The ACIT, Circle-2, JAMNAGAR V. M/s Metal Recycling Industries, JAMNAGAR

ITA 1209/RJT/2009

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 2978 (ITAT-RAJKOT)
• Duration Of Justice: 11 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-12-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2004-2005
• Appeal Filed On: 31-12-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JAI RAJ KUMAR
• Assessee Lawyers: PM MAHARSHI
• Keywords: Retrospective amendment; Difference of opinion; Revised return
• Section: 80HHC; 80IB; 139(5); 10B; 2; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH, RAJKOT BEFORE SHRI A.L. GEHLOT (AM) AND SHRI D.T. GARASIA (JM) I.T.A. NO.1209/RJT/2009 (ASSESSMENT YEAR 2004-05) ACIT, CIR.2 VS M/S METAL RECYCLING INDUSTRIES JAMNAGAR VILLAGE : LAKHA BAVAL JAMNAGAR PAN : AAFEM5933C (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI JAI RAJ KUMAR RESPONDENT BY : SHRI PM MAHARSHI O R D E R GARASIA : THIS APPEAL BY THE REVENUE IS DIRECTED AG AINST THE ORDER OF CIT(A), JAMNAGAR FOR THE ASSESSMENT YEAR 2004-05 WHEREBY HE CANCELLED THE PENALTY OF RS. 7,71,700 IMPOSED BY THE ASSESSING OFFICER U/S 2 71(1)(C) OF THE ACT. 2. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF PROCE SSING OF MIX FERROUS AND NON-FERROUS METAL SCRAP, WASTE / OBSOLETE AND UNUSA BLE METALS INTO INGOTS FOR MANUFACTURING / EXPORT OF ADDITION ITEMS, I.E. BRAS S BUILDING HARDWARE, ELECTRICAL BRASS COMPONENTS, RECYCLED FERROUS AND NON-FERROUS SCRAP, BILLETS, RODS AND OTHER ARTICLES. THE MANUFACTURING ACTIVITY IS CARR IED OUT FROM THE UNIT REGISTERED AS 100% EOU WITH THE DGFT. THE ASSESSEE FILED RET URN DECLARING INCOME OF RS.49,79,800 FOR THE ASSESSMENT YEAR UNDER CONSIDER ATION WHEREBY DEDUCTION U/S 10B OF THE ACT WAS CLAIMED AT RS.1,24,17,175. HOWEVER, DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSEE FILED REVISE D RETURN DECLARING TOTAL INCOME AT RS.40,75,180 WHEREIN DEDUCTION U/S 10B WA S REVISED TO RS.89,71,179 AND ALSO CLAIMED DEDUCTION U/S 80IB OF THE ACT AT R S.43,50,618 AND VIDE NOTE ATTACHED TO THE COMPUTATION OF INCOME IT WAS STATED THAT IN VIEW OF CLAIM OF DEDUCTION U/S 80IB, DEDUCTION U/S 80HHC WAS NOT CLA IMED. THE ASSESSING OFFICER REJECTED BOTH THE CLAIMS OF THE ASSESSEE, I .E. DEDUCTION U/S 10B AS WELL AS ITA NO.1209/RJT/2009 2 DEDUCTION U/S 80IB. WHILE REJECTING THE CLAIM OF T HE ASSESSEE U/S 80IB, THE ASSESSING OFFICER OBSERVED THAT THE RETURN FILED WA S BEYOND THE TIME LIMIT PRESCRIBED U/S 139(5) OF THE ACT AND THEREFORE, HAD TO BE IGNORED. THIS RESULTED IN TOTALLY IGNORING THE MATERIAL ADDUCED IN SUPPORT OF THE CLAIMS OF DEDUCTIONS MADE. FOR THIS PROPOSITION THE LEARNED ASSESSING O FFICER RELIED UPON THE JUDGMENT OF THE HONBLE APEX COURT IN THE CASE OF G OETZE (INDIA) LTD VS CIT 284 ITR 323. HOWEVER, ON APPEAL THE LD CIT(A) FOUND TH AT THE HONBLE APEX COURT HAS DISMISSED THE ABOVE CIVIL APPEAL ON THE BASIS O F CIRCUMSTANCES OF THE CASE AND HAS NOT INTERPRETED ANY STATUTORY PROVISION OR LAID DOWN ANY LAW AND THE ORDER IS LIMITED TO THE POWER OF THE ASSESSING OFFI CER WHETHER TO ENTERTAIN FRESH CLAIM OF DEDUCTION AND WHEREAS IN THE CASE OF THE A SSESSEE THE CLAIM MADE U/S 80IB WAS NOT FRESH CLAIM, BUT ALTERNATIVE CLAIM ARI SING OUT OF RESTRICTION OF CLAIM U/S 10B OF THE ACT. THE LD.CIT(A) ALSO FOUND THAT THE CLAIM WAS CONSEQUENTIAL TO APPELLATE ORDER FOR ASSESSMENT YEAR 2003-04. IN VI EW OF THIS, THE ASSESSEE ITSELF, BEFORE THE LD.CIT(A) THAT IF THE CLAIM OF THE ASSES SEE WAS TO BE CONSIDERED ON THE LINES OF APPELLATE ORDER FOR THE ASSESSMENT YEAR 20 03-04, THE DEDUCTION U/S 80IB WOULD BE ONLY RS.8,74,505 WHICH WAS ACCEPTABLE TO T HE LD.CIT(A) AND WE FIND THAT THE SAME WAS APPROVED BY THE ITAT, TOO. THE I MPUGNED CONCEALMENT PENALTY IS ARISING FROM THIS EPISODE. 