“I. Whether On The Facts And Thecircumstances Of The Itat Was Correct Toconfirm The Penalty Of Rs.21,17,500/-Under Section 271(1)(C) Of The Act Fora.y. 2007-08? v. Reliance Petro Products Pvt. Ltd.(2010) 322 Itr 158 (Sc) And Cit Vs.rubber Udyog Vikas Pvt. Ltd. (2011) 335Itr 588?

RESERVED ON 04.10.2018DELIVERED ON 21.02.2019 Court No. - 35 Case :- INCOME TAX APPEAL No. - 820 of 2012Appellant :- Hamirpur District Cooperative Bank LimitedRespondent :- The Commissioner Income Tax And AnotherCounsel for Appellant :- Rakesh Ranjan Agarwal,Suyash Agarwal Counsel for Respondent :- C.S.C. I.T.,Praveen Kumar Hon'ble Bharati Sapru,J.Hon'ble Salil Kumar Rai,J. (Delivered by Hon'ble Salil Kumar Rai,J.) Heard the counsel for the appellant and thecounsel for the revenue. The present appeal has been filed by theappellant-assessee under Section 260-A of the IncomeTax Act, 1961 (hereinafter referred to as, 'Act') againstthe judgment and order dated 6.9.2012 passed by theIncome Tax Appellate Tribunal, Lucknow Bench 'A:Lucknow in I.T.A. No. 114/Lkw/2012. I.T.A. No.114/Lkw/2012 was filed by the assessee against theorder dated 23.12.2011 passed by the Commissioner ofIncome-tax (Appeals)–II, Kanpur [hereinafter referredto as, 'CIT(A)'] under Section 250 of the Act. Theassessment year involved in the present appeal is 2007-08. The following questions of law have been framedin the memorandum of appeal for decision by thisCourt:- “i. Whether on the facts and thecircumstances of the ITAT was correct toconfirm the penalty of Rs.21,17,500/-under Section 271(1)(c) of the Act forA.Y. 2007-08? ii. Whether the ITAT right in law holdingthat the appellant made incorrect claimwhich tantamount to furnishinginaccurate particulars of income so as toattract the penalty under section 271(1)(c) of Act applying the decision of CIT vs.Zoom Communication Pvt. Ltd. (2010)327 ITR 510 (Del) contrary to decision ofCIT vs. Reliance Petro Products Pvt. Ltd.(2010) 322 ITR 158 (SC) and CIT vs.Rubber Udyog Vikas Pvt. Ltd. (2011) 335ITR 588? iii. Whether the ITAT while confirmingthe penalty rightly did not consider thatwhile preparing the income tax return innot adding income tax paid amount toRs.12,24,000/- and statutory provisionsamounting to Rs.52,24,042/- made asrequired under U.P. Cooperative SamitiLimited, where not added back inadvertently being intentional bonafideand clerical mistake due to the ignoranceof insertion of sub section (4) of section80P of the Act by Finance Act, 2006? iv. Whether the appellant bank havingclaim the amounts of Rs.12,24,000/- andRs.52,24,042/- as the transactions havingdisclosed in the return, on the basis of theaccountants prepared by the bank staff inthe format prescribed for cooperativebanks, under the control of RBI /NABARD without any professionaladvice, the penalty under Section 271(1)(c) of the Act was sustainable? v. Whether the ITAT was legally correctWhether the ITAT was legally correctin recording perverse finding of factpertaining to “deliberate and intentionalomission” on part of assesses in givinginaccurate particulars contrary to findingrecorded by A.D. & CIT (A)?”pertaining to “deliberate and intentionalomission” on part of assesses in givinginaccurate particulars contrary to findingrecorded by A.D. & CIT (A)?” The appellant-assessee is a cooperative bank v. Whether the ITAT was legally correctWhether the ITAT was legally correctin recording perverse finding of factpertaining to “deliberate and intentionalomission” on part of assesses in givinginaccurate particulars contrary to findingrecorded by A.D. & CIT (A)?”pertaining to “deliberate and intentionalomission” on part of assesses in givinginaccurate particulars contrary to findingrecorded by A.D. & CIT (A)?” The appellant-assessee is a cooperative bank registered under the Cooperative Societies Act, 1965(hereinafter referred to as, 'Act, 1965) and is carryingon banking business in Mahoba and Hamirpur Districtswith its Head Office at Mahoba (U.P.). The assessee isgoverned by the Banking Regulations Act, 1949. Theassessee filed its return under the Act for the assessmentyear 2007-08 on 31[st] of October, 2007 showing its grosstotal income to be Rs.20,16,000/-. The return wasprocessed under Section 143(1) of the Act and wasselected for scrutiny. Notices were issued to theassessee who submitted the details required in theassessment proceedings. During the assessmentproceedings, it