M/s ALP Overseas Pvt. Ltd., New Delhi V. DCIT, New Delhi

ITA 6140/DEL/2015

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 6683 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 8 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-07-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Assessment Year: 2006-2007
• Appeal Filed On: 18-11-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: BALJIT SINGH
• Assessee Lawyers: S R SENAPATI
• Keywords: Depreciation; Wrong claim; Reassessment proceedings
• Section: 143(3); 115JB; 147

Judgement Text

IN THE INCOME-TAX APPELLATE TRIBUNAL, DELHI BENCH F, NEW DELHI BEFORE : SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI L.P. SAHU, ACCOUNTANT MEMBER ITA NO. 6140/DEL./2015 ASSESSMENT YEAR: 2006-07 ALP OVERSEAS PVT. LTD., 25/31, EAST PATEL NAGAR, NEW DELHI. PAN : AAACG6366L (APPELLANT) VS. DCIT, CIRCLE 1(1), NEW DELHI. (RESPONDENT) REVENUE BY SHRI BALJIT SINGH, CA ASSESSEE BY SHRI S.R. SENAPATI, SR DR ORDER PER L.P. SAHU, A.M.: THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER OF LD. CIT(A)-I, NEW DELHI DATED 07.09.2015 FOR THE ASSESSMENT YEAR 2006 -07 ON THE FOLLOWING EFFECTIVE GROUND: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, LD. CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF THE LD. A.O. IN IMPOSING A PENALTY OF RS.1,77,000/- U/S.271(1)(C) OF THE ACT ON ACCOUNT OF FAILURE TO V OLUNTARILY ADD BACK PROVISION OF GRATUITY IN THE COMPUTATION OF INCOME, HOLDING THIS MISTAKE AS MALA FIDE EVEN THOUGH ALL FACTS WERE DISCLOSED. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSM ENT U/S. 143(3) OF THE IT ACT WAS COMPLETED ON 13.12.2008 AT AN INCOME OF RS.55,4 3,990/-. SUBSEQUENTLY, ASSESSMENT WAS REOPENED U/S. 147 OF THE IT ACT AND ASSESSMENT WAS DONE ON 28.02.2014 DETERMINING TOTAL INCOME AT RS.61,16,360 /-, THEREBY MAKING AN ADDITION OF RS.5,72,369/- ON ACCOUNT OF PROVISION O F GRATUITY WHICH THE ASSESSEE HAD SURRENDERED VIDE HIS LETTER DATED 09.12.2013. I N THE REASSESSMENT DATE OF HEARING 20.07.2018 DATE OF PRONOUNCEMENT 30 .07.2018 [TYPE THE DOCUMENT TITLE] 2 PROCEEDINGS, PENALTY U/S 271(1)(C) OF THE IT ACT WA S INITIATED AND SAME WAS LEVIED BY THE ASSESSING OFFICER OF RS.1,77,000/- VI DE ORDER DATED 29.08.2014. BEFORE THE LD. CIT(A), THE ASSESSEE MADE WRITTEN SU BMISSIONS AND RELIED UPON SOME CASES LAWS. THE LD. CIT(A) AFTER CONSIDERING T HE SUBMISSIONS OF THE ASSESSEE, DISMISSED THE APPEAL FILED BY HIM VIDE IMPUGNED ORD ER. THE LD. CIT(A) IN SUPPORT OF HIS DECISION ALSO RELIED UPON SOME CASE LAWS. AG GRIEVED BY THE IMPUGNED ORDER, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 3. THE LD. AR OF THE ASSESSEE HAS