The DCIT, Circle-1, Kakinada V. M/s Sudha Agro Oil & Chemical Industries Ltd, Samalkot

ITA 470/VIZ/2006

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 2596 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 4 year(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-12-2010
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 24-11-2010
• Assessment Year: 2001-2002
• Appeal Filed On: 20-11-2006
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: D S SUNDER SINGH
• Keywords: Unexplained cash credit; Salary income; Period of limitation; Retrospective amendment; Initiation of penalty proceedings; Reasonable cause; Onus to prove; Reason to believe; Set aside
• Section: 271(1)(c); 11A; 68

Judgement Text

ITA 470/VIZ/06 SUDHA AGRO OIL & CHEM. INDS. LTD., SAMALKOT IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE: SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI BR BASKARAN, ACCOUNTANT MEMBER ITA NO. 470 /VIZAG/ 20 06 ASSESSMENT YEAR : 2001 - 02 DCIT, CIRCLE - 1 KAK INADA SUDHA AGRO OIL & CHEMICAL INDUSTRIES LTD SAMALKOT (APPELLANT) VS. (RESPONDENT) GIR NO.S - 22 APPELLANT BY: SHRI D.S. SUNDER SINGH, DR RESPONDENT BY: SHRI G.V.N. HARI, CA ORDER PER SHRI S.K. YADAV, JUDICIAL MEMBER : - THIS APPEAL IS PREFERRED BY THE REVENUE AGAINST THE ORDER OF THE CIT(A) ON FOLLOWING GROUNDS: 1. THE ORDER OF THE CIT(A) IS ERRONEOUS BOTH ON FACTS AND IN LAW 2. THE CIT(A) OUGHT TO HAVE UPHELD THE IMPOSITION OF PENALTY U/S 271(1)(C) AMOUNTING TO RS.8,32,437/ - ATTRIBUTABLE TO THE ADDIT ION OF UNEXPLAINED CASH CREDITS U/S 68 OF THE I.T. ACT, 1961 WHICH WAS CONFIRMED BY THE CIT(A) AND ACCEPTED BY THE ASSESSEE. 3. THE CIT(A) WRONGLY HELD THAT THE AMENDMENT TO EXPLANATION 4 OF SECTION 271(1)(III) IS PROSPECTIVE WHILE THE HON. SUPREME COURT IN T HE CASE OF CIT VS. GOLD COIN HELATH FOOD PVT. LTD. [304 ITR 308 (SC)] HELD THAT THE AMENDMENT IS CLARIFICATORY AND RETROSPECTIVE IN NATURE. 4. THE CIT(A) WRONGLY HELD THAT THE CONCEALMENT PENALTY IS NOT LEVIABLE WHEN THE ADDITION OF CONCEALED INCOME HAD ONLY REDUCED THE LOSS AND NO TAX IS PAYABLE THERE ON, WHILE IN THE CASE OF CIT VS. ADITYA CHEMICALS LTD. & OTHERS [283 ITR 458 (DELHI) (2006)], IT WAS HELD THAT TOTAL INCOME INCLUDES EVEN THE LOSS. 5. ANY OTHER GROUND THAT MAY BE URGED AT THE TIME OF HEARING. 2. THOUGH VARIOUS GROUNDS ARE RAISED BY THE REVENUE ASSAILING THE ORDER OF THE CIT(A), BUT THEY ALL RELATE TO THE DELETION OF PENALTY LEVIED U/S 271(1)(C) OF THE I.T. ACT. 3. THE BRIEF FACTS BORNE OUT FROM THE RECORD ARE THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, ASSESSEE WAS REQUIRED TO PROVE THE GENUINENESS OF ITA 470/VIZ/0 6 SUDHA AGRO OIL & CHEM. INDS. LTD., SAMALKOT 2 THE DEPOSITS RECEIVED FROM THE PUBLIC AGGREGATING TO RS.19,67,000/ - AGAINST THE NAME OF 75 DEPOSITORS. THE ASSESSEE SUBMITTED CONFIRMATORY LETTERS ONLY IN RESPECT OF 17 DEPOSITORS BUT FAILED T O FURNISH THE CONFIRMATORY LETTERS IN RESPECT OF THE BALANCE DEPOSITORS. THE A.O. HAS GIVEN A FINDING IN RESPECT OF ALLEGED 17 DEPOSITORS THAT EVEN IN THESE CASES THE CONFIRMATORY LETTERS HAVE BEEN TYPED IN STEREO TYPE MANNER PARTICULARLY INFORMING THAT T HE SOURCES OF FOUNDS WERE OUT OF EITHER SAVINGS FROM SALARY INCOME OR FROM SAVINGS FROM AGRICULTURAL INCOME. NO CORROBORATIVE EVIDENCE WAS FILED IN RESPECT OF HAVING EARNED EITHER SALARY INCOME OR AGRICULTURAL INCOME. FURTHER MORE, NO POSTAL ADDRESSES FO R CORRESPONDENCE WERE COMMUNICATED IN RESPECT OF SUCH CONFIRMATORY LETTERS ON ACCOUNT OF WHICH ASSESSING OFFICER EXPRESSED HIS HELPLESSNESS IN ESTABLISHING THE IDENTITY OF THE ALLEGED DEPOSITORS AS WELL AS THEIR CREDITWORTHINESS. THE ASSESSING OFFICER THE REFORE PROCEEDED TO ADD THE ENTIRE DEPOSITS OF RS.19,67,000/ - TOGETHER WITH ACCRUED INTEREST THEREON OF RS.1,37,770/ - AGGREGATING TO RS.21,04,770/ - . R ESULTANTLY THE GROSS RETURN OF RS.3,08,82,852/ - WAS REVISED AT A FIGURE OF RS.2,87,92,792/ - . THE ACTION OF THE A.O. WAS CONFIRMED BY THE FIRST APPELLATE AUTHORITIES ON THE REASONING THAT IN VIEW OF THE INFIRMITY FOUND BY THE A.O. IN RESPECT OF THE DEPOSITS, THE AGGREGATE AMOUNT OF CREDIT DESERVES TO BE TREATED AS THE ASSESSEES UNDISCLOSED INCOME AND FURTHER MORE UPHELD THE DISALLOWANCE OF INTEREST THEREON OF RS.1,37,770/ - . 4. THE A.O. ACCORDINGLY INITIATED PENALTY PROCEEDINGS U/S 271(1)(C) AND DURING THE COURSE OF PENALTY PROCEEDINGS, IT WAS EXPLAINED ON BEHALF OF THE ASSESSEES THAT THE DEPARTMENT HAS NOT BEEN ABLE TO ESTABLISH ANY ACT OF CONCEALMENT BY THE ASSESSEES IN RESPECT OF SAID DEPOSITS FROM THE PUBLIC AND THEREFORE CONCEALMENT PENALTY WAS NOT EXIGIBLE. THE A.O. BRUSHED ASIDE THE EXPLANATION WITH THE REASONING THAT THE ASSESSEE COMPANY HAD CONCEAL ED ITS INCOME AMOUNTING TO RS.19,67,000/ - IN THE GUISE OF BOGUS DEPOSITS INTRODUCED IN ITS ACCOUNTS FROM THE UNDISCLOSED SOURCES, WHICH ACTION WAS UPHELD BY THE FIRST APPELLATE AUTHORITIES AND SUBSEQUENTLY THE ASSESSEE DID NOT PREFER ANY APPEAL AGAINST THE ORDER OF THE FIRST APPELLATE AUTHORITY. THERE ITA 470/VIZ/0 6 SUDHA AGRO OIL & CHEM. INDS. LTD., SAMALKOT 3 UPON THE A.O. LEVIED CONCEALMENT PENALTY OF RS.8,32,437/ - REPRESENTING THE MINIMUM PENALTY LEVIABLE. 5. THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A) AND PLACED A HEAVY RELIANCE UPON THE JUDGEMENT OF THE APEX COURT IN THE CASE OF CIT VS. PRITHIPAL SINGH AND CO. 249 ITR 670 IN SUPPORT OF HIS CONTENTION THAT IN THE CASE WHERE THE ASSESSED INCOME REMAINED AT LOSS FIGURE PENALTY U/S 271(1)(C) CANNOT BE LEVIED. BESIDES, IT WAS ALSO CONTENDED THAT WHILE LEV YING THE CONCEALMENT PENALTY , THE A.O. HAS NOT CLEARLY MENTIONED WHETHER THE PENALTY WAS LEVIED FOR CONCEALMENT OF INCOME OR FOR FURNISHING INACCURATE PARTICULARS OF INCOME. THE A.O. HAS MENTIONED BOTH THE INGREDIENTS IN A ROUTINE MANNER WITHOUT SPECIFYIN G WHETHER IT IS AN ACT OF CONCEALMENT OF INCOME OR AN ACT OF FURNISHING INACCURATE PARTICULARS OF INCOME. THE CIT(A) RE - EXAMINED THE ISSUE IN THE LIGHT OF ASSESSEES CONTENTIONS IN DETAIL AND ON MERIT HE CAME TO THE CONCLUSION THAT THE ASSESSEE CAN BE SAI D TO HAVE EITHER CONCEALED ITS PARTICULARS OF INCOME OR FURNISHED INACCURATE PARTICULARS OF INCOME. BUT RELYING UPON THE JUDGEMENT OF THE APEX COURT IN THE CASE OF CIT VS. PRITHIPAL SINGH AND CO. (SUPRA), HE DELETED THE PENALTY AFTER HAVING OBSERVED THAT AS FACT AND CIRCUMSTANCES IN RESPECT OF THE CASE ADJUDICATED UPON BY THE HONBLE SUPREME COURT AND HIGH COURTS OF KERALA AND ALLAHABAD ARE APPLICABLE TO THE FACT AND CIRCUMSTANCES OF THE ASSESSEES CASE ANY CONCEALMENT PENALTY, UNFORTUNATELY, IS NOT LEVIAB LE IN SPITE DETECTION OF ACT OF CONCEALMENT IN THE INSTANT CASE. 6 . AGGRIEVED, THE REVENUE HAS PREFERRED AN APPEAL BEFORE THE TRIBUNAL WITH THE SUBMISSION THAT JUDGEMENT OF TH E APEX COURT IN THE CASE OF PRITHIPAL SINGH (SUPRA) HAS BEEN OVER RULED BY THE LA RGER BENCH OF THE SUPREME COURT IN THE CASE OF CIT VS. GOLD COIN HEALTH FOOD (P) LTD. 304 ITR 308 IN WHICH THEIR LORDSHIP HAVE CATEGORICALLY HELD THAT EXPLANATION 4 TO SECTION 271(1)(C) INTENDED TO LEVY THE PENALTY NOT ONLY IN A CASE WHERE AFTER ADDITION O F CONCEALED INCOME, A LOSS RETURNED, AFTER ASSESSMENT BECOMES POSITIVE INCOME BUT ALSO IN A CASE WHERE ADDITION OF CONCEALED INCOME REDUCES THE RETURN ED LOSS AND FINALLY THE ASSESSED INCOME IS ALSO LOSS; THE SAID ITA 470/VIZ/0 6 SUDHA AGRO OIL & CHEM. INDS. LTD., SAMALKOT 4 EXPLANATION BEING CLARIFICATORY IS APPLICA BLE RETROSPECTIVELY. IN THE LIGHT OF THIS JUDGEMENT OF THE APEX COURT, THE FINDINGS OF THE CIT(A), FOLLOWING THE ORDER OF THE APEX COURT IN THE CASE OF PRITHIPAL SINGH DESERVES TO BE REVERSED. SINCE THE CIT(A) HAS CONFIRMED THE PENALTY ON MERIT, THE PENA LTY IMPOSED BY THE A.O. MAY FINALLY BE CONFIRMED. THE LD. D.R. HAS ALSO PLACED A RELIANCE UPON THE JUDGEMENT OF THE APEX COURT IN THE CASE OF DHARMENDRA TEXTILE PROCESSORS AND OTHERS 306 ITR 277 IN WHICH THE APEX COURT HAVE HELD THAT THE PRESENCE OF MENS REA IS NOT REQUIRED TO BE ESTABLISHED. IT IS A CIVIL LIABILITY . THEREFORE, THE INTENTION OF THE ASSESSEES EITHER FOR CONCEALMENT OR FURNISHING OF INACCURATE PARTICULARS ARE NOT REQUIRED TO BE PR OVED BEFORE LEVYING THE PENALTY. THE LD. D.R. HAS FURTHER C ONTENDED THAT ASSESSEE HAS INTRODUCED CERTAIN CREDITS IN ITS BOOKS OF ACCOUNTS UNDER THE GARB OF DEPOSITS BUT HE COULD NOT PROVE ITS GENUINENESS DESPITE OF VARIOUS OPPORTUNITIES GIVEN BY THE A.O. FEW CONFIRMATION LETTERS WERE FILED BUT THEY DO NOT CONTAIN THE COMPLETE DETAILS OF THE DEPOSIT ORS . THEREFORE, THE DEPOSITS COULD NOT BE VERIFIED BY THE A.O. HIMSELF. DURING THE COURSE OF PENALTY PROCEEDINGS, A FRESH OPPORTUNITY WAS ALSO GIVEN TO THE ASSESSEE TO PROVE THE GENUINENESS OF THE DEPOSITS BUT THE ASSE SSEE SOUGHT ADJOURNMENTS BY FILING DIFFERENT LETTERS. SINCE T HE ASSESSEE COULD NOT PROVE THE GENUINENESS OF THESE DEPOSITS EVEN DURING THE PENALTY PROCEEDINGS , THE A.O. HAS RIGHTLY CONCLUDED THAT ASSESSEE COMPANY HAS CONCEALED ITS INCOME AMOUNTING TO RS.1 9,67,000/ - IN THE GUISE OF BOGUS DEPOSITS INTRODUCED IN ITS BOOKS OF ACCOUNTS FROM ITS UNDISCLOSED SOURCES. 7. IN OPPUGNITION, THE LD. COUNSEL FOR THE ASSESSEE HAS CONTENDED THAT THIS JUDGEMENT OF THE APEX COURT IN THE CASE OF DHARMENDRA TEXTILE PROCESS ORS AND OTHERS (SUPRA) WAS EXAMINED BY THE APEX COURT IN THE CASE OF UOI VS. RAJASTHAN SPINNING AND WEAVING MILLS 224 CTR (SC) 1 AND CIT VS. RELIANCE PETRO PRODUCTS PVT. LTD. 322 ITR 158 (SC) AND THE IMPACT OF TH E JUDGEMENT IN THE CASE OF DHARMENDRA TEXTIL E PROCESSORS AND OTHERS (SUPRA) HAS BEEN TONED DOWN. IN THE CASE OF RELIANCE PETRO PRODUCTS PVT. LTD (SUPRA) , IT HAS BEEN HELD THAT THE OBSERVATIONS MADE BY THE APEX COURT IN THE CASE OF DILIP N. SHROFF VS. JCIT AND ANOTHER 201 CTR (SC) 228 ARE NOT OVER ITA 470/VIZ/0 6 SUDHA AGRO OIL & CHEM. INDS. LTD., SAMALKOT 5 R ULED IN TOTO . I T WAS ONLY ON THE POINT OF MENS REA IN THE JUDGEMENT IN DILIP N. SHROFF THAT WAS UPSET. IN THE CASE OF DILIP N. SHROFF, THE APEX COURT HAD HELD THAT MENS REA IS TO BE PROVED BEFORE LEVYING THE PENALTY U/S 271(1)(C) AND THESE FINDINGS HAVE BEEN REVERSED BY THE APEX COURT IN THE CASE OF DHARMENDRA TEXTILE PROCESSORS AND OTHERS (SUPRA) BY HOLDING THAT MENS REA IS NOT REQUIRED TO BE PROVED IN PENALTY PROCEEDINGS AS IT IS A CIVIL LIABILITY. REST OF THE OBSERVATIONS MADE BY THE APEX COURT IN THE CASE OF DILIP N. SHROFF (SUPRA) STILL HOLDS THE FIELD. HE HAS ALSO PLACED THE JUDGEMENTS OF VARIOUS HIGH COURTS IN WHICH THE JUDGEMENT OF APEX COURT IN THE CASE OF DHARMENDRA TEXTILE (SUPRA) WAS EXAMINED. 8 . THE LD. COUNSEL FOR THE ASSESSEE FURTHER PLAC ED A RELIANCE ON THE JUDGEMENT OF THIS MADRAS HIGH COURT IN THE CASE OF M. SAJJANRAJ NAHAR & ORS. VS. CIT 283 ITR 230 IN SUPPORT OF HIS CONTENTION THAT THE SATISFACTION IS REGARDING CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS ARE REQUIRED TO BE RECORDED IN THE ASSESSMENT ORDER. HE HAS ALSO PLACED A RELIANCE UPON THE ORDER OF THE TRIBUNAL IN THE CASE OF MEHANGA RAM SHARMA VS. ITO 26 DTR (ASR) (TRIB) 386 IN SUPPORT OF HIS CONTENTION THAT NO PENALTY U/S 271(1)(C) SHOULD BE LEVIED FOR ADDITIO NS MADE U/S 68 ON ACCOUNT OF NON - PROVING THE GENUINENESS OF THE CASH CREDITS. THE LD. COUNSEL FOR THE ASSESSEE HAS ALSO PLACED A RELIANCE UPON THE JUDGEMENT OF GUJARAT HIGH COURT IN THE CASE OF NEW SORATHIA ENGINEERING CO. VS. CIT 282 ITR 642 IN SUPPORT O F HIS CONTENTION THAT THE A.O. IS REQUIRED TO RECORD THE SPECIFIC FINDING THAT ASSESSEE HAS EITHER CONCEALED THE INCOME OR FURNISHED THE INACCURATE PARTICULARS. IN THE ABSENCE OF A SPECIFIC FINDING, THE PENALTY U/S 271(1)(C)CANNOT BE LEVIED. HE HAS ALSO PLACED A RELIANCE UPON THE JUDGEMENT OF TH E TRIBUNAL IN THE CASE OF DCIT VS. BIFORA WATCH CO. LTD. (MUM) (TM) 94 ITD 203 IN SUPPORT OF HIS CONTENTION THAT UNDER RULE 27 OF THE INCOME TAX APPELLATE TRIBUNAL RULES, THE ASSESSEE CAN SUPPORT THE ORDER OF THE C IT (A) QUESTIONING THE FINDINGS PASSED AGAINST HIM IN THE REVENUES APPEAL. 