was noticed by the Assessing Officer(hereinafter referred to as, 'A.O.') that the assessee hadclaimed a tax credit in respect of advance tax ofRs.12.24 lacs which had been included in the expensesof the assessee and were reflected under the accounthead 'other expenditure' and further that an amount ofRs.52,24,042.46/- had been debited in the profit andloss account as loss from sale of or dealing with non-banking business. The assessee was also asked to explain as to why the said amounts should not bedisallowed. The assessee submitted its reply but theA.O. disallowed the claim of Rs.52,24,042.46/- andcomputed the total income of the assessee for tax asRs.84,64,040/- and vide his order dated 16.11.2009 heldthat the assessee had furnished inaccurate particulars ofits income and therefore penalty proceedings underSection 271(1)(c) of the Act were initiated against theassessee. Consequently, a show cause notice was issuedto the assessee on 03.05.2010 to which the assesseesubmitted its reply on 25.05.2010. In its reply, the assessee pleaded its ignorance ofthe provisions of the Act and stated that their profit wascalculated as per the provisions of the CooperativeSocieties Act and their bye-laws after taking intoaccount necessary reserves/provisions and denied thatthey had concealed the particulars of their income orfurnished inaccurate particulars of the same. However,the Deputy Commissioner of Income Tax-VI, Kanpurvide his order dated 28[th] of May, 2010 held that theassessee-appellant had concealed its income by filinginaccurate particulars and, therefore, the case wascovered by Section 272(1)(c) of the Act and directedthe assessee to pay a penalty of Rs.21,70,500/-. Theorder dated 28[th] of May, 2010 was challenged by theassessee before the Commissioner of Income Tax In its reply, the assessee pleaded its ignorance ofthe provisions of the Act and stated that their profit wascalculated as per the provisions of the CooperativeSocieties Act and their bye-laws after taking intoaccount necessary reserves/provisions and denied thatthey had concealed the particulars of their income orfurnished inaccurate particulars of the same. However,the Deputy Commissioner of Income Tax-VI, Kanpurvide his order dated 28[th] of May, 2010 held that theassessee-appellant had concealed its income by filinginaccurate particulars and, therefore, the case wascovered by Section 272(1)(c) of the Act and directedthe assessee to pay a penalty of Rs.21,70,500/-. Theorder dated 28[th] of May, 2010 was challenged by theassessee before the Commissioner of Income Tax (Appeals) II, Kanpur who vide order dated 23.12.2011rejected the challenge and confirmed the order passedby the Assessing Officer. Subsequently, the assesseefiled Second Appeal No. I.T.A. No. 114 before theIncome Tax Appellate Tribunal which was alsodismissed by the Tribunal vide its judgment and orderdated 06.09.2012. Before the CIT(A) as well as theTribunal, the assessee had pleaded that in theassessment year previous to 2007-08, the income of theassessee was exempted under Section 80-P of the Actbut the Act was amended vide Finance Act, 2006 w.e.f.01.04.2007 and the assessee-cooperative bank wasexcluded from the purview of Section 80-P of the Actresulting in a taxable income for the assessment year2007-08. It was pleaded by the assessee that itsaccounts were audited by the cooperative sectorauditors who had issued an audit report under Section44-AB of the Act and the staff of the assessee-bank orits auditors were not professionals or charteredaccountants well versed with the provisions of the Actand the return was accordingly filed on the basis ofprofit and loss account as in the past and there was noconcealment or furnishing of inaccurate particulars ofincome and in any case there was no personal benefitinvolved in the discrepancy in filing the return whichwas unintentional and was a bona fide mistake,therefore, no case for levy of penalty under Section 271(1)(c) of the Act was made out against the assessee.The aforesaid plea of the assessee-bank was notaccepted by the appellate courts who vide their ordersdated 23.12.2011 and 06.09.2012 dismissed the appealsfiled by the assessee. Thus, the present appeal underSection 260-A of the Act. The counsel for the appellant-assessee has arguedthat while passing the impugned order, the Tribunal hasnot considered that the discrepancy in the return