Commissioner Of Income Tax, Jaipur-Ii ,Jaipur v. M/S Shiv Vilas Resorts Pvt. Ltd., Near G. Ramchandran Petrol Pump, Nh 8, Kukas Jaipur

HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH ATJAIPUR D.B. Income Tax Appeal No. 143 / 2015 COMMISSIONER OF INCOME TAX, JAIPUR-II ,JAIPUR ----Appellant Versus M/S SHIV VILAS RESORTS PVT. LTD., NEAR G. RAMCHANDRAN PETROL PUMP, NH 8, KUKAS JAIPUR ----Respondent _____________________________________________________ For Appellant(s) : Mr. K.D. Mathur for Mr. R.B. Mathur For Respondent(s) : Mr. P.K.Kasliwal _____________________________________________________ HON'BLE MR. JUSTICE K.S. JHAVERI HON'BLE MR. JUSTICE VIJAY KUMAR VYAS Order 12/09/2017 1.By way of this appeal, the appellant has assailed theorder of Tribunal whereby the Tribunal has dismissed the appeal ofthe revenue. 2.This Court while admitting this appeal on 03.05.2016,framed following substantial question of law:- “Whether the ITAT was justified in confirming thedeletion of penalty u/s.271(1)(c) of the IT Act byCIT(A) despite the fact the assessee has submittedinaccurate particulars, has claimed higher rate ofdepreciation and admitted inaccuracy during thecourse of assessment proceedings.” 3.Counsel for the appellant has taken us to the order ofAO and contended that AO has seriously committed an error. Hehas also taken us to the order of Tribunal which reads as under:- “4. Now the Revenue is in appeal before us. The learned D.R. vehemetly supported the order of theLd. Assessing Officer. At the outset the Ld. AR for theassessee has reiterated the submissions made beforethe ld. CIT(A) and supported his order. 5. We have heard the rival contentions of both theparties and perused the material available on record.The issue whether the depreciation on crockery andcutlery is allowed 100% and 80% in case of blanketand linen is debatable. This claim of the assessee wasaccepted by the Assessing Officer in A.Y. 2007-08.The assessee’s claim is bonafide during the yearunder consideration but in A.Y. 2008-09, theassessee revised the depreciation claimed during theassessment proceedings. The assets had beendisclosed by the assessee therefore, no inaccuracyparticulars of income has been furnished. We,therefore, uphold the order of the Ld. CIT(A).” 4. He contended that now the issue is covered by thedecision of this court in D. B. Income tax Appeal No.671/2009(M/s Indian Art Palace, Vs. The DCIT, Circle, Sikar)decided on 30.09.2016 wherein this court observed as under:- “4.Counsel for the appellant relied on thedecision of the Supreme Court in Commissioner ofIncome Tax, Ahmedabad Vs. Reliance PetroproductsPvt. Ltd., (2010) 322 ITR 158 (SC), more particularlyparagraph 7, 8 and 9 which reads as under: “7. As against this, Learned Counsel appearing onbehalf of the respondent pointed out that thelanguage of Section 271(1)(c)had to be strictlyconstrued, this being a taxing statute and moreparticularly the one providing for penalty. It waspointed out that unless the wording directly coveredthe assessee and the fact situation herein, there couldnot be any penalty under the Act. It was pointed outthat there was no concealment or any inaccurateparticulars regarding the income were submitted inthe Return. Section 271(1)(c)is as under:- "271(1) If the Assessing Officer or the Commissioner(Appeals) or the Commissioner in the course of anyproceedings under this Act, is satisfied that anyperson- (c) has concealed the particulars of his income orfurnished inaccurate particulars of such income." "271(1) If the Assessing Officer or the Commissioner(Appeals) or the Commissioner in the course of anyproceedings under this Act, is satisfied that anyperson- (c) has concealed the particulars of his income orfurnished inaccurate particulars of such income." A glance at this provision would suggest that in orderto be covered, there has to be concealment of theparticulars of the income of the assessee. Secondly,the assessee must have furnished inaccurateparticulars of his income. Present is not the case ofconcealment of the income. That is not the case of theRevenue either. However, the Learned Counsel forRevenue suggested that by making incorrect claim forthe expenditure on interest, the assessee hasfurnished inaccurate particulars of the income. As perLaw Lexicon, the meaning of the word "particular" is adetail or details (in plural sense); the details of aclaim, or the separate items of