TaxTMI 
TaxTMI 
2012 (8) TMI 764
X X X X Extracts X X X X
X X X X Extracts X X X X
....rom the AO to disallow deduction u/s 80-IB in the said notice is not acceptable." 2. The short facts of the case are as under: - "The assessee is a domestic company carrying on of business of manufacturing of organic chemicals and filed its return of income on 31st November, 2006 declaring the total income of Rs. 1359140/- after claiming the deduction u/s 80-IB of the Act amounting to Rs. 5590433/-. The said return was processed u/s 143(1) and the case was selected for scrutiny by way of issue of notice u/s 143(2) and 141 of the IT Act 1961. During the course of assessment proceeding, the AO notice that assessee has claimed the deduction u/s 80-IB of Rs. 5590433/- even after expiry of period of 10 consecutive assessment years. During the course of assessment proceedings, assessee has initially submitted that it has furnished revised return of income but later clarified that inadvertently they have not filed the revised return of income. Subsequently, the assessee has filed the copy of revised statement of income withdrawing the deduction claimed in original return of income and in view of this AO disallowed the deduction u/s 80-IB claimed by the assessee. The AO also in....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d suo mottu revised statement but filed after thought. As per the decision of Hon'ble Supreme Court in the case of Union of India v. Dharmendra Textiles Processors [2008] 174 Taxman 571 wherein it is held that the levy of penalty is automatic. The Hon'ble Supreme Court has held that as per section 271 (1) (c) read with explanation indicate that the said section has been enacted to provide for a remedy for a loss of revenue. The penalty u/s 271(1) (c) is a civil liability. The penalty is mandatory and AO has no discretion left with competent authority hence, AO is justified in his action and CIT (A) is not justified in holding that the decision of Dharmendra Textiles Processors (supra) is not supporting to the facts of assessee's case. Therefore AO's action should be upheld. 5. Ld. AR on the other hand submitted that penalty u/s 271(1)(c) is leviable if the AO satisfied in the course of proceedings under this Act that any person has concealed the particulars of income or furnished inaccurate particulars of income. From the assessment order there is no indication in assessment order which speaks of the AO being satisfied during the course of assessment proceedings ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nd tax was paid thereon out of which 10 lakhs of tax was paid on 07/08/2007 much before the issue of notice u/s 143 (2) which was received on 03/10/2007. The revised statement was not filed earlier because the consultant advised the assessee that revised statement can be filed only after full payment of taxes. The balance tax was paid by the assessee on 08/12/2007. The revised statement was filed after payment of full tax. The Ld. AR submitted that there is no allegation that the explanation of the assessee was not bona fide or the assessee failed to substantiate his explanation. The assessee has submitted his explanation which has been duly substantiated and it was bona fide. The assessee has suo mottu and voluntarily paid the tax due in respect of withdrawal of the claim u/s 80-IB. The ld. AR submitted that assessee has not filed in accurate particulars of income. The assessee has disclosed all necessary particulars in the return. The assessee was allowed the deduction u/s 80-IB in the earlier years and accordingly claim the deduction. The moment assessee has taken the legal advice he withdraw the claim by paying the taxes due on withdrawal of claim suo mottu and voluntarily. The....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... AO 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 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." From the perusal of the aforesaid section, it is apparent that penalty u/s 271(1)(c) is leviable if the AO is satisfied in the course of any proceedings under this Act that any person has concealed the particulars of his income or furnished inaccurate particulars of the income. From the assessment order that there is no indication in the assessment order which speaks of the AO being satisfied during the course of the assessment that the assessee has committed a default as stipulated u/s 271 (l)(c). No doubt, the legislature has inserted sub-section (1B) in section 271 by Finance Act 2008 w.e.f. 0....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ng about the charge for which penalty is imposed or initiated. It is incumbent upon the AO to state whether penalty was being levied for concealment of income or for furnishing of inaccurate particulars of income. In the absence of such findings, the order would be bad in law. The case of New Sorathia Engg. Co. Ltd., (supra) Hon'ble Gujarat High Court has held as under: - "It Is incumbent upon the Assessing Officer to state whether the penalty was being levied for concealment of particulars of income by the assessee or whether any inaccurate particulars of income had been furnished by the assessee. Held, that the penalty order and the order of the Commissioner (Appeals) showed that no clear-cut finding had been reached. The Tribunal had failed to appreciate this legal issue. The ration in CIT v. Manu Engineering Works 132 ITR 306 (Guj) was applicable and the order of penalty could not be upheld by the Tribunal. The order was invalid." In the case of Rajan and Co. (supra) (Del), wherein it is held that the provision of section 271 (1) (c) of the Income tax 1961 would require proper application of mind and recording of at least a bare minimum opinion on the p....
