ASSOCIATED STONE INDUSTRIES(KOTAH) LTD., Kota V. ACIT, Kota

ITA 512/JPR/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 5605 (ITAT-JAIPUR)
• Duration Of Justice: 2 year(s) 10 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-01-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2006-2007
• Appeal Filed On: 07-03-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJINDER SINGH JCIT DHK
• Assessee Lawyers: HARSH BHUTA
• Keywords: Depreciation; Retrospective amendment; Initiation of penalty proceedings; Tax effect; Revised return; Unabsorbed depreciation; Reassessment proceedings
• Section: 143(3); 148; 139

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR JH VKJ-IH-RKSYKUH] U;KF;D LNL; ,OA JH FOE FLAG ;KN O] YS[KK LNL; DS LE{K BEFORE: SHRI R.P. TOLANI, JM & SHRI VIKRAM SINGH YA DAV, AM VK;DJ VIHY LA-@ ITA NO. 512/JP/2013 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2006-07 M/S. ASSOCIATED STONE INDUSTRIES (KOTAH) LTD. BAZAR NO.1, RAMGANJ, MANDI KOTA CUKE VS. THE ACIT CIRCLE- 1 KOTA LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO .: AACCA 3549 F VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI HARSH BHUTA , CA JKTLO DH VKSJ LS@ REVENUE BY : SHRI RAJINDER SINGH,, JCIT LQUOKBZ DH RKJH[K@ DATE OF HEARING : 15/12/2015 ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 08 /01/2016 VKNS'K@ ORDER PER R.P. TOLANI, JM:- THE ASSESSEE HAS FILED AN APPEAL AGAINST THE ORDER OF THE LD. CIT(A), KOTA DATED 18-02-3013 FOR THE ASSESSMENT YEARS 2 006-07. 2.1 SOLE GROUND RAISED BY THE ASSESSEE CHALLENGES IMPOSITION OF PENALTY U/S. 271 (1) (C) OF THE INCOME TAX ACT AT RS. 75 LACS CONFIRMED BY AUTHORITIES BELOW. 2.2 BRIEF FACTS ARE ASSESSEE I.E. ASSOCIATED STON E INDUSTRIES (KOTAH) LTD., WAS HAVING TWO DIVISIONS VIZ; MINING DIVISION AND TEXTILE DIVISION (PRERNA SYNTEX). TEXTILE DIVISION WAS DEME RGED FROM A.S.I. (K) ITA NO. 512/JP/2013 M/S. ASSOCIATED STONE INDUSTRIES (KOTAH) LTD. VS. A CIT , CIRCLE- 1, KOTA 2 LTD. DUE TO SOME EXIGENCIES THEY WERE PROPOSED TO B E DEMERGED AS PER THE SCHEME OF ARRANGEMENT, W.E.F. 16 TH OCTOBER, 2005. THE SCHEME OF ARRANGEMENT FOR DE-MERGER WAS FINALLY APPROVED BY H ONBLE RAJASTHAN HIGH COURT VIDE ITS ORDER DATED 09.02.2007. THE ASS ESSEE IS GOVERNED BY REGULATORY LAWS INCLUDING THE COMPANIES ACT, 1956, INCOME TAX ACT, 1961 AND OTHER APPLICABLE LAWS IN THIS BEHALF. IT HAD TWO DIVISION ENGAGED IN DISTINCT ACTIVITIES I.E. STONE DIVISION AND TEXTILE DIVISION. REGULAR BOOKS OF ACCOUNTS FOR BOTH DIVISIONS DULY A RE MAINTAINED AND AUDITED, THERE WERE NO ADVERSE OBSERVATION IN THESE REPORTS. THE ASSESSE FILED ITS RETURN OF INCOME A.Y. 2006 2007 DECLARI NG A LOSS OF RS. (-) 6,44,82,042/- ALONG WITH AUDITED ACCOUNTS AS WELL A S THE TAX AUDIT REPORTS. THE ENCLOSURES CLEARLY MENTIONED THE FACTS ABOUT CO MPANIES PENDING DEMERGER AND ALSO THE LIKELY TAX EFFECT OF PENDING DEMERGER APPLICATION BEFORE HONBLE RAJASTHAN HIGH COURT. BEFORE FILING THE RETURN IN ELECTRONIC FORM FOR AY 2006-07 ON 27.11.2006, VIDE ITS LETTER DATED 24.11.2006, THE ASSESSEE INTIMATED LD. AO RELEVANT DETAILS AND THE FACTS ABOUT THE DEMERGER IN CONTEMPLATION AND INTENTION TO FILE A REVISED RETURN AS AND WHEN THE DEMERGER SCHEME WAS FINALLY APPROVE D BY THE HONBLE RAJASTHAN HIGH COURT. FURTHER AS A MATTER OF ABUND ANT CAUTION, ASSESSEE ALSO FILED THE RETURN OF INCOME IN PHYSICAL FORM ON 30.11.2006, WHICH ITA NO. 512/JP/2013 M/S. ASSOCIATED STONE INDUSTRIES (KOTAH) LTD. VS. A CIT , CIRCLE- 1, KOTA 3 CONTAINED A COVERING LETTER OF THE SAME DATE ENCLOS ED WITH 152 PAGES NOTES AND ENCLOSURE CONTAINING ALL THE FACTS AND NE CESSARY RECORD IN THIS BEHALF. THE ASSESSMENT FOR AY 2006-07 WAS ACCORDIN GLY FRAMED U/S 143(3) ON 31-12-2010 PENDING HIGH COURT ORDER BY MA KING SOME DISALLOWANCES. SUBSEQUENTLY, AS SOON AS THE HONBLE RAJASTHAN HIGH COURT PASSED THE FINAL ORDER ON 09.02.2007 APPROVIN G THE SCHEME, THE ASSESSEE AGAIN SUBMITTED A COPY OF THE ORDER AND HI GH COURT APPROVED SCHEME BEFORE THE A.O., VIDE ITS LETTER DATED 30.03 .2007. ASSESSEE AGAIN IN ITS RETURN OF INCOME FOR A.Y. 2007 2008 ELECTR ONICALLY FILED ON 31.10.2007 ALSO, AS AN ABUNDANT CAUTION FILED RELEV ANT DOCUMENTS OF DEMERGER IN PHYSICAL FORM UPON FILING SUCH E-RETURN . ON THE SAME DATE, TAX AUDIT REPORTS AND ACCOUNTS FOR THAT YEAR, AS WE LL AS COMPUTATION OF INCOME FOR THAT YEAR, IN WHICH, BY WAY OF A SEPARAT E NOTE, SPECIFICALLY BRINGING TO THE NOTICE OF LD. A.O. THAT IN TERMS OF THE APPROVAL OF THE SCHEME BY THE HONBLE HIGH COURT, ALL THE CARRIED F ORWARDED LOSSES HAVE BEEN TREATED AS THE LOSSES OF THE RESULTING COMPANY . ON THE BASIS OF HIGH COURT ORDER APPROVING DEMERGER AND ITS EFFECTS FIL ED BY THE ASSESSEE, LD. AO RECORDED FOLLOWING REASONS AND ISSUED NOTICE U/S 148 REOPENING THE ASSESSMENT FOR AY 2006-07:- ITA NO. 512/JP/2013 M/S. ASSOCIATED STONE INDUSTRIES (KOTAH) LTD. VS. A CIT , CIRCLE- 1, KOTA 4 REASONS FOR ISSUE OF NOTICE U/S 148 ASSESSMENT IN THE CASE OF M/S. VAST TEXTILES LTD., NEEMRANA FOR A.Y. 2006-07 WAS COMPLETED VIDE ORDER U/S 143(3) DATED 2 6-12-2008 BY ACIT, CIRCLE- 2, ALWAR. IT WAS INFORMED BY ACIT, CI RCLE- 2 VIDE HIS LETTER DATED 06-01-2009 THAT DURING THE COURSE OF A SSESSMENT PROCEEDINGS IT HAS BEEN OBSERVED THAT M/S. VAST TEX TILES LTD. HAS SHOWN LOSSES/UNABSORBED DEPRECIATION ETC. STANDING ON ACCOUNT OF PRERNA SYNTEX ON THE GROUND THAT EARLIER TO 16-10-2 006 THE SAID PRERNA SYNTEX TO BE A UNIT OF M/S. ASI WHICH HAS BE EN DEMERGED THEREFROM AND MERGED WITH VAST TEXTILES LTD. IN VIE W OF THIS FACT M/S. TEXTILES LTD. HAS REVISED ITS RETURN FROM PROFIT OF RS. 19,57,324/- TO A LOSS OF RS. 8,47,06,864/-. THUS, AS A NATURAL CONSEQUENCE OF THE DEMERGER, M/S . ASSOCIATED STONE INDUSTRIES (KOTAH) LTD., PAN AACCA 3549F SHOULD HAV E GET AWAY WITH THE LOSSES ETC. PERTAINING TO THE DEMERGD UNIT AND SHOULD HAVE REVISED ITS RETURN ACCORDINGLY. BUT, ON VERIFICATIO N OF FACTS, IT IS FOUND THAT M/S. ASSOCIATED STONE INDUSTRIES LTD., KOTA, P AN AACCA 3549F HAS NOT REVISED ITS RETURN FOR THE A.Y. 2006-07 AND CONTINUED TO SET OFF ITS PROFIT FROM THE LOSSES OF THE DEMERGED UNIT, FO R WHICH IT WAS NOT ENTITLED. CONSIDERING THE ABOVE FACTS, THE SUMMARIZED WORKING OF THE TOTAL INCOME OF M/S. ASSOCIATED INDUSTRIES (KOTAH) LTD. F OR A.Y. 2006-07 IS CALCULATED AS UNDER:- (THE CALCULATION IS MENTIONED AT PAGE 2 OF THE REASONS FOR ISSUE OF NOTICE U/S 148) FROM THE ABOVE, IT IS NOTED THAT AS AGAINST THE RET URNED LOSS OF RS. (-) 6,44,82,042/-FOR A.Y. 2006-07, THE TOTAL INCOME OF M/S. ASI, (KOTAH) LTD., SHOULD BE RS. 2,21,82,864/-. THUS, THE INCOME EQUAL TO THE AMOUNT OF RS. 8,66,64,904/- HAS ESCAPED ASSESSMENT IN THE CASE OF M/S. ASSOCIATED STONE INDUSTRIES (KOTAH) LTD., KOTA (PAN AACCA 3549F) THEREFORE, CONSIDERING THE ABOVE FACTS, I HAVE REAS ONS TO BELIEVE THAT INCOME OF RS. 8,66,64,904/- HAS ESCAPED ASSESSMENT IN THE A.Y. 2006- 07 AND THUS IT IS A FIT CASE FOR ISSUE OF NOTICE U/ S 148 OF THE I.T. ACT, 1961. ITA NO. 512/JP/2013 M/S. ASSOCIATED STONE INDUSTRIES (KOTAH) LTD. VS. A CIT , CIRCLE- 1, KOTA 5 2.3 DURING THE COURSE OF REASSESSMENT PROCEEDINGS, LD. AO WAS OF THE VIEW THAT FROM DEMERGER ORDER IT EMERGED THAT ASSES SEE IN ORIGINAL RETURN HAS CLAIMED THE LOSSES ATTRIBUTABLE TO RESULTING CO MPANY FOR WHICH A REVISED RETURN AS UNDERTAKEN HAS NOT BEEN FILED. TH E CORRESPONDING LOSS CONSEQUENT TO HIGH COURT DEMERGER ORDER DTD. 9-2-20 07 WAS REDUCED BY LD. AO ON FOLLOWING OBSERVATIONS:- 3.1 LOSS RELATED TO DEMERGER: DURING THE YEAR UND ER CONSIDERATION, DEMERGER OF THE COMPANY TOOK PLACE O N 15-10-2005, AS PER ORDER OF HON'BLE RAJASTHAN HIGH COURT DATED 9- 02-2007. WHILE COMPANY FILED ITS RETURN OF INCOME ON 27-11-2006 AT LOSS OF RS. 6,44,82,042/- . THAT LOSS ALSO INCLUDES LOSS OF RES ULTING COMPANY. THE LOSS RELATED TO RESULTING COMPANY CANNOT BE CLAIMED BY THE DMERGED UNIT. FURTHER, RESULTING COMPANY FILED REVISED RETU RN OF INCOME AND CLAIMED THE SAME LOSSES. AT THE SAME TIME, THE ASSESSEE COMPANY HAS TO REDUC E LOSSES RELATED TO RESULTED COMPANY. HOWEVER COMPANY DID NO T FILE ANY REVISED RETURN WHICH SHOWS THAT THE ASSESSEE HAS TAKEN UNDU E BENEFIT OF THE LOSSES OF THE RESULTING COMPANY. IN THIS REGARD, AS SESSEE WAS GIVEN SHOW CAUSE WHY LOSSES PERTAINING TO TEXTILE UNIT MA Y NOT BE DISALLOWED. IN RESPONSE TO THAT THE ASSESSEE SUBMIT TED ON 27-12-2010 THAT :- 'AFTER SUBMISSION OF THE FACTUAL POSITION AS ABOVE, WE HEREBY INFORM YOUR GOODSELF THAT AS WE FORGOT TO FI LE THE REVISED INCOME TAX RETURN FOR THE ASSTT. YEAR 2006-07, WE H EREBY ACCEPT AND AGREED TO BUY THE PEACE WITH THE DEPARTM ENT THAT LOSSES PERTAINING TO TEXTILE DIVISION MAY BE TRANSF ERRED TO RESULTING COMPANY WHICH COULD NOT BEEN TRANSFERRED AT THE TIME OF FILING OF ORIGINAL RETURN ON OR BEFORE DUE DATE IN ABSENCE OF THE FINAL APPROVAL OF THE HONBLE HIGH COURT FOR SC HEME OF ARRANGEMENT OF DEMERGER AND WE ALSO AGREED TO PAY N ET ACTUAL INCOME TAX ON THE TOTAL INCOME OF THE MINING DIVISI ON ONLY. WE HAVE FILED ORIGINAL INCOME TAX RETURN AS PER THE CI RCUMSTANCES ITA NO. 512/JP/2013 M/S. ASSOCIATED STONE INDUSTRIES (KOTAH) LTD. VS. A CIT , CIRCLE- 1, KOTA 6 AND STATUTE PREVAILING AT THAT TIME FILING OF ORIGI NAL RETURN AND THEREAFTER, ON APPROVAL OF SCHEME OF ARRANGEMENT FO R DEMERGER BY HONBLE HIGH COURT, WE HAVE ALSO NOT AV AILED BENEFIT OF ANY SET OFF DURING THE NEXT ASSESSMENT Y EAR AND ONWARDS FOR THE LOSSES PERTAINING TO TEXTILE DIVISI ON.' IN THIS REGARD, IT IS RELEVANT TO MENTION HERE THAT AS A NATURAL CONSEQUENCE OF THE DEMERGER, M/S. ASSOCIATED STONE INDUSTRIES (KOTAH) LTD., KOTA (PAN AACCA 3549F) SHOULD HAVE GOT AWAY W ITH THE LOSSES ETC. PERTAINING TO THE DEMERGED UNIT AND SHOULD HAV E REVISED ITS RETURN ACCORDINGLY. BUT, ON VERIFICATION OF FACTS, IT IS F OUND THAT M/S. ASSOCIATED STONE INDUSTRIES LTD., KOTA (PAN AACCA 3 549F) HAS NOT REVISED ITS RETURN FOR THE A.Y. 2006-07 AND CONSTIT UTED TO SET OF ITS PROFIT FROM THE LOSSES OF THE DEMERGED UNIT, FOR WH ICH IT WAS NOT ENTITLED. 