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Income Tax Appellate Tribunal, “E” BENCH, MUMBAI
Before: SHRI D. KARUNAKARA RAO, AM & SHRI AMARJIT SINGH, JM
आयकर अपीलीय अिधकरण, मुंबई �ायपीठ “ई‘’ मुंबई IN THE INCOME TAX APPELLATE TRIBUNAL“E” BENCH, MUMBAI BEFORE SHRI D. KARUNAKARA RAO, AM AND SHRI AMARJIT SINGH, JM आयकरअपीलसं/I.T.A. No.7379/Mum/2013 (िनधा�रणवष� / Assessment Year: 2009-10) बनाम/ ACIT 2(3) M/s. Trends Holdings & R. No.552, 5th Floor, Consultancy Pvt. Ltd. Vs. Aayakar Bhavan, M.K.Road, 11, Horizone view, 381, Mumbai – 400020 J. General Bhonsale Marg, Opp. Sachivalaya Gymkhana Mumbai - 400021 �थायीलेखासं./जीआइआरसं./PAN/GIR No. AAACT3203D (अपीलाथ�/Appellant) (��थ� /Respondent) ..
Revenue by: Shri Sambit Mishra Assessee by: Shri Vipul Joshi सुनवाईकीतारीख / Date of Hearing: 17.02.2017 घोषणाकीतारीख /Date of Pronouncement:. 28.02.2017 आदेश / O R D E R PER AMARJIT SINGH, JM:
The revenue has filed the present appeal against the order dated 20.09.2013 passed by the Commissioner of Income Tax (Appeals)-6, Mumbai [hereinafter referred to as the “CIT(A)”] relevant to the A.Y.2009- 10.
The revenue has raised the following grounds:-
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“1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting penalty u/s.271(1)(c) of the I.T. Act levied by the AO on account of not computing book profit u/s.115JB of the Act and payment of tax thereon, without appreciating that by not computing tax liability u/s.115JB of the Act, the assessee indeed willfully attempted to conceal the particulars of income by filing inaccurate particulars of income. 2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting penalty u/s.271(1)(c) of the IT Act levied by the AO on account of non computing book profit u/s.115JB of the IT Act and payment of tax thereon, without appreciating that if no scrutiny proceedings had taken place, the tax on book profit would not have been paid by the assessee. Further, the assessee though liable for tax on book profit did not pay the same voluntarily without the intervention of Department through scrutiny proceeding.
The brief facts of the case are that the assessee filed its return of income on 26.09.2009 declaring total income to the tune of Rs.48,042/-. The assessee did not pay the taxes as per tax payable u/s.115JB of the Income Tax Act, 1961 ( in short “the Act”). The scrutiny assessment u/s.143(3) of the Act was completed on 13.09.2011. At the time of assessment proceedings, it was found that while filing the return of income the assessee did not work out the book profit u/s.115JB of the Act. After receiving specific questionnaire on the issue, the assessee submitted copies of challan for payment of Rs.16 lacs. However, the working of tax computed u/s.115JB of the Act was not submitted. Since the assessee evaded the payment of tax u/s.115JB, the penalty proceeding u/s.271(1)(c) of the Act was initiated. The show cause notice was issued to the assessee
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on 13.09.2011 and 07.02.2012. The assessee also replied vide its letter dated 24.11.2011 that he did not conceal the particulars of income and paid the tax voluntarily. The book profit of the company was already disclosed in the return of income. The Assessing Officer was of the view that even though the assessee has mentioned the book profit in its profit and loss account but failed to provide a working u/s.115JB of the Act while filing return of income or during the course of assessment proceedings and if the case was not selected for scrutiny, the income u/s.115JB of the Act and tax thereon could be evaded. Thereafter, the Assessing Officer levied the penalty to the tune of Rs.16,57,611/-. Therefore, the assessee filed an appeal before the CIT(A) who deleted the penalty, therefore, the revenue has filed the present appeal before us.
ISSUE NO. 1 & 2:-
Under the above said issues, the revenue has challenged the deletion of penalty levied by the Assessing Officer by virtue of order dated 22.03.2012. The learned representative of the revenue has argued that the assessee has failed to furnish the working u/s.115JB of the Act, while filing return of income and thus the assessee tried to evade tax hence the Assessing Officer has rightly levied the penalty but the CIT(A) has wrongly deleted the same therefore in the said circumstances the order of the CIT(A) is wrong against law and law and facts therefore the same is liable to be set aside in accordance with law. However, on the other hand learned representative of the assessee has relied upon the order passed the CIT(A) in question. Before going further, it is necessary to advert the finding of the CIT(A) on record:-
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“6. I have considered the above submissions of the appellant as well as the facts of the case. In this case, the penalty has been levied on acc ount of book profit of Rs.1,46,30,290/- u/s 115JB, which was neither computed nor any taxes thereof were paid by the appellant at the time of filing of return of income. As a result, the AO has levied penalty of Rs.16,57,611/-, being 100% of the tax liability. The provisions of section 271(1)(c) are as under:
"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 - ( 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 – (i)...... (ii)...... (iii) In the cases referred to in clause (c) or clause (d), in addition to tax, if any, paid by him, a sum which shall not be less than, but which shall not exceed three times, the amount of tax sought to be evade by reason of the concealment of particulars of his income or fringe benefits or the furnishing of inaccurate particulars of such income or fringe benefits.
