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TMI Blog2021 (8) TMI 585X X X X Extracts X X X X X X X X Extracts X X X X ..... he case and in law, the Ld. AO and the Ld. CIT(A) erred in not appreciating the fact that penalty proceedings are separate and distinct from the assessment proceedings, and any additions/ disallowances made in the assessment order could not mechanically lead to a levy of penalty, unless it is proved that the Appellant has deliberately furnished any inaccurate particulars / concealed particulars of its income. 3. The Ld. AO and the Ld. CIT(A) have erred on facts and in law in holding that the Appellant has furnished inaccurate particulars of income without appreciating the fact that adequate disclosures were made in the return of income and/or submissions filed during the course of assessment/ penalty proceedings. 4. Without prejudice to the above, the Ld. AO erred in not appreciating that penalty under section 271(1)(c) is leviable with respect to the "amount of tax sought to be evaded" (i.e. tax on assessed income less tax on returned income). 5. Without prejudice to the above, the Ld. AO erred in computing the penalty on the total amount of reduction in section 10A claim without appreciating that in the Penalty order, concealment of income has been alleged only in relation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nue as reproduced above, this is the grievance of the Revenue that learned CIT(A) has erred in directing the AO to exclude the expenses incurred in foreign currency outside India from the total turnover of the assessee for computing deduction allowable u/s 10A. On this issue, it was held by Hon'ble Karnataka High Court that total turnover is sum total of domestic turnover and export turnover. Therefore, if an amount is reduced from export turnover, then total turnover also goes down by the same amount automatically. In view of this, we find that the direction of the learned CIT(A) is in line with this judgment of Hon'ble Karnataka High Court and respectfully following the same, we decline to interfere in the order of CIT(A) on this issue." 7. As such, there was no sustenance of addition on account of claim of deduction u/s. 10A of the Act. Being so, there is no question of levying penalty u/s. 271(1)(c) of the Act on this issue. 8. Further, regarding the levy of penalty for claim of short term capital loss by invoking the provisions of section 94(7) of the Act, the ld. AR submitted that the assessee company had disclosed these transactions and from the details furnished by the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee has deliberately/intentionally furnished inaccurate particulars of income. If the assessee has consciously furnished the inaccurate particulars of income or concealed the particulars of income, there is no dispute to the fact that the penalty under Section 271(10(c) of the Act is attracted. However, if the claim for deduction made is bonafide claim and there is no intention to hide particulars of income, we are of the considered view that the provision of Section 271(1)(c) of the Act are not attracted. 11. We observe that the assessee has furnished requisite details of the purchase and sale of the said units as well as receipt of dividend income and also the short term capital loss incurred thereon. The Hon'ble Supreme Court has held in the case of Union of India & Ors Vs. Dharamendra Textile Processors & Ors. (supra), that penalty under Section 271(1)(c) is only a civil liability to compensate for loss of revenue. The Hon'ble Apex Court in the said case has also held that nexus of wilful concealment is not required to be proved by the revenue. Thus, the case of penalty is to be evaluated under the provision of Explanation 1 to Section 271(1)(c) of the Act, and in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ocument, where the assessee can furnish the particulars of his income. When such particulars are found to be inaccurate, the liability would arise. But in the case under consideration we find that the assessee has furnished full detail and has not concealed any particulars of income or has furnished any inaccurate particular of income. Further, we noticed that there were no such specific requirements in the return form applicable to the year under consideration. Such requirement of the column in the return has been inserted by amendment in return form, ITR-6, at page 17, "Schedule CG capital gain" S.N.3(d) which is applicable from assessment year 2007-08. In the case of Reliance Pretroproducts Ltd. (supra) the Hon'ble Supreme Court held that where there is no finding that any details supplied by the assessee in its return are found to be incorrect or erroneous or false there is no question of inviting the penalty under section 271(1)(c). A mere making of a claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee. Such a claim made in the return cannot amount to furnishing inaccurate particulars. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accordingly the penalty levied was cancelled. Not only this, we also observe that the Hon'ble jurisdictional High Court in ITA No.3899/2010 (CIT Vs. M/s Aditya Birla Nova Limited), vide order dated 14th August, 2012, after considering the decision of the Hon'ble Apex Court in the case of Union of India & Ors. Vs. Dharamendra Textile Processors & Ors. (supra) and the decision of CIT Vs. Reliance Petroproducts Pvt. Ltd. (supra), has held that the levy of penalty even where a claim for deduction is not upheld, even though the assessee has disclosed all material facts and has not suppressed any material facts, the levy of penalty is not justified. In the said case, the assessee claimed deduction of Rs. .9,94,399/- on account of diminution in the value of shares held by it. The same were disallowed on the ground that the shares were held as investments, and profits and losses on the sale thereof were to be considered under the head "capital gains". Therefore, the quantum proceeding was concluded against the assessee. The Assessing Officer levied penalty under Section 271(1)(c) of the Act. The Hon'ble jurisdictional High Court held that it was not the case of the department ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e held guilty of furnishing inaccurate particulars. The revenue argued that submitting an incorrect claim in law for the expenditure on interest would amount to giving inaccurate particulars of such income. Such cannot be the interpretation of the concerned words. The words are plain and simple. In order to expose the assessee to the penalty unless the case is strictly covered by the provision, the penalty provision cannot be invoked. By any stretch of imagination, making an incorrect claim in law cannot tantamount to furnishing of inaccurate particulars. [Para 7] Therefore, it must be shown that the conditions under section 271(1)(c ) 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. [Para 8] The word 'particulars' must mean the details supplied in the return, which are not accurate, not exact or correct, not according to truth or erroneous. In the instant case, there was no finding that any details supplied by the assessee in its retur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase of the AO that the assessee has made false claim or suppressed the facts relating to the above claims of the expenditure. The disallowances have been made on the question of interpretation of law as to whether the assessee would be entitled for deduction and whether the income of the assessee false under the category of business income. Since the assessee disclosed all the facts before the authorities below at proper level, the part disallowances of the expenditure would not par-se lead to an inference that the assessee concealed the particulars of Mastek Limited income or filed inaccurate particulars of income. On disallowance of the expenditure imposition of penalty is not automatic. 6. The Hon'ble Supreme Court in the case of CIT Vs Reliance Petroproducts Pvt. Ltd. 322 ITR 158 (SC) held that "A glance at the provisions of section 271(1) (c ) of the Income-tax Act, 1961, suggest that in order to be covered by it, there has to be concealment of particulars of the income of the assessee. Secondly, the assessee must have furnished inaccurate particulars of his income. The meaning of the word "particulars" used in section 271(1) ( c ) would embrace the details of the clai ..... X X X X Extracts X X X X X X X X Extracts X X X X
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