2.4 AS A RESULT THE ORIGINALLY ASSESSED LOSS OF RS. 6,44,82,042/- U/S 143(3) VIDE ASSESSMENT ORDER DATED. 31-12-2010 WA S CONVERTED INTO INCOME OF RS. 2,21,82,042/- AS A RESULT OF ORDER DT D. 31-12-2010 PASSED U/S 147. LD. AO INITIATED PENALTY PROCEEDING S U/S 271(1)(C), THE SUM AND SUBSTANCE OF THE ASSESSES REPLY IS AS UND ER:- 1. AS THE HONBLE HIGH COURT HAS NOT SANCTIONED THE SCHEME OF ARRANGEMENT OF DE-MERGER TILL THE DUE DATE OF FILIN G OF INCOME TAX RETURN FOR THE ASSTT. YEAR 2006-07, HENCE THE COMPA NY HAS FILED ITS INCOME TAX RETURN AT LOSS OF RS.64482042/- ON 27.11 .2006, ELECTRONICALLY AND PHYSICALLY WITH ACIT, CIR.-1, KO TA ON 30.11.2006, WITHOUT CONSIDERING THE EFFECT OF DE-MERGER. THE COPY OF ACKNOWLEDGEMENT FOR SUBMISSION OF ELECTRONICALLY GE NERATED ACKNOWLEDGEMENT, COMPUTATION OF TOTAL INCOME WITH N ECESSARY NOTES REGARDING DEMERGER, ORIGINAL TAX AUDIT REPORT, BALA NCE SHEET AND OTHER RELEVANT DOCUMENTS HAS SUBMITTED EARLIER VIDE OUR LETTER NO.7948 DATED 03.12.2010 DURING THE ASSESSMENT PROC EEDINGS U/S 143(3). ITA NO. 512/JP/2013 M/S. ASSOCIATED STONE INDUSTRIES (KOTAH) LTD. VS. A CIT , CIRCLE- 1, KOTA 7 2. AS IN ELECTRONIC FILING OF INCOME TAX RETURN THE RE IS NO CLAUSE IN ITR TO MENTION THE ABOVE POSITION, WE HAVE INTIM ATED ABOUT THE DEMERGER IN DETAIL TO THE INCOME TAX DEPARTMENT BY WAY OF NOTE IN COMPUTATION OF TOTAL INCOME AND BY WAY OF SEPARATE LETTER DATED 24.11.2006, SUBMITTED ON DATED 30.11.2006 MENTIONIN G THAT NO EFFECT HAS BEEN GIVEN IN THE RESULTS FOR THE YEAR 2005-06 FOR THE DEMERGER IN TERMS OF THE SCHEME DUE TO PENDENCY OF THE REQUISIT E SANCTION OF THE HON'BLE HIGH COURT FOR DE-MERGER. THE COPY OF COMPU TATION OF TOTAL INCOME ALONGWITH NOTES AND ACKNOWLEDGEMENT LETTER D ATED 24.11.2006 IN RESPECT OF DEMERGER WAS ALREADY SUBMITTED EARLIE R WITH OUR LETTER NO.7948 DATED 03.12.2010 DURING THE ASSESSMENT PROC EEDINGS U/S 143(3). 3. DURING THE YEAR 2005-06, THREE AUDITED BALANCE S HEETS AND PROFIT & LOSS ACCOUNT WERE PREPARED FOR MINING & TE XTILE DIVISION ACCORDING TO THE REQUIREMENT, THE COPY OF PROFIT & LOSS ACCOUNT HAS ALREADY SUBMITTED EARLIER VIDE OUR LETTER NO.7948 D ATED 03.12.2010 DURING THE ASSESSMENT PROCEEDINGS U/S 143(3) AND AG AIN ENCLOSING AS ANNEXURE-F. 4. ON RECEIPT OF THE HONBLE HIGH COURT ORDER DATED 09.02.2007, THE COMPANY HAS ALSO FILED THE COPY OF JUDGMENT ALONGWITH SCHEME OF ARRANGEMENT OF DEMRGER VIDE LET TER NO.15101 DATED 30 TH MARCH, 2007. COPY OF ACKNOWLEDGEMENT LETTER HAS AL READY SUBMITTED EARLIER VIDE OUR LETTER NO.7948 DATED 03. 12.2010 DURING THE ASSESSMENT PROCEEDINGS. 5. IN THE INCOME TAX RETURN FOR THE SUBSEQUENT ASST T. YEAR 2007-08, ASSESSEE HAS NOT AVAILED ANY BENEFIT OF TH E BROUGHT FORWARD LOSSES/UNABSORBED DEPRECIATION CARRIED FORWARDED FR OM ASSTT. YEAR 2006-07 AS ASSESSEE KNEW THAT THESE LOSSES RELATED TO TEXTILE DIVISION AND IT WAS MENTIONED IN TAX AUDIT REPORT FILED WITH YOU ON 31.10.2007. THE FACT THAT ASSESSEE PAID INCOME TAX OF RS.224.74 LACS FOR THE ASSTT. YEAR 2007-08 ITSELF DEMONSTRATE CLEA R BONA FIDE INTENSION FOR NOT TO USE OR ADJUST ANY BROUGHT FORW ARD LOSSES OF TEXTILE DIVISION. THE RELEVANT PAGES OF TAX AUDIT REPORT AL ONGWITH ACKNOWLEDGEMENT LETTER AND SCHEDULE OF CYLA, BFLA & CFL OF ITR SHOWING THAT ASSESSEE HAS NOT TAKEN SET-OFF OF LOSS ES PERTAINING TO TEXTILE DIVISION WAS SUBMITTED VIDE LETTER NO.7948 DATED 03.12.2010 DURING THE ASSESSMENT PROCEEDINGS. ITA NO. 512/JP/2013 M/S. ASSOCIATED STONE INDUSTRIES (KOTAH) LTD. VS. A CIT , CIRCLE- 1, KOTA 8 6. DURING THE COURSE OF ASSESSMENT PROCEEDINGS U/S 147ASSESSEE AGREED TO PAY TAX ON THE INCOME OF MINI NG DIVISION ONLY WITH A FOLLOWING NOTE SUBMITTED EARLIER ON DATED 27 .12.2010. 'AFTER SUBMISSION OF THE FACTUAL POSITION AS ABOVE, WE HEREBY INFORM YOUR GOODSELF THAT AS WE FORGOT TO FILE THE REVISED INCOME TAX RETURN FOR THE ASSTT. YEAR 2006-07, WE HEREBY ACCEP T AND AGREED TO BUY THE PEACE WITH THE DEPARTMENT THAT LOSSES PERTA INING TO TEXTILE DIVISION MAY BE TRANSFERRED TO RESULTING COMPANY WH ICH COULD NOT BEEN TRANSFERRED AT THE TIME OF FILING OF ORIGINAL RETURN ON OR BEFORE DUE DATE IN ABSENCE OF THE FINAL APPROVAL OF THE HO NBLE HIGH COURT FOR SCHEME OF ARRANGEMENT OF DEMERGER AND WE ALSO A GREED TO PAY NET ACTUAL INCOME TAX ON THE TOTAL INCOME OF THE MI NING DIVISION ONLY. WE HAVE FILED ORIGINAL INCOME TAX RETURN AS PER TH E CIRCUMSTANCES AND STATUTE PREVAILING AT THAT TIME FILING OF ORIGI NAL RETURN AND THEREAFTER, ON APPROVAL OF SCHEME OF ARRANGEMENT FO R DEMERGER BY HONBLE HIGH COURT, WE HAVE ALSO NOT AVAILED BENEFI T OF ANY SET OFF DURING THE NEXT ASSESSMENT YEAR AND ONWARDS FOR THE LOSSES PERTAINING TO TEXTILE DIVISION.' WE HEREBY FURTHER SUBMIT THE IN VIEW OF THESE FACTS AND CIRCUMSTANCES NO PENALTY U/S 271 (1)(C) FOR CONCEA LMENT OF PARTICULARS OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF S UCH INCOME BE IMPOSED IN CASE OF DISALLOWANCES OF LOSSES PERTAINING TEXTI LE DIVISION DUE TO DEMERGER EFFECT. 7. ACCORDING TO SECTION U/S 139(1) OF THE INCOME TA X ACT, 1961, IT IS MANDATORY FOR EVERY COMPANY TO FURNISH A RETURN OF HIS INCOME DURING THE PREVIOUS YEAR ON OR BEFORE THE DUE DATE IN THE PRES CRIBED FORM AND VERIFIED IN THE PRESCRIBED MANNER AND SETTING FORTH SUCH OTHER PARTICULARS AS MAY BE PRESCRIBED.AS DEMERGER SCHEME WAS NOT SAN CTIONED BY THE HON'BLE RAJASTHAN HIGH COURT BEFORE THE DUE DATE OF FILING OF INCOME TAX RETURN, AND AT THE TIME OF FILING OF RETURN WE COUL D NOT ASSUMED THAT WHETHER HIGH COURT WILL SANCTION THE DEMERGER OR NO T? AND IT WAS MANDATORY FOR US TO FILE INCOME TAX RETURN BEFORE T HE DUE DATE AS PER THE PROVISION UNDER SECTION 139 (1) OF INCOME TAX ACT, 1961, HENCE WE HAVE ITA NO. 512/JP/2013 M/S. ASSOCIATED STONE INDUSTRIES (KOTAH) LTD. VS. A CIT , CIRCLE- 1, KOTA 9 FILED THE ORIGINAL INCOME TAX RETURN TIMELY BY CONS IDERING THE INCOME OF TEXTILE DIVISION BEING A PART OF OUR INCOME AND WIT HOUT CONSIDERING DEMERGER EFFECT. HOWEVER, WE HAVE INTIMATED ABOUT T HE SAME TO THE DEPARTMENT ALONGWITH THE INCOME TAX RETURN AND COMP UTATION OF INCOME AND FROM TIME TO TIME AS MENTIONED IN PARA 1 TO 10 ABOVE. WHILE FILING OF INCOME TAX RETURN WE HAVE NEITHER CONCEALED ANY INC OME NOR FURNISHED ANY INACCURATE PARTICULARS OF SUCH INCOME, WE HAVE JUST FILED THE ITR BASED ON THE STATUS OF THE COMPANY AND THE PROVISIO N OF INCOME TAX ACT APPLICABLE AT THE TIME OF FILING OF RETURN. THEREFO RE, OUR CASE IS NOT THE CASE OF IMPOSITION OF PENALTY U/S 271(1)(C).OF THE INCOME TAX ACT. 12. EXPLANATION 1 OF 271(1)(C) - WHERE IN RESPECT OF ANY FACTS MATERIAL TO THE COMPUTATION OF THE TOTAL INCOME OF ANY PERSO N UNDER THIS ACT, - (A) SUCH PERSON FAILS TO OFFER AN EXPLANATION OR OFFERS 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 A BLE TO SUBSTANTIATE AND FAILS TO PROVE THAT SUCH EXPLANATI ON IS BONA FIDE AND THAT ALL THE FACTS RELATING TO THE SAME AND MAT ERIAL TO THE COMPUTATION OF HIS TOTAL INCOME HAVE BEEN DISCLOSED BY HIM THEN, THE AMOUNT ADDED OR DISALLOWED IN COMPUTING THE TOT AL 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 INC OME IN RESPECT OF WHICH PARTICULARS HAVE BEEN CONCEALED. FOR THE APPLICATION OF CLAUSE (B) TO EXPLANATION 1 , THE FOLLOWING THREE CONDITIONS MUST CUMULATIVELY BE SATISFIED: (1) THE ASSESSEE FAILS TO SUBSTANTIATE THE EXPLANAT ION OFFERED BY IT AND (2) THE ASSESSEE FAILS TO PROVE THAT SUCH EXPLANATI ON IS BONA FIDE AND (3) THE ASSESSEE FAILS TO DISCLOSE ALL THE FACTS RE LATING TO THE SAME AND MATERIAL TO THE COMPUTATION OF HIS TOTAL INCOME. (2) KANBAY SOFTWARE INDIA LTD. VS DY. CIT 22 DTR 48 1 (PUNE)] AS LONG AS THE INFORMATION GIVEN IN THE INCOME TAX RETURN IS CORRECT AND COMPLETE TO THE BEST OF ASSESSEES KNOWLEDGE AND BE LIEF, IT CANNOT BE SAID ITA NO. 512/JP/2013 M/S. ASSOCIATED STONE INDUSTRIES (KOTAH) LTD. VS. A CIT , CIRCLE- 1, KOTA 10 THAT THE STATUTORY OBLIGATION UNDER SECTION 139(1) IS CONTRAVENED WHICH, EVEN FOR A CIVIL LIABILITY FOR PENALTY BEING IMPOSE D, IS A SINE QUA NON. THEREFORE, IN THESE FACTS AND CIRCUMSTANCES