Explanation 1. - Where in respect of any facts material to the computation of 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 Assessing Officer or Commissioner (Appeals) or theCommissioner to be false, or
(B)such person offers an explanation which he is not able to substantiate and fails to prove that such explanation is bona fide and that all the facts relating to the same and material to the computation of his income havebeen disclosed by him,
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Then the amount added or disallowed in computing the total income of such person as a result thereof shall, for the purpose of clause (c) of this subsection, be deemed to represent the income in respect of which particulars have been concealed."
On proper interpretation of the above section, it would be evident that all the particulars and facts relevant for the purpose of computation of total income of the appellant were on record and hence it cannot be said that such particulars of income have been concealed by the appellant, Furthermore, the appellant had not declared any wrong figures in its accounts which could have meant that the appellant had declared any inaccurate particulars or its income. The only, mistake, of the appellant was tbat.it.; had not computed the book profit u/s 115JB of the Act. The book profit of Rs.1,46,30,290/-which has been computed by the AO, was already disclosed in the P& L account by the appellant.
It is also seen that even before the first questionnaire dated18.07.2011issued by the AO for providing working of book profit u/s 115JB. The appellant hadsuo-moto started playing MAT and had paid Rs. 5 lakhs on 1107.2011 (i.e.before the issue of the questionnaire dated 18.07.2011). The balance amount was paid on 20.07.2011 (Rs. 2 laths) and 17.08.2011 (Rs. 9 lakhs). it is evident that the mistake committed by the appellant and/or its tax auditors was an inadvertent mistake.
In the background of above facts, therefore, it is evident that the appellant's case is not a case where particulars of income have been concealed or inaccurate particulars of such income have been furnished. From the details and records furnished by the appellant along with the return of income as well as during the course of assessment proceedings, it was very much possible for the AO to compute the correct income of the appellant, both under the normal provisions of the Act as well as under section 115JB of the Act. The AO has not brought on record any extra material on the basis of which the book profit under section 115JB has been computed by him.
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The appellant has relied upon the Supreme Court judgement in the case of Price Waterhouse Coopers Private Limited (supra). The facts in this case are that, in the tax audit report filed with the return of income, an amount of Rs.23,70,306/- was stated to be the provision for gratuity 'not allowable' in column 17(i). However, while filing the return of income, this amount was claimed as deduction and the same was also allowedby the AO under section 143(3) of the Act. Later, the assessment was reopened and theclaim was disallowed. The AO levied penalty under section 271(1)(c) of the Act. In the background of above facts of the case, Hon'ble Supreme Court has deleted the penalty while holding as under:
"17. Having heard learnedcounsel for the parties,we are of the view that thefacts of the case are rather peculiar and somewhat unique. The assessee is undoubtedly a reputed firm and has great expertise available with it. Notwithstanding this, it is possible that even the assessee could make a silly mistake and indeed this has been acknowledged both by the Tribunal as well as by the High Court,
The fact that the Tax Audit Report was filed along with the return and at it unequivocally stated that the provision for payment was not allowable under Scion 40A(7) of the Act indicates that the assessee made a computation error in its return of income. Apart from the fact that the asses-see did not notice the error, it was not even noticed even by the Assessing Officer who framed the assessment order in that sense, even the Assessing Officer seems to have made a mistake in overlooking the contents of the Tax Audit Report.
The contents of the Tax Audit Report suggest that there is no question of the assessee concealing its income. There is also no question of the assessee furnishing any inaccurate particulars. It appears to us that all that has happened in the present case is that through a bona fide and inadvertent error. the assessee while submitting its return, failed to add the provision for gratuity to its total income. This can only be described as a human error which we are all prone to
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make. The calibre and expertise of the assessee has little or nothing to do with the inadvertent error. That the assessee should have been careful cannot be doubted, but the absence of due care, in a case such as the present, does not mean that the assessee is guilty of either furnishing inaccurate particulars or attempting to conceal its income.