9. IN REBUTTAL T HE LD. D.R. HAS PLACED A RELIANCE UPON THE JUDGEMENT OF THIS DELHI HIGH COURT IN THE CASE OF CIT VS. RANJEET SINGH DHAWAN 189 ITA 470/VIZ/0 6 SUDHA AGRO OIL & CHEM. INDS. LTD., SAMALKOT 6 TAXMAN 365 IN SUPPORT OF HIS CONTENT IONS THAT AFTER THE AMENDMENT BY FINANCE ACT, 2008 WITH RETROSPECTIVE EFFECT FROM 1 ST APRIL , 1989 THE A.O. IS NOT REQUIRED TO RECORD A SATISFACTION IN THE ASSESSMENT ORDER. MERE INITIATION OF PENALTY IS SUFFICIENT FOR THE SATISFACTION OF THE A.O. THEREFO RE, THE A.O. HAS RIGHTLY LEVIED THE PENALTY. 10. HAVING HEARD THE RIVAL SUBMISSIONS AND FROM A CAREFUL PERUSAL OF THE RECORD AND THE JUDGEMENTS REFERRED TO BY THE PARTIES, WE FIND THAT THE ASSESSEE HAS INTRODUCED THE DEPOSITS OF RS.19,67,000/ - IN THE NAME OF 75 DEPOSITORS IN ITS BOOKS OF ACCOUNTS. WHEN HE WAS ASKED TO PROVE THE GENUINENESS OF THE DEPOSITS, HE FILED CONFIRMATORY LETTERS ONLY IN RESPECT OF 17 DEPOSITORS AND FAILED TO FURNISH THE CONFIRMATORY LETTERS IN RESPECT OF BALANCE DEPOSITORS. EVEN THE CONFIRMATORY LETTERS FILED BEFORE THE A.O. DID NOT BEAR THE COMPLETE ADDRESSES OR THE DETAILS OF THE DEPOSITORS. THE ASSESSEE WAS ASKED TO PRODUCE THESE DEPOSITORS BUT THE ASSESSEE FAILED TO DO SO AND THE ADDITIONS WERE MADE U/S 68 OF THE ACT AS AN UN EXPLAINED INCOME OF THE ASSESSEES. THIS ADDITION WAS LATER ON CONFIRMED BY THE APPELLATE AUTHORITIES. EVEN IN THE PENALTY PROCEEDINGS ONE MORE OPPORTUNITY WAS ALSO GIVEN TO THE ASSESSEE TO PROVE THE GENUINENESS OF THE DEPOSITS BUT THE ASSESSEE FAILED TO DO SO. ACCORDINGLY, THE A.O. HAS LEVIED THE PENALTY U/S 271(1)(C) OF THE I.T. ACT AT MINIMUM OF RS.8,32,437/ - . THOUGH THE CIT HAS CONFIRMED THE PENALTY ON MERIT BUT DELETED THE SAME ON THE GROUND THAT THE RETURN ED INCOME REMAINED TO BE IN LOSS FOLLOWING THE JUDGEMENTS OF THE APEX COURT IN THE CASE OF PRITHILAL SINGH AND CO. (SUPRA). NOW THE JUDGEMENT OF THE APEX COURT HAS BEEN OVER RULED BY THE APEX COURT IN THE CASE OF CIT VS. GOLD COIN HEALTH FOOD PVT. LIMITED (SUPRA). THEREFORE, THE FINDING OF THE CI T(A) IN THIS REGARD ARE HEREBY SET ASIDE. 11. THE FINDING OF THE CIT(A) CONFIRMING THE PENALTY ON MERIT ARE ALSO CHALLENGED BY THE LD. COUNSEL FOR THE ASSESSEES BY RESORTING THE PROVISIONS OF RULE 27 OF THE INCOME TAX APPELLATE TRIBUNAL RULES, 1963 WITH T HE SUBMISSIONS THAT AS PER RULE 27, THE RESPONDENT THOUGH HE MAY NOT HAVE APPEALED MAY SUPPORT THE ORDER APPEALED AGAINST ON ANY OF THE GROUNDS ITA 470/VIZ/0 6 SUDHA AGRO OIL & CHEM. INDS. LTD., SAMALKOT 7 DECIDED AGAINST HIM. THOUGH THE ASSESSEE HAS NOT CHALLENGED THE FINDING OF THE CIT(A) GIVEN ON MERIT AGAINST TH E ASSESSEES, BUT HE CAN CHALLENGE THE SAME IN REVENUES APPEAL IN AS MUCH AS HE HAD NO OCCASION TO FILE THE APPEAL AGAINST THE ORDER OF THE CIT(A) WHICH WAS ULTIMATELY PASSED IN FAVOUR OF THE ASSESSEE DELETING THE PENALTY. IN SUPPORT OF HIS CONTENTION, HE PLACED A RELIANCE UPON THE JUDGEMENT OF THE THIRD MEMBER OF THE TRIBUNAL IN THE CASE OF DCIT VS. BIFORA WATCH COMPANY LIMITED 94 ITD 203 MUMBAI (TM) AND FROM A CAREFUL PERUSAL OF THIS ORDER OF THE TRIBUNAL, WE FIND FORCE IN THE CONTENTION OF THE ASSESSEES THAT HE HAS A RIGHT TO CHALLENGE THE ORDER OF THE CIT(A) PASSED ON MERIT AGAINST IT IN THE REVENUES APPEAL. WE HAVE ALSO EXAMINED THE CONTENTIONS OF THE ASSESSEE THAT THE IMPACT OF THE JUDGEMENT OF THE APEX COURT IN THE CASE OF DHARMENDRA TEXTILE PROCES SORS AND OTHERS (SUPRA) HAS BEEN TONED DOWN BY THE SUBSEQUENT JUDGEMENTS OF THE APEX COURT IN THE CASE OF UOI VS. RAJASTHAN SPINNING & WEAVING MILLS (SUPRA), CIT VS. ATUL MOHAN BINDAL 317 ITR 1 (SC) AND CIT VS. RELIANCE PETRO PRODUCTS PVT. LTD. (SUPRA), RE CENTLY IN THE INCASE OF SMT. M. SHAKUNTALAMMA VS. ACIT 131 TO 136/VIZAG/2007 IN DETAIL AND CAME TO THE CONCLUSION THAT THE JUDGEMENT OF THE APEX COURT IN THE CASE OF DHARMENDRA TEXTILE (SUPRA) SHOULD NOT BE READ IN ISOLATION IT SHOULD BE READ ALONG WITH TH E OTHER JUDGEMENTS OF THE APEX COURT IN WHICH THE RATIO LAID DOWN IN THE CASE OF DHARMENDRA TEXTILE WAS EXAMINED. THE RELEVANT OBSERVATIONS OF THE TRIBUNAL IN THE CASE OF M. SHAKUNTALAMMA (SUPRA) ARE EXTRACTED HEREUNDER FOR THE SAKE OF REFERENCE: 12. BEFORE THE JUDGEMENTS OF THE APEX COURT IN THE CASE OF DHARMENDRA TEXTLE PROCESSORS AND OTHERS (SUPRA) IT WAS REPEATEDLY HELD BY THE APEX COURT AND VARIOUS HIGH COURTS THROUGH THEIR JUDICIAL PRONOUNCEMENTS THAT IN PENALTY BEING QUASI - CRIMINAL PROCEEDINGS, THE MENS REA SHOULD BE PRESENT. MERE INTENTION CANNOT BE PUNISHABLE EXCEPT WHERE THERE IS SOME TAX CONSEQUENCES ARISING OUT OF CONCEPT OF DEEMED CONCEALMENT IN EXPLANATION TO SECTION 271(1)(C) OR UNDER THE BLOCK SCHEME OF ASSESSMENT U/S 158BD, WHERE THE ENTRIES IN THE ACCOUNT BOOKS BY THEMSELVES MAY LEAD TO AN INFERENCE OF CONCEALMENT. APART FROM THE FACT THAT THERE SHOULD BE CONCEALMENT, THERE SHOULD ALSO BE JURISDICTION FOR THE ASSESSING OFFICER BECAUSE IT IS HE WHO SHOULD BE SATISFIED THAT CONCEALMENT HAD TAKEN PLACE. IT IS HE WHO SHOULD ITA 470/VIZ/0 6 SUDHA AGRO OIL & CHEM. INDS. LTD., SAMALKOT 8 HAVE MATERIAL FOR THE CONCLUSION THAT THERE HAS BEEN CONCEALMENT. IT IS A SATISFACTION THAT A PERSON HAS CONCEALED INCOME AND NOT UNDER MERE ISSUE OF NOTICE OR INTIMATION WHICH WOULD JUSTIFY THE JURISDICTION. THESE FACTS HAVE BEEN CLARIFIED BY THE APEX COURT IN THE CASE OF D.M. MANASVI VS. CIT 86 ITR 557 (SC). WHILE THE OTHER PENALTIES REFERRED TO ACT OF OMISSION OR COMMISSION EXCUSED ON REASONABLE CAUSE BEING SHOWN, CONCEALMENT IS A STATE OF MIND AND THE PENALTY TH EREFORE IS EXCUSED IF THE ACT COMPLAINED OF DOES NOT TANTAMOUNT TO MENS REA OR GUILTY OF MIND. IN THE CASE OF SIR SHADILAL AND GENERAL MILLS VS. CIT 168 ITR 705, IT WAS HELD BY THE APEX COURT THAT THERE MAY BE 101 REASONS FOR WHICH ASSESSEE MAY HAVE MADE ADMISSIONS BUT THIS WOULD NOT ABSOLVE THE REVENUE FROM PROVING THE QUASI - CRIMINAL OFFENCE. 