TaxTMI 
TaxTMI 
2010 (2) TMI 877
X X X X Extracts X X X X
X X X X Extracts X X X X
....t merely addition sustained on merit penalty u/s.271(1)(c) is not applicable unless it is found that assessee has furnished inaccurate particulars of income or has concealed particulars of his income. He further observed that the AO has only gone by the fact that addition has been sustained by the first appellate authority, however, confirmation of addition in itself does not suggest concealment of income. The CIT(A) has also observed that the treatment given in respect of section 80-HHC were subject matter of further litigation and in case of debatable claim which does not amount to concealment of particulars or inaccurate particulars the CIT(A) relied upon the judgment of Hon'ble Rajasthan High Court in the case of Harshvardhan Chemicals and Mineral Ltd.(2003) 259 ITR 212. 4. We have heard the ld. Representatives of the parties. We find that the first item on which AO levied penalty is on account of software expenses, has been sent back to the file of the AO by ITAT in assessee's own case on merit vide ITA No.6083 and 6138/M/06 dated 27.4.2009 for the Assessment Year 2003-04. The contention of the ld. AR is that in the case of Godfrey Philips India Ltd. in ITA No.2747 a....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the circumstances some time taxpayers agree to certain additions during assessment proceedings not always because they are convinced that such addition is warranted or otherwise justified, but with a view to bring finality to the whole matter to purchase peace and avoid litigation. The general view has always been that mere admission by itself need not offer immunity to the taxpayer, where the admission has been extorted from him after concealment had been brought home. But there are a number of cases where there is hardly any material to justify the addition at the time when addition is conceded. It is true that in some cases the addition may be agreed with a view to forestall enquiry. Even in such cases it would appear that penalty may not be levy able in absence of any material on record against the taxpayer. It is because a mere attempt to conceal income has not been specifically made liable for penalty. Even in a case where proceedings for detection of concealment is going on during the assessment proceedings, the assessee surrenders some income and AO drops the proceedings of detection of concealment by accepting assessee's surrender without making further examination or inv....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tion is not found acceptable, the question of penalty will arise. In other words, the explanation of the assessee has to be considered on the merits. During assessment proceedings, if the AO accept the surrender amount, in other words, it can be said that whatever explanation submitted by the assessee in respect of surrender of amount, have been accepted by the AO unless finding is given by the AO that explanation furnished by the assessee was false explanation. 5.2 The issue relating to "bonafide" and "false" returns in imposing penalty on the assessee under section 43 of the Madhya Pradesh General Sales Tax Act, 1958, and section 9(2) of the Central Sales Tax Act, 1956 have been examined by the Apex Court in the case of Cement Marketing Co. of India Ltd. V. Assistant Commissioner of Sales Tax [1980] 4 Taxman 44 (SC), 124 ITR 15 (SC). Facts in brief of that case were that the assessee-company effected certain transactions of sale of cement in accordance with the provisions of the Cement Control Order during the assessment period 1- 8-1971 to 31-7-1972. The amount of freight included in the "free on rail destinations railway station" was paid by the purchasers and hence t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....unt of freight in the taxable turnover, could not be said to be mala fide or unreasonable. What section 43 of the Madhya Pradesh General Sales Tax Act, 1958, requires is that the assessee should have filed a "false" return and a return cannot be said to be"false" unless there is an element of deliberateness in it. It is possible that even where the incorrectness of the return is claimed to be due to want of care on the part of the assessee and there is no reasonable explanation forthcoming from the assessee for such want of care, the court may, in a given case, infer deliberateness and the return may be liable to be branded as a false return. But where the assessee does not include a particular item in the taxable turnover under a bona f ide belief that he is not liable so to include it, it would not be right to condemn the return as a "false" return inviting imposition of penalty. This view which is being taken by us is supported by the decision of this Court in Hindustan Steel Ltd. v. State of Orissa [1970] 25 STC 211, where it has been held that: "...Even if a minimum penalty is prescribed, the authority competent to impose the penalty will be justified in refusing to impose pen....