20 We are of the opinion, given the peculiar facts of this case, that the imposition of penalty on the assessee is not justified. We are satisfied that the assessee had committed on inadvertent and bona fide error ad had not intended to or attempted to either conceal its income or furnish inaccurate particulars.
Under these circumstances, the appeal is allowed and the order passed by the Calcutta High Court is set aside.
It is evident that the above decision supports the arguments of the appellant thatno penalty is attracted in the case of the appellant. There are a number of other decision also, where it has been held that no concealment penalty can be levied in a case where a claim is made which is not sustainable in law [CIT Vs. Reliance Petro Products Pvt. Ltd, 189 Taxman 322 (SC); CIT Vs. SSP Ltd, 328 ITR 643 (P & H)]. In yet another set of decisions, it has also been held that where an assessee has furnished all particulars of income, imposition of penalty is not automatic [Dilip N Shroff, 291 ITR 519 (SC); Twin Star Jupiter Co-operative Housing Society Ltd, 31 SOT 474 (Mumbai); Enpake Motors Pvt. Ltd, ITA No. 914/Mum/2008]. It has also been held that where a legal issue under consideration is debatable and the assessee makes a claim which is not acceptable, penalty cannot be levied [Devsons Pvt. Ltd, 329 ITR 483 (Del)]. Let us examine a few of these judgements. In the case of Reliance Petro Products Pvt. Ltd (supra), Hon'ble Supreme Court has held as under:
"4. The assessee is a company and the relevant assessment year is 2001-02. The return was filed on 31st Jan., 2001 declaring loss of Rs. 26,54,554, This assessment was finalized under s. 143(3) of the Act on 25th Nov., 2003 whereby the total income was determined at Rs, 2,22,688. In this assessment the
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addition in respect of interest expenditure was made. Simultaneously penalty proceedings under s. 271(1)(c) of the Act were also initiated on account of concealment of income furnishing of inaccurate particulars of income. The said expenditure was claimed bit the assessee on the basis of expenditure made for paying the interest on the loans incurred by it by whichamount the assessee purchased some IPL shares by way of its business policies. However, admittedly, the assessee did not earn any income by way of dividend from those shares. The company in its return claimed disallowance of the amount of expenditure for Rs. 28, 77.242 under s. 14A of the Act.
5 By way of response to the show-cause notice regarding the penalty in its reply a:. 22nd March, 2005, the assessee claimed that allthe details giventhe return were correct, there was no concealment of income, nor were any inaccurate particulars of such income furnished. It was pointed out that the disallowance made by the assessing authority in the assessment order unders. 143(3)of the Act were solely on account of different views taken on the same set of facts and, therefore, they could, at. the most, be termed as difference of opinion but nothing to do with the concealment of income or furnishing of inaccurate particulars of such income: It was claimed that mere disallowance of the claim in the assessment proceedings could not be the sole basis for levying penalty under a 271'(1)(c) of the Act. It was submitted specifically that it was an investment company and in its own case for asst. yr. 2000-0 1 the CIT(A) had deleted the disallowance of interest made by the AO and the Tribunal has also confirmed the stand of the CIT(A) for that year and, therefore, it was on the basis of this that the expenditure was claimed. It was further submitted that in king a claim which is rejected would not make the assessee company liable under s. 271 (1)(c) of the Act. It was again reiterated that there was absolutely no concealment, nor were any inaccurate particular ever submitted by the assessee-company. ……..
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…………….
As against this, learned counsel appearing on behalf of the respondent pointed out that the language of a 27 (1)(c) had to be strictly construed, this being a taxing statute and in re particularly the one providing for penalty. It was pointed out that unless the wording directly covered the assessee and the fact situation herein, there could not be any penalty under the Act It was pointed out that there was no concealment of any inaccurate particulars regarding the income were submitted in the return sec. 271(1)(c) is as under: “271 (1) If the AO or the CIT(A) or the CIT 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, there has to be concealment of the particulars of the income of the assessee. 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. However, the learned counsel for Revenue suggested that by making incorrect claim for the expenditure on interest, the assessee has furnished inaccurate particulars of the income. As per Law Lexicon, the meaning of the word 'articular" 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 s.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 fade, the assessee cannot be held guilty of furnishing inaccurate particulars. The learned counsel argued that 'submitting an incorrect claim in law for the expenditure on interest would amount to giving inaccurate particulars of such income". We do not think that such can be the interpretation of the concerned words. 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 CIT vs. Awl Mohan Bindal (2009)
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225 CTR (SC) 248 : (2009) 28 DTR (SC) 1 :2009, 9 SCC 589, where this Court was considering the same provision, the Court observed that the AO has to be satisfied that a person has concealed the particulars of his income or furnished inaccurate particulars of income . This court referred to another decision of this Court in Union of India Vs. Dharamendra Textile Processors (2007) 212 CTR (SC) 432 : (2008) 13 SCC 369, as also, the decision in Union of India vs. Rajasthan Spinning & Weaving Mills (2009) 224 CTR (SC) 1: (2009) 23 DTR (SC) 158 (2009) 13 SCC 448 and reiterated in para 13 that:
It goes without saying that for applicability of s. 271(1)(c), conditions stated therein must exist.