an account. Therefore,the word "particulars" used in the Section 271(1)(c)would embrace the meaning of the details of the claimmade. It is an admitted position in the present casethat no information given in the Return was found tobe incorrect or inaccurate. It is not as if any statementmade or any detail supplied was found to be factuallyincorrect. Hence, at least, prima facie, the assesseecannot be held guilty of furnishing inaccurateparticulars. The Learned Counsel argued that"submitting an incorrect claim in law for theexpenditure on interest would amount to givinginaccurate particulars of such income". We do not thinkthat such can be the interpretation of the concernedwords. The words are plain and simple. In order toexpose the assessee to the penalty unless the case isstrictly covered by the provision, the penalty provisioncannot be invoked. By any stretch of imagination,making an incorrect claim in law cannot tantamount tofurnishing inaccurate particulars. In Commissioner ofIncome Tax, Delhi Vs. Atul Mohan Bindal [2009(9) SCC589], where this Court was considering the sameprovision, the Court observed that the AssessingOfficer has to be satisfied that a person has concealedthe particulars of his income or furnished inaccurateparticulars of such income. This Court referred toanother 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.RajasthanSpg. & Wvg. Mills [2009(13) SCC 448] and reiteratedin para 13 that:- "13. It goes without saying that forapplicability of Section 271(1)(c), conditions statedtherein must exist." 8. Therefore, it is obvious that it must be shown thatthe conditions under Section 271(1)(c)must existbefore the penalty is imposed. There can be no disputethat everything would depend upon the Return filedbecause that is the only document, where theassessee can furnish the particulars of his income.When such particulars are found to be inaccurate, theliability would arise. In Dilip N. Shroff Vs. JointCommissioner of Income Tax, Mumbai & Anr. [2007(6)SCC 329], this Court explained the terms"concealment of income" and "furnishing inaccurate 8. Therefore, it is obvious that it must be shown thatthe conditions under Section 271(1)(c)must existbefore the penalty is imposed. There can be no disputethat everything would depend upon the Return filedbecause that is the only document, where theassessee can furnish the particulars of his income.When such particulars are found to be inaccurate, theliability would arise. In Dilip N. Shroff Vs. JointCommissioner 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 inorder 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 oromission on behalf of the assessee. It went on to holdthat Clause (iii) of Section 271(1)provided for adiscretionary jurisdiction upon the Assessing Authority,inasmuch as the amount of penalty could not be lessthan the amount of tax sought to be evaded by reasonof such concealment of particulars of income, but itmay not exceed three times thereof. It was pointed outthat the term "inaccurate particulars" was not definedanywhere in the Act and, therefore, it was held thatfurnishing of an assessment of the value of theproperty may not by itself be furnishing inaccurateparticulars. It was further held that the assessee mustbe found to have failed to prove that his explanation isnot only not bona fide but all the facts relating to thesame and material to the computation of his incomewere not disclosed by him. It was then held that theexplanation must be preceded by a finding as to howand in what manner, the assessee had furnished theparticulars of his income. The Court ultimately went onto hold that the element of mens rea was essential. Itwas only on the point of mens rea that the judgmentin Dilip N. Shroff Vs. Joint Commissioner of IncomeTax, Mumbai & Anr. was upset. In Union of India Vs.Dharamendra Textile Processors (cited supra), afterquoting from Section 271extensively and alsoconsidering Section 271(1)(c), the Court came to theconclusion that since Section 271(1)(c) indicated theelement of strict liability on the assessee for theconcealment or for giving inaccurate particulars whilefiling Return, there was no necessity of mens rea. TheCourt went on to hold that the objective behindenactment of Section 271(1)(c) read with Explanationsindicated with the said Section was for providingremedy for loss of revenue and such a penalty was acivil liability and, therefore, willful