ASSESSE WAS NOT LIABLE IMPOSITION OF PENALTY U/S 271(1)(C).OF THE INCOME T AX ACT. FOR THE APPLICATION OF CLAUSE (B) TO EXPLANATION 1 TO SEC. 271(1)(C), THE FOLLOWING THREE CONDITIONS MUST CUMULATIVELY BE SATISFIED: (1) THE ASSESSEE FAILS TO SUBSTANTIATE THE EXPLANAT ION OFFERED BY IT AND (2) THE ASSESSEE FAILS TO PROVE THAT SUCH EXPLANATI ON IS BONA FIDE AND (3) THE ASSESSEE FAILS TO DISCLOSE ALL THE FACTS RE LATING TO THE SAME AND MATERIAL TO THE COMPUTATION OF HIS TOTAL INCOME. THE MADRAS HIGH COURT, IN A.V. THOMAS & CO. (INDIA) LTD V. CIT (1966) 59 ITR 499 (MAD) ANALYSED THE IMPLICATIONS O F WORD CONCEAL THAT IT PERTAINS TO AN AFFIRMATIVE ACTION LIKELY TO PREVENT OR INTENDED TO PREVENT KNOWLEDGE OF A FACT. SECRECY IS AN ESSENTIA L INGREDIENT OF THE ACT OF CONCEALMENT. TO CONSTITUTE CONCEALMENT, IT MUST APPEAR THAT THE STATEMENT OR ACT OF THE PERSON WAS CALCULATED A ND DESIGNED TO PREVENT DISCOVERY OF THE ACT WITH WHICH HE IS CHARG ED. HIS ACT MUST BE MISLEADING, FALSE OR DECEPTIVE. THE MADRAS HIGH COURT, IN A.V. THOMAS & CO. (INDIA) LTD V. CIT (1966) 59 ITR 499 (MAD) ANALYSED THAT WHEN PARTICUL ARS OF INCOME FURNISHED IN THE RETURN OF INCOME ARE NOT CORRECT R ESULTING IN UNDERSTATEMENT OF INCOME, IT MAY BE A CASE OF INACC URATE PARTICULARS OF INCOME. IN FURNISHING ITS RETURN OF INCOME, AS ASSESSEE IS REQUIRED TO FURNISH PARTICULARS AND ACCOUNTS ON WHICH SUCH RETURNED INC OME HAS BEEN ARRIVED AT. ANY INACCURACY MADE IN SUCH BOOKS OF AC COUNT OR OTHERWISE WHICH RESULTS IN KEEPING OFF OR HIDING A PORTION OF ITS INCOME IS PUNISHABLE AS FURNISHING INACCURATE PARTICULARS OF ITS INCOME CIT V. INDIAN METALS & FERRO ALLOYS LTD. (1994) 117 CTR (ORI.) 378. THE EXPRESSION CONCEALMENT OF INCOME IMPLIES THAT AN INCOME IS BEING HIDDEN, CAMOUFLAGED OR COVERED UP SO AS IT CA NNOT BE SEEN, FOUND, OBSERVED OR DISCOVERED. THE EXPRESSION FURN ISHING OF INACCURATE PARTICULARS OF INCOME IMPLIES FURNISHIN G OF DETAILS OF ITA NO. 512/JP/2013 M/S. ASSOCIATED STONE INDUSTRIES (KOTAH) LTD. VS. A CIT , CIRCLE- 1, KOTA 11 INFORMATION ABOUT INCOME WHICH ARE NOT IN CONFORMIT Y WITH THE FACTS OR TRUTH. IT DOES NOT EXTEND TO SUBJECTIVE AREAS SU CH AS THE TAXABILITY OF INCOME, ADMISSIBILITY OF A DEDUCTION AND INTERPRETA TION OF LAW. THE MAKING OF AN INCORRECT CLAIM DOES NOT AMOUNT TO FUR NISHING INACCURATE PARTICULARS. BOTH THE EXPRESSION AND 'CONCEALMENT OF INCOME' AND 'FURNISHING OF INACCURATE PARTICULARS' INDICATE SOME DELIBERATION ON THE PART OF THE ASSESS, THOUGH THE WORD 'DELIBERATELY' AND THE WORD WILLFULLY ARE NO LONGER PART OF STATUTE. MERE OMISSION OR NEGLIGENCE WOULD NOT CONSTITUTE A DELIBERATE ACT OF SUPPRESSIIO VERI OR SUGGESTIO FALSI - DILIP N. SHROFF V. JOINT CIT (2007) 291 ITR 519 (SC) AND T. ASHOK PAI V. CIT (2007) 292 ITR 11 (SC). LOOKING AT THE ENTIRETY OF FACTS IT EMERGES THAT: - THE TEXTILE DIVISION HAS BEEN DEMERGED AS PER SCHEME OF ARRANGEMENT W.E.F. 16.10.2005 BUT THE SCH EME OF ARRANGEMENT OF DEMERGER WAS APPROVED BY HIGH COURT ON DATED 09.02.2007. - IN ABSENCE OF SANCTION FROM HIGH COURT FOR DEMERGER, AUDITED BALANCE SHEET AND PROFIT & LOSS A CCOUNT FOR THE YEAR 2005-06, WAS PREPARED ON DATED 15.06.2006, WITHOUT CONSIDERING THE EFFECT OF DEMERGER OF TEXTILE DIVIS ION AND PUT UP A NOTE IN NOTES TO THE ACCOUNTS OF STATUTORY AUDIT RE PORT TO THAT EFFECT. - IN ABSENCE OF SANCTION FROM HIGH COURT FOR DEMERGER BEFORE THE DUE DATE OF FILING OF INCOME TA X RETURN, IT CAN NOT BE PRESUMED THAT WHETHER DEMERGER SCHEME WILL B E SANCTION BY THE HIGH COURT OR NOT OR WILL BE SANCTION WITH O R WITHOUT THE ANY CHANGE. - DUE TO MANDATORY PROVISION FOR FILING OF INCOME TAX RETURN BEFORE THE DUE DATE AS PER THE PROVISION UND ER SECTION 139 (1) OF INCOME TAX ACT, 1961, HENCE WE HAVE FILED TH E INCOME TAX RETURN TIMELY BY CONSIDERING THE INCOME OF TEXTILE DIVISION BEING A PART OF OUR INCOME AND WITHOUT CONSIDERING DEMERGER EFFECT. ITA NO. 512/JP/2013 M/S. ASSOCIATED STONE INDUSTRIES (KOTAH) LTD. VS. A CIT , CIRCLE- 1, KOTA 12 - ASSESSEE DULY INTIMATED TO THE DEPARTMENT ABOUT THE INCLUSION OF INCOME OF TEXTILE DIVISION ALONGWITH T HE REASON FOR THE SAME AT THE TIME OF FILING OF INCOME TAX RETURN AND COMPUTATION OF INCOME AND BY WAY OF SEPARATE LETTER FROM TIME TO T IME. WE HAVE DISCLOSED ALL THE FACTS RELATING TO NOT CONSIDERING THE DEMERGER IN THE COMPUTATION OF TOTAL INCOME. - WHILE FILING OF INCOME TAX RETURN ASSESSEE NEITHER CONCEALED ANY INCOME NOR FURNISHED ANY INACCURATE P ARTICULARS OF SUCH INCOME, WE HAVE JUST FILED THE ITR BASED ON TH E STATUS OF THE COMPANY AND THE PROVISION OF INCOME TAX ACT APPLICA BLE AT THE TIME OF FILING OF RETURN. - THE INTENSION OF THE COMPANY WAS BONA FIDE AND NOT TO AVAIL ANY BROUGHT FORWARD LOSSES PERTAINING TO T HE TEXTILE DIVISION AND ACCORDINGLY AFTER PASSING THE HIGH COU RT ORDER THE COMPANY ITSELF HAS NOT CLAIMED ANY BROUGHT FORWARD LOSSES PERTAINING TO TEXTILE DIVISION IN NEXT ASSESSMENT Y EAR. ASSESSEES CASE IS NOT A FIT CASE FOR IMPOSITION OF PENALTY U/S 271(1)(C).AS: RELIANCE WAS PLACED ON FOLLOWING JUDGMENTS : IT MAY BE NOTED THAT IF THE PARTY IS GUILTY OF CONT UMACIOUS OR DISHONEST CONDUCT, IT WOULD BE LEGITIMATE TO INVOKE THE PENAL TY PROVISION. IF THE TOTALITY OF THE FACTS AND CIRCUMSTANCES DISCLOSE SU FFICIENT CAUSE OR REFLECTS A BONA FIDE BELIEF ON THE PART OF THE OFFE NDER IN THE MATTER OF THE COMMISSION OF THE BREACH OF THE PROVISIONS OF T HE ACT, THEN A LIBERAL ATTITUDE TOWARDS THE ASSESSEE IS NECESSARY. IN CWT V. KUMARI KAVITHA GOENKA (1979) 119 ITR 974, 978-9 (MAD.) NO PENALTY UNLESS THERE IS A DELIBERATE ATTEMPT: ME RE OMISSION ON PART OF ASSESSEE DOES NOT AMOUNT TO CONCEALMENT AND IF N O SUPPORTIVE EVIDENCE ARE AVAILABLE TO PROVE THAT IT WAS A DELIB ERATE ATTEMPT ON PART OF THE ASSESSEE, IT WAS HELD THAT NO PENALTY U NDER SECTION 271(1) OF THE ACT IS LEVIABLE. {CIT V. ASHIM KUMAR AGARWAL (2005) 275 ITR 48 (JHARKHAND)}. ITA NO. 512/JP/2013 M/S. ASSOCIATED STONE INDUSTRIES (KOTAH) LTD. VS. A CIT , CIRCLE- 1, KOTA 13 THE DELHI HIGH COURT IN THE CASE OF CIT V. RAHULJEE AND CO. 250 ITR 225 (DEL.) HELD ATHAT IF THE EXPLANATION GIVEN BY T HE ASSESSEE WAS BONA FIDE, PENALTY U/S 271(1)(C) WILL NOT BE ATTRACTED. NO PENALTY IF THE FACTS OF THE TRANSACTION ARE DISC LOSED: IF THE ASSESSEE HAS CLAIMED ANY EXEMPTION AFTER DISCLOSING THE RELE VANT BASIC FACTS OF THE TRANSACTION OF THE INCOME AND UNDER IGNORANCE O F THE PROVISIONS OF THE ACT OF 1961 HAS NOT OFFERED THAT AMOUNT OF TAX, IN SUCH CASES, PENALTY SHOULD NOT BE IMPOSED. IN SUCH CASES RATHER IT IS THE DUTY OF THE ASSESSING OFFICER TO ASK FOR FURTHER DETAILS AND TA X THE INCOME IF IT IS LIABLE TO TAX. IN THE INSTANT CASE, THE ASSESSEE HA D SHOWN LONG-TERM CAPITAL GAIN AND CLAIMED EXEMPTION, BUT THE TRANSA CTION HAD BEEN DISCLOSED IN THE RETURN. THERE WAS NO CONCEALMENT O F INCOME AND PENALTY COULD NOT BE IMPOSED, {CHANDRAPAL BAGGA V. INCOME-TAX APPELLATE TRIBUNAL (2003) 261 ITR 67 (RAJ.)}. RECENTLY THE SUPREME COURT IN THE CASE OF UNION OF INDIA V. M/S RAJASTHAN SPINNING & WEAVING MILLS (2009) 224 CTR 1 (SC) HELD IN THE CONTEXT OF SECTION 11AC OF THE EXCISE ACT WHICH IS SIMILAR TO SEC. 271(1((C) THE VIEW TAKEN IN DHARMENDRA TEXTILES H AS BEEN QUESTIONED BY OBSERVING THAT 'WE FAIL TO SEE THAT HOW THE DECISION OF DHARMENDRA TEXTILES CAN BE SAID TO BE HOLD U/S 11 C WOULD APPLY TO EVERY CASE OF NONPAYMENT OR SHORT PAYMENT OF DUTY R EGARDLESS OF CONDITIONS EXCLUSIVELY MENTIONED IN THE SECTION FOR ITS APPLICATION.' - THE MUMBAI TRIBUNAL IN ITS ANOTHER DECISION ON 20.0 3.2009 IN THE CASE OF VIP INDUSTRIES V. ACIT 21 DTR MUM TRI 153 : AIT-2009-122- ITAT, HAS HELD THAT MERE CONFIRMATION OF ADDITION I N QUANTUM PROCEEDINGS CANNOT, PERSE, LEAD TO CONFIRMATION OF LEVY OF PENALTY. THE DHARMENDRA TEXTILE DIVISION IS CONFINED TO CONCLUDE THAT MENS ERA IS NOT ESSENTIAL FOR INVOKING PENALTY PROVISIONS. THE INTENTION OF THE SUPREME COURT IS TO COVER THOSE CASES WHERE THE ASS ESSEE EARNS INCOME BUT UNINTENTIONALLY OR INADVERTENTLY FAILS TO DISCLOSE THIS IN THE RETURN OF INCOME. THE SUPREME COURT HAS NOT HELD TH AT IN ALL CASES WHERE THE ADDITION IS CONFIRMED, THE PENALTY SHALL MECHANICALLY FOLLOW. - ITAT PUNE BENCH IN THE CASE OF KANBAY SOFTWARE V. DCIT 122 TTJ 721 (PUNE) AFTER CONSIDERING THE SUPREME COURT DECI SION OF DHARMENDRA TEXTILES HELD AS UNDER:- ITA NO. 512/JP/2013 M/S. ASSOCIATED STONE INDUSTRIES (KOTAH) LTD. VS. A CIT , CIRCLE- 1, KOTA 14 - AN ASSESSEE'S STATUTORY OBLIGATION U/S 139(1) IS TO GIVE CORRECT AND COMPLETE INFORMATION WITH THE RETU RN OF ICOME. IF THIS IS COMPLIED WITH THEN THERE IS NO CONTRAVENTIO N WHICH CAN ATTRACT EVEN A CIVIL LIABILITY. THE FACT THAT ADDIT IONS AND DISALLOWANCE ARE MADE BY THE A.O. DOES NOT MEAN THA T THERE IS A BREACH OF OBLIGATION. THE PROPOSITION THAT JUST BEC AUSE PENALTY U/S 271(1)(C) IS A CIVIL LIABILITY, IT MUST MEAN THE PE NALTY CAN AUTOMATICALLY BE LEVIED ON THE BASIS OF ANY ADDITIO N TO INCOME, IS NOT CORRECT. - DHARMENDRA TEXTILES IS NO MORE AN AUTHORITY FOR THE PROPOSITION