3. MATTER CARRIED TO THE CIT(A) AND THE LD.CIT(A) C ANCELLED THE PENALTY BY OBSERVING AS UNDER: 7. I HAVE CAREFULLY CONSIDERED THE ISSUE. THERE I S DIFFERENCE BETWEEN ASSESSED INCOME AND RETURNED INCOME BECAUSE OF CLAIM OF DEDUCTION U/S 80IB OF THE ACT AS EVIDENT FROM TH E RECONCILIATION MADE IN WRITTEN SUBMISSION BY APPELLANT. A CERTIFI CATE OF CHARTERED ACCOUNTANT SUPPORTED CLAIM U/S 80IB OF THE ASSESSEE . THE CERTIFICATE WAS ISSUED ON THE BELIEF THAT THERE WAS NO REQUIREMENT OF REDUCING ELIGIBLE PROFIT OF DEDUCTION U/S 80IB OF WITH THE DEDUCTION ALREADY ALLOWED TO THE ASSESSEE. THIS BELIEF OT TH E ASSESSEE CANNOT BE FAULTED IN VIEW OF THE RETROSPECTIVE AMEN DMENT BY FINANCE ACT, 2009 BY INSERTION OF SUB SECTION (4) I N SECTION 80A OF THE INCOME-TAX ACT WITH EFFECT FROM 1-4-2003. THER EFORE, IT IS EVIDENT THAT BEFORE INSERTION OF SUB SECTION (4) TO SECTION 80A THERE ITA NO.1209/RJT/2009 3 WAS A CONTROVERSY ON THIS ISSUE AND APPELLANT HAS T AKEN ONE OF THE POSSIBLE VIEW WHILE CALCULATING DEDUCTION U/S 80IB. THIS VIEW OF THE APPELLANT CANNOT BE BRUSHED ASIDE IN VIEW OF RETROS PECTIVE AMENDMENT TO THE SECTION. CLAIM MADE BY ASSESSEE C ANNOT BE STATED TO BE BOGUS OR WITHOUT ANY MATERIAL AS REDUC TION IN CLAIM IS MADE BECAUSE OF DIFFERENCE OF OPINION BETWEEN ASSES SEE AND LEARNED CIT(A) AND IN VIEW OF AMBIGUITY IN LAW WHIC H WAS CLEARED BY RETROSPECTIVE AMENDMENT. IN VIEW OF THIS, DIFFE RENCE BETWEEN CLAIM ALLOWED BY CIT(A) AND CLAIM MADE BY ASSESSEE DOES NOT RENDER ASSESSEE SUBJECT TO PENALTY U/S 271(1)(C) OF THE ACT. THEREFORE PENALTY OF RS.7,71,700/- IS CANCELLED. 4. THE LEARNED DEPARTMENTAL REPRESENTATIVE RELIED U PON THE ORDER OF THE ASSESSING OFFICER AND SUBMITTED THAT THE ASSESSEE H AS CLAIMED WRONG DEDUCTION AND THEREBY FURNISHED INACCURATE PARTICULARS OF INC OME AND THEREFORE, THE ASSESSING OFFICER WAS RIGHT IN IMPOSING THE PENALTY . HE PLEADED THAT THE ORDER OF THE CIT(A) MAY BE REVERSED AND THAT OF THE ASSESSIN G OFFICER MAY BE RESTORED. 5. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED T HAT IN THE ASSESSMENT ORDER THE ASSESSING OFFICER ALLOWED DEDUCTION U/S 1 0B OF THE ACT OF RS.77,47,148 AND DENIED THE CLAIM OF DEDUCTION U/S 80IB OF THE A CT. ON APPEAL, THE LEARNED CIT(A) ALLOWED THE CLAIM U/S 10B AT RS.89,68,548 AG AINST CLAIM OF RS.89,71,179 AND DEDUCTION U/S 80IB AT RS.8,74,505. THE LD.CIT( A) ALSO ALLOWED DEDUCTION U/S 80HHC TO THE ASSESSEE. THIS MODIFICATION IN THE CL AIM OF DEDUCTION U/S 80IB AND ALLOWING DEDUCTION U/S 80HHC WAS IN FACT RESORTED T O IN VIEW OF ORDER OF THE TRIBUNAL FOR THE ASSESSMENT YEAR 2003-04. ON FURTH ER APPEAL BY THE DEPARTMENT AND ASSESSEE BEFORE THE TRIBUNAL AGAINST THE ORDER OF THE CIT(A) ON QUANTUM APPEAL, THE TRIBUNAL HAS ALLOWED THE DEDUCTION U/S 10B AT RS.89,68,548 AND IN CASE OF DEDUCTION U/S 80IB THE TRIBUNAL MAINTAINED THAT THE DEDUCTION WAS ALLOWABLE TO THE ASSESSEE. BOTH SIDES DID NOT CHAL LENGE THE QUANTUM OF DEDUCTION. THE ASSESSEE IN RESPONSE TO THE PENALTY SHOW CAUSE NOTICE HAS