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Income Tax Appellate Tribunal, MUMBAI BENCHES, ‘B’ MUMBAI
Before: Shri Joginder Singh, & Shri Rajesh Kumar
आदेश / O R D E R Per Joginder Singh (Judicial Member) The assessee is aggrieved by the impugned order dated 24/12/2013 of the Ld. First Appellate Authority, Mumbai, confirming the penalty of Rs.60 lakh levied u/s 271(1)(c) of the Income Tax Act, 1961 (hereinafter the Act).
During hearing, the ld. counsel for the assessee, Shri Hero Rai, explained that while confirming the penalty, the First Appellate Authority could not appreciate that the assessee fully disclosed the material facts in its return and filed a note with the return that the sum of Rs.2 crore was received by way of compensation for surrendering the possessory rights of the premises. It was also contended that the case of the assessee is covered by the decision in the case of sister concern, order dated 15/07/2016 (ITA No.2383/Mum/2014). On the other hand, the Ld. DR, Shri T.A. Khan, defended the impugned order by contending that the assessee did not disclosed the material facts, therefore, there is furnishing of inaccurate particulars of income, thus, the penalty was rightly imposed.
2.1. We have considered the rival submissions and perused the material available on record. The facts, in brief, are that assessment order was framed u/s 143(3) of the Act by observing that the assessee received a consideration of Rs.2 crores on surrender of tenancy rights (as per the assessee possessory rights) and treated the same as capital receipt not chargeable to tax. The Ld. Assessing Officer considered the submissions of the assessee and was of the view that it was merely a change in the nomenclature and treated the said receipt as Long Term Capital Gain in respect of surrender of tenancy rights, whereas, the stand of the assessee is that it is surrender of possessory rights. The Ld. Assessing Officer levied penalty u/s 271(1)(c) of the Act. On appeal before the Ld. Commissioner of Income Tax (Appeal), the penalty so imposed was affirmed against which the assessee is in appeal before this Tribunal.
2.2. If the observation made in the assessment order, leading to addition made to the total income, penalty order, conclusion drawn in the impugned order, material available on record, assertions made by the ld. respective counsel, if kept in juxtaposition and analyzed, we find that assessment proceedings and penalty proceedings are altogether different and independent of each other. Now, considering these facts, we shall examine, whether there is concealment of income or furnishing of inaccurate particulars of such income. We have perused the return filed by the assessee and note that in computation of total income (page-2 of the paper book) following note has been mentioned by the assessee:-
“NOTE:- During the year, the Milton’s Pvt. Ltd. has received a sum of Rs.2 crores vide agreement dated 10th September, 2007 between Milton’s Pvt. Ltd. and New Jack Printing Works Pvt. Ltd. by way of compensation for surrendering possessory right of premises situated at N.M. Joshi Marg, Lower Parel. The assessee claims that this compensation for surrender of the above rights of licence is not taxable under the Income Tax Act.” In the light of the above note, it is also our bounded duty to analyze the provision of section 271(1)(c) of the Act, which is reproduced hereunder:-
"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."
2.3. 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 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, 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."
2.4. 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 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 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 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".
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 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. In the present appeal, the penalty was levied/confirmed due to the reason that the ld. Assessing Officer imposed the penalty invoking the provisions of section 45 r.w.s. 55(2)(a) of the Act on account of transfer of tenancy rights, whereas, the note put by the assessee in its return/P & L account, it has been clearly mentioned that the amount of `2 crores was received vide agreement dated 10th September, by way of compensation for surrendering possessory rights of the premises. Thus, neither there is concealment of income nor furnishing of inaccurate particular of such income, that being the case, there would be no question of levying the penalty under Section 271(1)(c) of the Act. In the light of the foregoing discussion, we are of the considered opinion that order of the Ld. Commissioner of Income Tax (Appeal) deserves to be reversed, resultantly, the appeal of the assessee is allowed.
Finally, the appeal of the assessee is allowed.
This order was pronounced in the open court in the presence of the ld. representative from both sides at the conclusion of the hearing on 25/01/2018.