Addl. C.I.T., Range-2, Farrukhabad V. The Kishan Shakari Chini Mills, Ltd., Farrukhabad

ITA 6/AGR/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 60098 (ITAT-AGRA)
• Duration Of Justice: 1 year(s) 2 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-04-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 29-03-2012
• Assessment Year: 2002-2003
• Appeal Filed On: 07-01-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A K SHARMA
• Assessee Lawyers: MUNNA LAL AGARWAL
• Keywords: Earning of tax free income; Question of law; Wrong claim
• Section: 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AGRA BENCH, AGRA BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI A.L. GEHLOT, ACCOUNTANT MEMBER ITA NO.06/AGR/2011 ASSESSMENT YEAR : 2002-03 ADDL. COMMISSIONER OF INCOME, VS. THE KISAN SAHKARI CHINI MILLS LTD., RANGE-2, FARRUKHABAD. KAIMGANJ, FARRUKHABAD. (PAN: AAACT 5855 F) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI A.K. SHARMA, JR. D.R. RESPONDENT BY : SHRI MUNNA LAL AGARWAL, C.A.. DATE OF HEARING : 29.03.2012 DATE OF PRONOUNCEMENT : 04.04.2012 ORDER PER A.L. GEHLOT, ACCOUNTANT MEMBER: THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER DATED 25.10.2010 PASSED BY THE LD. CIT(A), GHAZIABAD FOR THE ASSESSM ENT YEAR 2002-03. 2. THE EFFECTIVE GROUND RAISED IN THE APPEAL OF THE REVENUE IS IN RESPECT OF LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE INCOME TA X ACT, 1961 (THE ACT HEREINAFTER). ITA NO.06/AGR/2011 A.Y. 2002-03 2 3. THE BRIEF FACTS OF THE ISSUE ARE THAT ADDITION O F RS.90,23,233/- WAS MADE BY THE ASSESSING OFFICER WHICH HAS BEEN CONFIRMED BY T HE I.T.A.T. IN QUANTUM APPEAL FILED BY THE ASSESSEE IN ITA NO.203/AGR/2006 FOR AS SESSMENT YEAR 2002-03 ORDER DATED 27.02.2009. SOME OF THE RELEVANT PORTIONS OF THE FINDING OF I.T.A.T. IN QUANTUM APPEAL ARE REPRODUCED AS UNDER:- 5.9 THE ASSESSEE HAS BY WAY OF AN ARGUMENT SUBMITT ED THAT A SIMILAR ADDITION MADE FOR A.Y. 2003-04 STANDS DELET ED BY THE LD. CIT(A) IN FIRST APPEAL. WE HAVE GONE THROUGH THE S AID ORDER (PB PAGE 131 TO 132). THE SAME STANDS ALLOWED FOLLOWIN G THE DECISION BY THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE O F CIT VS. RAMALA SAHKARI CHINI MILLS LTD. (SUPRA) AND WHICH STANDS D ISTINGUISHED BY US VIDE THE FOREGOING PART OF THIS ORDER. FURTHER, WE ALSO OBSERVE THAT NO SUCH ADDITION STANDS MADE BY THE REVENUE IN THE ASSESSMENT FOR A.Y. 2004-05. IN THAT CASE, HOWEVER, WE FIND THAT THERE IS NO DISCUSSION ON THIS ASPECT OF THE MATTER IN THE ASSE SSMENT ORDER, COPY OF WHICH STANDS PLACED ON RECORD (PB PAGE 133 TO 13 5). AS SUCH, NO POSITIVE INFERENCE FROM THE SAME COULD BE DRAWN. I N FACT, IT WERE SO, THE FACT OF NO SUCH ADDITION HAVING BEEN MADE IN AN Y OF THE PRECEDING YEARS, SOME OF WHICH COULD BE SUBJECT TO REGULAR AS SESSMENT U/S 143(3)/S. 147, WOULD BY ITSELF LEAD TO THE DELETION OF THE IMPUGNED ADDITION. EACH YEAR