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Income Tax Appellate Tribunal, “C” BENCH, MUMBAI
Before: SHRI JASON P. BOAZ, AM & SHRI SANDEEP GOSAIN, JM
आदेश / O R D E R
Per Sandeep Gosain, Judicial Member:
The Present Appeal has been filed by the revenue against the order of Commissioner of Income Tax (Appeals)- 6, dated 22.04.2014 on the grounds of appeal mentioned herein below.
(A.Y. 1997-98) ITO Vs. M/s. Cyrus Engineers Pvt. Ltd. 1. “Whether on the facts and circumstances of the case and in law, the CIT(A) has erred in deleting the penalty levied u/s 271(1)(c) of the IT Act by holding that the submissions of the assessee were bonafide without appreciating the fact that the assessee had failed to substantiate its claim during assessment proceedings, therefore, making such claim amounts to furnishing of inaccurate particulars of income which falls within the ambit of Explanation 1(B) to section 271(1)(c) of the IT Act. “
The brief facts of the case are that order u/s 143(3) of the Act was passed on 29.02.2000 for A.Y. 1997-98. During the assessment proceeding, it was noticed that the assessee company had sold agricultural land situated in Village Bijwasan, Delhi. The LTCG of Rs.88,19,474/- arisen on sale of land and the same was claimed as exempt. However in the assessment order the LTCG thus arise on sale of agricultural land was to be taxable in view of section 2(14)(iii) of the act. The quantum appeal was also dismissed by CIT(A) vide order dated 08.12.2011 thereof penalty proceeding were initiated and after considering the case of both the parties, AO passed orders thereby levying penalty of Rs.88,19,474/- u/s 271(1)(c) of the Act.
Aggrieved by the order of the AO, assessee filed the appeal before CIT(A) and the CIT(A) after considering the case of the assessee allowed the appeal of the assessee thereby directing the AO to delete the penalty.
(A.Y. 1997-98) ITO Vs. M/s. Cyrus Engineers Pvt. Ltd. 4. Aggrieved by the order of CIT(A), the assessee filed the present appeal before us on the grounds mentioned herein above.
Ground No.1:-
We have heard the counsels for both the parties on this ground and we have also perused the material placed on record as well as the orders passed by the revenue authorities. Before we decide the merits of the case it is necessary to evaluate the orders passed by CIT(A) while dealing with this issue and the operative para is reproduced below:
“9. From the above, it is evident that the case of the appellant would fall in clause (A) only if the appellant had failed to offer an explanation or had offered an explanation which has been found to be false by the AO. Evidently, since the appellant did offer an explanation and also the said explanation was not found to be false by the AO, clause (A) of the above Explanation is not applicable. As discussed above, from the side of the appellant, the said explanation was bona fide, because the concerned land was shown as agricultural land in the returns in the current year and in earlier-years.
Alternately, the case of the appellant would fall in clause (8), if the appellant had offered an explanation, which it was not able to substantiate and had failed to prove that such explanation was bona fide and that all the facts relating to the same and material to the computation of his total income had been disclosed by the appellant. This clause also does not apply to the appellant because the appellant had offered an explanation and had also substantiated the same in terms of its return of income and the books of account of the Appellant till the date of sale. Thus it is evident that the explanation given by the appellant was bona fide. Although the capital gain was claimed exempt under a bona fide belief, the same was however not allowed in view of the provisions of section 2(14)(iii)(a) & (b) of the Act. In earlier assessment years, the return of income of the appellant has been accepted without any doubt expressed regarding the "appellant having held the agriculture land. It is pertinent to note that Explanation-1 to section 271 (1 )(c) is restricted to a case where the assessee is unable to offer an explanation or is unable to substantiate the explanation offered by him in respect of factual details of his income. Therefore, the Explanation-1 does not apply to a case where addition/disallowance has been made by mere rejection of a legal claim made by the assessee.
(A.Y. 1997-98) ITO Vs. M/s. Cyrus Engineers Pvt. Ltd.