THAT PENALTY IS AN AUTOMATIC CONSEQUENC E OF AN ADDITION BEING MADE TO THE INCOME OF THE TAXPAYER F OR THE REASON THAT WHETHER IT IS A CIVIL LIABILITY OR A CRIMINAL LIABILITY, PENALTY CAN ONLY COME INTO PLAY WHEN THE CONDITIONS ARE SATISFI ED. EVEN EXPLANATION 1 TO SECTION 271(1)(C) RAISES A REBUTTA BLE PRESUMPTION AND SHIFTS THE ONUS ON THE ASSESSEE TO ESTABLISH TH E BONAFIDES OF THE CLAIM; 1. THE PENALTY U/S 271(1)(C) CAN BE IMPOSED FOR CONCEA LMENT OF INCOME COMMITTED AT THE TIME OF FILING OF ORIGINAL INCOME TAX RETURN AND AS PER THE LAW ON THE DATE OF FILING OF RETURN. WHEREAS THE PENALTY U/S 271(1)(C) CANNOT BE IMPOSED IN OUR CASE AS DEMERGER SCHEME WAS NOT SANCTIONED BY THE HON'BLE R AJASTHAN HIGH COURT BEFORE THE DUE DATE OF FILING OF INCOME TAX R ETURN, AND AT THE TIME OF FILING OF RETURN WE COULD NOT ASSUMED THAT WHETHER HIGH COURT WILL SANCTION THE DEMERGER OR NOT? AND IT WAS MANDA TORY FOR US TO FILE INCOME TAX RETURN BEFORE THE DUE DATE AS PER THE PR OVISION UNDER SECTION 139 (1) OF INCOME TAX ACT, 1961, HENCE WE H AVE FILED THE ORIGINAL INCOME TAX RETURN TIMELY BY CONSIDERING TH E INCOME OF TEXTILE DIVISION BEING A PART OF OUR INCOME AND WITHOUT CON SIDERING DEMERGER EFFECT WITH NECESSARY DISCLOSURE OF FACTS. WE HAVE FILED THE INCOME TAX RETURN BASED ON THE STATUS OF THE COMPANY AND THE P ROVISION OF INCOME TAX ACT APPLICABLE AT THE TIME OF FILING OF ORIGINAL RETURN. THEREFORE, WE HAVE NOT CONCEALED THE INCOME OR HAVE FURNISHED INACCURATE PARTICULARS OF INCOME WHILE FILING THE O RIGINAL INCOME TAX RETURN. ITA NO. 512/JP/2013 M/S. ASSOCIATED STONE INDUSTRIES (KOTAH) LTD. VS. A CIT , CIRCLE- 1, KOTA 15 THE LAW APPLICABLE IS LAW AS IT STOOD ON THE DATE O F FILING OF THE RETURN AND NOT ON THE DATE OF PASSING THE PENALTY ORDER - JAIN BROS. V. UNION OF INDIA (1970) 77 ITR 107 (SC). THE SUPREME COURT IN THE CASE OF HINDUSTAN STEEL LT D. V. STATE OF ORISSA (1972) 83 ITR 26 (SC) HAS HELD THAT AN ORDER IMPOSING PENALTY FOR FAILURE TO CARRY OUT A STATUTORY OBLIGATION IS THE RESULT OF A QUASI- CRIMINAL PROCEEDING, AND PENALTY WILL NOT ORDINARIL Y BE IMPOSED UNLESS THE PARTY OBLIGED EITHER ACTED DELIBERATELY IN DEFIANCE OF LAW OR GUILTY OF CONDUCT, CONTUMACIOUS OR DISHONEST, OR AC TED IN CONSCIOUS DISREGARD TO ITS OBLIGATION. PENALTY WILL ALSO NOT BE IMPOSED MERELY BECAUSE IT IS LAWFUL TO DO SO. WHETHER PENALTY SHOU LD BE IMPOSED FOR FAILURE TO PERFORM A STATUTORY OBLIGATION IS A MATT ER OF DISCRETION OF THE AUTHORITY TO BE EXERCISED JUDICIALLY AND ON A CONSI DERATION OF ALL THE RELEVANT CIRCUMSTANCES. EVEN IF A MINIMUM PENALTY I S PRESCRIBED, THE AUTHORITY COMPETENT TO IMPOSE THE PENALTY WILL BE J USTIFIED IN REFUSING TO IMPOSE PENALTY WHEN THERE IS A TECHNICAL OR VENI AL BREACH OF THE PROVISIONS OF THE ACT OR WHERE THE BREACH FLOWS FRO M A BONA FIDE BELIEF THAT THE OFFENDER IS NOT LIABLE TO ACT IN THE MANNE R PRESCRIBED BY THE STATUTE. MERE TECHNICAL BREACH SHOULD NOT ORDINARILY ATTRACT PENALTY: PENALTY WILL NOT BE IMPOSED MERELY BECAUSE IT IS LAWFUL TO DO SO. WHETHER PENALTY SHOULD BE IMPOSED FOR FAILURE TO PERFORM A STATUTORY OBLIGATION IS A MATTER OF DISCRETION OF THE AUTHORITY TO BE EX ERCISED JUDICIALLY AND ON A CONSIDERATION OF ALL THE RELEVANT CIRCUMSTANCE S. EVEN IF A MINIMUM PENALTY IS PRESCRIBED THE AUTHORITY COMPETE NT TO IMPOSE THE PENALTY WILL BE JUSTIFIED IN REFUSING TO IMPOSE PEN ALTY WHEN THERE IS A TECHNICAL OR VENIAL BREACH OF THE PROVISIONS OF THE ACT OR WHERE THE BREACH FLOWS FROM A BONA FIDE BELIEF THAT THE OFFEN DER IS NOT LIABLE TO ACT IN THE MANNER PRESCRIBED BY THE STATUTE. (CIT V HARSIDDH CONSTRUCTION PVT. LTD. (2000) 244 ITR 417 (GUJ.)). 2. IT HAS NOT BEEN DISPUTED BY LOWER AUTHORITIES THAT ASSESSEE WAS NOT INTIMATED BY THE RESULTING COMPANY THAT THEY HAVE F ILED REVISED INCOME TAX RETURN AFTER THE DEMERGER EFFECT AND ALS O OUR MANAGER (ACCOUNTS) INADVERTENTLY FORGOT TO FILE THE REVISED INCOME TAX RETURN. THEREFORE, DURING THE ASSESSMENT PROCEEDINGS WE HAV E ACCEPTED AND AGREED TO BUY THE PEACE WITH THE DEPARTMENT THAT TH E LOSSES PERTAINING TO TEXTILE DIVISION MAY BE TRANSFERRED TO THE RESUL TING COMPANY WHICH ITA NO. 512/JP/2013 M/S. ASSOCIATED STONE INDUSTRIES (KOTAH) LTD. VS. A CIT , CIRCLE- 1, KOTA 16 COULD NOT BE TRANSFERRED AT THE TIME OF FILING OF O RIGINAL RETURN ON OR BEFORE DUE DATE IN ABSENCE OF FINAL APPROVAL OF HON 'BLE HIGH COURT FOR SCHEME OF ARRANGEMENT OF DEMERGER. THEREAFTER, ON A PPROVAL OF SCHEME OF ARRANGEMENT FOR DEMERGER BY HONBLE HIGH COURT, WE HAVE ALSO NOT AVAILED BENEFIT OF ANY SET OFF DURING THE NEXT ASSESSMENT YEAR AND ONWARDS FOR THE LOSSES PERTAINING TO TEXTI LE DIVISION.' CIT VS. RELIANCE PETROPRODUCTS (SUPREME COURT) : IT HAS BEEN HELD THAT P ENALTY U/S 271(1)(C) IS NOT MANDATORY PENALTY ITS T O BE LEVIED ONLY WHEN CONCEALMENT OF INCOME AND INACCURATE FURN ISHING OF PARTICULARS ARE PROVED. WE WANT TO CITE HERE A VERY IMPORTANT RECENT JUDGEMENT OF THE HONBLE SUPREME COURT WHEREIN IT H AS BEEN DECIDED THAT MERELY MAKING A NOT SUSTAINABLE CLAIM IN LAW D OES NOT LEAD TO FURNISHING INCORRECT PARTICULARS. THE ARGUMENT OF THE REVENUE THAT SUBMITTING AN INC ORRECT CLAIM FOR EXPENDITURE WOULD AMOUNT TO GIVING INACCURATE PARTI CULARS OF SUCH INCOME IS NOT CORRECT. BY NO STRETCH OF IMAGINATIO N CAN THE MAKING OF AN INCORRECT CLAIM IN LAW TANTAMOUNT TO FURNISHING INACCURATE PARTICULARS. A MERE MAKING OF THE CLAIM, WHICH IS N OT SUSTAINABLE IN LAW, BY ITSELF, WILL NOT AMOUNT TO FURNISHING INACC URATE PARTICULARS REGARDING THE INCOME OF THE ASSESSEE. IF THE CONTEN TION OF THE REVENUE IS ACCEPTED THEN IN CASE OF EVERY RETURN WHERE THE CLAIM MADE IS NOT ACCEPTED BY THE A.O. FOR ANY REASON, THE ASSESSEE W ILL INVITE PENALTY U/S 271(1)(C). THAT IS CLEARLY NOT THE INTENTION OF THE LEGISLATURE. FURTHER RELIANCE IS PLACED ON: J.K. JAJOO VS. CIT (1980) 181 ITR 410 (MP) 083 CTR (MP) 041 : HELD FROM THE MERE FACT THAT A CLAIM FOR CERTAIN EX PENDITURE IS REJECTED IT CANNOT BE HELD; THAT THE CLAIM FOR EXPE NDITURE MADE BY THE ASSESSEE WAS FALSE OR INACCURATE TO HIS KNOWLEDGE O R WAS AS A RESULT OF GROSS NEGLIGENCE. THEREFORE THE TRIBUNAL WAS NOT JU STIFIED IN HOLDING THE ASSESSEE WAS GUILTY OF CONCEALING THE PARTICULA RS OF HIS INCOME AND WAS LIABLE TO PAY PENALTY UNDER PROVISIONS OF 271(1 )(C). CIT V. ROSE LOCK FACTORY (1993) 117 TAXMAN 366 (GUJ .): NO PENALTY MERELY BECAUSE OF DISALLOWANCE OF CERTAIN EXPENSES BONA FIDE CLAIMED BY ASSESSEE ITA NO. 512/JP/2013 M/S. ASSOCIATED STONE INDUSTRIES (KOTAH) LTD. VS. A CIT , CIRCLE- 1, KOTA 17 GRUH FINANCE LTD V. ACIT 316 ITR (AT) 440 (AHD.): D ISALLOWANCE OF DEDUCTION CLAIMED BY THE ASSESSEE WHERE TRUE AND FU LL DISCLOSURE WAS MADE, DOES NOT AMOUNT TO CONCEALMENT. JHAVAR PROPERTIES P. LTD V. ACIT (2009) 317 ITR (AT ) 278 (MUM.): DISALLOWANCE ON THE GROUND OF RESONABLENESS OF EXPE NDITURE DOES NOT AMOUNT TO CONCEALMENT. CIT V. CAFCO SYNDICATE SHIPPING CO. (2007) 294 ITR 134 (MAD.): MERE ADDITION OF INCOME BY DISALLOWING EXPENSES IS NOT CONCEALMENT OF INCOME - 2.5 LD. AO, HOWEVER DID NOT ACCEPT THE REPLY OF THE ASS ESSE AND IMPOSED THE IMPUGNED PENALTY BY FOLLOWING OBSERVATI ONS: SUBMISSION OF ASSESSEE HAS BEEN CONSIDERED HOWEVE R, IT IS NOT ACCEPTABLE IN VIEW OF FOLLOWING DISCUSSION. ASSESSE E RELIED UPON VARIOUS DECISIONS OF HON'BLE COURTS, HOWEVER, THE CASE OF A SSESSEE IS TOTALLY DIFFERENT. IN THIS PARTICULAR CASE ASSESSEE HAD TO REVISE ITS RETURN OF INCOME AFTER DECISION OF DEMERGER. HOWEVER, COMPANY DID NOT REVI SED RETURN OF INCOME , BESIDES COMPANY TOOK UNDUE BENEFIT OF LOSSES. THESE LOOSES RELATED TO RESULTING COMPANY REDUCED TAXABLE INCOME OF THE COMPANY. FURT HER CLAIM OF COMPANY, THAT RESULTING COMPANY DID NOT INFORM AFTER REVISIN G RETURN OF INCOME, IS NOT RELEVANT. BECAUSE IT IS LEGAL DUTY OF THE COMPANY T O FURNISH CORRECT POSITION OF INCOME, WHETHER THE RESULTING COMPANY INFORMED OR N OT ABOUT CLAIM OF LOSSES SHOWS THAT COMPANY DELIBERATELY CONCEALED TRUE INCO ME, THEREFORE, PENALTY IS INEVITABLE IN THIS CASE ON THE ISSUE OF LOSS RELATE D TO DEMERGER, FURTHER ASSESSEE COMPANY SAID THAT COMPANY CLAIMED LOSS ONLY FOR THE RELEVANT YEAR, IN THE NEXT YEAR COMPANY REDUCED LOSS OF RESULTING COMPANY, HOW EVER IT IS RELEVANT TO SAY THAT IN THE NEXT YEAR COMPANY NOT OFFERED ANY ADDIT IONAL TAX ON ACCOUNT OF LOSSES CLAIMED IN ASSESSMENT YEAR 2006-07. IF COMPA NY DID NOT CLAIM LOSSES OF RESULTING COMPANY THEN COMPANY HAD TO PAY TAX ON RS . 