concealment is notan essential ingredient for attracting civil liability aswas the case in the matter of prosecution under-Section 276Cof the Act. The basic reason whydecision in Dilip N. Shroff Vs. Joint Commissioner ofIncome Tax, Mumbai & Anr. (cited supra) wasoverruled by this Court in Union of India Vs.Dharamendra Textile Processors (cited supra), wasthat according to this Court the effect and difference-between Section 271(1)(c)and Section 276C of theAct was lost sight of in case of Dilip N. Shroff Vs. JointCommissioner of Income Tax, Mumbai & Anr. (citedsupra). However, it must be pointed out that in Unionof India Vs. Dharamendra Textile Processors (citedsupra), no fault was found with the reasoning in thedecision in Dilip N. Shroff Vs. Joint Commissioner ofIncome Tax, Mumbai & Anr. (cited supra), where theCourt explained the meaning of the terms "conceal" and inaccurate". It was only the ultimate inference inDilip N. Shroff Vs. Joint Commissioner of Income Tax,Mumbai & Anr. (cited supra) to the effect that mensrea was an essential ingredient for the penalty underSection 271(1)(c)that the decision in Dilip N. ShroffVs. Joint Commissioner of Income Tax, Mumbai & Anr.(cited supra) was overruled. and inaccurate". It was only the ultimate inference inDilip N. Shroff Vs. Joint Commissioner of Income Tax,Mumbai & Anr. (cited supra) to the effect that mensrea was an essential ingredient for the penalty underSection 271(1)(c)that the decision in Dilip N. ShroffVs. Joint Commissioner of Income Tax, Mumbai & Anr.(cited supra) was overruled. 9. We are not concerned in the present case with themens rea. However, we have to only see as to whetherin this case, as a matter of fact, the assessee hasgiven inaccurate particulars. In Webster's Dictionary,the word "inaccurate" has been defined as:- "notaccurate, not exact or correct; not according to truth;erroneous; as an inaccurate statement, copy ortranscript". We have already seen the meaning of theword "particulars" in the earlier part of this judgment.Reading the words in conjunction, they must mean thedetails supplied in the Return, which are not accurate,not exact or correct, not according to truth orerroneous. We must hasten to add here that in thiscase, there is no finding that any details supplied bythe assessee in its Return were found to be incorrector erroneous or false. Such not being the case, therewould be no question of inviting the penalty underSection 271(1)(c)of the Act. A mere making of theclaim, which is not sustainable in law, by itself, will notamount to furnishing inaccurate particulars regardingthe income of the assessee. Such claim made in theReturn cannot amount to the inaccurate particulars.” 5. Taking into consideration the observations made bythe Tribunal, counsel for the appellant contended thatthe claim of depreciation of interest will not invite thepenalty proceedings. 6. Counsel for the respondent Mr. Sameer Jaincontended that doubtful claim is required to beobserved scrupulously and view taken by the Tribunalis required to be affirmed.He has invited the attentionof this Court towards penalty proceedings inparagraph 2.3 of CIT holding as under: “2.3 I have carefully considered the facts of thecase and submission of the Ld. Ar. I have also gonethrough the case laws relied upon by the Ld. AR insupport of the ground of appeal. On perusal of therelevant records, I find substantial merit in thearguments of Ld. AR. Firstly. It is seen that the tradingaddition has been made by the AO by rejecting thebooks of account and, thereafter, substituting the g.p.rate at 26.06% declared by the assessee, with the g.p.rate estimated at 26.10%, leading to a trading additionof Rs. 6,02,984/- On these facts. I agree with the Ld.AR that penalty u/s 271(1)( C) cannot be levied with reference to estimated trading addition by the AO,without establishing any conscious concealment on thepart of the assessee. This view finds support in thedecisions of Hon’ble ITAT, jaipur Bench in the case ofDCIT vs. Anupam Tiles (P) Ltd. (supra). Therefore, it isheld that penalty u/s 271(1)© is not levialbe withreference to the estimated trading addition of Rs.6,02,984/- in the facts and circumstances of theappellant’s case. Secondly, it is observed that addition of Rs. 6,70,377/-has been made by the AO only a/c of the interestincome, on FDR and bank deposit, held as income fromother sources, instead of the same claimed