IS AN INDEPENDENT UNIT OF ASSE SSMENT, SO THAT THE TRIBUNAL, OR ANY OTHER APPELLATE AUTHORITY FOR THAT MATTER, IS OBLIGED TO DECIDE THE ISSUE BEFORE IT IN ACCORDANCE WITH TH E LAW, I.E., APPLYING THE SAME IN THE LIGHT OF THE OBTAINING FACTS AND CI RCUMSTANCES, I.E., AS DISCERNED, SO THAT THE TRIBUNAL IS NOT BOUND BY THE DECISION OF THE LOWER AUTHORITIES. THE PRINCIPLE OF RES JUDICATA I S NOT APPLICABLE TO THE PROCEEDINGS UNDER THE ACT AND, FURTHER, THERE I S NO ESTOPPLE AGAINST THE LAW. COULD, ONE MAY ASK, THE TRIBUNAL SAY THAT THOUGH IN ITS CONSIDERED VIEW THE ASSESSEES CASE IS WITHOUT MERIT, AND AGAINST THE LAW AS LAID DOWN, YET THE REVENUE HAVING NOT AG ITATED THE MATTER FOR OTHER YEARS, CANNOT DO SO FAR THE YEAR IN WHICH IT ACTUALLY DOES SO, AS FOR EXAMPLE, THE YEAR UNDER REFERENCE?. IN THE FACTS OF THE CASE, HOWEVER, IT CANNOT ALSO BE SAID SO, AS THE REVENUE MAY WELL HAVE CONTESTED THE ASSESSMENT FOR A.Y.2003-04 IN APPEAL, AND THE A.O. HAS ITA NO.06/AGR/2011 A.Y. 2002-03 3 NOT RENDERED ANY DECISION ON MERITS WHILE FRAMING T HE ASSESSMENT FOR A.Y.2004-05. THE SAID REFERENCE, THUS, IS OF NO MO MENT. FURTHER, IT NEEDS TO BE CLARIFIED THAT THE ARGUMENT WOULD IN AN Y CASE APPLY ONLY TO THE SUM RECEIVED DURING THE RELEVANT YEAR(S) (AS RS.12.47 LACS FOR THE CURRENT YEAR), AND NOT TO THE BALANCE AMOUNT OF RS.77.76 LACS WHICH STANDS ASSESSED FOR THE CURRENT YEAR, CANNOT FORM PART OF THE INCOME FOR ANY OTHER YEAR(S), BEING SO FOLLOWING TH E DECISION IN THE CASE OF CIT VS. T.V. SUNDARAM IYENGAR (SUPRA). 5.10 EACH OF THE FACTORS, THUS, AS FOUND BY THE REV ENUE, I.E. NON- ALLOWABILITY OF INTEREST, ABSENCE OF LIABILITY, NO ACTUAL ISSUE OF CAPITAL, TOWARD LOSSES, DOMINION, ETC., WE FIND AS CORRECTLY SO. THE ISSUE STANDS FURTHER EXAMINED FROM ALL THE APPLICABLE ANG LES, EVEN AS EXPLAINED AND ENUNCIATED BY THE APEX COURT IN THE C ASE OF SIDDHESHWAR SAHAKARI SAKHAR KARKHANA LTD. VS. CIT ( SUPRA). THE SAME UNMISTAKABLY POINT TO THE ENTIRE IMPUGNED SUM OF RS.90.23 LACS AS REPRESENTING THE ASSESSEES INCOME, SO THAT THE SAME STANDS RIGHTLY ASSESSED AS SUCH BY THE REVENUE AS ITS BUSINESS INC OME U/S.28(1) OF THE ACT, AND THE ASSESSEES CASE AS WITHOUT MERIT I N VIEW OF THE FOREGOING FACTUAL FINDINGS, GIVEN THE LAW AS LAID D OWN BY THE APEX COURT PER THE AFORE-REFERRED DECISIONS. 4. THE ASSESSING OFFICER LEVIED PENALTY ON THE GROU ND THAT THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF INCOME. THE CI T(A) DELETED THE SAID PENALTY ON THE GROUND THAT THE ASSESSEE HAS CLAIMED SUCH DEDUC TIONS FROM PAYMENT TO FARMERS IN PAST YEARS BUT NO ADDITIONS WERE MADE, EVEN WHEN THE ADDITIONS WERE MADE, SAME WAS DELETED. IT HAS ALSO BEEN NOTED BY THE CI T(A) THAT HIS PREDECESSOR HAS TAKEN DIFFERENT STAND ON THIS ISSUE. IN THE ASSESS MENT YEAR 2003-04, THE CIT(A)S PREDECESSOR HELD THAT SUCH COLLECTION TOWARDS SHARE DEPOSIT ACCOUNT WAS NOT IN THE NATURE OF REVENUE RECEIPT AND HENCE WAS NOT TAXABLE . THE CIT(A) FURTHER NOTICED THAT THE DECISION OF I.T.A.T. IN QUANTUM MATTER IS ON THE BASIS OF LEGAL ITA NO.06/AGR/2011 A.Y. 2002-03 4 INTERPRETATION. THE CLAIM OF THE ASSESSEE WAS ON B ONA FIDE BELIEF OF PAST ACCOUNTING PRACTICE AND LEGAL INTERPRETATION. 