Thus, 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 inaccurate particulars of its income.
In this regard, the appellant has relied upon the judgment of Delhi High in the case of Hindustan Resources Ltd. 335 ITR 77 (Delhi) where the Hon'ble court held that the intention to use a particular piece of land for non agricultural purpose cannot by itself alter the character of land. This decision is not at all relevant to the facts of the case of the appellant, as in that case, the character of the land on the date, the same was purchased by the assessee was agriculture land and it remained so when it was acquired by the District Collector (Land Acquisition), Greater Noida, Bulandshar.
13. However, in the case of Reliance Petro Products Pvt. Ltd (supra) cited by the appellant Hon'ble Supreme Court has held as under:
"7. As against this, learned counsel. appearing on behalf of the respondent pointed out that the language of s. 271(1)(c) had to be strictly construed, this being a taxing statute and more 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 or 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 "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 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 facie,
(A.Y. 1997-98) ITO Vs. M/s. Cyrus Engineers Pvt. Ltd. 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. Atul Mohan Bindal (2009) 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 such 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 us. 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 s. 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 us. 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 s. 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 anywpere 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 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 us. 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
(A.Y. 1997-98) ITO Vs. M/s. Cyrus Engineers Pvt. Ltd. that since s. 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 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 us. 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 us. Jt. CIT & Anr. (cited supra). However, it must be pointed out that in - Union of India us. Dharamendra Textile Processors (cited supra), no fault was' found with the reasoning in the decision/in Dilip N. Shroff vs. Jt. CIT & 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. Jt. CIT & Anr. (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 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 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 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 s. 271(1)(c) of the Act. 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. "
Thus, the Hon'ble Supreme Court has held that penalty cannot be levied merely because the assessing officer and the assessee hold a divergent view on allowability of a claim for deduction. Further, in the case of Dilip N. Shroff, 291 ITR 519 (SC) [this case has been, though approved by the Hon'ble Supreme Court in principle, it has been over- ruled only on the point of mens-rea in Dharamendra Textile Processors, 306 ITR 277 (SC)], Hon'ble Supreme Court held as under:
(A.Y. 1997-98) ITO Vs. M/s. Cyrus Engineers Pvt. Ltd. "31. 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 cl. (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 consideration of this nicety of application thereof in a more appropriate case and apply the element of deliberation in the fact of the
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.
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 thereof 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. " 44. 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 value of the property may not by itself be furnishing of inaccurate particulars. Even if the Explanations are n{{]J/k:elfl! 7!ertr!JJlliTrS2 to, a finding has to be arrived at having regard to cl. (a) of Expln. 1 that the AO is required 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 have 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
(A.Y. 1997-98) ITO Vs. M/s. Cyrus Engineers Pvt. Ltd. should have been found as of fact that he has not disclosed all the facts which was material to the computation of his income.
The explanation, having regard to the decisions 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 ITG 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).
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, far 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 AG. He is required to arrive at a satisfaction so as to show that there is primary evidence to establish that the assessee had 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: (1973) 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 he 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 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 Ali (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 Anantharam Veerasinghaiah & Co. vs. CIT (1980) 16 CTR (SC) 189 : (1980) Supp SCC 13}.
(A.Y. 1997-98) ITO Vs. M/s. Cyrus Engineers Pvt. Ltd.
The appellant herein in the penalty proceedings had produced relevant particulars to show that they were materials in support of the report, although a part 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 CIT(A) and the Tribunal.
In K. C. Builders & Anr. vs. Asstt. err (2004) 186 CTR (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 consideration by this Court: (a) Whether a penalty imposed under s. 271 (1)(c) of the IT Act and prosecution under s. 276C of the TI' 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 Tl' 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 the AO who initiated the prosecution under s. 276C(1) had 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(l)(C)?
(e) Whether the High Court's order is liable to be set aside in view of the errors apparent on record?"
