ACIT, CHENNAI V. M/s. Shriram Chits Tamil Nadu Pvt. Ltd., CHENNAI

ITA 1614/CHNY/2009

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 7850 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 1 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-11-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 04-11-2010
• Assessment Year: 2001-2002
• Appeal Filed On: 15-10-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K E B RENGARAJAN JUNIOR
• Assessee Lawyers: V D GOPAL
• Keywords: Bonafide belief; Question of law; Bad and doubtful debts
• Section: 143(3); 260A; 246; 27; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BENCH C CHENNAI (BEFORE SHRI HARI OM MARATHA, JUDICIAL MEMBER AND SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER) ..... I.T.A. NO. 1614 / MDS/2009 ASSESSMENT YEAR : 2001-02 THE ASSISTANT COMMISSIONER OF INCOME TAX, COMPANY CIRCLE VI(2), CHENNAI - 600 034. (APPELLANT) V. M/S SHRIRAM CHITS TAMIL NADU PVT. LTD., GREAMS DUGAR, 4 TH & 5 TH FLOOR, NO.149, GREAMS ROAD, CHENNAI - 600 006. PAN : AABCS0167N (RESPONDENT) APPELLANT BY : SHRI K.E.B. RENGARAJAN JUNIOR STANDING COUNSEL RESPONDENT BY : SHRI V.D. GOPAL O R D E R PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER : THIS IS AN APPEAL FILED BY THE REVENUE IN WHICH IT ASSAILS THE ORDER OF THE CIT(APPEALS) DELETING A PENALTY OF ` 1.66 CRORES LEVIED ON THE ASSESSEE UNDER SECTION 271(1)(C) OF THE INCO ME-TAX ACT, 1961 (IN SHORT THE ACT). ACCORDING TO REVENUE, IN VIE W OF THE DECISION OF HON'BLE APEX COURT IN THE CASE OF UNION OF INDIA V. DHARMENDRA I.T.A. NO. 1614/MDS/09 2 TEXTILE PROCESSORS AND OTHERS 306 ITR 277, THE CIT( APPEALS) OUGHT NOT TO HAVE DELETED THE PENALTY. 2. SHORT FACTS APROPOS ARE THAT THE ASSESSEE A COMP ANY ENGAGED IN THE BUSINESS OF CONDUCTING CHITS, FILED ITS RETU RN OF INCOME FOR THE IMPUGNED ASSESSMENT YEAR ON 30.10.2001 DECLARING NI L INCOME. ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) OF TH E INCOME-TAX ACT, 1961 (IN SHORT THE ACT) WHEREIN VARIOUS ADDI TIONS WERE MADE BY THE A.O. WHICH, INTER ALIA, INCLUDED AN ADDITION FO R CLAIM OF DEDUCTION ON ACCOUNT OF FOREMANS DIVIDEND TO THE EXTENT OF ` 4,20,12,135/-. ASSESSEE HAD MOVED IN APPEAL BEFORE THE CIT(APPEALS ) WHO CONFIRMED THE ORDER OF THE ASSESSING OFFICER IN ALL RESPECTS EXCEPT FOR ONE ADDITION RELATING TO BAD DEBTS. FURTHER, APPEA L WAS FILED BY THE ASSESSEE BEFORE THIS TRIBUNAL AND THIS TRIBUNAL VID E ITS ORDER DATED 15.2.2008 DELETED ALL THE ADDITIONS EXCEPT THE AFOR EMENTIONED