IN THE HIGH COURT OF DELHI AT NEW DELHI
SUBJECT : INCOME TAX ACT
Judgement Reserved on: 2nd November, 2010
Judgement Pronounced on: August 03, 2011
ITA No. 1266/2009
THE COMMISSIONER OF INCOME TAX- II- Appellant
Through: Mr. Sanjeev Sabharwal, Sr. Standing Counsel with Mr. Utpal Saha, Advocates
MAHAVIR IRRIGATION PVT. LTD. – Respondent
Through: Mr. M.S. Syali, Sr. Advocate with Mr. Mahua Kalra, Mr.Mayank Nagi and Mr. Sumit K. Singh, Advocate
HON’BLE MR. JUSTICE A.K. SIKRI
HON’BLE MR. JUSTICE SURESH KAIT
SURESH KAIT, J.
1. The Assessee is a private limited company engaged in the business of providing service in connection with obtaining orders from Government Departments and has carried on the same business during the year under consideration as in the past besides acting as a liaison and service agent of M/s Daewoo Motors (India) Limited. The assessee filed its return of income declaring loss of Rs.5,38,2000/- for the assessment year 1998-99 in question, on 30.11.1998 and the same was assessed under the provisions of Section 143 (3) of the Act.
“Further, penalty proceedings under Section 271 (1) (c) of the Act have been separately initiated in regard to concealment of the particulars of this income of Rs.3 crores and furnishing of inaccurate particulars by labelling this amount as ‘deposit’”
“Whether the ITAT erred in deleting the penalty under Section 271 (1)(c) on tax sought to be evaded by assessee declaring its income as refundable security deposits under liability?”
8. For convenience Section 271(1)(c) of the Tax is re-produced as under:-
“271 Failure to furnish returns, comply with notice, concealment of income, etc., (1) If the Income-tax Officer or the Appellate Assistant Commissioner, in the course of any proceedings under this Act, is satisfied that any person-
(c) has concealed the particulars of his income or deliberately furnished inaccurate particulars of such income,
He may direct that such person shall pay by way of penalty,–
(iii) in the cases referred to in clause (c), in addition any tax payable by him, a sum which shall not be less than twenty per cent, but which shall not exceed one and a half times the amount of the tax, if any, which would have been avoided if the income as returned by such person had been accepted as the correct income”
9. The counsel for the Revenue has drawn our attention to the financial terms of the MOU which are as under:-
““8 That in consideration of the work, duties and functions undertaken by MIL to be performed under this MOU, DMIL will pay to MIL fee in the sum equal to 1% of the value of the contract that may be awarded by the DTC to DMIL pursuant to the DTC Tender, subject to a minimum of Rs.3 crores.
9 That the fee payable by DMIL to MIL in terms of clause 8 ante, will be deemed to accrue on the date on which the contract between the DTC and DMIL is signed or on which the DTC places an order on the DMIL for the supply of the buses, as the case may be, and DMIL under to make payment of the fee to MIL within 15 days of its accrual.
10 That DMIL will make an interest free deposit of Rs. 3 crores with MIL within six months from the date of this MOU that this deposit will be adjusted against the fee that may become payable to MIL in terms of Clause 8 ante.
11 That in the event of DMIL withdrawing from its offer against the DTC Tender or no order is being placed in its by DTC for any reason whatsoever, the amount paid to MIL under Clause 10 ante, shall not be refundable by MIL. ”
10. Learned counsel for the Revenue has further pointed out towards the judgment of Supreme Court in the case of CIT Vs. Durga Prasad More,  82 ITR 540 , wherein it was held that “if all that an assessee who wants to evade tax is to have some recitals made in a document either executed by him or executed in his favour then the door will be left wide open to evade tax. A little probing was suffering in the present case to show that the apparent was not the real. The taxing authorities were not required to put on blinkers while looking at the documents produced before them. They were entitled to look into the surrounding circumstances to find out the reality of recitals made in those documents.”
“There is no room for controversy that so far as the present payment is concerned it was a minimum payment in terms of Clause 8. Larger amounts could have been receivable by the assessee had a contract been placed on the DMIL by the Delhi Transport Corporation (DTC). Clause 11 uses the words for any reason whatsoever making it amply clear that the payment of Rs.3 crores would not be as reclaimable by DMIL. Referring to the CIT(A)’s order which holds that the appellant could retain the amount even where it renders no service whatsoever. Mr. Bhushan contends that it would be inconceivable that the sum of Rs.3 crores, which is a minimum commission or assured commission, could be retained by the assessee even if he had refused to render any service. We are of the view that this is reading too much into the words used by the authorities below. Reliance has also been placed on Commissioner of Income-Tax, Tamil Nadu-I v. A.V.M. Ltd.,  146 ITR 355, which is a decision of the Division Bench of the Madras High Court. The facts there were totally different. The assessee was carrying on business as a distributor of cinematography films and had taken security deposits from exhibitors which was to be adjusted against receipts by way of ticket sales. This is not the case where. For the same reason the decision in Commissioner of Income-Tax v. T.V. Sundram Iyengar and Sons Ltd.,  222 ITR 344 is not of any advantage to the Appellant. The question there was at what stage would a deposit of a capital nature become an income in the hands of the assessee. On our reading of the Agreement between the Appellant and DMIL, the amount of Rs. 3 crores had already been accrued to them as income in the year in which it was received by the appellant. No substantial question of law arises.
“During the year under consideration, there is an increase of Rs. 3 as security deposit. The assessee was asked to explain the same. As regard the deposit of Rs. 3 crores is reflected in the bank account as per photocopy submitted by the assessee, it has been explained by the assessee vide its letter dated 05.03.2001 as under:-
The receipt of Rs. 3 crores as security deposit by the assessee company from M/s Daewoo Motors (I) Ltd flows from the MOU entered into between them. The relevant clasue 8, 9, 10 and 11 of the MOU have been reproduced in our letter dated 06.02.2001. We refer to them again. In terms of clause 9 of the MOU, the fee payable by DMIL to MIL will accrue on the date on which the contract between the DTC and DMIL is signed or on which the DTC places an order on DMIL for the supply of buses. The order or the contract has yet not been awarded by DTC and hence the security deposit of Rs.3 cores has not yet changed its character and remains as a security deposit with the assessee company.”
19. We may usefully refer to the judgment of the Apex Court in Commissioner of Income Tax v. Reliance Petroproducts Pvt. Ltd.,  322 ITR 158 (SC). After taking note of various earlier pronouncements on the subject and reiterating that for imposition of penalty conditions stated in Section 271(1)(c) must exist. The Court explained the terms “concealment of income” and “furnishing inaccurate particulars” in the following manner:-
….. 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 Section 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.”
20. As a result, the question is answered in the negative, that is in favour of the assessee and against the Revenue and this appeal is dismissed.