13. IN THE CASE OF DILIP N. SHROFF VS. JCIT 291 ITR 519, THERE LORDSHIP OF THE APEX COURT HAVE HELD THAT CLAUSE (C) OF SUB - SECTION 1 OF SECTION 271 CATEGORICALLY S TATES THAT PENALTY SHOULD BE LEVIABLE IF THE ASSESSEE CONCEALS THE PARTICULARS OF HIS INCOME OR FURNISHES INACCURATE PARTICULARS THERE OF. BY REASON OF SUCH CONCEALMENT OR FURNISHING OF INACCURATE PARTICULARS ALONE, THE ASSESSEE DOES NOT IPSO - FACTO BECOME LIABLE FOR PENALTY. IMPOSITION OF PENALTY IS NOT AUTOMATIC. LEVY OF PENALTY NOT ONLY THE DISCRETIONARY IN NATURE BUT SUCH DISCRETION IS REQUIRED TO BE EXERCISED ON THE PART OF THE A.O., KEEPING THE RELEVANT FACTORS IN MIND, SOME OF THOSE FACTORS APART F ROM BEING INHERENT IN THE NATURE OF PENALTY PROCEEDINGS. THE PENALTY PROCEEDINGS ARE NOT TO BE INITIATED AS HAS BEEN NOTICED BY THE WANCHOO COMMITTEE ONLY TO HARASS THE ASSESSEE. THE APPROACH OF THE A.O. IN THIS BEHALF MUST BE FAIR AND OBJECTIVE. CLAUSE (III) OF SUB - SECTION 1 OF SECTION 271 AGAIN PROVIDES FOR A DISCRETIONARY JURISDICTION UPON THE ASSESSING AUTHORITY IN AS MUCH AS THE AMOUNT OF PENALTY MAY NOT BE LESS THAN THE AMOUNT OF TAX SOUGHT TO BE EVADED BY THE REASON OF SUCH CONCEALMENT OF PARTICUL ARS OF HIS INCOME, BUT IT MAY NOT EXCEED THREE TIMES THERE OF. THE FACTS WHICH ARE MATERIAL FOR THE PURPOSE OF COMPUTATION OF TOTAL INCOME AS IS SOUGHT TO BE EMPHASIZED IN EXPLANATION 1, REFERRED TO COMPUTATION OF INCOME ON THE PART OF THE ASSESSEE WHICH IS DIRECTLY RELATABLE TO CLAUSE (A) FAILURE TO OFFER AN EXPLANATION AND/OR OFFERING AN EXPLANATION WHICH IS FALSE; AND (B) WHICH HE IS NOT ABLE TO SUBSTANTIATE AND FAILS TO PROVE THAT SUCH EXPLANATION IS BONAFIDE. ONLY IN THE EVENT THE FACTORS ENUMERATED IN CLAUSE (A) & (B) OF EXPLANATION 1 ARE SATISFIED AND A FINDING IN THIS BEHALF IS ARRIVED AT BY THE A.O., THE LEGAL FICTION CREATED THERE UNDER WOULD BE ATTRACTED. THE EXPRESSION CONCEALED IS OF GREAT IMPORTANCE, IT SIGNIFIES A DELIBERATE ACT OR OMISSI ON ON THE PART OF THE ASSESSEE. SUCH DELIBERATE ACT MUST BE EITHER FOR THE PURPOSE OF CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS. THE TERM INACCURATE PARTICULARS IS NOT DEFINED. FURNISHING OF AN ASSESSMENT OF VALUE OF THE PROPERTY M AY NOT BY ITSELF BE FURNISHING OF INACCURATE PARTICULARS. EVEN IF THE EXPLANATIONS ARE TAKEN ITA 470/VIZ/0 6 SUDHA AGRO OIL & CHEM. INDS. LTD., SAMALKOT 9 RECOURSE TO, A FINDING HAS TO BE ARRIVED AT HAVING REGARD TO CLAUSE (A) OF EXPLANATION 1 THAT THE A.O. IS REQUIRED TO ARRIVE AT A FINDING THAT EXPLANATION OFFERED BY THE ASSESSEE, IN THE EVENT HE OFFERS ONE, WAS FALSE. HE MUST BE FOUND TO HAVE FAILED TO PROVE THAT SUCH EXPLANATION IS NOT ONLY NOT BONAFIDE BUT ALL THE FACTS RELATING TO THE SAME AND MATERIAL TO THE INCOME WERE NOT DISCLOSED BY HIM. THUS, APART FROM HIS EXPLANATION BEING NOT BONAFIDE, IT SHOULD HAVE BEEN FOUND AS OF FACT THAT HE HAS NOT DISCLOSED ALL THE FACTS WHICH WAS MATERIAL TO THE COMPUTATION OF HIS INCOME. THE EXPLANATION MUST BE PROCEEDED BY A FINDING AS TO HOW AND IN WHAT MANNER HE FURNISHED THE PARTICULARS OF HIS INCOME IT IS BEYOND ANY DOUBT OR DISPUTE THAT FOR THE SAID PURPOSE, THE I.T.O. MUST ARRIVED AT A SATISFACTION IN THIS BEHALF. 14. THE PRIMARY BURDEN OF PROOF, THEREFORE IS ON THE REVENUE. THE STATUTE REQUIRES SATISFACTION ON THE P ART OF THE A.O. HE IS REQUIRED TO ARRIVE AT A SATISFACTION SO AS TO SHOW THAT THERE IS A PRIMARY EVIDENCE TO ESTABLISH THAT THE ASSESSEE HAD CONCEALED THE AMOUNT OR FURNISHED INACCURATE PARTICULARS AND THIS ONUS IS TO BE DISCHARGED BY THE DEPARTMENT. WHI LE CONSIDERING AS TO WHETHER THE ASSESSEE HAS BEEN ABLE TO DISCHARGE HIS BURDEN, THE A.O. SHOULD NOT BEGIN WITH THE PRESUMPTION THAT HE IS GUILTY. ONCE THE PRIMARY BURDEN OF PROOF IS DISCHARGED, THE SECONDARY BURDEN OF PROOF WOULD SHIFT ON THE ASSESSEE BE CAUSE THE PROCEEDINGS U/S 271(1)(C) IS OF PENAL NATURE IN THE SENSE THAT ITS CONSEQUENCES ARE INTENDED TO BE AN EFFECTIVE DETERRENT WHICH WILL PUT A STOP TO PRACTICES, WHICH THE PARLIAMENT CONSIDERS TO BE AGAINST THE PUBLIC INTEREST AND, THEREFORE, IT WAS FOR THE DEPARTMENT TO ESTABLISH THAT THE ASSESSEE SHALL BE GUILTY OF THE PARTICULARS OF THE INCOME. THE ORDER IMPOSING PENALTY IS QUASI - CRIMINAL IN NATURE AND, THUS, BURDEN LIES ON THE DEPARTMENT TO ESTABLISH THAT THE ASSESSEE HAD CONCEALED HIS INCOME. S INCE BURDEN OF PROOF IN PENALTY PROCEEDINGS VARIES FROM THAT IN THE ASSESSMENT PROCEEDINGS, A FINDING IN ASSESSMENT PROCEEDINGS THAT A PARTICULAR RECEIPT IS INCOME CANNOT AUTOMATICALLY BE ADOPTED, THOUGH A FINDING IN THE ASSESSMENT PROCEEDINGS CONSTITUTES GOOD EVIDENCE IN THE PENALTY PROCEEDINGS. IN THE PENALTY PROCEEDINGS, THUS, THE AUTHORITIES MUST CONSIDER THE MATTER AFRESH AS THE QUESTION HAS TO BE CONSIDERED FROM A DIFFERENT ANGLE. THE CONCEALMENT OF INCOME AND FURNISHING OF INACCURATE PARTICULARS AR E DIFFERENT. BOTH CONCEALMENT AND FURNISHING INACCURATE PARTICULARS REFERS TO A DELIBERATE ACT ON THE PART OF THE ASSESSEES. A MERE OMISSION OR NEGLIGENCE WOULD NOT CONSTITUTE A DELIBERATE ACT OF SUPPRESSION VERI, SUGGESTIO FALSI. ALTHOUGH IT MAY NOT BE VERY ACCURATE OR APT BUT SUPPRESSIO VERI WOULD AMOUNT TO CONCEALMENT SUGGESTIO FALSI WOULD AMOUNT TO FURNISHING OF INACCURATE PARTICULARS. 