X X X X Extracts X X X X
X X X X Extracts X X X X
....xability of an income admissibility of a deduction and interpretation of law. Accordingly, it was held that mere rejection of a legal claim would not amount to furnishing of inaccurate particulars of income. This view is now fortified by the Supreme Court Judgment in the case of Reliance Petroproducts (P.) Ltd. (supra). In this case, the claim of 'Assessee' u/s 36(1) (iii) was rejected by the AO and the order of AO was upheld by the Tribunal. As a result thereof, the penalty u/s 271(1) (c) was imposed on account of furnishing of inaccurate particulars of income. The penalty was held to be illegally imposed by the Tribunal since factual details of income furnished by the 'Assessee' were found to be correct. The matter ultimately reached the SC and the Hon'ble court upheld the view of the Tribunal by holding that "mere making of the claim, which is not sustainable in law, by itself, will not amounting to furnishing inaccurate claim of furnishing inaccurate particulars regarding the income of the assessee." 13. At this stage, it is important to note that Explanation 1 to section 271(1) (c) cannot be applied where charge against the 'Assessee' is furnishi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....has been imposed on the assessee u/s 271(1) (c) of the Act. He has not brought out whether the assessee has concealed the particulars of income or whether the assessee has furnished inaccurate particulars of income. 17. In the case of the assessee, the AO has not initiated the proceedings for any particular charge. The penalty was initiated vide issue of notice dt. 16.12.2008. The notice reads as under: - "whereas in the course of proceedings before me for the assessment year 2006-07 it appears to me that you have concealed the particulars of your income or furnished inaccurate particulars of such income." 18. The AO in this case initiated the penalty without any mention of any particular default and levied the same again without mentioning any specific charge. In Atul Mohan Bindal (supra), where Hon'ble Supreme Court was considering the same provision, it observed that the assessing officer has to be satisfied that a person has concealed the particulars of his income or furnished inaccurate particulars of such income. Thus the satisfaction of the AO about the concealment of particulars of income or furnishing of inaccurate particulars of such income is essent....
X X X X Extracts X X X X
X X X X Extracts X X X X
....disallowance for 80-IB was made, rather the assessee himself withdraw the deduction. In the penalty proceedings the assessee is given an opportunity to explain his case if he successfully explains his position and is not trapped within the parameters of section 271(1) (c) along with the Explanations deeming the concealment of income, penalty cannot be imposed. In this case, the penalty has been imposed merely observing that the penalty is automatic and mandatory. Section 271(1) (c) deals with the two situations for imposing the penalty; has concealed the particulars of his income; or has furnished the inaccurate particulars of such income. Explanation 1 is applicable only in case of first situation i.e. amount added or disallowed in the total income be deemed to represent the income in respect of which the particulars have been concealed. 20. Now the question arises whether in this case can one say that the assessee has filed inaccurate particulars of income. The assessee has disclosed all the necessary particulars in the return. The assessee was allowed the deduction u/s 80-IB in the earlier years and accordingly it claimed deduction. The moment the assessee has taken legal adv....
X X X X Extracts X X X X
X X X X Extracts X X X X
....) 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 v. Joint CIT [2007] 6 SSC 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)(c) 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 furnis....