5. WE HAVE HEARD THE LD. REPRESENTATIVES OF THE PAR TIES AND RECORDS PERUSED. THE PENALTY PROCEEDINGS UNDER SECTION 271(1) (C) CA N BE INITIATED ONLY IF THE A.O OR THE FIRST APPELLATE AUTHORITY IS SATISFIED IN TH E COURSE OF ANY PROCEEDINGS UNDER THE ACT. IF HE IS SATISFIED AS PER CLAUSE (C) THAT ANY PERSON HAS CONCEALED THE PARTICULARS OF HIS INCOME OR HAS FURNISHED INACCURA TE PARTICULARS OF SUCH INCOME, HE MAY DIRECT THAT SUCH PERSON SHALL PAY BY WAY OF PEN ALTY THE SUM MENTIONED IN SUB- CLAUSE (III) OF CLAUSE (C). THE EXPRESSION USED IN CLAUSE (C) IS 'HAS CONCEALED THE PARTICULARS OF HIS INCOME' OR 'FURNISHED INACCURATE PARTICULARS OF SUCH INCOME'. THEREFORE, IN BOTH CASES OF CONCEALMENT AND INACCUR ACY THE PHRASE 'PARTICULARS OF INCOME ARE USED. IT WILL BE NOTED THAT AS REGARDS C ONCEALMENT, THE EXPRESSION IN CLAUSE (C) IS 'HAS CONCEALED THE PARTICULARS OF HIS INCOME' AND NOT 'HAS CONCEALED HIS INCOME'. THE EXPRESSIONS 'HAS CONCEALED THE PARTICU LARS OF INCOME' AND 'HAS FURNISHED INACCURATE PARTICULARS OF INCOME' HAVE NO T BEEN DEFINED EITHER IN SECTION 271(1)(C) OR ELSEWHERE IN THE ACT. ONE THING IS CER TAIN THAT THESE TWO CIRCUMSTANCES ARE NOT IDENTICAL IN DETAIL ALTHOUGH THEY MAY LEAD TO THE SAME EFFECT, NAMELY, KEEPING OFF A CERTAIN PORTION OF INCOME. THE FORMER IS DIRECT AND THE LATTER MAY BE INDIRECT IN ITS EXECUTION. ITA NO.06/AGR/2011 A.Y. 2002-03 5 5.1 THE WORD CONCEAL IS DERIVED FROM THE LATI N CONCELARE WHICH IMPLIES CON+CELARE TO HIDE. WEBSTER IN HIS NEW INTERNATIONA L DICTIONARY EQUATES ITS MEANING 'TO HIDE OR WITHDRAW FROM OBSERVATION, TO C OVER OR KEEP FROM SIGHT; TO PREVENT THE DISCOVERY OF; TO WITHHOLD KNOWLEDGE OF' . THE OFFENCE OF CONCEALMENT IS THUS A DIRECT ATTEMPT TO HIDE AN ITEM OF INCOME OR A PORTION THEREOF FROM THE KNOWLEDGE OF THE INCOME-TAX AUTHORITIES. THERE IS S TRICT LIABILITY ON THE ASSESSEE FOR CONCEALMENT OR FOR GIVING INACCURATE PARTICULARS WH ILE FILING THE RETURN. THE PENALTY UNDER THAT PROVISION IS A CIVIL LIABILITY. WILLFUL CONCEALMENT IS NOT AN ESSENTIAL INGREDIENT FOR ATTRACTING CIVIL LIABILITY . IT IS OBVIOUS THAT THE PENAL PROVISIONS WOULD OPERATE WHEN THERE IS CONCEALMENT OF PARTICULARS OF INCOME OR A FAILURE OF DUTY TO DISCLOSE FULLY AND TRULY PARTICU LARS OF INCOME, IMPOSED UNDER THE ACT AND THE RULES THERE UNDER. THE DUTY IS ENJOINED UPON A PERSON TO MAKE A CORRECT AND COMPLETE DISCLOSURE OF HIS INCOME AND I T IS ONLY WHEN HE FAILS IN HIS DUTY BY NOT DISCLOSING HIS INCOME OR PART THEREOF, HE CONCEALS THE PARTICULARS OF HIS INCOME. THE DUTY IS ENJOINED UPON HIM TO MAKE A COM PLETE DISCLOSURE OF HIS