15. THERE WAS A SEA CHANGE IN THE PERCEPTION WITH REGARD TO THE REQUISITE CONDITIONS FOR IMPOSING A PENALTY U/S 271 (1)(C) AFTER THE ITA 470/VIZ/0 6 SUDHA AGRO OIL & CHEM. INDS. LTD., SAMALKOT 10 JUDGEMENT OF THE APEX COURT IN THE CASE OF DHARMENDRA TEXTILE (SUPRA). IN THE CASE OF DHARMENDRA TEXTILE PROCESSORS AND OTHERS (SUPRA) WHILE DEALING WITH THE PROVISIONS OF SECTION 11AC OF CENTRAL EXCISE ACT, THEIR LORDSHIP OF THE APEX COU RT HAVE HELD THAT PROVISIONS OF SECTION 11AC INSERTED BY FINANCE ACT, 1996, WITH THE INTENTION OF IMPOSING MANDATORY PENALTY ON PERSONS WHO EVADED PAYMENT OF TAX CANNOT BE READ TO CONTAIN MENS REA AS AN ESSENTIAL INGREDIENT AND THERE IS NO DISCRETION WITH THE AUTHORITY COMPETENT TO IMPOSE PENALTY BELOW THE PRESCRIBED MINIMUM. THEIR LORDSHIP HAVE ALSO MADE AN OBSERVATION WITH REGARD TO THE PENALTY LEVIED U/S 271(1)(C) OF THE ACT AND THEY HELD THAT OBJECT BEHIND ENACTMENT OF SECTION 271(1)(C) READ WITH EXPL ANATIONS INDICATE THAT SAID SECTION HAS BEEN ENACTED TO PROVIDE FOR A REMEDY FOR LOSS OF REVENUE. PENALTY UNDER THAT PROVISION IS A CIVIL LIABILITY AND WILLFUL CONCEALMENT IS NOT AN ESSENTIAL INGREDIENT FOR ATTRACTING CIVIL LIABILITIES AS IS THE CASE IN T HE MATTER OF PROSECUTION U/S 276C. THEREFORE, THE MENS REA IS NOT ESSENTIAL INGREDIENT OF SECTION 271(1)(C) AND THERE IS NO DISCRETION WITH THE AUTHORITY COMPETENT TO IMPOSING TO LEVY PENALTY BELOW THE PRESCRIBED MINIMUM. THE JUDGEMENT OF THE APEX COURT IN THE CASE OF DHARMENDRA TEXTILE WAS FURTHER EXAMINED BY THE APEX COURT IN THE CASE OF RAJASTHAN SPINNING AND WEAVING MILLS AND THEIR LORDSHIP HAVE HELD THAT THE DECISION IN CASE OF UOI VS. DHARMENDRA TEXTILE PROCESSORS AND OTHERS (SUPRA) MUST BE UNDERST OOD TO MEAN THAT THOUGH THE APPLICATION OF SECTION 11AC WOULD DEPEND UPON THE EXISTENCE OR OTHERWISE, OF THE CONDITIONS EXPRESSLY STATED IN THE SECTION, ONCE THE SECTION IS APPLICABLE IN A CASE, THE CONCERNED AUTHORITY WOULD HAVE NO DISCRETION IN QUANTIFYI NG THE AMOUNT AND PENALTY MUST BE IMPOSED EQUAL TO THE DUTY DETERMINED UNDER SUB - SECTION 2 OF SECTION 11A. DECISION IN DHARMENDRA TEXTILE CANNOT BE SAID TO HOLD THAT SECTION 11AC WOULD APPLY TO EVERY CASE OF NON - PAYMENT OR SHORT PAYMENT OF DUTY REGARDLESS OF THE CONDITIONS EXPRESSLY MENTIONED IN THE SECTION FOR ITS APPLICATION. THIS JUDGEMENT ON DHARMENDRA TEXTILE (SUPRA) AND DILIP N. SHROFF (SUPRA) AND RAJASTHAN SPINNING AND WEAVING MILLS (SUPRA) OF THE APEX COURT WERE AGAIN EXAMINED BY THE APEX COURT IN THE CASE OF CIT VS. ATUL MOHAN BINDAL 317 ITR 1 (SC) AND HAVE HELD THAT IT GOES WITHOUT SAYING THAT FOR APPLICABILITY OF SECTION 271(1)(C), CONDITION STATED THEREIN MUST EXIST. THE RELEVANT OBSERVATION OF THE APEX COURT ARE EXTRACTED HEREUNDER: A CLOSE LOOK AT SECTION 271(1)(C) AND EXPLANATION 1 APPENDED THERETO WOULD SHOW THAT IN THE COURSE OF ANY PROCEEDINGS UNDER THE ACT, INTER ALIA, IF THE ASSESSING OFFICER IS SATISFIED THAT A PERSON HAS CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHED INACCURAT E PARTICULARS OF SUCH INCOME, SUCH PERSON MAY BE DIRECTED TO PAY PENALTY. THE QUANTUM OF PENALTY IS PRESCRIBED IN CLAUSE (III). EXPLANATION 1, APPENDED TO SECTION 271(1) PROVIDES THAT IF THAT PERSON FAILS TO OFFER AN EXPLANATION OR THE ITA 470/VIZ/0 6 SUDHA AGRO OIL & CHEM. INDS. LTD., SAMALKOT 11 EXPLA - NATION OFFERED BY SUCH PERSON IS FOUND TO BE FALSE OR THE EXPLANATION OFFERED BY HIM IS NOT SUBSTANTIATED AND HE FAILS TO PROVE THAT SUCH EXPLA - NATION IS BONA FIDE AND THAT ALL THE FACTS RELATING TO THE SAME AND MATERIAL TO THE COMPUTATION OF HIS TOTAL INCOME HAVE BEEN DISCLOSED BY HIM, FOR THE PURPOSES OF SECTION 271(1)(C), THE AMOUNT ADDED OR DISALLOWED IN COMPUTING THE TOTAL INCOME IS DEEMED TO REPRESENT THE CONCEALED INCOME. THE PENALTY SPOKEN OF IN SECTION 271(1)(C) IS NEITHER CRIMINAL NOR QUASI - CRIMINAL BUT A CIVIL LIABILITY ; ALBEIT A STRICT LIABILITY. SUCH LIABILITY BEING CIVIL IN NATURE, MENS REA IS NOT ESSENTIAL. IN THE CASE OF UNION OF INDIA V. DHARAMENDRA TEXTILE PROCESSORS [2008] 306 ITR 277 (SC), A THREE - JUDGE BENCH OF THIS COURT HELD THAT DILIP N. SHROFF * DID NOT LAY DOWN THE CORRECT LAW AS THE DIFFERENCE BETWEEN SECTION 271(1)(C) AND SECTION 276C OF THE ACT WAS LOST SIGHT OF. THE COURT HELD THAT THE EXPLANATION APPENDED TO SECTION 271(1)(C) INDICATES THE ELEMENT OF STRICT LIABILITY ON THE ASSESSEE FOR CO NCEALMENT OR FOR GIVING INACCURATE PARTICULARS WHILE FILING THE RETURN. THE COURT HELD THUS: 'THE EXPLANATIONS APPENDED TO SECTION 271(1)(C) OF THE INCOME - TAX ACT ENTIRELY INDICATE THE ELEMENTS OF STRICT LIABILITY ON THE ASSESSEE FOR CONCEALMENT OR FOR GIVING INACCURATE PARTICULARS WHILE FILING THE RETURN. THE JUDGMENT IN DILIP N. SHROFF'S CASE [2007] 291 ITR 519 (SC) HAS NOT CONSIDERED THE EFFECT AND RELEVANCE OF SECTION 276C OF THE INCOME - TAX ACT. THE OBJECT BEHIND THE ENACTMENT OF SECTION 271(1)(C) RE AD WITH EXPLANATIONS INDICATES THAT THE SECTION HAS BEEN ENACTED TO PROVIDE FOR A REMEDY FOR LOSS OF REVENUE. THE PENALTY UNDER THAT PROVISION IS A CIVIL LIABILITY. WILFUL CONCEALMENT IS NOT AN ESSENTIAL INGREDIENT FOR ATTRACTING CIVIL LIABILITY AS IS THE CASE IN THE MATTER OF PROSECUTION UNDER SECTION 276C.' THE DECISION OF THIS COURT IN DHARAMENDRA TEXTILE PROCESSORS [2008] 306 ITR 277 HAS BEEN EXPLAINED RECENTLY BY THIS COURT IN THE CASE OF UNION OF INDIA V. RAJASTHAN SPINNING AND WEAVING MILLS [2009] 8 SCALE 231 THUS : ' 20. AT THIS STAGE, WE NEED TO EXAMINE THE RECENT DECISION OF THIS COURT IN DHARAMENDRA TEXTILE PROCESSORS [2008] 306 ITR 277. IN ALMOST 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 NON - PAYMENT OR SHORT PAYMENT OF DUTY THE PENALTY CLAUSE WOULD AUTOMATICALLY GET ATTRACTED AND THE AUTHORITY HAD NO DISCRETION IN THE