SUBMITTED A PAPER BOOK CONTAINING 23 PAGES INCLUDING THE WRITTEN SUBMISSIONS. THE SUBMISSIONS PLACED BEFORE US READ AS UNDER : 5.1 THE ASSESSEE'S CHARTERED ACCOUNTANT WHILE COMPUTING THE COMPUTATION OF INCOME INADVERTENTLY MADE AN ERROR AND FAILED TO ADD THE A MOUNT OF RS.5,72,3697- TO THE TAXABLE INCOME. THIS WAS AN INADVERTENT MISTAKE AND THERE W AS NO INTENTION ON THE PART OF THE CHARTERED ACCOUNTANT OR THE COMPANY TO CONCEAL INCO ME OR DECLARE INACCURATE PARTICULARS OF INCOME. THEREFORE, ON THIS MERE MIST AKE NO PENALTY CAN BE IMPOSED. NO TAX FURTHER THERE WAS A LOSS IN THE COMPUTATION OF INCO ME (PLEASE REFER PAGE NO. 14 TO __ OF THE PAPER BOOK) AND THEREFORE THERE WAS NO ADDITION AL TAX WHICH THE ASSESSEE WOULD HAVE TO PAY IF IT HAD ADDED BACK THE GRATUITY. PENALTY CAN BE IMPOSED ONLY WHEN THERE IS SOME INTE NTION TO FILE INACCURATE PARTICULARS AND IN THIS CASE THE ASSESSEE HAD NO INTENTION TO F ILE ANY INACCURATE PARTICULARS. 5.2 THE PROVISION FOR GRATUITY HAS BEEN CLEARLY DISCLOSED IN THE BALANCE SHEET AND THERE WAS NO FAILURE OF ANY PART OF THE ASSESSEE TO DISCL OSE THE FACT OF PROVISIONS OF GRATUITY AND LD. A.O. HAS PICKED UP THIS FIGURE FROM THE BALANCE SHEET ITSELF. FURTHER, THE CASE OF AY 2006-07 WAS CARRIED OUT IN SCRUTINY AND ALL PARTICU LARS WERE DISCLOSED. 5.3 EXCEPT ASSESSMENT YEAR 2006-07 WHERE THE G RATUITY WAS NOT ADDED BY MISTAKE THE ASSESSEE HAS IN THE PAST YEAR 2005-06 AND 2007- 08, 2008-09 AND 2009-10 I.E. ALL FUTURE YEARS ADDED THE AMOUNT OF GRATUITY TO THE TA XABLE INCOME. A COPY OF THE COMPUTATIONS IS ATTACHED HEREIN AT PAGE 15 TO 20 OF THE PAPER BOOK. THIS CLEARLY SHOWS THAT IT WAS ONLY IN THE ASSESSMENT YEAR 2006-07 THA T THE ASSESSEE BY A MISTAKE OF THE CHARTERED ACCOUNTANT, DID NOT ADD THE PROVISION FOR GRATUITY TO THE TAXABLE INCOME. LOSS IN COMPUTATION OF INCOME [TYPE THE DOCUMENT TITLE] 3 FURTHER THERE WAS A LOSS IN THE ASSESSMENT YEAR 200 6-07 AND ADDING BACK THE GRATUITY AMOUNT TO THE TAXABLE INCOME WOULD NOT HAVE ENTAILE D ANY ADDITIONAL TAX BURDEN ON THE ASSESSEE AND THEREFORE THE ASSESSEE COULD NOT HAVE ANY MAL INTENTION. 5.4 FURTHER IT MAY BE STATED THAT IT WAS ONLY F ROM FINANCIAL YEAR 2004-05 (AY 2005- 06) THAT GRATUITY WAS TO BE PROVIDED COMPULSORILY A S AS-15 WAS INTRODUCED. NOTE ON GRATUITY THE ACCOUNTING STANDARD 15: EMPLOYEE BENEFIT (EARLI ER CALLED AS ACCOUNTING FOR RETIREMENT BENEFITS BEFORE REVISION IN 2005) WAS MADE MANDATORY FROM FINANCIAL YEAR 2006-07. BEFORE THAT IT WAS RECOMMENDATORY. THE COMPANY HAD MADE TH E PROVISION FOR GRATUITY FIRST TIME IN THE ASSESSMENT YEAR 2005-06 (PREVIOUS YEAR 2004-05) , WHEREIN IT HAD ADDED BACK THE PROVISION FOR GRATUITY IN THE TOTAL INCOME. IN THE ASSESSMENT YEAR 2006-07 THE SAME WAS MISSED OUT FOR ADDITION DUE TO AN INADVERTENT MISTA KE OF THE CHARTERED ACCOUNTANT. 