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TMI Blog2010 (8) TMI 18X X X X Extracts X X X X X X X X Extracts X X X X ..... tract the penalty under section 271 (1)(c). - 321/2010 - - - Dated:- 6-8-2010 - Through Ms. Sonia Mathur, Advocate Through Mr. O.P. Sapra, Advocate CORAM: HON'BLE THE CHIEF JUSTICE HON'BLE MR. JUSTICE MANMOHAN JUDGMENT MANMOHAN, J 1. The present appeal has been filed under Section 260A of Income Tax Act, 1961 (for brevity "Act, 1961") challenging the order dated 17th April, 2009 passed by the Income Tax Appellate Tribunal (in short "ITAT") in ITA No. 3607/Del/2008 for the Assessment Year 2005-2006. 2. Ms. Sonia Mathur, learned counsel for Revenue submitted that the ITAT had failed to appreciate that the respondent-assessee had furnished inaccurate particulars of income with deliberate intent to reduce its statutory liability. According to her, the respondent-assessee had not made sufficient disclosure to justify deletion of penalty of Rs. 16,10,000/- under Section 271(1)(c) of Act, 1961. 3. She lastly submitted that making a provision for encashment of leave amounted to furnishing of inaccurate particulars regarding the income of the respondent-assessee. In this connection, she relied upon a judgment of the Supreme Court in Union of India (UO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch may not have been accepted in assessment proceedings and addition in respect of which might have become final, but there was no diversion of income or there was no suppression of facts. The learned DR had also relied on the decision of Hon'ble Supreme Court in the case of Union of India and Others vs. Dharmendra Textile Processors Others (2008) 306 ITR 277, in which it was held that the Explanation appended to section 271(1)(c) indicate the element of strict liability on the assessee while filing the return in respect of the concealment of income or furnishing inaccurate particulars of income. This aspect was not taken into account in the case of Dilip N. Shroff (2007) 8 SCALE 304. The Explanation were appended as a matter of remedy for loss of revenue. Therefore, the penalty was a civil liability and accordingly willful concealment was not an essential ingredient for attracting the penalty as is the case in respect of prosecution u/s 276C of the Act. In our view, this judgment holds that the issue of penalty has to be decided in terms of provisions contained in the Explanation to section 271(1)(c). Explanation-1 is applicable to the facts of the case and the assessee has f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere is nothing on the record to show that the assessee was not liable to make payment in respect of unavailed earned leave. There may be a dispute about the quantum of the liability, which has been settled in the quantum appeal. However, it cannot be said that the claim per se was not bona fide. 3.2 Thus, we are of the view that the assessee has furnished reasonable explanation in respect of both the items, which meets the requirement of the provision contained in Explanation-1 to section 271(1)(c) of the Act. In view thereof, the levy of penalty is deleted. 4. In the result, the appeal is allowed." 5. In our opinion, the Supreme Court in Dharamendra Textile Processors and Ors. (supra) has only held that mens rea is not essential for imposing penalty for breach of civil obligations. However, it has not been stipulated by the Apex Court that by merely making a claim, which is not sustainable in law by itself, will amount to furnishing of inaccurate particulars within the meaning of 271(1)(C) of Act, 1961. 6. In fact, recently the Supreme Court in Commissioner of Income Tax v. Reliance Petroproducts Pvt. Ltd., (2010) 322 ITR 158 (SC) has observed as under:- "9. Ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted with the said section was for providing remedy for loss of revenue and such a penalty was a civil liability and, therefore, willful concealment is not an essential ingredient for attracting civil liability as was the case in the matter of prosecution under Section 276C of the Act. The basic reason why decision in Dilip N. Shroff v. Joint CIT was overruled by this Court in Union of India v. Dharamendra Textile Processors, was that according to this Court the effect and difference between Section 271(1)(c) and Section 276C of the Act was lost sight of in the case of Dilip N. Shroff v. Joint CIT. However, it must be pointed out that in Union of India v. Dharamendra Textile Processors, no fault was found with the reasoning in the decision in Dilip N. Shroff v. Joint CIT, where the court explained the meaning of the terms "conceal" and "inaccurate". It was only the ultimate inference in Dilip N. Shroff v. Joint CIT to the effect that mens rea was an essential ingredient for the penalty under Section 271(1)(c) that the decision in Dilip N. Shroff v. Joint CIT was overruled. 10. We are not concerned in the present case with the mens rea. However, we have to only see as to whether i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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