Loading judgment…
No AI summary yet for this case.
Yes
IN THE HIGH COURT OF DELHI AT NEW DELHI
% Date of Decision: 10<sup>th</sup> August, 2010
+ ITA 1067/2010
COMMISSIONER OF INCOME TAX-II, NEW DELHI. ..... Appellant
Through: Mr. N.P. Sahni, Adv.
versus
M/S KRISHNA MARUTI LTD. ..... Respondent Through: None.
CORAM: HON'BLE THE CHIEF JUSTICE HON'BLE MR. JUSTICE MANMOHAN
- 1. Whether reporters of the local papers be allowed to see the judgment? Yes - 2. To be referred to the Reporter or not? - 3. Whether the judgment should be reported in the Digest? Yes
DIPAK MISRA, CJ
The present appeal under Section 260A(1) of the Income Tax Act, 1961 (hereinafter referred to as 'the Act, 1961) has been preferred by the appellant against the order dated 25.06.2009 passed by the Income Tax Appellate Tribunal, Delhi Bench 'D', New Delhi (for short 'the tribunal') in ITA No.1794/Del/2008 for the assessment year 1997-98 with a prayer to set aside the orders passed by the Tribunal and the CIT (A) and to restore the order passed by the Assessing Officer. The facts which are necessitous to be adumbrated are that during the course of assessment proceeding, the Assessing Officer assessed the income of the assessee at Rs.5,21,28,628/- as against the declared income of Rs.4,49,56,750/-, disallowed the claim of deduction u/s 80 IA of the Act and further imposed penalty of
Rs.49,78,202/-. Being aggrieved with the penalty order of the Assessing Officer, the assessee preferred an appeal before the CIT(A) who, by virtue of its order dated 20.02.2008, allowed the appeal of the assessee. Eventually the matter travelled to the tribunal which, vide its order dated 26.06.2009, relying on the order of the CIT(A), dismissed the appeal preferred by the revenue before it.
- 2. Before the tribunal, the revenue, the appellant herein, supporting the order of the Assessing Office, canvassed that by claiming wrong deductions u/s 80 IA of the Act, additional depreciation and doubtful debts, inaccurate particulars of income have been furnished. The further submission was that when the disallowance of deduction u/s 80 IA was not challenged by the assessee in appeal and was, in fact, accepted at the AO level, the penalty was rightly levied which ought to be restored. - 3. In oppugnation of the aforesaid submissions and negativing the contentions put forth by the revenue, the counsel for the assessee submitted before the tribunal that the assessee had not furnished inaccurate particulars or concealed any income inasmuch as a proper working for claim of deduction u/s 80 IA was given along with the return of income and no particulars were erroneously mentioned or withheld.
After appreciating the rival contentions and on perusal of the material on record, the tribunal concurred with the view of the CIT (A) and affirmed the deletion of penalty imposed by the Assessing Officer on the assessee. The tribunal relied on the view taken by the CIT (A) and taking note of the
position of law in this regard came to the conclusion that additional claim of depreciation due to non-allowance of set-off can neither be said to be an addition to the income of the assessee nor can non-allowing of bad debt claim per se amount to concealment or furnishing of inaccurate particulars and, therefore, penalty is not imposable on the self-same basis.
- 5. In this regard, we may profitably note to a three-Judge Bench decision rendered in Union of India v. Dharmendra Textiles Processors & Ors., [2008] 306 ITR 277 (SC). In the said case, the Apex Court held that Dilip N. Shroff v. Joint CIT, [2007] 8 Scale 304 (SC) = [2007] 291 ITR 519 (SC) did not lay down the law correctly. Their Lordships referred to the anatomy especially the explanations to Section 271(1)(c) and 276C of the Act and came to hold as follows: - "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 (supra) 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. Wilful concealment is not an essential ingredient for attracting civil liability as is the case in the matter of prosecution under Section 276C of the Income Tax Act."
It is worth noting that in the said case the Bench was also addressing penalty imposable under Section 11AC of the Central Excise Act, 1944 and the Central Excise Rules, 1944.
- 7. In Union of India v. Rajasthan Spinning and Weaving Mills, (2009) - 13 SCC 448, their Lordships decision in the context of Section 11AC of the Central Excise Act, thus: - "32. After referring to a number of decisions on interpretation and construction of statutory provisions, in ELT paragraphs 26 and 27 of the decision, the court observed and held as follows: - "19. In Union Budget of 1996-97, Section TIAC of the Act was introduced. It has made the position clear that there is no scope for any discretion. In para 136 of the Union Budget reference has been made to the provision stating that the levy of penalty is a mandatory penalty. In the Notes on Clauses also the similar indication has been given. - 20. Above being the position, the plea that the Rules 96ZQ and 96ZO have a concept of discretion inbuilt cannot be sustained. Dilip Shroff's case (supra) was not correctly decided but SEBI's case, (2006) 5 SCC 361 has analysed the legal position in the correct perspectives. The reference is answered"
From the above, we fail to see how the decision in Dharamendra Textile can be said to hold that Section IIAC would apply to every case of non-payment or short payment of duty regardless of the conditions expressly mentioned in the section for its application. There is another very strong reason for holding that Dharmendra Textile (supra) could not have interpreted Section 11AC in the manner as suggested because in that case that was not even the stand of the Revenue.
The decision in Dharamendra Textile must, therefore, be understood to mean that though the application of Section 11AC would depend upon the existence or otherwise of the conditions expressly stated in the section, once the section is applicable in a case the Authority concerned would have no discretion in quantifying the amount and penalty must be imposed equal to the duty determined under Sub-section (2) of Section 11A. That is what Dharamendra Textile decides. It must, however, be made clear that what is stated above in regard to the decision in Dharamendra Textile is only insofar as Section 11AC is concerned. We make no observations (as a matter of fact there is no occasion for it) with regard to the several other statutory provisions that came up for consideration in that decision."
was upset. In Union of India v. Dharamendra Textile Processors (supra), after quoting from Section 271 extensively and also considering Section 271(1)(c), the Court came to the conclusion that since Section 271(1)(c) indicated the element of strict liability on the assessee for the concealment or for giving inaccurate particulars while filing Return, there was no necessity of mens rea. The Court went on to hold that the objective behind enactment of Section 271(1)(c) read with Explanations indicated with the said Section was for providing remedy for loss of revenue and such a penalty was a civil liability and, therefore, willful concealment is not an essential ingredient for attracting civil liability as was the case in the matter of prosecution under Section 276C of the Act. The basic reason why decision in Dilip N. Shroff (supra) was overruled by this Court in Union of India v. Dharamendra Textile Processors (supra), was that according to this Court the effect and difference between Section 271(1)(c) and Section 276C of the Act was lost sight of in the case of Dilip N. Shroff (supra). However, it must be pointed out that in Union of India v. Dharamendra Textile Processors (supra), no fault was found with the reasoning in the decision in Dilip N. Shroff (supra), where the Court explained the meaning of the terms "conceal" and "inaccurate". It was only the ultimate inference in Dilip N. Shroff (supra) to the effect that mens rea was an essential ingredient for the penalty under Section 271(1)(c) that the decision in Dilip N. Shroff (supra) was overruled."
- 9. After so stating their Lordships referred to the meaning of the term "inaccurate" as per Webster's Dictionary and further opined thus: - "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. We have quoted in extenso to understand the basic circumstances which would warrant imposition of penalty. - 11. In the case at hand, the tribunal has taken note of the stand of the assessee that it had not furnished inaccurate particulars or concealed any
backdrop. The conditions which are required to be in existence under Section 271(c) are not in existence. Thus, we are not inclined to dislodge the order passed by the tribunal.
Ex consequenti, we do not perceive any merit in this appeal and, accordingly, the same is dismissed in limine.
CHIEF JUSTICE
MANMOHAN, J.
AUGUST 10, 2010 dk