Therefore, it is obvious that it must be shown that the conditions under a 271(1)(c) must exist before the penalty is imposed. There can be no dispute that everything would depend upon the return filed 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. Jt. CIT & Anr. (2007) 210 CTR (SC) 228: (2007) 6 SCC 329, this 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 s. 271 (1)(c),mens rea was necessary, as according to the Court, the word 'inaccurate' signified a deliberate act or omission on behalf of the assessee. It went on to hold that cl (iii) of a 271(1)provided for a discretionary jurisdiction upon the assessing authority, in as much 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 not bonafide 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 what manner, the assessee had furnished the particulars of his income. The Court ultimately went on to hold that the element of
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mens rea was essential. It was only on the point of mens rea that the judgment in Dilip N. Shroff vs. Jt. CIT & Anr. (supra) was upset. In Union of India vs. Dharamendra Textile Processors (cited supra), after quoting from s. 271 extensively and also considering s. 271(1)(c), the Court came to the conclusion that since s. 271(1)(c) indicated the element of strict liability on the assessee 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 s. 271(1)(c) r/w 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 s. 276C of the Act. The basic reason why decision in Dilip N. Shroff vs. Jt. CIT & Anr. (cited supra) was overruled by this Court in Union of India vs. Dharamendra Textile Processors (cited supra), was that according to this Court the effect, and difference between s. 271 (1)(c) and s. 276C of the Act was lost sight of in case of Dilip N. Shroff vs. Jt. CIT & Anr. (cited supra). However, it must be pointed out that in Union of India vs. Dhararnendra Textile Processors (cited supra), no fault was found with the reasoning in the decision in Dilip IV. Shroff vs. Jt. CIT & Anr. (cited supra), where the Court explained the meaning of the terms "conceal' and "inaccurate". It was only ultimate inference in Dilip N. Shroff vs. Jt. CIT & /tnr (cited supra) to the effect that mens rea was an essential ingredient for the penalty under s. 271(1)(c) that the decision in Dilip N. Shroff vs. Jt. CIT & 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 Websters 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 judgment. 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
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details supplied by the assessee in its return were fou nd t o be incorr ect or err one ous or fal se. Such n ot be ing the cas e, ther e w ould be no que st ion of inv it ing t he pe nalt y under a 271( 1)(c) of t he A ct . A mer e making of the cl ai m, whic h is n ot sust ai na bl e in l aw , by i tsel f wi ll not amount to fur ni sh in g inacc urate par ti culars re gar di ng the inco me of t he assessee. Such c lai m ma de in t he return cannot amount t o the i nacc urate partic ul ars."
Further, in the case of Dilip N. Shroff (cited supra) [this case has been, though approved by the Hon'ble Supreme Court in principle, it has been over-ruled on the point of mens-rea, later, in Dharamendra Textile Processors, 212 CTR 432 (SC)j, Hon’ble Supreme Court held as under:
"2. The appellant herein is an assessee tinder the IT Act. it is an HUE. For the assessment year 1998-99, an income of Rs. .30,80,030 was declared by it, interalia, showing a long-term capital loss of Rs. 34,12,000. The said capital loss was said to have arisen on account of sale of property being land and building known as Jekison Niwas. 220, Walkeshuar Road, Mumbai. Admittedly, the appellant had 1/ 4th share therein. Jr entered into an cigree.T67Lt for sale of undivided 1/4th share in the said property for a sum of Rs. 8 crores with one M/s. Layer Exports (P) Ltd.) For the purpose of valuation of the said property, one Shri U.D.Chande, a registered valuer, was appointed. On 1st April, 1981, the value of the said 1/4th share in the property was determined at Rs.2,52,00,000/-. In the said valuation report, it was stated that the purpose was valuation for computation of capital gains. The report was filed in the prescribed form. All the required particulars / information were furnished. In the said report description of the property, location thereof, whether situated in residential / commercial / mixed / industrial area, and classification thereof were shown. As regard proximity to civic amenities, is was stated that the plot is very close to “Raj
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Bhawan”. All the amenities except cinema were within 1 km. Means and proximity to surface communication by which the locality is served were also stated. All other requisite particulars, as specified, were stated. 3. After noticing that the total development area of land is 4,605 sq. yds. with an F.S.I. of 1. 33, it was stated
"I am informed that the land was reserved for a vegetable and retail market before 1965. I am of the opinion that it is possible to get this reservation modified or waived and hence I consider the effect of this on the value of the property negligible. In any event there will be no loss of F.S.I. even if reservation is retained for the purpose of my valuation of share in the property.