filedby the assessee was a bona fide mistake and there wasno intention of the appellant to furnish inaccurateparticulars of its income or to conceal its income andthe aforesaid discrepancy was because the income ofthe assessee-bank in the preceding years was exemptedunder Section 80-P of the Act and the assessee-appellant was excluded from the benefit of Section 80-Pof the Act only w.e.f. 01.04.2007 resulting in a taxableincome for assessment year 2007-08. It was argued thatas there was no personal benefit to any official ordirector of the bank, therefore, the case did not comewithin the purview of Section 271(1)(c) of the Act. Itwas further argued that the accounts of the assessee-appellant were audited as per the Act, 1965 and theassessee-appellant had no professional advice while theaccounts of the assessee were prepared by its staffregularly in the format prescribed for cooperative banks (7) (7) which are controlled by the RBI/NABARD. It wasargued that the assessee had successfully discharged theonus that no case for levy of penalty under Section271(1)(c) of the Act was made out against the assessee.In support of his submission, the counsel for theassessee has relied on Commissioner of Income Tax,Ahmedabad vs. Reliance Petroproducts PrivateLimited 2010 (11) SCC 762 and Dilip N. Shroff vs.Joint Commissioner of Income Tax, Mumbai &.Another 2007 (6) SCC 329 Rebutting the arguments of the counsel for theassessee, the counsel for the revenue argued that thepenalty levied on the appellant was for a statutoryoffence and the concealment made by the assessee cameto light only when its details were divulged by theassessee-appellant on being specifically inquired intoby the A.O. It was argued that the assessee was a bankand is adequately assisted by a qualified staff. Thecounsel for the revenue argued that it was a clear caseof an intentional claim of the impugned expenses andthus of concealment of particulars of income and it wasnot a case of bona fide mistake on the part of theassessee in supplying the particulars of its income. Itwas argued by the counsel for the revenue that theassessee had not been able to successfully discharge itsburden that it was not a case for levy of penalty under Section 271(1)(c) of the Act. We have considered the rival submissions of thecounsel for the appellant-assessee and the counsel forthe revenue. The relevant portion of Section 271(1)(c) of theAct reads as follows: “S. 271. (1) If the [Assessing Officer] orthe Commissioner (Appeals)] [or theCommissioner] in the course of anyproceedings under this Act, is satisfied thatany person- ….. (c) has concealed the particulars of hisincome or furnished inaccurate particularsof [such income, or] ….. Explanation 1. - Where in respect of anyfacts material to the computation of thetotal income of any person under this Act, (A) such person fails to offer anexplanation or offers an explanation whichis found by the [Assessing Officer] or theCommissioner (Appeals)] [or theCommissioner] to be false, or (B) such person offers an explanationwhich he is [not able to substantiate andfails to prove that such explanation is bonafide and that all the facts relating to thesame and material to the computation ofhis total income have been disclosed byhim,] then, the amount added or disallowed incomputing the total income of such person as a result thereof shall, for the purposes ofclause (c) of this sub-section, be deemed torepresent the income in respect of whichparticulars have been concealed:” In Dilip N. Shroff (supra), the Supreme Court held that before a penalty could be imposed underSection 271(1)(c) of the Act, the entirety of thecircumstances must reasonably point to the conclusionthat the disputed amount represented income and thatthe assessee had consciously concealed the particularsof its income or had furnished inaccurate particularsthereof. In its aofresaid judgment, the Supreme Courtfurther held that Section 271(1)(c) of the Act was apenal statute and the concealment and furnishing ofinaccurate particulars referred to a deliberate act on thepart of the assessee. A mere omission or negligencewould not constitute a deliberate act of concealment orfurnishing of inaccurate particulars. However, theSupreme Court in Union of India & Others vs.Dharamendra Textile Processors and Others 2008(13) SCC 369 held that the explanations appended toSection 271(1)(c) of