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TMI Blog2013 (11) TMI 221X X X X Extracts X X X X X X X X Extracts X X X X ..... l on merits: "(1) Whether the Appellate Authorities were justified in setting aside the penalty levied under Section 271(1)(c) of the Act based on the judgment in Hindustan Steel Ltd. v. State of Orissa (S.C.) 83 ITR 26 without taking into consideration the findings recorded by the Assessing Officer? (2) Whether the assessee furnished either inaccurate particulars or concealed the income while filing the return of income for the Assessment year 2002-03, as contemplated under Section 271(1)(c) of the Act, so as to attract levy of penalty under this provision?" 3. The facts that are relevant for deciding the questions of law are as under:- The assessee had filed return of income for the Assessment year 1998-99 on 31.12.1999. In the return, the assessee computed the loss and sought carry forward as contemplated by Section 72 of the Act. The return filed by the assessee was processed by the Assessing officer. The Assessing officer issued an intimation under Section 143(1) of the Act dated 19.09.2000. Though, an intimation was issued under Section 143(1), no further steps as contemplated by Section 143(2) and 143(3) were initiated/taken by the Assessing Off ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted without the benefit of set off of the loss carried forward of the Assessment year 1998-99. The Assessment order dated 30.06.2003 passed by the Assessing officer was, therefore, carried in appeal by the assessee before the Appellate Authority under Section 246-A of the Act. The Appellate Authority confirmed the order of the Assessing Officer dated 30.06.2003 and disposed of the appeal vide order dated 20.10.2003. The assessee did not carry the matter further. In other words, the assessment order dated 30.06.2003 attained finality. It appears that even before the assessment order was passed, a penalty proceedings under Section 271(1)(c) of the Act were initiated. The Assessing officer vide order dated 06.02.2004 levied 100% penalty under Section 271(1)(c)(iii) of the Act i.e., Rs.41,04,239/-. It would be necessary to notice the observations made by the Assessing officer for levying penalty, which read thus:- "The assessee company had filed its original return of income on 31.10.2002. While filing this return, the assessee company was aware that the return filed for asst.year 98-99 was belated and thus it was not entitled to carry forward the business loss. The asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... idered the facts of the case. The assessee had loss for A.Y.1998-99 in respect of which it filed a return of income showing the above loss and claiming its carry forward. The assessee cannot be faulted for doing this even though the return was late. In the intimation dated 19/02/2000 made by the Assessing Officer, the returned loss has been accepted. No mention has been made that the claim of carry forward of business loss is not allowed in view of delay in filing of return of income. In the second return for A.Y.1998-99 filed, the assessee returns a revised business loss and claims its carry forward. The Assessing Officer issued a notice u/s 148 for this year but dropped the proceedings u/s 148 vide letter dated 04/04/03 in which he mentions that the claim of carry forward of loss is not being allowed as the return is late. In reponse to this, the assessee has written a letter dated 05/05/03 requesting for completion of assessment proceedings for A.Y. 1998-99. For A.Y. 2002-03, set off of loss for A.Y.98-99 was made in the original return based on the return filed for A.Y.98-99. In the revised return filed on 12/5/03, the claim of set off of loss for A.Y.98-99 was maintained. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nbsp; (c) has concealed the particulars of his income or [***] furnished inaccurate particulars of [such income or] (d) xxxxxxxxxx (i) xxxxxxxxx (ii) xxxxxxxxx (iii) in the case 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]. 5. A glance at this provision would show that in order to be covered, there has to be "concealment of particulars of income" of the assessee or the assessee must have "furnished inaccurate particulars of his income". 6. In the present case, though Mr.Aravind, learned Standing Counsel appearing for the revenue could not state whether the act of the assessee amounts to concealment of income or furnishing inaccurate particulars, we proceeded to examine the case to find out both. In order to understand the purport of Section 271(1)(c), it would be advantageous to look into the observations ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... penalty unless the case is strictly covered by the provision, the penalty provision cannot be invoked. It is also clear, making an incorrect claim in law would not tantamount to furnishing inaccurate particulars. The word "particulars" used in Section 271(1)(c) would embrace the meaning of details of the claim made. It is not the case of the revenue that, in the present case, information given in the return of Income filed for the assessment year 2002-03 was either incorrect or inaccurate. In other words, the details supplied in the return in respect of loss suffered in the year 1998-99 were factually correct. It is in this backdrop, we would like to consider the submission advanced on behalf of the revenue to examine whether the assessee was guilty of furnishing inaccurate particulars. 8. Learned Counsel for the revenue submitted that the assessee was informed by the AO vide letter dated 4.4.2003 that the assessee was not entitled to carry forward the business loss for subsequent years since the return of income for the assessment year 1998-99 was filed after the due date. Despite such intimation, he submitted, the assessee dared to file revised return on 12.5.2003 once again cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng of an assessment of value of the property may not by itself be furnishing of inaccurate particulars. Even if the explanations are taken recourse to, a finding has to be arrived at having regard to clause (A) of Explanation 1 that the Assessing Officer is required to arrive at a finding that the explanation offered by an assessee, in the event he offers one was false. He must be found to have failed to prove that such explanation is not only not bonafide but all the facts relating to the same and material to the income were not disclosed by him. Thus, apart from his explanation being not bona fide, it should have been found as of fact that he has not disclosed all the facts which were material to the computation of his income. The explanation having regard to the decisions of this court, must be preceded by a finding as to how and in what manner he furnished the particulars of his income. It is beyond any doubt or dispute that for the said purpose the Income-tax Officer must arrive at his satisfaction in this behalf. (See CIT v. Ram Commercial Enterprises (2000) 246 ITR 568 (Delhi) and Diwan Enterprises v. CIT (2000) 246 ITR 571 (Delhi). The order impo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nishing inaccurate particulars. As a matter of fact, the particulars that were furnished were based on the fact of loss. It is not in dispute that the assessee did not suffer loss or the loss shown in the return for the assessment year 1998-99 was not suffered by the assessee. That being so, in our opinion, claiming set off of the loss carried forward of the assessment year 1998-99 in the face of the letter dated 4.4.2003 would not amount to furnishing inaccurate particulars. That would at the most amount to either furnishing incorrect return of income. As observed by the Supreme Court in Reliance Petroproducts Pvt., Ltd., by no stretch of imagination, making an incorrect claim in law would tantamount to furnishing inaccurate particulars. 13. In order to expose the assessee to penalty, unless the case is strictly covered by the provision, the penalty provision cannot be invoked. There cannot be any 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. In the present case, we do not find th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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