INCOME AS WELL AS A CORRECT DISCLOSURE. THEREFORE, IF THE DISCLOSURE MADE-OF THE PARTICULARS OF INCOME IS INCORRECT, THEN ALSO HE CO MMITS BREACH OF HIS DUTY. SUCH DEFAULTS ENTAIL THE PENAL CONSEQUENCES CONTEMPLATED BY SECTION 271(1)(C)(III). THERE CANNOT BE A STRAIGHT JACKET FORMULA FOR DETEC TION OF THESE DEFAULTS OF CONCEALMENT OR OF FURNISHING INACCURATE PARTICULARS OF INCOME AND INDEED ITA NO.06/AGR/2011 A.Y. 2002-03 6 CONCEALMENT OF PARTICULARS OF INCOME AND IN ACCURAT E PARTICULARS OF INCOME MAY AT TIMES OVERLAP. IT DEPENDS UPON THE FACTS OF THE EAC H CASE. IN THE ASSESSMENT PROCEEDINGS THE ITO WHILE ASCERTAINING THE TOTAL IN COME CHARGEABLE TO TAX WOULD BE IN A POSITION TO DETECT THE SPECIFIC OR DEFINITE PARTICULARS OF INCOME CONCEALED OR OF WHICH FALSE PARTICULARS ARE FURNISHED. WHERE IN THE CONSTITUENTS OF INCOME RETURNED, SUCH SPECIFIC OR DEFINITE PARTICULARS OF INCOME ARE DETECTED AS CONCEALED, THEN EVEN IN THE TOTAL INCOME FIGURE TO THAT EXTENT THEY REFLECT, IT WOULD AMOUNT TO CONCEALMENT TO THAT EXTENT. IN THE SAME WAY WHERE S PECIFIC AND DEFINITE PARTICULARS OF INCOME ARE DETECTED AS INACCURATE, THEN SUCH FIG URE WILL ALSO MAKE THE TOTAL INCOME INACCURATE IN PARTICULARS TO THE EXTENT IT D OES NOT INCLUDE SUCH INCOME. IN OTHER, WORDS THE AO CANNOT INVOKE PROVISION OF SECT ION 271(1)(C) ON THE BASIS OF ROUTINE AND GENERAL PRESUMPTIONS. WHETHER IT BE A C ASE OF ONLY CONCEALMENT OR OF ONLY INACCURACY OR BOTH, THE PARTICULARS OF INCOME SO VITIATED WOULD BE SPECIFIC AND DEFINITE AND BE KNOWN IN THE ASSESSMENT PROCEEDINGS BY THE ITO, WHO ON BEING SATISFIED ABOUT EACH CONCEALMENT OR INACCURACY OF P ARTICULARS OF INCOME WOULD BE IN A POSITION TO INITIATE THE PENALTY PROCEEDINGS O N ONE OR BOTH OF THE GROUNDS OF DEFAULT AS MAY HAVE BEEN SPECIFICALLY AND DIRECTLY DETECTED. 5.2 IN ADDITION TO MAIN PROVISIONS OF CONCEALMENT HAS CONCEALED THE PARTICULARS OF HIS INCOME OR 'HAS FURNISHED INACCURATE PARTICU LARS OF SUCH INCOME' THERE ARE ITA NO.06/AGR/2011 A.Y. 2002-03 7 DEEMED TO REPRESENT THE INCOME IN RESPECT OF WHICH PARTICULARS HAVE BEEN CONCEALED .THE DEEMED CONCEALMENT IS PROVIDED IN EX PLANATIONS .OFTEN A QUESTION AROSE WHETHER IN CASES WHERE ADDITIONS OR DISALLOWA NCES MADE BY THE ITO THE PENAL PROVISIONS OF SECTION 271(1)(C) WOULD ATTRACT . EXPLANATION 1 TAKES CARE OF THIS SITUATION. THE EXPLANATION TO SECTION 271(1) OF THE ACT READS AS UNDER:- EXPLANATION 1.-WHERE IN RESPECT OF ANY FACTS MATERI AL TO THE COMPUTATION OF THE TOTAL INCOME OF ANY PERSON UNDER THIS ACT,- (A) SUCH PERSON FAILS TO OFFER AN EXPLANATION OR OFFERS AN EXPLANATION WHICH IS FOUND BY THE ASSESSING OFFICER OR THE COMMISSION ER (APPEALS) OR THE COMMISSIONER TO BE FALSE, OR (B) SUCH PERSON OFFERS AN EXPLANATION WHICH HE IS NOT ABLE TO SUBSTANTIATE AND FAILS TO PROVE THAT SUCH EXPLANATION IS BONA FI DE AND THAT ALL THE FACTS RELATING TO THE SAME AND MATERIAL TO THE