TaxTMI 
TaxTMI 
2019 (7) TMI 853
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....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 / Disallowances (i) As discussed in para 4 Rs. 30,250/- (ii) As discus....
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....s 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 difference and also consented for addition thereto. The plea of the assessee was not found acceptable by the Learned AO. He, thus made the add....
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.... 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 therein, it is further placed on record that when it has undertaken ongoing contract which continues for several months or for several year there is generally a provision for the contractor raising a runni....
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....rate 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 specifically draws kind attention to the fact that even after retrospective insertion of section 271(1B). it is only the Initiation of penalty proceedings without specifying the satisfaction of the AO as to the specific charge, that has been val....
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....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 reputed firm and has great expertise available with it, it is possible that even the assessee could make, a "silly" mistake. The fact that the Tax Audit Report was filed along with the return and that it unequivocally stated that the provision for payment was not allowable u/....
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....nd 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 department, penalty is not automatic. While dealing with the issue the Learned DCIT discussed the legal ambit of the matter in the following manner: "3. Legal position 3.1 In this connection, it may be mentioned that the term "inaccurate particulars" has not been defined in the Act....
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...."......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 liability on the assessee for concealment or for giving inaccurate particulars while filing return. It is also held that the section has been enacted to provide for a remedy for loss of revenue and that willful concealment is not an essential ingredient for attracting civil liability as u/s. 271(1)(c) of the I. T. Act. 3.5 Furthermore, the Hon'ble Delhi Court in the....
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....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 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 urns not acting bona fide while making a claim of this nature, that would give a licence to the 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 f....
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....ich 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 DCIT observed that it is a clear case of 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(1)(c) but finally it was held that the assessee has furnished inaccurate particulars of income and therefore liability of penalty arises with the following manner: "4.6 In view of above facts and legal position discussed in the preceding paras, ....
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.... 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 was a case of concealment of income. However looking at the facts in another way that the relevant source of contract receipts was disclosed, however, full receipts related to these sources were not recorded in the gross receipts and this leads to influence of furnishing of inaccurate particulars. Thus in the present case there is considerable overlap between the term concealment of income for furnishing inaccurate particulars of income. In fact in the case both are applicable. 8. Coming to the case of Gujarat High Court re....
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....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" particulars of income and, therefore, penalty under s. 271(1)(c) is leviable. The honourable High Court held in para 7 (quoted verbatim) as below: 7......... When this order was challenged, the Commissioner has ruled that the department has not discharged its burden in the case on hand. The order of the Assessing Officer would clearly go to show that the assessing authority has chosen to discharge his burden by way of material on record. The Commissioner, in our view, is not correct in holding that the Assessing Officer is not justified in imposing penalty. When this order was challenged by t....
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....t 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 total income of any person under this Act,- (A) such person fails to offer an explanation or offers an explanation which is found by the [Assessing] Officer or the [Commissioner (Appeals)] 7[or the Commissioner] to be false, or (B) such person offers an explanation which he is not able to substantiate and fails to prove that 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 th....
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....k 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 follow that the amount agreed to be added was concealed income is undoubtedly what was laid down by this court in the case of Sir Shadilal Sugar and General Mills Ltd. [ 987] 168 ITR705 and that, therefore, the Revenue was required to prove the mens rea of a quasi-criminal offence. But it was because of the view taken in this and other judgments that the Explanation to section 271 was added. By reason of the addition of that Explanation, the view taken in this case can no longer be said to be applicable. 10.2.4 COMMISSIONER OF INCOME TAX vs. JAMNADAS & COMPANY (1995) 123 CTR (Guj) 308 : (1994) 210 ITR 218 (Guj) : (1995) 78 TAXMAN 573 Penalty under s. 271(l)(c), Explanation-Concealment-Assessee's own explanation that cash credit entries in ....
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....s 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 has been confirmed which shows that all the facts relating to the explanation offered by appellant and material to the computation of total income were not disclosed by it. The assessee failed to prove veracity, correctness and completeness of its books of accounts even though the entries for the tedious were made by it and deduction was also claimed for the tedious certificates furnished to him by the deductors. Thus the submission of the assessee cannot be accepted. 10.4 In view of the above, it is held that on the big clear facts of the case, and the explanation 1(B) below section 271(1)(c) is clearly applicable and hence the assessee's case is covered u/s 271(1)(c) for levy of penalty. Hence the penalty levied by the assessing officer for the assessment year on sum of Rs. 1252978 is hereby conf....