RAJESH C. GANDHI, MUMBAI V. ITO 6(2)(4), MUMBAI

ITA 3158/MUM/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 7504 (ITAT-MUMBAI)
• Duration Of Justice: 9 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-03-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2005-2006
• Appeal Filed On: 14-05-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Salary income; Peak credit; Period of limitation; Initiation of penalty proceedings; Speculation loss; Revised return
• Section: 143(3); 11A; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH D, MUMBAI BEFORE SHRI A.L. GEHLOT, A.M. AND SMT. P. MADHAVI DEVI, J.M. ITA NO. 3158/M/2009 ASSESSMENT YEAR: 2005-06 SHRI RAJESH C. GANDHI, APPELLANT 16, ASHIRWAD BUILDING, 4 TH FLOOR, NEXT TO VITHOBA TEMPLE, SION (WEST), MUMBAI 400 022. (PAN AABPG2278F) VS. INCOME-TAX OFFICER, RESPONDENT 6(2)(4), AAYAKAR BHAVAN, M.K. ROAD, MUMBAI. APPELLANT BY : MR. VIJAY MEHTA RESPONDENT BY : MR. MOHD. USMAN ORDER PER A.L. GEHLOT, A.M.: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER OF CIT(A)-VI, MUMBAI, PASSED ON 12.03.2009 FOR THE ASS ESSMENT YEAR 2005-06. 2. THE GROUND RAISED IN THIS APPEAL IS IN RESPECT O F LEVY PENALTY OF RS. 37,89,520/- U/S 271(1)(C) OF THE ACT. 3. THE ASSESSEE DERIVES INCOME FROM SALARY, HOUSE P ROPERTY, CAPITAL GAINS AND INCOME FROM OTHER SOURCES. ORIGIN AL RETURN OF INCOME WAS FILED BY THE ASSESSEE ON 26.08.2005 DECL ARING TOTAL INCOME OF RS. 3,53,027/-. THE REVISED RETURN OF INC OME WAS FILED ON 29 TH AUGUST, 2007 DECLARING TOTAL INCOME OF RS. 1,18,06 ,439/-. THE ASSESSMENT WAS COMPLETED U/S 143(3) VIDE ORDER DATE D 26.12.2007 ACCEPTING THE REVISED RETURN OF INCOME AT RS. 1,18, 06,439/-. THE ITA NO. 3158/M/09 RAJESH C. GANDHI 2 ASSESSEE HAS ALSO REVISED HIS RETURNS OF INCOME FOR AY 2003-04, 2004- 05 AND 2006-07. THE ASSESSEE HAD GIVEN EXPLANATION AND REASONS FOR REVISING THE RETURN, WHICH WAS REPRODUCED BY THE AO IN HIS ORDER, WHICH READS AS UNDER:- I) ORIGINAL RETURN WAS FILED ON 26.8.05 II) LATE SHRI SHAILESH GANDHI, BROTHER OF THE ASSES SEE, WAS OPERATING SAVINGS BANK ACCOUNTS (JOINT ACCOUNTS) TH AT WERE OPENED WITH UNION BANK OF INDIA, GHATKOPAR BR., DET AILS OF WHICH ARE AS UNDER:- A/C NO. OPENED ON NAME OF ACCOUNT HOLDERS 17154 PRIOR TO 31/3/2003 RAJESH GANDHI & ALKA GANDHI 76630 1/7/2004 ALKA GANDHI, RAJESH GANDHI & KINJAL GANDHI III) THE ASSESSEE BEING THE YOUNGER BROTHER USED TO HANDOVER SIGNED CHEQUE BOOKS TO HIS ELDER BROTHER AND USED T O SIGN ON PAPERS THAT WERE PUT UP TO HIM BY HIS BROTHER. ALL STAY IN THE JOINT FAMILY. IV) SHRI SHAILESH GANDHI EXPIRED ON 18/4/2007 AT TH E AGE OF 51 YEARS. AFTER HIS SUDDEN DEMISE, THE ASSESSEE AND HI S FAMILY IN THE 1 ST WEEK OF AUGUST 2007, CAME TO KNOW ABOUT THE INVEST MENTS MADE IN THE NAMES OF THE ASSESSEE AND HIS WIFE AND THE BANK ACCOUNTS. HE APPROACHED THE BANK IN AUGUST07 AND O BTAINED DUPLICATE PASS BOOKS. SOME WORKING PAPERS WERE ALS O FOUND FROM THE CUPBOARD OF SHRI SHAILESH GANDHI. V) IMMEDIATELY THEREAFTER THE ASSESSEE CONSULTED HI S CA. HE IS ADVISED TO WORK OUT THE TRANSACTIONS AND VOLUNTARIL Y APPROACH THE IT DEPARTMENT AND PAY OFF THE TAX ON INCOME ARI SING FROM THESE BANK TRANSACTIONS. ACCORDINGLY, THE ASSESSEE HAS WORKED OUT THE INCOME FOR ALL THE YEARS FROM BANK ACCOUNT NUMBERS 17154 & 76630 AND IS INCLUDED FOR AY 2003-04 TO 200 7-08. THE INCOME IS OFFERED TO TAX VOLUNTARILY UNDER THE CIRC UMSTANCES NARRATED HEREINABOVE. AS PER THE DUPLICATE PASSBOOK S OBTAINED THERE IS BROUGHT FORWARD BALANCE AS OPENING BALANCE OF RS. 79,216/-. THIS IS ROUNDED OFF TO RS. 1,00,000/- AND IS OFFERED IN AY 2003-04. IN THE SUBSEQUENT YEARS PEAK CREDIT IS WORKED OUT AND IS OFFERED TO TAX AS UNDER:- AY PEAK PEAK OFFERED AFTER DEDUCTION OF PEAK OFFERED IN EARLIER YEAR. 2003-04 - 1,00,000 ITA NO. 3158/M/09 RAJESH C. GANDHI 3 2004-05 22,79,216 22,00,000 2005-06 1,12,63,274 89,84,058 VI) NO DETAILS COULD BE LOCATED FOR THE PERIOD UPTO 30/6/2004. IN VIEW OF THIS, PEAK IS WORKED OUT UP TO THAT DATE. A FTER THAT DATE, DETAILS AVAILABLE AND HENCE EXACT WORKING (HEADWISE ) IS CARRIED OUT AND INCOME IS ACCORDINGLY OFFERED. VII) I ENCLOSED HEREWITH THE PEAK WORKING. AS EXPLA INED HEREIN, DUE TO THE CIRCUMSTANCES, ALL THE DETAILS ARE NOT A VAILABLE. WE HAVE ARRIVED AT THE STOCK AS ON 31/3/2005. THIS IS WORKED OUT BACKWARDS FROM THE STOCK POSITION AVAILABLE AS ON T ODAY. VIII) FOR AY 2005-06, RS. 24 LAKHS IS INCLUDED AS A DDITIONAL INCOME WHICH IS OVER AND ABOVE THE PEAK CREDIT. THI S IS TO MATCH THE STOCK THAT IS WORKED OUT FOR 31/3/2005. IX) THESE RETURNS ARE REVISED VOLUNTARILY AND UNDER THE CIRCUMSTANCES BEYOND MY CONTROL. ALL TRANSACTIONS F ROM BOTH THE ACCOUNTS ARE CONSIDERED. IN VIEW OF THIS, IT IS REQ UESTED NOT TO INITIATE ANY PENALTY PROCEEDINGS AND TO WAIVE/REDUC E INTEREST AS PER THE LAW. 4. THE AO LEVIED PENALTY U/S 271(1)(C) GIVING REASO N THAT THE FILING OF REVISED RETURN WAS NOT VOLUNTARY AS IT WAS ONLY WHEN THE SOURCE OF INVESTMENT IN MUTUAL FUNDS, REPORTED IN AIR WAS CAL LED FOR, THE ASSESSEE REVISED THE RETURN OF INCOME. HE FURTHER N OTED THAT THE REVISED RETURN HAD BEEN FILED BEYOND THE TIME LIMIT PRESCRIBED UNDER THE ACT AND DURING THE