Krishi Upaj Mandi Samiti Anoopgarh District Sri Ganganagar v. Income Tax Officer, Suratgarh, District Sri Gangnagar

HIGH COURT OF JUDICATURE FOR RAJASTHAN ATJODHPUR D.B. Income Tax Appeal No. 12 / 2013 Krishi Upaj Mandi Samiti Anoopgarh District Sri Ganganagar,through its Secretary Shri Babu Lal Meena, S/o Shri Badri Lal JiMeena, Aged 42 years ----Appellant Versus Income Tax Officer, Suratgarh, District Sri Gangnagar. ----Respondent _____________________________________________________ For Appellant(s) : Mr. Sharad Kothari For Respondent(s) : Mr. K.K. Bissa _____________________________________________________ HON'BLE MR. JUSTICE K. S. JHAVERI HON'BLE DR. JUSTICE PUSHPENDRA SINGH BHATIJudgment 25/01/2018 1.By way of this appeal, the appellant has challenged theimpugned judgment and order of the learned CITA as well aslearned Tribunal, whereby both the forums have decided the caseagainst the appellant. 2.However, while admitting this appeal, this Court on21.04.2014 has framed the following substantial question of law: “(1) Whether on the facts and in the circumstances ofthe case, the ITAT was justified in confirming thepenalty imposed upon the appellant-assessee underSection 271(1)(c) of the Income Tax Act, 1961 whenthe claim of the assessee was a debatable one andthere was no specific finding that the assessee hadsubmitted false or incorrect accounts ?” 3.Admittedly, the issue is covered by the judgment of the Hon’ble Apex Court in CIT Vs. Reliance Petro Products Pvt. Ltd., reported in 2010 (322) ITR 158 SC, which reads as under: “1. Leave granted. 2. The only question in this appeal which hasbeen filed by the Commissioner of Income Tax-IIIis as to whether the respondent-assessee is liableto pay the penalty amounting to Rs.11,37,949/-under Section 271(1)(c) of the Income Tax Act(hereinafter referred to as "the Act") ordered bythe Assessing Authority. The Commissioner ofIncome Tax (Appeals), however, deleted the saidpenalty. The order of the Commissioner (Appeals)was appealed against before the Income TaxAppellate Tribunal (hereinafter referred to "theTribunal") which confirmed the order of theCommissioner (Appeals) and dismissed the appealfiled by the Revenue. However, the Revenuechallenged the said order before the High Courtwhich confirmed the orders passed by theCommissioner (Appeals) and the Tribunal whiledismissing the Tax Appeal filed by the Revenue. 3. Few facts would be relevant. 4. The assessee is a company and the relevantAssessment Year is 2001-02. The Return was filedon 31.1.2001 declaring loss of Rs.26,54,554/-.This assessment was finalized underSection143(3) of the Act on 25.11.2003 whereby thetotal income was determined at Rs.2,22,688/-. Inthis assessment the addition in respect of interestexpenditure was made. Simultaneously penaltyproceedings under Section 271(1)(c) of the Actwere also initiated on account of concealment ofincome/furnishing of inaccurate particulars ofincome. The said expenditure was claimed by theassessee on the basis of expenditure made forpaying the interest on the loans incurred by it bywhich amount the assessee purchased some IPLshares by way of its business policies. However,admittedly, the assessee did not earn any incomeby way of dividend from those shares. Thecompany in its Return claimed disallowance of theamount of expenditure for Rs.28,77,242/-under Section 14A of the Act. 5. By way of response to the Show Cause Noticeregarding the penalty in its reply dated22.3.2006, the assessee claimed that all thedetails given in the Return were correct, therewas no concealment of income, nor were anyinaccurate particulars of such income furnished. Itwas pointed out that the disallowance made bythe Assessing Authority in the Assessment Orderunder Section 143(3) of the Act were solely onaccount of different views taken on the same setof facts and, therefore, they could, at the most,be termed as difference of opinion but nothing todo with the concealment of income or furnishingof inaccurate particulars of such income. It wasclaimed that mere disallowance of the claim in theassessment proceedings could not be the solebasis for levying penalty under Section 271(1)(c)of the Act. It was submitted specifically that itwas an investment company and in its own casefor Assessment Year 2000-01 the Commissioner(Appeals) had deleted the disallowance of interestmade by the Assessment Officer and the Tribunalhas also confirmed the stand of the Commissioner(Appeals) for that year and, therefore, it was onthe basis of this that the expenditure wasclaimed. It was further submitted that making aclaim which is rejected would not make theassessee company liable under Section 271(1)(c) of the Act. It was again reiterated that therewas absolutely no concealment, nor were anyinaccurate particular ever submitted by theassessee-company. 6. Shri Bhattacharya, Learned ASG submits thatCommissioner (Appeals), the Tribunal as well asthe High Court have ignored the positive languageof Section 271(1)(c) of the Act. He pointed outthat the claim of the interest expenditure wastotally without legal basis and was made with themalafide intentions. It was further pointed outthat the claim made for the interest expenditurewas not accepted by the Assessing Authority norby the Commissioner (Appeals) and, therefore, itwas obvious that the claim for the interestexpenditure did not have any basis. He furtherpointed out that the contention about the earlierclaims being finalized was also not correct as theappeal was pending before the High Court against the order of the Tribunal for the year 2000-01.According to the Learned ASG, even otherwise,the expenditure on interest could not have beenclaimed in law, as under Section 36(1)(iii), onlythe amount of interest paid in respect of capitalborrowed for the purposes of the business orprofession could have been claimed and it wasclear that the interest in the present case was notin respect of the capital borrowed. Our attentionwas also invited toSection 14A of the Act, whichprovides that no deduction could be allowed inrespect of the expenditure incurred by theassessee in relation to income which does notform part of the total income under this Act. TheLearned ASG also invited our attention toprovision ofSection 10(33) to show that theincome arising from the transfer of a capital assetcould not be reckoned as an income which canform the part of the total income. In short, thecontention was that the assessee in this case hadmade a claim which was totally unacceptable inlaw and thereby had invited the provisionsof Section 271(1)(c) of the Act and had,therefore, exposed itself to the penalty under thatprovision. 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 directlycovered the assessee and the fact situationherein, there could not be any penalty under theAct. It was pointed out that there was noconcealment or any inaccurate particularsregarding the income were submitted in theReturn. Section 271(1)(c) is 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 directlycovered the assessee and the fact situationherein, there could not be any penalty under theAct. It was pointed out that there was noconcealment or any inaccurate particularsregarding the income were submitted in theReturn. Section 271(1)(c) is as under:- "271(1) If the Assessing Officer or theCommissioner (Appeals) or the Commissioner inthe course of any proceedings under this Act, issatisfied that any person- (c) has concealed the particulars of his income orfurnished inaccurate particulars of such income." A glance at this provision would suggest that inorder to be covered, there has to be concealment of the particulars of the income of the assessee.Secondly, the assessee must have furnishedinaccurate particulars of his income. Present isnot the case of concealment of the income. Thatis not the case of the Revenue either. However,the Learned Counsel for Revenue suggested thatby making incorrect claim for the expenditure oninterest, the assessee has furnished inaccurateparticulars of the income. As per Law Lexicon, themeaning of the word "particular" is a detail ordetails (in plural sense); the details of a claim, orthe separate items of an account. Therefore, theword "particulars" used in the Section 271(1)(c) would embrace the meaning of the details ofthe claim made. It is an admitted position in thepresent case that no information given in theReturn was found to be incorrect or inaccurate. Itis not as if any statement made or any detailsupplied was found to be factually incorrect.Hence, at least, prima facie, the assessee cannotbe held guilty of furnishing inaccurate particulars.The Learned Counsel argued that "submitting anincorrect claim in law for the expenditure oninterest would amount to giving inaccurateparticulars of such income". We do not think thatsuch can be the interpretation of the concernedwords. The words are plain and simple. In orderto expose the assessee to the penalty unless thecase is strictly covered by the provision, thepenalty provision cannot be invoked. By anystretch of imagination, making an incorrect claimin law cannot tantamount to furnishing inaccurateparticulars. In Commissioner of Income Tax, DelhiVs. Atul Mohan Bindal [2009(9) SCC 589], wherethis Court was considering the same provision,the Court observed that the Assessing Officer hasto be satisfied that a person has concealed theparticulars of his income or furnished inaccurateparticulars of such income. This Court referred toanother decision of this Court in Union of IndiaVs. Dharamendra Textile Processors [2008(13)SCC 369], as also, the decision in Union of IndiaVs.Rajasthan Spg. & Wvg. Mills [2009(13) SCC448] and reiterated in para 13 that:- "13. It goeswithout saying that for applicability of Section271(1)(c), conditions stated therein must exist." 8. Therefore, it is obvious that it must be shownthat the conditions under Section 271(1)(c)mustexist before the penalty is imposed. There can beno dispute that everything would depend uponthe Return filed because that is the onlydocument, where the assessee can furnish theparticulars of his income. When such particularsare found to be inaccurate, the liability wouldarise. In Dilip N. Shroff Vs. Joint Commissioner ofIncome Tax, Mumbai & Anr. [2007(6) SCC 329],this Court explained the terms "concealment ofincome" and "furnishing inaccurate particulars".The Court went on to hold therein that in order toattract the penalty under Section 271(1)(c), mensrea was necessary, as according to the Court, theword "inaccurate" signified a deliberate act oromission on behalf of the assessee. It went on tohold that Clause (iii) of Section 271(1) providedfor a discretionary jurisdiction upon the AssessingAuthority, inasmuch as the amount of penaltycould not be less than the amount of tax soughtto be evaded by reason of such concealment ofparticulars of income, but it may not exceed threetimes thereof. It was pointed out that the term"inaccurate particulars" was not defined anywherein the Act and, therefore, it was held thatfurnishing of an assessment of the value of theproperty may not by itself be furnishinginaccurate particulars. It was further held that theassessee must be found to have failed to provethat his explanation is not only not bona fide butall the facts relating to the same and material tothe computation of his income were not disclosedby him. It was then held that the explanationmust be preceded by a finding as to how and inwhat manner, the assessee had furnished theparticulars of his income. The Court ultimatelywent on to hold that the element of mens rea wasessential. It was only on the point of mens reathat the judgment in Dilip N. Shroff Vs. JointCommissioner of Income Tax, Mumbai & Anr. wasupset. In Union of India Vs. Dharamendra TextileProcessors (cited supra), after quotingfrom Section271extensivelyandalsoconsidering Section 271(1)(c), the Court came tothe conclusion that since Section 271(1)(c) indicated the element of strict liability on the assessee for the concealment or for givinginaccurate particulars while filing Return, therewas no necessity of mens rea. The Court went onto hold that the objective behind enactmentof Section 271(1)(c) read with Explanationsindicated with the said Section was for providingremedy for loss of revenue and such a penaltywas a civil liability and, therefore, willfulconcealment is not an essential ingredient forattracting civil liability as was the case in thematter of prosecution under Section 276-C of theAct. The basic reason why decision in Dilip N.Shroff Vs. Joint Commissioner of Income Tax,Mumbai & Anr. (cited supra) was overruled by thisCourt in Union of India Vs. Dharamendra TextileProcessors (cited supra), was that according tothis Court the effect and differencebetween Section 271(1)(c) and Section 276-Cofthe Act was lost sight of in case of Dilip N. ShroffVs. Joint Commissioner of Income Tax, Mumbai &Anr. (cited supra). However, it must be pointedout that in Union of India Vs. Dharamendra TextileProcessors (cited supra), no fault was found withthe reasoning in the decision in Dilip N. Shroff Vs.Joint Commissioner of Income Tax, Mumbai & Anr.(cited supra), where the Court explained themeaning 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 thatmens rea was an essential ingredient for thepenalty under Section 271(1)(c) that the decisionin Dilip N. Shroff Vs. Joint Commissioner ofIncome Tax, Mumbai & Anr. (cited supra) wasoverruled. 9. We are not concerned in the present case withthe mens rea. However, we have to only see as towhether in this case, as a matter of fact, theassessee has given inaccurate particulars. InWebster's Dictionary, the word "inaccurate" hasbeen defined as:- "not accurate, not exact orcorrect; not according to truth; erroneous; as aninaccurate statement, copy or transcript". We have already seen the meaning of the word"particulars" in the earlier part of this judgment.Reading the words in conjunction, they must mean the details supplied in the Return, which arenot accurate, not exact or correct, not accordingto truth or erroneous. We must hasten to addhere that in this case, there is no finding that anydetails supplied by the assessee in its Return werefound to be incorrect or erroneous or false. Suchnot being the case, there would be no question ofinviting the penalty under Section 271(1)(c) ofthe Act. A mere making of the claim, which is notsustainable in law, by itself, will not amount tofurnishing inaccurate particulars regarding theincome of the assessee. Such claim made in theReturn cannot amount to the inaccurateparticulars. 10. It was tried to be suggested that Section14A of the Act specifically excluded thedeductions in respect of the expenditure incurredby the assessee in relation to income which doesnot form part of the total income under the Act. Itwas further pointed out that the dividends fromthe shares did not form the part of the totalincome. It was, therefore, reiterated before usthat the Assessing Officer had correctly reachedthe conclusion that since the assessee hadclaimed excessive deductions knowing that theyare incorrect; it amounted to concealment ofincome. It was tried to be argued that thefalsehood in accounts can take either of the twoforms; (i) an item of receipt may be suppressedfraudulently; (ii) an item of expenditure may befalsely (or in an exaggerated amount) claimed,and both types attempt to reduce the taxableincome and, therefore, both types amount toconcealment of particulars of one's income as wellas furnishing of inaccurate particulars of income.We do not agree, as the assessee had furnishedall the details of its expenditure as well as incomein its Return, which details, in themselves, werenot found to be inaccurate nor could be viewed asthe concealment of income on its part. It was upto the authorities to accept its claim in the Returnor not. Merely because the assessee had claimedthe expenditure, which claim was not accepted orwas not acceptable to the Revenue, that by itselfwould not, in our opinion, attract the penaltyunder Section 271(1)(c). If we accept thecontention of the Revenue then in case of every Return where the claim made is not accepted byAssessing Officer for any reason, the assessee willinvite penalty under Section 271(1)(c). That isclearly not the intendment of the Legislature. 11. In this behalf the observations of this Courtmade in Sree Krishna Electricals v. State of TamilNadu & Anr. [(2009) 23VST 249 (SC)] as regardsthe penalty are apposite. In the aforementioneddecision which pertained to the penaltyproceedings in Tamil Nadu General Sales Tax Act,the Court had found that the authorities belowhad found that there were some incorrectstatements made in the Return. However, the saidtransactions were reflected in the accounts of theassessee. This Court, therefore, observed: "So far as the question of penalty is concernedthe items which were not included in the turnover were found incorporated in the appellant'saccount books. Where certain items which are notincluded in the turnover are disclosed in thedealer's own account books and the assessingauthorities include these items in the dealer'sturnover disallowing the exemption, penaltycannot be imposed. The penalty levied stands setaside." "So far as the question of penalty is concernedthe items which were not included in the turnover were found incorporated in the appellant'saccount books. Where certain items which are notincluded in the turnover are disclosed in thedealer's own account books and the assessingauthorities include these items in the dealer'sturnover disallowing the exemption, penaltycannot be imposed. The penalty levied stands setaside." The situation in the present case is still better asno fault has been found with the particularssubmitted by the assessee in its Return. 12. The Tribunal, as well as, the Commissioner ofIncome Tax (Appeals) and the High Court havecorrectly reached this conclusion and, therefore,the appeal filed by the Revenue has no merits andis dismissed.” 4.Merely because the claim which is made was debatable, it will not fall under Section 271 (1)(c) of the Income Tax Act, 1961. 5.In that view of the matter, the present appeal deservesto be allowed and the same is allowed and the impugned orderdated 12.09.2012 as well as 20.08.2009 are quashed and set aside. The substantial questions of law is answered in favour of the assessee and against the department. (DR. PUSHPENDRA SINGH BHATI)J. (K. S. JHAVERI)J. Skant/-59