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TMI Blog2014 (9) TMI 552X X X X Extracts X X X X X X X X Extracts X X X X ..... of mental element or mens rea in most criminal proceedings is mandatory unless the legislature mandate is to the contrary but not so in the penalty proceeding under Section 13 of the Act - the Tribunal has not erred in upholding the order of the CIT(A) in deleting the penalty – relying upon National Insurance Company Limited versus Commisioner of Income Tax and Another [2011 (6) TMI 123 - CALCUTTA HIGH COURT] - Section 2(5) would override and interest earned on bill discounting with credit institutions would not be included in interest u/s 2(7) of the Act – the order of the Tribunal is upheld – Decided against revenue. - Income Tax Appeal No. 586/2014 - - - Dated:- 11-9-2014 - Sanjiv Khanna And V. Kameswar Rao,JJ. For the Appellant : Ms. Suruchi Aggarwal, Sr. Standing Counsel. For the Respondent : Mr. Mayank Nagi Mr. Tarun Singh, Advocates. ORDER Sanjiv Khanna, J. (Oral): This appeal by the Revenue relates to Assessment Year 1992-93 and impugns order dated 4th March, 2014 passed by the Income Tax Appellate Tribunal ( Tribunal , for short) upholding the order passed by the Commissioner of Income Tax (Appeals) deleting penalty of ₹ 44,42,839/- im ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontention in detail subsequently. The aforesaid order dated 14th December, 2006 has attained finality. 5. The Assessing Officer thereafter initiated penalty proceedings under Section 13 of the Act and by order dated 20th June, 2007 penalty of ₹ 44,42,839/- was imposed in respect of the two additions. On appeal, Commissioner of Income Tax (Appeals) vide order dated 31.8.2010, deleted the said penalty after referring to several facts, which we shall notice below. The Tribunal has in its impugned order affirmed the aforesaid finding. 6. Learned Senior Standing Counsel for the Revenue has drawn our attention to Section 2(7), which defines interest to mean interest on loans and advances made in India and after amendment w.e.f. 1st Oct, 1991, it includes bills discounting. Section 2(7) of the Act, as amended with effect from 1st Oct, 1991, reads as under:- 2(7) interest means interest on loans and advances made in India and includes (a) commitment charges on unutilised portion of any credit sanctioned for being availed of in India; and (b) discount on promissory notes and bills of exchange drawn or made in India, but does not include (i) interest referred t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed on the same transactions but with the scheduled banks, it would have been exempt under Section 2(5A)(1) of the Act, but as the transactions were with the Central Bank, i.e., Reserve Bank of India, the income or interest earned would be taxable. 9. The stand of the respondent-assessee, that under Section 2(7) interest means interest on loans and advances and, therefore, necessarily refers to commercial transactions entered into by the assessee, was rejected. The submission, that the definition of interest had been expanded to include discount on promissory notes and bills of exchange, but it was not the legislative intention to tax interest earned on transactions with Reserve Bank of India as they did not partake or have a commercial character, was not accepted. 10. The respondent-assessee may be wrong and may have erroneously interpreted and relied upon Section 2(5A)(1) of the Act, but their contention does not and cannot be treated per se without merit or baseless. The question related to the definition of the term credit institution and if scheduled banks are included therein, whether or not Reserve Bank of India should be treated alike and similarly. The respondent-as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome Tax Act and not to cover larger tax base than the earlier one. 11. The Commissioner of Income Tax (Appeals) and the Tribunal have also noted and referred to clarification made by Central Board of Direct Taxes vide instruction No. 1923 dated 14th March, 1995 suggesting that interest on debentures, bonds, securities, etc. and deposits should be also made subject matter of tax under the Act. The said circular/instruction was issued after the original return was filed on 31st December, 1992. 12. Section 13 of the Act reads as under:- Section 13 - Penalty for concealment of chargeable interest If the Assessing Officer or the Commissioner (Appeals) in the course of any proceeding under this Act, is satisfied that any person has concealed the particulars of chargeable interest or has furnished inaccurate particulars of such interest, he may direct that such person shall pay by way of penalty, in addition to any interest-tax payable by him, a sum which shall not be less than, but shall not exceed three times, the amount of interest-tax sought to be evaded by reason of the concealment of particulars of his chargeable interest or the furnishing of inaccurate particulars of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and bona fide difference of opinion, penalty for concealment/furnishing of inaccurate particulars, should not and cannot be imposed. If the view taken by the assessee required consideration and was reasonably arguable, he should not be penalized for taking the position. The tax statutes are complex and there can be a bona fide difference of opinion on legal interpretation and understanding of a provision. In such cases, even when the interpretation placed by the Revenue is accepted, penalty should not be imposed if the contention of the assessee was plausible and bona fide. Of course full facts should be disclosed. The Supreme Court in Reliance Petroproducts Anr. (Supra), examined their earlier judgment in the case of Union of India vs. Dharmendra Textile Processors, [2008] 306 ITR 277 (SC) and it has been held as under:- 8. 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 inaccurate particulars of his income. The present is not a case of concealment of the income. That is not the case of the Revenue either. However, the learned counse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 facts relating to the same and material to the computation of his income were not disclosed by him. It was then held that the explanation must be preceded by a finding as to how and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lty proceedings were quasi criminal in nature and require establishment and proof of mens rea, has been discarded/disapproved in the judgment of the Supreme Court in Dharmanedra Textile Processor s case (supra). In the said decision, the view expressed in Dalip N. Shroff vs. Joint Commissioner of Income Tax, Mumbai Anr. (2007) 6 SCC 329, was overruled and after referring to series of decisions in Director of Enforcement vs. MCTM Corpn. (P) Ltd. (1996)2 SCC 471, JK Industries Ltd. vs. Chief Inspector of Factors Boilers, (1996) 6 SCC 665, R.S. Joshi vs. Ajit Mills Ltd. (1977) 4 SCC 98, Gujarat Travancore Agency vs. CIT (1989) 3 SCC 52, Swedish Match AB vs. SEBI (2004) 11 SCC 641, the following legal principle: A penalty imposed for a tax delinquency is a civil obligation, remedial and coercive in its nature, and is far different from the penalty for a crime or a fine or forfeiture provided as punishment for the violation of criminal or penal laws. In Corpus Juris Secundrum, Vol. 85 at p. 580, para 1023, has been approved. 12. We may note here that the Supreme Court in Union of India vs. Rajasthan Spinning Weaving Mills (2009) 13 SCC 448, had examined Section 11AC of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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