Principal Commissioner Of Income Tax 2 v. M/S.f L Smidth Limited

IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 30.08.2017 CORAM : The Hon'ble Ms.INDIRA BANERJEE, CHIEF JUSTICE AND The Hon'ble Mr.JUSTICE M.SUNDAR Principal Commissioner of Income Tax 2,No.121, Mahatma Gandhi Road,Chennai-600 034... Appellant Vs. M/s.F L Smidth Limited,No.34, Egatoor, Kelambakkam,Old Mahabaliburam Road,Chennai-603 103... Respondent Tax Case Appeal is preferred under Section 260A of the IncomeTax Act, 1961 against the order of the Income Tax AppellateTribunal, Madras 'B' Bench, dated 30[th] September, 2016 in ITANo.1229/Mds/2016 against the order, of the Commissioner ofIncome Tax(Appeal)6, Chennai dated 24/02/2016, relevant to theassessment year 2002-03 made in ITA.No.162/CIT(A)-6)2010-2011. against the order of the Assistant Commissioner of Income Tax,Central Circle III(2), Chennai, dated 28/06/2010, made in PANAAAC14817F. For Appellant: Mr.Karthick Ranganathan - - - - JUDGMENT M.SUNDAR, J. This appeal is under Section 260A of the Income Tax Act,1961 (hereinafter referred to as 'IT Act' for the sake ofbrevity). https://hcservices.ecourts.gov.in/hcservices/ 2Essential facts necessary for understanding andappreciating our order are set out infra under the caption“Factual Matrix”. FACTUAL MATRIX : 3(i) The Principal Commissioner of Income Tax-2, Chennai isthe sole appellant before us and is hereinafter referred to as'Revenue' for the sake of convenience and clarity.3(ii)F L Smidth Limited, Chennai, a company andtherefore, a juristic person is the sole respondent before usand is hereinafter referred to as 'Assessee' for the sake ofconvenience and clarity. 3(iii)Assessment year, which is subject matter of theinstant appeal, is 2002-03 and is hereinafter referred to as the'said assessment year' for the sake of convenience.3(iv)The other abbreviations used in this order for thesake of convenience, clarity and brevity are as follows : (a) Assessing Officer is referred to as 'AO' ; (b) Commissioner of Income-tax (Appeals)-6,Chennai is referred to as 'CIT(A)';(c) Income Tax Appellate Tribunal 'B' Bench,Chennai is referred to as 'ITAT'. 3(v) Assessee is engaged inter-alia in the business ofdesign, fabrication and supply of cement equipment. Assessee hasfiled its return of fringe income for the said assessment yearon 31.10.2002 declaring a total income of Rs.3,10,70,066.00. Theassessment was completed under Section 143(3) of the IT Act,determining the income of Assessee as Rs.9,22,42,335.00.Subsequently, the assessment was revised under Section 154 ofthe IT Act, determining the income as Rs.9,26,68,392.00.Thereafter, on 31.12.2008, a revision was made giving effect toan order dated 22.06.2007 made by the ITAT, wherein and wherebythe income of the Assessee was determined at Rs.9,16,60,121.00. 3(vi)When the matter stood as above, reassessmentproceedings were initiated by issuance of a notice under Section148 of the IT Act on 23.3.2009 and reassessment was completed on24.12.2009 arriving at a total income of Rs.9,99,04,240.00. 3(vii)Under the above scenario, penalty under Section271(1)(c) of the IT Act was levied qua restriction of claim ofdeduction under Section 80HHB of the IT Act. Penalty so leviedunder Section 271(1)(c) of the IT Act was Rs.29,43,150.00. 3(viii)Against the above said penalty order, Assesseefiled an appeal before the CIT(A). CIT(A) after a detailedhearing, in and by order dated 24.2.2016 deleted the penaltylevied. https://hcservices.ecourts.gov.in/hcservices/ 3(ix)Aggrieved, revenue carried the matter to ITAT. TheITAT after a detailed hearing, in and by order dated 30.9.2016dismissed the appeal preferred by the Revenue, confirming thedeletion of penalty by CIT(A). 3(x) Aggrieved by the above said order of ITAT, Revenue isbefore us by way of this appeal. 3(xi)We now proceed to discuss (under the caption'Discussion' infra) the rival submissions made at the Bar andthe issues in this appeal, in the light of the records before us. 3(viii)Against the above said penalty order, Assesseefiled an appeal before the CIT(A). CIT(A) after a detailedhearing, in and by order dated 24.2.2016 deleted the penaltylevied. https://hcservices.ecourts.gov.in/hcservices/ 3(ix)Aggrieved, revenue carried the matter to ITAT. TheITAT after a detailed hearing, in and by order dated 30.9.2016dismissed the appeal preferred by the Revenue, confirming thedeletion of penalty by CIT(A). 3(x) Aggrieved by the above said order of ITAT, Revenue isbefore us by way of this appeal. 3(xi)We now proceed to discuss (under the caption'Discussion' infra) the rival submissions made at the Bar andthe issues in this appeal, in the light of the records before us. DISCUSSION : 4(i) We have already set out supra the facts andcircumstances leading to levy of penalty under Section 271(1)(c)of IT Act, which is subject matter of the instant appeal. 4(ii)While assailing the order of levy of penaltybefore the CIT(A), Assessee inter-alia contended that it doesthe work of commissioning of large cement plants in India aswell as outside India and that copies of all certificates issuedby the Chartered Accountants in Form No.10CCAH for twoassessment years prior to the said assessment year were filed. 