TaxTMI 
TaxTMI 
TaxTMI 
2016 (3) TMI 323
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....t exigible to tax on actual receipt of the said income? ii) Whether, the assessee in the instant case was justified in treating the interest received on income-tax refund as being contingent in nature, although there is no provision to that effect in the Income Tax Act 1961 and income is to be taxed either on accrual or receipt basis? iii) Whether, the assesse in the instant case has furnished inaccurate particulars of income considering the judicial view that interest received on refund of income tax is liable to be taxed in the year of receipt notwithstanding the fact that quantum appeals are pending before the appellate authority?" The facts and circumstances of the case briefly stated are as follows:- During the financial year 2004-05 the assessee received interest amounting to Rs. 101.45 lakhs with the amount of refund arising from orders passed by the Commissioner of Income Tax (Appeals) (hereinafter referred to as "CIT(A)") for the assessment years 1993-94 to 1996-97. The revenue appealed against the order of the CIT(A) before the Tribunal. Since the matter was subjudice the assessee did not include the income arising out of the aforesaid amount of interest in his prof....
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....hould be very clear that the proceedings under the I.T. Act are guided by the provisions of the I.T. Act, 1961 and are not based on the surmise of the assessee. It was the duty of the assessee to offer each and every kind of income for taxation and every effort whether bonafide or malafide for not including a certain part of income in the computation of income and failing to offer tax on it would attract penalty provision u/s.271(1)(c). Therefore A.O. was legally correct to initiate penalty proceedings as this is clear case of furnishing inaccurate particulars of income to reduce the tax burden of the assessee." The assessee appealed before the CIT(A) against the aforesaid order imposing penalty. The CIT(A) by the order dated 18th August, 2008 allowed the appeal and set aside the order imposing penalty. The Revenue appealed before the Tribunal unsuccessfully and has now come up in appeal before this Court. Mr. M. P. Agarwal, learned advocate appearing on behalf of the appellant/revenue contended as follows:- (a) That there was lack of bona fide on the part of the assessee; (b) That the fact that no appeal was preferred by the assessee against the order dated 21st December, 20....
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....tal income. Therefore, in view of the deeming provision under Explanation 1, as aforesaid, the income would be deemed to have been concealed; and (e) That the omission on the part of the assessee in not disclosing the interest on refund received by him was not bona fide. Mere disclosure regarding the interest income in the notes of accounts was insufficient. Mr. J. P. Khaitan learned senior advocate appearing for the assessee contended as follows:- 1) That the assessee acted in a bona fide manner and made the relevant disclosure on the issue under consideration in its financial statements for the assessment year 2005-06. Disclosure regarding the interest income received was made by way of a note under Clause -5 of Schedule - H titled 'Accounting Policies and Notes on Accounts' as would appear from the order of CIT(A) dated 18th August 2008. The assessee had submitted a written reply dated 29th May, 2008 (quoted above) wherein he stated the exact reason for not offering the interest on refund as income. 2) That the assessing officer by his order dated 27th June, 2008 imposing penalty has altogether failed to consider the mandate of Clause (B) of Explanation 1 to Section....
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.... "submitting an incorrect claim in law for the expenditure on interest would amount to giving inaccurate particulars of such income". We do not think that such can be the interpretation of the words concerned. The words are plain and simple. In order to expose the assessee to the penalty unless the case is strictly covered by the provision, the penalty provision cannot be invoked. By any stretch of imagination, making an incorrect claim in law cannot tantamount to furnishing inaccurate particulars. In CIT v. Atul Mohan Bindal [(2009) 9 SCC 589] where this Court was considering the same provision, the Court 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. This Court referred to another decision of this Court in Union of India v. Dharamendra Textile Processors [(2008) 13 SCC 369] as also the decision in Union of India v. Rajasthan Spg. & Wvg. Mills [(2009) 13 SCC 448] and reiterated in para 13 that: (Atul Mohan Bindal case [(2009) 9 SCC 589], SCC p. 597, para 13) "13. It goes without saying that for applicability of Section 271(1)(c), conditions stated therein must e....
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....he taxable income and, therefore, both types amount to concealment of particulars of one's income as well as furnishing of inaccurate particulars of income. We do not agree, as the assessee had furnished all the details of its expenditure as well as income in its return, which details, in themselves, were not found to be inaccurate nor could be viewed as the concealment of income on its part. It was up to the authorities to accept its claim in the return or not. Merely because the assessee had claimed the expenditure, which claim was not accepted or was not acceptable to the Revenue, that by itself would not, in our opinion, attract the penalty under Section 271(1)(c). If we accept the contention of the Revenue then in case of every return where the claim made is not accepted by the assessing officer for any reason, the assessee will invite penalty under Section 271(1)(c). That is clearly not the intendment of the legislature." We have heard the rival contentions advanced by the learned advocates for the parties and perused the record. The learned CIT(A) while allowing the assessee's appeal held as follows:- "6. On perusing the above mentioned facts of the case, observa....
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....icial pronouncements and going by the facts of the assessee's case, it is not possible to agree with the observations of the A.O.. Plethora of case-laws on the issue including the judgement of the Apex Court in the case of Dilip N. Shroff vs Joint CIT (291 ITR 513) do not make the assessee's case a fit case for imposition of penalty, under Section 271(1)(c) of the Income tax Act, 1961. The facts of the assessee's case do not constitute a deliberate act of "Suppressio veri or Suggestio falsi". 7. In view of the discussions made under paras 6(1) to 6 (v) above, the penalty order is cancelled." The learned tribunal upheld the order of the learned CIT(A) and held as follows:- "5. Heard the rival contested submissions, went through the record. It is a fact that the assessee has acted bonafidely in this case. There is no condition of the provision of section 271(1)(c) with regard to the imposition of penalty for concealment. Neither there is furnishing of inaccurate particulars nor concealment of particulars by the assesse. Since the revenue has gone in further appeal against the refund of interest, the assessee did not treat the same as income because of its contingent ....
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....ealment is bad. Furthermore it cannot also be said that the assesse had furnished inaccurate particulars of income. This is so because there was no material on record to indicate that the particulars furnished by the assesse were factually incorrect. As held in Reliance Petroproducts (supra) merely making a claim which is not sustainable in law by itself will not amount to furnishing inaccurate particulars regarding the income of the assesse. The conditions precedent under clause (c) of section 271(1) is that the assessee should have concealed the particulars of his income or furnished inaccurate particulars. Mr. Agarwal contends that his case is covered by Explanation (B). In order to bring the case within Explanation (B) following conditions have to be fulfilled. (a) The assessee offers an explanation which he is not able to substantiate; and (b) The assessee fails to prove that such explanation is bona fide; and (c) The assessee fails to prove that all the facts relating to and material to the computation of his total income have been disclosed by him. It may be true that the assessing officer did not accept the explanation offered by the assessee and made additions whic....