M/S SWAPNIL PROMOTERS & DEVELOPERS PVT.LTD,NAGPUR vs. DCIT CIRCLE-1,NAGPUR, NAGPUR

LA {c}. :NAG/ZQ1t ASsesSMeIll r:2013-14 {45 IN THE INCOME TAX APPELLATE TRIBUNAL NAGPUR BENCH, NAGPUR BEFORE SHRI P. K; BANSAL, VICE PRESIDENT AND SHRI PAWAN SINGH; JUDICIAL MEMBER LLANo 32S/NAG/201Z Assessment_yezr:2013-14 Ms Swapnil Promotors Developers Pvt: Ltd: _ 263, Swapnii Swarnadi; M,AK. Azad Road; Nagpur. PANAACCS 5305H (Appellant) Vs. Dy.CI.T.1, Nagpur. (Respondent) Appellant by Respondent by Date of hearing Date af pronouncement Shri Mahavir Atal, C. A. Shri Geetesh Kumar, DR_ 23/11/2017 24/11/2017 ORDER PER P K_BANSALVR This appeal has been filed by the assessee against the order of the CIT(A)-1, Nagpur dated 20/06/2017 relating to assessment year 2013-14. 2. The only issue involved in this appeal relates to the sustenance of penalty levied by the Assessing Officer U/s 271(1)(c) of the IT. Act: 3_ The facts of the case; in brief, are that the Assessing Officer during of assessment proceedings made an addition Of Rs. Three the course crores disclosed by the assessee during the course of survey but not returned in his income tax return. The Assessing Officer initiated the penalty u/s 271(1)(c) by observing 'penalty proceedings uls 271(1)(c) are initiated separately" . Subsequently, the Assessing Officer Issued the show 'Ojm I.T'A.X3Z5/N/M/2017 Assessmlent Yeal '2013-14 150 cause notice dated 23/01/2016 to the assessee mentioning therein "have concealed the particulars of your income and furnished particulars of such income and ultimately after disagreeing with the reply of the assessee dated 05/02/2016, levied the penalty ufs 271(1)(c) relying on Explanation 1 to section 271(1)(c) for furnishing inaccurate particulars of income by the assessee amounting to Rs.92,70,000/- being 100% of the tax sought to be evaded. 4 Before deciding whether this is a fit case for levy of penalty u/s 271(1)(c) of the Act; it is necessary to Iook into the provisions of section 271(1)(c) of the Act; which read 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 ay person (a) (b} (c) has concealed the particulars Of his income Or furnished Inaccurate particulars of Such income; Or (d) He may direct that such person shall pay by way Of penalty, Explanation 1- Where in respect of any facts material to the computation of the total income Of any person under this Act (A) Such person fails to offer an explanation Or Offers an explanation which is found by the AO or the Commissioner (Appeals) 0r the Commissioner to be False Or (8) Such person offers an explanation which he Is not able to substantiate and [fails to prove such explanation Is bona fide and that all the facts relating to the same and material to the computation of his total income have been disclosed by him} Then, the amount added or disallowed in computing the total income of such person a5 a result thereof shall, for the QeLLAr 2 LT: Nu,325/NAG/2017 Ass" esSmteb yvar:20l3-14 Apnftn: purposes Of clause (c} pf this sub-section be deemed to represent the income in respect Of which particulars have been concealed 5 Fram the perusal of the aforesaid section , it is apparent that penalty u/s 271(1)(c) is leviable if the Assessing Officer is satisfied in the course of any proceedings under this Act that any person has cancealed the particulars of his income or furnished inaccurate particulars of the income; 5.1 This Is the settled Iaw that the penalty proceedings and assessment proceedings are different: Section 271(1J(c) lays down that the penalty proceedings can be initiated on the basis of either of the two charges i.e 1) concealment of particulars of income or i) furishing of inaccurate particulars Of income Both the charges are entirely different If the proceedings are initiated on charge of concealment; then penalty cannot be levied on the charge of furnishing of inaccurate particulars of income and vice versa. Thus; there must be a clear finding about the charge for which penalty is imposed or initiated, Et is incumbent upon the AO to state whether penalty was being levied for concealment of income or for furnishing of inaccurate particulars of income; In the absence Of such findings; the order would be bad in law. The case of New Sorathia Engineering Co. Ltd, 282 ITR 642, Hon'ble Gujarat High Court has held as under: ELLA "It is incumbent upon the assessing officer to state whether the penalty was being levied for concealment of particulars Of income by the assessee Or whether any inaccurate particulars of Income had been furnished by the assessee: Held;, that the penalty Order and the order Of the Commissioner (Appeals) showed that no clear cut finding had been reached The Tribunal had failed to appreciate this legal issue The ratio in CIT V Manu Engineering Works 132 ITR Mozn) :.10 N..325/N46/2017 Assess:elt year:2O13-14 152 306 (Guj) was applicable and be upheid by the Tribunal the order of penalty could not The order was invalid, 5.2 In the