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TMI Blog2020 (12) TMI 229X X X X Extracts X X X X X X X X Extracts X X X X ..... t such expenditure was not allowable, as the Assessee had not commenced its business operations and on that issue, there was no serious dispute from the side of the learned counsel for the Assessee before us also and that is why, the Assessee seems to have accepted the income tax liability fixed upon him and paid the said tax without a demur. The considerations for imposition of penalty under Section 271(1)(c) of the Act are however entirely different. It requires existence of mens rea on the part of the Assessee and either of the twin conditions of (i) concealment of income or (ii) filing of inaccurate particulars by Assessee, are required to be satisfied and the burden of proving that lies upon the revenue authority and not on the Assessee. Merely because the claim of expenditure made by the Assessee is found to be a wrong claim and is disallowed, it does not per se attract imposition of penalty under Section 271(1)(c). One fails to understand how the reduction of loss in the Assessment order would amount to income on which tax payment could have been evaded by Assessee. No positive income could result by such disallowance and therefore, no tax in fact could ever be imp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of such income . In the present case, related quantum addition is not on account of different views being taken on the same set of facts but on account of plain words of the statute which admit no ambiguity. The assessee does not, therefore, derive any help from Supreme Court's judgment in the case of Reliance Petroproducts (supra) either. We reject the same. 22. Learned counsel for the assessee has also laid a lot of emphasis on the fact that the assessee's explanation has not been found 'false' but then this plea overlooks the fact that when an assessee's explanation is found 'false', this case falls in category (A) of Explanation 1 to Section 271(1)(c) whereas the present case is in category (B) thereof and it covers a situation when assessee offers an explanation and not able to prove its bona fides. These two situations are mutually exclusive situation and just because conditions in part (A) of Explanation 1 are not satisfied, the revenue's case in (B) also does not come to an end. The plea of the assessee does not, therefore, acceptable. 23. Further, we also place reliance on the judgment of Supreme Court in the case of Mak Data (P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issions or wrong statements in the original return of income. The assessee is having full knowledge about the wrong claim made by it and therefore, it cannot take a plea that the error is bona fide and it is to be condoned. 25. Being so in the present case the impugned penalty is not in respect of a bogus claim but in respect of making a claim which is patently inadmissible. In such a situation, it is difficult to understand, much less approve, this plea of the assessee that the assessee as bona fide in claiming the expenditure. In our opinion levy of penalty by Assessing Officer u/s 271(1)(c) of the Act is justified and accordingly, we reverse the order of the Commissioner of Income Tax (Appeals) and restore that of the Assessing Officer. 3. The question of law which arises for our consideration and as suggested in the name of appeal is as under:- Whether on the facts and in the circumstances of the case the Income Tax Appellate Tribunal was right in law in reversing the order of the Commissioner of Income-Tax (Appeals) and restoring the levy of penalty u/s 271(1)(c) of the Income Tax Act? 4. The first Appellate Authority, namely Commissioner of Income Tax (Appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Income Tax, Delhi Vs. Atul Mohan Bindal [2009(9) SCC 589], where this Court was considering the same provision, the Court observed that the Assessing Officer has to be satisfied that a person has concealed the particulars of his income or furnished inaccurate particulars of such income. This Court referred to another decision of this Court in Union of India Vs. Dharamendra Textile Processors [2008(13) SCC 369], as also, the decision in Union of India Vs.Rajasthan Spg. Wvg. Mills [2009(13) SCC 448] and reiterated in para 13 that (page 13 of 317 ITR): 13. It goes without saying that for applicability of Section 271(1)(c), conditions stated therein must exist. Their Lordships, after considering various decisions including Dilip N.Shroff v. Jt.CIT [2007] 291 ITR 5191 (SC) and Dharamendra Textile Processors' case (supra) have observed and held (page 158 headnotes) as under: A glance at the provisions of Section 271(1)(c) of the Income-tax Act, 1961, suggests that in order to be covered by it, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... along with the Return of Income under the bonafide belief that the said expenditure is revenue in nature. It is only a difference of opinion and no inaccurate particulars were furnished by the appellant. Also, the AR has relied on the decision of the Hon'ble Jurisdictional High Court in the case of CIT, Chennai IV vs. M/s.Gem Granites (Karnataka) in Tax Case (Appeal) No.504 of 2009 dated 12.11.2013 and also following the decision of the Apex Court in the case of Reliance Petroproducts Pvt. Ltd. supra, wherein it was observed that for sustaining penalty, the bona fide explanation of the assessee must be looked into, so that the contumacious conduct of the assessee for the purpose of sustaining the penalty would be taken as condition that is the main requirement under Section 271(1)(c) of the Act for attracting penal provisions under the Act. Where information given in the return is found to be correct and accurate, the assessee cannot be held to be guilty of furnishing inaccurate particulars. In the instant case under consideration, the Assessing Officer failed to satisfy that the appellant has concealed the particulars of his income or furnished inaccurate particulars of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch was earned by the Assessee during