as businessincome by the assessee. It is seen that this issueinvolves a debatable legal/technical question. Further, itis also seen that the AO has not made out any case inthis regard that the assessee has furnished anyinaccurate particulars of income or has concealed anyincome. Therefore, when the assessee had fullydisclosed all the particulars with reference to thatinterest income, and only because the AO held thatincome as income from other sources, instead ofbusiness income, no penalty u/s 271(1)© is leviablewith reference to that addition. Secondly, it is observed that addition of Rs. 6,70,377/-has been made by the AO only a/c of the interestincome, on FDR and bank deposit, held as income fromother sources, instead of the same claimed as businessincome by the assessee. It is seen that this issueinvolves a debatable legal/technical question. Further, itis also seen that the AO has not made out any case inthis regard that the assessee has furnished anyinaccurate particulars of income or has concealed anyincome. Therefore, when the assessee had fullydisclosed all the particulars with reference to thatinterest income, and only because the AO held thatincome as income from other sources, instead ofbusiness income, no penalty u/s 271(1)© is leviablewith reference to that addition. Thirdly, the penalty has been levied with reference tothe disallowance of a part of the claim of loss made bythe assessee on account of fire. It is observed thatther3e is no dispute regarding the fact that there was afire on 27[th] & 28[th] March. 2001 at the business premisesof the assessee at Ramgarh. According to the assessee.There was a loss of Rs. 43,35,000/- due to fire,whereas the insurance company passed the claim tothe extent of Rs. 11,72,488/-. Therefore the AOdisallowed the balance of the claim amounting to Rs.31,62,512/- on the ground that the assessor of theinsurance company was a technical person, and,therefore, would have correctly assessed the loss ona/c of fire by the assessee. Hence, the addition of Rs.31,62,512/- was made on a/c of partly disallowing theclaim of loss made by the assessee. In this regard, Ifind merit in the contentions of the Ld. AR that penaltyu/s 271(1)(C) cannot be levied with reference to anaddition made on account of disallowance of someexpenses or claim made by the assess, without the AOestablishing the fact that the assessee had delibertelyfurnished incorrect particulars or concealed anyparticulars with reference to the claimed loss. In thiscontext, it is seen that Hon’ble Madras High Court inthe case of CIT vs. K.R. Chinni Krishna Chettty, 246 ITR121 (Mad.) has held that mere revision of income tohigher figure does not warrant an inference ofconcealment and, therefore, definite finding ofconcealment is must for imposing penalty. Further, it isseen that Hon’ble Punjab & Haryana High Court in thecase of CIT vs. AjaibSingh & Co., 253 ITR 630, has held that the disallowance of an expense per se. can notmean that the assessee had furnished incorrectparticulars of his income. Hon’ble High Court hasfurther held that as concealments involve penal action,it has to be proved as a conscious act and any claimmade under erroneous understanding of law not lead tothe conclusion of concealment.” 7. In this regard, the ITAT in paragraph 6 observed asunder:- “6. As regards the addition on account of fire loss,the assessee produced a list of stock burnt in fire at Rs43.35 lacs which had no basis. The said list of stock wasvalued at Rs. 11,72,488/- by the surveyor and lossAssessor. Moreover, the assessee has claimed 100%depreciation on temporary wood structure at Rukansaron one hand, whereas the assessee has also made aclaim of fire loss of Rs 6,18,600/- for temporary woodstructure (Shed) burnt and GIC Sheet of Rs 88,600/-.Similar position is with regard to seasoning plant atRukansar on which depreciation @ 25% as well as fireloss has been claimed. Thus there is a double claim ofthe expenditure by the assessee. The assesseetherefore, has furnished inaccurate particular of incomeand has concealed the income. The AO is therefore,justified in levying the penalty u/s 271(1)© of the Act.The order of the ld. CIT(A) therefore, is reversed indeleting the penalty on this account. The assesseetherefore, gets the part relief from the order of the AO.” 5.Taking into consideration the above, the issue is answered in favour of the assessee and against the department.