In K.c. Builders (supra), this Court noticed the dictionary meaning of the Explanation (sic-concealment) and held:
(A.Y. 1997-98) ITO Vs. M/s. Cyrus Engineers Pvt. Ltd. "4. 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 (l)(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, Chennaifor offences under ss. 276C(2), 277 and 278B of the Act and ss. 120B, 34, 193, 196 and 420 of 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 to show that 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.”
To sum up, it has been held by Hon'ble Supreme Court in the above case that the meaning of the words 'conceal' and 'inaccurate' involves 'hiding' or 'keeping a secret' or 'withdraw from observation' or 'cover up' or 'keep away from sight' or 'prevent the discovery of or 'to withhold knowledge of. The offence of concealment is, thus, a direct attempt to hide an item of income or a portion thereof from the knowledge of the income-tax authorities. Further, it has been held that the primary burden of proof in this regard is on the Revenue. Other decisions cited by the AO also support this view.
Coming back to the facts of the case of the appellant, it may be noted that the appellant, during the course of assessment proceedings, had claimed the long- term capital gain as exempt, contending that the same had arisen due to transfer of agricultural land. The AO disallowed the same in view of the provisions of section 2(14)(iii)(a) & (b) and Ld. CIT(A) also confirmed the action of the AO. However the claim of the Appellant was on the basis of a bona fide belief that the land purchased was an agriculture land, as it was being shown as agriculture land in the books of the Appellant as well as in the returns of income till the date of sale and such returns for earlier years had been accepted by the department. It is a well settled law that both the assessment and the penalty proceedings are independent of each other, and in the penalty proceedings, the assessee has liberty to show and establish that it's stand was bona fide and all the facts
(A.Y. 1997-98) ITO Vs. M/s. Cyrus Engineers Pvt. Ltd. material to the computation of income were fully and truly \ disclosed [as so provided in Explanation 1 to s. 271 (1 )(c) of the Act] and if the assessee succeeds in discharging the said burden, then no penalty could be levied.”
After taking into consideration the arguments of both the parties and from the perusal of the afore mentioned orders we find that the ld. CIT(A) after considering the facts of the case and while taking into consideration the judgment passed by Hon’ble Supreme Court in the case of “Reliance Petro Products Pvt. Ltd.” (supra) had came to the conclusion that no penalty could be levied in the present case. The ld. CIT(A) has elaborately discussed that the assessee during the course of assessment proceeding, had claimed LTCG as exempt thereby contending that the same had arise due to transfer of agricultural land. Ld. CIT(A) has categorically held that claim of assessee was on the basis of bonafide belief that the land purchased was an agriculture land, as it was being shown as agriculture land in the books of the assessee as well as in the return of income till the date of sale and such return for earlier years had been accepted by the department. After going through the facts of the present case we are of the considered view that the revenue had been accepting the returns of earlier years.
Ld. CIT(A) has rightly applied the principles laid down by the Hon’ble Supreme Court in the case of “Reliance petro Products Pvt. Ltd.” it has been categorically held that in the said judgement the meaning of the words ‘conceal’ and ‘inaccurate’ involves ‘hiding’ or ‘keeping’ a secret’ or ‘withdraw from (A.Y. 1997-98) ITO Vs. M/s. Cyrus Engineers Pvt. Ltd. observation’ or ‘cover up’ or ‘keep away from sight’ or ‘prevent the discovery of’ or ‘to withhold knowledge of’. Therefore as per principles laid down in the afore mentioned case the offence of concealment is thus, a direct attempt to hide an item of income or a portion thereof from the knowledge of the income-tax authorities. Although the primary burden of proof in this regard is on the Revenue, which in this case has not been discharged.
After analyzing the afore mentioned order we found that the CIT(A) has dealt with all the issues and has passed judicious and well reasoned order and no new circumstances or judgements have been brought before us in order to controvert or rebut the findings recorded by the CIT(A). Therefore, we see no reasons to deviate or interfere into the well reasoned findings recorded by the CIT(A) and hence, we reject this grounds raised by the revenue and uphold the order of the CIT(A).