FOREMANS DIVIDEND. IN OTHER WORDS, WHAT FINALLY S TUCK WAS THE ADDITION ON ACCOUNT OF FOREMANS DIVIDEND. ASSESSE E HAD ALL ALONG CLAIMED BEFORE THE VARIOUS AUTHORITIES THAT FOREMAN S DIVIDEND WAS EXEMPT ON THE PRINCIPLES OF MUTUALITY. HOWEVER, T HIS TRIBUNAL HAD CONFIRMED THE ADDITION WITH REGARD TO FOREMANS DIV IDEND FOLLOWING ITS OWN ORDERS IN ASSESSEES OWN CASE FOR ASSESSMENT YE AR 1996-97 AND I.T.A. NO. 1614/MDS/09 3 1997-98 IN I.T.A. NO. 1254/MDS/99 AND 1921/MDS/2000 AND THAT FOR ASSESSMENT YEAR 2002-03 IN I.T.A. NO. 1088/MDS/2006 . ARGUMENT OF THE ASSESSEE BEFORE THE A.O. IN THE PENALTY PROCEED ING WAS THAT IT HAD FILED FURTHER APPEALS BEFORE THE HON'BLE HIGH CO URT AND SUCH APPEAL WAS ADMITTED BY THE HON'BLE HIGH COURT UPTO A SSESSMENT YEAR 2000-01 AND HENCE THE SUBJECT ADDITIONS COULD NOT BE A REASON FOR LEVY OF PENALTY. HOWEVER, THIS WAS NOT APPREC IATED BY THE A.O. THE A.O. WAS OF THE OPINION THAT THE TRIBUNAL HAD A LREADY HELD FOREMANS DIVIDEND TO BE NOT EXEMPT ON PRINCIPLE OF MUTUALITY. FURTHER, ACCORDING TO THE A.O., IN VIEW OF SECTION 275(1A) INSERTED BY TAXATION LAWS (AMENDMENT) ACT 2006, PENALTY WAS LEV IABLE EVEN IF THE HIGH COURT HAD ADMITTED A QUESTION OF LAW. THU S, THE A.O. WAS OF THE OPINION THAT INSPITE OF KNOWING VERY WELL THAT CLAIM FOR EXEMPTING FOREMANS DIVIDEND WAS NOT ALLOWABLE, ASSESSEE HAD PERSISTED WITH SUCH CLAIM. HE, THEREFORE, CONSIDERED THE CASE TO BE ONE WHERE SECTION 271(1)(C) WAS ATTRACTED AND PENALTY AT THE MINIMUM LEVEL OF ` 1,66,15,799/- WAS IMPOSED ON THE ASSESSEE. 3. IN ITS APPEAL BEFORE THE CIT(A), ARGUMENT OF THE ASSESSEE WAS THAT IT HAD EXPLAINED BOTH IN THE COURSE OF ASSESSM ENT AND PENALTY PROCEEDINGS THAT FOREMANS DIVIDEND WAS NOT EXIGIBL E TO TAX AND THIS I.T.A. NO. 1614/MDS/09 4 ISSUE WAS ADMITTED BY THE HON'BLE JURISDICTIONAL HI GH COURT FOR ADJUDICATION. ACCORDING TO THE ASSESSEE, ITS EXPLA NATION MIGHT NOT HAVE BEEN ACCEPTABLE, BUT THIS WOULD NOT MEAN THAT THERE WAS ANY MISREPRESENTATION OF FACTS OR ANY INACCURATE FURNIS HING OF PARTICULARS. FURTHER, IT WAS SUBMITTED BY THE ASSESSEE THAT AN A PPEAL HAVING BEEN ADMITTED BY THE JURISDICTIONAL HIGH COURT ON THE IS SUE, IT WOULD ONLY GO TO SHOW THAT THERE WAS SUBSTANTIAL QUESTION OF LAW INVOLVED. RELYING ON THE DECISION OF MUMBAI BENCH OF THIS TRIBUNAL IN THE CASE OF K,J, NARIMAN ALIAS N.K. GAJWANI V. ITO 33 TTJ 565 AND TH AT OF THIS TRIBUNAL IN THE CASE OF ROOPAM MERCANTILE LIMITED V . DCIT 91 ITD 237, IT WAS SUBMITTED BEFORE THE LD. CIT(APPEALS) T