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ssee was regularized as it is. During the course of assessment, the aforesaid explanation given by the assessee was neither rejected nor was it held to be mala f ide. The Tribunal has recorded a pure f inding of fact to the effect that the Revenue has not placed on record any material or evidence to discharge its burden of proving concealment. In the assessment order no such f inding was recorded. The Department has simply rested its conclusion on the act of the assessee of having offered additional income in the return f iled in response to the notice issued under section 148. The Tribunal has further held that the additional income so offered by the assessee was done in good faith and to buy peace. Therefore, in view of the aforesaid finding, the Tribunal was justif ied in upholding the order of the CIT(A), whereby the penalty imposed u/s 271(1)(c) by the AO was order to be deleted." b) The learned AR has also relied upon the decisions of ITAT in cases of Niton Valve Industries (P.) Ltd. vs. ACIT, [2009] 30 SOT 236 (Mum.), ITO vs. GACL Finance Ltd., [2009] 30 SOT 360 (Mum.) and Twin Star Jupiter Cooperative Hsg. Soc.Ltd., vs. ITO, [2009] 31 SOT 474 (Mum.) The ITAT in th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ticulars of income" and "has furnished inaccurate particulars of income" have not been def ined either in section 271(1)(c) or elsewhere in the Act. There cannot be a straight jacket formula for detection of these defaults of concealment of particulars or of furnishing inaccurate particulars of income. It depends upon the facts of the each case. There was concealment or not is, ordinarily, a question of fact. Once bearing in mind the correct principles comes to the conclusion that the assessee has discharged the onus, it becomes a conclusion of fact. Similarly, whether the explanation offered by the assessee was bona fide or not is also a question of fact. In the assessment proceedings the ITO while ascertaining the total income chargeable to tax would be in a position to detect the specif ic or definite particulars of income concealed or inaccurate particulars are furnished. Where in the constituents of income returned, such specif ic or def inite particulars of income are detected as concealed, then even in the total income f igure to that extent they ref lect, it would amount to concealment to that extent. In the same way where specif ic and def inite particulars of income are d....
X X X X Extracts X X X X
X X X X Extracts X X X X
....amendra Textile case (supra). In almost every case relating to penalty, the decision is referred to on behalf of the revenue as if it laid down that in every case of non-payment or short payment of duty the penalty clause would automatically get attracted and the authority had no discretion in the matter. One of us (Aftab Alam, J.) was a party to the 2009] UOI vs. Rajasthan Spg. and Wvg. Mills (SC) 621 decision in Dharamendra Textile case (supra) and we see no reason to understand or read that decision in that manner. In Dharamendra Textile case (supra) the court framed the issues before it, in paragraph 2 of the decision, as follows: "2. A Division Bench of this Court has referred the controversy involved in these appeals to a Larger Bench doubting the correctness of the view expressed in Dilip N. Shroff v. Joint CIT 2007 (8) SCALE 304. The question which arises for determination in all these appeals is whether section 11AC of the Central Excise Act, 1944 (the inserted by Finance Act, 1996 with the intention of imposing mandatory penalty on persons who evaded payment of tax should be read to contain mens rea as an essential ingredient and whether there is a scope for lev....
X X X X Extracts X X X X
X X X X Extracts X X X X
....) could not have interpreted section 11AC in the manner as suggested because in that case that was not even the stand of the revenue. The court noted the submission made on behalf of the revenue as follows: 622 Taxman Tax Reports [Vol. 180 "5. Mr. Chandrashekharan, Additional Solicitor General submitted that in rules 96ZQ and 96ZO there is no reference to any mens rea as in section 11AC where mens rea is prescribed statutorily. This is clear from the extended period of limitation permissible under section 11A of the Act. It is in essence submitted that the penalty is for statutory offence. It is pointed out that the proviso to section 11A deals with the time for initiation of action. Section 11AC is only a mechanism for computation and the quantum of penalty. It is stated that the consequences of fraud etc. relate to the extended period of limitation and the onus is on the revenue to establish that the extended period of limitation is applicable. Once that hurdle is crossed by the revenue, the assessee is exposed to penalty and the quantum of penalty is fixed. It is pointed out that even if in some statutes mens rea is specifically provided for, so is the limit ....