4(iii)Assessee, while assailing the order of penalty,asserted before CIT(A) that it is entitled to claim deduction onthe profits derived from the business of execution of foreignprojects under Section 80HHB(1) of the IT Act. Assessee alsopointed out that the AO restricted the claim of deduction underSection 80HHB of the IT Act to the extent of amount transferredto the Foreign Projects Reserve Account. 4(iv)Assessee contended that restriction of deductionunder Section 80HHB of the IT Act to the extent of the amounttransferred to foreign policy reserve account was an inadvertenterror. Assessee further contended that it had recomputed thebusiness income and had also paid the entire tax dues thereon. 4(v) Pivotal and primary contention of the Assessee in theappeal before the CIT(A) was that the AO had failed toappreciate the fact that there was a mere inadvertent humanerror on the part of the Chartered Accountant (who according tothe Assessee was different from the Chartered Accountant whoissued certificates in earlier years) while issuing thecertificate under Section 80HHB of the IT Act and as such, theAO has not examined the aforesaid facts. 4(vi)So contending, Assessee advanced it's case thatthe perspective of AO while proceeding to levy penalty underSection 271(1)(c) of the IT Act is erroneous. https://hcservices.ecourts.gov.in/hcservices/ 4(vii)Per contra, the primary contention of Revenue,both before the ITAT and before us is that the Assessee hasfurnished inaccurate particulars and therefore, is liable to bemulcted with penalty under Section 271(1)(c) of the IT Act. 4(viii)We noticed that this is the fulcrum and sheetanchor of the case of Revenue. 4(ix)We have heard the learned counsel for the RevenueMr.T.R.Senthil Kumar. We have also perused the orders of theauthorities below, i.e., AO, CIT(A), besides perusing the orderof ITAT, which is called in question before us. 4(x) What we gather from the orders of the two authoritiesbelow and ITAT is that Revenue does not have any incriminatingmaterial or evidence against Assessee qua penalty proceedings. 4(xi)AO has not, in his order, referred to any materialon record to say with specificity and precision as to whatconstitutes inaccurate particulars of income in the Assessee'sreturn and as to how AO has arrived at the satisfaction that thesame constitutes the crucial determinants for coming to theconclusion that inaccurate particulars have been furnished byAssessee warranting penalty proceedings under Section 271(1)(c)of the IT Act. 4(x) What we gather from the orders of the two authoritiesbelow and ITAT is that Revenue does not have any incriminatingmaterial or evidence against Assessee qua penalty proceedings. 4(xi)AO has not, in his order, referred to any materialon record to say with specificity and precision as to whatconstitutes inaccurate particulars of income in the Assessee'sreturn and as to how AO has arrived at the satisfaction that thesame constitutes the crucial determinants for coming to theconclusion that inaccurate particulars have been furnished byAssessee warranting penalty proceedings under Section 271(1)(c)of the IT Act. 4(xii)We also noticed that the Assessee had furnishedall details of expenditure as well as income in its return onassessment. There is no finding by the AO that any of thedetails furnished by the Assessee in its return were found to beincorrect, erroneous or false. 4(xiii)Most importantly, the case of the Assessee thatthere is only an inadvertent mistake on the part of the newChartered Accountant in making the claim under Section 80HHB ofthe IT Act has not been disputed or disbelieved. 4(xiv)In this context, as rightly noticed by ITAT in itsorder under challenge before us that the AO who framed theoriginal assessment order had committed an error in overlookingthe contents of the tax audit report and that this leads to theinference that Assessee has concealed income. As noted supra,Assessee has not furnished inaccurate particulars either. 4(xv)As rightly observed by ITAT, all that happened inthe present case was that though a bonafide inadvertent error bythe Charted Accountant had occurred in failing to note theceiling in respect of the amount credited by the Assessee toForeign Projects Reserve Account while computing deduction underSection 80HHB of the IT Act, the same does not warrant penaltyproceedings much less mulcting the Assessee with penalty under https://hcservices.ecourts.gov.in/hcservices/ Section 271(1)(c) of the IT Act. 4(xvi)In our opinion, ITAT has correctly relied on ajudgment of the Hon'ble Supreme Court of India in PriceWaterhouse Coopers Private Ltd. Vs. CIT reported in (2012) 348ITR 306 (SC) and also CIT Vs. Reliance Petroproducts Pvt. Ltd.reported in 322 ITR 158 (SC), wherein the Hon'ble Supreme Courtheld that mere making of a claim which is not sustainable in lawby itself will not amount to furnishing inaccurate particularsregarding the income of Assessee. 