DCIT, Circle - 4, Kolkata, Kolkata V. M/s. A. Tosh & Sons (India) Ltd., Kolkata

ITA 1930/KOL/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 54628 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-11-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 24-06-2011
• Assessment Year: 2000-2001
• Appeal Filed On: 12-10-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P P SARKAR
• Assessee Lawyers: N K PODDA R; A K TIBREWAL
• Keywords: Retrospective amendment; Wrong claim; Bonafide mistake
• Section: 143(3); 147; 148; 263

Judgement Text

, , , , , , ,, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : KOLKATA [ . . . . . .. . , ! ! ! ! , , , , ] [BEFORE SHRI S.V. MEHROTRA, AM & SHRI MAHAVIR SINGH , JM] ' ' ' ' / I.T.A. NOS. 1930 & 1931/KOL/2011 !#$ %& !#$ %& !#$ %& !#$ %&/ // / ASSESSMENT YEARS : 2000-01 & 2002-03 DEPUTY COMMISSIONER OF INCOME TAX -VS.- M/S. A. TOSH & SONS (INDIA) LIMITED CIRCLE-4, KOLKATA. KOLKATA [PAN : AAACCA 48 63 A] [ () () () () /APPELLANT] [ *+() *+() *+() *+()/ // / RESPONDENT] () () () () / FOR THE APPELLANT : , ,, , /SHRI P. P. SARKAR *+() *+() *+() *+() / FOR THE RESPONDENT : , ,, , / S/SHRI N. K. PODDAR & A.K. TIBREWAL -#. / 0 -#. / 0 -#. / 0 -#. / 0 /DATE OF HEARING : 15.09.2011 1% / 0 1% / 0 1% / 0 1% / 0 /DATE OF PRONOUNCEMENT : 2 /O R D E R [ . . . . . .. . , ] PER S.V. MEHROTRA, AM THE DEPARTMENT HAS FILED THESE TWO APPEALS AGAINST ORDER OF LD. CIT(A)-IV, KOLKATA BOTH DATED 24.12.2009 FOR ASSESSMENT YEARS 2000-01 & 200 2-03. BOTH THESE APPEALS WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS COMMON O RDER FOR THE SAKE OF CONVENIENCE. 2. THE ONLY GROUND OF APPEAL IN BOTH THE APPEALS IS THAT LD. CIT(A) ERRED IN DELETING THE PENALTY UNDER SECTION 271(1)(C) OF THE ACT RELYING ON THE DECISION OF VARIOUS COURTS AND AUTHORITIES AND ALSO ON THE DECISION OF HONBLE DEL HI HIGH COURT IN CIT VS. NATH BROS. EXIM INTERNATIONAL LTD. [2007] 288 ITR 670 (DEL.). THE F ACTS ARE IDENTICAL IN BOTH THE APPEALS, THEREFORE, FOR THE SAKE OF CONVENIENCE, WE REFER TO THE FACTS AS OBTAINING IN ASSESSMENT YEAR 2000- 01 VIDE ITA NO.1930/KOL/2010. 3. THE ASSESSEE HAD FILED ITS RETURN OF INCOME SHOW ING TOTAL INCOME OF RS.54,40,020/-. THE RETURN WAS PROCESSED UNDER SECTION 143(1)(A) AND LA TER ON ASSESSMENT WAS COMPLETED UNDER [ITA NO. 1930 & 1931/KOL/2010] 2 SECTION 143(3) ON 28.03.2003. SUBSEQUENTLY, IT WAS NOTICED THAT THE ASSESSEE-COMPANY CALCULATED LOSS OF RS.2,00,95,096/- BY APPLYING COST INFLATION INDEX ON SALE OF BONDS OF RAILWAY FINANCIAL CORPORATION, RURAL ELECTRIFICATION CORPORATION AND NATIONAL HYDROELECTRIC POWER CORPORATION LIMITED. HOWEVER, AS PER THIRD PROVISO TO SECTION 4 8 OF INCOME TAX ACT, ASSESSEE-COMPANY COULD NOT CLAIM BENEFIT OF THESE BONDS AND, THEREFORE, NO TICE UNDER SECTION 148 WAS ISSUED AND ASSESSMENT WAS COMPLETED