Based on the sales instances the prices given in "Accommodation Times" I am of the opinion and feel that the rate of the residential apartment in the area in 1981 would be in between Rs. 2,500 to Rs 3,000 per sq. ft. I think that the lower value of Rs. 2,500 per sq. ft. as fair and reasonable.
This rate will be fair and reasonable for the share of property belonging to late Mr. Natwarlal Shroff and late Mrs. Sonabai Shroff as the title of their holding is clear and marketable.
I am appointed to give value of the share of the property belonging to the late Mrs. Sonabal Shroff i.e. 1/ 4th share of the property.As regards (valuation of) 114th share of Mr. Bhagwandas Dwarkadas Shroff and 1/4th share of Mr. Madhavdas Dwarkadas, I am informed that there is suit pending in courts regarding title to the property and tenancy rights. Each of the other holders will fetch the reports of valuation for their respective shares separately.
In 1981 the cost of construction may be taken at Rs.275 per sq. ft. Further, considering the builder’s profit Rs.700 per sq.ft. and deducting both the value of cost of construction and the builder's profits from the above stated works out to Rs. 1,525 per sq. ft. of saleable area.
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Considering that it is a jointly owned property, I take it as fair and reasonable.
At this rate the value of the share of the property belonging to Late Mr. Natwarlal Shroff comes to: 16536.5x1525Rs. 2,52,18,16S. 05 Say Rs. 2,50,00,000.00....(I)
Though the building itself is old and dilapidated, I consider the scrap value of it at Rs 50 per sq. ft. As the built-up area is 16, 000 sq. ft., the scrap value of structure comes to Rs. 8,00,000. The value of the share of Late Mr. Natwarlal Shroff of this scrap value is Rs. 8,00,000. The value of the share of Late Mr. Natwarlal Shroff of this scrap value is
=Rs. 2, 00, 000. 00 .... (II)
Therefore value of the property belonging to Late Mr. Nartwarlal Shroff works out to (I)-1-(II).
Rs.2,50,00,000.00 + Rs.2,00,000.00 = Rs.2,52,00,000.00
I therefore value the share of the above property belonging to LateMr.Natwarlal Shroff at Rs 2,52,00,000.00 (Rs. Two crore fifty two lakhs only) as on 1st April, 1981.
As regard existence of sale instances, however, although a sheet was said to have been attached thereto, no such thing was done. As against column 40, namely, 'if sale instances are not available or not relied upon, the basis of arriving at the land rate', it was stated:
"In addition to sales instances and 'Accommodation Times' are used."
The valuer in his report, inter alia, stated:
"When I inspected the premises I found the building in a dilapidated condition. In fact part of the building has
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collapsed. I am informed that in 1981 the building was in similar condition I am therefore inclined to consider only the scrap value of the building and the value of only land as the basis of my valuation."
In the year 1997 by reason of a consent decree passed in Suit No 3845 of 1997, 1/4th undivided share in Jekison Niwas was sold and possession was transferred to M/s Layer Export (P) Ltd. against final payment.
The return filed by the appellant on 30th Sept., 1998 came up for scrutiny before the first respondent, who in exercise of its power under s. 55A of the IT Act, 1961 (for short, 'the Act) referred the matter for valuation of the said 1/4th undivided share of the appellant as on 1st April, 1981 to the DVO; whereupon the DVO submitted a report dt. 29th June, 2000 wherein the 1/4th undivided share of the appellant in the said property as on 1st April, 1981 was determined at Rs. 1, 14,92,907, the basis whereof is said to be as under: ………………… ………………………
The first respondent having regard to the aforementioned valuation report of the DVO passed an order of assessment on 8th Aug., 2000 holding:
The cost of acquisition as on 1st April, 1981 is therefore, adopted at Ps. 1,44,92,907 as per the report of the DVO-II, Mumbai. Accordingly, the longterm capital gain is worked out as under: ……………… ………………………
Thus, in the said order, valuation of the land as made by the DVO was opted and on the basis thereof long-term capital gain was determined to be Rs.3,09,78,478 by taking the valuation of the 1/4th undivided share of the appellant as Ps. 1,44,92,907 as on 1st April, 1981. In view of the said order of assessment, a show cause notice under s. 274 r/w s.
