TaxTMI 
TaxTMI 
2016 (12) TMI 1087
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....the I.T. Act during the course of which loose sheets were discovered containing details of cash creditors of all the three concerns of Poddar Group. Also a few signed receipts from the creditors were attached to the list which were blank and undated. On 14.4.1981 the assessee filed a settlement application before the Settlement Commission claiming that the loans in question had been taken during the period relevant to the assessment years 1977-78 to 1980-81. The matter was ultimately disposed of by the Settlement Commission on 18.4.1995. The assessee did not initially surrender the said cash credit at the time of filing the application before the Settlement Commission but ultimately in the course of hearing of the settlement application, the cash credits were shown as its own income and accordingly, immunity was granted by the Settlement Commission with respect to the same under Section 245H of the Act. With respect to the assessment years in question, i.e., 1981-82 and 1983-84, which were not the matter before the Settlement Commission, the assessee filed his return on 30.9.1981 and 2.8.1983 and assessment orders with respect to them were passed on 21.3.1984 and 31.3.1986 respec....
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.... 1983-84 were filed on 30.9.1981 and 2.8.1983 respectively, after the filing of the settlement application on 14.4.1981, the benefit is not available to the petitioner, without considering the fact that the hearing before the Settlement Commission had finally concluded on 18.4.1995 during the course of which the applicant surrendered the cash credit after lapse of about 14 years. It is submitted that the Tribunal has failed to consider that the surrender had been made by the petitioner only to buy peace with the department, in order to put to an end the protracted litigation. It is also submitted that the fact that the petitioner had surrendered the cash credit in settlement proceedings cannot be evidence in penalty proceedings which were conducted more than a decade earlier. It is urged that the assessment proceedings are separate from the penalty proceeding and the findings in the settlement proceedings are separate from penalty proceedings and what transpired during the settlement cannot be evidence in penalty proceedings. In support of the aforesaid proposition learned counsel relies upon a decision of the Supreme Court in the case of M/s. Anantharam Veerasinghaiah & Co. Vs. C....
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....of the explanation given by the assessee, it was observed, was insufficient without there being in addition cogent material or evidence from which the necessary conclusion attracting a penalty could be drawn. These principles were reiterated by this Court in Commr. of Income-Tax, Madras v. Khoday Eswarsa and Sons, (1972) 83 ITR 369: (AIR 1972 SC 132)." The principal submission of learned counsel is that in the present matter there has been no concealment of the particulars of income or furnishing incorrect particulars of income by the assessee; rather it was only the claim for interest as expenditure which has been disallowed. It is submitted that mere disallowance of expenditure cannot give rise to an order of penalty. In support of the same, learned counsel relies upon a decision of the Supreme Court in the case of Commissioner of Income Tax Vs. Reliance Petroproducts Private Limited.: (2010) 322 ITR 158(SC) in paras 8 and 9 of which the law has been succinctly laid down as follows: A glance at this provision would suggest that in order to be covered, there has to be concealment of the particulars of the income of the assessee. Secondly, the assessee must have furnished inaccu....
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.... the particulars of his income. When such particulars are found to be inaccurate, the liability would arise. In Dilip N. Shroff Vs. Joint CIT (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)(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 furnishing inaccurate particulars. It was further held that the Assessing Officer must be found to have failed to prove that his explanation is not only not bona fide but all the f....
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..... It is also submitted by learned counsel that the Tribunal has rightly held that the assessee's case before the Settlement Commission did not pertain to assessment years in question and thus it cannot escape the liability for penalty in the said years. In support of the said stand learned counsel relies upon a decision of the Supreme Court in the case of Union of India & ors.. Vs. Dharmendra Textiles Processors & Ors.: (2008) 306 ITR 277 (SC), in paras 26 and 27 of which it has been held as follows:- "26. It is of significance to note that the conceptual and contextual difference between section 271(1) (c ) and section 276C of the Income-tax Act was lost sight of in Dilip N.Shroff's case (2007) 8 Scale 304 (SC)= (2007) 291 ITR 519 (SC). 27. The explanations appended to section 271(1)(c) of the Income-tax Ac entirely indicate the element of strict liability on the assessee for concealment or for giving inaccurate particulars while filing the return. The judgment in Dilip N. Shroff's case (2007) 8 Scale 304 (SC) = (2007) 291 ITR 519 (SC) has not considered the effect and relevance of section 276C of the Income-tax Act. The object behind the enactment of section 271(1) (c ) read....
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.... the income and that the assessee has concealed consciously the particulars of his income and deliberately furnished the incorrect particulars. It was further held that normally mere claim of the assessee was insufficient without there being in addition cogent material or evidence from which the necessary conclusion of imposing the penalty could be drawn. It does appear from the materials on the record that no such attempt has been made to arrive at the finding; rather only on conjecture and surmises with regard to the assessee having surrendered the cash credit on his income in the course of hearing of the settlement application, he would have found that the goings were not favourable to it before the Settlement Commission. In our view it was not open to the Revenue or the Tribunal to have come to any such conclusion on the basis of mere conjecture and surmises as there can be many reasons for such surrender, including that put forward by the assessee that he wanted to avoid the protracted litigations. Further, in our view the question of immunity granted under Section 245H by the Tribunal with regard to the said cash credit has not been considered in the proper light including ....