UNDER SECTION 147/143(3) O N 30.11.2007, BY RECALCULATING THE LONG TERM CAPITAL GAIN ON SALE OF BONDS OF RS.33,30,000/ - AGAINST LONG TERM CAPITAL LOSS CLAIMED BY ASSESSEE AND, THEREFORE, HE DETERMINED LONG TERM CAPITAL GAIN AT RS.60,29,850/- (33,30,000 + 26,99,850). ASSESSING OFFICER INITIATED PENALTY PRO CEEDINGS UNDER SECTION 271(1)(C) OF THE ACT. ASSESSING OFFICER NOTED THAT ASSESSEE HAD NOT FILED ANY APPEAL AGAINST REASSESSMENT ORDER. HE OBSERVED THAT THE ASSESSEE-COMPANY WAS INCORPORATED ON 20.08.1982 AND HAD BEEN INVESTING AND SELLING ITS INVESTMENTS IN THE PRECEDING AND SUCCEE DING YEARS ALSO. THUS, ASSESSEE WAS MANAGING ITS PORTFOLIO OF INVESTMENT ON REGULAR BASIS AND WA S NOT NEW IN INVESTMENT PLANNING. ITS AFFAIRS WERE DEALT BY QUALIFIED PERSONNEL, AND, THEREFORE, IT WAS DIFFICULT TO ACCEPT THAT ASSESSEE SIMPLY MADE A MISTAKE OF TAKING THE BENEFIT OF INDEXATION AND EVEN DURING THE COURSE OF SCRUTINY ASSESSMENT ASSESSEE DID NOT DISCLOSE THE MISTAKE BE FORE THE ASSESSING OFFICER. HE OBSERVED THAT CLAIMING A LOSS OF MORE THAN RS.2.00 CRORE, WITHOUT VERIFYING THE ALLOWABILITY OF CLAIM, IS MOST UNLIKELY AND, THEREFORE, IT APPEARED THAT FURNISHIN G OF INACCURATE PARTICULARS OF INCOME ON THE PART OF THE ASSESSEE WAS NOT A BONAFIDE MISTAKE. HE OBSE RVED THAT ASSESSEE KNOWINGLY CLAIMED THE INDEXATION BENEFIT. HE, ACCORDINGLY, LEVIED PENALTY @ 100% OF TAX ARE TO BE DELETED. 4. BEFORE LD. CIT(A), ASSESSEE, INTER ALIA, SUBMITT ED THAT IT HAD DISCLOSED ALL THE MATERIAL FACTS AND PARTICULARS IN RELATION TO LONG TERM CAPI TAL LOSS CLAIMED BY IT UNDER SECTION 45 READ WITH SECTION 48 OF THE ACT. IT WAS FURTHER SUBMITTE D THAT ASSESSMENT UNDER SECTION 143(3) WAS COMPLETED AFTER SCRUTINIZING THE RETURN AND AFTER S EEKING SUCH DETAILS AND EXPLANATION AS WERE CONSIDERED FIT AND PROPER BY THE ASSESSING OFFICER FOR THE PURPOSE OF COMPUTING ITS TOTAL INCOME. THE NET LONG TERM CAPITAL LOSS WAS ASSESSED BY THE ASSESSING OFFICER AT RS.1,73,95,246/- AFTER ALLOWING SET OFF OF LONG TERM CAPITAL GAIN OF RS.26 ,99,850/- FROM LAND AGAINST LONG TERM CAPITAL LOSS OF RS.2,00,95,096/- AND THE SAME WAS A LLOWED TO BE CARRIED FORWARD FOR SET OFF IN FUTURE YEARS IN ACCORDANCE WITH THE PROVISIONS CONT AINED IN SECTION 74 OF THE SAID ACT. IT WAS ALSO SUBMITTED THAT ASSESSEE HAD PREFERRED APPEAL BEFORE THE LD. CIT(A) AND BEFORE THE TRIBUNAL ON OTHER ISSUES. ASSESSING OFFICER ALSO PASSED ORDER U NDER SECTION 154/143(3) TO RECTIFY CERTAIN [ITA NO. 1930 & 1931/KOL/2010] 3 MISTAKES. HOWEVER, LONG TERM CAPITAL LOSS CARRIED F ORWARD WAS RETAINED AT RS.1,73,95,246/- AS WAS ORIGINALLY COMPUTED. HOWEVER, WHEN ASSESSEE CAM E TO KNOW CORRECT POSITION OF LAW, IT FILED FRESH RETURN OF ITS TOTAL INCOME IN RESPONSE TO NOT ICE UNDER SECTION 148 OF THE ACT WITHDRAWING THE INDEXATION BENEFIT AND RETURNING ITS LONG TERM