COMPUTATIO N OF HIS TOTAL INCOME HAVE BEEN DISCLOSED BY HIM, THEN, THE AMOUNT ADDED OR DI SALLOWED IN COMPUTING THE TOTAL INCOME OF SUCH PERSON AS A RESULT THEREOF SHALL, FOR THE PURPOSES OF CLAUSE (C) OF THIS SUB-SECTION, BE DEEMED TO REPRES ENT THE INCOME IN RESPECT OF WHICH PARTICULARS HAVE BEEN CONCEALED. ITA NO.06/AGR/2011 A.Y. 2002-03 8 5.3 A CONSPECTUS OF THE EXPLANATION MAKES IT C LEAR THAT THE STATUTE VISUALISED THE ASSESSMENT PROCEEDINGS AND PENALTY PROCEEDINGS TO B E WHOLLY DISTINCT AND INDEPENDENT OF EACH OTHER. IN ESSENCE, THE EXPLANAT ION IS A RULE OF EVIDENCE. PRESUMPTIONS WHICH ARE REBUTTABLE IN NATURE ARE AVA ILABLE TO BE DRAWN. THE INITIAL BURDEN OF DISCHARGING THE ONUS OF REBUTTAL IS ON TH E ASSESSEE. THE RATIONALE BEHIND THIS VIEW IS THAT THE BASIC FACTS ARE WITHIN THE SP ECIAL KNOWLEDGE OF THE ASSESSEE. SECTION 106 OF THE INDIAN EVIDENCE ACT, 1872, GIVES STATUTORY RECOGNITION TO THIS UNIVERSALLY ACCEPTED RULE OF EVIDENCE. THERE IS NO DISCRETION CONFERRED ON THE ASSESSING OFFICER AS TO WHETHER HE CAN INVOKE THE E XPLANATION OR NOT. EXPLANATION 1 COMES INTO OPERATION WHEN, IN RESPECT OF ANY FACT S MATERIAL TO THE COMPUTATION OF TOTAL INCOME OF ANY PERSON, THERE IS FAILURE TO OFF ER AN EXPLANATION OR AN EXPLANATION IS OFFERED WHICH IS FOUND TO BE FALSE B Y THE ASSESSING OFFICER OR THE FIRST APPELLATE AUTHORITY, OR AN EXPLANATION IS OFF ERED WHICH IS NOT SUBSTANTIATED. IN SUCH A CASE, THE AMOUNT ADDED OR DISALLOWED IN COMP UTING THE TOTAL INCOME IS DEEMED TO REPRESENT THE INCOME IN RESPECT OF WHICH PARTICULARS HAVE BEEN CONCEALED. AS PER THE PROVISION OF EXPLANATION 1: T HE ONUS TO ESTABLISH THAT THE EXPLANATION OFFERED WAS BONA FIDE AND A:' FACTS REL ATING TO THE SAME AND MATERIAL TO THE COMPUTATION OF HIS INCOME HAVE BEEN DISCLOSED B Y HIM WILL BE ON THE PERSON CHARGED WITH CONCEALMENT. THE EXPLANATION OF THE AS SESSEE FOR THE PURPOSE OF AVOIDANCE OF PENALTY MUST BE AN ACCEPTABLE EXPLANAT ION; IT SHOULD NOT BE A FANTASTIC ITA NO.06/AGR/2011 A.Y. 2002-03 9 OR FANCIFUL ONE. AS INDICATED ABOVE, THE CONSEQUENC E FOLLOWS AS A MATTER OF LAW. THE BURDEN IS ON THE ASSESSEE. IF HE FAILS TO DISCH ARGE THAT BURDEN, THE PRESUMPTION THAT HE HAD CONCEALED THE INCOME OR FURNISHED INACC URATE PARTICULARS THEREOF IS AVAILABLE TO BE DRAWN. 5.4 PART A OF THE EXPLANATION TO SECTION 271( 1)(C) PROVIDES THAT IF ASSESSEE FAILS TO OFFER AN EXPLANATION OR OFFERS AN EXPLANATION WH ICH IS FOUND BY THE ASSESSING OFFICER OR THE COMMISSIONER (APPEALS) OR THE COMMIS SIONER TO BE FALSE, THIS EXPLANATION CAN THEREFORE, BE APPLIED ONLY WHERE TH E ASSESSEE HAS EITHER NOT OFFERED ANY EXPLANATION OR WHERE HE HAS OFFERED ANY EXPLANA TION, THE SAME FOUND TO BE FALSE BY THE AO. IN OTHER WORDS, WHERE THE ASSESSEE OFFERS SOME EXPLANATION, IT IS ONLY THE PROVING BY THE ASSESSEE OFFICER OF THE EXP LANATION TO BE FALSE, THAT PART A OF THE EXPLANATION MAY BE ATTRACTED, MERE NON ACCEP TANCE OF EXPLANATION OFFERED BY THE ASSESSEE CANNOT FORM A BASIS FOR THE SATISFA CTION OF ITO TO THE EFFECT THAT THE ASSESSEE HAS CONCEALED PARTICULAR OF HIS INCOME. TH E ITO MUST HAVE SOME DEFINITE EVIDENCE TO REFUSE THE ASSESSEE'S CLAIM OR EVIDENCE OR EXPLANATION. 