HAT ASSESSEES EXPLANATION HAD TO BE DEEMED AS SUBSTANTIATED AND T HEREFORE, THERE COULD NEVER BE A LEVY OF PENALTY. FURTHER, ACCORDI NG TO ASSESSEE, IN VIEW OF THE DECISION OF THE HON'BLE PUNJAB AND HARYA NA HIGH COURT IN THE CASE OF SODA SILICATE AND CHEMICAL WORKS V. CIT 179 ITR 588, IT WAS JUSTIFIED IN MAKING A CLAIM IN THIS REGARD BEFO RE THE ASSESSING OFFICER. CIT(APPEALS) APPRECIATED THE CONTENTION O F THE ASSESSEE, FOR, ACCORDING TO HIM, ASSESSEE HAD GIVEN AN EXPLAN ATION BEFORE THE A.O. WHICH WAS BONAFIDE IN NATURE AND IT ALSO HAD J UDICIAL BACKING FOR TAKING A VIEW THAT FOREMANS DIVIDEND WAS NOT EXIGI BLE TO TAX. HENCE, I.T.A. NO. 1614/MDS/09 5 ACCORDING TO HIM, LEVY OF PENALTY WAS NOT WARRANTED . HE CANCELLED THE PENALTY. 4. NOW, BEFORE US, THE LEARNED D.R. STRONGLY ASSAIL ING THE ORDER OF THE CIT(APPEALS), SUBMITTED THAT ASSESSEE DESPITE K NOWING THAT ITS CLAIM REGARDING FOREMANS DIVIDEND WAS NOT EXEMPT, AND THAT SIMILAR CLAIMS WERE NEVER ACCEPTED BY THE DEPARTMENT IN THE EARLIER YEARS, STILL PERSISTED WITH SUCH A CLAIM FOR THE IMPUGNED ASSESSMENT YEAR. HENCE, ACCORDING TO HIM, ASSESSEE HAD SUBMITTED PAR TICULARS WHICH WERE INACCURATE AND WHICH WERE NOT SUBSTANTIATED. LEARNED D.R. POINTED OUT THAT THE DECISION OF HON'BLE PUNJAB AND HARYANA HIGH COURT IN THE CASE OF SODA SILICATE AND CHEMICAL WOR KS V. CIT (SUPRA), RELIED ON BY THE ASSESSEE, FOR CLAIMING EX EMPTION FOR FOREMANS DIVIDEND ON THE BASIS OF PRINCIPLE OF MUT UALITY, WAS NOT WELL FOUNDED SINCE HON'BLE PUNJAB AND HARYANA HIGH COURT WAS NOT DEALING WITH THE CASE OF AN ASSESSEE DOING CHIT FUN D BUSINESS BUT ONLY THAT OF A SUBSCRIBER TO A CHIT FUND BUSINESS. ACCORDING TO HIM, HON'BLE KERALA HIGH COURT IN THE CASE OF M. GEORGE B ROS. CHITTY FUND V. CIT 150 ITR 333 HAD CLEARLY HELD THAT FOREMANS DIVIDEND IN THE CASE OF A PERSON WHO WAS CARRYING ON THE BUSINESS O F RUNNING CHIT WAS INSEPARABLY CONNECTED WITH OWNERSHIP OF THE BUS INESS AND I.T.A. NO. 1614/MDS/09 6 THEREFORE, VERY MUCH A PART OF ITS INCOME. ACCORDI NG TO LEARNED D.R., THIS DECISION OF HON'BLE KERALA HIGH COURT WAS DATE D 13 TH JULY, 1984 AND AVAILABLE AT THE TIME OF FILING THE RETURN. AS SESSEE OUGHT HAVE BEEN AWARE OF THIS DECISION AND NEVER CLAIMED EXEMP TION FOR THE FOREMANS DIVIDEND. LEARNED D.R. FURTHER PLACED RE LIANCE ON THE DECISION OF HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF BILAHARI INVESTMENTS (P) LTD. & OTHERS V. CIT 288 ITR 39 WHE RE HON'BLE JURISDICTIONAL HIGH COURT HAD DISSENTED FROM THE DE CISION OF HON'BLE PUNJAB AND HARYANA HIGH COURT IN THE CASE OF SODA S ILICATE AND CHEMICAL WORKS V. CIT (SUPRA). LEARNED D.R. POINTE D OUT THAT THE ASSESSEE WAS FOLLOWING MERCANTILE SYSTEM OF ACCOUNT ING AND INCOME DERIVED IN A PARTICULAR YEAR BY WAY OF CHIT DIVIDEN D INCLUDING FOREMANS DIVIDEND, WAS TO BE ASSESSED IN THE SAME YEAR. RELIANCE WAS ALSO PLACED ON THE DECISION OF HON'BLE ANDHRA PR ADESH HIGH COURT IN THE CASE OF CIT V. KOVUR TEXTILES AND CO. 136 ITR 61. 5. PER CONTRA, THE LEARNED A.R. SUBMITTED THAT ASSE SSEE HAD BEEN CLAIMING BEFORE THE DEPARTMENT THAT FOREMANS DIVID END WAS EXIGIBLE TO TAX SINCE LAST VERY MANY YEARS. HE POINTED OUT PAGE NO.43 OF THE PAPER-BOOK GIVING DETAILS OF TAX CASES FILED BY VAR IOUS ASSESSEES FALLING IN THE GROUP FOR ASSESSMENT YEAR 1987-88 TO 2002-03, BEFORE I.T.A. NO. 1614/MDS/09 7 THE JURISDICTIONAL HIGH COURT ON THIS ISSUE. ACCOR DING TO HIM, APPEALS FOR ASSESSMENT YEARS 1996-97 TO 2002-03 WERE DIRECT LY ON THE ISSUE WHETHER FOREMANS DIVIDEND WAS EXIGIBLE TO TAX OR E XEMPT ON THE GROUNDS OF MUTUALITY AND SUCH APPEALS WERE ADMITTED BY THE HON'BLE JURISDICTIONAL HIGH COURT. THEREFORE, ACCORDING TO HIM, THE STAND TAKEN BY THE ASSESSEE BEFORE THE ASSESSING OFFICER WAS A POSSIBLE ONE AND AS HELD BY MUMBAI BENCH OF ITAT IN THE CASE OF K,J, NARIMAN ALIAS N.K. GAJWANI V. ITO (SUPRA) AND AHMED ABAD BENCH OF ITAT IN THE CASE OF ROOPAM MERCANTILE LIMITED V. DC IT (SUPRA) ASSESSEE SHOULD BE DEEMED TO HAVE SUBSTANTIATED HIS EXPLANATION. LD. COUNSEL FURTHER SUBMITTED THAT THERE WAS NO QUE STION OF ANY INACCURATE PARTICULARS BEING FURNISHED OR ANY NON-S UBSTANTIATION OF EXPLANATION SINCE EVERY PARTICULAR WERE GIVEN BY TH E ASSESSEE ALONG WITH ITS RETURN AND THERE WAS NOTHING WHICH WAS NOT KNOWN TO THE DEPARTMENT. 6. WE HAVE PERUSED THE ORDERS AND HEARD THE RIVAL C ONTENTIONS. THE QUESTION HERE IS WHETHER ASSESSEE HAD CONCEALED ANY PARTICULARS OF INCOME OR FURNISHED ANY INACCURATE P ARTICULARS OF ITS INCOME. IN OUR OPINION, THERE IS NO QUESTION OF CO NCEALMENT AT ALL SINCE ASSESSEE HAD VERY MUCH GIVEN THE DETAILS OF F OREMANS I.T.A. NO. 1614/MDS/09 8 DIVIDEND IN ITS RETURN OF INCOME AND CLAIMED EXEMPT ION ON THE GROUNDS OF MUTUALITY. IT IS ALSO NOT A CASE FURNIS HING OF INACCURATE PARTICULARS OF INCOME. ASSESSEE HAD GIVEN EXPLANAT ION BEFORE THE A.O. NO DOUBT THIS EXPLANATION WAS NOT ACCEPTABLE TO THE A.O. HOWEVER, WE CANNOT SAY THAT THE EXPLANATION WAS FAL SE OR THE EXPLANATION WAS NOT BONAFIDE. ASSESSEE HAD BEEN MA KING