TaxTMI 
TaxTMI 
TaxTMI 
2014 (12) TMI 516
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....rading under F&O as short term capital loss and not as a speculation loss. The Assessing Officer treated the loss as speculation loss and did not allow the claim of the assessee and penalty proceedings u/s 271(1)(c) of the Income-tax Act, 1961 was initiated for furnishing inaccurate particulars of income. It is undisputed fact that actual delivery of commodities has not taken place. The transaction was speculative. These transactions are taken on regular basis. The transactions are covered by definition of speculative transaction as provided in section 43 (5) of the Act. This disallowance was confirmed by the CIT (A). The Assessing Officer levied the penalty on this addition relying on the decision of Hon'ble Supreme Court in the case of Union of India vs. Dharmendra Textiles Processors - 306 ITR 277 (SC), ITO vs. Geep Industrial Syndicated Ltd. - 101 ITD 448, CIT vs. Gates Foam and Rubber (Co.) - 91 ITR 464 (Kerala) and Anand Liquors vs. CIT - 232 ITR 35 (Kerala) by holding that assessee has filed inaccurate particulars of income and concealed the income and levied the penalty u/s 271(1)(c) of the Act. The CIT (A) confirmed the levy of penalty and directed the Assessing Office....
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....rdinarily with the Department is sought to be placed on the assessee. This burden on the assessee is subject to "conditions precedent" which are required to be satisfied before the Explanation could be applied. It was also pointed out as held by Supreme Court in K.C. Builders Vs ACIT (2004) (265 ITR 562) (SC) that "deliberateness" is implied in the concept of concealment. 4.3 However after the decision laid down in Dilip N. Shroff (Supra), T. Ashok Pai (Supra) in a dispute under Central Excise Law the Apex Court in the case of UOI Vs Dharamendra Textile Processors (2.008) (306 ITR 277) (SC) held that "default merited penalty without having to consider any intend of the assessee to evade tax. The Mens rea is essential only for matters of prosecutor & not penalty". Thus after the decision in the case of Dharamendra Textile Processor (Supra) "Mens rea is not necessary to be proved by revenue for civil penalties." 4.4 But with the decision of the Supreme Court in the case of CIT Vs Reliance Petro Products Pvt. Ltd (20l0) (322 ITR 158) (SC), it is clear that the Supreme Court by giving the ruling in Dharmendra Textile Processor's Case (Supra) has not overruled their decision in ....
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.... in law but is also wholly without any basis and the explanation furnished by him for making' such a claim is not found to be bonafide, it would be difficult to say that he would still not be liable to penalty under Section 271(l)(c) of the Act. If we take the view that a claim which is wholly untenable in law and has absolutely no foundation on which it could be made the assessee would not be liable to imposition of penalty even if he was not acting bonafide while making a claim of this nature, that would give a licence to unscrupulous assessees to make wholly untenable and unsustainable claims without there being any basis for making them, in the hope that their return would not be picked up for scrutiny and they would be assessed on the basis of self Assessment under Section 143(1) of the Act and even if their case is selected for scrutiny, they can get away merely by paying the tax, which in any case, was payable by them. The consequence would be that the persons who make claims of this nature, actuated by a malafide intention to evade tax otherwise payable by them would get away without paying the tax legally payable by them, if their cases are not picked up for scrutiny.....
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.... (P) Ltd. Vs. CIT (ITA No. 944/2011), where court on the same facts has held "the claim of statutorily prohibited deduction falls within the mischief of expression "furnishing of inaccurate particular" and assessee cannot take the shelter 'behind the decision in the case of Reliance Petro Products (supra), rather in such situations, the ruling of Zoom communications (supra) is to be followed." 4.14 Thus in view of the above discussion, in the facts of the appellant's case the penalty levied by the AO is upheld. However, in terms of calculating the amount of penalty, I agree with the appellant that in the instant case the penalty should be levied on the amount of tax sought to be evaded. Accordingly, AO is directed to compute the tax on the amount of Rs.l,61,27,836 as per the relevant laws at that time and then levy the penalty on that tax which was sought to be evaded. Now, the assessee is in appeal by taking the following ground :- "The learned CIT (A) erred in fact and in law in confirming the penalty of Rs. 54,28,629/- imposed u/s 271(1)(c), which is not only bad in law but also against the facts and circumstances of the case. 3. We have heard both the sides on the i....