TaxTMI 
TaxTMI 
2011 (1) TMI 480
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....gs for reduction of value of stock was duly substantiated by the assessee even though the addition made at Rs.1,18,12,295/- on account of reduction in value of stock was duly upheld by the Hon'ble ITAT holding that the explanation offered by the assessee in this respect was not correct?" 2. Briefly stated the facts of the case are that the respondent Corporation is a Government owned Company. It is engaged in the business of extraction of timber and resin from forests. The assessment of the year 1987-88 was completed under Section 143(3) and 147. During the course of the assessment proceedings the Assessing Officer noticed that the assessee had disclosed work in progress at Rs.44,27,42,081/- with a note that net provision was of Rs.2,12,18,295/-. No such provision was made in the balance sheet. According to the assessee the closing stock was reduced by Rs.2,12,18,295/- on account of deterioration of old stocks. The case of the Revenue is that the value of the stock was reduced illegally on the basis of the reports received from the concerned Officers and therefore the Assessing Officer made addition of this amount to the income of the assessee. The assessee filed an appea....
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.... fringe benefits. Explanation 1.-Where in respect of any facts material to the computation of the 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 the [Commissioner (Appeals) or the Commissioner 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 total income have been disclosed by him, then, the amount added or disallowed in computing the total income of such person as a result thereof shall, for the purposes of clause (c) of this sub-section, be deemed to represent the income in respect of which particulars have been concealed." 6. We have heard learned counsel for the parties and also gone to the authorities cited by them. 7. Shri Vinay Kuthiala, learned counsel for the Revenue has urged that in the previous proceedings between the parties, the authorities clearly held that the assessee had furnished inaccurate particulars of its income and therefore the provision....
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....orated considerably and such lots may fetch substantially low prices in the market when compared to the book values. The Divisional Managers have, therefore, recommended an overall reduction of 25% in Chamba division and 50% in Chopal Division in the value of such stock. We are, however, not in a position to determine the exact reliable value and have to rely on such estimation in the interest of proper and fair valuation of inventories in our balance sheet for the financial year 1986-87. We, therefore, recommend that the valuation of old lots lying in the forests at various stages under work in progress as on 31.3.1987 (but which still exist as on date) be valued at their reliable value as estimated by the Divisional Managers i.e. 25% and 50% respectively below book value as per details annexed. It is emphasized here that this reduced valuation of inventory is purely for the purpose of presenting a true and fair picture in the balance sheet and in no way prevents the right of the Corporation in recovering any physical loss of inventory at actual cost." 10. It appears that some timber of the assessee lying in Chamba and Chopal Divisions had deteriorated consider....
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.... in determining the value of the depreciated stocks that the claim was not accepted by the Revenue. In regard to the Resolution of the Board of Directors passed in the year 1990 the ITAT came to the conclusion that the Government Corporations move at their own pace and have to follow long procedures. It found that the decision of the Board of Directors would not personally benefit any of the Directors. It also came to the conclusion that the statutory Auditors had audited the accounts including the valuation in respect of the deteriorated stocks. It was also found that even the Comptroller and Auditor General of India had approved the accounts of the assessee in this regard. According to the ITAT the assessee had disclosed all material facts and had also disclosed that the deduction was claimed on the basis of the estimates. Since thee was no concealment the assessee was not liable to pay penalty. It also held that merely because the explanation afforded was not substantiated the consequences could not be that the assessee must pay penalty. 13. Both the sides have relied upon a large number of decisions and we therefore propose to cite them in chronological order. ....
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....ome or furnished inaccurate particulars for evasion of the tax. In view of the findings of the Tribunal, no case is made out for interference by this Court." 18. The question with regard to the interpretation of Section 271(1)(c) and the Explanation thereto, came up for consideration before the Apex Court in Commissioner of Income Tax, Ahmedabad vs. Gold Coin Health Food Private Ltd., (2008) 9 SCC 622, which is not relevant because the main question decided in that case was that even in a case where the assessee declared loss in income, if there is concealment of income, penalty can be imposed. 19. The Apex Court in Commissioner of Income Tax, Delhi vs. Atul Mohan Bindal, (2009) 9 SCC 589, after considering the provisions of Section 271 held as follows: " The quantum of penalty is prescribed in Clause (iii). Explanation 1, appended to section 271(1) provides that if that person fails to offer an explanation or the explanation offered by such person is found to be false or the explanation offered by him is not substantiated and he fails to prove that such explanation is bona fide and that all the facts relating the same and material to the computation o....
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.... assessee can furnish the particulars of his income. When such particulars are found to be inaccurate, the liability would arise. In Dilip N. Shroff Vs. Joint Commissioner of Income Tax, Mumbai & Anr. [2007(6) SCC 329], 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 Section 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 Clause (iii) of Section 271(1) provided for a discretionary jurisdiction upon the Assessing Authority, inasmuch as the amount of penalty could not be less than the amount of tax sought to be evaded by reason of such concealment of particulars of income, but it may not exceed three times thereof. It was pointed out that the term "inaccurate particulars" was not defined anywhere in the Act and, therefore, it was held that furnishing of an assessment of the value of the property may not by itself be furnishing inaccurate particulars. It was further held that the assessee must be found to have failed to prove that his exp....
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....nbsp; 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 as....
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....hority it cannot be said that the statement of particulars is so inaccurate or erroneous as to invite imposition of penalty. True it is, that mens rea is not required to be proved. When mens rea is proved it shows that the person had an intention of evading payment of tax by illegal means. Merely because a wrong interpretation to the same set of facts is given would not, in our opinion, mean that the assessee is liable to pay penalty also. We must remember that penalty is by its very nature penal and somebody is being punished for an act which is unjustified. The assessee in the present case has already been burdened with tax and interest on the amount added to his income. The moot question is whether the assessee should be made liable to pay penalty. 22. The Apex Court in Reliance Petro Products' case (supra) has clearly laid down that merely because the assessee makes a claim which is not sustainable in law, will not amount to furnishing inaccurate particulars regarding the income of the assessee. In the present case, as pointed out above, the assessee was deducting the amount of Rs.2,12,18, 295/- on account of deterioration of old stock. This was being done on estimati....