2,21,82,864/-, IT MAKES CLEAR THAT COMPANY CONCEALED INCOME AND FILED INACC URATE PARTICULARS OF INCOME. FURTHER, IT IS ALSO PERTINENT TO MENTION THAT ASSES SEE HAS NOT FILED ANY APPEAL IN THIS REGARD. IN THIS PARTICULAR CASE COMP ANY ACCEPTED THAT DEMERGED UNIT COULD NOT CLAIM LOSS RELATED TO RESULTING COMP ANY. COMPANY SUBMITTED THAT IN THE RETURN OF INCOME FOR THE A.Y. 2007-08, COMPANY NEITHER CONCEALED INCOME NOR FILED INACCURATE PARTICULARS OF INCOME, HOWEVER, IT IS WORTHWHILE TO MENTION THAT ON THE DATE OF NOTICE, ISUED U/S 148, ASSESSEE WAS LIABLE TO FILE ITA NO. 512/JP/2013 M/S. ASSOCIATED STONE INDUSTRIES (KOTAH) LTD. VS. A CIT , CIRCLE- 1, KOTA 18 REVISED RETURN, HOWEVER, COMPANY DID NOT FILE REVIS ED RETURN OF INCOME. IT SHOWS THAT IF REASSESSMENT WAS NOT DONE IN THE CASE OF ASSESSEE, COMPANY NEVER PAY TAX ON LOSS RELATED TO RESULTING COMPANY. IN THIS CASE, IT IS VERY CLEAR THAT ASSESSEE HIDE TRUE PARTICULARS OF INCOME. HEN CE, EXPLANATION OF THE ASSESSEE IS NEITHER BONA FIDE NOR RELIABLE. FURTHE R, IN VIEW OF THE EXPLANATION DEEMING CONCEALMENT, THE ASSESSEE HAS A DUTY TO OFF ER AN EXPLANATION. HOWEVER, WHERE AN EXPLANATION WAS OFFERED AND FOUND TO BE UNRELIABLE, PENALTY BECOMES EXIGIBLE. ALSO, IT HAS BEEN HELD IN THE CASE OF [CIT VS. SHRE E KRISHNA TRADING CO., (2002) 253 ITR 645, 649 (KERALA HIGH COURT)] T HAT AFTER INTRODUCTION OF EXPLANATION 1 CONSCIOUS CONCEALMENT NEED NOT BE EST ABLISHED. IT IS ALSO HELD IN THE CASE OF UNION OF INDIA VS. DHARMENDRA TEXTIL E PROCESSORS (2008) TAXMAN 65 (SC). PENALTY U/S 271(1) ( C ) IS CIVIL L IABILITY AND FOR ATTRACTING SUCH CIVIL LIABILITY, WILLFUL CONCEALMENT IS NOT AN ESSENTIAL INGREDIENT. ALSO, IT IS HELD THAT IN THE CASE OF RAGHUVEER SONI VS. ACIT (2002) 258 ITR 239 BY RAJASTHAN HIGH COURT THAT IF IN ADDITION TO FAILURE TO SUBSTANTIATE THE EXPLANATION, THE ASSESSEE ALSO FAILS TO PROVE T HAT THE EXPLANATION FURNISHED BY HIM WAS BONA FIDE AND THAT HE HAS DISCLOSED ALL MATERIAL FACTS NECESSARY FOR ASSESSMENT THEN EXPLANATION 1 TO SECTION 271(1)( C ) OPERATES. LOOKING TO THE ABOVE FACTS AND CIRCUMSTANCES OF THE CASE, IT IS HELD THAT ASSESSEE HAS FILED INACCURATE PARTICULARS OF INCOME AND HAS CONCEALED ITS INCOME OF RS. 2,21,82,864/-. THEREFORE, PENALTY U/S 271(1)( C) IS IMPOSED UPON THE ASSESSEE AND CALCULATION OF THE PENALTY IS MAD E AS UNDER:- TAX CHARGEABLE ON INCOME IN RESPECT OF WHICH PARTI CULARS OF WHICH HAVE BEEN CONCEALED RS. 2182864/- MINIMUM PENALTY LEVIABLE @ 100% OF TAX EVADED R S. 7466752/- MAXIMUM PENALTY LEVIABLE @ 300% OF TAX EVADED R S. 22400256/- 2.6 AGGRIEVED ASSESSEE PREFERRED 1 ST APPEAL CHALLENGING THE IMPOSITION OF PENALTY AND CONTENDED THAT: THERE HAS BEEN COMPLETE AND FULL DISCLOSURE OF ALL RELEVANT FACTS AND DOCUMENTS BY THE ASSESSEE, EVEN BEFORE THE ASSE SSMENT WAS TAKEN UP FOR SCRUTINY. THE MOST IMPORTANT ASPECT OF THE ENT IRE MATTER IS THAT IT IS NOT EVEN THE CASE OF THE A.O. THAT THE RETURN OF IN COME FILED BY THE ITA NO. 512/JP/2013 M/S. ASSOCIATED STONE INDUSTRIES (KOTAH) LTD. VS. A CIT , CIRCLE- 1, KOTA 19 ASSESSEE FOR A.Y. 2006 2007 WHICH HAS TO BE THE SOLE BASIS FOR EVALUATING THIS PENALTY PROVISION CONTAINED OR DE PICTED CONCEALMENT OF INCOME OR INACCURATE PARTICULAR. THE MOST CRUCIAL ASPECT OF THE MATTER IS THAT THE LAW IN THIS REGARD IS VERY WELL ESTABLISHE D TO THE EFFECT THAT THE CHARGE OF CONCEALMENT / FILING OF INACCURATE PARTIC ULARS IS ALWAYS VIS A VIS THE RETURN OF INCOME FILED; NOTHING MORE, NOTHI NG LESS. IN OTHER WORDS, THE ONLY DOCUMENT WHICH ONE NEEDS TO EVALUATE FOR T HIS PURPOSE IS THE RETURN OF INCOME. THE ASSESSEE SHOULD HAVE CONCEAL ED THE INCOME / FILED INACCURATE PARTICULAR OF INCOME VIS A VIS THE R ETURN OF INCOME FILED BY HIM. ANY SUBSEQUENT CONDUCT OF AN ASSESSEE CANNOT CHANGE THE POSITION IN THIS REGARD. JUST AS ANY ACT ON THE PART OF THE ASSESSEE POST FILING OF HIS RETURN OF INCOME WHETHER BY WAY OF SURRENDER OF I NCOME OR OTHERWISE DOES NOT ABSOLVE HIM FROM THE CHARGE OF THIS PENALT Y IF, IN THE RETURN OF INCOME FILED, HE HAD CONCEALED INCOME / FILED INACC URATE PARTICULAR OF INCOME, SIMILARLY, AN ACT OF OMISSION ON THE PART O F THE ASSESSEE POST FILING OF HIS RETURN OF INCOME DOES NOT, BY ITSELF, ATTRACT THIS PENALTY IF THE RETURN OF INCOME FILED BY HIM DID NOT CONTAIN CONCE ALMENT / INACCURATE PARTICULARS. TO REITERATE, IT IS UNDISPUTED THAT T HE RETURN OF INCOME FILED BY THE ASSESSEE ON 27.11.2006 WAS A PERFECTLY VALID AN D CORRECT RETURN AND DID NOT CONTAIN ANY CONCEALMENT / INACCURATE PARTIC ULARS. IT IS NOBODYS CASE THAT THE RETURN OF INCOME WOULD HAVE OR SHOULD HAVE BEEN OTHERWISE. IN THE CIRCUMSTANCES, IT IS CLEAR THAT THERE WAS NO CONCEALMENT / FILING OF INACCURATE PARTICULARS VIS A VIS THE RETURN OF INCOME SO FILED. ANOTHER IMPORTANT ASPECT IS THAT NEITHER ANY FACT HAS BEEN FOUND TO BE UNTRUE NOR A.O. HAS DISCOVERED ANY NEW FACT. IN OTHER WORDS, THE PENALTY HAS BEEN LEVIED ON THE BASIS OF THE FACTS W HICH WERE BROUGHT ON ITA NO. 512/JP/2013 M/S. ASSOCIATED STONE INDUSTRIES (KOTAH) LTD. VS. A CIT , CIRCLE- 1, KOTA 20 RECORD BY ASSESSEE ONLY, BEFORE EVEN THE ASSESSMENT OR REASSESSMENT PROCEEDINGS WERE INITIATED. THE FACTS CLEARLY DEPICT THAT THERE WAS NEITHER AN Y ATTEMPT NOR INTENTION TO CONCEAL ANY INCOME OR FILE ANY INACCUR ATE PARTICULAR OF INCOME BUT EVEN ON THE BASIS OF THE CIRCUMSTANTIAL EVIDENCES AS WELL AS TAKING INTO ACCOUNT PREPONDERANCE OF PROBABILITY, H UMAN CONDUCT OR SURROUNDING CIRCUMSTANCES., THERE COULD NOT HAVE BE EN ANY IOTA OR SEMBLANCE OF INTENTION TO DO SO. MOREOVER, THE ASSESSEE HAS NOT TAKEN ANY UNDUE ADV ANTAGE OF ITS OMISSION, AS IT HAD NOT CLAIMED ANY SET OFF OF SUCH LOSSES IN THE SUBSEQUENT YEAR I.E A.Y. 2007 2008 AND ALSO IT HA D PAID TAXES. THIS NEGATES ANY PROBABILITY OF THE INTENTION TO CONCEAL INCOME / FILE INACCURATE PARTICULARS OF INCOME. EVEN AFTER INITIATION OF T HE ASSESSMENT PROCEEDING, THE ASSESSEE AGAIN PUT ALL THE FACTS ON RECORD IN DETAILS. THE ASSESSEE ALSO GAVE REASONS / EXPLANATION FOR NON-FI LING OF A REVISED RETURN DUE TO INADVERTENCE. UPON REALIZING THE UNINTENTIO NAL OMISSION, THE ASSESSEE READILY AND IMMEDIATELY ACCEPTED THE MISTA KE. THE EXPLANATION OF THE ASSESSEE IS SUPPORTED BY HOST OF DIRECT AND CIRCUMSTANTIAL EVIDENCES, CONDUCT AND PREPONDERANCE OF PROBABILITI ES. BY FURNISHING A CORROBORATIVE EXPLANATION ASSESSEE DISCHARGED ITS P RIMARY ONUS AND SUBSTANTIATED THE EXPLANATION ABOUT ITS BONA FIDES. LD. A.O. HAS NOT BROUGHT ON ANY RECORD ANY INQUIRIES, FACTS OR CIRCU MSTANCES MUCH LESS COGENT EVIDENCE, TO REBUT THAT THE EXPLANATION WAS FALSE. PENALTY HAS NOT BEEN LEVIED BY CONSIDERING THE REPLY BUT ONLY ON TE CHNICAL CONSIDERATION THAT REVISED RETURN WAS NOT FILED, IGNORING THE GLA RING FACTS THAT EVERYTHING ITA NO. 512/JP/2013 M/S. ASSOCIATED STONE INDUSTRIES (KOTAH) LTD. VS. A CIT , CIRCLE- 1, KOTA 21 WAS ON RECORD FILED BY NONE OTHER THAN THE ASSESSEE HIMSELF. RELIANCE WAS PLACED ON: MS. MADHUSHREE GUPTA VS. UNION OF INDIA 317 ITR 107 (DEL)] CIT VS. RAMPUR ENGINEERING CO. LTD. 309 ITR 143 (DE LHI)(FB)] CIT VS. RAM COMMERCIAL ENTERPRISES LTD. 246 ITR 568 (DEL)] GLOBAL GREEN CO. LIMITED VS. DCIT {I.T.A 1390/DEL/2 011] IT IS UNDISPUTED THAT ON THE DATE OF FILING THE RET URN, THE ASSESSEE HAD COMPLETELY AND ACCURATELY DISCLOSED ALL THE PARTICU LARS OF ITS INCOME. ADDL. CIT V. PREM CHAND GARG 24 DTR 513 (TM) (DELHI VTRIB)] (I) THE ASSESSEE HAS OFFERED ALL THE NECESSARY EXPLANAT IONS WITH SUBSTANTIVE EVIDENCE BEFORE THE A.O. FROM TIME TO T IME, THE VERACITY OF WHICH HAVE NOT BEEN DOUBTED. THE SOLE CONTENTION OF THE A.O. IS THAT THE ASSESSEE FAILED TO FILE A REVISED RETURN. THIS, BY ITSELF, CANNOT LEAD TO IMP OSITION OF PENALTY. (II) THE RETURN OF INCOME FILED BY THE ASSESSEE WAS BONA FIDE AND TRUE ON THE DATE OF FILING THE RETURN RELIANCE WAS PLACED ON: PWC PVT. LTD. VS. CIT [(2012) 348 ITR 306 (SC)] CIT V/S. RELIANCE PETROPRODUCTS P. LTD. [(2010) 322 ITR 158 (SC)] T. ASHOK PAI V/S. CIT [(2007) 292 ITR 11 (SC)] MAHADESWARA MOVIES VS. CIT (1983) [144 ITR 127 (KAR )]} (III) THE ASSESSEE HAD DISCLOSED ALL THE MATERIAL INFORMA TION RELATING TO THE COMPUTATION OF INCOME. FURTHER, THE RE IS NO INDEPENDENT FINDING ON THE PART OF THE AO. IN FACT, HE HAS ITA NO. 512/JP/2013 M/S. ASSOCIATED STONE INDUSTRIES (KOTAH) LTD. VS. A CIT , CIRCLE- 1, KOTA 22 RELIED COMPLETELY ON THE DISCLOSURES MADE BY THE AS SESSEE IN ITS RETURN AND SUBMISSIONS. 