notice has to bring out exact charge or exact offence which the assessee has to meet. In the absence of such specific notice, the notice would be invalid as held in various judicial pronouncements including the decision of Hon’ble Karnataka High Court in CIT V/s SAS’s Emerald Meadows (73 Taxmann.com 241) against which Special Leave Petition (SLP) filed by the department stood dismissed by Hon’ble Supreme Court which is reported as 73 Taxmann.com 248. It was further submitted that the assessee sincerely accepted the view of the AO and filed revised working of capital gains and business income. Nowhere in the assessment order or in the penalty order, Ld. AO found that any

ITA No.1276/Chny/2017 - 7 - documents were concealed or suppressed by the assessee. None of the document was held to be inaccurate. All the documents filed before him clearly prove that the land under consideration was agricultural land only. It was this agricultural land that was re-classified as residential land. The assessee had bona-fide belief that the land was agricultural land and the income arising from sale thereof was agricultural income. Merely because a claim has not been accepted in the assessment, it would not follow that the assessee had concealed its income or furnished inaccurate particulars of income as held by Hon’ble Supreme Court in the case of CIT V/s Reliance Petro Products Pvt. Ltd. (322 ITR 158). It was also highlighted that the Joint Venture Agreement was entered into financial year 2009-10 and only supplementary agreement was entered into this year. Without going into the controversy as to whether the income would be assessable in the year of entering into Joint Development Agreement (JDA) or supplementary JDA, the assessee gave a quietus to the possible litigation by accepting the proposal of Ld. AO. 6.2 The Ld. CIT(A) noted that penalty was civil liability and willful concealment was not an essential ingredient for attracting civil liability as per settled legal position. The power to impose penalty depend on the satisfaction of Ld. AO in the course of assessment proceedings. Since Ld. AO concluded that it was a fit case for levy of penalty and recorded his satisfaction while passing the assessment order, the requirements of Sec.271(1B) were duly fulfilled. Accordingly, penalty proceedings were in accordance with law. Regarding consent given by the assessee, the same would not absolve assessee of penal consequence as held by

ITA No.1276/Chny/2017 - 8 - Hon’ble Supreme Court in the case of CIT V/s Mak Data Private Ltd (supra). 6.3 Regarding assessee’s submissions that notice u/s 271(1)(c) did not specify the exact charge i.e., concealment of income or furnishing of inaccurate particulars income, it was seen that assessment proceedings were concluded after detailed discussion with the assessee. The assessee was in real estate business and it would be too far-fetched to believe that income from transfer of land was claimed as exempt income without the knowledge or conscious decision being taken by the assessee especially where they were ably advised by the experienced professionals. The assessee clearly concealed the fact that it was non- agricultural land and by claiming it to be agricultural land in the return of income. The aforesaid fact would not have come to light but for the fact that the case was scrutinized to verify this issue. The assessee also furnished inaccurate particulars of income with regard to what part of income was to be considered under the head ‘business income’ and what part of the income was assessable under the head ‘capital gains’. Therefore, this is a case where both the parts of the offences i.e., concealment of income as well as furnishing of inaccurate particulars of income were involved. The decision of Jaipur Tribunal (Third Member) in the caser of Grass Field Farms and Resorts P. Ltd. (159 ITD 31) was referred to confirm the impugned penalty. Aggrieved, the assessee is in further appeal before us. Our findings and Adjudication 7. Upon careful consideration of factual matrix, we find that the assessee had purchased the impugned land during the year 1995 admeasuring 5.82 acres as agricultural land in Thaiyur ‘B’ Village,