4(xvii)Further more, this being an appeal under Section260A of the IT Act, we cannot and therefore, we do not reexaminethe factual findings. We take it that the factual findingarrived at by the authority below, namely, CIT(A), as confirmedby ITAT are conclusive, as no perversity has been pointed out byrevenue in arriving at such findings. 4(xviii) Having said this, it takes us to the proposedsubstantial questions of law, on which the Revenue wanted thisTCA to be admitted. Questions, which according to the Revenueare substantial questions of law as proposed by the Revenue, inthe instant TCA, read as follows : “1.Whether in the facts and in thecircumstances of the case the Appellate Tribunalwas correct in deleting the penalty levied u/s271(1)(c) of the Act, relying on the ApexCourt's decisions in the case of PriceWaterhouse Private Ltd. (348 ITR 306) andReliance Petro Products Pvt. Ltd. (322 ITR 158)when the case on hand is distinguishable onfacts?2.Whether the Appellate Tribunal was correctin holding that inadvertent error that theChartered Accountant failed to note the ceilingin respect of amount credited by the assessee toforeign project reserve account while computingthe deduction under section 80HHB of the Act byitself would not attract penalty u/s 271(1)(c)of the Act? 4(xix)We have carefully examined the questions set outsupra, which according to the Revenue are substantial questionsof law. 4(xix)We have carefully examined the questions set outsupra, which according to the Revenue are substantial questionsof law. 4(xx)Section 260A(7) of the IT Act has clearly mandatedthat the provisions of the Code of Civil Procedure, 1908 ('CPC',for brevity), relating to appeals to the High Court shall, asfar as my be, apply in the case of appeals under this section. https://hcservices.ecourts.gov.in/hcservices/ Therefore, we turn to Section 100 of CPC, which inter-alia dealswith second appeals on substantial questions of law. 4(xxi)Hon'ble Supreme Court has given the same meaningto the concept of 'substantial question of law' to both theseprovisions, i.e., Section 100 CPC and Section 260A of IT Act.This can be inferred from the judgment of M.Janardhana Rao Vs.Joint Commissioner of Income Tax [2005 273 ITR 50 (SC) = (2005)2 SCC 324], wherein the Supreme Court remanded to High Court anappeal under Section 260A of IT Act since substantial questionsof law were not framed at the time of admission and were framedafter the conclusion of arguments. In doing so, it referred tothe Apex Court judgment in Sir Chunilal V. Mehta & Sons Ltd. vsCentury Spg. & Mfg. Co. Ltd. to enumerateprinciples regarding substantial questions of law. ThoughChunilal Mehta's case dealt with Article 133(1) of theConstitution of India which provides for certificate of appealto be granted by the High Court, 'substantial question of law'and principles regarding the concept of ‘substantial question oflaw’ were elucidated by the Supreme Court in Hero Vinoth Vs.Seshammal [(2006) 5 SCC 545] and in the said case, the SupremeCourt laid down the principles regarding substantial question oflaw in an appeal under Section 100 of CPC. 4(xxii)We notice that the Hon'ble Supreme Court of Indiain Hero Vinoth's case has clearly held that the substantialquestion of law occurring in Section 100 CPC is different anddistinct from a mere question of law. Relevant paragraph readsas follows : “24.The principles relating to Section 100CPC relevant for this case may be summarisedthus: (i) An inference of fact from the recitals orcontents of a document is a question of fact.But the legal effect of the terms of a documentis a question of law. Construction of a documentinvolving the application of any principle oflaw, is also a question of law. Therefore, whenthere is misconstruction of a document or wrongapplication of a principle of law in construinga document, it gives rise to a question of law. (ii) The High Court should be satisfied that thecase involves a substantial question of law, andnot a mere question of law. A question of lawhaving a material bearing on the decision of thecase (that is, a question, answer to whichaffects the rights of parties to the suit) willbe a substantial question of law, if it is notcovered by any specific provisions of law or settled legal principle emerging from bindingprecedents, and, involves a debatable legalissue. A substantial question of law will alsoarise in a contrary situation, where the legalposition is clear, either on account of expressprovisions of law or binding precedents, but thecourt below has decided the matter, eitherignoring or acting contrary to such legalprinciple. In the second type of cases, thesubstantial question of law arises not becausethe law is still debatable, but because thedecision rendered on a material question,violates the settled position of law. settled legal principle emerging from bindingprecedents, and, involves a debatable legalissue. A substantial question of law will alsoarise in a contrary situation, where the legalposition is clear, either on account of expressprovisions of law or binding precedents, but thecourt below has decided the matter, eitherignoring or