SUCH CLAIM OF EXEMPTION FROM TAX ON THE GROUNDS OF MUTUA LITY SINCE LAST VERY MANY YEARS AND AS POINTED OUT BY THE LEARNED A .R., THE ISSUE IS STILL TO REACH A FINALITY ON ACCOUNT OF THE REASON THAT ASSESSEES APPEAL ON THIS ISSUE HAS BEEN ADMITTED BY THE HON'B LE JURISDICTIONAL HIGH COURT FOR MANY YEARS INCLUDING 2000-01 TO 2005 -06. PAGE NO.64 OF PAPER-BOOK GIVES REFERENCE OF THE RELEVANT TRIBUNAL ORDERS WHEREIN IT WAS HELD THAT FOREMANS DIVIDEND WAS EXI GIBLE TO TAX, AGAINST WHICH APPEALS OF THE ASSESSEE HAD BEEN ADMI TTED BY THE JURISDICTIONAL HIGH COURT. STAND OF THE A.O. ON T HE FACE OF THIS EXPLANATION OF THE ASSESSEE WAS THAT THOUGH THE ISS UE INVOLVED SUBSTANTIAL QUESTION OF LAW AND WAS ADMITTED BY JUR ISDICTIONAL HIGH COURT SECTION 275(1A) OF THE ACT GAVE POWERS TO THE REVENUE TO IMPOSE PENALTY EVEN IN SUCH CASES. TO RESOLVE THIS , WE ARE REPRODUCING SECTION 275(1A) OF THE ACT HEREUNDER:- I.T.A. NO. 1614/MDS/09 9 275 [(1A)] IN A CASE WHERE THE RELEVANT ASSESSMENT OR OTHER ORDER IS THE SUBJECT MATTER OF AN APPEAL TO T HE COMMISSIONER (APPEALS) UNDER SECTION 246 OR SECTION 246A OR AN APPEAL TO THE APPELLATE TRIBUNAL UNDER SECTIO N 253 OR AN APPEAL TO THE HIGH COURT UNDER SECTION 260A OR A N APPEAL TO THE SUPREME COURT UNDER SECTION 261 OR RE VISION UNDER SECTION 263 OR SECTION 264 AND AN ORDER IMPOS ING OR ENHANCING OR REDUCING OR CANCELING PENALTY OR DROPP ING THE PROCEEDINGS FOR THE IMPOSITION OF PENALTY IS PASSED BEFORE THE ORDER OF THE COMMISSIONER (APPEALS) OR THE APPE LLATE TRIBUNAL OR THE HIGH COURT OR THE SUPREME COURT IS RECEIVED BY THE CHIEF COMMISSIONER OR THE COMMISSIO NER OR THE ORDER OF REVISION UNDER SECTION 263 OR SECTI ON 264 IS PASSED, AN ORDER IMPOSING OR ENHANCING OR REDUCI NG OR CANCELING PENALTY OR DROPPING THE PROCEEDINGS FOR T HE IMPOSITION OF PENALTY MAY BE PASSED ON THE BASIS OF ASSESSMENT AS REVISED BY GIVING EFFECT TO SUCH ORDE R OF THE COMMISSIONER (APPEALS) OR, THE APPELLATE TRIBUN AL OR THE HIGH COURT, OR THE SUPREME COURT OR ORDER OF RE VISION UNDER SECTION 263 OR SECTION 264: 7. WHAT THE ABOVE SUB-SECTION EMPOWERS THE A.O. IS TO PASS AN ORDER IMPOSING OR ENHANCING OR REDUCING OR CANCELIN G PENALTY OR DROPPING PENALTY PROCEEDINGS BASED ON A REVISED ASS ESSMENT DONE FOR GIVING EFFECT TO THE ORDERS OF HIGHER APPELLATE FORUMS. THIS CANNOT BE SO CONSTRUED TO MEAN THAT THE CLAIM MADE BY THE ASSESSEE HERE WAS INACCURATE, EVEN WHEN IT WAS FOUND BY THE JURIS DICTIONAL HIGH COURT TO INVOLVE SUBSTANTIAL QUESTION OF LAW. IN S O FAR AS IMPUGNED ASSESSMENT YEAR IS CONCERNED, ASSESSEE HAD FILED IT S RETURN ON 30.10.2001. AS ON THE DATE OF FILING RETURN, ASSES SEE WAS HAVING WITH IT THE DECISION OF HON'BLE PUNJAB AND HARYANA HIGH C OURT IN THE CASE I.T.A. NO. 1614/MDS/09 10 OF SODA SILICATE AND CHEMICAL WORKS V. CIT (SUPRA). THE SAID DECISION WAS DATED 4 TH APRIL, 1989. ASSESSEE WAS ALSO HAVING DECISION OF HON'BLE KERALA HIGH COURT IN THE CASE OF M. GEORGE BROS. CHITTY FUND V. CIT (SUPRA) WHICH DECISION WAS DATED 13 TH JULY, 1984. THE EARLIER DECISION WOULD SUPPORT THE CASE OF THE ASSESSEE AT LEAST TO A CERTAIN EXTENT, WHEREAS THE LATER DECISION OF HON'BLE HIGH COURT DEFINITELY WAS AGAINST IT. IN THE CASE OF SODA SIL ICATE AND CHEMICAL WORKS V. CIT (SUPRA), HON'BLE PUNJAB AND HARYANA HI GH COURT HAD CLEARLY HELD THAT THERE WAS A CLEAR MUTUALITY AMONG ST THE CONTRIBUTORS AND PARTICIPATORS OF THE CHIT FUND WITH THEIR IDENT ITY BEING KNOWN AND WELL ESTABLISHED. NO DOUBT, THEIR LORDSHIP WAS NOT DEALING WITH THE CASE OF AN ASSESSEE WHO WAS CONDUCTING CHIT BUT, OF AN ASSESSEE WHICH WAS ONLY A SUBSCRIBER TO A CHIT. NEVERTHELES S, IT WAS ALSO NOTED BY THEIR LORDSHIP THAT THE CONTENTION OF THE REVENU E THAT THE ISSUE REGARDING NATURE OF CHIT FUND WAS NOT RAISED IN THE QUESTION REFERRED TO IT AND HENCE COULD NOT HAVE BEEN ADJUDICATED, WAS D EVOID OF ANY MERIT SINCE THIS WAS THE VERY FOUNDATION ON WHICH T RANSACTIONS INVOLVED IN A CHIT FUND HAD TO BE CONSIDERED. THUS , ASSESSEE DID HAVE SUFFICIENT REASON TO CONSIDER THAT ON THE PRIN CIPLE OF MUTUALITY, FOREMANS DIVIDEND WOULD NOT BE EXIGIBLE TO TAX. A SSESSEE COULD NOT HAVE BEEN FORCED TO FOLLOW THE DECISION OF HON'BLE KERALA HIGH COURT I.T.A. NO. 1614/MDS/09 11 IN THE CASE OF M. GEORGE BROS. CHITTY FUND V. CIT ( SUPRA) EVEN WHEN ANOTHER DECISION FAVOURABLE TO IT WAS AVAILABLE. A S FOR THE DECISION IN THE CASE OF BILAHARI INVESTMENTS (P) LTD. & OTHERS V. CIT (SUPRA) OF THE HON'BLE JURISDICTIONAL HIGH COURT, STRONGLY RELI ED ON BY THE LEARNED D.R., IT WAS DATED 19 TH JUNE, 2006 AND IT WOULD HAVE BEEN NIGH IMPOSSIBLE FOR THE ASSESSEE TO FORESEE THAT SUCH A VIEW WHICH WAS DETRIMENTAL TO IT WOULD BE TAKEN BY THE HON'BLE JURI SDICTIONAL HIGH COURT. EVEN OTHERWISE, WE FIND FROM THE DECISION O F HON'BLE JURISDICTIONAL HIGH COURT THAT THE QUESTION BEFORE IT WAS REGARDING ACCRUAL OF CHIT DIVIDEND. THUS IT COMES TO A SITUA TION THAT ASSESSEE HAD MADE A CLAIM WHICH IT THOUGHT GENUINE THOUGH TH E DEPARTMENT THOUGHT OTHERWISE. IT IS HERE THAT THE