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TMI Blog2024 (8) TMI 627X X X X Extracts X X X X X X X X Extracts X X X X ..... tionale and computation of the claim along with facts relating to carried forward losses available with the assessee which even after set off are available in the subsequent assessment years. There is nothing on record brought by the revenue to negate the availability of carried forward losses. Thus, the amount of tax sought to be evaded as required in explanation 1 to section 271(1)(c) is indeterminable for the imposition of penalty as rightly observed by the ld. CIT(A). Effect of decision of the assessee to pursue or not to pursue legal remedy against rejection of its stand - The fact that the assessee has not carried in appeal the reduction of its claim by the Assessing Officer is sought to be used against the assessee's claim of bona fides. We are unable to see any rationale in this. The decision to go in litigation or not does not depend on the merits alone. Merely because an assessee does not challenge a particular addition or disallowance in appeal does not mean that the claim for such exclusion from income or deduction lacked bona fides . No reason to interfere with the observations and findings arrived at by the ld. CIT(A) in deleting the penalty imposed on the reducti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n, the levy of penalty was deleted on account of defect in the notice issued u/s 274 r.w.s. 271(1)(c) without specifying the specific charge as to which limb was invoked for the imposition of penalty. 3.1. Ld. Assessing Office had imposed a penalty of Rs. 2,85,23,354/- u/s. 271(1)(c) vide order dated 31.03.2022. The said penalty was levied in respect of transfer pricing adjustment of Rs. 7,46,225/- and disallowance of deduction u/s. 10B amounting to Rs. 8,31,70,675/-. The Coordinate Bench of ITAT, Mumbai in assesse s case (supra) had deleted the penalty in respect of transfer pricing adjustment. However, the matter was remanded back to the file of ld. CIT(A) on the issue of levy of penalty for furnishing inaccurate particulars of income in relation to deduction claimed u/s. 10B of the Act, for adjudication on merits. Specific direction given by the Coordinate Bench in this respect as contained in para 16 is extracted below: Accordingly, we set aside the issue of levy of penalty for furnishing of inaccurate particulars of income in relation to deduction claimed under section 10B of the Act back to the file of CIT(A) for adjudication on merits. [emphasis supplied by us by bold and un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax liability. Mere disallowance of claim of deduction cannot be treated as furnishing of inaccurate particulars of income for which it placed strong reliance on the decision of Hon ble Supreme Court in the case of CIT vs. Reliance Petroproducts Pvt. Ltd. 322 ITR 158 (SC). According to the assessee, ld. AO has only estimated the expenditure on the turnover without rejecting the contention of facts. 5. Ld. CIT(A) by accepting the contentions of the assessee deleted the penalty so imposed. He held that assessee had decided not to press the ground of appeal taken against disallowance of deduction u/s. 10B in the quantum appeal, for the reason that there was no positive income and therefore allowance or otherwise of the deduction could not have had any impact on the amount of tax payable by it. He also noted the fact that after giving effect to the order of ld. CIT(A) in the quantum appeal, the income finally assessed is a negative figure. Accordingly, not pressing the disallowance of deduction u/s. 10B in the quantum appeal cannot be a ground of levy of penalty, observed the ld. CIT(A). 5.1. He further held that claim of excess deduction cannot be a basis for levy of penalty unless it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . He noted that common expenses which could not be directly identified with any of the units were allocated in certain pre-determined ratio. It was submitted by the assessee that in the past, no disallowance was made out of claim u/s 10B which establishes that the criterion used by it had received acceptance by the Department. However, ld. Assessing Officer concluded in para 5.5 to apportion these common expenses to the EOU on the basis of turnover of each unit. Accordingly, this apportionment of expenses worked out to Rs. 9,24,11,861/- as reallocation for the EOU. Claim u/s 10B was thus reworked by him, restricting it to Rs. 52,04,147/- as against assessee s claim of Rs. 8,83,74,822/-. Penalty was imposed for this disallowance by charging the assessee with the charge of furnishing of inaccurate particulars of income. 7.1. The scheme of section 271(1)(c) visualizes imposition of penalty when the assessee has concealed particulars of income or when the assessee has furnished inaccurate particulars of income. We are not concerned with the merits of the case for the claim made by the assessee u/s 10B of the Act, but all that is necessary to be examined for our purposes is whether maki ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eeded to treat assessee's making an incorrect claim of income as furnishing of inaccurate particulars. What is a correct claim and what is an incorrect claim is a matter of perception. In our considered view, raising a legal claim, even if it is ultimately found to be legally unacceptable, cannot amount of furnishing of inaccurate particulars of income. 'Inaccurate', as we have noted above, is something factually incorrect and interpretation of law can never be a factual aspect. Just because an Assessing Officer does not accept an interpretation, such an interpretation is not rendered incorrect. Even the judgments of Hon'ble Supreme Court are reversed by the larger Benches of Hon'ble Supreme Court. The development of law is a dynamic process which is affected by the innumerable factors, and it is always an ongoing exercise. In such circumstances, a bona fide legal claim by the assessee being visited with penal consequences only because it has not been accepted thus far by the tax authorities or judicial authorities is an absurdity. In any event, as we have noted above, the connotations of expression 'particulars of income' do not extend to the issues of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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:- 13. It goes without 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and difference between Section 271(1)(c) and Section 276-C of the Act was lost sight of in case of Dilip N. Shroff Vs. Joint Commissioner of Income Tax, Mumbai Anr. (cited supra). However, it must be pointed out that in Union of India Vs. Dharamendra Textile Processors (cited supra), no fault was found with the reasoning in the decision in Dilip N. Shroff Vs. Joint Commissioner of Income Tax, Mumbai Anr. (cited supra), where the Court explained the meaning of the terms conceal 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 trans ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e is not accepted by Assessing Officer for any reason, the assessee will invite penalty under Section 271(1)(c). That is clearly not the intendment of the Legislature 7.4. In the present case, there is no dispute that all the relevant facts material to the computation of total income are duly furnished by the assessee and no deficiencies in furnishing of such facts are pointed out by the authorities below. In respect of claim u/s 10B, assessee had explained the facts in detail vide its submissions dated 18.03.2020, 15.02.2021 and 15.09.2021 before the ld. Assessing Officer as to the number of manufacturing divisions run by it and how the business expenditure incurred is bifurcated towards each division. The explanation of the assessee has not been found to be false. The onus of proving that the explanation is false is on the revenue and there is no finding in this direction at all. Claim made by the assessee is an allowable claim though quantum of the same has been reworked by the ld. Assessing Officer by applying a different arithmetic. 7.5. All the details and justifications of claim have been set out in the return of income itself. There was a detailed note giving rationale and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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