acting contrary to such legalprinciple. In the second type of cases, thesubstantial question of law arises not becausethe law is still debatable, but because thedecision rendered on a material question,violates the settled position of law. (iii) The general rule is that High Court willnot interfere with the concurrent findings ofthe courts below. But it is not an absoluterule. Some of the well-recognised exceptions arewhere (i) the courts below have ignored materialevidence or acted on no evidence; (ii) thecourts have drawn wrong inferences from provedfacts by applying the law erroneously; or (iii)the courts have wrongly cast the burden ofproof. When we refer to “decision based on noevidence”, it not only refers to cases wherethere is a total dearth of evidence, but alsorefers to any case, where the evidence, taken asa whole, is not reasonably capable of supportingthe finding. “ 4(xxiii)With regard to 'substantial question of law', thetests laid down by the Supreme Court of India for finding outwhether a given set of questions of law are mere questions oflaw or substantial questions of law is found in Hero Vinoth'scase / judgment. The ratio laid down by the Supreme Court isfound in paragraphs 21 to 23 of the said judgment, which read asfollows : “21. The phrase “substantial question of law”,as occurring in the amended Section 100 CPC isnot defined in the Code. The word substantial,as qualifying “question of law”, means—of havingsubstance, essential, real, of sound worth,important or considerable. It is to beunderstood as something in contradistinctionwith—technical, of no substance or consequence,or academic merely. However, it is clear thatthe legislature has chosen not to qualify thescope of “substantial question of law” bysuffixing the words “of general importance” ashas been done in many other provisions such asSection 109 of the Code or Article 133(1)(a) ofthe Constitution. The substantial question of law on which a second appeal shall be heard neednot necessarily be a substantial question of lawof general importance. In Guran Ditta v. RamDitta [(1927-28) 55 IA 235 : AIR 1928 PC 172]the phrase “substantial question of law” as itwas employed in the last clause of the thenexisting Section 100 CPC (since omitted by theAmendment Act, 1973) came up for considerationand their Lordships held that it did not mean asubstantial question of general importance but asubstantial question of law which was involvedin the case. In Sir Chunilal case [1962 Supp (3)SCR 549 : AIR 1962 SC 1314] the ConstitutionBench expressed agreement with the followingview taken by a Full Bench of the Madras HighCourt in Rimmalapudi Subba Rao v. Noony Veeraju[AIR 1951 Mad 969 : (1951) 2 MLJ 222 (FB)] :(Sir Chunilal case [1962 Supp (3) SCR 549 : AIR1962 SC 1314] , SCR p. 557) “When a question of law is fairlyarguable, where there is room fordifference of opinion on it or where theCourt thought it necessary to deal withthat question at some length and discussalternative views, then the question wouldbe a substantial question of law. On theother hand if the question was practicallycovered by the decision of the highestcourt or if the general principles to beapplied in determining the question arewell settled and the only question was ofapplyingthoseprinciplestotheparticular fact of the case it would notbe a substantial question of law.” This Court laid down the following test asproper test, for determining whether a questionof law raised in the case is substantial: (SirChunilal case [1962 Supp (3) SCR 549 : AIR 1962SC 1314] , SCR pp. 557-58) “When a question of law is fairlyarguable, where there is room fordifference of opinion on it or where theCourt thought it necessary to deal withthat question at some length and discussalternative views, then the question wouldbe a substantial question of law. On theother hand if the question was practicallycovered by the decision of the highestcourt or if the general principles to beapplied in determining the question arewell settled and the only question was ofapplyingthoseprinciplestotheparticular fact of the case it would notbe a substantial question of law.” This Court laid down the following test asproper test, for determining whether a questionof law raised in the case is substantial: (SirChunilal case [1962 Supp (3) SCR 549 : AIR 1962SC 1314] , SCR pp. 557-58) “The proper test for determining whether aquestion of law raised in the case issubstantial would, in our opinion, bewhether it is of general public importanceor whether it directly and substantiallyaffects the rights of the parties and if sowhether it is either an open question inthe sense that it is not finally settled bythis Court or by the Privy Council or bythe Federal Court or is not free from difficulty or calls for discussion ofalternative views. If the question issettled by the highest court or the generalprinciples to be applied in determining thequestion are well settled and there is amere question of applying those principlesor that the plea raised is palpably absurdthe question would not be a substantialquestion of law.” 22. In Dy. Commr. v. Rama