the Act indicate the element ofstrict liability on the assessee for concealment or forgiving inaccurate particulars while filing the return. Itwas held that Section 271(1)(c) of the Act had beenenacted to provide a remedy for loss of revenue and thepenalty under the said provision was a civil liability.The Supreme Court further held that willful (10) (10) concealment was not an essential ingredient forattracting civil liability as was the case in matter ofprosecutions under Section 276-C of the Act. InDharamendra Textile (supra), the Supreme Court heldthat the Dilip N. Shroff's case had not been correctlydecided. Subsequently, in Reliance Petroproducts(supra), the Supreme Court held that DharamendraTextile (supra) had overruled Dilip N. Shroff only tothe extent that Dilip N. Shroff held that mens rea on thepart of the assessee was an essential ingredient forimposing penalty under Section 271(1)(c) of the Act butthe Supreme Court in Dharamendra Textile (supra)found no fault with the reasoning in Dilip N. Shroff(supra) regarding the meaning of the terms 'conceal'and 'inaccurate'. It is relevant to notice that in ReliancePetroproducts (supra), the assessee had neitherconcealed its income or furnished inaccurate particularsof its income in the return and all the details given inthe return filed by the assessee were found to be correct.The dispute between the assessee and the revenue wasregarding certain amounts for which the assesseeclaimed deductions under Section 14-A of the Actwhich was not allowed by the revenue. Theobservations of the Supreme Court made in Paragraphnos. 10 and 18 of the said judgment are relevant for thepurposes and are reproduced below: “10. Section 271(1)(c) is as under:- "271. Failure to furnish returns, complywith notices, concealment of income, etc.- (1) If the Assessing Officer or theCommissioner (Appeals) in the course ofany proceedings under this Act, issatisfied that any person- (c) has concealed the particulars of hisincome or furnished inaccurateparticulars of such income." A glance at this provision would suggestthat in order to be covered, there has tobe concealment of the particulars of theincome of the assessee. Secondly, theassessee must have furnished inaccurateparticulars of his income. Present is notthe case of concealment of the income.That is not the case of the Revenueeither. However, the learned counsel forRevenue suggested that by makingincorrect claim for the expenditure oninterest, the assessee has furnishedinaccurate particulars of the income. Asper Law Lexicon, the meaning of the word"particular" is a detail or details (inplural sense); the details of a claim, orthe separate items of an account.Therefore, the word "particulars" used inthe Section 271(1)(c) would embrace themeaning of the details of the claim made.It is an admitted position in the presentcase that no information given in thereturn was found to be incorrect orinaccurate. It is not as if any statementmade or any detail supplied was found tobe factually incorrect. Hence, at least,prima facie, the assessee cannot be held guilty of furnishing inaccurateparticulars. 18.We must hasten to add here that inthis case, there is no finding that anydetails supplied by the assessee in itsreturn were found to be incorrect orerroneous or false. Such not being thecase, there would be no question ofinviting the penalty under Section 271 (1)(c) of the Act. A mere making of theclaim, which is not sustainable in law, byitself, will not amount to furnishinginaccurate particulars regarding theincome of the assessee. Such claim madein the return cannot amount to theinaccurate particulars.” (emphasis added) A reading of the judgment of the Supreme Courtin Reliance Petroproducts (supra) shows that theparticulars furnished in the return filed by the assesseewould be relevant to decide whether the assessee couldbe subjected to penalty under Section 271(1)(c) of theAct and if the particulars furnished in the return arefound to be inaccurate the liability to pay penalty underSection 271(1)(c) would arise. The relevantobservations of the Supreme Court in Paragraph no. 12of the aforesaid judgment are reproduced below: (emphasis added) A reading of the judgment of the Supreme Courtin Reliance Petroproducts (supra) shows that theparticulars furnished in the return filed by the assesseewould be relevant to decide whether the assessee couldbe