5.5 THE ESSENCE OF PART B OF THE EXPLANATION I S THAT THE PERSON MUST PROVIDE AN EXPLANATION WHICH IS BON FIDE AND HE SHOULD SUBSTAN TIATE THAT EXPLANATION BY SOME EVIDENCE WITH; HIM. IF HE FAILS TO DO SO, HIS EXPLA NATION MAY BE TREATED AS ITA NO.06/AGR/2011 A.Y. 2002-03 10 UNTENABLE. BUT WHEN THE ASSESSEE IS ABLE TO OFFER R EASONABLE EXPLANATION BASED ON SOME EVIDENCE, THE ITO CANNOT INVOKE PART B OF THE EXPLANATION UNLESS HE HAS GIVEN FINDING BASED ON SOME CONTRADICTORY EVIDENCE TO DISAPPROVE THAT EXPLANATION OFFERED BY THE ASSESSEE WHICH THE ASSESSEE IS NOT A BLE TO SUBSTANTIATE AND FAILS TO PROVE THAT SUCH EXPLANATION IS BONA FIDE AND THAT A LL THE FACTS RELATING TO THE SAME AND MATERIAL TO THE COMPUTATION OF HIS TOTAL INCOME HAVE BEEN DISCLOSED BY HIM 5.6 IN LIGHT OF ABOVE BACK GROUND OF DIS CUSSIONS ON RELEVANT PROVISIONS OF THE ACT WE WOULD LIKE TO REFER RECENT SOME JUDICIAL PRONOUNCEMENTS ON THE ISSUE. IN CASE PENALTY UNDER SECTION 271(1)(C) GENERALLY REVENUE HAS RELIED UPON THE JUDGMENT OF THE APEX COURT IN THE CASE OF DHARMENDR A TEXTILE PROCESSOR 306 ITR 277 (SC). THE FALLOUT OF THE DECISION IN UOI V. DH ARAMENDRA TEXTILE PROCESSORS (2008) 306 ITR 277 (SC) QUESTIONING THE CORRECTNESS OF THE DECISION IN DILIP N. SHROFF V. JOINT CIT (2007) 291 ITR 519 (SC) HAS CAU SED GREAT UNCERTAINTY AS TO THE PENALTY LAW FOR DIRECT TAXES. THE DECISION IN DHAR AMENDRA TEXTILE PROCESSORS CASE (SUPRA) HAS BEEN EXPLAINED BY THE SUPREME COURT ITS ELF IN UNION OF INDIA V. RAJASTHAN SPINNING AND WEAVING MILLS (2010) GSTR 66 (SC), WHEREIN THE SUPREME COURT UNDERSTOOD DHARAMENDRA TEXTILE PROCES SORS CASE TO BE NOT APPLICABLE, WHERE SECTION 11 AC OF THE CENTRAL EXCI SE ACT IS NOT APPLICABLE, ESPECIALLY SINCE THAT WAS NOT EVEN THE STAND OF THE REVENUE IN THIS CASE. THE SUPREME COURT HAD FURTHER EXPLAINED THE DECISION IN CIT V. ATUL MOHAN BINDAL ITA NO.06/AGR/2011 A.Y. 2002-03 11 (2009) 317 ITR 1 (SC) POINTING OUT THAT DHARAMENDRA TEXTILE PROCESSORS CASE HAS BEEN EXPLAINED IN RAJASTHAN SPINNING AND WEAVING MI LLS CASE (SUPRA) AND CONCLUDED IN LINE WITH THIS DECISION THAT PENALTY U NDER SECTION 11AC OF THE CENTRAL EXCISE ACT COULD NOT BE LEVIED IN EVERY CASE OF NON -PAYMENT OR SHORT PAYMENT OF DUTY AND THAT PENALTY IN RESPECT OF SECTION 271(1)( C) OF THE INCOME-TAX ACT WOULD BE LEVIABLE, SUBJECT ONLY TO THE CONDITIONS THERE U NDER. IT REQUIRED THE MATTER TO BE CONSIDERED NOT SOLELY WITH REFERENCE TO DHARAMENDRA TEXTILE PROCESSORS CASE BUT ALONG WITH THE DECISION OF RAJASTHAN SPINNING AND W EAVING MILLS CASE (SUPRA). IN THE CASE OF CIT V. RELIANCE PETROPRODUCTS PVT LTD 