ITA No.1276/Chny/2017 - 9 - Chengelpet Taluk, Kancheepuram District. The said land was subject matter of Joint Development vide agreement dated 14.12.2009 with another entity i.e., M/s Akshaya Private Limited (APL). As per the terms, APL was to develop the property at their own cost and the assessee was entitled for 20% of overall built-up area. It is evident that the agreement happened in financial year 2009-10 relevant to assessment year 2010- 11. Another supplementary agreement was entered into by the assessee on 06.06.2011 which is after necessary approvals obtained by the developer. This supplementary agreement has been entered to bring about changes in the light of approvals granted by the appropriate authorities. Thus, the supplementary agreement has merely revised the terms of the joint development agreement. Though the transaction has happened in AY 2010-11, going by the version of Ld. AO that the Joint Development Agreement (JDA) would crystallize capital gains liability on the assessee, the said transaction would have been taxable in the year of entering into JDA i.e. AY 2010-11. Nevertheless, the assessee has offered the transaction in AY 2012-13 which would lend credence to the argument that the assessee made sincere efforts to put a quietus to the possible litigation by accepting the proposal of Ld. AO. 8. Another fact to be noted is that this land was purchased in the year 1995 and the deed of purchase clearly mentioned that the land was agricultural land only. In fact that assessee incurred development expenditure and initially planted fodder and seasonal crops. But due to non-viability of the project, the assessee in the year 2007, planted mango trees and coconut trees. All these facts would lend credence to assessee’s belief that the land under consideration was an agricultural land only and any income arising there from would be agricultural

ITA No.1276/Chny/2017 - 10 - income only which is exempt from tax. On the basis of said belief, the assessee separately disclosed sale of agricultural land in the financial statements as well as in the computation of income. Upon perusal of these documents, it could be well said that the transaction was duly disclosed in the financial statement as well as in the return of income and it could not be said that there was any concealment of particulars of income by the assessee. No mala-fide intention could be attributed on the part of the assessee to conceal the income or to furnish inaccurate particulars of income. The assessee made a claim in the return of income which was not accepted by Ld. AO. However, this fact alone would not necessarily justify imposition of penalty as per the decision of Hon’ble Supreme Court in the case of CIT V/s Reliance Petro Products Private Ltd. (322 ITR 158). The case law of Hon’ble Apex Court in CIT V/s Mak Data Private Ltd. (38 Taxmann.com 448) as cited by lower authorities is a case where offer of surrender of certain amount received as share application money was made by assessee in view of detection made by Assessing Officer in search conducted in case of assessee's sister concern. It was held that said surrender of income was not voluntary in nature and therefore, the authorities were justified in levying penalty under section 271(1)(c). However, the facts in the present case are different and the ratio of this decision, in our considered opinion, is not applicable to the facts of the present case. Rather the ratio of CIT V/s Reliance Petro Products Private Ltd. (supra) would apply. Similar is the ratio of decision of Hon’ble High Court of Madras in M.N.Rangachari V/s second ITO (23 TTJ 530) as well as in CIT Vs D.Harindran (97 Taxmann.com 297).

ITA No.1276/Chny/2017 - 11 - 9. The last aspect of the matter is that though the penalty has been initiated by Ld. AO in the body of assessment order, however, the show cause notice issued to the assessee does not specify the limb for which the penalty was being initiated i.e. for furnishing of inaccurate particulars of income or for concealment of income. This issue, though raised before Ld. CIT(A), has been decided against the assessee wherein it has been held that both the limbs of Sec.271(1)(c) were applicable. However, we find that it is settled position of law that exact charge should be framed against the assessee in the show cause notice and in the absence of such specific charge, the penalty proceedings become null and void as held by larger bench of Hon’ble High Court of Bombay in the case of Mohd. Farhan A.Shaikh V/s DCIT (125 Taxmann.com 253; 11.03.2021). The Hon’ble Court has, inter-alia, held that defect in notice would vitiate penalty proceedings. From the perusal of penalty order, it could be seen that the penalty was levied by Ld. AO for furnishing of inaccurate particulars of income only and not for concealment of income. 10. Most importantly, Ld. AR has also relied on the decision of Hon’ble High Court of Madras in the case of Babuji Jacob Vs. lTO (430 lTR 259; 08.12.2020). Upon perusal of the same, we find that the ratio of this decision is squarely applicable to the facts of the present case and this decision cover the issue in assessee’s favor on legal grounds as well as on merits. In that case, Ld. AO had noted that the land sold by assessee claiming it to be agricultural land was actually a capital asset attracting tax. Accordingly, Ld. AO made additions to income of the assessee and initiated penalty proceedings under section 271(1)(c). The Hon’ble Court held that since the assessee had mentioned about sale of its land in his return of income but only mistakenly claimed the same as agricultural

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land and there was no specific finding regarding concealment of income against assessee, impugned penalty proceedings under section 271(1)(c) was to be set aside. The assessee had produced all facts of transactions, namely sale documents, materials, etc., before Ld. AO and the entire amount of sale consideration was received by assessee through banking channels. It was also observed by Hon’ble Court that the impugned notice under section 271(1)(c) did not specifically state as to whether assessee was guilty of concealing particulars of his income or had furnished inaccurate particulars of income. Therefore, there was no specific finding regarding concealment of income against assessee. Hence, the impugned penalty was invalid and same was to be set aside. The adjudication of Hon’ble Court was as under: - 18. The first aspect is as to whether there is any concealment of particulars of the assessee's income. At the first instance i.e. during the scrutiny assessment, the assessee sent a letter dated 15.3.2016 explaining the entire transaction wherein he had stated that while filing the return of income, he was under the impression that both the properties were agricultural lands and that there was no tax liability. Consequently, since one of the properties namely the property at Egattur Village was treated to be a capital asset, the long term capital gains were computed and the assessee requested for deduction under Section 54F of the Act, as the sale consideration received was utilized for purchase of a new flat, in which, the name of the assessee's wife was also included as a purchaser. The assessee further stated about the sale of livestock and standing crops. The assessee also stated that he is a senior citizen carrying on agricultural operations for 27 years and that his income was based upon the interest received from bank deposits and offered that a sum of Rs.50 lakhs may be treated as revenue in nature and taxed as income though there was no positive fact or finding had been found so as to avoid protracted litigation. 19. Further, with regard to deposits, the assessee explained that he had received the amount of Rs.21,56,250/- towards development cost of the agricultural land and a copy of the letter acknowledging payment made by the party was produced. This amount was received by RTGS to his bank account and the buyer had confirmed in writing that this was paid as development cost. Hence, this amount related to sale consideration of the land. 20. This explanation, which was offered by the assessee, did not find favour with the Assessing Officer, who rejected the same and completed the assessment vide order dated 30.3.2016 under Section 143(3) of the Act and made additions as mentioned above. Thus, there was no allegation in the assessment under Section 143(3) of the Act that there had been concealment of particulars of income.