Krishna Narain [1954SCR 506 : AIR 1953 SC 521] also it was held thata question of law of importance to the partieswas a substantial question of law entitling theappellant to a certificate under (the then)Section 100 CPC. 23. To be “substantial” a question of law mustbe debatable, not previously settled by law ofthe land or a binding precedent, and must have amaterial bearing on the decision of the case, ifanswered either way, insofar as the rights ofthe parties before it are concerned. To be aquestion of law “involving in the case” theremust be first a foundation for it laid in thepleadings and the question should emerge fromthe sustainable findings of fact arrived at bycourt of facts and it must be necessary todecide that question of law for a just andproper decision of the case. An entirely newpoint raised for the first time before the HighCourt is not a question involved in the caseunless it goes to the root of the matter. Itwill, therefore, depend on the facts andcircumstance of each case whether a question oflaw is a substantial one and involved in thecase or not, the paramount overall considerationbeing the need for striking a judicious balancebetween the indispensable obligation to dojustice at all stages and impelling necessity ofavoiding prolongation in the life of any lis.(See Santosh Hazari v. Purushottam Tiwari[(2001) 3 SCC 179] .) “ 4(xxiv)We applied the above tests to the instant case.There is no debatable question of law of substance necessary fordetermining the rights of the parties in the case. This is justa case where the question as to whether the assessee is liableto be mulcted with penalty under Section 271(1)(c) of IT Act inthe given fact scenario / conduct needs to be answered by https://hcservices.ecourts.gov.in/hcservices/ applying ratio in this regard, which has been indisputablysettled by the Supreme Court of India in Price WaterhouseCoopers Private Ltd. Vs. CIT reported in (2012) 348 ITR 306 (SC)and also CIT Vs. Reliance Petroproducts Pvt. Ltd. reported in322 ITR 158 (SC). Therefore, we have no hesitation whatsoever inholding that the proposed questions of law are definitely notsubstantial questions of law. Owing to all that we have set outherein, in our considered view, we do not find any othersubstantial question of law arising in this case. https://hcservices.ecourts.gov.in/hcservices/ applying ratio in this regard, which has been indisputablysettled by the Supreme Court of India in Price WaterhouseCoopers Private Ltd. Vs. CIT reported in (2012) 348 ITR 306 (SC)and also CIT Vs. Reliance Petroproducts Pvt. Ltd. reported in322 ITR 158 (SC). Therefore, we have no hesitation whatsoever inholding that the proposed questions of law are definitely notsubstantial questions of law. Owing to all that we have set outherein, in our considered view, we do not find any othersubstantial question of law arising in this case. 4(xxv)We are of the view that they may not even qualifyas pure questions of law as they are all turning heavily onfacts. 4(xxvi)We have held elsewhere in this judgment that thefactual findings returned by the CIT(A) and ITAT are held to beconclusive as we are sitting in Section 260A of the IT Act andas no perversity has been pleaded or projected qua such factualfindings. 5CONCLUSION : 5(i) Owing to all that have been stated supra, we have nohesitation whatsoever in holding that no substantial questionsof law arises in the instant TCA and the same deserves to bedismissed. 5(ii)We have also concluded that the assessee is notguilty of deliberate furnishing of inaccurate particulars /concealment of income and is not liable to be mulcted withpenalty under Section 271(1)(c) of IT Act. 6DECISION : 6(i) This TCA is dismissed, confirming the order of theITATdated30.9.2016bearingreferenceNo.I.T.A.No.1229/Mds/2016, which in turn confirms the order ofthe CIT(A) dated 24.2.2016 bearing reference ITA No.162/CIT(A)-6/2010-11. To be noted, the CIT(A) order has set aside the orderof the Assistant Commissioner of Income Tax, Central Circle III(2), Chennai, dated 28.6.2010, imposing a penalty ofRs.29,43,150.00 on the Assessee. 6(ii)Considering the fact that we have not even issuednotice on admission, we are not even examining the aspect ofcosts. Therefore, the parties will be left to bear theirrespective costs. THE HON'BLE CHIEF JUSTICE I have gone through the draft judgment prepared by myesteemed brother, M.Sundar,J., and I am in full agreement withthe same. I would, however, like to add as hereunder. 2. Section 271(1)(c) of the Income Tax Act, 1961(hereinafter referred to as the “1961 Act”) provides that if theAssessing Officer or the Commissioner (Appeals) or the PrincipalCommissioner or Commissioner, in the course of any proceedingsunder the 1961 Act, is satisfied that any person has concealedparticulars of his income or furnished inaccurate particulars ofincome, he may direct the person to pay penalty as stipulated. 3. Explanation I to Section 271 of the 1961 Act is set outherein below for convenience:“Explanation 1.