subjected to penalty under Section 271(1)(c) of theAct and if the particulars furnished in the return arefound to be inaccurate the liability to pay penalty underSection 271(1)(c) would arise. The relevantobservations of the Supreme Court in Paragraph no. 12of the aforesaid judgment are reproduced below: “12. Therefore, it is obvious that it mustbe shown that the conditions underSection 271(1)(c) must exist before thepenalty is imposed. There can be nodispute that everything would dependupon the return filed because that is the only document, where the assessee canfurnish the particulars of his income.When such particulars are found to beinaccurate, the liability would arise.” (emphasis added) The dispute in the present case shall be consideredin light of the law laid down by the Supreme Court inits aforesaid judgments. It is an admitted case of the assessee that Rs.12.24lacs and Rs.52.24 lacs which were shown in the profitand loss account and under the head of otherexpenditures and which were included by the A.O. incomputing the business income of the assesse wereliable to be assessed for tax. It is also apparent that theassessee had paid an advance tax of Rs.12.24 lacs andhad debited the said amount under 'other expenditure'.Rs.52.24 lacs was debited in profit and loss account asloss from sale of or dealing with non-banking businesseven though the said amount was not an expense but anappropriation of profit. It is also evident that even afternotice was issued to the assessee under Section 143(2)of the Act, the assessee did not file any revised return tocorrect the omissions. The contention of the assesee inthe courts below and before this Court was that theerror in its return was because the assessee wasexcluded from the purview of Section 80-P of the Actw.e.f. 01.04.2007 and the assessee had been claimingbenefit of Section 80-P of the Act in the previous (14) assessment years. The said explanation cannot beaccepted in view of the particulars given in the returnfiled by the assessee. A perusal of the return filed by theassessee, which according to the judgment of theSupreme Court in Reliance Petroproducts (supra) isthe only document where the assessee could havefurnished the particulars of his income, shows that inSchedule F (statement of total income) at Serial No. 6,the assessee had disclosed his gross total income asRs.20,16,002.20/- and did not claim any deductionsunder Chapter VI-A of the Act. It is pertinent to notethat Section 80-P of the Act is a part of Chapter VI-A ofthe Act. It is also pertinent to note that under Section80-B(5) of the Act, the gross total income means thetotal income computed in accordance with theprovisions of the Act before making any deductionsunder Chapter VI-A of the Act. Evidently, the assesseehad furnished inaccurate particulars of his income andhad also concealed the particulars of his income whichwere deliberate and intentional. The Tribunal or theappellate authority committed no error or illegality innot accepting the plea of the assessee that the mistakein filing its return was bona fide and because of theamendment in the Finance Act, 2006 excluding theassessee from the purview of Section 80-P of the Act. The next contention of the assessee that the (15) The next contention of the assessee that the (15) mistake in filing the return occurred because theassessee lacked the services of professional charteredaccountants can also not be accepted in as much asunder Section 44-AB of the Act, the assessee wasrequired to get its account audited by an accountant asdefined in Section 288(2)-Explanation, i.e. charteredaccountant within the meaning of CharteredAccountants Act, 1949. It is not a case where theassessee has claimed deductions under any head whichhad been disallowed by the revenue but is a case wherethe assessee had concealed its total taxable income andfurnished inaccurate details in its return. Theappellant/assessee was not able to establish his bona-fides regarding the inaccurate particulars furnished inhis return. For the aforesaid reasons, the proceedings underSection 271(1)(c) of the Act were rightly initiatedagainst the assessee and the penalty was also rightlyimposed on him. There is no error in the impugnedorder dated 6.9.2012 passed by the Income TaxAppellate Tribunal. The questions of law are answereddismissed. accordingly and the appeal stands Order Date :- 21.2.2019Satyam