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Hence, we hold that there is inherent defect in the notice dated 30.3.2016 issued under Section 271(1)(c) of the Act, as it will vitiate the entire proceedings. 26. Since we have heard the learned counsel on the correctness of the orders passed by the Assessing Officer, the CIT(A) and the Tribunal on the merits of the matter, we proceed to discuss the other issues as well. 27. The CIT(A), while confirming the order of penalty, took note of the order passed by the Assessing Officer wherein the Assessing Officer rejected the explanation offered by the assessee, which ultimately resulted in an addition and the assessment was completed vide order dated 30.3.2016. The question would be as to whether rejection of the explanation and the consequential addition would automatically result in an order of penalty. 28. Mrs.R.Hemalatha, learned Senior Standing Counsel appearing for the Revenue seeks to substantiate her case by relying upon the decision of the Hon'ble Supreme Court in the case of Mak Data (P) Ltd. Vs. CIT, II [reported in (2013) 38 Taxmann.com 448] wherein it was held that voluntary disclosure does not release the assessee from mischief of penalty proceedings under Section 271(1)(c) of the Act and in terms of the said provision, the Assessing Officer has to satisfy as to whether the penalty proceedings have to be initiated or not during the course of assessment proceedings and he is not required to record his satisfaction in a particular manner or reduce it into writing. 29. Reliance is also placed on the decision of the Hon'ble Supreme Court in the case of K.P.Madhusudhanan Vs. CIT [reported in (2001) 118 Taxman 324]. The decision of the Hon'ble Supreme Court in the case of Mak Data (P) Ltd., was taken note of by the Division Bench of this Court, to which, one of us (TSSJ) was a party, in the case of CIT, Chennai-IV Vs. Gem Granites (Karnataka) [reported in (2014) 42 Taxmann.com 493] and the aspect as to how onus/burden of proof shifts from the assessee to the Revenue when penalty proceedings are initiated, is held in the following terms : “11. In a recent decision of the Hon'ble Supreme Court in Civil Appeal No.9772 of 2013, dated 30.10.2013 (Mak Data P. Ltd., vs. Commissioner of Income Tax-II), the Hon'ble Supreme Court while considering the Explanation to Section 271(1), held that the question would be whether the assessee had offered an explanation for concealment of particulars of income or furnishing inaccurate particulars of income and the Explanation to Section 271(1) raises a presumption of concealment, when a difference is noticed by the Assessing Officer between the reported and assessed income. The burden is then on the assessee to show otherwise, by cogent and reliable evidence and when the initial onus placed by the explanation, has been discharged by the assessee, the onus shifts on the Revenue to show that the amount in question constituted their income and not otherwise. Factually, we find that the onus cast upon the assessee has been discharged by giving a cogent and reliable explanation. Therefore, if the department did not agree with the explanation, then the onus was on the department to prove that there was concealment of particulars of income or furnishing inaccurate particulars of income. In the instant case, such onus which shifted on the department has not been discharged. In the circumstances, we do not find that there is any ground for this Court to substitute our interfere with the finding of the Tribunal on the aspect of the bonafides of the conduct of the assessee.” 30. In the instant case, the assessee offered an explanation and we find the explanation to be cogent because all deposits were made through banking channels

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and out of two properties sold, the Assessing Officer accepted the assessee's stand that one of the properties was an agricultural land. Hence, we find that the burden cast upon the assessee to offer an explanation stands fulfilled. Consequently, the burden now shifts to the Revenue to establish the concealment of income or furnishing of inaccurate particulars of income or both. If the Revenue does not agree with the explanation offered by the assessee as in the instant case, then the onus is on the Revenue to prove that there was concealment of particulars of income or furnishing of inaccurate particulars of income. We find this aspect to be completely absent in the instant case. Therefore, we also find the imposition of penalty to be unjustified. 31. The assessee filed an appeal before the Tribunal, which confirmed the order passed by the CIT(A) that the assessee raised a new stand before the CIT(A). No such new stand has been raised. The stand taken by the assessee after receipt of the notice under Section 143(2) of the Act dated 02.9.2014 has been consistent i.e. before the Assessing Officer while submitting the reply to the penalty notice, in the appeal before the CIT(A) and before the Tribunal. This is evident on a reading of the grounds of appeal filed before the CIT(A) as well as the notes of arguments filed by the assessee before the CIT(A) dated 30.6.2017. Therefore, to that extent, the CIT(A) and the Tribunal have committed an error. 32. The decision of this Court in the case of Sundaram Finance Ltd., was couched on a different factual position wherein the Court rejected the plea of the assessee, which was a limited company, when they raised an argument with regard to the validity of the notice for the first time before the High Court and considering the administrative set up of the said assessee and the fact that the assessee was never prejudiced on account of the alleged defect, the Court rejected the argument of the assessee. 33. In the case on hand, we find that at the first instance, while replying to the penalty show cause notice dated 30.3.2016, the assessee raised a specific plea that there was no concealment of income, that he had not furnished inaccurate particulars of income and that the notice was not proper. Therefore, the phraseology, which was adopted by the assessee, if read as a whole, would clearly show that he had objected to the issuance of the notice and as there was no basis for issuance of the notice under Section 271(1)(c) of the Act, both limbs in the said provision do not get attracted. Hence, the decision of this Court in the case of Sundaram Finance Ltd., cannot be applied. 34. The decision of the Hon'ble Supreme Court in the case of K.P.Madhusudhanan is factually different wherein the assessee was unable to furnish evidence for loans and that he offered the amount of transaction as additional income and this explanation was not acceptable to the Assessing Officer and he applied Explanation (1B) to Section 271(1)(c) of the Act and imposed penalty. 35. In the instant case, the assessee has been able to explain the transaction even at the first instance i.e. while submitting the reply dated 15.3.2016 in response to the notice under Section 143(2) of the Act, which explanation he maintained till he filed an appeal before the Tribunal. Therefore, on facts, the decision of the Hon'ble Supreme Court in the case of K.P.Madhusudhanan is distinguishable. 36. Further, the CIT(A) found fault with the assessee in not challenging the assessment order and for having accepted the same. However, this cannot be a ground to enable the Assessing Officer to automatically levy penalty. In this regard, it is beneficial to refer to the decision of the Hon'ble Division Bench of this Court in the case of CIT Vs. Smt.Anitha Kumaran [reported in (2017) 79 Taxmann.com 304]

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wherein the decision of the Hon'ble Supreme Court in the case of CIT Vs. Reliance Petro Products (P) Limited [reported in (2010) 322 ITR 158] was followed wherein the Hon'ble Supreme Court examined the issue threadbare and discussed at length as to what was meant by the expression 'concealment of particulars of income and/or furnishing of inaccurate particulars of income' and after applying the decision in the case of Reliance Petro Products (P) Ltd., the Hon'ble Division Bench of this Court dismissed the appeal filed by the Revenue in the following terms : “13.3. The Supreme Court examined the issue threadbare and discussed at length as to what was meant by the expression concealment of particulars of income and/or furnishing inaccurate particulars of income and went on to observe as follows: ".....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 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 such can be the interpretation of the concerned words. The words are plain and simple. In order to expose the assessee to the penalty unless the case is strictly covered by the provision, the penalty provision cannot be invoked. By any stretch of imagination, making an incorrect claim in law cannot tantamount to furnishing inaccurate particulars. In Commissioner of Income Tax, Delhi Vs. Atul Mohan 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...." 9. We are not concerned in the present case with the mens rea. However, we have to only see as to whether in this case, 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". We have already seen the meaning of the word "particulars" in the earlier part of this judgment. Reading the words in conjunction, they must mean the details supplied in the Return, which are not accurate, not exact or correct, not according to truth or erroneous. We must hasten to add here that in this case, there is no finding that any details supplied by the assessee in its Return were found to be incorrect or erroneous or false. Such not being the case, there would be no question of inviting the penalty under Section

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271(1)(c) of the Act. A mere making of the claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee. Such claim made in the Return cannot amount to the inaccurate particulars. 10. It was tried to be suggested that Section 14A of the Act specifically excluded the deductions in respect of the expenditure incurred by the of assessee in relation to income which does not form part the total income under the Act. It was further pointed out that the dividends from the shares did not form the part of the total income. It was, therefore, reiterated before us that the Assessing Officer had correctly reached the conclusion that since the assessee had claimed excessive deductions knowing that they are incorrect; it amounted to concealment of income. It was tried to be argued that the falsehood in accounts can take either of the two forms; (i) an item of receipt may be suppressed fraudulently; (ii) an item of expenditure may be falsely (or in an exaggerated amount) claimed, and both types attempt to reduce the taxable income and, therefore, both types amount to concealment of particulars of one's income as well as furnishing of inaccurate particulars of income. We do not agree, as the assessee had furnished all the details of its expenditure as well as income in its Return, which details, in themselves, were not found to be inaccurate nor could be viewed as the concealment of income on its part. It was up to the authorities to accept its claim in the Return or not. Merely because the assessee had claimed the expenditure, which claim was not accepted or was not acceptable to the Revenue, that by itself would not, in our opinion, attract the penalty under Section 271(1)(c). If we accept the contention of the Revenue then in case of every Return where the claim made is not accepted by Assessing Officer for any reason, the assessee will invite penalty under Section 271(1)(c). That is clearly not the intendment of the Legislature." 37. On this issue, a useful reference can be to the decision of the Gujarat High Court in the case of National Textiles Vs. CIT [reported in (2001) 249 ITR 125], which related to the assessment year 1974-75 wherein it was held that in order to justify the levy of penalty, two factors must co-exist namely (i) there must be some material or circumstance leading to a reasonable conclusion that the amount does not represent the assessee's income and it is not enough for the purpose of penalty that the amount has been assessed as income and (ii) the circumstances must show that there was animus i.e. conscious concealment or act of furnishing inaccurate particulars on the part of the assessee. 38. Further, the decision of the Hon'ble Division Bench of this Court in the case of CIT Vs. S.I.Paripushpam [reported in (2001) 118 Taxman 844] would support the case of the assessee. In the said case, the Appellate Assistant Commissioner, in the penalty proceedings, held that the amount, the addition of which was agreed to by the assessee was an amount, which had been set out in an enclosure filed along with the return. While testing the correctness of the order, the Tribunal held that the levy of penalty under Section 271(1)(c) of the Act was wholly unwarranted as there had been no fraud or wilful neglect and that the assessee had only, with a view to cooperate with the Department, agreed to the addition. We observe that the above position will help the assessee, as there is not even a remote allegation that there was any fraudulent act by the assessee or the assessee was guilty of wilfully or

ITA No.1276/Chny/2017 - 18 - negligently concealing the income and that his agreement to the addition of the amount, by itself, will not establish fraud or wilful neglect without something more. 39. For the above reasons, the assessee has to succeed on all grounds and consequently, it has to be held that the notice initiating the penalty proceedings is defective and invalid and the other findings rendered by the Assessing Officer, the CIT(A) and the Tribunal do not warrant imposition of penalty on the assessee. 40. In the result, the above tax case appeal is allowed, the impugned order passed by the Tribunal is set aside and the substantial questions of law are answered in favour of the assessee. No costs. Similar legal grounds qua framing of specific charge in the notice have been allowed by Hon’ble High Court of Bombay in Ventura Textiles ltd. V/s CIT (117 Taxmann.com 182); Hon’ble High Court of Karnataka in CIT V/s MWP Ltd. (41 Taxmann.com 496) as well as in Safina Hotels (P.) Ltd. V/s CIT (66 Taxmann.com 334) which has been relied upon by Ld. AR during the course of hearing. We find all these decision supports the case of the assessee on legal grounds. The Ld. CIT-DR has relied on the decision of Hon’ble High Court of Madras in the case of Gangotri Textiles Ltd. V/s DCIT (121 Taxmann.com 171) which is distinguishable on facts. In this case, it is the findings that the assessee had understood the notices well and filed replies contesting the levy of penalty. The legal ground assailing defect in notice was raised for the first time before Hon’ble High Court. The same is not the case here. The case law of Delhi High Court in CIT V/s Zoom communication P. Ltd. (191 Taxman 179) is a case where the assessee made a claim which was not only incorrect in law but wholly without any basis and the explanation furnished by him for making such claim was not found to be bona-fide. However, in the present case, the factual matrix is different wherein the assessee, under a bona-fide belief, has claimed an income to be exempt by filing necessary particulars in

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the return of income. Therefore, the cited case laws are distinguishable on facts. 11. Finally, respectfully following the binding judicial precedents as cited aforesaid, we are of the considered opinion that the impugned penalty is not sustainable on legal grounds as well as on merits. Hence, by deleting the same, we allow the appeal of the assessee. 12. The appeal stands allowed in terms of our above order.

Order pronounced in open Court on 04th May, 2022.

Sd/- Sd/- (ANIKESH BANERJEE) (MANOJ KUMAR AGGARWAL) �ाियक सद6 / Judicial Member लेखा सद6 /Accountant Member

चे-ई/ Chennai; िदनांक/ Dated : 04-05-2022 JPV JPV JPV JPV आदेशकीUितिलिपअ1ेिषत/Copy of the Order forwarded to : 1. अपीलाथ�/Appellant2. ��यथ�/Respondent 3. आयकरआयु� (अपील)/CIT(A)4. आयकरआयु�/CIT 5. िवभागीय�ितिनिध/DR6. गाड�फाईल/GF