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271 of the Act was served to which a reply was filed by the appellant on or about 14th Aug., 2000 claiming that there was no concealment of income as all 'the details of property were submitted along with the return of income and the difference in the matter of valuation of the 1/4th share of the appellant does not amount to concealment. It was stated therein:
"3. All the material facts in respect of the 1/4th share of the sale of property has been disclosed when the return was filed. It is the difference of opinion in respect of value of the property as of 1st April, 1981 between the registered valuer and Divisional Valuation Officer with regard to value of the property as of 1st April, 1981 does not amount to concealment.
The valuation report by the Divisional Valuer of the Department has been arrived at by using his best judgment and perception. The value determined by him as of 1st April, 1981 has been on the basis of concepts and methods adopted by him, without taking into account the objections and suggestions made by the assessee.
The difference between the value as determined by the registered valuer and Department’s Divisional Valuation Officer does not change the basic character or the details of valuation, hence there is n0 concealment whatsoever. You are therefore requested to drop the penalty proceedings initiated under s.271(1)© and oblige, …………… …………………………………
The first respondent, however, in his order dt. 23rd Aug., 2000 purported to be in exercise of its power under s. 271(1)(c) of the Act, held:
.....The assessee, it would appear, has notified an appeal against the order under s. 143(3) of the Act and hence the conclusions drawn as regards the computation of total income in this case are final ..... By no stretch of imagination a property in a posh locality like Walkeshwar, Mumbai would
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have resulted in loss after substitution of indexed cost of acquisition. The intention of assessee in obtaining the valuation report is obviously viewed in the context of assessee having returned loss under the head capital gains..... In the circumstances, the assessed is considered to have furnished inaccurate particulars of income in respect of the amount added under the head capital gains. The amount of tax sought to be evaded is worked out as per cl. (a) to Expln. 4 to s. 271(1)(c) of the Act at 20 per cent of Rs. 3,43,90,478 i.e. Rs. 68,78,095. Accordingly, a minimum penalty of Rs. 68,78,095 is levied under s. 271(1)(c) of the Act. " …………… …………………………………
We have noticed hereinbefore that the main contention raised on behalf of the Revenue justifying the levy of penalty against the appellant, inter alia, is that although as against item No. 38 of the report, a sheet was purported to have been attached but in fact the same had not been done and furthermore no land rate was adopted for valuation and as against item No.. 40 in addition to the Accommodation Times) which was a local newspaper, no other sale instance was taken, and even a copy thereof had not been furnished; nor the sale instances had been mentioned. The explanation of the assessee was thatin the instant case, Explanation to s. 271(1)(c)was never invoked.
Sec. 271(1)(c) of the Act is in two parts. Whereas the first part refers to concealment of income, the second part refers to furnishing of inaccurate particulars thereof. In the instant case, the penalty has been levied upon the appellant under the second part of s. 271 (1)(c) of the Act. One of the questions which arises for consideration is as to whether Expln. 1 is applicable in respect of both the parts or in respect of the first part only.
Let us also assume that later part of ci. (c) of .s. 271(1) did not invite any investigation into whether it was done deliberately or wilfully or not; but let us leave final
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consideration of this nicety of application thereof in a.: more appropriate case and apply the element of deliberation in the fact of the present case.
However, according to the assessee the omission to annex the sheet as mentioned against column No. 38 as also to enclose a copy of the "Accommodation Times" was a clerical error and no significance could have been attached thereto inasmuch no sale instance was 'relied upon by the valuer and, thus, by reason thereof no inaccurate particulars thereof can be said to have been furnished. It is not a case where the appellant is alleged to have concealed the income as the authorities proceeded on the basis that the penalty was to be levied upon the appellant only on the ground of furnishing inaccurate particulars.
We are not oblivious that some decisions point out that the principles of mens rea may have application only in certain categories of cases some of which are:
In Sherras vs. Dc Rutzen (1895) 1 QB 918, it was suggested that mens rea is an essential ingredient in every offence except in three cases; (i) Cases not criminal in any real sense but which in the public interest are prohibited under a penalty, e.g; Revenue Acts; (ii) Public nuisances (iii) Cases criminal in form but which are really only a summary mode of enforcing a civil right.
In 85, Corpus Juris Secundum, para 1023, it is stated:
"Apenalty imposed for a tax delinquency is a civil obligation, remedial arid coercive in it's nature, and is far differentfrom the penalty for a crime or afine or forfeiture provided as punishment for the violation of criminal or penal laws." ……………
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………………………
If the ingredients contained in the main provisions as also the Explanation appended thereto are to be given effect to, despite deletion of the word 'deliberate', it may not be of much significance.
The expression "conceal" is of great importance. According to Law Lexicon, the word "conceal" means:
'to hide or keep secret. The word conceal' is con+celare which implies to hide. It means to hide or withdraw from observation; to cover or keep from sight; to prevent the discovery of; to withhold knowledge of. The offence of concealment is, thus, a direct attempt to hide an item of income or a portion there of from the knowledge of the income-tax authorities."
In Webster's Dictionary, 'inaccurate' has been defined as:
"not accurate, not exact or correct; not according to truth; erroneous; as an inaccurate statement, copy or transcript.
It signifies a deliberate act or omission on the part of the assessee. Such ., deliberate act must be either for the purpose of concealment of income or furnishing of inaccurate particulars.
The term inaccurate particulars is not defined. Furnishing of an assessment of value of the property may not by itself be furnishing of inaccurate particulars. Even if the Explanations are taken recourse to, a finding has to be arrived at having regard to cl. (a) of Expln. I that the AO isrequired to arrive at a finding that the explanation offered by an assessee, in the event he offers one, was false. He must be found to ave failed to prove that such explanation is not only not bona fide but all the facts relating to the same and material to the income were not disclosed by him. Thus, apart from his explanation being not bona fide, it should have been found as of fact that he
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has not disclosed all the facts which was material to the computation of his income.
The explanation, having regard to the decision of this Court, must be preceded by a finding as to how and in what manner he furnished the particulars of his income. it is beyond any doubt or dispute that for the said purpose the ITO must arrive at a satisfaction in this behalf. See CIT Vs. Ram Commercial Enterprises Ltd. (2001) 167 CTR (Del) 321 : (2000) 246 ITR 568 (Del.) and Diwan Enterprises Vs. CIT (2001) 167 CTR (Del) 324 : (2000) 246 ITR 571 (Del.) 47. It is furthermore of some significance that the CIT(A) in his order dated 30th Nov., 2000 made a terse comment that the assessee cannot shift the burden of concealment to any other person, meaning thereby, the registered valuer. He, furthermore, made a comment that the registered valuer had adopted a strange way of valuing although no reason, for less than sufficient or cogent reason, has been assigned in support thereof. The said comments were unwarranted.
Primary burden of proof, therefore, is on the revenue. The statute requires satisfaction on the part of the AO. He is required to arrive at a satisfaction so as to show that there is primary evidence to establish that the assessee has concealed the amount or furnished inaccurate particulars and this onus is to be discharged by the department. See D.M.Manasvi Vs. CIT 1972 CTR (SC) 437 : 3 SCC 207.
While considering as to whether the assessee has been able to discharge his burden, the AO should not begin with the presumption that his is guilty.
Once the primary burden of proof is discharged, the secondary burden of proof would shift on the assessee because the proceeding under s. 271 (1)(c) is of penal nature in the sense that its consequences are intended to be an effective deterrent which will put a stop to practices
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which the Parliament considers to be against the public interest and, therefore, it was for the Department to establish that the assessee shall be guilty of the particulars of income. See Anwar All (supra) and Khoday Eswarsa (supra).
The order imposing penalty is quasi-criminal in nature and, thus, burden lies on the Department to establish that the assessee had concealed his income. Since burden of proof in penalty proceedings varies from that in the assessment proceeding, a finding in an assessment proceeding that a particular receipt is income cannot automatically be adopted, though a finding in the assessment proceeding constitutes good evidence in the penalty proceeding. In the penalty proceedings, thus, the authorities must consider the matter afresh as the question has to be considered from a different angle. [See Anarttharam Veerasinghaiah & Co. vs. CIT (1980) 16 CTR (SC) 189 (1980) Supp SCC 131.
The appellant herein in the penalty proceedings had produced relevant particulars to show that they were materials in support of the report, although apart of which was not annexed with the report.
Before, thus, a penalty can be imposed, the entirety of the circumstances must reasonably point to the conclusion that the disputed amount represented income and that the assessee had consciously concealed the particulars of his income or had furnished inaccurate particulars thereof. ………… ………………………………
We have, however, noticed hereinbefore that the ITO had merely held that the assessee is guilty of furnishing of inaccurate particulars and not of concealment of income; which finding was arrived at also by the GJT(A) and the Tribunal.
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In K. C. Builders & Anr. vs. Asstt CIT (2004) 186 0Th (SC) 721 (2004) 2 SCC 731, this Court formulated the following questions for consideration:
"8. On the above pleadings and facts and circumstances of the case, the following questions of law arise for considerc4tion by this Court: (a) Whether a penalty imposed under s. 271(J)(c) of the IT Act and prosecution under s. 276C of the IT Act are simultaneous? (b) Whether the criminal prosecution gets quashed automatically when the Tribunal which is the final Court on the facts comes to the conclusion that there is no concealment of income, since no offence survives under the IT Act thereafter?