CAPI TAL GAIN ASSESSABLE TO TAX ON TRANSFER OF THREE GOVERNMENT BONDS. IT WAS CONTENDED THAT IT WAS AN I NADVERTENT MISTAKE COMMITTED BY IT WHILE FILING THE RETURN. THE ASSESSEE RELIED ON VARIOUS C ASE LAWS AND SUBMITTED THAT IN ABSENCE OF ANY GROSS OR WILLFUL NEGLIGENCE ON THE PART OF THE ASSE SSEE, PENALTY CAN NOT BE LEVIED. LD. CIT(A) AFTER CONSIDERING THE ASSESSEES SUBMISSION DELETED THE P ENALTY, INTER ALIA, FOLLOWING THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. NA TH BROS. EXIM INTERNATIONAL LTD. [2007] 288 ITR 670 (DEL.). 5. LD. DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT R ETURN FOR ASSESSMENT YEAR 2000-01 WAS FILED ON 29.11.2000 AND FOR ASSESSMENT YEAR 2002-03 WAS FILED ON 30.10.2002 AND, THEREFORE, IT CAN NOT BE ACCEPTED THAT IN BOTH THE RETURNS, ASSES SEE COMMITTED THE SAME MISTAKE OF CLAIMING INDEXATION BENEFIT IN RESPECT OF GOVERNMENT BONDS T HOUGH, ADMITTEDLY, IT WAS NOT ENTITLED FOR THE SAME. HE RELIED ON THE PENALTY ORDER. 6. LD. SR. COUNSEL, SHRI N. K. PODDAR APPEARING ON BEHALF OF THE ASSESSEE SUBMITTED THAT ASSESSEE IS IN THE BUSINESS OF TEA EXPORT AND ADMIT TEDLY, IT WAS NOT ENTITLED FOR INDEXATION BENEFIT IN RESPECT OF GOVERNMENT BONDS ONLY. HE REFERRED TO PAGE 38 OF THE PAPER BOOK WHEREIN COMPUTATION OF TOTAL INCOME IS CONTAINED AND POINTE D OUT THAT ASSESSEE HAD CLAIMED LONG TERM CAPITAL LOSS AS PER HIS COMPUTATION OF RS.1,73,95,2 43/-. HE FURTHER REFERRED TO PAGE 43 OF PAPER BOOK WHEREIN DETAILS REGARDING COMPUTATION OF LONG TERM CAPITAL GAIN IS CONTAINED AND POINTED OUT THAT ASSESSEE HAD GIVEN THE DETAILS OF INVESTME NTS SOLD AS UNDER :- ASSESSMENT YEAR : 2000-2001 PREVIOUS YEAR : 1999-2000 COMPUTATION OF SHORT TERM CAPITAL GAINS SALES CONSIDERATION : VEHICLES 95,000 LESS : DEDUCTION UNDER SECTION 51(1) W.D.V. VEHICLES 2,502,647 ADDITIONS 1,692,273 4,194,920 [ITA NO. 1930 & 1931/KOL/2010] 4 LOSS UNDER THE HEAD SHORT-TERM CAPITAL GAINS TO BE CARRIED FORWARD 4,099,920 COMPUTATION OF LONG TERM CAPITAL GAINS SALES CONSIDERATION INVESTMENTS : BONDS OF RAILWAYS FINANCE CORPORATION 30,000,000 BONDS OF RURAL ELECTRIFICATION CORPORATION 10,000, 000 BONDS OF NATIONAL HYDROELECTRIC POWER CORPORATION LIMITED 10,000,000 50,000,000 LESS : INDEXED COSTS OF ACQUISITION OF BONDS SOLD : [VIDE 2 ND PROVISO TO SECTION 48] INDIAN RAILWAYS FINANCE CORPORATION LIMITED PURCHASED IN THE YEAR 1994-95 27,470,000 X 389 41,258,031 259 RURAL ELECTRIFICATION CORPORATION LIMITED PURCHASED IN THE YEAR 1994-95 9,550,000 X 389 14,343,436 259 NATIONAL HYDROELECTRIC POWER CORPORATION LTD. PURCHASED IN THE YEAR 1994-95 9,650,000 X 389 14,343,629 259 70,095,096 LOSS UNDER THE HEAD LONG TERM CAPITAL GAINS TO BE CARRIED FORWARD (A) 2 0,095,695 LAND AT COIMBATORE SALES CONSIDERATION 3,299,410 INDEXED COSTS OF ACQUISITION OF PURCHASED IN THE YEAR 1982-83 1,68,000 X 