MATTER. ONE OF US (AFTAB ALAM J.) WAS A PARTY TO THE DECISION IN DHARAMENDRA TEXTILE AND W E SEE NO REASON TO UNDERSTAND OR READ THAT DECISION IN THAT MANNER. IN DHARMENDRA TEXTILE THE COURT FRAMED THE ISSUES BEFORE IT, IN PARAGRAPH 2 OF THE DECISION AS FOLLOWS : ITA 470/VIZ/0 6 SUDHA AGRO OIL & CHEM. INDS. LTD., SAMALKOT 12 `2. A DIVISION BENCH OF THIS COURT HAS REFERRED THE CONTROVERSY INVOLVED IN THES E APPEALS TO A LARGER BENCH DOUBTING THE CORRECTNESS OF THE VIEW EXPRESSED IN DILIP N. SHROFF V. JOINT CIT [2007] 8 SCALE 304*. THE QUESTION WHICH ARISES FOR DETERMINATION IN ALL THESE APPEALS IS WHETHER SECTION 11AC OF THE CENTRAL EXCISE ACT, 1944 (IN SHO RT ' THE ACT') INSERTED BY THE FINANCE ACT, 1996, WITH THE INTENTION OF IMPOSING MANDATORY PENALTY ON PERSONS WHO EVADED PAYMENT OF TAX SHOULD BE READ TO CONTAIN MENS REA AS AN ESSENTIAL INGREDIENT AND WHETHER THERE IS A SCOPE FOR LEVYING PENALTY BELOW THE PRESCRIBED MINIMUM. BEFORE THE DIVISION BENCH, THE STAND OF THE REVENUE WAS THAT THE SAID SECTION SHOULD BE READ AS PENALTY FOR STATUTORY OFFENCE AND THE AUTHORITY IMPOSING PENALTY HAS NO DISCRETION IN THE MATTER OF IMPOSITION OF PENALTY AND THE ADJUDICAT ING AUTHORITY IN SUCH CASES WAS DUTY BOUND TO IMPOSE PENALTY EQUAL TO THE DUTIES SO DETERMINED. THE ASSESSEE ON THE OTHER HAND REFERRED TO SECTION 271(1)(C) OF THE INCOME - TAX ACT, 1961 (IN SHORT ' THE IT ACT') TAKING THE STAND THAT SECTION 11AC OF THE ACT IS IDENTICALLY WORDED AND IN A GIVEN CASE IT WAS OPEN TO THE ASSESSING OFFICER NOT TO IMPOSE ANY PENALTY. THE DIVISION BENCH MADE REFERENCE TO RULE 96ZQ AND RULE 96ZO OF THE CENTRAL EXCISE RULES, 1944 (IN SHORT ' THE RULES') 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) OF THE INCOME - TAX ACT, SECTION 11AC OF THE ACT AND RULE 96ZQ(5) OF THE RULES IS COMMON. ACCORDING TO THE D IVISION BENCH, THE CORRECT POSITION IN LAW WAS LAID DOWN IN CHAIRMAN, SEBI' S CASE [2006] 5 SCC 3612 AND NOT IN DILIP N. SHROFF' S CASE [2007] 8 SCALE 304*. THEREFORE, THE MATTER WAS REFERRED TO A LARGER BENCH' . AFTER REFERRING TO A NUMBER OF DECISIONS ON INTERPRETATION AND CONSTRUCTION OF STATUTORY PROVISION, IN PARAGRAPHS 26 AND 27 OF THE DECISION, THE COURT OBSERVED AND HELD AS FOLLOWS : `26. IN THE UNION BUDGET OF 1996 - 97, SECTION 11AC OF THE ACT WAS INTRODUCED. IT HAS MADE THE POSITION CLEAR THA T THERE 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. 27. ABOVE BEING THE POSITION, THE PLEA THAT RULES 96ZQ AND 96ZO HAVE A CONCEPT OF DISCRETION INBUILT CANNOT BE SUSTAINED. DILIP N. SHROFF' S CASE [2007] 8 SCALE 304 WAS NOT CORRECTLY DECIDED BUT CHAIRMAN, SEBI' S CASE [2006] 5 SCC 361 HAS ANALYSED THE LEGAL POSITION IN T HE CORRECT PERSPECTIVES. THE REFERENCE IS ANSWERED.' 21. FROM THE ABOVE, WE FAIL TO SEE HOW THE DECISION IN DHARAMENDRA TEXTILE CAN BE SAID TO HOLD THAT SECTION 11C WOULD ITA 470/VIZ/0 6 SUDHA AGRO OIL & CHEM. INDS. LTD., SAMALKOT 13 APPLY TO EVERY CASE OF NON - PAYMENT OR SHORT PAYMENT OF DUTY REGARDLESS OF THE CO NDITIONS EXPRESSLY MENTIONED IN THE SECTION FOR ITS APPLICATION. 22. THERE IS ANOTHER VERY STRONG REASON FOR HOLDING THAT DHARAMENDRA TEXTILE COULD NOT HAVE INTERPRETED SECTION 11AC IN THE MANNER AS SUGGESTED BECAUSE IN THAT CASE THAT WAS NOT EVEN THE S TAND OF THE REVENUE. IN PARAGRAPH 5 OF THE DECISION, THE COURT NOTED THE SUBMISSION MADE ON BEHALF OF THE REVENUE AS FOLLOWS : `5. MR. CHANDRASHEKHARAN, ADDITIONAL SOLICITOR GENERAL SUB - MITTED THAT IN RULES 96ZQ AND 96ZO THERE IS NO REFERENCE TO ANY MEN S REA AS IN SECTION 11AC WHERE MENS REA IS PRESCRIBED STATUTORILY. THIS IS CLEAR FROM THE EXTENDED PERIOD OF LIMITATION PERMISSIBLE UNDER SECTION 11A OF THE ACT. IT IS IN ESSENCE SUBMITTED THAT THE PENALTY IS FOR STATUTORY OFFENCE. IT IS POINTED OUT THAT T HE PROVISO TO SECTION 11A DEALS WITH THE TIME FOR INITIATION OF ACTION. SECTION 11AC IS ONLY A MECHANISM FOR COMPUTATION AND THE QUANTUM OF PENALTY. IT IS STATED THAT THE CONSEQUENCES OF FRAUD, ETC., RELATE TO THE EXTENDED PERIOD OF LIMITATION AND THE ONUS IS ON THE REVENUE TO ESTABLISH THAT THE EXTENDED PERIOD OF LIMITATION IS APPLICABLE. ONCE THAT HURDLE IS CROSSED BY THE REVENUE, THE ASSESSEE IS EXPOSED TO PENALTY AND THE QUANTUM OF PENALTY IS FIXED. IT IS POINTED OUT THAT EVEN IF IN SOME STATUTES MENS R EA IS SPECIFICALLY PROVIDED FOR, SO IS THE LIMIT OR IMPOSITION OF PENALTY, THAT IS THE MAXIMUM FIXED OR THE QUANTUM HAS TO BE BETWEEN TWO LIMITS FIXED. IN THE CASES AT HAND, THERE IS NO VARIABLE AND, THEREFORE, NO DISCRETION. IT IS POINTED OUT THAT PRIOR T O INSERTION OF SECTION 11AC, RULE 173Q WAS IN VOGUE IN WHICH NO MENS REA WAS PROVIDED FOR. IT ONLY STATED ' WHICH HE KNOWS OR HAS REASON TO BELIEVE' . THE SAID CLAUSE REFERRED TO WILFUL ACTION. ACCORDING TO LEARNED COUNSEL, WHICH WAS INFERENTIALLY PROVIDED IN SOME RESPECTS IN RULE 173Q STANDS EXPLICITLY PROVIDED IN SECTION 11AC. WHERE THE OUTER LIMIT OF PENALTY IS FIXED AND THE STATUTE PROVIDES THAT IT SHOULD NOT EXCEED A PARTICULAR LIMIT, THAT ITSELF INDICATES SCOPE FOR DISCRETION BUT THAT IS NOT THE CASE HERE.' 23. THE DECISION IN DHARAMENDRA TEXTILE MUST, THEREFORE, BE UNDERSTOOD TO MEAN THAT THOUGH THE APPLICATION OF SECTION 11AC WOULD DEPEND UPON THE EXISTENCE OR OTHERWISE OF THE CONDITIONS EXPRESSLY STATED IN THE SECTION, ONCE THE SECTION IS APPLICA BLE IN A CASE THE CONCERNED AUTHORITY WOULD HAVE NO DISCRETION IN QUANTIFYING THE AMOUNT AND PENALTY MUST BE IMPOSED EQUAL TO THE DUTY DETERMINED UNDER SUB - SECTION (2) OF SECTION 11A. THAT IS WHAT DHARAMENDRA TEXTILE DECIDES.' IT GOES WITHOUT SAYING THA T FOR APPLICABILITY OF SECTION 271(1)(C), THE CONDITIONS STATED THEREIN MUST EXIST. ITA 470/VIZ/0 6 SUDHA AGRO OIL & CHEM. INDS. LTD., SAMALKOT 14 16. THE JUDGEMENT OF THE