TaxTMI 
TaxTMI 
2019 (7) TMI 853
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....s credited in the books of account, treating the same as satisfying the charge of the Appellant having furnished inaccurate particulars of income. Considering the facts of the case, the provisions of law as interpreted by various Courts and Tribunal Benches and the content of the paper book filed before him, he ought to have deleted the said penalty. The assessee craves leave to add, amend, delete or alter one or more grounds of appeal." 2. Subsequently, following additional ground was also submitted by the assessee before us. "Additional Ground: Since the notice issued under section 274 does not clearly specify the charge based on which, the penalty proceeding are initiated, the penalty proceedings needs to be quashed since there is no application mind by the Learned AO." 3. The brief fact of the case is this that the assessee engaged in the business of dealing in construction, telecom & infrastructure work filed its return of income on 04.10.2010 declaring total income at Rs. 48,33,544/- which was ultimately finalized inter alia with the following disallowance: Total income as per return of income Rs. 48,33,544/- Add:- Additions ....
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....is absent in the instant case, hence the order of penalty is liable to be dismissed as argued by the Learned AO. Neither adverse has been brought on record by the revenue during the assessment proceeding, which can substantiate the contention thus the company has furnished inaccurate particulars. He, thus prayed for quashing of the penalty proceeding. On the contrary the Learned DR relied upon the order passed by the authorities below. 5. We have heard the respective parties, perused the relevant materials available on record. It appears that during the assessment proceeding, the assessee was asked to reconcile the claim of TDS vis-à-vis income offered from tax in the return of income upon which by and under a letter dated 09.11.2012 assessee submitted the said reconciliation wherefrom it appears that the income was shown less by Rs. 9,04,528/- and Rs. 3,48,450/-. The assessee was thus confronted with the said discrepancy. Time was sought for to explain the same on behalf of the assessee and ultimately the same was offered to tax. By and under a subsequent letter dated 26.11.2012 the assessee further asked for time for three months to enable him to reconcile the differ....
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....tc. Since section 194C requires deduction of tax at source in respect of any sum paid to a contractor for carrying out any work even the payments made by them either towards taxes, reimbursement of expenses or otherwise, have been subjected to deduction of tax at source. Though these do not form part of the turnover. It is for this reason that prima fade, them is a slight mismatch between the sum total of the gross amount as mentioned in the respective TDS certificates issued by the principals and the corresponding sales credited to the Profit & Loss account. This difference is thus due to the express provisions of law and the sane is thus fully and completely reconciled 5.2 Subject to what has been mentioned above, a detailed chart containing reconciliation between the sum total of the gross amount subjected to TDS by various principals and the corresponding aggregate sales credited to Profit & Loss account is enclosed herewith From written submission dated 26th November 2012: We specifically draw your kind attention to our detailed written submission in this regard which has already been filed earlier. In addition to what has already been mentioned ther....
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....nd specifically asking for certain time to reconcile the difference, your Honor deemed it proper to add back the same to the returned income of the Company and initiated the penalty proceedings for furnishing inaccurate particulars of income. 4.3 The Company submits that on facts and on law the penalty is not leviable in view or the following among other masons. (a) Mere fact that such addition had not been challenged in appeal cannot thus automatically result in the satisfaction of the charge for which the penalty was initiated. Since the penalty under section 271(1)(c) is held to be a proceeding which is clearly independent of the assessment proceedings, there cannot be a case of automatic levy of penalty once the addition is made or confirmed appeal. Had it been the case, the legislature would not have provided for the levy of penalty by way of a separate order and by conducting separate hearing in this regard. The condition of running en extra mile on the part of the AC so as to establish that the addition made In the order passed in quantum in fact amounted to satisfaction of the charge for which the penalty was initiated. (b) The company sp....
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....pers, the litigant in the present case, is one of the international tax firms having global presence and designated as one of the big four across the world. While furnishing the return of income, even this company committed an error in not disallowing a sum ofRs. 23 lacs towards provision for gratuity despite there being a clear provision in the Act in the form of section 40A(7) and despite the disallowability of this debit in the Profit & Loss account having been mentioned in the Tax Audit Report. It was the argument of the Revenue that since it is the case of a very reputed firm having great experience in taxation matters, the mistake in claiming deduction of something which is not allowable under the express provisions of the Act clearly amounts to satisfaction of the charge, thus justifying levy of penalty under section 271(1)(c) of the Act. As against this the Apex Court held that despite the assessee being a reputed company having great expertise available with it, it is possible that even it can make a silly make. The relevant para of the order of Hon'ble Supreme Court is reproduced herein below. "Notwithstanding the fact that the assessee is undoubtedly a reput....
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.... on the theme of furnishing inaccurate particulars of income are to be treated as valid, the same are clearly attributable to the silly mistake committed by the CA who was undoubtedly of the caliber much below the caliber of Price Waterhouse Coopers Pvt. Ltd. If penalty was found not leviable even in relation to Price Waterhouse Coopers Pvt. Ltd. and that too, by Hon'ble Supreme Court of India, applying the same analogy, no penalty can be levied even in relation to the company, which may please be noted.".......... Reliance was also placed on different judgments passed by the Hon'ble Supreme Court including the case CIT-vs-Reliance Petroproducts Pvt. Ltd. and CIT-vs-K.R. Chinni Krishna Chetty reported in [2000] 246 ITR 121 (Mad) passed by the Hon'ble Madras High Court as well as the order passed by the Chennai Tribunal in the matter of Gem Granites (Karnataka) -vs-DCIT reported in [2009] 18 DTR 358. The contention of the assessee was this that merely because the additions confirmed does not ipso facto attract penalty provision. Penalty provision requires a strict adherence and onus to prove that there was a concealment of income with a view to avoid the tax is on the departm....
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.... in any constituent element of return of income would constitute "inaccurate particulars". 3.3 It is also pertinent to note that the observation of Hon'ble Supreme Court in the case of CIT, Ahmedabad vs. Reliance Petroproducts (P) Ltd. (322 ITR 158). The Hon'ble Supreme Court in the said judgement has noted as under: "......The meaning of the word "particulars" used in section 271(l)(c) would embrace the details of the claim made. Where no information given in the return is found to be incorrect or inaccurate, the assessee cannot be held guilty of furnishing inaccurate particulars............." Further, the Hon'ble Court has noted: "There can be no dispute that everything would depend upon the return filed by the assessee, 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." 3.4 It is further noted that the Hon'ble Supreme Court in the case of Dharmendra Textiles Processors 306 ITR 277 (2008) (SC) has noted that the explanations appended to sec. 271(1)(c) entirely indicate the element of strict liabilit....
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....urse of assessment proceedings the assessee was asked to reconcile the claim of TDS vis a vis income offered for tax in the return of income. The assessee has confronted vide order sheet entry dated 22.11.2012 with the said discrepancy and the assessee accepted the said fact that it cannot explain the said difference and the same was offered for tax. If the case of the assessee would not have been taken into scrutiny, the income would have escaped assessment. Therefore, the contention of the assessee is not acceptable and is rejected and penalty is levied on the amount of Rs. 12,52,978/-. 4.3 Further ( 191 TAXMAN 179 ) HON'BLE HIGH COURT OF DELHI in Commissioner of Income-tax* vs. Zoom Communication (P.) Ltd.(2010) stated "The Court cannot overlook the fact that only a small percentage of the incometax returns are picked up for scrutiny. If the assessee makes a claim which is not only incorrect 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 bona fide, it would be difficult to say that he would still not be liable to penalty under section 271(1)(c ). If one takes the view tha....
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.... income as well as furnishing of inaccurate particulars of income. And Hon'ble Gujarat High Court, which is also the jurisdictional High Court in the case at hand, in the case of A. M. Shah & Co. v. CIT [2000] which says "Any concealment or inaccuracy in the particulars of income in the return occurring at any stage upto and inclusive of the ultimate stage of working out of total income would attract the penalty provision of section 271(l)(c). Every figure in the return which is set opposite to the item of income is a particular income, whether the figure is one which is stated independently of anything else that appears in the return or the documents accompanying it or whether it is something derived from other figures elsewhere stated in such return or documents. False result may be produced by the falsity of one or more of the constituent items in the return. The words 'inaccurate particulars' would cover falsity in the final figure as also the constituent elements or items. They simply would mean inaccurate in some specific or definite respect whether in the constituent or subordinate items of income or the end result" Ultimately, the Learned DC....
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....things are not above board otherwise the appellant must have submitted the details of reconciliation even across the years starting from beginning of the contract to the completion of the contract and explain its accounting policy with reference to recording of receipts and the IDS made by the principal or the deductors. Thus these grounds taken by the appellant fail. 7. Coming to legal submissions it is seen that facts of the cases of various appeal orders were different. In the present case facts are not related to any claim made which was disallowed. So the case law CIT vs Reliance Petro Products 322 ITR 158 will not apply. The case in the CIT vs. Price water. 6924/2012 also will not be applicable since the facts related to disallowance were not disclosed. In fact in the present case the facts are not related to disallowance but rather addition of undisclosed receipts. Here another point which is required to be discussed is whether the amount added represents furnishing inaccurate particulars or concealment of income. This is a fact that entire receipts was not shown by the appellant in its accounts and so it is to be held that entire income was not disclosed and so it ....
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.... the effect that the alleged depositors had received gifts and had independent sources of income- levy of penalty held justified. It was further held that ITO need not record his satisfaction in a particular manner and it can be gathered from the assessment order. 9.4 Further, the honourable Kerla High Court in the case reported at (2003) 263 ITR 0579 (Ker) I'll the levy of penalty as justified and the ratio of said decision was: The lower authorities erred in holding that though the amount was agreed to be added, the AO failed to prove concealment. The onus was on the assessee to substantiate the explanation offered. AO is required to record his finding on the explanation furnished. 9.5 Further, in the case of COMMISSIONER OF INCOME TAX vs. MASTER SUNIL R. KALRO reported as (2007) 211 CTR (Kar) 314 : (2007) 292 ITR 86 (Kar) : (2007) 163 TAXMAN 675 (Kar) it was held that AO having found on a detailed examination that the so-called gifts received by the assessee were not genuine, and all the authorities, including the Court having sustained the addition under s. 68, it cannot be said that this is a case of "no concealment" or of "no inaccurate" particu....
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....tances of this case. 10. To analyse the peculiar facts of the case and application of penalty provisions on the same, it is first necessary to reproduce the provisions of section 271 (1) (c) to appreciate the law: Failure to furnish returns, comply with notices, concealment of income, etc. 271, (1) If the [Assessing] Officer or the [Commissioner (Appeals)] or the Commissioner in the course of any proceedings under this Act, is satisfied that any person- ..... (c) has concealed the particulars of his income or furnished inaccurate particulars of [such income, or] ..... he may direct that such person shall pay by way of penalty,- ..... [(iii) in the cases referred to in clause (c) [or clause (d)], [in addition to tax, if any, payable] by him, a sum which shall not be less than, but which shall not exceed [three times], the amount of tax sought to be evaded by reason of the concealment of particulars of his income [or fringe benefits] or the furnishing of inaccurate particulars of such income [or fringe benefits], [Explanation 1.-Where in respect of any facts material to the computation of the to....
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....be used against him. These provisions include the Explanation........ The assessee is, therefore, by virtue of the notice under section 271 put to notice that if he does not prove, in the circumstances stated in the Explanation, that his failure to return his correct income was not due to fraud or neglect, he shall be deemed to have concealed the particulars of his income or furnished inaccurate particulars thereof and, consequently, be liable to the penalty provided by that section. No express invocation of the Explanation to section 271 in the notice under section 271 is, in our view, necessary before the provisions of the Explanation therein are applied. The High Court at Bombay was, therefore, in error in the view that it took and the Division Bench in the impugned judgment was right. Learned counsel for the assessee then drew out attention to the judgment of this court in Sir Shadilal Sugar and GeneralMills Ltd. v. CIT [1987] 168 ITR 705. He submitted that the assessee had agreed to the additions to his income referred to hereinabove to buy peace and it did not follow therefrom that the amount that was agreed to be added was concealed income. That it did not ....
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....ted in the books of accounts and the corresponding figure reflected in the respective TDS statements. The difference can only be due to certain variation in the accounting treatments for errors omission and commissions that may have been committed by the principles etc. The case of the assessee dose not fall under the explanation 1(A) to Sec 271(1)(c) as an explanation for the unaccounted receipt has not been proved to be false. Let us examine now the applicability of explanation 1(B) to section 271(1)(c) as below: (a) The assessee has offered an explanation regarding difference in receipts as per TDS statement and as per books of accounts but assessee itself is stated that difference can be..... And thus the explanation is based on possible reasons without any analysis of facts and figures and thus the explanation is totally unsubstantiated. (b) The appellant also failed to prove that it's explanation was bona fide, as no attempt was made to prove the bona fides of the explanation rather appellant tried to skirt the issue by taking shelter of various case laws rather than verifying the facts. (c) The addition made by the assessing officer ha....