389 109 599,560 PROFIT UNDER THE HEAD LONG TERM CAPITAL GAINS TO BE CARRIED FORWARD (B) 2 ,699,850 LONG TERM CAPITAL GAINS LOSS AS PER (A) 20,095.096 PROFIT AS PER (B) 2,699,850 17,395,246 WITH REFERENCE TO AFOREMENTIONED COMPUTATION, LD. S R. COUNSEL POINTED OUT THAT THE NAMES OF THE BONDS WERE CLEARLY INDICATED IN THE COMPUTATION AND IT WAS CLEARLY STATED THAT INDEXATION BENEFIT [ITA NO. 1930 & 1931/KOL/2010] 5 WAS CLAIMED AS PER 2 ND PROVISO TO SECTION 48 OF THE ACT. SIMILARLY, HE RE FERRED TO COMPUTATION OF TOTAL INCOME FOR ASSESSMENT YEAR 2002-03 AND POINTE D OUT THAT AT PAGE NO. 3 & 4, DETAILS OF COMPUTATION OF LONG TERM CAPITAL GAINS WERE GIVEN A S UNDER :- SALES CONSIDERATION NO. OF UNITS (COST PER UNIT) SALES PROCEEDS OF INVESTMENTS (RUPEES) (RUPEES) XXX XXX XXX XXX 9% IRFC BONDS 30,000.00 1,000.00 30,000,000.00 LD. COUNSEL FURTHER SUBMITTED THAT IN THE ORIGINAL ASSESSMENT, IN BOTH THE YEARS UNDER CONSIDERATION, ASSESSING OFFICER HAD ALLOWED INDEXA TION BENEFIT AND, THUS, COMMITTED AN ERROR WHILE PASSING ORDER UNDER SECTION 143(3) OF THE ACT . THE SAID MISTAKE WAS CORRECTED IN ONE YEAR I.E. IN ASSESSMENT YEAR 2000-01 BY INITIATING REASS ESSMENT PROCEEDINGS AND IN ASSESSMENT YEAR 2002-03 BY RESORTING TO PROCEEDINGS UNDER SECTION 2 63 OF THE ACT. HE SUBMITTED THAT THE MOMENT ASSESSEE CAME TO KNOW ABOUT THE CORRECT LEGAL POSIT ION, HE OFFERED THE SAME FOR TAXATION. HE SUBMITTED THAT UNDER SUCH CIRCUMSTANCES, IT CANNOT BE SAID THERE WAS ANY MALAFIDE INTENTION ON THE PART OF THE ASSESSEE TO CONCEAL THE PARTICULARS OF INCOME BY CLAIMING WRONG DEDUCTION. HE RELIED ON THE FOLLOWING DECISIONS :- (I) CIT VS. RELIANCE PETROPRODUCTS PVT. LTD. [2010] 322 ITR 158 (SC) (II) SREE KRISHNA ELECTRICALS VS. STATE OF TAMIL NADU & ANR. [2009] 23 VST 249 (SC) (III) MR. WALTER SALDHANA VS. DCIT [2011] 44 SOT 26 (MUM .) (IV) CIT VS. NATH BROS. EXIM INTERNATIOANL LTD. [2007] 2 88 ITR 670 (DEL.) (V) ITO VS. M/S. PARIKH INVESTMENT & DEVELOPMENTS (P) L TD. [2011] 43 SOT 537 (MUM.) (VI) MAHENDRA KUMAR VS. UNION OF INDIA [1997] 226 ITR 718 (MP) (VII) H.P. STATE FOREST CORPN. LTD. VS. DCIT [2005] 93 ITD 442 (TRIB-CHAD.) (VIII) CIT VS. M/S. RUBBER UDYOG VIKAS (P) LTD. [2011] 3 35 ITR 558 (P&H) (IX) DCIT VS. GUJARAT STATE FERTILIZER & CHEMICALS LTD . [2010] 1 ITR (TRIB) 361 (AHD.) 7. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE P ARTIES AND HAVE PERUSED THE RECORDS OF THE CASE. THE FACTS ARE NOT DISPUTED. ADMITTEDLY, A SSESSEE HAD CLAIMED COST INFLATION INDEX ON SALE OF BONDS OF RAILWAY FINANCE CORPORATION LIMITED, RU RAL ELECTRIFICATION CORPORATION LIMITED & NATIONAL HYDROELECTRIC POWER CORPORATION LIMITED. T HE ASSESSEE WAS NOT ENTITLED FOR THE SAME. THESE DETAILS WERE SPECIFICALLY GIVEN IN THE COMPUT ATION OF INCOME AND IT WAS POINTED OUT THAT THE SAID INDEXATION WAS CLAIMED IN TERMS