PENDENCY OF THE SCRUTINY ASS ESSMENT OF THE ASSESSEE UNDER CONSIDERATION. IT WAS ALSO NOTED BY THE AO THAT THE ASSESSEE CLAIMED THAT THE ASSESSMENT IS COMPLETED A S PER THE REVISED RETURN FILED BY HIM; THEREBY FINDING ALL HIS WORKIN G AND EXPLANATIONS TO BE CORRECT IS NOT ACCEPTABLE AS INDEPENDENT ENQU IRIES WERE CARRIED OUT WITH THE BANK AND DETAILS OF THE BANK ACCOUNTS WERE CALLED FOR FROM THE BANK. UPON RECEIPT OF THE BANK STATEMENT, THE ASSESSEE WAS ASKED TO FURNISH THE BANK SUMMARY OF BOTH THE ACCOU NTS AND EXPLAIN EACH AND EVERY ENTRY IN THE BANK STATEMENT. FURTHE R AUTHORISED REPRESENTATIVE WAS ASKED TO SUBMIT THE WORKING OF T OTAL ADDITIONAL INCOME OFFERED IN THREE YEARS VIZ., AY 2003-04, 200 4-05 & 2005-06 AND INCOME EARNED OUT OF THE ADDITION INCOME VIS-- VIS STOCK OF MUTUAL FUND, BANK BALANCE AND A BALANCING FIGURE. A FTER VERIFICATION ITA NO. 3158/M/09 RAJESH C. GANDHI 4 OF THESE SUBMISSIONS ONLY THE INCOME AS PER REVISED STATEMENT WAS ACCEPTED. THE AO AFTER CONSIDERING THE SUBMISSIONS AND VARIOUS DECISIONS LEVIED THE SAID PENALTY OBSERVING THAT HE SATISFIED THAT THE ASSESSEE HAS CONCEALED THE PARTICULARS OF HIS INCOM E FOR AY 2005-06. THE AO LEVIED MINIMUM PENALTY LEVIABLE 100% OF TAX SOUGHT TO BE EVADED. THE CIT(A) CONFIRMED THE ORDER OF AO OBSER VING THAT THE FILING OF REVISED RETURN WAS NECESSITATED AS THE AO CAME T O KNOW THROUGH AIR THAT INVESTMENT MADE BY THE ASSESSEE IN MUTUAL FUND AND THEN ONLY CALLED FOR BANK STATEMENT OF UNION BANK OF IND IA, THROUGH WHICH INVESTMENT WAS MADE BY THE ASSESSEE. WHILE CONFIRMI NG THE PENALTY ORDER OF AO, THE CIT(A) ALSO RELIED UPON THE JUDGME NT OF HONBLE SUPREME COURT IN THE CASE OF BA BALASUBRAMANIUM BRO S. CO. VS. CIT, 236 ITR 977 WHEREIN IT WAS HELD THAT IF EXPLANATION IS FOUND TO BE FALSE, PENALTY IS LEVIABLE. THE CIT(A) HAD ALSO PLA CED RELIANCE ON THE ANOTHER JUDGMENT IN THE CASE OF UNION OF INDIA & OR S. VS. M/S DHARMENDRA TEXTILE PROCESSORS & ORS., 306 ITR 277. 5. THE LEARNED AR SUBMITTED THAT THE ASSESSEE HAS S URRENDERED ADDITIONAL INCOME THROUGH REVISED RETURN BEFORE DET ECTION BY THE AO. THE LEARNED AR DREW OUR ATTENTION TO THE PROCEEDING SHEET OF AO SHOWING VARIOUS DATES OF ASSESSMENT PROCEEDINGS BEF ORE THE AO, A COPY OF WHICH HAS BEEN PLACED ON RECORD. THE LEARNE D AR SUBMITTED THAT NOTICE U/S 143(2) WAS ISSUED TO THE ASSESSEE O N 26 TH JULY, 2006 ALONG WITH QUERY LETTER WHEREIN NO SPECIFIC QUERY W AS RAISED IN RESPECT OF THE AMOUNTS SURRENDERED BY THE ASSESSEE. THEREAF TER, VARIOUS DATES WERE FIXED FOR HEARING BUT THE AO DID RAISE SPECIFI C QUERY OR QUESTION IN THIS REGARD. THE ASSESSEE FILED REVISED RETURN ON 29.08.2007 AND, THEN, THE AO STARTED ENQUIRY FROM BANK AND OTHERS. THE LEARNED AR SUBMITTED THAT THE ASSESSEE HAS EXPLAINED REASONS F OR THE REVISED RETURNS, WHICH WERE NOT FOUND FALSE BY THE AO. HE C ONTENDED THAT WHEN THE EXPLANATION OF THE ASSESSEE WAS BONAFIDE A ND IN SUCH A CASE PENALTY U/S 271(1)(C) IS NOT LEVIABLE. THE LEARNED AR SUBMITTED THAT THE CIT(A) HEAVILY RELIED UPON THE JUDGMENT OF OF H ONBLE SUPREME ITA NO. 3158/M/09 RAJESH C. GANDHI 5 COURT IN THE CASE OF BA BALASUBRAMANIUM BROS. CO. V S. CIT, 236 ITR 977 IS DISTINGUISHABLE ON FACTS. IN THE CASE OF UN ION OF INDIA & ORS VS. M/S DHARMENDRA TEXTILE PROCESSORS & ORS., 306 I TR 277 IT WAS HELD THAT PENALTY IS A CIVIL LIABILITY AND MENSREA IS NOT REQUIRED TO BE ESTABLISHED FOR LEVY PENALTY U/S 271(1)(C) OF THE A CT. THE LEARNED AR SUBMITTED THAT THE HONBLE SUPREME COURT NOWHERE ST ATED THAT PENALTY IS NOT DISCRETIONARY. THE LEARNED AR SUBMIT TED THAT MERE SURRENDER OF ADDITIONAL INCOME DOES NOT AMOUNT TO C ONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF I NCOME, FOR WHICH THE HE RELIED UPON THE DECISION OF ITAT, DELHI BENC H (THIRD MEMBER) IN THE CASE OF ADDL. CIT VS. PREM CHAND GARG, 301 S OT 97 (DELHI)(TM). THE LEARNED AR SUBMITTED THAT IN THE S AID DECISION THE ITAT HAS ALSO CONSIDERED THE APPLICATION OF JUDGMEN T OF HONBLE SUPREME COURT IN THE CASE OF DHARMENDRA TEXTILES CI TED SUPRA. THE LEARNED AR HAS ALSO RELIED UPON THE FOLLOWING CASES IN SUPPORT OF ASSESSEES CASE: I. CIT VS. SHANKERLAL NEBHUMAL UTTAMCHANDANI, 31 1 ITR 327 (GUJ.) II. CIT VS. SIDHARTHA ENTERPRISES, 184 TAXMAN 460 (P&H) III. CIT VS. ESCORTS FINANCE LTD., 183 TAXMAN 453 (DELHI) 5.1 IT IS ALSO SUBMISSIONS OF THE LEARNED AR THAT S IMILAR REVISED RETURNS FOR AY 2003-04 AND 2004-05 WERE FILED BUT IN THESE YEARS PENALTY PROCEEDINGS HAVE BEEN DROPPED BY THE AO HIM SELF. THE LEARNED AR FILES COPIES OF THOSE ORDERS OF THE AO W HICH ARE PUT ON RECORD. 