(c) Whether the High Court was justified in dismissing the criminal revision petition vide its impugned order ignoring the settled law as laid down by this Court that the finding of the Tribunal was conclusive and the prosecution cannot be sustained since the penalty after having been cancelled by the complainant following the Tribunal’s order no offence survives under the IT Act and thus the quashing of the prosecution is automatic?
(d) Whether the finding of the Tribunal is binding upon the criminal Court in view of the fact that the Chief CIT and AO who initiated the prosecution under s. 276C(1) has no right to overrule the order of the Tribunal? More so when the ITO giving the effect to the order cancelled the penalty levied under s. 271(1)(c)?
(e) Whether the High Court’s order is liable to be set aside in view of the errors apparent on record?”
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In K.C. Builders (supra), this court noticed the dictionary meaning of the Explanation (sic-concealment) and held:
The respondent assessing authority treated the difference between the income as per original return and revised income as concealed income. The Asstt. CIT levied penalties under s. 271 (1)(c) of the IT Act, 1961 (hereinafter referred to as 'the Act') for all the aforesaid four assessment years. Accordingly, penalty proceedings were initiated. The first appeal against the order of penalties levied for concealment of income against the appellants were confirmed by the CIT(A). As per the directions of the Chief CIT, four complaints were filed in the Court of the Additional. Chief Metropolitan Magistrate, Egmore, Chennai for offences under ss. 276C(2), 277 and 278B of the Act and ss. 120B, 34, 193, 196 and 420 f the IPC."
The learned Additional Solicitor General, however, submitted that although on the facts of the case the decision rendered is correct but the view of the Court that unless there is some evidence to show or some circumstances found from which it can be gathered that the omission was attributable on the part of the assessee to conceal his income so as to evade income-tax thereon may not be correct. As at present advised, we do not intend to go into the said question; as in the facts and circumstances of the case there are enough material lo show 01 at the action on the part of the appellant may not be said to be such which would attract the penal provision under s. 271(1)(c) of the Act.
For the reasons aforementioned, the impugned judgment cannot be sustained. It is set aside accordingly. The appeal is allowed. However, in the facts and circumstances of this case, there shall be no order as to costs.
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Therefore, in view of these decisions and in the background of the facts of the case of the appellant as discussed above, the penalty levied by the AO in the case of the appellant is not justified. All the particulars and facts relevant for the purpose of computation of total income of the appellant under the normal provisions of the Act as well as for computation of book profit under section 11 SJB were on record and the appellant had not declared any wrong figures in its return of income and hence any inaccurate particulars of its income were not furnished. The AO has also not brought on record any extra material on the basis of which, the book profit has been computed by him. The book profit has been computed only on the basis of facts and material already available on record and such facts and figures were not found to be inaccurate. It was also an inadvertent mistake on the part of the appellant to have not computed the book profit under section 11 SJB. The penalty levied by the AO is therefore deleted. 14. In the result the appeal of the appellant is allowed.
On appraisal of the above mentioned order passed by the CIT(A), it came into the notice that the assessee did not disclose any wrong figure in its return of income. Inaccurate particulars of its income were not furnished. All the relevant facts for the computation total income of the assessee under normal provision of the Act as well as for computation of book profit u/s.115JB of the Act were on record. The facts and figures in the return were not false. The only question is that the assessee failed to furnish the working u/s.115JB of the Act. Nothing was available on the file to which it can be assumed that the assessee concealed the income and furnished inaccurate particulars. No tax was sought to be evaded. Merely, the assessee failed to compute the book profit u/s.115JB of the Act inadvertently well in time which does not attract the penalty proceedings in accordance with law. In view of the reasoning given by the CIT(A), we are of the view
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that the CIT(A) has passed the order judiciously and correctly which is not required to be interfere with at this appellate stage.
In the result the appeal filed by the revenue is hereby Dismissed. 5.
Order pronounced in the open court on 28th February, 2017. Sd/- Sd/- (D.KARUNAKARA RAO) (AMARJIT SINGH) लेखासद� / ACCOUNTANT MEMBER �ाियकसद�/JUDICIAL MEMBER मुंबई Mumbai; िदनांकDated :28th February, 2017 MP MP MP MP आदेशकी�ितिलिपअ�ेिषत/Copy of the Order forwarded to : अपीलाथ�/ The Appellant 1. ��थ�/ The Respondent. 2. आयकरआयु�(अपील)/ The CIT(A)- 3. आयकरआयु�/ CIT 4. िवभागीय�ितिनिध,आयकरअपीलीयअिधकरण, मुंबई/ DR, ITAT, Mumbai 5. गाड�फाईल /Guard file. 6. आदेशानुसार/ BY ORDER, स�ािपत�ित //True Copy// उप/सहायकपंजीकार (Dy./Asstt.Registrar) आयकरअपीलीयअिधकरण, मुंबई / ITAT, Mumbai