5.5 PENALTY IS NOT EXIGIBLE THE MATTER IS COMPLETELY DISCLOSED THE ASSESSEE HAD CLEARLY DISCLOSED THE PROVISION IN THE BALANCE SHEET AND HAS ONLY FAILED TO ADD IT BACK TO INCOME IN THE COMPUTATION OF INCO ME. THIS IS BORNE BY THE FACT THAT THE ID. A.O. HAS DETECTED THIS FROM THE BALANCE SHEET. DISCLOSURE IN BALANCE SHEET IS DISCLOSURE - SUPREMENT COURT IN CIT V CORPORATION BANK LTD 254 ITR791 (2002) SC - NEEDLE INDUSTRIES (I) LTD V CIT (1990) 183 ITR 39 3 THUS THERE IS NO FAILURE ON THE PART OF THE ASSESSE E TO DISCLOSE THE PROVISION OF GRATUITY AND IT WAS ONLY DUE TO A MISTAKE ON THE PART OF THE CHA RTERED ACCOUNTANT, THAT IN THE COMPUTATION OF INCOME THE ASSESSEE DID NOT ADD BACK THE GRATUITY TO THE TAXABLE INCOME. HUMAN ERROR A MISTAKE IS A HUMAN ERROR AND CAN BE COMMITTED BY ANY ONE AND THAT DOES NOT WARRANT A PENALTY. THE FOLLOWING CASE LAWS STATE THE SAME R ATIO: CASE LAWS [2012] 25 TAXMANN.COM 400 (SC) SUPREME COURT OF IND IA PRICE WATERHOUSE COOPERS (P.) LTD. V. COMMISSIONER OF INCOME-TAX, KOLKATA-L* S.H. KAPADIA, CJ. AND MADAN B. LOKUR, J. CIVIL APPE AL NO. 6924 OF 2011 F SEPTEMBER 25, 2012 SECTION 271(1)(C), READ WITH SECTION 37(1), OF THE INCOME-TAX ACT, 1961 - PENALTY - FOR CONCEALMENT OF INCOME - BONA FIDE MISTAKE -ASSESSME NT YEAR 2000-01 - ASSESSEE FIRM FILED ITS RETURN OF INCOME ALONG WITH TAX AUDIT REPORT - IN ITS TAX AUDIT REPORT IT WAS INDICATED THAT PROVISION TOWARDS PAYMENT OF GRATUITY WAS NOT ALLOWABLE BUT IT FAILED TO ADD PROVISION FOR GRATUITY TO ITS TOTAL INCOME - WHETHER IT WAS A BONA FIDE AND INADVERTENT ERROR - HELD, YES - WHETHER ASSESSEE WAS NOT GUILTY OF EITHER FUR NISHING INACCURATE PARTICULARS OR ATTEMPTING TO CONCEAL ITS INCOME - HELD, YES - WHET HER IMPOSITION OF PENALTY WAS UNJUSTIFIED - HELD, YES [PARA 20] [IN FAVOUR OF ASSESSEE [TYPE THE DOCUMENT TITLE] 4 FAULT OF CHARTERED ACCOUNTANTS CANNOT BE VISITED ON THE ASSESSEE.- WHERE THE ASSESSEE HAD CLAIMED RELIEF UNDER SECTION 80-1 ON A CERTIFICATE FILED BY A CHARTERED ACCOUNTANT AND THE CHARTERED ACCOUNTANT D ISOWNED THE CERTIFICATE AND EVEN HAD STATED THAT HE WAS NOT COMPETENT TO CERTIFY, THE BON A FIDE CLAIM OF THE ASSESSEE BASED UPON SUCH CERTIFICATE, PENALTY COULD NOT BE LEVIED, IF SU CH CERTIFICATE WAS WRONG. IT WAS POINTED OUT THAT THE ASSESSING OFFICER COULD NOT HAVE ACTED ON IT WITHOUT PUTTING THE COMMUNICATION FROM THE CHARTERED ACCOUNTANT TO THE ASSESSEE. DELETION OF PENALTY BY THE TRIBUNAL IN SUCH CIRCUMSTANCES ON THE GROUND OF ALLE GED WRONG CLAIM WAS UPHELD IN CIT V RICE MILLS (S.D.). (2005) 275ITR 206 (P&H) 6.3 S. 271 - ERRONEOUS DEDUCTION U/S. SOL DID NOT AMOUNT TO CONCEALMENT OF INCOME - WHERE DEDUCTION U/S 80L WAS ERRONEOUSLY CLAIMED AND GRANTED TO THE PARTNER OF A FIRM, IT WAS HELD THAT THE ASSESSEE HAD HONESTLY DISCLOSED T HE INCOME AND HAD NOT CONCEALED ANYTHING DELIBERATELY AND HIS ACTION DID NOT SUFFER FROM ANY MENS REA. THEREFORE, THE PENALTY PROCEEDINGS U/S 271(1)(C) WERE NOT WARRANTE D. THE PROPOSAL IN THE ASSESSMENT ORDER FOR INITIATING PENALTY PROCEEDINGS AGAINST THE ASS ESSEE AFTER RE-OPENING WAS LIABLE TO BE QUASHED. MAHENDRA KUMAR V. UNION OF INDIA, (1997) 94 TAXMAN 3: (1997) 140 CTR 331: (1997) 226 ITR 718 (MP) 6.4 S. 271 - PENALTY FOR ACCIDENTAL AND INADVERTENT MISTAKE IN DISCLOSING CORRECT INCOME - THE ASSESSEE, A FILM DISTRIBUTOR, DECLARED AN INCOME OF RS.24,760 AFTER DEDUCTING RS.21,907 FOR AMORTISATION OF FIVE FILMS FROM A PROFIT OF RS. 46,667 AND SUBMITTED BOTH A PROFIT AND LOSS ACCOUNT AND A SEPARATE STATEMENT OF AMORTIISATION F OR 1969-70. ON SCRUTINY, THE ITO DISCOVERED THAT AMORTIZATION IN RESPECT OF TWO FILM S HAD ALREADY BEEN CONSIDERED IN DRAWING UP THE PROFIT AND LOSS ACCOUNT. THE ASSESSE E ADMITTED THIS ERROR AND AGREED TO THE ADDITION OF THE TWO AMOUNTS. T PENALTY FOR CONCEALMENT WAS IMPOSED: HELD, THAT IT WAS A CASE OF ACCIDENTAL AND INADVERT ENT MISTAKE. SINCE THE ASSESSEE HAD DISCLOSED THE BASIC FACTS BY SUBMITTING THE PROFIT AN D LOSS ACCOUNT AND THE AMORTIZATION ACCOUNT THERE WAS NO ATTEMPT AT CONCEALMENT. THE PE NALTY LEVIED WAS, CONSEQUENTLY, ILLEGAL. MAHADESWARA MOVIES V. CIT, (1983) 144 ITR 127 (KARN) 6.5 A WRONG CLAIM WITH DISCLOSURE OF FULL FAC TS, - WHERE THE ASSESSEE, WHILE DISCLOSING EXTRA INTEREST CHARGED OVER AND ABOVE THE LIMIT FIXED UNDER KERALA MONEY LENDERS ACT, 1958, HAD WRONGLY C LAIMED THE EXCESS AS NOT LIABLE TO TAX HAVING REALIZED THE SAME DUE TO MISCONCEPTION OF LA W, SINCE THERE WAS NO CONCEALMENT OF THE FACT OF RECEIPT, BUT ONLY A CLAIM THAT IT WAS N OT TAXABLE, THOUGH SUCH CLAIM WAS MISCONCEIVED, PENALTY IS NOT LEVIABLE. [TYPE THE DOCUMENT TITLE] 5 CIT V SANTOSH FINANCIERS (2001) 247 ITR 742 (KER) FOLLOWING THE RATIONALE OF THE DECISION OF THE SUPREME COURT IN CIT (ADDL) V JEEVAN LAL SAH (1994) 205 ITR 244 (SC) AND SIR SHADILAL SUGAR & GENERAL MILLS LTD. V C/T(1987) 168 ITR 705 (SC). CIT V SEEDS INDIA LTD. (P.H.I) (2008) 301 ITR 13 (DEL). WHERE THERE WAS A SOLITARY MISTAKE IN DEBITING COST OF WIRES TO CONSUMABLE STORES ACCOUNT AND THERE WAS NO SUGGESTION FROM THE INCOME-TAX DEP ARTMENT, THAT THE MISTAKE WAS NOT BONA FIDE, PENALTY IS NOT LEVIABLE. CIT V UNION ELECTRIC CORPORATION (2006) 281 ITR 266 (GUJ) [2012] 24 TAXMANN.COM 