6. THE LEARNED DR, ON THE OTHER HAND, RELIED UPON T HE ORDERS OF THE REVENUE AUTHORITIES AND SUBMITTED THAT BY REFERRING THE BALANCE SHEET, WHICH APPEARING AT PAGES 30 & 31 OF ASSESSEES PAPE R BOOK, SUBMITTED THAT BALANCE SHEET FIGURES FILED ALONG WITH ORIGINA L RETURN AND FILED ALONG WITH REVISED RETURN OF INCOME WERE SUBSTANTIA LLY INCREASED. THE LEARNED AR FURTHER SUBMITTED THAT IN THE BALANCE SH EET TWO BANK ITA NO. 3158/M/09 RAJESH C. GANDHI 6 ACCOUNTS, WHICH WERE NOTED BY THE AO, HAVE NOT BEEN DISCLOSED IN THE ORIGINAL BALANCE SHEET FILED BY THE ASSESSEE. HE FU RTHER SUBMITTED THAT THE ASSESSEE DID NOT DISCLOSE INVESTMENT IN MUTUAL FUNDS. THE LEARNED DR FURTHER SUBMITTED THAT THE AO HAS DETECTED CONCE ALMENT OF PARTICULARS OF INCOME AND FURNISHING OF INACCURATE PARTICULARS ON THE BASIS OF AIR. THE REASONS/EXPLANATION HAD GIVEN BY THE ASSESSEE IN SUPPORT OF REVISED RETURNS ARE NOT BONAFIDE REASONS /EXPLANATION AND THE SAME ARE THE COOKED-UP STORIES, THEREFORE, THE AO REJECTED THE SAME. THE LEARNED DR SUBMITTED THAT REVISED RETURN FILED BY THE ASSESSEE IS NOT IN ACCORDANCE WITH THE SECTION 139( 5) OF THE ACT. AS REGARDS THE CONTENTION OF THE ASSESSEE THAT IN OTHE R YEARS FOR AY 2003-04 AND 2005-06 WHERE THE ASSESSEE HAD FILED RE TURN AND NO PENALTY HAS BEEN LEVIED, THE LEARNED DR SUBMITTED T HAT EACH YEAR IS A DIFFERENT YEAR AND THE AO AFTER EXAMINING THE FACTS OF THE YEAR UNDER CONSIDERATION, FOUND THAT THERE IS CONCEALMENT OF I NCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME BY T HE ASSESSEE AND, THEREFORE, HE LEVIED PENALTY. THE LEARNED DR SUBMI TTED THAT AT THE TIME OF ASSESSMENT PROCEEDINGS, THE ASSESSEE GOT VA RIOUS OCCASIONS BUT NOW WHERE WAS STATED ABOUT THE INCOME SURRENDER ED BY THE ASSESSEE. THE LEARNED DR SUBMITTED THAT IT IS NOT A CASE OF OMISSION BUT IT IS A CASE OF CONCEALMENT OF PARTICULARS OF I NCOME AND FURNISHING OF INACCURATE PARTICULARS OF INCOME. THE LEARNED DR FURTHER SUBMITTED THAT THE CASES CITED BY THE LEARNED AR ARE DISTINGU ISHABLE ON FACTS. 7. IN THE REJOINDER, THE LEARNED AR SUBMITTED THAT THE FACTS AND REASONS GIVEN FOR ADDITIONAL INCOME IN THE REVISED RETURNS FOR AY 2003-04 AND 2006-07 ARE SIMILAR TO THE FACTS OF THE CASE UNDER CONSIDERATION. THE LEARNED AR WHILE REFERRING THE J UDGMENT OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. SH ANKERLAL NEBHUMAL UTTAMCHANDANI, 311 ITR 327 (GUJ.) SUBMITTE D THAT THE HIGH COURT HELD THAT QUERIES RAISED BUT NO DETECTIO N OF UNDISCLOSED INCOME AND THE ASSESSEE FILING REVISED RETURN SURRE NDERING AMOUNT STANDING IN NAMES OF FAMILY MEMBERS AND THE FAMILY MEMBERS ITA NO. 3158/M/09 RAJESH C. GANDHI 7 ASSESSED ON SUCH INCOME, NO CONCEALMENT OF INCOME A ND PENALTY COULD NOT BE IMPOSED UNDER SECTION 271(1)(C) OF THE ACT. 8. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF THE PARTIES AND PERUSED THE RECORD AS WELL AS GONE THROUGH THE DECISIONS CITED. THE CRUX OF THE MATTER TO BE EXAMINED IN THIS CASE IS WHETHER SURRENDER OF ADDITIONAL INCOME DURING THE COURSE OF ASSESSMENT PROCEEDINGS AMOUNTS TO CONCEALMENT OF INCOME OR FUR NISHING OF INACCURATE PARTICULARS OF INCOME. IN CASE OF PENALT Y U/S 271(1)(C), THE REVENUE IS HEAVILY RELIED UPON THE JUDGMENT OF THE APEX COURT IN THE CASE OF DHARMENDRA TEXTILES CITED SUPRA. 8.1 INCOME TAX IS COLLECTED FROM TAX PAYERS, WHO ARE HAVING TAXABLE INCOME FOR THE WELFARE OF THE STATE. THE CI TIZENS ARE BOUND TO PAY SUCH INCOME TAX AS IT IS A PART OF THEIR DUTY T O THE NATION. THE INCOME TAX IS PAYABLE YEARLY ON THE ANNUAL TAXABLE INCOME, THAT MEANS, THIS DUTY TOWARDS THE NATION IS YEARLY DUTY OF THE TAXPAYERS. UNDER THE CIRCUMSTANCES SOME TIME TAXPAYERS AGREE T O CERTAIN ADDITIONS DURING ASSESSMENT PROCEEDINGS NOT ALWAYS BECAUSE THEY ARE CONVINCED THAT SUCH ADDITION IS WARRANTED OR OTHERW ISE JUSTIFIED, BUT WITH A VIEW TO BRING FINALITY TO THE WHOLE MATTER T O PURCHASE PEACE AND AVOID LITIGATION. THE GENERAL VIEW HAS ALWAYS B EEN THAT MERE ADMISSION BY ITSELF NEED NOT OFFER IMMUNITY TO THE TAXPAYER, WHERE THE ADMISSION HAS BEEN EXTORTED FROM HIM AFTER CONCEALM ENT HAD BEEN BROUGHT HOME. BUT THERE ARE A NUMBER OF CASES WHERE THERE IS HARDLY ANY MATERIAL TO JUSTIFY THE ADDITION AT THE TIME WH EN ADDITION IS CONCEDED. IT IS TRUE THAT IN SOME CASES THE ADDITIO N MAY BE AGREED WITH A VIEW TO FORESTALL ENQUIRY. EVEN IN SUCH CASE S IT WOULD APPEAR THAT PENALTY MAY NOT BE LEVY ABLE IN ABSENCE OF ANY MATERIAL ON RECORD AGAINST THE TAXPAYER. IT IS BECAUSE A MERE ATTEMPT TO CONCEAL INCOME HAS NOT BEEN SPECIFICALLY MADE LIABLE FOR PENALTY. EVEN IN A CASE WHERE PROCEEDINGS FOR DETECTION OF CONCEALMENT IS GOING O N DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSEE SURRENDERS SOM E INCOME AND ITA NO. 3158/M/09 RAJESH C. GANDHI 8 AO DROPS THE PROCEEDINGS OF DETECTION OF CONCEALMEN T BY ACCEPTING ASSESSEES SURRENDER WITHOUT MAKING FURTHER EXAMINA TION OR INVESTIGATION REGARDING DETECTION OF CONCEALMENT, U NDER THESE CIRCUMSTANCES ALSO, IT CAN BE HELD THAT IT IS NOT A CASE OF CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING OF INACCURAT E PARTICULARS OF INCOME; BECAUSE IN THAT SITUATION, THE AO DOES NOT RECORD SATISFACTION AS REQUIRED U/S 271(1). IN THIS REGARD, THE LEGAL P OSITION IS WELL SETTLED IN VIEW OF THE SUPREME COURT DECISIONS IN COMMISSIO NER OF INCOME TAX, MADRAS AND ANR. VS. S.V. ANGIDI CHETTIAR 44 IT R 739 (SC) AND D.M. MANASVI V. COMMISSIONER OF INCOME TAX, GUJARA T II, AHMEDABAD 86 ITR 557 (SC) THAT POWER TO IMPOSE PENALTY UNDER SECTION 271(1) OF THE ACT DEPENDS UPON THE SATISFACTION OF THE INCOME TAX OFFICER IN THE COURSE OF THE PROCEEDINGS UNDER THE ACT. IT CANNOT BE EXERCISED IF HE IS NOT SATISFIED AND HAS NOT RECORDED HIS SATISFACT ION ABOUT THE EXISTENCE OF THE CONDITIONS SPECIFIED IN CLAUSES (B ), (C) AND (D) OF SECTION 271(1) OF THE ACT. BEFORE THE PROCEEDINGS A RE CONCLUDED. IT IS TRUE THAT MERE ABSENCE OF THE WORDS I AM SATISFIED MAY NOT BE FATAL BUT SUCH A SATISFACTION MUST BE SPELT OUT FROM THE ORDER OF THE ASSESSING AUTHORITY AS TO THE CONCEALMENT PARTICULA RS OF INCOME OR FURNISHING INACCURATE PARTICULARS. IN THE ABSENCE O F A CLEAR FINDING AS TO THE CONCEALMENT OF INCOME FURNISHING INACCURATE PARTICULARS, THE INITIATION OF PENALTY PROCEEDINGS WILL BE WITHOUT J URISDICTION. 