OF 2 ND PROVISO TO SECTION 48 OF THE INCOME TAX ACT. THIS CLAIM OF ASSESSEE WAS ALLOWED BY ASSESSING OFFICER IN THE PROCEEDINGS UNDER SECTION 143(3). [ITA NO. 1930 & 1931/KOL/2010] 6 HOWEVER, WHEN IT WAS NOTICED THAT IN VIEW OF 3 RD PROVISO TO SECTION 48, ASSESSEE WAS NOT ENTITLED TO CLAIM THE BENEFIT OF COST INFLATION INDEX IN RES PECT OF GOVERNMENT BONDS, THE SAID BENEFIT WAS WITHDRAWN BY RESORTING TO PROCEEDINGS UNDER SECTION 147 FOR ASSESSMENT YEAR 2000-01 AND UNDER SECTION 263 FOR ASSESSMENT YEAR 2002-03. IT IS NOT THE CASE OF THE DEPARTMENT THAT ASSESSEE HAD NOT DISCLOSED ALL THE FACTS IN REGARD TO THE GOVERN MENT BONDS. ONLY CHARGE IS THAT ASSESSEE HAD WRONGLY CLAIMED THE BENEFIT THOUGH WAS NOT ENTITLED FOR THE SAME IN VIEW OF 3 RD PROVISO TO SECTION 48 OF INCOME TAX ACT. UNDER SUCH CIRCUMSTANCES, THE FIRST QUESTION WHICH ARISES FOR CONSIDERATION IS WHETHER THE ASSESSEE HAD FURNISHED ANY INACCURATE PARTICULARS OF INCOME. FURNISHING OF AN INACCURATE PARTICULARS IMPLY THAT THERE IS SOME POSITIVE ACTION ON THE PART OF THE ASSESSEE WITH AN INTENTION TO CONCEAL THE INCOME. H OWEVER, IN THE PRESENT CASE, THERE IS NO SUCH CHARGE. THE MOMENT ASSESSEE CAME TO KNOW ABOUT THE WRONG CLAIM, IT REVISED ITS CLAIM IN ACCORDANCE WITH LAW. IT IS PERTINENT TO NOTE THAT M ISTAKE WAS NOT ONLY COMMITTED BY THE ASSESSEE BUT EVEN THE ASSESSING OFFICER DID NOT DISCOVER THE LEGAL MISTAKE. WE FIND THAT HONBLE SUPREME COURT IN THE CASE OF RELIANCE PETROPRODUCTS PVT. LT D. [2010] 322 ITR 158 (SC) HAS HELD AS UNDER:- A GLANCE AT THIS PROVISION WOULD SUGGEST THAT IN O RDER TO BE COVERED, THERE HAS TO BE CONCEALMENT OF THE PARTICULARS OF T HE INCOME OF THE ASSESSEE. SECONDLY, THE ASSESSEE MUST HAVE FURNISHE D INACCURATE PARTICULARS OF HIS INCOME. THE PRESENT IS NOT A CAS E OF CONCEALMENT OF THE INCOME. THAT IS NOT THE CASE OF THE REVENUE EITHER. HOWEVER, THE LEARNED COUNSEL FOR REVENUE SUGGESTED THAT BY MAKING INCORR ECT CLAIM FOR THE EXPENDITURE ON INTEREST, THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF THE INCOME. AS PER LAW LEXICON, THE MEANING OF T HE WORD PARTICULAR IS A DETAIL OR DETAILS (IN PLURAL SENS E) ; THE DETAILS OF A CLAIM, OR THE SEPARATE ITEMS OF AN ACCOUNT. THEREFORE, THE WORD PARTICULARS USED IN THE SECTION 271(1)(C) WOULD EMBRACE THE MEA NING OF THE DETAILS OF THE CLAIM MADE. IT IS AN ADMITTED POSITION IN TH E PRESENT CASE THAT NO INFORMATION GIVEN IN THE RETURN WAS FOUND TO BE INC ORRECT OR INACCURATE. IT IS NOT AS IF ANY STATEMENT MADE OR ANY DETAIL SU PPLIED WAS FOUND TO BE FACTUALLY INCORRECT. HENCE, AT LEAST, PRIMA FACIE, THE ASSESSEE CANNOT BE HELD GUILTY OF FURNISHING INACCURATE PARTICULARS. T HE LEARNED COUNSEL ARGUED THAT SUBMITTING AN INCORRECT CLAIM IN LAW F OR THE EXPENDITURE ON INTEREST WOULD AMOUNT TO GIVING PARTICULARS OF SUCH INCOME. WE DO NOT THINK THAT SUCH CAN BE THE INTERPRETATION OF THE CO NCERNED WORDS. THE WORDS ARE PLAIN AND SIMPLE. IN ORDER TO EXPOSE THE ASSESSEE TO THE PENALTY UNLESS THE CASE IS STRICTLY COVERED BY THE PROVISION, THE PENALTY PROVISION CAN NOT BE INVOKED. BY ANY STRETCH OF IMA GINATION, MAKING AN INCORRECT CLAIM IN LAW CAN NOT TANTAMOUNT TO FURNIS HING INACCURATE PARTICULARS. [ITA NO. 1930 & 1931/KOL/2010] 7 FURTHER, IN THE CASE OF SREE KRISHNA ELECTRICALS VS . STATE OF TAMIL NADU & ANR. [2009] 23 VST 249 (SC), IT HAS BEEN HELD BY HONBLE SUPREME COUR T AS UNDER :- SO FAR AS THE QUESTION OF PENALTY IS CONCERNED THE ITEMS WHICH WERE NOT INCLUDED IN THE TURNOVER WERE FOUND INCORPORATED IN THE APPELLANTS ACCOUNTS BOOKS. WHERE CERTAIN ITEMS WHICH ARE NOT I NCLUDED IN THE TURNOVER ARE DISCLOSED IN THE DEALERS OWN ACCOUNT BOOKS AND THE ASSESSING AUTHORITIES INCLUDES THESE ITEMS IN THE D EALERS TURNOVER DISALLOWING THE EXEMPTION PENALTY CANNOT BE IMPOSED . THE PENALTY LEVIED STANDS SET ASIDE. IN THE CASE OF MR. WALTER SALDHANA VS. DCIT [2011] 44 SOT 26 (MUM.), IT WAS OBSERVED THAT THE DUTY IS ENJOINED UPON A PERSON TO MAKE A CORRECT AN D COMPLETE DISCLOSURE OF PARTICULARS OF HIS INCOME AND IT IS ONLY WHEN HE FAILS IN HIS DUTY BY NOT DISCLOSING PARTICULARS OF HIS INCOME OR PART THEREOF, HE CONCEALS THE PARTICULARS OF HIS INCOME. THE DUTY IS ENJOINED UPON HIM TO MAKE A COMPLETE DISCLOSURE OF PARTICULARS OF HIS INCOME AS WELL AS A CORRECT DISCLOSURE. THEREFORE, IF THE DISCLOSURE MADE OF THE PARTICULARS OF INCOME IS INC ORRECT, THEN ALSO HE COMMITS BREACH OF HIS DUTY. THUS, IT IS TO BE EXAMINED WHETHER PARTICULARS OF I NCOME HAVE BEEN CORRECTLY DISCLOSED OR NOT. THE FACTS IN THE CASE OF MAHENDRA KUMAR VS. UNION O F INDIA [1997] 226 ITR 718 (MP) WAS AS UNDER :- DURING THE ASSESSMENT YEAR 1985-86, THE ASSESSEE DERIVED INCOME FROM BANK INTEREST AMOUNTING TO RS. 3,076. THIS AMOUNT O F RS. 3,076 FELL TO THE SHARE OF THE ASSESSEE FROM THE TOTAL INTEREST OF TH E FIRM IN WHICH HE WAS A PARTNER. THE ASSESSEE CLAIMED DEDUCTION UNDER SECTI ON 80L OF THE ACT. IT WAS DISALLOWED BY THE INCOME-TAX OFFICER ON THE GRO UND THAT SECTION 80L WAS AMENDED BY THE INSERTION OF SUB-SECTION (3) BY THE TAXATION LAWS (AMENDMENT) ACT, 1984, WITH RETROSPECTIVE EFFECT FR OM APRIL 1, 1976. IN VIEW OF THE AMENDMENT BY THE ACT OF 1984, WITH EFFE CT FROM APRIL 1, 1976, A NOTICE WAS ISSUED TO THE ASSESSEE UNDER SEC TION 148 READ WITH SECTION 147 OF THE ACT FOR REOPENING OF PROCEEDINGS FOR THE ASSESSMENT YEARS 1983-84 AND 1984-85 SEEKING THEREBY TO TAX TH E ESCAPED INCOME FROM INTEREST IN ACCORDANCE WITH THE PROVISION INTR ODUCED BY THE AMENDMENT ACT OF 1984. MEANWHILE, THE ASSESSEE WAS ASSESSED AND PENALTY PROCEEDINGS WERE DIRECTED TO BE INITIATED B Y THE ORDER OF THE ASSESSING AUTHORITY. ON A WRIT PETITION: HELD, THAT THE ASSESSEE HAD