APEX COURT IN THE CASE OF DHARMENDRA TEXTILE WAS ALSO EXAMINED BY THE VARIOUS HIGH COURTS IN THE CASE OF CIT VS. HARYANA WARE HOUSING CORPORATIO N 314 ITR 215 AND CIT VS. SIDHARTHA ENTERPRISES 322 ITR 80. IN THE CASE OF SIDHARTHA ENTERPRISES (SUPRA) THEIR LORDSHIP OF THE PUNJAB & HARYANA HIGH COURT HAVE HELD THAT JUDGEMENT OF THE HONBLE SUPREME COURT IN THE CASE OF DHARMENDRA TEXTILE (SUPRA) CANN OT BE READ AS LAYING DOWN THAT IN EVERY CASE WHERE PARTICULARS OF INCOME ARE INACCURATE PENALTY MUST FOLLOW. WHAT HAS BEEN LAID DOWN IS THE QUALITATIVE DIFFERENCE BETWEEN CRIMINAL LIABILITY U/S 276C AND PENALTY U/S 271(1)(C) HAD TO BE KEPT IN MIND AND APP ROACH ADOPTED TO THE TRIAL OF A CRIMINAL CASE NEED NOT BE ADOPTED WHILE CONSIDERING THE LEVY OF PENALTY. EVEN SO, THE CONCEPT OF PENALTY HAS NOT UNDERGONE CHANGE BY VIRTUE OF THE JUDGEMENT. PENALTY IS IMPOSED ONLY WHEN THERE IS SOME ELEMENT OF DELIBERATE DEFAULT AND NOT A MERE MISTAKE. THIS BEING THE POSITION, THE FINDING HAVING BEEN RECORDED ON FACTS THAT THE FURNISHING OF INACCURATE PARTICULARS WAS SIMPLY A MISTAKE AND NOT A DELIBERATE ATTEMPT TO EVADE THE TAX, THE VIEW TAKEN BY THE TRIBUNAL CANNOT BE HELD TO BE PERVERSE. 17. THE IMPACT OF JUDGEMENT OF DHARMENDRA TEXTILE WAS FURTHER EXAMINED BY THE APEX COURT IN THE CASE OF CIT VS. RELIANCE PRODUCTS PVT. LTD. 322 ITR 158 IN WHICH THEIR LORDSHIP HAVE HELD THAT IT MUST BE SHOWN THAT CONDITION U/S 271(1 )(C) MUST EXIST BEFORE THE PENALTY IS IMPOSED. THERE CAN BE NO DISPUTE THAT EVERYTHING WOULD DEPEND UPON THE RETURN FILED BECAUSE THAT IS THE ONLY DOCUMENT, WHERE THE ASSESEE CAN FURNISH THE PARTICULARS OF HIS INCOME. WHEN SUCH PARTICULARS ARE FOUND TO B E INACCURATE, THE LIABILITY WOULD ARISE. IN DILIP N. SHROFF VS. JCIT (SUPRA), THIS COURT EXPLAINED THE TERMS CONCEALMENT OF INCOME AND FURNISHING OF INACCURATE PARTICULARS. THIS COURT WENT ON TO HOLD THERE IN THAT IN ORDER TO ATTRACT PENALTY U/S 271( 1)(C), MENS REA WAS NECESSARY, AS ACCORDING TO THE COURT, THE WORD INACCURATE SIGNIFIED A DELIBERATE ACT OR OMISSION ON BEHALF OF THE ASSESSEES. IT ALSO WENT ON TO HOLD THAT CLAUSE (III) OF SECTION 271(1) PROVIDED FOR A DISCRETIONARY JURISDICTION UPON T HE ASSESSING AUTHORITY, IN AS MUCH AS THE AMOUNT OF PENALTY COULD NOT BE LESS THAN THE AMOUNT OF TAX SOUGHT TO BE EVADED BY REASON OF SUCH CONCEALMENT OF PARTICULARS OF INCOME, BUT IT MAY NOT EXCEED THREE TIMES THERE OF. IT WAS POINTED OUT THAT TERMS INA CCURATE PARTICULARS WAS NOT DEFINED ANY WHERE IN THE ACT AND, THEREFORE, IT WAS HELD THAT FURNISHING OF AN ASSESSMENT OF THE VALUE OF THE PROPERTY MAY NOT BY ITSELF BE FURNISHING INACCURATE PARTICULARS. IT WAS FURTHER HELD THAT ASSESSEE MUST BE FOUND TO HAVE FAILED TO PROVE THAT HIS EXPLANATION IS NOT ONLY UNDER BONAFIDE BUT ALL THE FACTS RELATING TO THE SAME AND MATERIAL TO COMPUTATION OF HIS INCOME WERE NOT DISCLOSED BY HIM. THE COURT ULTIMATELY WENT ON TO HOLD THAT ELEMENT OF MENS REA WAS ESSENTIAL. IT WAS ONLY ON THE POINT OF MENS REA THE JUDGEMENT IN THE CASE OF DILIP N SHROFF VS. JCIT (SUPRA) WAS UP SET BY THE APEX COURT THROUGH ITS ITA 470/VIZ/0 6 SUDHA AGRO OIL & CHEM. INDS. LTD., SAMALKOT 1 5 JUDGEMENT IN THE CASE OF UOI VS. DHARMENDRA TEXTILE (SUPRA). IT WAS FURTHER CLARIFIED BY THE APEX COURT IN THIS JUDG EMENT THAT IN THE CASE OF DHARMENDRA TEXTILE PROCESSORS AND OTHERS (SUPRA) NO FAULT WAS FOUND WITH THE REASONING IN THE DECISION IN DILIP N. SHROFF VS. JCIT AND OTHERS (SUPRA) WHERE THE COURT EXPLAINED THE MEANING OF TERMS CONCEALED AND INACCURATE. TH EREFORE, THE APEX COURT HAS FINALLY CONCLUDED IN THE CASE OF RELIANCE PRODUCTS THAT THE FINDINGS GIVEN IN DILIP N. SHROOF EXCEPT THE POINT OF MENS REA, HOLDS GOOD. ONLY THE FINDING THAT MENS REA WAS AN ESSENTIAL INGREDIENT FOR THE PENALTY U/S 271(1)(C) WA S OVER RULED IN THE CASE OF DHARMENDRA TEXTILE (SUPRA). 12. IN THE CASE OF RELIANCE PETRO PRODUCTS (SUPRA) THE ASSESSEES CLAIM OF DEDUCTION OF INTEREST ON LOANS TAKEN BY IT FOR PURCHASE OF SHARES WAS DISALLOWED. THE VERACITY OF THE LOAN TAKEN BY THE ASS ESSEE WERE NOT DISPUTED BY THE REVENUE. THEREFORE, THEIR LORDSHIP HAVE HELD THAT SINCE NO INFORMATION GIVEN IN THE RETURN WAS FOUND TO BE INCORRECT OR INACCURATE, THE ASSESSEE CANNOT BE HELD GUILTY OF FURNISHING INACCURATE PARTICULARS. THEIR LORDSHIP HAV E ALSO MADE IT CLEAR THAT MAKING AN INCORRECT CLAIM IN LAW CANNOT TANTAMOUNT TO FURNISHING OF INACCURATE PARTICULARS. MERELY BECAUSE THE ASSESSEES CLAIMED DEDUCTION WHICH HAS NOT BEEN ACCEPTED BY THE REVENUE, PENALTY U/S 271(1)(C) IS NOT ATTRACTED. THEIR LORDSHIP HAVE FURTHER HELD THAT IF THE CONTENTION OF THE REVENUE IS ACCEPTED, THE ASSESSEE WOULD BE LIABLE FOR PENALTY U/S 271(1)(C) IN EVERY CASE WHERE THE CLAIM MADE BY THE ASSESSEE IS NOT ACCEPTED BY THE A.O. FOR ANY REASON. THAT IS CLEARLY NOT THE IN TENTMENT OF THE LEGISLATURE. 13. FROM A CAREFUL READING OF THE AFORESAID JUDGEMENTS, WE ARE OF THE VIEW THAT IF THE ASSESSEE CARR Y OUT CERTAIN ENTRIES IN ITS BOOKS OF ACCOUNTS AND FURNISH ED THE INFORMATION IN THE RETURN OF INCOME IN THAT REGARD AND IF TH E ASSESSING OFFICER QUESTION S THE VERACITY OF THOSE ENTRIES, THE ONUS IS UPON THE ASSESSEE TO PROVE ITS GENUINENESS AND IF HE FAILED TO DO SO THE REVENUE MAY INITIATE THE PENALTY PROCEEDINGS U/S 271(1)(C) BESIDES THE ADDITIONS. BUT IF THAT ENTRY DEPENDS U PON SOME OTHER ENTRY WHICH HAS BEEN ACCEPTED BY THE REVENUE OR NOT QUESTIONED DURING THE COURSE OF ASSESSMENT PROCEEDINGS TH E CLAIM ON THE BASIS OF SECOND ENTRY , THOUGH NOT PROVED, PENALTY U/S 271(1)(C) CAN NOT BE LEVIED. IN THE CASE OF RELIANCE PETRO PRO DUCTS THE REVENUE HAS NOT ITA 470/VIZ/0 6 SUDHA AGRO OIL & CHEM. INDS. LTD., SAMALKOT 16 DOUBTED THE GENUINENESS OF THE LOANS TAKEN BY THE ASSESSEE FOR PURCHASE OF SHARES. HE HAS DISALLOWED THE CLAIM OF PAYMENT OF INTEREST ON LOANS. THEREFORE, THE APEX COURT HAVE HELD FOR MAKING A DISALLOWANCE OF THE CLAIM OF PAYMEN T OF INTEREST BY THE REVENUE PENALTY U/S 271(1)(C) CANNOT BE LEVIED. 