8.2 THE ABOVE VIEW IS ALSO SUPPORTED BY THE PROVISIONS OF EXPLANATION 1(B) OF SECTION 271 OF THE ACT. ACCORDI NG TO US AS PER THE PROVISIONS OF EXPLANATION 1(B) OF S. 271 OF THE ACT THE BURDEN IS ON THE ASSESSEE TO SUBSTANTIATE THE MATTERS STATED IN THE EXPLANATION, THAT IT IS SETTLED POSITION IN LAW THAT THERE CANNO T BE AN ESTOPPELS AGAINST A STATUTE. IT IS FOR THE DEPARTMENT TO CONS IDER THE EXPLANATION OFFERED BY THE ASSESSEE IN RESPECT OF AN AMOUNT WHI CH WAS OFFERED AS TAX. IT IS NOT AUTOMATIC THAT WHENEVER AN AMOUNT WA S OFFERED BY THE ASSESSEE, PENALTY IS TO BE LEVIED. THEREFORE, IN TH E PENAL PROCEEDINGS WHICH CONCEPTUALLY DIFFER FROM ASSESSMENT PROCEEDIN GS, THE ASSESSEE ITA NO. 3158/M/09 RAJESH C. GANDHI 9 CAN FILE AN EXPLANATION JUSTIFYING ITS ACTION IN NO T INCLUDING A PARTICULAR ITEM OF INCOME IN ITS RETURN, THOUGH IT MAY HAVE OFFERED THE AMOUNT TO BE TAXED SUBSEQUENTLY, THAT IF SUCH AN EX PLANATION IS OFFERED, THE DEPARTMENT HAS TO EXAMINE ITS ACCEPTAB ILITY AND RECORD A FINDING AS TO WHETHER THE EXPLANATION IS ACCEPTABLE OR NOT. ONLY IF THE EXPLANATION IS NOT FOUND ACCEPTABLE, THE QUESTION O F PENALTY WILL ARISE. IN OTHER WORDS, THE EXPLANATION OF THE ASSESSEE HAS TO BE CONSIDERED ON THE MERITS. DURING ASSESSMENT PROCEEDINGS, IF TH E AO ACCEPT THE SURRENDER AMOUNT, IN OTHER WORDS, IT CAN BE SAID TH AT WHATEVER EXPLANATION SUBMITTED BY THE ASSESSEE IN RESPECT OF SURRENDER OF AMOUNT, HAVE BEEN ACCEPTED BY THE AO UNLESS FINDING IS GIVEN BY THE AO THAT EXPLANATION FURNISHED BY THE ASSESSEE WAS F ALSE EXPLANATION. 8.3 THE ISSUE RELATING TO BONAFIDE AND FALS E RETURNS 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 THAT CASE WERE THAT THE ASSESSEE-COMPANY EFFECTED C ERTAIN TRANSACTIONS OF SALE OF CEMENT IN ACCORDANCE WITH T HE PROVISIONS OF THE CEMENT CONTROL ORDER DURING THE ASSESSMENT PERI OD 1-8-1971 TO 31-7-1972. THE AMOUNT OF FREIGHT INCLUDED IN THE 'F REE ON RAIL DESTINATIONS RAILWAY STATION' WAS PAID BY THE PURCH ASERS AND HENCE THE ASSESSEE DEDUCTED FROM THE PRICE SHOWN IN THE I NVOICES SENT TO THE PURCHASERS. IN THE COURSE OF ITS ASSESSMENT TO SALE S TAX UNDER THE MADHYA PRADESH GENERAL SALES TAX ACT, 1958 AND THE CENTRAL SALES TAX ACT, 1956, THE ASSESSEE DID NOT INCLUDE THE SAI D AMOUNT OF FREIGHT IN ITS TAXABLE TURNOVER ON THE GROUND THAT IT DID N OT FORM PART OF THE SALE PRICE. IN HIS TWO SEPARATE ASSESSMENT ORDERS, ONE UNDER THE CENTRAL SALES TAX ACT, 1956, AND THE OTHER UNDER TH E MADHYA PRADESH GENERAL SALES TAX ACT, 1958, THE ASSISTANT COMMISSI ONER, HOWEVER, INCLUDED THE SAME IN THE TAXABLE TURNOVER FOR LEVYI NG TAX. HE ALSO ITA NO. 3158/M/09 RAJESH C. GANDHI 10 IMPOSED HEAVY PENALTY ON ACCOUNT OF THE ASSESSEE'S FAILURE TO DISCLOSE THE SAME IN ITS TAXABLE RETURNS. ON DIRECT APPEAL T O THE SUPREME COURT, HELD AS UNDER:-. 5. THE NEXT QUESTION THAT ARISES FOR CONSIDERATION IS WHETHER THE ASSISTANT COMMISSIONER WAS RIGHT IN IMPOSING PENAL TY ON THE ASSESSEE FOR NOT SHOWING THE AMOUNT OF FREIGHT AS F ORMING PART OF THE TAXABLE TURNOVER IN ITS RETURNS. THE PENALTY WA S IMPOSED UNDER SECTION 43 OF THE MADHYA PRADESH GENERAL SALE S TAX ACT, 1958 AND SECTION 9(2) OF THE CENTRAL SALES TAX ACT, 1956, ON THE GROUND THAT THE ASSESSEE HAD FURNISHED FALSE RETURN S BY NOT INCLUDING THE AMOUNT OF FREIGHT IN THE TAXABLE TURN OVER DISCLOSED IN THE RETURNS. NOW, IT IS DIFFICULT TO SEE HOW THE ASSESSEE COULD BE SAID TO HAVE FILED 'FALSE' RETURNS, WHEN WHAT TH E ASSESSEE DID, NAMELY, NOT INCLUDING THE AMOUNT OF FREIGHT IN THE TAXABLE TURNOVER, WAS UNDER A BONA FIDE BELIEF THAT THE AMO UNT OF FREIGHT DID NOT FORM PART OF THE SALE PRICE AND WAS NOT INC LUDIBLE 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 TA X ACT, 1958, AND SECTION 2(H) OF THE CENTRAL SALES TAX ACT, 1956 , THE AMOUNT OF FREIGHT DID NOT FALL WITHIN THE DEFINITION AND WAS NOT LIABLE TO BE INCLUDED IN THE TAXABLE TURNOVER. THIS WAS THE REAS ON WHY THE ASSESSEE DID NOT INCLUDE THE AMOUNT OF FREIGHT IN T HE TAXABLE TURNOVER IN THE RETURNS FILED BY IT. NOW, IT CANNOT BE SAID THAT THIS WAS A FRIVOLOUS CONTENTION TAKEN UP MERELY FOR THE PURPOSE OF AVOIDING LIABILITY TO PAY TAX. IT WAS A HIGHLY ARGU ABLE CONTENTION WHICH REQUIRED SERIOUS CONSIDERATION BY THE COURT A ND THE BELIEF ENTERTAINED BY THE ASSESSEE THAT IT WAS NOT LIABLE TO INCLUDE THE AMOUNT OF FREIGHT IN THE TAXABLE TURNOVER, COULD NO T BE SAID TO BE MALA FIDE OR UNREASONABLE. WHAT SECTION 43 OF THE M ADHYA PRADESH GENERAL SALES TAX ACT, 1958, REQUIRES IS TH AT THE ASSESSEE SHOULD HAVE FILED A 'FALSE' RETURN AND A R ETURN CANNOT BE SAID TO BE 'FALSE' UNLESS THERE IS AN ELEMENT OF DELIBERATENESS IN IT. IT IS POSSIBLE THAT