case of Commissioner of Income Tax V ITR 340 (Del), it is held that Rajan and Co: 291 the provision of section 271 Income Tax 1961 (1) (c) of the would require proper application of mind and of at least a bare minimum recording opinion On the patt initiation of penalty of AO that a proceeding case for was made income as there Or was that incorrect concealment of particulars had been furnished by the with the intention to avoid assessee payment of taxes. This view is various decisions of High Court supported by other therefore it Is not necessary to discuss 'judgment on the issue; the APPELLA 6_ In this case, we noted from the pfficer has not assessment order that the Assessing mentioned during the course of hat for what charge he initiated assessment proceedings moja) the not made proceedings U/s 271(1)c): He has out any Specific charge either of income Or furnishing of concealment of particulars of inaccurate particulars of income: The 271(1) (c) can be levied for penalty ujs either of the charge. levied by The concluding penalty has been that the assessee had furnished of his income. inaccurate particulars A.O. further observed that after the Introduction 271 there is no question of of section proof of mens-rea and ous is to prove that his failure on the assessee to return the correct income neglect: In the absence Is not due to fraud or of any such proof; have he shall have been concealed the been deemed to income Or income; furnished inaccurate Section 271(1) (c) (ii) is particulars of levied for explicitly clear that the penalty can be concealment of particulars of income Qr furnishing particulars of income: of inaccurate It is the particulars of subject matter of incorne which is the common both the charges The word Dictionary means "to 'conceal as per hide, Websters keep withdraw, or remove from observation; from sight; to keep cover Qr secret; to avoid disclosing Or divulging: That EEA. Nu.3Z5/NAG/20017 Ert Assussiient year;2013-14 J XY47 means non disclosure of particulars of income; On the other hand, where particulars are disclosed but such disclosure i5 not correct, true or accurate, it wouid amount to furmshing Qf inaccurate particulars of income: For example; in case Of businessman, if 3 particular transaction of sale is not shown in the books, it would amount to concealment of particulars income while of sale is shown but at a lesser value, it furnishing would amount ta of inaccurate particulars of income; 7 The trust of the legislature is upon the particulars of income which are either concealed or furnished inaccurately by the assessee Therefore, we must understand the meaning of the words 'particulars of income Income The Tax Tribunal had to consider the meaning of the expression "furnishing of Inaccurate particulars of income' appearing in section 271(1) (c} in the case of Kanbay Software India (P) Ltd, 122 TT] 721 (Pune) It was held that the expression 'particulars' refers to facts, details, specifics the information Or about someone Or something: Thus, the details information about the income Or would deal with factual details of income and cannot be extended to areas which are subjective such as status of the taxabllity of a income admissibility of a deduction and law. interpretation of Accordingly, it was held that mere rejection of a legal claim would not amount to furnishing af inaccurate particulars of income_ This view is now fortified by the Supreme Court Judgment in the case of Reliance products, 322 ITR 158 SC. Petro In this case, the (iit} claim of 'Assessee' u/s 36(1) was rejected by the AO and the order of AO tribunal; As a was upheld by the result thereof, the penalty u/s 271(1) (c) was account of imposed On furnishing of inaccurate particulars of held t0 be income: The penalty was illegally imposed by the tribunal since factual details of income furnished by the 'Assessee' were found to be correct: The matter ultimately reached the SC ad the Hon"ble Court upheld the view of the Tribunal by holding that 'mere making of the claim; which is not sustainable in law, by Wojni I'Ta.A.3ZS;NAC/2017 Assussineeri yeAr;2013-14 Is, itself, will not anount to furnishing inaccurate clain of furnishing inaccurate particulars regarding the income of the assessee. 8 We are of the opinion that Explanation 1 to section 271(1) (c) cannot be applied where charge against the 'Assessee' is furnishing of inaccurate particulars of income since it provides 2 deeming fiction qua concealment of particulars of income only and consequently cannat be exterded to a case where charge against the Assessee' is furnishing of inaccurate particulars of income: While, on the other hand, where charge against the 'Assessee' is concealment of particulars of income, the AO has to establish either that 'Assessee has not disclosed tne particulars of income under the main provisions Qr the case of Assessee falls within the scope pf the deeming fictions created under the Explanations: For example, the 'Assessee' might not disclose particular sales or dividend income or income from any source. Such instances would fall under the main provisions itself. In such cases; the burden is on the AO to establish the existence of the charge on the basis of material on record. 9 Explanation 1 to section 271(1) (c) states that the amount added or disallowed In computing the total income of the assessee shall be deemed to be the ircore in respect of which particulars have been concealed; This deering provision is not absolute one but is rebuttable one. It oly shifts the onus on the assessee_ Explanation 1 refers to the two situations in which presumption of the concealment of the particulars of income is deemed, It is not applicable where the charge against the assessee is furnishing inaccurate particulars of the income. The first situation Is where the assessee in respect of any fact material to the computation of his total income fails to offer an explanation or offers an explanation, which is found by the AO or the Commissioner to be false The second situation is where the assessee in respect of any facts material to the computation of his total LT.i. No.3e5/N.ll;Zu[7 Assess[cnt year:2013,14 income offers an explanation, which, the assessee is not able to substantiate and also fails to prove that such explanation was bona fide one and that all the facts relating to the computation of total income have been disclosed by him: The presumption available under explanation to section 271(1) (c), cannot be drawn unless the case of the assessee Falls under either of the clauses (a) or (b) 10_ In this case; the AO has not brought out ay specific charge for which the penalty has been imposed on the assessee u/s 271/1) (c) of the Act He has not brought out whether the assessee has concealed the particulars of income Or whether the assessee has furnished inaccurate particulars of incame_ Even the AQ has not initiated the proceedings for any particular charge: The AO in this case initiated the penalty without any mention of any particular default and levied the same again without mentioning ay specific charge In CIT V. Atul Mohan Bindal (2009) 9 SCC 589, where Hon'ble Supreme Court was considering the same provision; 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: Thus the satisfaction of the AO about the concealment of particulars of income or furnishing of inaccurate particulars of such income is essential before levying any penalty u/s 271(1)(c) In this case the Assessing Officer , we noted, in a mechanical manner imposed the penalty by relving Explanation 1 for furnishing inaccurate particulars of income by the assessee. The Assessing Officer should be aware of that Explanation 1 is nat applicable in a case where assessee has furnished inaccurate particulars of income. Concealment of particulars of ircome or furnishing of inaccurate particulars of income are both the different charges. In the case of concealment of particulars of income, due to applicability of Explanation 1, the onus gets shifted o the assessee to prove that he has not concealed the particulars of income while in case of furnishing of # [""4, Nc32s/N4G/2017 156 Assessment ycar:2013-14 inaccurate particulars of income, the Ous is on the the Revenue to prove that assessee has furnished inaccurate particulars of income. The Assessing Officer on the one side has relied on Explanation 1 for but levied the penalty furnishing of inaccurate particulars of income: In our opinion; law not permit to do s0. does This clearly denotes that the Assessing Officer is not clear for what charges he is levying the penalty on the assessee, 11_ Hon'ble Karnataka High Court in the case of CIT Cotton and VS_ Manjunath Ginning Factory [2013] 359 ITR 565 (Kar) has taken that there the view must be specific charge for levying the penalty. Recently Hon'ble Bombay High Court in the case Of CIT vs. Samson Parinchery 392 ITR (Bom) 4 has also taken similar view. Since in this case; we noted that no specific charge has been levied by the Assessing Officer, therefore; we delete the penalty imposed Ufs 271(1)(c) of the I.T , Act 12. Similar issue has arisen before Hon"ble @Le Karnataka High Court In the case of SSA Emerald Midows in LTA.No. 380 of 2015 in which Hon'ble High Court vide order dated 23/11/2015 has taken the same view as has 4w033 been taken in the case of CIT VS. Manjunath Cotton and Ginning [2013] 359 ITR 565 (Kar) Factory When the matter went before Honble Court in S.L.P: CC No.11485/2016, Hon' Supreme 'ble Supreme Court vide order dated 05/08/2016 dismissed the S.LP. 13 In the result; the appeal of the assessee stands allowed. (Order was pranounced in the open court on 24/11/2017 Sd/_ (PAWAN SINGH) Judicial Member P K. BANSAL ) Vice President Dated:24/11/2017 # Singh 1.T'4 No.SZS/NAC 207 27415 44744 Assess entyear:2013-14 rue#xi CQpY of the_grder forwarded to : 1_ The Appellant 2. The Respondent. 3, Concerned CIT 4. The CIT(A)