2.7 LD. CIT(A) HOWEVER CONFIRMED THE PENALTY BY FOLLOWI NG OBSERVATIONS: I HAVE CONSIDERED THE FINDINGS OF AO AND ASSESSEE 'S SUBMISSION. THE ASSESSEE MAINLY RELIED ON THE FACT THAT IT HAS DISCLOSED ALL THE MATERIAL FACT BEFORE THE AO. THE BASIC FACTS ARE AS UNDER:- (I) THE ASSESSEE FILED ITS RETURN OF INCOME ON 30 -11-2006. (II) THE ASSESSEE FILED PETITION BEFORE THE HON'BL E HIGH COURT FOR DEMERGER OF COMPANY INTO TWO COMPANIES NA MELY M/S. ASSOCIATED STONE INDUSTRIES (KOTAH), LTD. AND M/S. VAST TEXTILES LTD. THE SCHEME WAS TO BECOME EFFECTIVE FR OM 16- 10-2005. (III) THE HON'BLE HIGH COURT OF RAJASTHAN APPROVED THE SCHEME VIDE ITS ORDER DATED 09-02-2007. (IV) THE ASSESSEE HAD TIME TO FILE REVISED RETURN TILL 31-03- 2008. HOWEVER, NO REVISED RETURN WAS FILED. (V) THE ASSESSEE INFORMED THE AO ON 31-1-2006 THAT AS SOON AS THE SCHEME OF DEMERGER WAS APPROVED IT WOUL D FILE REVISED RETURN. HOWEVER, NO REVISED RETURN WAS FILE D. (VI) THE ASSESSEE SUBMITTED A COPY OF LETTER INTIM ATING THE A.O. ALONGWITH COPY OF ORDER OF HONBLE HIGH COURT OF RAJASTHAN, APPROVING THE SCHEME OF DEMERGER. VII). THE ASSESSEE FILED RETURN FOR A.Y. 2007-08 ON 31.10.2007 WITHOUT CLAIMING CANY FORWARD LOSSES. THE ASSESSEE CLAIMED BEFORE ME THAT ASSESSEE HAS AL L ALONG KEPT ON INFORMING THE A.O ABOUT VARIOUS DEVELOPMENT S AND HAS ALSO NOT CLAIMED CARRY FORWARD OF LOSSES IN A.Y 2007-08, ITA NO. 512/JP/2013 M/S. ASSOCIATED STONE INDUSTRIES (KOTAH) LTD. VS. A CIT , CIRCLE- 1, KOTA 23 WHICH SHOWED ITS BONAFIDE. THE ASSESSEE ALSO CLAIME D THAT AS ALL THE MATERIAL FACTS WERE DISCLOSED AND AS THE RE IS NO DEFECT IN THE ORIGINAL RETURN, THE ASSESSEE CANNOT BE TREATED AS AN ASSESSEE WHO HAS CONCEALED PARTICULARS OF INCOME OR CONCEALED ITS INCOME. THE FACTS OF THE CASE REQUIRES A DIFFERENT APPROAC H AS THIS IS NOT A SIMPLE CASE WHERE WE CAN DECIDE THE ISSUE ON THE BASIS OF ORIGINAL RETURN ITSELF. THIS IS A CASE OF DEMERG ER AND AS SOON AS THE SCHEME IS APPROVED BY THE HONBLE HIGH COURT, THE ASSESSEE WAS REQUIRED TO COMPLETE VARIOUS FORMA LITIES BEFORE VARIOUS AUTHORITIES E.G. REGISTRAR OF COMPAN IES ETC. THE ASSESSEE WAS ALSO REQUIRED TO PREPARE DEMERGED ACCOUNTS, THEREFORE, IT CAN BE REASONABLY CONCLUDED THAT THE ISSUE OF CANY FORWARD OF LOSSES MUST HAVE COME TO I TS KNOWLEDGE AGAIN AND AGAIN. THE DEMERGED ENTITY M/S VAST TEXTILE LTD. ALSO FILE D REVISED RETURN AND CLAIMED CARIY FORWARD OF LOSSES. UNDER THESE CIRCUMSTANCES, THE LEAST, WHICH THE ASS ESSEE COULD HAVE DONE WAS TO FILE A REVISED RETURN BUT IT APPEARS THAT THE ASSESSEE NEVER HAD ANY INTENTION OF FILING REVISED RETURN BUT ITS INTENTION WAS ALL ALONG TO CREATE EV IDENCE TO ESCAPE PENALTY U/S 271(LJ(E).[IN CASE IT WAS CAUGHT ] AND NOT TO PAY TAXES BY FILING REVISED RETURN. IN MY OPINION, THE ASSESSEE HAS DELIBERATELY AVOIDE D FILING OF REVISED RETURN AND PAYMENT OF TAXES, AND THEREFO RE ITS A FIT CASE FOR LEVY OF PENALTY U/S 271(L)(C) OF THE I.T. ACT. THE PENALTY OF RS. 75,00,000/ (ROUGHLY 100% OF TAX SOUG HT TO BE EVADED) IS CONFIRMED. THE ASSESSEE ALSO RAISED THE ISSUE OF RECORDING SATISFACTION BEFORE INITIATING PENALTY PROCEEDI NG. IN VIEW OF SEC 271(1)(B), MERE ISSUANCE OF DIRECTION TO INI TIATE PENALTY IS SUFFICIENT TO CONSTITUTE SATISFACTION SO , THIS ISSUE ALSO GOES AGAINST ASSESSEE. THIS GROUND OF APPEAL IS THEREFORE DISMSISED. 2.8 AGGRIEVED ASSESSEE IS BEFORE US. LD. COUNSEL FO R THE ASSESSEE CONTENDS THAT: ITA NO. 512/JP/2013 M/S. ASSOCIATED STONE INDUSTRIES (KOTAH) LTD. VS. A CIT , CIRCLE- 1, KOTA 24 1. IT IS NOWHERE DISPUTED BY THE LD. AO THAT ALL THE R ELEVANT DETAILS ABOUT DEMERGER SCHEME, ITS PENDENCY AND SUBSEQUENTL Y ITS ORDER, EVERYTHING WAS FILED BY ASSESSEE ITSELF BEFORE LD. AO. THERE IS NO REASON WHATSOEVER THAT ASSESSEE CONCEALED ANYTHING OR FURNISHED INACCURATE PARTICULARS OF INCOME. RELEVANT DETAILS WERE FILED IN PHYSICAL FORM AS WELL AS NOTES IN E RETURN WHEREVER POSSIBLE FOR THE ASSESSE. THUS THERE IS NO ISSUE ON THE UNDISPUTED F ACTS THAT ASSESSEE MADE COMPLETE AND FULL DISCLOSURE OF ALL RELEVANT F ACTS, CIRCUMSTANCES AND DOCUMENTS EVEN BEFORE THE ASSESSM ENT WAS TAKEN UP FOR SCRUTINY. 2. THE ENTIRE BASIS FOR IMPOSITION OF PENALTY HINGES O N ONE ASPECT THAT ASSESSE DID NOT FILE THE REVISED RETURN; THIS IS WI THOUT DISPUTING THE MOST CRUCIAL ASPECT THAT THE ENTIRE DISCLOSURE WAS MADE AT THE TIME OF FILING THE APPLICATION FOR DEMERGER, RETURNS OF INCOME FOR AYS 2006-07 & 07-08, AFTER THE APPROVAL OF DEMERGER SCH EME BY HIGH COURT. IT IS NOT EVEN THE CASE OF THE A.O. THAT THE RETURN OF INCOME FILED BY THE ASSESSEE FOR A.Y. 2006 2007 WHICH HA S TO BE THE SOLE BASIS FOR CONSIDERING THE APPLICABILITY OF PENALTY PROVISION CONTAINED OR DEPICTED EVEN AN IOTA OF CONCEALMENT O F INCOME OR FURNISHING ANY INACCURATE PARTICULARS. 3. IT IS A FUNDAMENTAL REQUIREMENT OF LAW THAT ALLEGAT ION ABOUT CONCEALMENT PENALTY OR IMPOSITION THEREOF AND FILIN G OF INACCURATE PARTICULARS IS ALWAYS RELATED TO THE PARTICULARS DI SCLOSED ALONG WITH RETURN OF INCOME FILED BY ASSESSE. IT HAS BEEN HOLD SO BY VARIOUS HONBLE COURTS BY WAY OF PLETHORA OF JUDGMENTS. IN OTHER WORDS, FOR LEVY OF PENALTY IT SHOULD BE DEMONSTRATED BY LD . AO THAT ASSESSEE IN THE RETURN OF INCOME FILED BY IT HAS EI THER CONCEALED THE ITA NO. 512/JP/2013 M/S. ASSOCIATED STONE INDUSTRIES (KOTAH) LTD. VS. A CIT , CIRCLE- 1, KOTA 25 INCOME OR FILED INACCURATE PARTICULARS OF INCOME IN THE RETURN OF INCOME. IF THE PARTICULARS OF INCOME IN THE RETURN OF INCOME ARE PROPER UNDER NO CIRCUMSTANCES PENALTY CAN BE IMPOSE D U/S 271(1)(C). LD. AO HAS ADOPTED AN EXTREME STEP BY HO LDING NON FILING OF REVISED RETURN AS TANTAMOUNT TO CONCEALME NT OR FILING INACCURATE PARTICULARS. THE ACTION IS UNJUSTIFIED S INCE AL THE RELEVANT DETAILS HAVE BEEN FILED DURING THE ASSESSMENT PROCE EDINGS. 4. ANY SUBSEQUENT CONDUCT, POST ASSESSMENT PROCEEDING S OR OMISSION ON THE PART OF THE ASSESSEE CANNOT, ATTRACT CONCEAL MENT PENALTY, IF ALL THE RELEVANT FACTS, INFORMATION AND RECORD IS S UPPLIED BY THE ASSESSE IN RETURNS OF INCOME FOR AYS 2006-07, 07-08 . BESIDES WHEN THE SCHEME IS APPROVED BY HIGH COURT THE REPRE SENTATIVE OF THE INCOME TAX DEPARTMENT IS ALSO HEARD. THUS THE E NTIRE PROCEEDINGS RELATED TO DEMERGER SCHEME WERE IN PUBL IC DOMAIN, WITHIN THE KNOWLEDGE OF THE DEPARTMENT BY WAY OF CO PIOUS QUANTITY OF DOCUMENTS WHICH WERE FILED NOT ON ONE OCCASION B UT SEVERAL OCCASIONS. 5. THE ALLEGATION OF CONCEALMENT OR INACCURATE PART ICULARS HAS NOT BEEN PROVED ON THE BASIS OF ANY FURTHER INQUIRY, DI SCOVERY OF ANY NEW FACT OR INFORMATION BUT ONLY ON FOR NO FILING O F REVISED ON FACTS WHICH ARE ALREADY DISCLOSED TO DEPARTMENT BY THE AS SESSEE. FOR THIS PURPOSE, WHAT HAS BEEN RELIED ON, IS NOTHING BUT TH E RECORD AND SUBMISSIONS MADE BY THE ASSSESSEE ITSELF. 6. THE UNDISPUTED FACTS CLEARLY DEMONSTRATE THAT TH ERE WAS NEITHER EFFORT NOR ANY INTENTION TO CONCEAL ANY INCOME OR F ILE ANY INACCURATE PARTICULAR OF INCOME TAKING INTO ACCOUNT PREPONDERANCE ITA NO. 512/JP/2013 M/S. ASSOCIATED STONE INDUSTRIES (KOTAH) LTD. VS. A CIT , CIRCLE- 1, KOTA 26 OF PROBABILITY, HUMAN CONDUCT, SURROUNDING CIRCUMST ANCES OR REASONABLE LOGIC. 7. MORE IMPORTANTLY, IT IS NOWHERE ALLEGED THAT ASS ESSEE HAS TAKEN ANY UNDUE ADVANTAGE AS IT HAS NOT CLAIMED ANY SET OFF O F SUCH LOSSES IN THE SUBSEQUENT YEAR I.E A.Y. 2007 2008. SINCE THE ASSESSE DESIRED TO CLOSE THE ISSUES IT HAS PAID ALL THE DUE TAX DEM AND IN THIS BEHALF. THUS THERE IS NO LOSS WHATSOEVER TO REVENUE AND OUT RIGHT NEGATES ANY SUSPICION THAT ASSESSEE CONCEALED ANY INCOME OR FILED INACCURATE PARTICULARS OF INCOME IN THE RETURN. 8. AFTER INITIATION OF THE REASSESSMENT PROCEEDING, THE ASSESSEE AGAIN FURNISHED ALL THE RELEVANT FACTS ON RECORD IN DETAI LS, SUBMISSIONS AND CASE LAWS. THE REVISED RETURN COULD NOT BE FIL ED BY THE ASSESSE DUE TO AN UNINTENTIONAL OMISSION. THERE IS NO PROVI SION IN THE IT ACT FOR LEVYING CONCEALMENT OF INCOME U/S 271(1)(C) FOR NON-FILING OF RETURN. THE RELEVANT PROVISION IS SEC. 271(1)(A) , WHICH IS NEITHER INITIATED NOR ATTRACTED. THUS THE PENALTY HAS BEEN IMPOSED FOR NOT FILING A RETURN AND UNFOUNDED ALLEGATION THAT ASSES SEE FILED INACCURATE PARTICULARS IN RETURN OF INCOME DTD. 27- 11-06 IS BASELESS AS ALL THE DETAILS ABOUT PENDING DEMERGER APPLICATI ON WERE FURNISHED AND MENTIONED. THERE CAN BE NO MISTAKE IN THIS RETURN AS THE DEMERGER WAS NOT APPROVED BY THE TIME OF FILING OF RETURN OR THE ASSESSMENT. HAVING OFFERED A SATISFACTORY EXPLANAT ION IN THIS BEHALF, ASSESSEE HAD DISCHARGED ITS PRIMARY ONUS TO SUBMIT AN EXPLANATION WHICH IS CORROBORATED BY UNDISPUTED FAC TS AND SUBSTANTIATED BY RECORD ABOUT ITS TRUTHFULNESS. PE R CONTRA LD. A.O. HAS OVERLOOKED THE RECORD, COURT ORDERS AND EVIDENC E AND ON AN EXCUSE THAT REVISED RETURN WAS NOT FILED BY THE ASS ESSE, ARBITRARILY ITA NO. 512/JP/2013 M/S. ASSOCIATED STONE INDUSTRIES (KOTAH) LTD. VS. A CIT , CIRCLE- 1, KOTA 27 IMPOSED THE PENALTY. THE PENALTY IS IMPOSED QUA ORI GINAL RETURN DTD. 27-11-2006 WHICH REMAINS ACCEPTED ON THIS ISSU E AND WHEN EVEN THE SCHEME WAS NOT APPROVED AND ALL THE DUE DI SCLOSURE WAS MADE IN THE PROCEEDINGS TIME AND AGAIN. 9. A LEGAL PLEA IS ALSO TAKEN THAT PROPER SATISF ACTION HAS NOT BEEN RECORDED BY LD. AO IN WHILE INITIATING THE PENALTY PROCEEDINGS AS IN TERMS OF SECTION 271 (1) (C): (I) NEITHER ASSESSMENT ORDER NOR THE SHOW CAUSE NOT ICE MENTIONED AS TO WITH RESPECT TO WHAT ITEM OF ADDITI ON / DISALLOWANCE THE PENALTY PROCEEDINGS WERE INITIATED . (II) THERE WAS NO PROPER RECORDING OF SATISFACTION , WITHIN THE MEANING OF SECTION 271 (1) (C) AND AS LAID DOWN BY COURTS. (III) THERE IS VAGUENESS OF THE CHARGE, AS IT WAS N OT CLEAR WHETHER THE CHARGE WAS FOR CONCEALMENT OF INCOME OR FOR FIL ING OF INACCURATE PARTICULARS. BOTH THE CHARGES ARE DIFFE RENT AND HAVE DIFFERENT LEGAL CONNOTATIONS. RELIANCE WAS PLACED ON: MS. MADHUSHREE GUPTA VS. UNION OF INDIA [(2009) 317 ITR 107 (DEL)] CIT VS. RAMPUR ENGINEERING CO. LTD. [(2009) 309 ITR 143 (DELHI)(FB)] CIT VS. RAM COMMERCIAL ENTERPRISES LTD. [(2000) 246 ITR 568 (DEL)] GLOBAL GREEN CO. LIMITED VS. DCIT {I.T.A 1390/DEL/2 011][ITAT DEL]} NO CONCEALMENT / FILING OF INACCURATE PARTICULA RS ITA NO. 512/JP/2013 M/S. ASSOCIATED STONE INDUSTRIES (KOTAH) LTD. VS. A CIT , CIRCLE- 1, KOTA 28 (IV) IT IS UNDISPUTED THAT ON THE DATE OF FILING THE RET URN, THE ASSESSEE HAD COMPLETELY AND ACCURATELY DISCLOSED AL L THE PARTICULARS OF ITS INCOME. ADDL. CIT V. PREM CHAND GARG [(2009) 24 DTR 513 (TM ) (DELHI) THE ASSESSEE HAS OFFERED ALL THE NECESSARY EXPLANAT IONS WITH SUBSTANTIVE EVIDENCE BEFORE THE A.O. FROM TIME TO T IME, THE VERACITY OF WHICH HAVE NOT BEEN DOUBTED. THE SOLE C ONTENTION OF THE A.O. IS THAT THE ASSESSEE FAILED TO FILE A REVI SED RETURN. THIS, BY ITSELF, CANNOT LEAD TO IMPOSITION OF PENALTY. (V) THE RETURN OF INCOME FILED BY THE ASSESSEE WAS BONA FIDE AND TRUE ON THE DATE OF FILING THE RETURN FURTHER RELIANCE WAS PLACED ON: PWC PVT. LTD. VS. CIT [(2012) 348 ITR 306 (SC)] CIT V/S. RELIANCE PETROPRODUCTS P. LTD. [(2010) 322 ITR 158 (SC)] T. ASHOK PAI V/S. CIT [(2007) 292 ITR 11 (SC)] MAHADESWARA MOVIES VS. CIT (1983) [144 ITR 127 (KAR )]} (VI) THE ASSESSEE HAD DISCLOSED ALL THE MATERIAL INFORMA TION RELATING TO THE COMPUTATION OF INCOME. FURTHER, THE RE IS NO INDEPENDENT FINDING ON THE PART OF THE AO. IN FACT, HE HAS RELIED COMPLETELY ON THE DISCLOSURES MADE BY THE AS SESSEE IN ITS RETURN AND SUBMISSIONS. (VII) RELIANCE WAS PLACED ON: DILIP N. SHROFF V/S. JT. CIT [(2007) 291 ITR 519 (S C)] KANBAY SOFTWARE INDIA (P) LTD. VS DY. CIT 22 DTR 48 1 (PUNE) NO SATISFACTION WITHIN THE MEANING OF SECTION 271 (1) (C) MS. MADHUSHREE GUPTA VS. UNION OF INDIA 317 ITR 107 (DEL) ITA NO. 512/JP/2013 M/S. ASSOCIATED STONE INDUSTRIES (KOTAH) LTD. VS. A CIT , CIRCLE- 1, KOTA 29 IN THIS CASE, THE CONSTITUTIONAL VALIDITY OF SECTIO N 271(1B) WAS CHALLENGED. THE HIGH COURT, WHILE UPHOLDING CONSTITUTIONAL VALI DITY, HELD THAT THE POSITION OF LAW BOTH, PRE AND POST AMENDMENT WHEREB Y SECTION 271(1B) WAS INSERTED WITH RETROSPECTIVE EFFECT FROM 1-4-198 9, IS SIMILAR, INASMUCH AS ASSESSING OFFICER WILL HAVE TO ARRIVE AT A PRIMA FACIE SATISFACTION DURING COURSE OF ASSESSMENT PROCEEDINGS WITH REGARD TO ASSESSEE HAVING CONCEALED PARTICULARS OF INCOME OR FURNISHED INACCU RATE PARTICULARS BEFORE HE INITIATES PENALTY PROCEEDINGS. THE COURT FURTHER HELD THAT THE SATISFACTION OF ASSESSING OFFICER THAT CASE MAY DES ERVE IMPOSITION OF PENALTY SHOULD BE DISCERNIBLE FROM ORDER PASSED DUR ING COURSE OF ASSESSMENT PROCEEDINGS. CIT VS.RAMPUR ENGINEERING CO. LTD. 309 ITR 143 (DEL HI)(FB)] THE HIGH COURT HELD THAT THE POWER TO IMPOSE PENALT Y UNDER SECTION 271 OF THE ACT DEPENDS UPON THE SATISFACTION OF THE INC OME-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 SATISFACTION ABOUT THE EXISTENCE OF THE CONDITIONS SPECIFIED IN CLAUSES (A), (B) AND (C ) BEFORE THE PROCEEDINGS ARE CONCLUDED. MERE ABSENCE OF WORDS I AM SATISFIE D IN ASSESSMENT ORDER MAY NOT BE FATAL, YET SUCH A SATISFACTION MUS T BE SPELT OUT FROM ORDER OF ASSESSING OFFICER AS TO CONCEALMENT OF INC OME OR DELIBERATELY ITA NO. 512/JP/2013 M/S. ASSOCIATED STONE INDUSTRIES (KOTAH) LTD. VS. A CIT , CIRCLE- 1, KOTA 30 FURNISHING OF INACCURATE PARTICULARS AND IN ABSENCE OF A CLEAR FINDING AS TO CONCEALMENT OF INCOME OR DELIBERATELY FURNISHING OF INACCURATE PARTICULARS, INITIATION OF PENALTY PROCEEDINGS U/S 271(1)(C) WOULD BE WITHOUTJURISDICTION. CIT VS. DAJIBHAI KANJIBHAI [1991] 189 ITR 41 (BOM) CIT VS. VIKAS PROMOTERS LTD. [2005] 277 ITR 337 (D EL) CIT VS. RAM COMMERCIAL ENTERPRISES LTD. 246 ITR 568 (DEL) THE HIGH COURT HELD THAT MERELY BECAUSE THE PENALTY PROCEEDINGS HAVE BEEN INITIATED, IT CANNOT BE ASSUMED THAT SUCH A SA TISFACTION WAS ARRIVED AT IN THE ABSENCE OF THE SAME BEING SPELT OUT BY THE O RDER OF THE ASSESSING AUTHORITY. WHERE THE ASSESSMENT ORDER DID NOT RECOR D THE SATISFACTION AS WARRANTED BY SECTION 271 FOR INITIATING THE PENALTY PROCEEDINGS, PENALTY CANNOT BE HELD TO BE SUSTAINABLE. GLOBAL GREEN CO. LIMITED VS. DCIT [I.T.A 1390/DEL/2 011][ITAT DEL] THE TRIBUNAL HELD THAT DESPITE THE INSERTION OF SUB -SECTION (1B) TO S. 271, THE NECESSITY FOR PRIMA FACIE SATISFACTION FOR IN ITIATION OF PENALTY PROCEEDINGS CONTINUES TO BE A JURISDICTIONAL FACT. THE AO HAS TO RECORD THE FINDING THAT THERE WAS CONCEALMENT OF INCOME. I N THE S. 143(3) ASSESSMENT ORDER, THE AO HAS NOT MENTIONED A WORD T HAT THERE WAS FURNISHING OF INACCURATE PARTICULARS OR CONCEALMENT OF INCOME. HE MADE THE ADDITION MERELY ON THE GROUND THAT THE ASSESSEE WAS NOT ABLE TO ITA NO. 512/JP/2013 M/S. ASSOCIATED STONE INDUSTRIES (KOTAH) LTD. VS. A CIT , CIRCLE- 1, KOTA 31 PRODUCE ANY EVIDENCE FOR WRITING OFF OF THE AMOUNT IN THE BOOKS OF ACCOUNT. AS THE SATISFACTION THAT THE ASSESSEE HAD CONCEALED INCOME OR FURNISHED INACCURATE PARTICULARS OF SUCH INCOME IS NOT DISCERNIBLE FROM THE ASSESSMENT ORDER, THE PENALTY ORDER SUFFERS FRO M LACK OF JURISDICTION TO IMPOSE PENALTY. FOR CONCLUDING WHETHER THERE WAS ANY CONCEALMENT OR IF INACCURATE PARTICULARS WERE FURNISHED, THE RELEVANT TIME IS WH EN THE RETURN WAS FILED. ADDL. CIT V. PREM CHAND GARG 24 DTR 513 (TM) (DELHI ) (TRIB) THE FACT, WHETHER THERE IS CONCEALMENT OF INCOME OR WHETHER INACCURATE PARTICULARS THEREOF HAVE BEEN FURNISHED, IS ESSENTI ALLY A QUESTION OF FACT. TO FIND OUT THAT OR TO DECIDE WHICH, ALL THE ATTEND ING CIRCUMSTANCES HAVE TO BE TAKEN INTO ACCOUNT. THE QUESTION IS AT WHAT P OINT OF TIME THIS MATERIAL FACT IS TO BE FOUND OUT. GENERALLY IT IS W ITH REFERENCE TO THE RETURN OF INCOME AND AT THAT TIME IT IS TO BE SEEN WHETHER THERE WAS CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS T HEREOF IN THE RETURN OF INCOME CHARGEABLE TO TAX. NO PENALTY WHEN A BONAFIDE CLAIM IS REJECTED IT IS ALSO A FUNDAMENTAL PRINCIPLE OF PENALTY THAT NO PENALTY CAN BE LEVIED JUST BECAUSE A CLAIM PREFERRED BY THE ASSESSEE IS D ISALLOWED. RELIANCE, IN THIS REGARD, IS PLACED ON THE FOLLOWING DECISION S, AMONG OTHERS: ITA NO. 512/JP/2013 M/S. ASSOCIATED STONE INDUSTRIES (KOTAH) LTD. VS. A CIT , CIRCLE- 1, KOTA 32 (1) PWC PVT. LTD. VS. CIT [(2012) 348 ITR 306 (SC)] THERE IS ALSO NO QUESTION OF THE ASSESSEE FURNISHIN G ANY INACCURATE PARTICULARS. ALL THAT HAPPENED IN THE PRESENT CASE IS THAT THROUGH A BONA FIDE AND INADVERTENT ERROR FAILED TO ADD THE PROVIS ION FOR GRATUITY TO ITS TOTAL INCOME. THIS CAN ONLY BE DESCRIBED AS A HUMAN ERROR WHICH WE ARE ALL PRONE TO MAKE. THE CALIBRE AND EXPERTISE OF THE ASSESSEE HAS LITTLE OR NOTHING TO DO WITH THE INADVERTENT ERROR. THAT T HE ASSESSEE SHOULD HAVE BEEN CAREFUL CANNOT BE DOUBTED, BUT THE ABSENCE OF DUE CARE, IN A CASE SUCH AS THE PRESENT, DOES NOT MEAN THAT THE ASSESSE E IS GUILTY OF EITHER FURNISHING INACCURATE PARTICULARS OR ATTEMPTING TO CONCEAL ITS INCOME. (2) CIT V/S. RELIANCE PETROPRODUCTS P. LTD. 322 ITR 158 (SC)] SECTION 271 (1) (C) APPLIES WHERE THE ASSESSEE HAS CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHED INACCURATE P ARTICULARS OF SUCH INCOME. THE WORDS INACCURATE PARTICULARS MEAN TH AT THE DETAILS SUPPLIED IN THE RETURN ARE NOT ACCURATE, NOT EXACT OR CORRECT, NOT ACCORDING TO TRUTH OR ERRONEOUS. IN THE ABSENCE OF A FINDING BY THE AO THAT ANY DETAILS SUPPLIED BY THE ASSESSEE IN ITS RETURN WERE FOUND TO BE INCORRECT OR ERRONEOUS OR FALSE, THERE WOULD BE NO QUESTION OF I NVITING PENALTY U/S 271(1)(C). BY NO STRETCH OF IMAGINATION CAN THE MA KING OF AN INCORRECT CLAIM IN LAW TANTAMOUNT TO FURNISHING INACCURATE PA RTICULARS. A MERE ITA NO. 512/JP/2013 M/S. ASSOCIATED STONE INDUSTRIES (KOTAH) LTD. VS. A CIT , CIRCLE- 1, KOTA 33 MAKING OF THE CLAIM, WHICH IS NOT SUSTAINABLE IN LA W, BY ITSELF, WILL NOT AMOUNT TO FURNISHING INACCURATE PARTICULARS REGARDI NG THE INCOME OF THE ASSESSEE. IF THE CONTENTION OF THE REVENUE IS ACCEP TED THEN IN CASE OF EVERY RETURN WHERE THE CLAIM MADE IS NOT ACCEPTED B Y THE AO FOR ANY REASON, THE ASSESSEE WILL INVITE PENALTY UNDER SECT ION 271(1)(C). THAT IS CLEARLY NOT THE INTENT OF THE LEGISLATURE. (3) T. ASHOK PAI V/S. CIT [(2007) 292 ITR 11 (SC)] IF AN EXPLANATION GIVEN BY THE ASSESSEE WITH REGARD TO THE MISTAKE COMMITTED BY HIM HAS BEEN TREATED TO BE BONA FIDE, THE QUESTION OF HIS FAILURE TO DISCHARGE HIS BURDEN IN TERMS OF THE EXP LANATION TO SECTION 271(1)(C) DOES NOT ARISE. THE LANGUAGE OF THE PROVI SION SIGNIFIES A DELIBERATE ACT OF OMISSION ON THE PART OF THE ASSES SEE. SUCH DELIBERATE ACT MUST BE EITHER FOR THE PURPOSE OF CONCEALMENT OF IN COME OR FURNISHING OF INACCURATE PARTICULARS. (4) MAHADESWARA MOVIES VS. CIT (1983) [144 ITR 127 (KAR)] THE ASSESSEE, A FILM DISTRIBUTOR, HAD CLAIMED AMORT ISATION EXPENSES THAT THE ITO FOUND TO HAVE ALREADY BEEN INCLUDED IN PROF IT AND LOSS ACCOUNT FILED BY ASSESSEE ALONGWITH RETURN OF INCOME. THIS MISTAKE READILY ACCEPTED BY ASSESSEE AS INADVERTENT ONE. NO ATTEMPT WAS MADE BY THE ASSESSEE TO SUPPRESS ANY MATERIAL FACTS. FURTHER, I N THE PAST NO SUCH ITA NO. 512/JP/2013 M/S. ASSOCIATED STONE INDUSTRIES (KOTAH) LTD. VS. A CIT , CIRCLE- 1, KOTA 34 MISTAKE HAD OCCURRED WAS A RELEVANT CIRCUMSTANCE TO BE TAKEN INTO CONSIDERATION, AND THERE WAS NOTHING IMPROBABLE IN THE EXPLANATION THAT THE MISTAKE WAS DUE TO INADVERTENCE. THEREFORE, THE LEVY OF PENALTY WAS NOT JUSTIFIED. IF THE ASSESSEE DISCLOSES ALL MATERIAL INFORMATION OF HIS INCOME, HIS ONUS STANDS DISCHARGED. DILIP N. SHROFF V/S. JT. CIT [(2007) 291 ITR 519 (S C)] EVEN IF EXPLANATION IS TAKEN RECOURSE TO, A FINDING HAS TO BE ARRIVED AT HAVING REGARD TO CLAUSE (A) OF EXPLANATION 1 THAT T HE ASSESSING OFFICER IS REQUIRED TO ARRIVE AT A FINDING THAT THE EXPLANATIO N OFFERED BY AN 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 BONAFID E BUT ALL THE FACTS RELATING TO THE SAME AND MATERIAL TO THE INCOME WER E NOT DISCLOSED BY HIM. THUS, APART FROM HIS EXPLANATION BEING NOT BO NA FIDE, 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. KANBAY SOFTWARE INDIA (P) LTD. VS DY. CIT 22 DTR 48 1 (PUNE)] AS LONG AS THE INFORMATION GIVEN IN THE INCOME TAX RETURN IS CORRECT AND COMPLETE TO THE BEST OF ASSESSEES KNOWLEDGE AND BE LIEF, IT CANNOT BE SAID THAT THE STATUTORY OBLIGATION UNDER SECTION 139(1) IS CONTRAVENED WHICH, EVEN FOR A CIVIL LIABILITY FOR PENALTY BEING IMPOSE D, IS A SINE QUA NON. ITA NO. 512/JP/2013 M/S. ASSOCIATED STONE INDUSTRIES (KOTAH) LTD. VS. A CIT , CIRCLE- 1, KOTA 35 2.9 LD. DR SUPPORTED THE ORDERS OF LOWER AUTHORITIE S AND CONTENDS THAT BY NOT FILING THE REVISED RETURN ASSESSE HAS AVOIDE D THE PAYMENT OF TAXES AND THEREFORE, IT IS LIABLE FOR PENALTY U/S 271(1)( C). BOTH THE LOWER AUTHORITIES HAVE DEMONSTRATED THAT ASSESSEE HAS DEL IBERATELY CONCEALED THE PARTICULARS IN THIS BEHALF AND FURNISHED INACCURATE PARTICULARS. 2.10 LD COUNSEL FOR ASSESSE IN REJOINDER CONTENDS T HAT THE CONTENTIONS OF LD. DR HAVE NO BEARING ON THE ISSUES IN QUESTION. T HERE IS NO PROVISION U/S 271(1)(C) FOR IMPOSING PENALTY FOR NOT FILING A REVISED RETURN QUA WHICH ALL THE PARTICULARS ARE TIMES AND AGAIN FILED BY THE ASSESSE AND ARE IN THE POSSESSION OF THE DEPARTMENT. BESIDES THE FA CTS HAVE NOT BEEN DISPUTED. NONE OF THE AUTHORITY BELOW IN ANY WAY DE MONSTRATED MUCH LESS EVEN INDICATED THAT ASSESSE FURNISHED ANY INACCURAT E PARTICULARS OR CONCEALED ANY INCOME. THERE IS NO SCOPE OF THIS PEN ALTY GIVEN THE UNDISPUTED FACTS, CIRCUMSTANCES AND JUDICIAL PRECED ENTS. THE PENALTY CANNOT BE IMPOSED WHEN DEPARTMENT DOES NOT DISPUTE THE POSSESSION OF DOCUMENTS, EVIDENCE, INFORMATION, HIGH COURT ORDER AND OTHER MATERIAL FILED BY THE ASSESSE. 2.11 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSE D THE MATERIAL AVAILABLE ON RECORD. FACTS HAVE BEEN NARRATED IN DE TAILS ABOVE WHICH NEED NOT BE REPEATED IN OUR CONCLUSION. ITA NO. 512/JP/2013 M/S. ASSOCIATED STONE INDUSTRIES (KOTAH) LTD. VS. A CIT , CIRCLE- 1, KOTA 36 I. AS THE RECORD REVEALS ASSESSE HAD FILED ALL THE RELEVANT DOCUMENTS, INFORMATION AND EVENTS BEFORE LD. AO DURING THE COU RSE OF FILING OF RETURN FOR AY 2006-07, ASSESSMENT PROCEEDINGS AND I N AY 2007-08 ALSO. WHEN THE ORDER OF HONBLE RAJASTHAN HIGH COUR T APPROVING THE SCHEME OF DEMERGER WAS PASSED, THE SAME WAS ALSO DU LY AND PROMPTLY FILED BY THE ASSESSE WITH LD. AO. THESE FACTS HAVE NOT AT ALL BEEN DISPUTED BY THE DEPARTMENT IN ANY MANNER. II. THE ALLEGATION OF CONCEALMENT OR INACCURATE PAR TICULARS HAS NOT BEEN ESTABLISHED BY THE LD. A.O. ON DISCOVERY OF ANY NE W FACT, INFORMATION OR INQUIRY. THE ENTIRE ADVERSE INFERENCE IS DRAWN O N NOTHING BUT ASSEESSEES OWN RECORD AND HONBLE HIGH COURT APPRO VAL FOR DEMERGER SCHEMES AFTER THE INCOME TAX DEPARTMENT IS HEARD. IN OUR CONSIDERED VIEW THERE EXISTS NO SCOPE TO HOLD THAT ASSESSSEE HAS CONCEALED ANY FACT OR FURNISHED INACCURATE PARTICUL ARS IN THE RETURN OF INCOME DTD. 27-11-2006 FILED PRIOR TO APPROVAL OF D EMERGER SCHEME BY HONBLE RAJASTHAN HIGH COURT. SO ALSO IN THE RETURN FILED IN RESPONSE TO NOTICE U/S 148 AS IT IS NOT DISPUTED THAT ASSESS EE DID NOT CLAIM ANY SET OFF OF LOSS. THUS WE SEE NO JUSTIFICATION IN AL LEGING THAT ASSESSSEE HAS CONCEALED ANY FACT OR FURNISHED INACCURATE PART ICULARS IN ANY RETURNS OF INCOME. III. A MULTITUDE OF UNDISPUTED FACTS MENTIONED ABOV E CLEARLY DEMONSTRATE THAT THERE WERE NO EFFORT MUCH LESS INTENTION TO CO NCEAL ANY PARTICULARS OR FILE ANY INACCURATE PARTICULAR OF IN COME BY ASSESSEE TESTING IT ON THE TOUCHSTONE OF PREPONDERANCE OF PR OBABILITY, HUMAN CONDUCT, SURROUNDING CIRCUMSTANCES OR REASONABLE LO GIC. ITA NO. 512/JP/2013 M/S. ASSOCIATED STONE INDUSTRIES (KOTAH) LTD. VS. A CIT , CIRCLE- 1, KOTA 37 IV. THERE IS NO LOSS TO REVENUE AS ASSESSEE HAS PAI D ALL THE DUE TAXES. IT HAS NOT TAKEN ANY ADVANTAGE AS IT HAS NOT CLAIMED A NY SET OFF OF SUCH LOSSES IN ANY MANNER IN THE SUBSEQUENT YEAR. T HERE BEING REPETITIVE AND FULL DISCLOSURE OF FACTS AND RECORD; THERE BEING NO LOSS TO REVENUE AS THE LOSS IS NOT SET OFF BY THE A SSESSE AND MERELY BECAUSE REVISED RETURN IS NOT FILED BY THE ASSSESSE E, IT IS DESIRABLE THE ALL THE SURROUNDING CIRCUMSTANCES, HUMAN CONDUC T AND ASSESSEES EXPLANATION ARE TO BE CONSIDERED IN HARM ONIOUS MANNER. CONSIDERING ALL THE ASPECT WE ARE NOT IN AGREEMENT WITH AUTHORITIES BELOW THAT ASSESSEE CONCEALED OR FILED INACCURATE P ARTICULARS OF INCOME SO AS TO BE LIABLE FOR IMPUGNED PENALTY. V. HAVING FILED ALL THE RELEVANT DETAILS ON SEVERAL OCCASIONS WHOSE VERACITY IS NOT AT ALL CHALLENGED BY THE REVENUE, T HE SOLE ISSUE REMAINS WHETHER THE IMPUGNED CONCEALMENT PENALTY IS LEGALLY OR FACTUALLY LEVIABLE FOR NOT FILING OF A REVISED RETU RN WHICH WAS UNDERTAKEN BY ASSESSE. IN OUR CONSIDERED VIEW PENAL TY PROVISION FOR NOT FILING A RETURN ARE DIFFERENT I.E. SEC 271( 1)(A) AND NOT 271(1)(C). BESIDES IN ORIGINAL RETURN OR NOTICE U/S 148 ASSESSSEE DID NOT CONCEAL ANY INCOME OR FURNISHED INACCURATE PART ICULARS. BY THE TIME OR ORIGINAL RETURN MERGER SCHEME WAS NOT APPRO VED AND ASSESSE OFFERED INCOME IN RETURN IN RESPONSE TO NO TICE U/S 148. IT IS TRITE LAW THAT PENALTY U/S 271(1)(C) CANNOT BE IMPO SED BY PICKING UP ONE DEFAULT, THE LEVY IS TO BE CONSIDERED AFTER CAREFULLY CONSIDERING THE ENTIRETY OF FACTS, RECORD, ASSESSEE S SUBMISSIONS, JUDICIAL PRECEDENTS AND APPLYING PROPER DISCRETION. ANY PENALTY IMPOSED WITHOUT PROPER CARE AND IN AN ARBITRARY MAN NER HAS A PROPENSITY TO BECOME UNTENABLE. ITA NO. 512/JP/2013 M/S. ASSOCIATED STONE INDUSTRIES (KOTAH) LTD. VS. A CIT , CIRCLE- 1, KOTA 38 VI. THERE IS NO PROVISION IN THE IT ACT FOR LEVYING CONCEALMENT OF INCOME U/S 271(1)(C) FOR NON-FILING OF A RETURN. TH E RELEVANT PROVISION IS SEC. 271(1)(A), WHICH IS NEITHER INITI ATED NOR ATTRACTED. THUS THE PENALTY HAS BEEN IMPOSED FOR NOT FILING A RETURN AND UNFOUNDED ALLEGATION THAT ASSESSEE FILED INACCURATE PARTICULARS IN RETURN OF INCOME DTD. 27-11-06 IS UNSUSTAINABLE. VII ASSESSEE HAVING OFFERED A SATISFACTORY EXPLANAT ION WHICH REMAINS LARGELY UNCONTROVERTED, IT BECOMES CLEAR THAT IT DI SCHARGED ITS PRIMARY ONUS TO FURNISH AN EXPLANATION WHICH IS COR ROBORATED BY UNDISPUTED FACTS AND SUBSTANTIATED BY RECORD ABOUT ITS TRUTHFULNESS. IN OUR CONSIDERED VIEW THIS IS NOT A FIT CASE FOR I MPOSITION OF PENALTY. VIII. OUR VIEW IS FORTIFIED BY HONBLE SUPREME COUR T JUDGMENTS IN THE CASE OF RELIANCE PETRO PRODUCTS HOLDING THAT WHEN T HE RELEVANT INFORMATION IS SUBMITTED IN THE RETURN OF INCOME, I T IS TO BE HELD THAT ASSESSE HAS THE ASSESSE HAS DISCHARGED ITS O NUS OF OFFERING A SATISFACTORY EXPLANATION. IX. HONBLE SUPREME COURT IN THE CASE OF HINDUSTAN STEELS (SUPRA) HAS HELD THAT PENALTY SHOULD NOT BE IMPOSED MERELY BECA USE IT IS LAWFUL TO DO SO. BESIDES TECHNICAL OR VENIAL BREACH OF LAW CAN NOT BE VISITED WITH STRINGENT PENALTY PROCEEDINGS U/S 271( 1)(C). WITH ALL THE RECORD IN POSSESSION OF DEPARTMENT, INADVERTENT NON FILING OF REVISED RETURN CANNOT CONSTITUTE A DECISIVE FACTOR FOR IMPOSITION OF PENALTY AT THE COST OF HOST OF OTHER FACTS AVAILABL E ON RECORD DEMONSTRATING THAT ASSESSEE FILED ALL THE RELEVANT DETAILS TIMES AND AGAIN SUO MOTU. A TECHNICAL DEFAULT FOR WHICH PROVI SIONS OF SEC. ITA NO. 512/JP/2013 M/S. ASSOCIATED STONE INDUSTRIES (KOTAH) LTD. VS. A CIT , CIRCLE- 1, KOTA 39 271(1)(A) MAY BE ATTRACTED CANNOT BE MADE A BASIS F OR PENALTY U/S 271(1)(C). X. IN CONSIDERATION OF ABOVE FACTS AND CIRCUMSTANCE S OF THE CASE, RELYING ON THE HONBLE SUPREME COURT JUDGMENTS IN THE CASES OF RELIANCE PETRO PRODUCTS, PRICE WATER HOUSE, HINDUSTAN STEELS AND HOST OF OTHER JUDGMENTS ON OTHER RELEVANT ISSUES, WE HOLD T HAT, THIS IS NOT A FIT CASE FOR IMPOSITION OF PENALTY U/S 271(1)(C). T HE SAME IS DELETED. 3.0 IN THE RESULT, THE APPEAL OF THE ASSESSEE IS A LLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 08/01/20 16 SD/- SD/- FOE FLAG ;KNO VKJ-IH-RKSYKUH (VIKRAM SINGH YADAV) (R.P.TOLANI) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 08 /01/ 2016 *MISHRA VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- M/S. ASSOCIATED STONE INDUSTRIES (KO TAH) LTD., KOTA 2. IZR;FKHZ@ THE RESPONDENT- THE ACIT , CIRCLE- 1, KOTA 3. VK;DJ VK;QDRVIHY ) @ CIT(A) 4. VK;DJ VK;QDR@ CIT 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR 6. XKMZ QKBZY@ GUARD FILE (ITA NO.512/JP/2013) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR