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Income Tax Appellate Tribunal, MUMBAI BENCHES “E”, MUMBAI
Before: Shri Joginder Singh, & Shri N.K. Pradhan
आदेश / O R D E R
Per Joginder Singh (Judicial Member) These two appeals are by the assessee against the impugned order dated 29/01/2016 of the Ld. First Appellate Authority, Mumbai. First, we shall take up the appeal in wherein, the only ground agitated by the assessee with respect to valuation of stock at cost or market price and entitlement of claim of write off of actual inventory destroyed in the year.
During hearing, the ld. counsel for the assessee, Shri Navneet Kumar Arora, explained that the assessee is in the business of beauty spa related to hair and skin therapy discarded the expired or damaged stock which could not be used in the business of the assessee. On the other hand, Shri V. Justin, Ld. DR, defended the addition.
2.1. We have considered the rival submissions and perused the material available on record. The facts, in brief, are that the assessee is engaged in the business of beauty spa related to hair and skin therapy, declared nil income in its 3 M/s. SYKZ Hair & Skin Solutions Pvt. Ltd. & 1583/Mum/2016 return filed on 30/09/2011. On perusal of administrative expenses, it was found that the assessee debited sum of Rs. 26,23,595/- on account of material consumptions. In Assessment Year 2010-11, such consumption was shown at Rs.13,88,398/- and the business receipt were Rs.1,05,81,975/- as against Rs.87,83,984/-. The assessee was asked to justify the claim for increasing consumption of material. The assessee submitted the breakup of items which were consumed. As per the Revenue, for amount of Rs.7,39,814/- (as stock consumed) no details were filed. The assessee claimed that this stock was discarded due to expiry and was un-useable. However, the Ld. Assessing Officer in the absence of any evidence of having discarded the stock added to the income of the assessee. On appeal, before the Ld. Commissioner of Income Tax (Appeal), the addition so made was affirmed. The assessee is in further appeal before this Tribunal.
2.2. If the observation made in the assessment order, leading to addition made to the total income, conclusion drawn in the impugned order, material available on record,
4 M/s. SYKZ Hair & Skin Solutions Pvt. Ltd. & 1583/Mum/2016 assertions made by the ld. respective counsel, if kept in juxtaposition and analyzed, the main reason for the addition was that the assessee could not produce any evidence with respect to the expiry of the claimed product/material.
However, we find that even in the assessment order in para-4, the Ld. Assessing Officer himself has mentioned that ‘in response to the same, the assessee submitted the breakup of items, which were consumed’. The addition was made merely on the basis that the assessee could not produce any evidence with respect to the stock, which was discarded on expiry and was not used. Considering the totality of facts, we find merit in the claim of the assessee but at the same time, as contended by Ld. DR, the necessary details were not furnished, therefore, by taking a lenient view, the addition is reduced to 50% (as against the total addition of Rs.7,39,814/- ), which comes to Rs.3,69,907/-. Thus, this appeal of the assessee is partly allowed.
Now, we shall take up the penalty appeal of the assessee imposed u/s 271(1)(c) of the Act on the aforesaid addition. Under the aforementioned facts, we find that a 5 M/s. SYKZ Hair & Skin Solutions Pvt. Ltd. & 1583/Mum/2016 penalty of Rs.2,29,000/- was imposed. Even it is presumed that a wrong claim was made by the assessee, it cannot be said that something was hide from the Department. Possibly, it may be a case for quantum addition but certainly not for imposing penalty u/s 271(1)(c) of the Act because due to non- filing of full details the addition was made. The assessee presumably discarded the expired material due to ignorance or in good faith. Still the assessee as mentioned in the assessment order filed by the bifurcation of such material, therefore, we are of the view, even if a wrong claim is made by the assessee, that ipso facto, cannot lead to concealment.
Even if a wrong claim has been made, it may be a good case for quantum addition but certainly not for imposing penalty u/s 271(1)(c) of the Act. This proposition is sheltered by the decision from Hon'ble Apex Court in the case of Reliance Petro Products Pvt. Ltd. 322 ITR 158 (SC) and CIT vs Ajaib Singh & Company 253 ITR 630(P &H). While coming to this conclusion, the Hon'ble Apex Court in Reliance Petro Products Pvt. Ltd. (supra) observed as under:-
6 M/s. SYKZ Hair & Skin Solutions Pvt. Ltd. & 1583/Mum/2016 “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.” 3.1. In the light of the above observation, we are reproducing hereunder the relevant section 271(1)(C) of the Act for ready reference and analysis:-
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." 3.2. A glance at this provision would suggest that in order to be covered under this section firstly, there has to be concealment of the particulars of the income of the assessee and 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. 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 7 M/s. SYKZ Hair & Skin Solutions Pvt. Ltd. & 1583/Mum/2016 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 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 Hon'ble Apex 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. Hon'ble Court referred to another decision of this Court in Union of India Vs. Dharamendra Textile Processors [2008(13) SCC 369], as also,
8 M/s. SYKZ Hair & Skin Solutions Pvt. Ltd. & 1583/Mum/2016 the decision in Union of India Vs. Rajasthan Spg. & Wvg. Mills [2009(13) SCC 448] and reiterated in para 13 that:-
"13. It goes without saying that for applicability of Section 271(1)(c), conditions stated therein must exist."
3.3. 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 by the assessee 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 Vs. Joint Commissioner of Income Tax, Mumbai & Anr. [2007(6)
SCC 329], Hon'ble Court explained the terms "concealment of income" and "furnishing inaccurate particulars". The Court went on to hold therein that in order to attract the penalty under Section 271(1)(c), mens rea was necessary, as according to the Court, the word "inaccurate" signifies a deliberate act or omission on behalf of the assessee. It went on to hold that Clause (iii) of Section 271(1) provided for a discretionary jurisdiction upon the Assessing Authority, inasmuch as the 9 M/s. SYKZ Hair & Skin Solutions Pvt. Ltd. & 1583/Mum/2016 amount of penalty could not be less than the 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 the term "inaccurate particulars" was not defined anywhere in the Act and, therefore, it was held that furnishing of an assessment of the value of the property may not by itself be furnishing inaccurate particulars. It was further held that the assessee must be found to have failed to prove that his explanation is not only bona fide but all the facts relating to the same and material to the computation of his income were not disclosed by him. It was then held that the explanation must be preceded by a finding as to how and in what manner, the assessee had furnished the particulars of his income. The Court ultimately went on to hold that the element of mens rea was essential. It was only on the point of mens rea that the judgment in Dilip N. Shroff Vs. Joint Commissioner of Income Tax, Mumbai & Anr. was upset. In Union of India Vs. Dharamendra Textile Processors (cited supra), after quoting from Section 271 extensively and also considering Section 10 M/s. SYKZ Hair & Skin Solutions Pvt. Ltd. & 1583/Mum/2016 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 276-C of the Act. The basic reason why decision in Dilip N. Shroff Vs. Joint Commissioner of Income Tax, Mumbai & Anr. (cited supra) was overruled by Hon'ble Apex Court in Union of India Vs. Dharamendra Textile Processors (cited supra), was that according to the Court the effect and difference between Section 271(1)(c) and Section 276-C of the Act was lost sight of in case of Dilip N. Shroff Vs. Joint Commissioner of Income Tax, Mumbai & Anr. (cited supra). However, it must be pointed out that in Union of India Vs. Dharamendra Textile Processors (cited supra), no fault
11 M/s. SYKZ Hair & Skin Solutions Pvt. Ltd. & 1583/Mum/2016 was found with the reasoning in the decision in Dilip N. Shroff Vs. Joint Commissioner of Income Tax, Mumbai & Anr. (cited supra), where the Court explained the meaning of the terms "conceal" and inaccurate". It was only the ultimate inference in Dilip N. Shroff Vs. Joint Commissioner of Income Tax, Mumbai & Anr. (cited 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 Vs. Joint Commissioner of Income Tax, Mumbai & Anr. (cited supra) was overruled. 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". 3.4. We have already seen the meaning of the word "particulars" in the earlier part of this order. Reading the words in conjunction, they must mean the details supplied in the Return, which are not accurate, not exact or correct, not 12 M/s. SYKZ Hair & Skin Solutions Pvt. Ltd. & 1583/Mum/2016 according to truth or erroneous. In the light of the foregoing discussion, and since, we have reduced the quantum addition to 50%, therefore, the penalty will be leviable accordingly and direct the Ld. Assessing Officer to reduce the penalty to 50% which comes to Rs.1,14,500/-. Thus, the penalty appeal is also partly allowed.
Finally, the appeals of the assessee are partly allowed. This Order was pronounced in the open court in the presence of ld. representatives from both sides at the conclusion of the hearing on 24/05/2018.
Sd/- Sd/- (N.K. Pradhan) (Joginder Singh) लेखा सद�य / ACCOUNTANT MEMBER �या�यक सद�य / JUDICIAL MEMBER मुंबई Mumbai; �दनांक Dated : 24/05/2018 f{x~{tÜ? P.S /�नजी स�चव आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant 2. ��यथ� / The Respondent. 3. आयकर आयु�त(अपील) / The CIT, Mumbai. 4. आयकर आयु�त / CIT(A)- , Mumbai 5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, मुंबई / DR, ITAT, Mumbai 6. गाड� फाईल / Guard file.