this assessment year even prior to commencement of its business claimed against the said income, the deduction of the expenditure to the extent of ₹ 2,97,275/- being operating and administrative expenses and ₹ 1,25,30,730/- as finance charges being interest on loan taken by the Assessee and thus in the Revised Return, a net loss of ₹ 1,23,51,488/- was shown in the Revised Return. The Assessing Authority however said that these two expenditures claimed by the Assessee were not allowable expenditure, because the Assessee had not yet commenced its regular business operations. Therefore, the Assessing Authority, vide its Assessment Order dated 27.03.2013, imposed income tax to the extent of ₹ 2,00,240/- on said foreign exchange gains of ₹ 4,76,517/-, which the Assessee accepted and accordingly paid the said amount of tax of ₹ 2,00,240/- and did not prefer any appeal against the said Assessment Order. However, the Assessing Authority separately initiated penalty proceedings under Section 271(1)(c) of the Act for the alleged concealment/filing of inaccurate particulars by the Assessee and imposed the said penalty of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enalty amount later on under Section 154 of the Act vide order dated 31.12.2015 and further imposing surcharge and education cess on the said deemed evaded tax at the rate of 30% on deemed income in the form of reduction of loss as discussed in the penalty order dated 26.09.2013 and he increased the amount of penalty at the rate of 100% of alleged evasion of tax to the extent of ₹ 43,60,239/-. The appeal of the Assessee against the said order under Section 154 however came to be dismissed by the learned Commissioner (Appeals) on 29.03.2019. 7. The learned counsel for the Assessee submitted that since the audited Balance Sheet in which the said figures of income and expenditure was duly shown in respective schedule 7, 8 and 9 of the Balance Sheet and the same was filed by the Assessee with the original Return of Income itself, there was no concealment or filing of inaccurate particulars on the part of the Assessee and merely because the claim of the Assessee of the deduction of expenditure in the form of finance charges and administrative expenses was not allowed by the Assessing Authority, the Assessee could not be penalized by way of penalty under Section 271(1)(c) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s) and (xiv) Samtel India Ltd vs CIT, Delhi 25 Taxmann.com page 535 (SC) 9. We have heard the learned counsels at length and perused the records and case laws cited. 10. Section 271(1)(c) of the Act, to its relevant extent, is quoted below for ready reference:- Failure to furnish returns, comply with notices, concealment of income, etc. 271. (1) If the Assessing Officer or the Commissioner (Appeals) or the Principal Commissioner or Commissioner in the course of any proceedings under this Act, is satisfied that any person- (a) [***] (b) has failed to comply with a notice under subsection (2) of Section 115WD or under sub-section (2) of Section 115WE or under sub-section (1) of Section 142 or sub-section (2) of Section 143 or fails to comply with a direction issued under subsection (2A) of Section 142, or (c) has concealed the particulars of his income or furnished inaccurate particulars of such income, or (d) has concealed the particulars of the fringe benefits or furnished inaccurate particulars of such fringe benefits, he may direct that such person shall pay by way of penalty,- (i) [***] (ii) in the cases referred to in cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch income, and disclosed all these facts in audited Balance Sheet filed with the Return of Income and filed a Loss Return before the authority, the authority concerned was entitled to take a different view of the matter that such expenditure was not allowable, as the Assessee had not commenced its business operations and on that issue, there was no serious dispute from the side of the learned counsel for the Assessee before us also and that is why, the Assessee seems to have accepted the income tax liability of ₹ 2,00,240/- fixed upon him and paid the said tax without a demur. 12. The considerations for imposition of penalty under Section 271(1)(c) of the Act are however entirely different. It requires existence of mens rea on the part of the Assessee and either of the twin conditions of (i) concealment of income or (ii) filing of inaccurate particulars by Assessee, are required to be satisfied and the burden of proving that lies upon the revenue authority and not on the Assessee. Merely because the claim of expenditure made by the Assessee is found to be a wrong claim and is disallowed, it does not per se attract imposition of penalty under Section 271(1)(c) of the Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Revised Return and disclosing income and had also made a bona fide claim of deduction in the form of administrative expenses and interest or finance charges. Even if these expenditure were not to be allowed, how could Assessee be blamed for filing inaccurate particulars or concealment of income. Whatever he had to file was already on the record of the Assessing Authority, right with the original return. The authorities concerned have not arrived at any figures or disclosures from any material outside the record, which was furnished to them by the Assessee. Therefore, the blame of concealment or filing of inaccurate particulars could not be simply laid at the doors of the Assessee. 17. The misfortune of the Assessees at the hands of such errant officials is that such authorities consider imposition of penalties under Section 271(1)(c) of the Act as a regular legally obligatory source of income tax to the Revenue Department and do not distinguish between the penalty provisions and tax provisions, totally being unaware of the different schemes and purpose of such two provisions. It is indeed pitiable that the final appellate body, the Income Tax Appellate Tribunal was also caug ..... X X X X Extracts X X X X X X X X Extracts X X X X
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