—Where in respect of any factsmaterial to the computation of the total income ofany 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 the PrincipalCommissioner or Commissioner to be false, or(B) such person offers an explanation whichhe is not able to substantiate and fails toprove that such explanation is bona fide andthat all the facts relating to the same andmaterial to the computation of his totalincome have been disclosed by him, then, the amount added or disallowed in computingthe total income of such person as a result thereofshall, for the purposes of clause (c) of this sub-section, be deemed to represent the income inrespect of which particulars have been concealed.” (A) such person fails to offer anexplanation or offers an explanation whichis found by the Assessing Officer or theCommissioner (Appeals) or the PrincipalCommissioner or Commissioner to be false, or(B) such person offers an explanation whichhe is not able to substantiate and fails toprove that such explanation is bona fide andthat all the facts relating to the same andmaterial to the computation of his totalincome have been disclosed by him, then, the amount added or disallowed in computingthe total income of such person as a result thereofshall, for the purposes of clause (c) of this sub-section, be deemed to represent the income inrespect of which particulars have been concealed.” 4. In view of Explanation I, referred to above, the amountadded or disallowed in computing the total income of theassessee is, for the purpose of Section 271(1)(c), to be deemedto represent his income in respect of which particulars havebeen concealed, only if the assessee fails to offer anexplanation or offers an explanation which is found by theAssessing Authority to be false or if the assessee offers anexplanation which he is unable to substantiate and fails toprove that the explanation was bona fide and that facts materialto the computation of his total income had been disclosed by him. 5. Under Section 271(1)(c) of the 1961 Act, the impositionof penalty is not automatic whenever there is less incomereturned. The pre-condition for imposition of penalty issubjective satisfaction of the Assessing Officer or theCommissioner (Appeals) or the Principal Commissioner or theCommissioner, as the case may be, that the assessee hasconcealed particulars of his income or furnished inaccurateparticulars of such income. The furnishing of inaccurateparticulars would have to be deliberate. 6. In view of Explanation I, referred to above, there is norequirement on the part of the Revenue to establish mens rea forthe purpose of imposition of penalty. Mere satisfaction ofconcealment and/or furnishing of inaccurate particulars would initself attract the penal provisions. 7. In Sir Shadilal Sugar & General Mills Ltd. v.Commissioner of Income Tax, reported in (1987) 168 ITR 705, theAssessee had agreed to additions to his income to buy peace.The Supreme Court held that it did not follow that the amountthat was agreed to be added was concealed income. The Revenuewas, therefore, required to prove mens rea. 8. However, in K.P.Madhusudhanan v. Commissioner of IncomeTax, reported in (2001) 251 ITR 0099 (SC), the Supreme Courtheld that the Explanation to Section 271(1)(c) of the 1961 Actis a part of Section 271. When the Income Tax Officer or theAppellate Assistant Commissioner issues to an Assessee a noticeunder Section 271 of the 1961 Act, he makes the Assessee awarethat the provisions thereof are to be used against him. Theseprovisions include the Explanation. By reason of theExplanation, where the total income returned by the Assessee isless than 80 per cent of the total income assessed underSections 143 or 144 or 147, reduced to the extent thereinprovided, the Assessee is deemed to have concealed theparticulars of his income or furnished inaccurate particularsthereof, unless he proves that the failure to return the correctincome did not arise from any fraud or neglect on his part. TheAssessee is, therefore, by virtue of the notice under Section 271 of the 1961 Act put to notice that if he does not prove, inthe circumstances stated in the Explanation, that his failure toreturn his correct income was not due to fraud or neglect, heshall be deemed to have concealed the particulars of his incomeor furnished inaccurate particulars thereof and, consequently,be liable to penalty. 271 of the 1961 Act put to notice that if he does not prove, inthe circumstances stated in the Explanation, that his failure toreturn his correct income was not due to fraud or neglect, heshall be deemed to have concealed the particulars of his incomeor furnished inaccurate particulars thereof and, consequently,be liable to penalty. 9. In K.P.Madhusudhanan (supra), the Supreme Court dissentedfrom and disapproved its earlier view in Sir Shadilal Sugar &General Mills Ltd. (supra) that the Revenue was required toprove mens rea for imposition of penalty. The proposition inSir Shadilal Sugar & General Mills Ltd (supra) that the Revenueis required to prove mens rea for imposition of penalty is nolonger good law. 10. The case of K.P.Madhusudhanan (supra), is clearlydistinguishable, as it was a case of concealment, where incomeof Rs.93,000/- had not been disclosed. Only after explanationwas called for, the Assessee in that case stated that it hadobtained loans, which could not be established and ultimately,the concealed income was treated as additional income. In thebackground of the aforesaid facts, penalty was imposed. TheSupreme Court rejected the contention that the onus lay on theAssessing Officer to establish mens rea. In effect andsubstance, the Supreme Court held that on receipt of a notice,it was for the Assessee to explain, that concealment was notdeliberate. 11. After the insertion of the Explanation, it cannot besaid that the onus lies on the Revenue to establish mens rea forconcealment of income before imposition of penalty. If therewas failure to return the correct income, there would be apresumption of concealment, unless the Assessee was able toprove that his failure to return his correct income was not dueto fraud or neglect. 12. In the instant case, the learned Tribunal arrived at thefactual finding that there was no concealment, but a bona fideerror made by the Chartered Accountant. The Assessing Officeralso did not record any finding that the explanation of bonafide error of the Chartered Accountant was incorrect. 13. In M.A.K.Data P. Ltd. v. Commissioner of Income Tax,reported in (2013) 358 ITR 0593 (SC), the Supreme Court heldthat the Explanation to Section 271(1)(c) of the Act raises apresumption of concealment, when a difference is noticed by theAssessing Officer, between reported and assessed income. Theburden is then on the Assessee to show otherwise, by cogent andreliable evidence. When the initial onus placed by theExplanation has been discharged by him, the onus shifts on theRevenue to show that the amount in question constituted the https://hcservices.ecourts.gov.in/hcservices/ income and not otherwise. 14. In the aforesaid case, the contention of the Assessee ofhaving surrendered the additional sum of Rs.40,74,000/- to avoidlitigation, buy peace and to channelize energy and resourcestowards productive work and to make amicable settlement with theIncome Tax Department was not accepted. The Supreme Court heldthat voluntary disclosure did not release the Assessee from themischief of penal proceedings. Voluntary disclosure ofconcealed income did not absolve the Assessee from penalty. TheSupreme Court also held that the Assessing Officer was notrequired to record his satisfaction of concealment ofparticulars of income in any particular way or to reduce it intowriting. 15. This was also a clear case of concealment of income.The reply of the Assessee of giving up his claim just to buypeace and avoid litigation was found unacceptable. The judgmentis distinguishable. 15. This was also a clear case of concealment of income.The reply of the Assessee of giving up his claim just to buypeace and avoid litigation was found unacceptable. The judgmentis distinguishable. 16. In CRN Investments (P) Ltd. v. Commissioner of IncomeTax, reported in (2008) 300 ITR 0342 (Madras), a Division Benchof this Court found that there was claim for supply of steelrolls, when in fact there was never any supply. Bills had beenraised to facilitate finance from credit institutions and thealleged lease transaction was found to be false and a makebelieve one. The Assessee resisted the claim of the departmentcontending that they were not aware of forged documents andcontended that they had not concealed income nor furnishedinaccurate particulars. There was no dispute that the documentswere forged. 17. In the aforesaid case, the learned Tribunal had upheldthe imposition of penalty. The Division Bench found that theconclusion was factual giving rise to no questions of law.Considering the limited scope of Section 260A of the Act, theDivision Bench did not find any justification to disturb theorder of the learned Tribunal and, accordingly, the appeal wasdismissed. 18. In Union of India v. Dharamendra Textile Processors,reported in (2008) 13 SCC 369, the Supreme Court observed asunder:“17. It is of significance to note that theconceptual and contextual difference betweenSection 271(1)(c) and Section 276-C of theIT Act was lost sight of in Dilip N. Shroffv. CIT, (2007) 6 SCC 329.18. The Explanations appended to Section 271(1)(c) of the IT Act entirely indicates the https://hcservices.ecourts.gov.in/hcservices/ element of strict liability on the Assesseefor concealment or for giving inaccurateparticulars while filing return. Thejudgment in Dilip N. Shroff case has notconsidered the effect and relevance ofSection 276-C of the IT Act. Object behindenactment of Section 271(1)(c) read withExplanations indicate that the said sectionhas been enacted to provide for a remedy forloss of revenue. The penalty under thatprovision is a civil liability. Wilfulconcealment is not an essential ingredientfor attracting civil liability as is thecase in the matter of prosecution underSection 276-C of the IT Act.” 19. The proposition of law enunciated in Dharamendra TextileProcessors (supra) is unexceptionable. However, as observedabove, there was no concealment in this case and in any case,when the Appellate Tribunal, the fact finding body, has arrivedat a finding on facts that there was no concealment, theinterference of this Court under Section 260A of the Act is notwarranted. 20. In Commissioner of Income Tax, Delhi v. Atul MohanBindal, reported in (2000) 9 SCC 589, the Supreme Court referredto and explained its earlier decision in Dharamendra TextileProcessors case (supra) and found that there was an element ofstrict liability on the Assessee for concealment and for givinginaccurate particulars in view of the explanation appended toSection 271(1)(c) of the Act. The Supreme Court concluded thatfor applicability of Section 271(1)(c) of the Act, theconditions stated therein must exist. 21. The proposition of law that emerges from the judgmentsreferred to above is that in view of the explanation added, itcannot be said that the onus lies on the Revenue to establishmens rea in cases of concealment and/or short payment of tax.There is an onus on the Assessee to show that there was no mensrea. Whether the Assessee has been able to discharge the onusof establishing that there was no concealment or deliberatefurnishing of inaccurate particulars of income, would depend onthe facts and circumstances of the case. 21. The proposition of law that emerges from the judgmentsreferred to above is that in view of the explanation added, itcannot be said that the onus lies on the Revenue to establishmens rea in cases of concealment and/or short payment of tax.There is an onus on the Assessee to show that there was no mensrea. Whether the Assessee has been able to discharge the onusof establishing that there was no concealment or deliberatefurnishing of inaccurate particulars of income, would depend onthe facts and circumstances of the case. 22. In Lanxess India (P) Ltd. v. Assistant Commissioner ofIncome Tax, reported in (2015) 60 Taxmann.com 352 (Madras), aDivision Bench of this Court, having regard to the facts of thatcase, found that the department was justified in imposingpenalty as the explanation of the Assessee in that case was noexplanation at all in the eye of law. The Division Bench also found that the facts had thoroughly been examined by theTribunal and rightly held against the Assessee. The DivisionBench found that there was no question of law, far less anysubstantial question of law, arising for consideration in theappeal and, accordingly, dismissed the appeal. In this casetoo, there is no question of law, far less any substantialquestion of law. We are in full agreement with the DivisionBench that when the appeal does not raise any substantialquestion of law, the appeal is liable to be dismissed. 23. The judgment of the High Court of Karnataka in UnitedBreweries Ltd. v. Deputy Commissioner of Income Tax, CentralCircle-2(3), Bangalore, reported in (2016) 72 Taxmann.com 102(Karnataka), is clearly distinguishable on facts. That was acase where the Assessee had made advances to a ControlledCompany and also incurred expenditure and debited these amountsto the account of the Controlled Company. The Tribunal opinedthat this might be prudent business practice or might havearisen because of the Assessee's anxiety to save its ControlledCompany from facing financial crunch. However, this did not initself afford nexus between the Assessee's business and theloss. The Tribunal was of the view that the loss could not beallowed as a business loss under Section 28 of the 1961 Act andconfirmed the disallowance. The High Court rejected the appeal.That was not a case of imposition of penalty. 24. A judgment is a precedent for the issue of law which israised and decided. A decision rendered in the particular factsand circumstances of a case does not constitute a bindingprecedent. 25. The initiation of penal proceedings is not automatic anddepends upon the facts and circumstances of each case. In thecase at hand, having regard to the particular facts andcircumstances, the learned Tribunal upheld the order of theCommissioner of Income Tax (Appeals) accepting the explanationof the Assessee of bona fide error on the part of the CharteredAccountant and allowing the appeal. The learned Tribunal, ineffect, arrived at a clear finding that imposition of penaltywas not justified having regard to the facts and circumstancesof the case. 26. I fully agree with my learned brother that there is noquestion of law, not to speak of any substantial question oflaw, that warrants interference under Section 260A of the 1961Act. The appeal is not liable to be entertained and should bedismissed. 27. In the result, this appeal is dismissed. Sd/- Assistant Registrar(CCC)dt:3/10/2017 //True Copy// Sub Assistant RegistrarvvkTo1.Principal Commissioner of Income Tax 2, No.121, Mahatma Gandhi Road, Chennai-600 034.2.The Income Tax Appellate Tribunal, 'B' Bench, Chennai.3.The Commissioner of Income Tax(Appeals)-6 Chennai-64.The Assistant Commissioner of Income Tax,Central Circle III(2)Chennai+1 cc to M/s.Karthik Ranganathan Advocate sr 62347T.C.A.No.440 of 2017arcccaa05/10/2017 https://hcservices.ecourts.gov.in/hcservices/