3Q9 (DELHI) HIGH COURT OF DELHI COMMISSIONER OF INCOME-TAX V. SOCIETEX* S. RAVINDRA BHATAND R.V. EASWAR, JJ. IT APPEAL NO. 1190 OF 2011 JULY 19,2012 SECTION 271(1)(C) OF THE INCOME-TAX ACT, 1961 - PEN ALTY - FOR CONCEALMENT OF INCOME - ASSESSMENT YEAR 1997-98 - ASSESSEE WAS ENGAGED INTE R ALIA IN RENDERING CONSULTANCY SERVICES - IT HAD, FOR ASSESSMENT YEAR 1997-98, CLA IMED DEPRECIATION IN RESPECT OF PROPERTIES ONE AT BANGALORE AND OTHER AT DELHI - IN FIRST ROUN D WHEN MATTER CAME FOR DETERMINATION BEFORE COMMISSIONER (APPEALS), HE CONCLUDED THAT DEP RECIATION WAS ALLOWABLE ONLY TO EXTENT OF 2/3RD CLAIM IN RESPECT OF BANGALORE PROPE RTY AND THAT FOR DELHI PROPERTY SUCH DEDUCTION COULD NOT BE CLAIMED AT ALL - HE MADE ADDI TION - ASSESSING OFFICER LEVIED PENALTY - ASSESSEE CONTENDED THAT IT WAS EVIDENT THAT COMMISS IONER (APPEALS) HAD PARTIALLY ACCEPTED ASSESSEE'S CLAIMS FOR DEPRECIATION - IT WAS FURTHER SUBMITTED THAT DELHI PROPERTY WAS LET OUT FOR FIRST TIME IN LATTER PART OF CONCERNED ASSESSME NT YEAR I.E., IN AUGUST, 1996 AND, THUS, ONLY AN INADVERTENT CLAIM WAS MADE - SIMILARLY, WITH REG ARD TO PROVISION OF TAXATION, -ASSESSEE SUBMITTED THAT IT WAS INADVERTENT ERROR AS SUCH A CL AIM HAD BEEN MADE FOR FIRST TIME DURING ASSESSMENT YEAR - THIS WAS CLEAR FROM RELEVANT RECO RD -TRIBUNAL UPHELD SAID SUBMISSION AND CONCLUDED THAT THERE WAS NO HISTORY OF FURNISHI NG OF INACCURATE PARTICULARS BY ASSESSEE FOR PREVIOUS YEARS AND, ACCORDINGLY, DELETED PENALT Y - WHETHER TRIBUNAL WAS JUSTIFIED IN DELETING PENALTY - HELD, YES [IN FAVOUR OF ASSESSEE ] [2013] 36 TAXMANN.COM 533 (GUJ A RAT) HIGH COURT OF GUJARAT COMMISSIONER OF INCOME-TAX-L V. GUJARAT STATE FERTILIZERS & CHEMICALS LTD.* M.R. SHAH AND MS. SONIA GOKANI, JJ. TAX APPEAL NO. 127 OF 20131 JUNE 25,2013 SECTION 271(1)(C), READ WITH SECTION 115JB, OF THE INCOME-TAX ACT, 1961 - PENALTY - FOR CONCEALMENT OF INCOME [WRONG CLAIM, EFFECT OF] - AS SESSEE'S CLAIM WITH RESPECT TO DEPRECIATION AND CAPITAL LOSS WAS FOUND ERRONEOUS- WHEN SAID FACT WAS BROUGHT TO ASSESSEE'S NOTICE, IT OFFERED AMOUNT OF DIFFERENCE FOR TAXATION -ASSESSING OFFICER, HOWEVER, LEVIED PENALTY UNDER SECTION 271(1)(C) - COMMISSION ER (APPEALS) DELETED PENALTY HOLDING THAT IT WAS BONA FIDE INADVERTENT MISTAKE - .ADMITTE DLY, EVEN AFTER MAKING SOME DISALLOWANCE ON BOTH COUNTS, TAX REQUIRED TO BE PAID AS PER SECTION 115JB REMAINED SAME - WHETHER IN ABSENCE OF ANY MATERIAL TO HOLD THAT ASS ESSEE HAD EITHER CONCEALED PARTICULARS [TYPE THE DOCUMENT TITLE] 6 OF HIS INCOME OR FURNISHED INACCURATE PARTICULARS, PENALTY UNDER SECTION 271(1)(C) WAS RIGHTLY CANCELLED - HELD, YES [PARAS 4,5 & 6] [IN F AVOUR OF