EVEN WHERE THE INCORRECT NESS OF THE RETURN IS CLAIMED TO BE DUE TO WANT OF CARE ON THE PART OF THE ASSESSEE AND THERE IS NO REASONABLE EXPLANATION FORTHCOMING FROM THE ASSESSEE FOR SUCH WANT OF CARE, THE COURT MAY, IN A GIVEN CASE, INFER DELIBERATENESS AND THE RETURN MAY BE LIABLE T O BE BRANDED AS A FALSE RETURN. BUT WHERE THE ASSESSEE DOES NOT INCLUDE A PARTICULAR ITEM IN THE TAXABLE TURNOVER UNDER A BON A FIDE BELIEF THAT HE IS NOT LIABLE SO TO INCLUDE IT, IT WOULD NO T BE RIGHT TO CONDEMN THE RETURN AS A 'FALSE' RETURN INVITING IMP OSITION OF PENALTY. THIS VIEW WHICH IS BEING TAKEN BY US IS SU PPORTED BY THE DECISION OF THIS COURT IN HINDUSTAN STEEL LTD. V. S TATE OF ORISSA [1970] 25 STC 211, WHERE IT HAS BEEN HELD THAT: '.. .EVEN IF A MINIMUM PENALTY IS PRESCRIBED, THE AUTHORITY COMPET ENT TO IMPOSE THE PENALTY WILL BE JUSTIFIED IN REFUSING TO IMPOSE PENALTY, WHEN THERE IS A TECHNICAL OR VENIAL BREACH OF PROVISIONS OF THE ACT OR ITA NO. 3158/M/09 RAJESH C. GANDHI 11 WHERE THE BREACH FLOWS FROM A BONA FIDE BELIEF THAT THE OFFENDER IS NOT LIABLE TO ACT IN THE MANNER PRESCRIBED BY TH E STATUTE....' IT IS ELEMENTARY THAT SECTION 43 OF THE MADHYA PRADESH GENERAL SALES TAX ACT, 1958, PROVIDING FOR IMPOSITION OF PE NALTY IS PENAL IN CHARACTER AND UNLESS THE FILING OF AN INACCURATE RETURN IS ACCOMPANIED BY A GUILTY MIND, THE SECTION CANNOT BE INVOKED FOR IMPOSING PENALTY. IF THE VIEW CANVASSED ON BEHALF O F THE REVENUE WERE ACCEPTED, THE RESULT WOULD BE THAT EVEN IF THE ASSESSEE RAISES A BONA FIDE CONTENTION THAT A PARTICULAR ITE M IS NOT LIABLE TO BE INCLUDED IN THE TAXABLE TURNOVER, 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 PENALTY IN CASE HIS CONTENTION IS ULTIMATELY FOUND BY THE COURT TO BE N OT ACCEPTABLE. THAT SURELY COULD NEVER HAVE BEEN INTENDED BY THE L EGISLATURE. 6. WE ARE, THEREFORE, OF THE VIEW THAT THE ASSESSEE COULD NOT BE SAID TO HAVE FILED 'FALSE' RETURNS WHEN IT DID NOT INCLUDE THE AMOUNT OF FREIGHT IN THE TAXABLE TURNOVER SHOWN IN THE RETURNS AND THE ASSISTANT COMMISSIONER WAS NOT JUSTIFIED 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. 7. WE, ACCORDINGLY, REJECT THE APPEALS INSOFAR AS T HEY ARE DIRECTED AGAINST THE INCLUSION OF THE AMOUNT OF FREIGHT IN T HE TAXABLE TURNOVER OF THE ASSESSEE BUT ALLOW THE APPEALS INSO FAR AS THEY RELATE TO IMPOSITION OF PENALTY AND SET ASIDE THE O RDERS PASSED BY THE ASSISTANT COMMISSIONER IMPOSING PENALTY ON THE ASSESSEE. 8.4 WE MAY REFER FOLLOWING DECISIONS WHICH ARE D IRECTLY ON THE ISSUE: A) THE PUNJAB & HARYANA HIGH COURT IN THE CASE OF C IT VS. RAJIV GARG &ORS., 313 ITR 256 HELD AS UNDER:- PURUSANT TO THE NOTICE U/S 148 THE ASSESSEE FILED T HE REVISED RETURN OF INCOME SHOWING HIGHER INCOME. THE SAID RE TURN OF INCOME WAS ACCOMPANIED BY A NOTE IN WHICH THE ASSES SEE SUBMITTED THAT HE SURRENDERED THE ENTIRE AMOUNT OF SALE PROCEEDS OF SHARES TO BUY PEACE OF MIND AND TO AVOID HAZARDS OF LITIGATION AND ALSO TO SAVE HIMSELF FROM ANY PENAL ACTION. LAT ER ON, ON THE BASIS OF REVISED RETURN, THE ASSESSMENT WAS FRAMED AND THE RETURN SUBMITTED BY THE ASSESSEE WAS REGULARIZED AS IT IS. DURING THE COURSE OF ASSESSMENT, THE AFORESAID EXPLANATION GIVEN BY THE ASSESSEE WAS NEITHER REJECTED NOR WAS IT HELD TO BE MALA FIDE. THE TRIBUNAL HAS RECORDED A PURE FINDING OF FACT TO THE EFFECT THAT THE REVENUE HAS NOT PLACED ON RECORD ANY MATERIAL O R EVIDENCE TO DISCHARGE ITS BURDEN OF PROVING CONCEALMENT. IN THE ASSESSMENT ORDER NO SUCH FINDING WAS RECORDED. THE DEPARTMENT HAS SIMPLY RESTED ITS CONCLUSION ON THE ACT OF THE ASSESSEE OF HAVING OFFERED ITA NO. 3158/M/09 RAJESH C. GANDHI 12 ADDITIONAL INCOME IN THE RETURN FILED IN RESPONSE T O THE NOTICE ISSUED UNDER SECTION 148. THE TRIBUNAL HAS FURTHER HELD THAT THE ADDITIONAL INCOME SO OFFERED BY THE ASSESSEE WAS DO NE IN GOOD FAITH AND TO BUY PEACE. THEREFORE, IN VIEW OF THE A FORESAID FINDING, THE TRIBUNAL WAS JUSTIFIED IN UPHOLDING TH E ORDER OF THE CIT(A), WHEREBY THE PENALTY IMPOSED U/S 271(1)(C) B Y THE AO WAS ORDER TO BE DELETED. B) THE DECISIONS OF ITAT IN CASES OF NITON VALVE IN DUSTRIES (P.) LTD. VS. ACIT, [2009] 30 SOT 236 (MUM.), ITO VS. GACL FI NANCE LTD., [2009] 30 SOT 360 (MUM.) AND TWIN STAR JUPITER COOP ERATIVE HSG. SOC.LTD., VS. ITO, [2009] 31 SOT 474 (MUM.) ARE DIR ECTLY ON THE ISSUE. THE ITAT IN THE CASE OF M/S OASIS SECURITIES LTD. I N ITA NO. 846/M/08 FOR AY 2002-03 VIDE ITS ORDER DATED 29 TH JANUARY, 2010 CONSIDERED ITS DECISION IN GACL LTD. CITED SUPRA AN D OTHER DECISIONS OF ITAT AND UPHELD THE ORDER OF THE CIT (A) WHO DIR ECTED THE AO TO DELETE THE PENALTY LEVIED U/S 271(1)(C). THE RELEVA NT FINDINGS OF THE ITAT REPRODUCED BELOW:- 7.3 NOW COMING TO THE MERITS OF THE CASE, WE NO TICED THAT THE AO LEVIED PENALTY U/S 271(1)(C) ON THE GROUND THAT THE ASSESSEE HAS FILED INACCURATE PARTICULARS OF INCOME. WHAT IS INACCURATE PARTICULARS OF INCOME WITHIN THE MEANING OF PROVISI ONS OF SECTION 271(1)(C) OF THE ACT HAS BEEN DISCUSSED IN DETAILS BY THE ITAT MUMBAI BENCH IN THE CASE OF MIMOSA INVESTMENT CO. P VT. LTD, IN ITA NO. 2983/MUM/07 FOR AY 2004-05 ORDER DATED 15.0 1.09. THE SAID ORDER HAS BEEN FOLLOWED BY THE ITAT IN THE CA SE OF ITO VS. GACL LTD. IN ITA NO. 6528/M/05 VIDE ORDER DATED 19. 