3 22 ITR 158 THE SUPREME COURT FURTHER EXPLAINED THE MATTER AND FINALLY SETTLED TH E CONTROVERSY CREATED IN DHARAMENDRA TEXTILE PROCESSORS CASE (SUPRA). THE SUPREME COURT IN THIS CASE HAS ANALYSED THE FACTS IN DILIP N. SHROFFS CASE (SUPRA ) AND FOUND FROM THE FACTS, THAT THE EXPLANATION GIVEN BY THE ASSESSEE WAS BONA FIDE NOR DID NOT ASSESSEE FURNISH ANY INACCURATE PARTICULARS. IT NO DOUBT WENT ON TO OBSERVE THAT THE ELEMENT OF MENS REA WAS ESSENTIAL. THE SUPREME COURT IN DHARAMENDR A TEXTILE PROCESSORS CASE (SUPRA) HAD POINTED OUT ONLY TO THIS ASPECT OF THE DECISION IN THAT, THERE WAS NO NECESSITY TO PROVE MENS REA ON A PLAIN READING OF T HE PROVISIONS OF SECTION 271(1)(C) IN THE CONTEXT OF A PENALTY BEING A COMPE NSATION FOR LOSS OF REVENUE LIKELY TO HAVE BEEN OCCASIONED BY THE ACCEPTANCE OF THE RETURN. IT WAS FURTHER POINTED OUT BY THE SUPREME COURT, THAT THE REASONIN G IN THE CONCLUSION ON THE ITA NO.06/AGR/2011 A.Y. 2002-03 12 MERITS IN DILIP N. SHROFFS CASE (SUPRA) HAD NOT BE EN QUESTIONED. IT WAS ONLY THE INFERENCE THAT MENS REA WAS AN ESSENTIAL INGREDIENT FOR PENALTY, THAT WAS OVERRULED. APPLYING THIS UNDERSTANDING OF LAW, THE SUPREME COU RT FOUND THAT IN THE CASE BEFORE IT, THE ASSESSING OFFICER HAD FOUND THAT THE ASSESSEES CLAIM FOR DEDUCTION OF THE ENTIRE INTEREST ON A BORROWING, WHICH HAD BE EN PARTLY UTILISED FOR EARNING EXEMPT INCOME REQUIRED DISALLOWANCE OF THE PROPORTI ONATE PART UNDER SECTION 14A. THE CLAIM OF THE ASSESSEE WAS THAT, BEING AN INVEST MENT COMPANY, THE CLAIM OF INTEREST NEED NOT BE PROPORTIONATELY APPORTIONED TO EXEMPT INCOME FROM DIVIDEND, CANNOT JUSTIFY PENALTY EVEN IF THE DISALLOWANCE ITS ELF WAS JUSTIFIED. THIS CONCURRENT VIEW OF THE COMMISSIONER (APPEALS), TRIBUNAL AND TH E HIGH COURT WAS UPHELD BY THE SUPREME COURT. 5.7 IN VIEW OF THE DEVELOPMENT OF LAW AT TH E STAGE OF THE SUPREME COURT IN RELIANCE PETROPRODUCTS CASE (SUPRA), ONE NEED NOT TAKE THE TROUBLE OF DISTINGUISHING DILIP N. SHROFFS CASE, SINCE IT HAS NOT BEEN OVERRULED EXCEPT FOR ITS MENTION OF MENS REA THEREIN. NOTWITHSTANDING THE R IPPLE CREATED BY DHARAMENDRA TEXTILE PROCESSORS CASE (SUPRA), THE HIGH COURTS H AVE FOLLOWED THE LONG- ESTABLISHED LAW, THAT A BONA FIDE OMISSION CANNOT J USTIFY PENALTY IN A NUMBER OF DECISIONS. WHERE AN ADDITION TO AN INCOME WAS ADJU STED AGAINST THE VALUE OF CLOSING STOCK AND EXPLANATION THEREFORE WAS ALSO FO UND TO BE BONA FIDE, PENALTY ITA NO.06/AGR/2011 A.Y. 2002-03 13 WAS FOUND TO HAVE BEEN RIGHTLY DELETED IN CIT V. HI NDUSTAN COMPUTERS LTD. (2010) 322 ITR 88 (ALL). CANCELLATION OF PENALTY FOR A WR ONG CLAIM OF DEDUCTION IN COMPUTATION OF NON-AGRICULTURAL INCOME BONA FIDE MA DE AND FOR A WRONG CLAIM OF RELIEF UNDER SECTION 80P WERE FOUND TO BE DECISIONS ON THE FACTS ON WHICH NO QUESTION OF LAW WOULD ARISE AS HELD IN CIT V. SHAHB AD CO-OP. SUGAR MILLS LTD (2010) 322 ITR 73 (P&H). IN THE CASE OF CIT V. SID HARTHA ENTERPRISES (2010) 322 ITR 80 (P&H) IT WAS HELD THAT A WRONG CLAIM AS BUS INESS INCOME OF WHAT SHOULD BE TREATED AS SHORT TERM CAPITAL GAINS ON THE ADVIC E OF THE ASSESSEES COUNSEL, COULD NOT BE TREATED AS AN INSTANCE OF DELIBERATE DEFAULT . 5.8 IN THE LIGHT OF THE ABOVE DISCUSSIONS, IF WE CONSIDER THE FACTS OF THE CASE UNDER CONSIDERATION WE NOTICED THAT THE ASSESSEE CO LLECTED RS.90,23,233/- FROM PURCHASE PRICE GIVEN TO FARMERS ON THE GROUND THAT SUCH COLLECTION WAS TO BE UTILIZED FOR ISSUANCE OF SHARES. THE SUBMISSION OF THE ASSESSEE IS THAT THE SHARES COULD NOT BE ISSUED AS STATE GOVERNMENT DID NOT GIV E SANCTION TO ISSUE SUCH SHARES. IT IS ADMITTED FACT THAT IN EARLIER YEARS AS WELL A S SUBSEQUENT YEARS, AS SUBMITTED BY THE LD. AUTHORISED REPRESENTATIVE AND NOTED BY THE I.T.A.T. IN 2002-03, NO SUCH ADDITION WAS MADE. HOWEVER, IN QUANTUM APPEAL THE I.T.A.T. HAS CONFIRMED THE ADDITION AS PER THE REASONS GIVEN IN THAT ORDER WHI CH HAS BEEN REPRODUCED ABOVE. WE FIND THAT THE ASSESSEE HAS FURNISHED ALL RELEVAN T PARTICULARS OF ITS INCOME. WE FIND THAT THE ASSESSEE HAS DISCLOSED THE COMPLETE F ACTS IN THE BOOKS OF ACCOUNTS AND ITA NO.06/AGR/2011 A.Y. 2002-03 14 RETURN OF INCOME THOUGH IN COMPUTATION OF TOTAL INC OME THE ASSESSEE MAY NOT HAVE BEEN CORRECTLY TAKEN THIS AMOUNT FOR THE PURPOSE OF COMPUTATION OF TOTAL INCOME IN ACCORDANCE WITH LAW. IT IS DUTY OF THE AO TO COMPUT E TOTAL INCOME IN ACCORDANCE WITH LAW ON THE BASIS OF PARTICULARS FILED BY THE A SSESSEE. UNDER THESE CIRCUMSTANCES, IT CANNOT BE SAID THAT THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF INCOME. APART FROM THIS FACT, THERE IS NO FINDING OF THE ASSESSING OFFICER THAT THE EXPLANATION FURNISHED BY THE ASSES SEE WAS FOUND FALSE. THE EXPLANATION FURNISHED BY THE ASSESSEE IS A BONA FID E EXPLANATION IN THE SENSE THAT THE ASSESSING OFFICER HIMSELF DID NOT DISALLOW SUCH AMOUNT IN EARLIER YEARS AS WELL AS IN SUBSEQUENT YEARS, UNDER THESE CIRCUMSTANCES; BONA FIDE EXPLANATION OF THE ASSESSEE CANNOT BE DOUBTED. WHEN THE EXPLANATION O F THE ASSESSEE WAS BONAFIDE, PENALTY UNDER SECTION 271(1)(C) IS NOT LEVIABLE IN ACCORDANCE WITH EXPLANATION-1 TO SECTION 271(1)(C) OF THE ACT. WE, THEREFORE, FIND THAT THIS IS NOT A FIT CASE WHERE PENALTY UNDER SECTION 271(1)(C) IS LEVIABLE. THERE FORE, PENALTY OF RS.27,61,108/- LEVIED BY THE ASSESSING OFFICER HAS BEEN RIGHTLY CA NCELLED BY THE CIT(A). THE ORDER OF CIT(A) IS CONFIRMED. 6. IN THE RESULT, APPEAL FILED BY THE REVENUE IS DI SMISSED. (ORDER PRONOUNCED IN THE OPEN COURT ON 04.04.2012) SD/- SD/- (BHAVNESH SAINI) (A.L. GEHLOT) JUDICIAL MEMBER ACCOUNTANT MEMBER DATE: 4 TH APRIL, 2012 ITA NO.06/AGR/2011 A.Y. 2002-03 15 PBN/* COPY OF THE ORDER FORWARDED TO: APPELLANT RESPONDENT CIT CONCERNED CIT (APPEALS) CONCERNED D.R., ITAT AGRA BENCH, AGRA GUARD FILE. BY ORDER ASSISTANT REGISTRAR INCOME-TAX APPELLATE TRIBUNAL, AGRA TRUE COPY