14. TURNING TO THE FACTS OF THE INSTANT CASE, WE FIND THAT ASSESSEE HAS INTRODUCED THE DEPOSITS OF RS.19,67,000/ - IN THE NAME OF 75 DEPOSITORS. WHEN THE ASSESSEE WAS ASKED TO EXPLAIN THE GENUINENESS OF THESE DEPOSITS, THE ASSESSEE COULD NOT PROVE IT TO THE SATISFACTION OF THE A.O. HE HAS FILED CONFIRMATORY LETTERS ONLY IN RESPECT OF 17 DEPOSITORS AND EVEN THAT LETTERS DID NOT BEAR THE COMPLETE DETAILS OF THE DEPOSITORS. THE DEPOSITS ARE ORIGINAL ENTRIES FOUND IN THE BOOKS OF THE ACCOUNTS OF THE ASSESSEES OF WHICH GENUINENESS WAS QUESTIONED AND ASSESSEE WAS FAILED TO PROVE THE SAME. DURING THE COURSE OF HEARING OF THE APPEAL, ASSESSEE WAS SPECIFICALLY ASKED TO FURNISH SOME EVIDENCE OR TO FURNISH THE COMPLETE PARTICULARS OF THE DEPOSITORS TO PROVE THE GENUINENESS OF THE DEPOSITS AND IN RESPONSE THERE TO THE LD. COUNSEL FOR THE ASSESSEE HAS STATED THAT ASSESSEE DID NOT WANT TO DISCLOSE THE COMPLETE DETAILS OF THE DEPOSITORS FOR SO MANY R EASONS AND HE CANNOT BE FORCED BY THE REVENUE TO DISCLOS E THE DETAILS OF THE DEPOSITORS . T HEY SHOULD GO BY THE LIST OF DEPOSITS PREPARED BY THE ASSESSEE. WE HAVE ALSO EXAMINED THE CONTENTIONS OF THE ASSESSEES THAT ASSESSEE IS A PUBLIC LIMITED COMPANY AND IT CALLED FOR THE DEPOSITS FROM THE PUBLIC AND THEREFORE, IT DID NOT KEEP THE COMPLETE RECORDS OF THE DEPOSITORS. THIS ARGUMENT OF THE LD. COUNSEL FOR THE ASSESSEE CANNOT BE ACCEPTED FOR THE REASONS THAT IF THE ASSESSEE HAS MADE A PUBLIC ANNOUNCEMENT EIT HER THROUGH ADVERTISEMENT OR BY ANY OTHER MODE, HE SHOULD HAVE KEPT THE COPY OF THE TEXT OF NOTIFICATION, ADVERTISEMENT OR ANNOUNCEMENTS TO SUPPORT HIS CONTENTIONS. IF THE DEPOSITS ARE MADE BY THE PUBLIC WITH THE ASSESSEES IT MUST HAVE BEEN MADE ALONG WIT H THE APPLICATION FORM OF DEPOSITS IN WHICH THE ADDRESSES OF THE DEPOSITORS MAY BE AVAILABLE. WE ARE AT LOSS TO UNDERSTAND THAT HOW THE PUBLIC WILL DEPOSIT THEIR HARD EARNED MONEY WITH THE ASSESSEES WITHOUT FURNISHING THEIR DETAILS OF PARTICULARS AND WITH OUT OBTAINING ANY RECEIPT. THE CONTENTION OF THE ASSESSEE THAT HE MAY BE HAVING 101 REASONS FOR NOT FURNISHING THE PARTICULARS OF THE ITA 470/VIZ/0 6 SUDHA AGRO OIL & CHEM. INDS. LTD., SAMALKOT 17 DEPOSITORS CANNOT BE ACCEPTED. BECAUSE THIS ARGUMENT ITSELF AMOUNTS A CONCEALMENT OF PARTICULARS RELATING TO THE DEPOSIT S ITSELF FOR WHICH PENALTY CAN BE INITIATED. SINCE THE ASSESSEE WAS AFFORDED THE OPPORTUNITIES DURING THE COURSE OF PENALTY PROCEEDINGS ALSO AND THE ASSESSEE COULD NOT PRODUCE ANYTHING TO PROVE THE GENUINENESS OF THE DEPOSITS, THE REVENUE HAS RIGHTLY LEVI ED THE PENALTY U/S 271(1)(C) OF THE ACT. EVEN BEFORE US NO EVIDENCE WAS FILED TO PROVE THE GENUINENESS OF THE DEPOSITS. SINCE THE ORIGINAL ENTRIES IN THE BOOKS OF ACCOUNTS RELATING TO DEPOSITS WERE QUESTIONED, DOUBTED AND TREATED TO BE THE BOGUS DEPOSIT S, THE REVENUE HAS RIGHTLY LEVIED THE PENALTY U/S 271(1)(C) AND THE ASSESSEE CANNOT GET THE PROTECTION OF THE JUDGEMENT OF THE APEX COURT RENDERED IN THE CASE OF RELIANCE PETRO PRODUCTS PVT. LTD. (SUPRA) BECAUSE IN THAT CASE THE ORIGINAL ENTRIES PERTAINING TO LOAN WERE ACCEPTED AND ONLY THE CLAIM OF INTEREST ON LOAN WAS DISALLOWED. 15. WE HAVE ALSO EXAMINED THE OTHER ARGUMENTS OF THE ASSESSEE THAT SATISFACTION WITH REGARD TO THE CONCEALMENT OF PENALTY WAS NOT RECORDED BY THE A.O. IN THE ASSESSMENT ORDER IN THE LIGHT OF JUDGEMENT OF THE DELHI HIGH COURT IN THE CASE OF CIT VS. RANJEET SINGH DHAWAN 189 TAXMAN 567 IN WHICH THEIR LORDSHIP HAVE HELD THAT THE AMENDMENT IN SECTION 271(1)(C) BY FINANCE ACT , 2008 INTRODUCING EXPLANATION 1B IS WITH RETROSPECTIVE EFFEC T FROM 1 ST APRIL, 1989 AND THEY HAVE SET ASIDE THE ORDER OF THE TRIBUNAL AND THE CASE WAS REMANDED BACK TO THE TRIBUNAL TO DECIDE THE ISSUE OF PENALTY IN THE LIGHT OF AMENDED PROVISIONS. WE HAVE ALSO EXAMINED THE EXPLANATION 1B OF SECTION 271 AND WE FIND THAT THIS AMENDMENT WAS BROUGHT WITH RETROSPECTIVE EFFECT , BY WHICH IT HAS BEEN MADE CLEAR THAT WHERE AN AMOUNT IS ADDED OR DISALLOWED IN COMPUTING THE TOTAL INCOME OR LOSS OF AN ASSESSEE IN ANY ORDER OF ASSESSMENT OR RE - ASSESSMENT AND THE SAID OR DER CONTAINS A DIRECTION FOR INITIATION OF PENALTY PROCEEDINGS UNDER CLAUSE (C) OF SUB - SECTION 1, SUCH AN ORDER OF ASSESSMENT OR RE - ASSESSMENT SHALL BE DEEMED TO CONSTITUTE SATISFACTION OF THE ASSESSING OFFICER FOR INITIATION OF THE PENALTY PROCEEDINGS UND ER SECTION 271(1)(C) OF THE ACT. IN THE INSTANT CASE, THE INSTRUCTIONS WERE ISSUED IN THE ASSESSMENT ORDER FOR INITIATION OF PENALTY. THEREFORE, IT CANNOT ITA 470/VIZ/0 6 SUDHA AGRO OIL & CHEM. INDS. LTD., SAMALKOT 18 BE SAID THAT THERE WAS NO SATISFACTION OF THE ASSESSING OFFICER IN THE ASSESSMENT ORDER BEFORE LEVY ING THE PENALTY. 16. HAVING CAREFULLY EXAMINED THE FACTUAL ASPECTS OF THE CASE IN THE LIGHT OF LEGAL PROPOSITIONS LAID DOWN BY AFORESAID JUDICIAL PRONOUNCEMENTS, WE ARE OF THE CONSIDERED VIEW THAT THE REVENUE HAS RIGHTLY LEVIED THE PENALTY U/S 271(1)(C) O F THE ACT AND WE ACCORDINGLY SUBSCRIBE THE FINDING OF THE CIT(A) ON MERIT AND CONFIRM THE PENALTY. 17. IN THE RESULT, THE APPEAL OF THE REVENUE IS ALLOWED. PRONOUNCED IN THE OPEN COURT ON 2.12 .20 10 SD/ - SD/ - (BR BASKARAN) (SUNIL KUMAR YAD AV) ACCOUNTANT MEMBER JUDICIAL MEMBER VG/SPS VISAKHAPATNAM, DATED 2 ND DECEMBER , 20 10 COPY TO 1 DCIT, CIRCLE - 1, KAKINADA` 2 SUDHA AGRO OIL & CHEMICAL INDUSTRIES LTD., SAMALKOT, E.G. DISTRICT 3 THE CI T, R AJAHMUNDRY 4 THE CIT (A) , RAJAHMUNDRY 5 THE DR, ITAT, VISAKHAPATNAM. 6 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM