9911796707
TMI Blog2015 (7) TMI 75X X X X Extracts X X X X X X X X Extracts X X X X ..... allowed. - Decided in favour of assessee. - ITA Nos. 220 to 222/PN/2014 - - - Dated:- 20-5-2015 - Sushma Chowla, JM And R. K. Panda, AM,JJ. For the Appellant : Shri Sunil Pathak For the Respondent : Shri Ravi Prakash ORDER Per R K Panda, AM The above 3 appeals filed by the Assessee are directed against the order dated 29-11-2013 of the CIT(A)-I, Nashik relating to Assessment Years 2004-05 to 2006-07 respectively. Since common grounds have been taken by the assessee in all these appeals, therefore, these were heard together and are being disposed of by this common order. 2. Levy of penalty of ₹ 6,72,866/- for A.Y. 2004-05, ₹ 6,00,961/- for A.Y. 2005-06 and ₹ 4,99,120/- for A.Y. 2006- 07 u/s.271(1)(c) of the I.T. Act by the AO and upheld by the CIT(A) is the only issue raised by the assessee in the grounds of appeal for the above 3 appeals. 3. Facts of the case, in brief, are that the assessee is a private limited company and derived income from dividend and rent during the relevant previous years. During the Financial Years 2003-04, 2004-05 2005-06, the assessee was Constructing a building for the purpose of its business. The renta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aim of depreciation. 6. Subsequently, the AO initiated penalty proceedings u/s.271(1)(c) of the I.T. Act. He observed that the assets were not put to use for the purpose of running business activity in the years under consideration. In response to the same it was submitted by the assessee that during the course of assessment proceedings the assessee has agreed for disallowance of claim for depreciation under bonafide belief that on his agreeing for addition department will not initiate penalty. It was argued that the assessee has not concealed particulars of income or filed inaccurate particulars of income. Due to certain legal contention expenditure was disallowed and income returned by the assessee was enhanced by the AO. It was argued that the assessee has actually incurred expenditure under the head depreciation. However, the AO was not satisfied with the explanations given by the assessee. Rejecting the various explanations given by the assessee and distinguishing the various decisions cited before him the AO levied penalty of ₹ 6,72,866/- for A.Y. 2004-05, ₹ 6,00,961/- for A.Y. 2005-06 and ₹ 4,99,120/- for A.Y. 2006- 07 u/s.271(1)(c) of the I.T. Act, 1961 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r of the CIT(A). Referring to para 3 of the order of the CIT(A) he submitted that it is an undisputed fact that the assessee has shown the rental income during the relevant years from letting out a part of the partly constructed building and the open spaces around it for marriages and other ceremonies. Referring to pages 5 to 7 of the paper book the Ld. Counsel for the assessee drew the attention of the Bench to the computation of income for A.Yrs. 2004-05 to 2006-07 where such income has been shown under the head income from house property . Referring to page36 of the paper book the Ld. Counsel for the assessee drew the attention of the Bench to the trading profit and loss account for the year ending 31-03-2005 where such income has been shown in the profit and loss account and the assessee has also debited electricity charges of ₹ 88,466/-, labour charges of ₹ 49,305/-and telephone expenses of ₹ 28,404/- etc. He submitted that the assessee had disclosed all material facts necessary for assessment and the assessment was based on the particulars disclosed by the assessee in the profit and loss account and computation of income and there was nothing unearthed duri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cancelled. Referring to the decision of the Delhi Bench of the Tribunal in the case of DCIT Vs. JMD Advisors Pvt. Ltd. reported in 310 ITR 280 he submitted that the Tribunal has held that a mere change of head of income by the AO in the assessment cannot be construed as concealment as envisaged in section 271(1)(c) of the I.T. Act so as to attract the penal provisions therein. He submitted that in the instant case it was not a bogus claim but was a bonafide claim, therefore, there is no justification for levy of penalty u/s. 271(1)(c) of the I.T. Act. 13. Referring to various decisions of the Tribunal he submitted that it has been held in all these decisions that even when the assessee could not prove that the asset was used, still no penalty could be levied. For the above proposition, he relied on the decisions reported in 53 ITD 245, 53 ITD 370, 47 ITD 383 and 68 ITD 117. 14. He submitted that assessee has not concealed any particulars of income and has made a bonafide disclosure of material facts. He submitted that the claim of depreciation may be incorrect in law but the fact remains that all material facts are disclosed, therefore, there is neither any concealment nor f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 45 he submitted that the Hon'ble High Court in the said decision has held that levy of penalty is not justified in a case where the cash credit appearing in the accounts of the assessee was assessed as income from undisclosed sources due to admission by the assessee firm. He submitted that in that case the cash credits were found in the books of the assessee. In assessment proceedings the assessee firm admitted the existences of the credits and stated that it was not in a position to call the parties in whose favour the cash credit appear. The reason given by the assessee being that it was always heavily indebted and unable to trouble its creditors to give evidence. The Assessing Officer worked out the amount of such peak credits and assessed ₹ 10,590/- as the assessee's income from undisclosed sources. Penalty was also levied u/s.271 (1)(c) of the I.T. Act but the Tribunal cancelled the penalty. On a reference the Hon'ble High Court held that in the present case the assessee has nowhere admitted that it has concealed its income even the ITO has not added the said amount of ₹ 10,590/- as concealed income or business income but as income from undisclosed sou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome was derived and under mistaken belief the assessee agreed before the Assessing Officer for treating such income as rental income. It is also the submission of the Ld. Counsel for the assessee that had there been no building the assessee would not have paid property tax and could not have earned such rental income. 19. We find some force in the above submission of the Ld. Counsel for the assessee. It is an undisputed fact that the rental income during the relevant years was derived from letting out part of the partly constructed building and open spaces around it to marriage and other ceremonies, a fact brought on record by the Ld.CIT(A) at page 3 of the appeal order and not controverted by the Revenue. From pages 5 to 7 of the paper book we find the assessee has paid property tax of ₹ 1,37,765/- each for A.Yrs. 2004-05 and 2005-06 and ₹ 1,37,758/- for A.Y. 2006-07. All these things prove that the building was in existence and the income was derived from letting out of the property. The assessee had disclosed all material facts in the return of income and the addition has been made by the Assessing Officer on the basis of the particulars disclosed by the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vered in the account books of the assessee loans to the tune of ₹ 90,000, he came to the prima facie conclusion that these represented concealed income. The assessee firm agreed to the addition of the aforesaid amount of ₹ 90,000 as its business income for that year and the addition was made by the ITO as the assessee's concealed income from business and not as income from undisclosed sources. In the present case, the assessee has nowhere admitted that it has concealed its income and even the ITO has not added the said amount of ₹ 10,590 as concealed income from business but as from undisclosed sources. In view of this, the said decision in the case of Western Automobiles (India) [1978] 112 ITR 1048 (Bom) is clearly inapplicable to the present case. In the result, the question referred to us is answered in the negative and in favour of the assessee. The Commissioner to pay the costs. 21. We find the Hon'ble Supreme Court in the case of Reliance Petroproducts Pvt. Ltd., (Supra) has held that a mere making of the claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thout saying that for applicability of Section 271(1)(c), conditions stated therein must exist. 8. Therefore, it is obvious that it must be shown that the conditions under Section 271(1)(c) must exist before the penalty is imposed. There can be no dispute that everything would depend upon the Return filed 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 Dilip N. Shroff Vs. Joint Commissioner of Income Tax, Mumbai Anr. [2007(6) SCC 329], this Court explained 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) 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 e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l and inaccurate . It was only the ultimate inference in Dilip N. Shroff Vs. Joint Commissioner of Income Tax, Mumbai Anr. (cited supra) 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 Vs. Joint Commissioner of Income Tax, Mumbai Anr. (cited supra) was overruled. 9. We are not concerned in the present case with the mens rea. However, we have to only see as to whether in this case, as a matter of fact, the assessee has given inaccurate particulars. In Webster's Dictionary, the word inaccurate has been defined as:- not accurate, not exact or correct; not according to truth; erroneous; as an inaccurate statement, copy or transcript . We have already seen the meaning of the word particulars in the earlier part of this judgment. Reading the words in conjunction, they must mean the details supplied in the Return, which are not accurate, not exact or correct, not according to truth or erroneous. We must hasten to add here that in this case, there is no finding that any details supplied by the assessee in its Return were found to be incorrect or erroneous or false. Such not being the ca ..... X X X X Extracts X X X X X X X X Extracts X X X X
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