DECISION OF HON'BLE APEX COURT IN THE CASE OF CIT V. RELIANCE PETROPRODUCTS PVT. LTD. 322 ITR 158 BECOMES VERY RELEVANT. AFTER CONSIDERING THE DECIS ION IN THE CASE OF UNION OF INDIA AND OTHERS V. DHARAMENDRA TEXTILE PR OCESSORS AND OTHERS (SUPRA). IT WAS HELD BY THEIR LORDSHIP AS U NDER IN PARA 8 OF THE ORDER:- 8. T HEREFORE, IT IS OBVIOUS THAT IT MU S T BE SHOWN THAT THE CONDITIONS UNDER S. 2 71(1) ( C) MUST E XIST BE F ORE THE PENALTY I S I MPOSED. THERE CAN BE NO D I SPUTE THAT EVERYTH I NG WOULD DEPEND UPON TH E RET UR N FILED BECAUSE T HAT IS THE ONLY DOCUMENT, WHERE THE ASSESSEE CAN FURN I SH THE PART I CULA RS O F H IS I NCOME. I.T.A. NO. 1614/MDS/09 12 WHEN SUCH PARTICULARS ARE FOUND TO BE INACCURATE , THE L I ABILITY WOU L D ARISE. I N D I L I P N . SH R OFF VS . JT. CIT & ANR . (2007) 210 CTR (SC) 228 : (2007) 6 SCC 329 , THIS COURT EXPLAINED THE TE R M S ' CONCEALMENT OF INCOME ' AND ' FURNISHING INACCURATE PARTICULARS'. THE COURT WENT ON TO HO L D TH EREI N THAT I N ORDER TO ATTRACT THE PENALTY UNDER S . 271(1)(C), MENS REA WAS NECE S SARY , A S A CC ORD I NG TO THE COURT, THE WORD ' INACCURATE ' SIGNIFIED A DELIBERATE ACT OR OMISSION ON BEHALF OF TH E A SS ESSEE . IT WENT ON TO HOLD THAT C1. (III) OF S. 271(1) PROVIDED FOR A DISCRETIONARY JURISDICTION UPON TH E ASSESSING AUTHORITY, IN AS MUCH AS THE AMOUNT OF PENALTY COULD NOT BE LESS THAN THE AMOUN T O F TA X S OUGHT TO BE EVADED BY REASON OF SUCH CONCEALMENT OF PARTICULARS OF I NCOME , BUT I T MAY N O T E XCE ED THREE TIMES THEREOF. IT WAS POINTED OUT THAT THE TERM ' INACCURATE PARTICULARS ' WA S N O T DEFINED ANYWHERE IN THE ACT AND, THEREFORE, IT WAS HELD THAT FURNISHING OF AN ASSE S SMENT OF THE VALUE OF THE PROPERTY MAY NOT BY ITSELF BE FURNISHING INACCURATE PARTICULARS. IT WA S FURTHER HELD THA T T HE A SS ESSEE MUST BE FOUND TO HAVE FAILED TO PROVE THAT HIS EXPLANATION I S NOT ONLY NOT BONA FI D E B UT ALL T HE FACTS RELATING TO THE SAME AND MATER I AL TO THE COMPUTATION OF HI S INCOME WERE NOT DI S CLOSED BY HIM. IT WAS THEN HELD THAT THE EXPLANATION MUST BE PRECEDED BY A FINDING A S TO HOW A N D I N WHAT MANNER , THE ASSESSEE HAD FURNISHED THE PARTICULARS OF HIS I NCOME. THE COURT ULTIMATELY W ENT ON TO HOLD THAT THE ELEMENT OF MENS REA WAS ESSENTIA L . I T WAS ONLY ON THE POINT OF MEN S R EA TH AT THE J UDGMENT IN DILIP N . SHROFF VS . JT . CIT & ANR . (SUPRA) WAS UPSE T . IN UNION OF I NDIA V S . D H ARAMENDRA TEXTILE PROCESSORS (CITED SUPRA) , AFTER QUOTING FROM S. 271 EXTENSIVELY AND ALSO C O NSI DERING S. 271(1)(C) , THE COURT CAME TO THE CONCLUSION THAT S INCE S . 271(1)(C) IND I CATED TH E E LEME NT OF STR I CT LIABILITY ON THE ASSESSEE FOR THE CONCEALMENT OR FOR G I VING INACCURATE PARTICULAR S WHILE F IL ING RETU R N, THERE WAS NO NECESSITY OF MENS REA . THE COURT W E NT ON TO HOLD THAT TH E OB JE CTIVE BEHIND ENACTMENT OF S. 271(1)(C) R/W EXPLANATIONS INDICATED WITH THE S AID SECTION WAS FO R P R OVI D I NG REMEDY FOR LOSS OF REVENUE AND SUCH A PENALTY WAS A CIVIL L I ABI LIT Y AND , THEREFORE , WILFU L CONC EALMENT IS NOT AN ESSENTIAL INGREDIENT FOR ATTRACTING CIV I L LIAB I L I TY AS WA S THE CASE IN THE MATTE R OF PR O S ECUT I ON UNDER S. 276C OF THE ACT . THE BASIC REASON WHY DECISION IN D I LIP N . SHROFF VS . JT . CIT & A N R . (CITED SUPRA) WAS OVERRULED BY THIS COURT IN UNION OF INDIA VS. DHARAM E NDRA TEXTILE PRO C E S SORS (CITED SUPRA), WAS THAT ACCORDING TO THIS COURT THE EFFECT AND DIFFERENCE B ET WEEN S . 2 7 1 ( L )(C) AND S. 276C OF THE ACT WAS LOST SIGHT OF IN CASE OF DILIP N . SHROFF VS. JT. CIT & AN R . ( C IT ED S UPRA ) . HOWEVER , I T MUST BE POINTED OUT THAT IN UNION OF INDIA VS. DHARAMENDRA TE X T I LE PROCE S SOR S ( C ITE D S UPRA ) , NO I.T.A. NO. 1614/MDS/09 13 FAULT WAS FOUND WITH THE REASONING IN THE DECISION IN DILIP N. SHROFF V S . JT . CIT & ANR . (CI TED S UPRA) , WHERE THE COURT EXPLAINED THE MEANING OF THE TERMS ' CONCEAL ' AND 'I NACCURATE ' . IT W AS ON L Y THE ULTIMATE INFERENCE IN DILIP N . SHROFF VS . JT. CIT & ANR . (CITED S UPRA ) TO T H E EF FE C T T H AT M E NS REA WAS AN ESSENTIAL INGRED I ENT FOR THE PENALTY UNDER S . 271(1)(C) THAT THE D E C I S I O N IN DI LI P N . SHROFF VS . JT. CIT & ANR . (CITED SUPRA) WAS OVERRULED. 8. WE ARE, THEREFORE, OF THE OPINION THAT THE ASSES SEE COULD NOT BE SADDLED WITH A LEVY OF PENALTY FOR A CLAIM WHICH IT HAD MADE ON THE BASIS OF A BONAFIDE BELIEF THAT IT WAS LEGALLY ALLO WABLE TO IT, THOUGH AT A LATER STAGE IT WAS HELD OTHERWISE BY THE HIGHER APP ELLATE FORUM. LEVY OF PENALTY WAS RIGHTLY DELETED BY THE LEARNED CIT(A PPEALS). NO INTERFERENCE IS CALLED FOR. 9. IN THE RESULT, THE APPEAL FILED BY THE REVENUE S TANDS DISMISSED. THE ORDER WAS PRONOUNCED IN THE COURT ON 26.11.2010 . SD/- SD/- (HARI OM MARATHA) (ABRA HAM P. GEORGE) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI, DATED THE 26 TH NOVEMBER, 2010. KRI. COPY TO: (1) APPELLANT (2) RESPONDENT (3) CIT(A)-V, CHENNAI-34 (4) CIT, CHENNAI-III, CHENNAI (5) D.R. (6) GUARD FILE