03.2009, THE DECISION CITED BY THE LEARNED AR. THE FACTS OF THE CASE OF ITO VS. GACL LTD WERE THAT THE ASSESSEE CLAIMED LOSS AS LOSS FROM TRADING OF SHARES. THE ASSESSING OFFICER TREATED T HE SAID LOSS UNDER EXPLANATION TO SECTION 73 AND TREATED THE SAM E AS DEEMED SPECULATION LOSS. THE ASSESSING OFFICER HAS APPORTI ONED THE INTEREST AND OTHER EXPENSES ATTRIBUTABLE TO SPECULA TION BUSINESS INCOME. PENALTY U/S 271(1)(C) LEVIED BY THE AO HAS BEEN CANCELLED BY THE ITAT FOLLOWING THEIR ANOTHER DECIS ION IN CASE OF MIMOSA INVESTMENT CO PVT LTD, ITA NO 2983/MUM/07 FO R AY 2004-05 ORDER DATED 15.01.09 WHEREIN IT WAS HELD 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 I N THE COURSE OF ANY PROCEEDINGS UNDER THE ACT. IF HE IS SATISFIED A S PER CLAUSE (C) THAT ANY PERSON HAS CONCEALED THE PARTICULARS OF HI S INCOME OR HAS FURNISHED INACCURATE PARTICULARS OF SUCH INCOME , HE MAY DIRECT THAT SUCH PERSON SHALL PAY BY WAY OF PENALTY THE SUM MENTIONED IN SUB-CLAUSE (III) OF CLAUSE (C). THE EX PRESSION USED IN CLAUSE (C) IS HAS CONCEALED THE PARTICULARS OF HIS INCOME OR ITA NO. 3158/M/09 RAJESH C. GANDHI 13 FURNISHED INACCURATE PARTICULARS OF SUCH INCOME. THEREFORE, BOTH IN CASES OF CONCEALMENT AND INACCURACY THE PHRASE PARTICULARS OF INCOME ARE USED. IT WILL BE NOTED THAT AS REGARDS CONCEALMENT, THE EXPRESSION IN CLAUSE (C) IS HAS CONCEALED THE PARTICULARS OF HIS INCOME AND NOT HAS CONCEALED HIS INCOME. THE EXPRESSIONS 'HAS CONCEALED THE PARTICULARS OF INCOME' AND 'HAS FURNISHED INACCURATE PARTICULARS OF INCOME' HAVE NOT BEEN DEF INED EITHER IN SECTION 271(1)(C) OR ELSEWHERE IN THE ACT. THERE CA NNOT BE A STRAIGHT JACKET FORMULA FOR DETECTION OF THESE DEFA ULTS OF CONCEALMENT OF PARTICULARS OR OF FURNISHING INACCUR ATE PARTICULARS OF INCOME. IT DEPENDS UPON THE FACTS OF THE EACH CA SE. THERE WAS CONCEALMENT OR NOT IS, ORDINARILY, A QUESTION OF FA CT. ONCE BEARING IN MIND THE CORRECT PRINCIPLES COMES TO THE CONCLUS ION THAT THE ASSESSEE HAS DISCHARGED THE ONUS, IT BECOMES A CONC LUSION OF FACT. SIMILARLY, WHETHER THE EXPLANATION OFFERED BY THE ASSESSEE WAS BONA FIDE OR NOT IS ALSO A QUESTION OF FACT. IN THE ASSESSMENT PROCEEDINGS THE ITO WHILE ASCERTAINING THE TOTAL IN COME CHARGEABLE TO TAX WOULD BE IN A POSITION TO DETECT THE SPECIFIC OR DEFINITE PARTICULARS OF INCOME CONCEALED OR INACCUR ATE PARTICULARS ARE FURNISHED. WHERE IN THE CONSTITUENTS OF INCOME RETURNED, SUCH SPECIFIC OR DEFINITE PARTICULARS OF INCOME ARE DETE CTED AS CONCEALED, THEN EVEN IN THE TOTAL INCOME FIGURE TO THAT EXTENT THEY REFLECT, IT WOULD AMOUNT TO CONCEALMENT TO THAT EXT ENT. 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 EXTENT IT D OES 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 OF PARTICULARS OR BOTH, THE PARTICULARS OF INCOME SO V ITIATED WOULD BE SPECIFIC AND DEFINITE AND BE KNOWN IN THE ASSESSMEN T PROCEEDINGS BY THE ITO, WHO ON BEING SATISFIED ABOU T EACH CONCEALMENT OR INACCURACY OF PARTICULARS OF INCOME WOULD BE IN A POSITION TO INITIATE THE PENALTY PROCEEDINGS ON ONE OR BOTH OF THE GROUNDS OF DEFAULT AS MAY HAVE BEEN SPECIFICALLY AN D DIRECTLY DETECTED. 7.4 IT WAS ALSO HELD THAT FROM THE SCHEME OF THE ACT, TWO IMPORTANT THINGS COME OUT ARE THAT IT IS THE DUTY O F THE ASSESSEE TO FURNISH PARTICULARS OF INCOME WHICH SHOULD BE AC CURATE PARTICULARS, SIMULTANEOUSLY HE HAS RIGHT TO CLAIM A LL EXEMPTIONS AND DEDUCTIONS PROVIDED IN THE ACT, ACCORDING TO TH E ASSESSEE FOR WHICH HE IS ENTITLED. THE DUTY OF THE ASSESSING OFF ICER IS TO ASSESS REAL AND CORRECT INCOME IN ACCORDANCE WITH L AW. THE CBDT IN ITS CIRCULAR NO. 14(XL35) OF 1955 DATED 11.04.19 55 STATED THAT OFFICERS OF THE DEPARTMENT MUST NOT TAKE ADVANTAGES OF IGNORANCE OF AN ASSESSEE AS TO HIS RIGHTS, IT IS ONE OF THEIR DUTIES TO ASSIST A TAX PAYER IN EVERY REASONABLE WAY .ON THE BASIS O F DETAILED DISCUSSIONS IN THIS REGARD THE ITAT OBSERVED THAT A FTER FURNISHING ITA NO. 3158/M/09 RAJESH C. GANDHI 14 PARTICULARS REGARDING DETERMINATION OF INCOME THE A SSESSEE HAS RIGHT TO CLAIM EXEMPTION AND DEDUCTION, ACCORDING T O HIM WHICH ARE AS PER LAW .THE ASSESSING OFFICER WHILE DISCHAR GING HIS DUTY ALLOW OR DISALLOW ASSESSEES CLAIM AND ARRIVED AT A DIFFERENT FIGURE OF TOTAL INCOME THEN THE TOTAL INCOME DECLAR ED BY THE ASSESSEE, THAT CASE CANNOT BE SAID TO BE A CASE OF FURNISHING INACCURATE PARTICULARS OR CONCEALING OF PARTICULARS OF INCOME. C. WE MAY ALSO REFERRED RELIED UPON THE JUDGMENT S CITED BY THE LEARNED AR IN THE CASE OF CIT VS. SHANKERLAL NEBHU MAL UTTAMCHANDANI, 311 ITR 327 (GUJ.) AND CIT VS. ESCO RTS FINANCE LTD., 183 TAXMAN 453 (DELHI) IN SUPPORT OF ABOVE VIEW. 8.5 (I) IN THE CASE UNDER CONSIDERATION, THE CIT (A) HAS HEAVILY RELIED UPON THE LATEST JUDGMENT OF DHARMENDRA TEXTILES (SU PRA).THE APPLICABILITY OF THIS JUDGMENT HAS BEEN DISCUSSED I N AN ANOTHER JUDGMENT BY THE SUPREME COURT IN THE CASE OF UNION OF INDIA V. RAJASTHAN SPG. & WVG. MILLS 224 CTR 1(SC). THE RELE VANT DISCUSSION OF THE APEX COURT IS REPRODUCED AS UNDER:- 20. AT THIS STAGE, WE NEED TO EXAMINE THE RECENT DE CISION OF THIS COURT IN DHARAMENDRA TEXTILE CASE (SUPRA). IN