REQUESTED THE ASSESSING OFFICER TO KEEP THE PENALTY PROCEEDINGS IN ABEYANCE PENDING DISPOSAL OF APPEAL BY THE TRIBUNAL. HOWEVE R, THE ASSESSING OFFICER PROCEEDED ON WITH THE PROCEEDINGS AND IMPOSED THE I MPUGNED CONCEALMENT PENALTY. THE LEARNED COUNSEL ARGUED THAT IN VIEW O F THE TRIBUNAL ORDER AGAINST ITA NO.1209/RJT/2009 4 THE QUANTUM APPEALS FILED BY BOTH SIDES, THERE IS N O CASE WITH THE DEPARTMENT FOR CHALLENGING ACTION OF THE LD.CIT(A) IN CANCELLING T HE PENALTY. THE LD.AR SUBMITTED THAT IN FACT THE DIFFERENCE IS ONLY ON ACCOUNT OF T HE EFFECT GIVEN TO THE ORDER OF THE TRIBUNAL FOR THE ASSESSMENT YEAR 2003-04, OTHERWISE THE CLAIMS OF THE ASSESSEE STAND ALLOWED. THE MODIFICATION WAS EFFECT TO ON A GREED BASIS AND AS A NATURAL CONSEQUENCE TO THE ORDER OF THE TRIBUNAL FOR THE AS SESSMENT YEAR 2003-04. 5.1 FROM THE LEGAL POINT OF VIEW, THE LD.AR SUBMITT ED THAT THE CASE OF THE ASSESSEE IS SQUARELY COVERED IN FAVOUR OF IT AND AG AINST THE REVENUE BY THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE O F RELIANCE PETROPRODUCTS PVT.LD. (322 ITR 158) ( AT PAGE 164). 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE MATERIAL PLACED BEFORE US. THE UNDISPUTED FACT IN THE CASE ON HAND IS THAT THE DEDUCTION U/S 80IB WAS NOT DENIED TO THE ASSESSEE AS THE ASSE SSEE WAS NOT ELIGIBLE FOR THE DEDUCTION CLAIM. IT TRANSPIRES TO US THAT THE REVI SED RETURN FILED BY THE ASSESSEE WAS BEYOND THE TIME LIMIT PRESCRIBED IN SECTION 139 (5) OF THE ACT RESULTING IN TOTAL IGNORANCE OF THE MATERIAL / DOCUMENTS ATTACHED WITH THE RETURN OF INCOME IN SUPPORT OF THE CLAIMS MADE. IT ALSO REMAINS A FACT THAT THE LD.CIT(A) WHILE DECIDING THE QUANTUM APPEAL FILED BY THE ASSESSEE D ISTINGUISHED THE JUDGMENT OF THE HONBLE APEX COURT CITED SUPRA INASMUCH AS THAT THE HONBLE WHILE DECIDING THE CIVIL APPEAL OF THE APPELLANT COMPANY, INTER-AL IA OBSERVED THE DECISION DOES NOT IN ANY WAY RELATE TO THE POWER OF THE ASSE SSING OFFICER TO ENTERTAIN A CLAIM FOR DEDUCTION OTHERWISE THAN BY FILING A REVI SED RETURN. IN THE CIRCUMSTANCES OF THE CASE, WE DISMISS THE CIVIL APP EAL. HOWEVER, WE MAKE IT CLEAR THAT THE ISSUE IN THIS CASE IS LIMITED TO THE POWER OF THE ASSESSING AUTHORITY AND WHEREAS IN THE INSTANT CASE THE CLAIM MADE IN T HE REVISED RETURN WAS CONSEQUENTIAL TO THE CLAIM MADE FOR THE ASSESSMENT YEAR 2003-04 AND IN LINE WITH THE APPELLATE ORDER FOR ASSESSMENT YEAR 2003-0 4 AND THEREFORE CANNOT BE TREATED AS FRESH CLAIM OF DEDUCTION. IT IS ALSO A FACT THAT THE ASSESSEE SUO MOTU ACCEPTED BEFORE THE CIT(A) THAT IF THE ISSUE WERE T O BE DECIDED IN LINE WITH THE ITA NO.1209/RJT/2009 5 APPELLATE ORDER FOR ASSESSMENT YEAR 2003-04, THE CL AIM U/S 80IB BE RESTRICTED TO RS. 8,74,505. WITH THESE ADMITTED POSITION AND FAC TUAL MATRIX, IT IS TOO HARD FOR US TO HOLD THAT THE ASSESSEE HAS EITHER CONCEALED A NY INCOME OR HAS FURNISHED INACCURATE PARTICULARS OF INCOME. 7. LOOKING THE CASE FROM THE LEGAL ANGLE WE FIND TH AT THE PROCEEDINGS UNDER SECTION 271(1) (C) CAN BE INITIAT ED ONLY IF THE A.O OR THE FIRST APPELLATE AUTHORITY IS SATISFIED IN THE C OURSE OF ANY PROCEEDINGS UNDER THE ACT AS PER CLAUSE (C) OF THE SECTION 271(1) THAT ANY PERSON HAS CONCEALED THE PARTICULARS OF HIS INC OME OR HAS FURNISHED INACCURATE PARTICULARS OF SUCH INCOME, HE MAY DIRECT THAT SUCH PERSON SHALL PAY BY WAY OF PENALTY THE SUM MEN TIONED IN SUB- CLAUSE (III) OF CLAUSE (C) OF THE SECTION 271(1). T HE EXPRESSION USED IN CLAUSE (C) OF THE SECTION 271(1) IS HAS CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHED INACCURATE PARTICULARS OF SUC H INCOME. THEREFORE, BOTH IN CASES OF CONCEALMENT AND INACCURACY THE PHR ASE PARTICULARS OF INCOME ARE USED. IT WILL BE NOTED THAT AS REGARDS CONCEALMENT, THE EXPRESSION IN CLAUSE (C) OF THE SECTION 271(1) IS HAS CONCEALED THE PARTICULARS OF HIS INCOME AND NOT HAS CONCEALED H IS INCOME. THE EXPRESSIONS 'HAS CONCEALED THE PARTICULARS OF INCOM E' AND 'HAS FURNISHED INACCURATE PARTICULARS OF INCOME' HAVE NO T BEEN DEFINED EITHER IN SECTION 271(1)(C) OR ELSEWHERE IN THE ACT . TWO WORDS ARE IMPORTANT WORDS FOR CONSIDERING A MATTER FOR LEVY O F PENALTY UNDER SECTION 271(1) OF THE ACT . THESE WORDS ARE CONCE ALED' AND 'INACCURATE PARTICULARS' .THE APEX COURT IN THE CAS E OF RELIANCE PETROPRODUCTS PVT.LD. (322 ITR 158) ( AT PAGE 164 ) REGARDING THE WORD PARTICULARS USED IN THIS SECTION, OF THE SECTION 271(1) (C) HAS HELD AS UNDER:_ THERE CAN BE NO DISPUTE THAT EVERYTHING WOULD DEPEN D UPON THE RETURN FILED BECAUSE THAT IS THE ONLY DOCUMENT, WHERE THE ASSESSEE CAN FURNISH THE PARTICULARS OF HIS INCOME. WHEN ITA NO.1209/RJT/2009 6 SUCH PARTICULARS ARE FOUND TO BE INACCURATE, THE LI ABILITY WOULD ARISE. 8. NOW COMING TO THE MEANING OF WORDS INACCURATE AND CONCEAL. AS STATED ABOVE, THESE WORDS HAVE NOT BEEN DEFINED IN THE ACT. HOWEVER, IN WEBSTERS DICTIONARY, THE WORD 'INACCUR ATE' HAS BEEN DEFINED AS UNDER: 'NOT ACCURATE, NOT EXACT OR CORRECT; NOT ACCORDING TO TRUTH; ERRONEOUS; AS AN INACCURATE STATEMENT, COPY OR TRAN SCRIPT.' 9. THE WORD 'CONCEAL' IS DERIVED FROM THE LATIN CON CELARE WHICH IMPLIES CON+CELARE TO HIDE. WEBSTER IN HIS NEW INTE RNATIONAL DICTIONARY EQUATES ITS MEANING 'TO HIDE OR WITHDRAW FROM OBSER VATION, TO COVER OR KEEP FROM SIGHT; TO PREVENT THE DISCOVERY OF; TO WI THHOLD KNOWLEDGE OF'. THE OFFENCE OF CONCEALMENT IS THUS A DIRECT ATTEMPT TO HIDE AN ITEM OF INCOME OR A PORTION THEREOF FROM THE KNOWLEDGE OF T HE INCOME-TAX AUTHORITIES. 10. THE APEX COURT IN THE CASE OF RELIANCE PETROPRODUCTS PVT.LD. (322 ITR 158) HAS CONSIDERED SOME OTHER CASES OF THE APEX COURT ON THE ISSUE AT PAGE 164 AND 165 AND OBSERVED AS UNDE R:- IN DILIP N. SHROFF V. JT. CIT [2007] 6 SCC 329, TH IS COURT EXPLAINED THE TERMS 'CONCEALMENT OF INCOME' AND 'FU RNISHING INACCURATE PARTICULARS'. THE COURT WENT ON TO HOLD THEREIN THAT IN ORDER TO ATTRACT THE PENALTY UNDER SECTION 271(1 )( C), MENS REA WAS NECESSARY, AS ACCORDING TO THE COURT, THE W ORD 'INACCURATE' SIGNIFIED A DELIBERATE ACT OR OMISSION ON BEHALF OF THE ASSESSEE. IT WENT ON TO HOLD THAT CLAUSE (II I) OF SECTION 271(1) PROVIDED FOR A DISCRETIONARY JURISDICTION UP ON THE ASSESSING AUTHORITY, INASMUCH AS THE AMOUNT OF PENA LTY COULD NOT BE LESS THAN THE AMOUNT OF TAX SOUGHT TO BE E VADED BY REASON OF SUCH CONCEALMENT OF PARTICULARS OF INCOME , BUT IT MAY NOT EXCEED THREE TIMES THEREOF. IT WAS POINTED OUT THAT THE TERM 'INACCURATE PARTICULARS' WAS NOT DEFINED A NYWHERE IN THE ACT AND, THEREFORE, IT WAS HELD THAT FURNISHING OF AN ITA NO.1209/RJT/2009 7 ASSESSMENT OF THE VALUE OF THE PROPERTY MAY NOT BY ITSELF BE FURNISHING ACCURATE PARTICULARS. IT WAS FURTHER HE LD THAT THE ASSESSEE MUST BE FOUND TO HAVE FAILED TO PROVE THAT HIS EXPLANATION IS NOT ONLY NOT BONA FIDE BUT ALL THE F ACTS RELATING TO THE SAME AND MATERIAL TO THE COMPUTATION OF HIS INCOME WERE NOT DISCLOSED BY HIM. IT WAS THEN HELD THAT T HE EXPLANATION MUST BE PRECEDED BY A FINDING AS TO HOW AND IN WHAT MANNER, THE ASSESSEE HAD FURNISHED THE PARTICU LARS OF HIS INCOME. THE COURT ULTIMATELY WENT ON TO HOLD TH AT THE ELEMENT OF MENS REA WAS ESSENTIAL. IT WAS ONLY ON T HE POINT OF MENS REA THAT THE JUDGMENT IN DILIP N. SHROFFS CAS E (SUPRA) WAS UPSET. IN DHARAMENDRA TEXTILE PROCESSORS CASE (SUPRA), AFTER QUOTING FROM SECTION 271 EXTENSIVELY AND ALSO CONSIDERING SECTION 271(1)( C), THE COURT CAME TO T HE CONCLUSION THAT SINCE SECTION 271(1)( C) INDICATED THE ELEMENT OF STRICT LIABILITY ON THE ASSESSEE FOR THE CONCEAL MENT OR FOR GIVING INACCURATE PARTICULARS WHILE FILING RETURN, THERE WAS NO NECESSITY OF MENS REA. THE COURT WENT ON TO HOLD TH AT THE OBJECTIVE BEHIND ENACTMENT OF SECTION 271(1)( C) RE AD WITH EXPLANATIONS INDICATED WITH THE SAID SECTION WAS FO R PROVIDING REMEDY FOR LOSS OF REVENUE AND SUCH A PENALTY WAS A CIVIL LIABILITY AND, THEREFORE, WILFUL CONCEALMENT IS NOT AN ESSENTIAL INGREDIENT FOR ATTRACTING CIVIL LIABILITY AS WAS TH E CASE IN THE MATTER OF PROSECUTION UNDER SECTION 276C OF THE ACT . THE BASIC REASON WHY DECISION IN DILIP N. SHROFFS CASE (SUPRA) WAS OVERRULED BY THIS COURT IN DHARAMENDRA TEXTILE PROCESSORS CASE (SUPRA), WAS THAT CCORDING TO THI S COURT THE EFFECT AND DIFFERENCE BETWEEN SECTION 271(1)(C) AND SECTION 276C OF THE ACT WAS LOST SIGHT OF IN CASE OF DILIP N.SHROFF (SUPRA). HOWEVER, IT MUST BE POINTED OUT THAT IN DHARAMENDRATEXTILE PROCESSORS CASE (SUPRA), NO FAU LT WAS FOUND WITH THE REASONING IN THE DECISION IN DILIP N . SHROFFS CASE (SUPRA), WHERE THE COURT EXPLAINED THE MEANING OF THE TERMS 'CONCEAL' AND 'INACCURATE'. IT WAS ONLY THE ULTIMATEINFERENCE IN DILIP N. SHROFFS CASE (SUPRA) TO THE EFFECT THAT MENS REA WASAN ESSENTIAL INGREDIENT FOR THE PE NALTY UNDER SECTION 271(1)(C) THAT THE DECISION IN DILIP N. SHROFFS CASE (SUPRA) WAS OVERRULED. 11 FROM ABOVE DISCUSSIONS WE FIND THAT THERE IS STRICT LIABILITY ON THE ASSESSEE FOR CONCEALMENT OR FOR GIVING INACCURATE P ARTICULARS WHILE FILING THE RETURN. THE PENALTY UNDER THAT PROVISION IS A CIVIL LIABILITY. WILFUL CONCEALMENT IS NOT AN ESSENTIAL INGREDIENT F OR ATTRACTING CIVIL LIABILITY. IT IS OBVIOUS THAT THE PENAL PROVISIONS WOULD OPERATE WHEN ITA NO.1209/RJT/2009 8 THERE IS CONCEALMENT OF PARTICULARS OF INCOME OR A FAILURE OF DUTY TO DISCLOSE FULLY AND TRULY PARTICULARS OF INCOME, IMP OSED UNDER THE ACT AND THE RULES THERE UNDER. THE DUTY IS ENJOINED UPO N A PERSON TO MAKE A CORRECT AND COMPLETE DISCLOSURE OF PARTICULARS OF HIS INCOME AND IT IS ONLY WHEN HE FAILS IN HIS DUTY BY NOT DISCLOSING PA RTICULARS OF HIS INCOME OR PART THEREOF, HE CONCEALS THE PARTICULARS OF HIS INCOME. THE DUTY IS ENJOINED UPON HIM TO MAKE A COMPLETE DISCLO SURE OF PARTICULARS OF HIS INCOME AS WELL AS A CORRECT DISCLOSURE. THER EFORE, IF THE DISCLOSURE MADE OF THE PARTICULARS OF INCOME IS INC ORRECT, THEN ALSO HE COMMITS BREACH OF HIS DUTY. SUCH DEFAULTS ENTAIL TH E PENAL CONSEQUENCES CONTEMPLATED BY SECTION 271(1) (C). 12. THERE CANNOT BE A STRAIGHT JACKET FORMULA FOR D ETECTION OF THESE DEFAULTS OF CONCEALMENT OR OF FURNISHING INACCURATE PARTICULARS OF INCOME AND INDEED CONCEALMENT OF PARTICULARS OF INC OME AND IN ACCURATE PARTICULARS OF INCOME MAY AT TIMES OVERLAP . IT DEPENDS UPON THE FACTS OF THE EACH CASE. IN THE ASSESSMENT PROCE EDINGS THE AO WHILE ASCERTAINING THE TOTAL INCOME CHARGEABLE TO T AX WOULD BE IN A POSITION TO DETECT THE SPECIFIC OR DEFINITE PARTICU LARS OF INCOME CONCEALED OR OF WHICH FALSE PARTICULARS ARE FURNISH ED. WHERE IN THE CONSTITUENTS OF INCOME RETURNED, SUCH SPECIFIC OR D EFINITE PARTICULARS OF INCOME ARE DETECTED AS CONCEALED, THEN EVEN IN THE TOTAL INCOME FIGURE TO THAT EXTENT THEY REFLECT, IT WOULD AMOUNT TO CON CEALMENT TO THAT EXTENT. IN THE SAME WAY WHERE SPECIFIC AND DEFINITE PARTICULARS OF INCOME ARE DETECTED AS INACCURATE, THEN SUCH FIGURE WILL ALSO MAKE THE TOTAL INCOME INACCURATE IN PARTICULARS TO THE EXTEN T IT DOES NOT INCLUDE SUCH INCOME. IN OTHER WORDS THE AO CANNOT INVOKE PR OVISION OF SECTION271 (1) (C) ON THE BASIS ROUTINE AND GENERAL PRESUMPTIONS. WHETHER IT BE A CASE OF ONLY CONCEALMENT OR OF ONLY INACCURACY OR BOTH, THE PARTICULARS OF INCOME SO VITIATED WOULD BE SPEC IFIC AND DEFINITE AND BE KNOWN IN THE ASSESSMENT PROCEEDINGS BY THE ITO, WHO ON BEING ITA NO.1209/RJT/2009 9 SATISFIED ABOUT EACH CONCEALMENT OR INACCURACY OF P ARTICULARS OF INCOME WOULD BE IN A POSITION TO INITIATE THE PENAL TY PROCEEDINGS ON ONE OR BOTH OF THE GROUNDS OF DEFAULT AS MAY HAVE B EEN SPECIFICALLY AND DIRECTLY DETECTED. 13. IN ADDITION TO MAIN PROVISIONS OF CONCEALMENT HAS CONCEALED THE PARTICULARS OF HIS INCOME OR HAS FURNISHED INACCU RATE PARTICULARS OF SUCH INCOME THERE ARE DEEMED TO REPRESENT THE INCO ME IN RESPECT OF WHICH PARTICULARS HAVE BEEN CONCEALED .THE DEEMED C ONCEALMENT IS PROVIDED IN EXPLANATIONS. OFTEN A QUESTION AROSE WH ETHER IN CASES WHERE ADDITIONS OR DISALLOWANCES MADE BY THE ITO TH E PENAL PROVISIONS OF SECTION 271(1)(C) WOULD ATTRACT. EXPLANATION 1 T AKES CARE OF THIS SITUATION. THE EXPLANATION 1 TO SECTION 271(1) OF T HE ACT READS AS UNDER:- EXPLANATION 1.-WHERE IN RESPECT OF ANY FACTS MATE RIAL TO THE COMPUTATION OF THE TOTAL INCOME OF ANY PERSON UNDER THIS ACT,- (A) SUCH PERSON FAILS TO OFFER AN EXPLANATION OR OF FERS AN EXPLANATION WHICH IS FOUND BY THE ASSESSING OFFICER OR THE COMMISSIONER (APPEALS) OR THE COMMISSIONER TO BE FA LSE, OR (B) SUCH PERSON OFFERS AN EXPLANATION WHICH HE IS N OT ABLE TO SUBSTANTIATE AND FAILS TO PROVE THAT SUCH EXPLANATI ON IS BONA FIDE AND THAT ALL THE FACTS RELATING TO THE SAME AN D MATERIAL TO THE COMPUTATION OF HIS TOTAL INCOME HAVE BEEN DISCL OSED BY HIM, THEN, THE AMOUNT ADDED OR DISALLOWED IN COMPUT ING THE TOTAL INCOME OF SUCH PERSON AS A RESULT THEREOF SHA LL, FOR THE PURPOSES OF CLAUSE (C) OF THIS SUB-SECTION, BE DEEM ED TO REPRESENT THE INCOME IN RESPECT OF WHICH PARTICULAR S HAVE BEEN CONCEALED. 14. A CONSPECTUS OF THE EXPLANATION MAKES IT CLEAR THAT THE STATUTE VISUALISED THE ASSESSMENT PROCEEDINGS AND PENALTY P ROCEEDINGS TO BE WHOLLY DISTINCT AND INDEPENDENT OF EACH OTHER. IN E SSENCE, THE EXPLANATION IS A RULE OF EVIDENCE. PRESUMPTIONS WHI CH ARE REBUTTING TABLE IN NATURE ARE AVAILABLE TO BE DRAWN. THE INIT IAL BURDEN OF DISCHARGING THE ONUS OF REBUTTAL IS ON THE ASSESSEE . THE RATIONALE ITA NO.1209/RJT/2009 10 BEHIND THIS VIEW IS THAT THE BASIC FACTS ARE WITHIN THE SPECIAL KNOWLEDGE OF THE ASSESSEE. SECTION 106 OF THE INDIAN EVIDENCE ACT, 1872, GIVES STATUTORY RECOGNITION TO THIS UNIVERSALLY ACCEPTED RULE OF EVIDENCE. THERE IS NO DISCRETION CONFERRED ON THE ASSESSING O FFICER AS TO WHETHER HE CAN INVOKE THE EXPLANATION OR NOT. EXPLANATION 1 COMES INTO OPERATION WHEN, IN RESPECT OF ANY FACTS MATERIAL TO THE COMPUTATION OF TOTAL INCOME OF ANY PERSON, THERE IS FAILURE TO OFF ER AN EXPLANATION OR AN EXPLANATION IS OFFERED WHICH IS FOUND TO BE FALSE B Y THE ASSESSING OFFICER OR THE FIRST APPELLATE AUTHORITY, OR AN EXP LANATION IS OFFERED WHICH IS NOT SUBSTANTIATED. IN SUCH A CASE, THE AMO UNT ADDED OR DISALLOWED IN COMPUTING THE TOTAL INCOME IS DEEMED TO REPRESENT THE INCOME IN RESPECT OF WHICH PARTICULARS HAVE BEEN CO NCEALED. AS PER THE PROVISION OF EXPLANATION 1, THE ONUS TO ESTABLISH T HAT THE EXPLANATION OFFERED WAS BONA FIDE AND ALL FACTS RELATING TO THE SAME AND MATERIAL TO THE COMPUTATION OF HIS INCOME HAVE BEEN DISCLOSED B Y HIM WILL BE ON THE PERSON CHARGED WITH CONCEALMENT. 15. THE ISSUE RELATING TO BONAFIDE AND FALSE RE TURNS IN IMPOSING PENALTY ON THE ASSESSEE UNDER SECTION 43 OF THE MAD HYA PRADESH GENERAL SALES TAX ACT, 1958, AND SECTION 9(2) OF TH E CENTRAL SALES TAX ACT, 1956 HAVE BEEN EXAMINED BY THE APEX COURT IN T HE CASE OF CEMENT MARKETING CO. OF INDIA LTD. V .ASSISTANT COM MISSIONER OF SALES TAX [1980] 4 TAXMAN 44 (SC), 124 ITR 15 (SC). FACTS IN BRIEF OF THIS CASE WERE THAT THE ASSESSEE-COMPANY EFFECTED CERT AIN TRANSACTIONS OF SALE OF CEMENT IN ACCORDANCE WITH THE PROVISIONS OF THE CEMENT CONTROL ORDER DURING THE ASSESSMENT PERIOD 1-8-1971 TO 31-7 -1972. THE AMOUNT OF FREIGHT INCLUDED IN THE 'FREE ON RAIL DES TINATIONS RAILWAY STATION' WAS PAID BY THE PURCHASERS AND HENCE THE A SSESSEE DEDUCTED FROM THE PRICE SHOWN IN THE INVOICES SENT TO THE PU RCHASERS. IN THE COURSE OF ITS ASSESSMENT TO SALES TAX UNDER THE MAD HYA PRADESH GENERAL SALES TAX ACT, 1958 AND THE CENTRAL SALES T AX ACT, 1956, THE ITA NO.1209/RJT/2009 11 ASSESSEE DID NOT INCLUDE THE SAID AMOUNT OF FREIGHT IN ITS TAXABLE TURNOVER ON THE GROUND THAT IT DID NOT FORM PART OF THE SALE PRICE. IN HIS TWO SEPARATE ASSESSMENT ORDERS, ONE UNDER THE CENTR AL SALES TAX ACT, 1956, AND THE OTHER UNDER THE MADHYA PRADESH GENERA L SALES TAX ACT, 1958, THE ASSISTANT COMMISSIONER, HOWEVER, INCLUDED THE SAME IN THE TAXABLE TURNOVER FOR LEVYING TAX. HE ALSO IMPOSED H EAVY PENALTY ON ACCOUNT OF THE ASSESSEE'S FAILURE TO DISCLOSE THE S AME IN ITS TAXABLE RETURNS. ON DIRECT APPEAL TO THE SUPREME COURT HELD THAT IT IS DIFFICULT TO SEE HOW THE ASSESSEE COULD BE SAID TO HAVE FILED 'F ALSE' RETURNS, WHEN WHAT THE ASSESSEE DID, NAMELY, NOT INCLUDING THE AM OUNT OF FREIGHT IN THE TAXABLE TURNOVER, WAS UNDER A BONA FIDE BELIEF THAT THE AMOUNT OF FREIGHT DID NOT FORM PART OF THE SALE PRICE AND WAS NOT INCLUDIBLE IN THE TAXABLE TURNOVER. THE CONTENTION OF THE ASSESSEE TH ROUGHOUT WAS THAT ON A PROPER CONSTRUCTION OF THE DEFINITION OF 'SALE PRICE' IN SECTION 2(O) OF THE MADHYA PRADESH GENERAL SALES TAX ACT, 1958, AND SECTION 2(H) OF THE CENTRAL SALES TAX ACT, 1956, THE AMOUNT OF F REIGHT DID NOT FALL WITHIN THE DEFINITION AND WAS NOT LIABLE TO BE INCL UDED IN THE TAXABLE TURNOVER. THIS WAS THE REASON WHY THE ASSESSEE DID NOT INCLUDE THE AMOUNT OF FREIGHT IN THE TAXABLE TURNOVER IN THE RE TURNS FILED BY IT. THE COURT FURTHER HELD THAT IT WAS A HIGHLY ARGUABLE CO NTENTION WHICH REQUIRED SERIOUS CONSIDERATION BY THE COURT AND THE BELIEF ENTERTAINED BY THE ASSESSEE THAT IT WAS NOT LIABLE TO INCLUDE T HE AMOUNT OF FREIGHT IN THE TAXABLE TURNOVER, COULD NOT BE SAID TO BE MALA FIDE OR UNREASONABLE. WHAT SECTION 43 OF THE MADHYA PRADESH GENERAL SALES TAX ACT, 1958, REQUIRES IS THAT THE ASSESSEE SHOULD HAVE FILED A 'FALSE' RETURN. WHERE THE ASSESSEE DOES NOT INCLUDE A PARTI CULAR ITEM IN THE TAXABLE TURNOVER UNDER A BONA FIDE BELIEF THAT HE I S NOT LIABLE SO TO INCLUDE IT, IT WOULD NOT BE RIGHT TO CONDEMN THE RE TURN AS A 'FALSE' RETURN INVITING IMPOSITION OF PENALTY. THE COURT HE LD THAT IF THE VIEW CANVASSED ON BEHALF OF THE REVENUE WERE ACCEPTED, T HE RESULT WOULD BE THAT EVEN IF THE ASSESSEE RAISES A BONA FIDE CONTEN TION THAT A PARTICULAR ITA NO.1209/RJT/2009 12 ITEM IS NOT LIABLE TO BE INCLUDED IN THE TAXABLE TU RNOVER, HE WOULD HAVE TO SHOW IT AS FORMING PART OF THE TAXABLE TURNOVER IN HIS RETURN AND PAY TAX UPON IT ON PAIN OF BEING HELD LIABLE FOR PENALT Y IN CASE HIS CONTENTION IS ULTIMATELY FOUND BY THE COURT TO BE N OT ACCEPTABLE. THAT SURELY COULD NEVER HAVE BEEN INTENDED BY THE LEGISL ATURE. UNDER THE CIRCUMSTANCE OF THE CASE THE COURT WAS OF THE VIEW THAT THE ASSESSEE COULD NOT BE SAID TO HAVE FILED 'FALSE' RETURNS WHE N IT DID NOT INCLUDE THE AMOUNT OF FREIGHT IN THE TAXABLE TURNOVER SHOWN IN THE RETURNS AND THE ASSISTANT COMMISSIONER WAS NOT JUSTIFIED IN IMP OSING PENALTY ON THE ASSESSEE UNDER SECTION 43 OF THE MADHYA PRADESH GENERAL SALES TAX ACT, 1958, AND SECTION 9(2) OF THE CENTRAL SALE S TAX ACT, 1956. 16. FROM THE ABOVE DISCUSSION OF SCHEME OF THE ACT, TWO IMPORTANT THINGS COME OUT ARE THAT IT IS THE DUTY OF THE ASSE SSEE TO FURNISH PARTICULARS OF INCOME SIMULTANEOUSLY HE HAS RIGHT T O CLAIM ALL EXEMPTIONS AND DEDUCTIONS PROVIDED IN THE ACT, ACCO RDING TO THE ASSESSEE FOR WHICH HE IS ENTITLED. THE DUTY OF THE ASSESSING OFFICER IS TO ASSESS REAL AND CORRECT INCOME IN ACCORDANCE WIT H LAW. THE CBDT IN ITS CIRCULAR NO. 14(XL35) OF 1955 DATED 11.04.1955 REGARDING DEPARTMENTAL ATTITUDE TOWARDS STATED THAT THE CB DT IN ITS CIRCULAR NO. 14(XL35) OF 1955 DATED 11.04.1955 REGARDING DE PARTMENTAL ATTITUDE TOWARDS STATED THAT OFFICERS OF THE DEP ARTMENT MUST NOT TAKE ADVANTAGE OF IGNORANCE OF AN ASSESSEE AS TO HIS RIG HTS. IT IS ONE OF THEIR DUTIES TO ASSIST A TAXPAYER IN EVERY REASONAB LE WAY, PARTICULARLY IN THE MATTER OF CLAIMING AND SECURING RELIEFS AND IN THIS REGARD THE OFFICERS SHOULD TAKE THE INITIATIVE IN GUIDING A TA XPAYER WHERE PROCEEDINGS OR OTHER PARTICULARS BEFORE THEM INDICA TE THAT SOME REFUND OR RELIEF IS DUE TO HIM. IT IS FURTHER STATED THAT OFFICERS SHOULD, WHEN REQUESTED, FREELY ADVISE ASSESSEES THE WAY IN WHICH ENTRIES SHOULD BE MADE IN VARIOUS FORMS, THEY SHOULD NOT THEMSELVES M AKE ANY IN THEM ON THEIR BEHALF. WHERE SUCH ADVICE IS GIVEN, IT SHO ULD BE CLEARLY ITA NO.1209/RJT/2009 13 EXPLAINED TO THEM THAT THEY ARE RESPONSIBLE FOR THE ENTRIES MADE IN ANY FORM AND THAT THEY CANNOT BE ALLOWED TO PLEAD THAT THEY WERE MADE UNDER OFFICIAL INSTRUCTIONS. 17. IN VIEW OF THE ABOVE DISCUSSION, WE HOLD THAT THE L D.CIT(A) WAS JUSTIFIED IN CANCELING THE PENALTY. HIS ORDER IS HEREBY UPH ELD. 18. IN THE RESULT, APPEAL FILED BY THE REVENUE IS D ISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 10-12-2010 SD/- SD/- (A.L. GEHLOT) (D.T. GARASIA) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DT : 10 TH DECEMBER, 2010 PK/- COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A), JAMNAGAR 4. THE CIT, JAMNAGAR 5. THE DR (TRUE COPY) BY ORDER ASSTT.REGISTRAR, ITAT, RAJKOT