HONESTLY DISCLOSED THE INCOME AND HAD NOT CONCEALED ANYTHING DELIBERATELY AND HIS ACTION DID NOT SUFFER FROM ANY MENS REA. THE PENALTY PROCEEDINGS WERE UNWARRANTED. THE PROPOSAL IN THE [ITA NO. 1930 & 1931/KOL/2010] 8 AMENDMENT ORDER FOR INITIATING PENALTY PROCEEDINGS AGAINST THE ASSESSEE AFTER REOPENING UNDER SECTION 148 OF THE ACT WAS LI ABLE TO BE QUASHED. HONBLE MADHYA PRADESH HIGH COURT, INTER ALIA, HELD AS UNDER :- THE NEXT QUESTION IS REGARDING THE PENALTY PROCEEDI NGS SOUGHT TO BE INITIATED AGAINST THE PETITIONER BY ISSUING NOTICE AND REOPENING THE ASSESSMENT PROCEEDINGS UNDER SECTION 148 OF THE ACT . THIS ACTION OF INITIATING PENALTY PROCEEDINGS AGAINST THE ASSESSEE DOES NOT APPEAR TO BE WELL FOUNDED. AS A MATTER OF FACT, THE ASSESSEE ALS O WOKE UP WHEN THIS CLARIFICATION UNDER SUB-SECTION (3) TO SECTION 80L WAS MADE AND WHEN ACTION UNDER SECTION 148 OF THE ACT WAS INITIATED. THE ASSESSING AUTHORITY WAS HIMSELF LABOURING UNDER A MISCONCEPTION WHETHER BENEFIT UNDER SECTION 80L WAS TO BE GIVEN OR NOT AND THE ASSESSME NT WAS MADE AND IT WAS SOUGHT TO BE REOPENED. THE ASSESSEE HAD HONESTL Y DISCLOSED THE INCOME AND HAD NOT CONCEALED ANYTHING DELIBERATELY AND HIS ACTION DID NOT SUFFER FROM ANY MENS REA. SINCE THE ASSESSEE IS NOT GUILTY OF ANY CONCEALMENT, PENALTY PROCEEDINGS UNDER SECTION 271( 1)(C) ARE ABSOLUTELY UNWARRANTED. NOW, LET US CONSIDER EXPLANATION TO SECTION 271(1)( C) WHICH READS AS UNDER :- EXPLANATION 1. - WHERE IN RESPECT OF ANY FACTS MA TERIAL 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 COMM ISSIONER (APPEALS) OR THE COMMISSIONER TO BE FALSE, OR (B) SUCH PERSON OFFERS AN EXPLANATION, WHICH HE IS NOT ABLE TO SUBSTANTIATE AND FAILS TO PROVE THAT SUCH EXPLANATION IS BONA FI DE AND THAT ALL THE FACTS RELATING TO THE SAME AND MATERIAL TO THE COMP UTATION OF HIS TOTAL INCOME HAVE BEEN DISCLOSED BY HIM. THEN, THE AMOUNT ADDED OR DISALLOWED IN COMPUTING T HE TOTAL INCOME OF SUCH PERSON AS A RESULT THEREOF SHALL, FOR THE PURP OSES OF CLAUSE (C) OF THIS SUB-SECTION, BE DEEMED TO REPRESENT THE INCOME IN R ESPECT OF WHICH PARTICULARS HAVE BEEN CONCEALED. WHILE CONSIDERING THE MERIT OF CLAUSE (A) & (B) OF EXPLANATION TO SECTION 271(1)(C), TRIBUNAL IN THE CASE OF H.P. STATE FOREST CORPN. LTD. VS. DCIT [2005] 93 ITD 442 (TRIB-CHAD.), INTER ALIA, OBSERVED AS UNDER:- THERE IS VITAL DISTINCTION BETWEEN CLAUSE (A) AND CLAUSE (B) OF THE EXPLANATION WHICH IS NOTICEABLE. THE DEEMING FICTIO N CONTAINED IN THE EXPLANATION THAT THE AMOUNT ADDED OR DISALLOWED, RE PRESENTED INCOME IN RESPECT OF WHICH PARTICULARS HAVE BEEN CONCEALED WI LL APPLY AS PER (A) IF NO EXPLANATION IS GIVEN BY THE ASSESSEE OR IF AN EX PLANATION HAS BEEN [ITA NO. 1930 & 1931/KOL/2010] 9 GIVEN, THE SAME IS FOUND TO BE FALSE. UNDER THIS EX PLANATION, THE ONUS IS ON THE ASSESSEE TO SHOW THAT THERE IS NO CONCEALMENT O R FURNISHING OF INACCURATE PARTICULARS OF INCOME. HOWEVER, IF THE A SSESSEE HAS FURNISHED AN EXPLANATION, WHICH HAS NOT BEEN FOUND TO BE FALSE, EXPLANATION 1(A) WILL NOT APPLY. EXPLANATION 1(B) WILL BE ATTRACTED IF TH E ASSESSEE FURNISHES AN EXPLANATION BUT THE SAME IS NOT SUBSTANTIATED. THE PRESUMPTION UNDER THIS EXPLANATION, HOWEVER, IS REBUTTABLE AND IT CAN BE R EBUTTED IF THE ASSESSEE IS ABLE TO ESTABLISH THAT ALL THE PARTICULARS RELATING TO COMPUTATION OF INCOME HAVE BEEN DISCLOSED. THIS VIEW IS SUPPORTED BY THE DECISION OF RAJASTHAN HIGH COURT IN THE CASE OF RAGHUVIR SONI V. ASSTT. C IT [2002] 258 ITR 239 (123 TAXMAN 205) DECISION OF PUNAB & HARYANA HIGH C OURT IN THE CASE OF CIT V. LAL CHAND TIRATH RAM [1997] 225 ITR 675 (92 TAXMAN 320) AND THE DECISION OF MADRAS HIGH COURT IN THE CASE OF CI T V. G.R. RAJENDRAN [2003] 259 ITR 109. THUS THE EXPLANATION (1)(B) WIL L CEASE TO OPERATE IF THE ASSESSEE PROVES THAT THE EXPLANATION FURNISHED IS BONAFIDE AND ALL THE PARTICULARS RELATING TO COMPUTATION OF INCOME HAVE BEEN DISCLOSED. THEREFORE, IF THE EXPLANATION FURNISHED BY ASSESSEE IS BONAFIDE, THEN, PENALTY CANNOT BE LEVIED. IN ORDER TO FIND WHETHER THE EXPLANATION FURNISHED BY ASSESSEE IS BONAFIDE OR NOT, WE HAVE TO EXAMINE THE DETAILS DISCLOSED BY ASSESSEE IN EACH C ASE. IF THE DISCLOSURE IS COMPLETE THEN MERE ADVANCING OF A WRONG LEGAL CLAIM ON THE BASIS OF SA ID SET OF FACTS, THE EXPLANATION OF ASSESSEE HAS TO BE ACCEPTED AS BANAFIDE. 7.1 FROM THE ABOVE DECISIONS, IT IS EVIDENT THAT IF THE ASSESSEE HAD DISCLOSED ALL THE FACTS RELATING TO INCOME IN THE RETURN AND ANNEXURE ACCOM PANYING IT, THEN, MERELY BECAUSE THE ASSESSEES CLAIM IS NOT ADMISSIBLE ON ACCOUNT OF SO ME LEGAL PROVISIONS THEN, IT IS PURELY A MISTAKE COMMITTED BY THE ASSESSEE IN MAKING SUCH CLAIM WHIC H WAS CORRECTABLE BY ASSESSING OFFICER. HOWEVER, PENALTY CAN NOT BE LEVIED FOR THE SAME AS THERE WAS NO FURNISHING OF INACCURATE PARTICULARS OF INCOME. IN VIEW OF ABOVE DISCUSSIONS , WE CONFIRM THE ORDER OF LD. CIT(A). 8. IN THE RESULT, BOTH THE APPEALS FILED BY THE DEP ARTMENT ARE DISMISSED. 2 2 2 2 - - - - 3 33 3 -# -# -# -# 4 4 4 4 5 55 5 0 0 0 0 ORDER PRONOUNCED IN THE COURT ON 04.11.201 1. SD/- SD/- [ ! ! ! ! , ] [ . .. . . .. . , ] [MAHAVIR SINGH] [S.V. MEHROTRA ] JUDICIAL MEMBER ACCOUNTANT MEMBE R 0 0 0 0 / DATED : 04.11.2011. [ITA NO. 1930 & 1931/KOL/2010] 10 2 / *!!6 76%8 - COPY OF THE ORDER FORWARDED TO: 1. /APPLICANT- DY.COMMISSIONER OF INCOME TAX, CIRCLE -4, P-7, CHOWRINGHEE SQUARE, 8 TH FLOOR, KOLKATA-70069. 2 . *+() / RESPONDENT : M/S. A. TOSH & SONS (INDIA) LIMITED, P-32 & 33, INDIA EXCHANGE PLACE, KOLKATA-700 001. 3. !2# / CIT 4. !2# ( )/ CIT(A) 5. !4 *!# / DR, KOLKATA BENCHES, KOLKATA [ +6 *! / TRUE COPY] 2#- / BY ORDER 9 / : /DEPUTY/ASSTT. REGISTRAR . [KKC ;< !#=: !> /SR.PS]