Case Law Details
A glance at the provisions of section 271(1)(c) of the Income-tax Act, 1961, suggests that in order to be covered by it, 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. The meaning of the word “particulars” used in section 271(1)(c) would embrace the details of the claim made. Where no information given in the return is found to be incorrect or inaccurate, the assessee cannot be held guilty of furnishing inaccurate particulars. In order to expose the assessee to penalty, unless the case is strictly covered by the provision, the penalty provision cannot be invoked. By no stretch of imagination can making an incorrect claim tantamount to furnishing inaccurate particulars. 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. To attract penalty, the details supplied in the return must not be accurate, not exact or correct, not according to the truth or erroneous.
Where there is no finding that any details supplied by the assessee in its return are found to be incorrect or erroneous or false there is no question of inviting the penalty under section 271(1)(c). A mere making of a claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee. Such a claim made in the return cannot amount to furnishing inaccurate particulars.
INCOME TAX APPELLATE TRIBUNAL, MUMBAI
ITA no. 3647/Mum./2011- Assessment Year : 2001-02
M/s. Vidhya Synthetic (I) Pvt. Ltd.
v/s
Dy. Commissioner of Income Tax
Date of Order – 25.07.2012
ORDER
PER AMIT SHUKLA, J.M.
The present appeal preferred by the assessee, is directed against the impugned order dated 31st January 2011, passed by the learned Commissioner (Appeals)-II, Thane. The sole ground raised by the assessee is whether or not the learned Commissioner (Appeals) was justified in confirming the penalty of Rs. 38,42,906, imposed by the Assessing Officer under section 271(1)(c) of the Income Tax Act, 1961 (for short “the Act”), on account of various ad-hoc disallowances.
2. The relevant facts of the case are that the assessee is engaged in the business of manufacturing and trading in textile goods. The return of income was filed at a loss of Rs. 42,08,178, on 31st October 2001. During the course of the assessment proceedings, the assessee could not attend the proceedings and, accordingly, the Assessing Officer disallowed the entire loss claimed in the return of income and completed the assessment at nil income, vide order dated 20th October 2003. In pursuance of the assessment order, penalty proceedings under section 271(1)(c) of the Act was initiated. During the first appellate proceedings in quantum, the learned Commissioner (Appeals) confirmed the action of the Assessing Officer and decided the issue against the assessee, vide his order dated 1st September 2004. Against this, the assessee preferred appeal before the Tribunal. In the mean time, penalty order passed was passed imposing penalty under section 271(1)(c), vide order dated 21st December 2004. This penalty was challenged before the learned Commissioner (Appeals) which was deleted by the learned Commissioner (Appeals), vide order dated 30th May 2005. No appeal has been preferred by the Department against the said order. Thereafter, on 28th August 2008, quantum appeal was decided by the Tribunal and the matter was restored to the file of the Assessing Officer. The Assessing Officer, vide order dated 14th December 2009, has passed set aside order under section 144 r/w 254 of the Act, after making various ad-hoc disallowance and, finally, the assessed income stood at a loss of Rs. 4,58,660. The additions which were made in the assessment order, were as follows:-
Donation Rs. 1,500
As per Section 68 Rs. 74,000
As per section 43B Rs. 25,69,431
Out of purchases Rs. 61,77,761
25% out of expenses Rs. 8,93,886
3. On these disallowances aggregating to Rs. 97,16,578, penalty of Rs. 38,42,906, was imposed vide order dated 28th June 2010. In the penalty proceedings also, the assessee has not furnished any explanation.
4. During the course of first appellate proceedings, it was submitted by the assessee that due to series of problems and the assessee’s business was going through a very pad phase, requisite information before the Assessing Officer could not be furnished. However, it was submitted that even though the additions made in the assessment order has not been challenged, yet penalty for concealment of income on furnishing of inaccurate particulars of income cannot be levied as all the additions have been made purely on ad- hoc basis. The assessee’s explanation has been given in Paras-9 and 10 of the order passed by the learned Commissioner (Appeals). The learned Commissioner (Appeals), however, confirmed the penalty, mostly on the ground that non-filing of details required by the Assessing Officer raises the presumption that particulars of income filed by the assessee are not correct. While confirming the penalty, he has relied upon various decisions which has been given in Paras-13 to 16 of the appellate order.
5. Before us, the learned Counsel, on behalf of the assessee, submitted that due to some unavoidable circumstances, the appeal in quantum proceedings could not be filed. However, on merits also, penalty cannot be sustained as there is no material before the Assessing Officer to hold that the assessee is guilty of concealment of income or furnishing of inaccurate particulars of income. Moreover, all the details were available in the audited statement of accounts which is prima-facie a good evidence in support of the expenditure claimed and nothing has been found on record that these expenses are bogus or these expenses are not supported by any evidence.
6. On the other hand, learned Departmental Representative submitted that failure to furnish details amounts to furnishing of inaccurate particulars of income. He strongly relied upon the findings of the learned Commissioner (Appeals).
7. We have heard the rival contentions and perused the material available on record. From the nature of disallowance, it can be seen that major items are purely based on ad-hoc basis like claim of financial charges, disallowance of 25% out of purchases and 25% on administrative expenses. The other items relate to credit of TDS and donation of Rs. 1,500 and also unsecured loan of Rs. 74,000. Even though, such disallowances have attained finality in the quantum proceedings as no appeal has been preferred. However, for the purpose of penalty proceedings, such a finding cannot be held to be conclusive as all the relevant details are available in the audited balance sheet and there is no material on record to show that these expenses are bogus. Since most of the disallowance are ad-hoc in nature, we do not find any merit in the findings of the learned Commissioner (Appeals) in confirming the penalty. Mere disallowance of claim of expenses, penalty for concealment of income or furnishing of inaccurate particulars of income cannot be levied. The ratio and principles laid down by the Hon’ble Supreme Court in CIT v/s Reliance Petroproducts Pvt. Ltd., [2010] 322 ITR 158 (SC) squarely applies to the facts of the present case, where Their Lordships observed and held as follows:-
“A glance at the provisions of section 271(1)(c) of the Income-tax Act, 1961, suggests that in order to be covered by it, 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. The meaning of the word “particulars” used in section 271(1)(c) would embrace the details of the claim made. Where no information given in the return is found to be incorrect or inaccurate, the assessee cannot be held guilty of furnishing inaccurate particulars. In order to expose the assessee to penalty, unless the case is strictly covered by the provision, the penalty provision cannot be invoked. By no stretch of imagination can making an incorrect claim tantamount to furnishing inaccurate particulars. 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. To attract penalty, the details supplied in the return must not be accurate, not exact or correct, not according to the truth or erroneous.
Where there is no finding that any details supplied by the assessee in its return are found to be incorrect or erroneous or false there is no question of inviting the penalty under section 271(1)(c). A mere making of a claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee. Such a claim made in the return cannot amount to furnishing inaccurate particulars.
Decision of the Gujarat High Court affirmed.
Dilip N. Shroff v. Joint CIT [2007] 291 ITR 519 (SC) and Sree Krishna Electricals v. State of Tamil Nadu [2009] 23 VST 249 (SC) relied on.”
8. Thus, on the facts of the present case, penalty under section 271(1)(c) imposed by the Assessing Officer and confirmed by learned Commissioner (Appeals) is hereby deleted.
9. In the result, assessee’s appeal is allowed.
Order pronounced in the open Court on 25th July 2012