ALMOS T EVERY CASE RELATING TO PENALTY, THE DECISION IS REFERRED TO ON BEHALF OF THE REVENUE AS IF IT LAID DOWN THAT IN EVERY CASE OF NO N-PAYMENT OR SHORT PAYMENT OF DUTY THE PENALTY CLAUSE WOULD AUTO MATICALLY GET ATTRACTED AND THE AUTHORITY HAD NO DISCRETION IN TH E MATTER. ONE OF US (AFTAB ALAM, J.) WAS A PARTY TO THE 2009] UOI V. RAJASTHAN SPG. & WVG. MILLS (SC) 621 DECISION IN DHARAMENDRA TEXTILE CASE (SUPRA) AND WE SEE NO REASON TO UNDERSTAND OR READ THAT DECISION IN THAT MANNER. IN DHARAMENDRA TEXTILE CASE (SUPRA) THE COURT FRAMED THE ISSUES BEFORE IT, IN PARAGRAPH 2 OF THE DECISION, AS FOLLOWS : '2. A DIVISION BENCH OF THIS COURT HAS REFERRED THE CONTROVERSY INVOLVED IN THESE APPEALS TO A LARGER BENCH DOUBTIN G THE CORRECTNESS OF THE VIEW EXPRESSED IN DILIP N. SHROF F V. JOINT CIT 2007 (8) SCALE 304. THE QUESTION WHICH ARISES FOR D ETERMINATION IN ALL THESE APPEALS IS WHETHER SECTION 11AC OF THE CENTRAL EXCISE ACT, 1944 (THE INSERTED BY FINANCE ACT, 1996 WITH T HE INTENTION OF IMPOSING MANDATORY PENALTY ON PERSONS WHO EVADED PA YMENT OF TAX SHOULD BE READ TO CONTAIN MENS REA AS AN ESSENT IAL INGREDIENT AND WHETHER THERE IS A SCOPE FOR LEVYING PENALTY BE LOW THE PRESCRIBED MINIMUM. BEFORE THE DIVISION BENCH, THE STAND OF THE ITA NO. 3158/M/09 RAJESH C. GANDHI 15 REVENUE WAS THAT THE SAID SECTION SHOULD BE READ AS PENALTY FOR STATUTORY OFFENCE AND THE AUTHORITY IMPOSING PENALT Y HAS NO DISCRETION IN THE MATTER OF IMPOSITION OF PENALTY A ND THE ADJUDICATING AUTHORITY IN SUCH CASES WAS DUTY BOUND TO IMPOSE PENALTY EQUAL TO THE DUTIES SO DETERMINED. THE ASSE SSEE ON THE OTHER HAND REFERRED TO SECTION 271(1)(C) OF THE INC OME-TAX ACT, 1961 TAKING THE STAND THAT SECTION 11AC OF THE ACT IS IDENTICALLY WORDED AND IN A GIVEN CASE IT WAS OPEN TO THE ASSES SING OFFICER NOT TO IMPOSE ANY PENALTY. THE DIVISION BENCH MADE REFERENCE TO RULE 96ZQ AND RULE 96ZO OF THE CENTRAL EXCISE RULES , 1944 AND A DECISION OF THIS COURT IN CHAIRMAN, SEBI V. SHRIRAM MUTUAL FUND [2006] 5 SCC 361 AND WAS OF THE VIEW THAT THE BASIC SCHEME FOR IMPOSITION OF PENALTY UNDER SECTION 271(1)(C), SECT ION 11AC OF THE ACT AND RULE 96ZQ(5) OF THE RULES IS COMMON. ACCORD ING TO THE DIVISION BENCH THE CORRECT POSITION IN LAW WAS LAID DOWN IN CHAIRMAN, CASE [2006] 5 SCC 361 AND NOT IN DILIP CA SE [2007] 8 SCALE 304 (SC). THEREFORE, THE MATTER WAS REFERRED TO A LARGER BENCH.' (P. 280). AFTER REFERRING TO A NUMBER OF DE CISIONS ON INTERPRETATION AND CONSTRUCTION OF STATUTORY PROVIS IONS, THE COURT OBSERVED AND HELD AS FOLLOWS : '28. IN UNION BUDGET OF 1996-97, SECTION 11AC OF TH E ACT WAS INTRODUCED. IT HAS MADE THE POSITION CLEAR THAT THE RE IS NO SCOPE FOR ANY DISCRETION. IN PARA 136 OF THE UNION BUDGET REFERENCE HAS BEEN MADE TO THE PROVISION STATING THAT THE LEVY OF PENALTY IS A MANDATORY PENALTY. IN THE NOTES ON CLAUSES ALSO THE SIMILAR INDICATION HAS BEEN GIVEN. 29. THE ABOVE BEING THE POSITION, THE PLEA THAT THE RULES 96ZQ AND 96ZO HAVE A CONCEPT OF DISCRETION IN-BUILT CANN OT BE SUSTAINED. DILIP N. CASE [2007] 8 SCALE 304 (SC) WA S NOT CORRECTLY DECIDED BUT CHAIRMAN, CASE [2006] 5 SCC 3 61 HAS ANALYSED THE LEGAL POSITION IN THE CORRECT PERSPECT IVES. THE REFERENCE IS ANSWERED....' (P. 302) 21. FROM THE ABOVE, WE FAIL TO SEE HOW THE DECISION IN DHARAMENDRA TEXTILE CASE (SUPRA) CAN BE SAID TO HOL D THAT SECTION 11AC WOULD APPLY TO EVERY CASE OF NON-PAYMENT OR SH ORT PAYMENT OF DUTY REGARDLESS OF THE CONDITIONS EXPRESSLY MENT IONED IN THE SECTION FOR ITS APPLICATION. 22. THERE IS ANOTHER VERY STRONG REASON FOR HOLDING THAT DHARAMENDRA TEXTILE CASE (SUPRA) COULD NOT HAVE IN TERPRETED SECTION 11AC IN THE MANNER AS SUGGESTED BECAUSE IN THAT CASE THAT WAS NOT EVEN THE STAND OF THE REVENUE. THE COU RT NOTED THE SUBMISSION MADE ON BEHALF OF THE REVENUE AS FOLLOWS : 622 TAXMAN TAX REPORTS [VOL. 180 '5. MR. CHANDRASHEKHARAN, ADDITIONAL SOLICITOR GENE RAL SUBMITTED THAT IN RULES 96ZQ AND 96ZO THERE IS NO REFERENCE T O ANY MENS ITA NO. 3158/M/09 RAJESH C. GANDHI 16 REA AS IN SECTION 11AC WHERE MENS REA IS PRESCRIBED STATUTORILY. THIS IS CLEAR FROM THE EXTENDED PERIOD OF LIMITATIO N PERMISSIBLE UNDER SECTION 11A OF THE ACT. IT IS IN ESSENCE SUBM ITTED THAT THE PENALTY IS FOR STATUTORY OFFENCE. IT IS POINTED OUT THAT THE PROVISO TO SECTION 11A DEALS WITH THE TIME FOR INITIATION O F ACTION. SECTION 11AC IS ONLY A MECHANISM FOR COMPUTATION AND THE QU ANTUM OF PENALTY. IT IS STATED THAT THE CONSEQUENCES OF FRAU D ETC. RELATE TO THE EXTENDED PERIOD OF LIMITATION AND THE ONUS IS O N THE REVENUE TO ESTABLISH THAT THE EXTENDED PERIOD OF LIMITATION IS APPLICABLE. ONCE THAT HURDLE IS CROSSED BY THE REVENUE, THE ASS ESSEE IS EXPOSED TO PENALTY AND THE QUANTUM OF PENALTY IS FI XED. IT IS POINTED OUT THAT EVEN IF IN SOME STATUTES MENS REA IS SPECIFICALLY PROVIDED FOR, SO IS THE LIMIT OR IMPOSITION OF PENA LTY, THAT IS THE MAXIMUM FIXED OR THE QUANTUM HAS TO BE BETWEEN TWO LIMITS FIXED. IN THE CASES AT HAND, THERE IS NO VARIABLE A ND, THEREFORE, NO DISCRETION. IT IS POINTED OUT THAT PRIOR TO INSERTI ON OF SECTION 11AC, RULE 173Q WAS IN VOGUE IN WHICH NO MENS REA WAS PRO VIDED FOR. IT ONLY STATED HE KNOWS OR HAS REASON TO DO. THE SA ID CLAUSE REFERRED TO WILFUL ACTION. ACCORDING TO LEARNED COU NSEL WHAT WAS INFERENTIALLY PROVIDED IN SOME RESPECTS IN RULE 173 Q, NOW STANDS EXPLICITLY PROVIDED IN SECTION 11AC. WHERE THE OUTE R LIMIT OF PENALTY IS FIXED AND THE STATUTE PROVIDES THAT IT S HOULD NOT EXCEED A PARTICULAR LIMIT, THAT ITSELF INDICATES SCOPE FOR DISCRETION BUT THAT IS NOT THE CASE HERE.' (P. 281) 23. THE DECISION IN DHARAMENDRA TEXTILE CASE (SUPRA ) MUST, THEREFORE, BE UNDERSTOOD TO MEAN THAT THOUGH THE AP PLICATION OF SECTION 11AC WOULD DEPEND UPON THE EXISTENCE OR OTH ERWISE OF THE CONDITIONS EXPRESSLY STATED IN THE SECTION, ONC E THE SECTION IS APPLICABLE IN A CASE THE CONCERNED AUTHORITY WOULD HAVE NO DISCRETION IN QUANTIFYING THE AMOUNT AND PENALTY MU ST BE IMPOSED EQUAL TO THE DUTY DETERMINED UNDER SUB-SECT ION (2) OF SECTION 11A. THAT IS WHAT DHARAMENDRA TEXTILE CASE (SUPRA) DECIDES. 8.5 (II) THE ABOVE VIEW HAS BEEN FOLLOWED BY THE PUNJAB AND HARYANA HIGH COURT IN THE CASE OF CIT VS. SIDHARTHA ENTERPRISES, 184 TAXMAN 460 (P&H) CITED BY THE LEARNED AR. 8.6 WE NOTICED THAT THE JUDGMENT IN DHARAMEND RA TEXTILE (SUPRA) IS APPLICABLE IN CASE WHERE IT WAS FOUND THAT ALL THE CONDITIONS LAID DOWN IN THE SECTION 271(1)(C) ARE SATISFIED. ONCE T HE SECTION IS APPLICABLE IN THAT CASE THE CONCERNED AUTHORITY WOU LD HAVE NO DISCRETION IN QUANTIFYING THE AMOUNT AND PENALTY MU ST BE IMPOSED AS PRESCRIBED / DETERMINED UNDER THE SECTION. IN THE L IGHT OF ABOVE ITA NO. 3158/M/09 RAJESH C. GANDHI 17 DISCUSSION WE FIND THAT IN THE CASE UNDER CONSIDERA TION CONDITIONS LAID DOWN IN SECTION 271(1)(C) ARE NOT SATISFIED TH EREFORE PENALTY PROVISIONS OF SECTION 271(1)(C) NOT APPLICABLE EVEN IN ACCORDANCE WITH ABOVE JUDGMENT OF THE APEX COURT. SIMILARLY THE JU DGMENT IN THE CASE OF BA BALASUBRAMANIUM BROS. CO. VS. CIT, 236 ITR 97 7 IS A ALSO DISTINGUISHABLE ON FACTS AS IN THE SAID JUDGMENT IT WAS HELD THE ASSESSEE DID NOT DISCHARGE HIS ONUS. 8.7 IN THE LIGHT OF THE ABOVE DISCUSSION, IF W E CONSIDER THE FACTS OF THE CASE UNDER CONSIDERATION, WE FIND THAT THE ALLEGATION OF THE REVENUE IS THAT THE AO HAS DETECTED CONCEALMENT OF PARTICULARS OF INCOME. THE AO CAME TO KNOW CONCEALMENT FROM AIR. E XPLANATION OF THE ASSESSEE WAS THAT THE ASSESSEE HAS SURRENDERED ADDITIONAL INCOME DURING THE COURSE OF ASSESSMENT PROCEEDINGS BY FILI NG REVISED RETURN BEFORE RECORDING SATISFACTION REGARDING CONCEALMENT / BEFORE REACHING FINAL CONCLUSION ON DETECTION OF CONCEALMENT OF PAR TICULARS OF INCOME. THE ASSESSEE EXPLAINED THE REASONS OF REVISED RETUR N, WHICH IS REPRODUCED IN PARA 3 OF THIS ORDER. THE CIT (A) HEL D THAT THE EXPLANATION OF THE ASSESSEE WAS CONSIDERED AS FALSE BY THE AO. KEEPING IN VIEW THE DISCUSSION MADE IN PARA 5.2 OF THIS ORDER, WHAT IS FALSE, WE NOTICED THAT THIS FINDING OF CIT(A) IS GE NERAL FINDING WITHOUT BASE ON ANY MATERIAL. THAT MERE REJECTION OF THE EX PLANATION CANNOT BE SAID TO BE A FALSE UNLESS SOMETHING IS FOUND TO BE FALSE. IF WE SEE THE PROCEEDING SHEET OF THE AO, OF WHICH, A COPY HA S BEEN PLACED ON RECORD/IN THE PAPER BOOK, WE FIND THAT THE CASE WAS SELECTED FOR SCRUTINY ASSESSMENT UNDER CASS AND NOTICE U/S 143(2 ) WAS ISSUED ALONG WITH ONE QUERY LETTER ON 26 TH JULY, 2006 WHEREIN THE AO DID NOT ASK ANY SPECIFIC INFORMATION OR RAISED ANY QUERY RE GARDING ADDITIONAL INCOME SURRENDERED BY THE ASSESSEE. THE ASSESSEE FI LED REVISED RETURN ON 29 TH AUGUST, 2007 AND, THEREAFTER, THE AO STARTED VERIF ICATION FROM THE BANK AND OTHERS BUT FINALLY ACCEPTED THE INCOME SURRENDERED BY THE ASSESSEE IN THE REVISED RETURN. AFTER CONSIDER ING THE TOTALITY OF THE FACTS OF THE CASE, WE FIND THAT THE ASSESSEE HA S SURRENDERED THE ITA NO. 3158/M/09 RAJESH C. GANDHI 18 INCOME DURING THE ASSESSMENT PROCEEDINGS BEFORE ANY SATISFACTION RECORDED BY THE AO THAT THE ASSESSEE HAS CONCEALED PARTICULARS OF INCOME OR FURNISHED INACCURATE PARTICULARS OF INCOM E. WE ALSO NOTICED THAT THE EXPLANATION FURNISHED BY THE ASSESSEE ALSO BONAFIDE EXPLANATION SO FAR AS THE PENALTY U/S 271(1)(C) IS CONCERNED. WE ARE, THEREFORE, OF THE VIEW THAT THIS IS NOT A FIT CASE FOR LEVY OF PENALTY U/S 271(1)(C) OF THE ACT. THEREFORE, WE HEREBY CANCEL T HE PENALTY OF RS. 37,89,520/- LEVIED BY THE AO U/S 271(1)(C) AND CONF IRMED BY THE CIT(A). 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. PRONOUNCED ON THIS 9 TH DAY OF MARCH, 2010. SD/- SD/- (P. MADHAVI DEVI) (A.L. GEHLOT) JUDICIAL MEMBER ACCOUNTAN T MEMBER DATED: 9 TH MARCH, 2010. COPY TO:- 1) THE APPELLANT. 2) THE RESPONDENT. 3) THE CIT (A) CONCERNED. 4) THE CIT CONCERNED. 5) THE DEPARTMENTAL REPRESENTATIVE, D BENCH, I.T .A.T., MUMBAI. BY ORDER //TRUE COPY// ASST. REGISTRAR, I.T.A.T., MUMBAI. KV S.NO. DESCRIPTION DATE INTLS 1. DRAFT DICTATED ON 25.02.10 SR.P.S./P.S 2. DRAFT PLACED BEFORE AUTHOR 26.02.10 SR.P.S/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM ITA NO. 3158/M/09 RAJESH C. GANDHI 19 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5 APPROVED DRAFT COMES TO THE SR.P.S./PS SR.P.S./P.S 6. KEPT FOR PRONOUNCEMENT ON SR. P.S./P.S. 7. FILE SENT TO THE BENCH CLERK SR.P.S./P.S 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER