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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 Revenue is aggrieved by the impugned order dated 16/02/2012 of the First Appellate Authority, Mumbai, deleting the penalty of Rs.26,88,042/-, imposed u/s 271(1)(c) of the Income Tax Act, 1961 (hereinafter the Act).
During hearing, none was present for the assessee. On earlier occasion, the Ld. DR was directed to effect the service upon the assessee. As per the report from the Department, it was found that the assessee is not residing at the given address, therefore, the service could not be effected. The ld. DR contended that the Ld. Commissioner of Income Tax (Appeal) deleted the penalty without appreciating the fact that the assessee had claimed deduction of interest u/s 36(1)(iii) of the Act even though the said expenditure pertained to capital work in progress and thus not allowable as per proviso to section 36(1)(iii) fo the Act.
2.1. We have considered the submissions of Ld. DR and perused the material available on record. Since, the assessee was not found residing at the given address, therefore, we have no option but to proceed ex-parte, qua the assessee and tend to dispose of this appeal on the basis of material available on record. The facts, in brief, are that the assessee company is engaged in the business of manufacturing of polyster films in various micron thickness and sizes of different grades which are chemically treated. The assessee had an application under BIFR as the assessee accumulated losses which are more than the funds of the share holders. The Ld. Assessing Officer levied penalty u/s 271(1)(c) of the Act on the disallowances claimed u/s 36(1)(iii) and 43B of the Act. The stand of the Ld. Assessing Officer was that the capital asset amounting to Rs.34,56,00,000/- was not put to use and the amount invested therein represented borrowed funds on which interest was paid, therefore, the disallowance was worked out at Rs.1,85,13,497/- as attributable to interest to work in progress, which was restricted to Rs.79,29,330/- by the Ld. First Appellate Authority. Likewise, the initial disallowance of Rs.1,83,00,000/- was restricted to Rs.1,44,00,000/- by the Ld. Commissioner of Income Tax (Appeal). The assessee, took the stand before the Ld. Assessing Officer that since the assessee company is a BIFR company, therefore, unable to pay the interest to the Banks. Plea was also raised before the Ld. Commissioner of Income Tax (Appeal) that the Ld. Assessing Officer did not initiate the penalty proceedings during assessment proceedings with reference to disallowances. There is a finding in the impugned order that the Ld. Assessing Officer could not establish the nexus of interest on borrowed funds and it utilization for acquisition of assets and ad-hoc disallowance was made on proportionate basis, which was reduced to 70% by the Ld. Commissioner of Income Tax (Appeal) which further weakened the case of the Department. It was also found that the assessee was having own funds of Rs.16,792.35 lakhs and borrowed funds were Rs.11940.48 lakhs and there was no finding by the Ld. Assessing Officer that borrowed funds were utilized to meet the expenses for capital work in progress and own funds were not utilized. Considering the totality of facts as narrated/observed in para-5 onwards of the impugned order with respect to section 36(1)(iii) and 43B of the Act, we are in agreement with the finding of the Ld. Commissioner of Income Tax (Appeal) that is not the case of concealment or furnishing of inaccurate particulars of income. The finding contained in the impugned order was not controverted by the Revenue.
2.2. 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." 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."
2.3. 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 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. Such not being the case, there would be no question of inviting the penalty under Section 271(1)(c) of the Act. In the light of the foregoing discussion, we are of the considered opinion that the Ld. Commissioner of Income Tax (Appeal) was justified in deleting the penalty. We upheld the same.
Finally, the appeal of the Revenue is dismissed.
This order was pronounced in the open court in the presence of the ld. DR at the conclusion of the hearing on 15/01/2018.
Sd/- Sd/- (Rajesh Kumar) (Joginder Singh) लेखा सद�य / ACCOUNTANT MEMBER �या�यक सद�य /JUDICIAL MEMBER मुंबई Mumbai; �दनांक Dated : 15/01/2018 f{x~{tÜ? P.S //.�न.स. आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant (Respective assessee) 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