ASSESSEE] [2013] 40 TAXMANN.COM 17 (ANDHRA PRADESH) HIGH COUR T OF ANDHRA PRADESH COMMISSIONER OF INCOME-TAX V. MS. SANIA MIRZA* MADAN B. LOKUR, CJ. AND SANJAY KUMAR, J. ITTA NO. 526 OF 20111 FEBRUARY 9,2012 SECTION 271(1)(C), READ WITH SECTION 4, OF THE INCO ME-TAX ACT, 1961 - PENALTY - FOR CONCEALMENT OF INCOME [DISALLOWANCE OF CLAIM, EFFEC T OF] - ASSESSMENT YEAR 2004-05 - ASSESSEE, A TENNIS PLAYER, DID NOT OFFER TO TAX AMO UNT RECEIVED AS AWARDS FROM GOVERNMENT AND FROM OTHER INSTITUTION - HOWEVER WHEN ASSESSMEN T WAS REOPENED, ASSESSEE VOLUNTARILY OFFERED SAID AMOUNT FOR TAX - WHETHER SINCE AMOUNT IN QUESTION WAS SHOWN BY ASSESSEE IN HER RETURN, THERE BEING NO CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME, IT WAS NOT FIT CASE FOR IMPOSITION OF PENAL TY UNDER SECTION 271(1)(C) - HELD, YES [PARAS 8 & 9] [IN FAVOUR OF ASSESSEE ________________ [2010] 232 CTR 78 (PUNJ. & HAR.) HIGH COURT OF PUNJ AB & HARYANA COMMISSIONER OF INCOME TAX V. DEEPAK KUMAR M.M. KUMAR & JITENDRA CHAUHAN, JJ. IT APPEAL NO. 191 OF 2009 MARCH 8, 2010 SECTION 271(1)(C) OF THE INCOME-TAX ACT, 1961 - PEN ALTY - FOR CONCEALMENT OF INCOME - ASSESSMENT YEAR 2004-05 WHERE PENALTY WAS LEVIED ON ASSESSEE ON GROUND THAT ASSESSEE HAD WRONGLY CLAIMED DEDUCTION UNDER SECTION 10(36) BUT TRIBUNAL FOUND T HAT ASSESSEE HAD ACTED UPON ADVICE OF HIS COUNSEL, WHO WAS DEALING WITH HIS TAX MATTERS F OR LAST SO MANY YEARS, AS IT WAS A CASE OF BONA FIDE MISTAKE, LEVY OF PENALTY ON ASSESSEE WAS N OT JUSTIFIED [IN FAVOUR OF ASSESSEE] FURTHER IT NEEDS TO BE APPRECIATED THAT THIS WAS DI SCLOSED AND NOT CONCEALED. A MERE ERROR OR MISTAKE WOULD NOT CREATE INACCURATE PARTIC ULARS. 7.1 LEGAL SUBMISSION: THE ASSESSEE HAD SUBMITTED ALL THE REQUIRED DETAILS AND NOTHING WAS CONCEALED. IT IS NOT THAT THE LD A.O HAD BLOWN OUT ANY UNDISCLOSED INCOM E. ALL FACTS WERE AVAILABLE ON RECORD. SECTION 271 (1)(C). U/S 271(1)(C), PENALTY IS IMPOSED IF THE ASSESSEE 'HAS CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHED INACCURATE PARTICULARS OF SUCH INCOME'. EXTRACTS: EXPLANATION 1. - EXTRACT WHERE IN RESPECT OF ANY FACTS MATERIAL TO THE COMPU TATION OF THE TOTAL INCOME OF ANY PERSON UNDER THIS ACT (A) SUCH PERSON FAILS TO OFFER AN EXPLANATION OR OFFERS AN EXPLANATION WHICH IS F OUND BY THE LD. AO OR THE COMMISSIONER (A) OR COMMISSIONER TO BE FALSE, [TYPE THE DOCUMENT TITLE] 7 OR SUCH PERSON OFFERS AN EXPLANATION WHICH HE IS NOT A BLE TO SUBSTANTIATE [AND FAILS TO PROVE THAT SUCH EXPLANATION IS BONA FIDE AND THAT ALL THE FACTS RELATING TO THE SAME AND MA TERIAL TO THE COMPUTATION OF HIS TOTAL INCOME HAVE BEEN DIS CLOSED BY HIM] THEN THE AMOUNT ADDED OR DISALLOWED IN COMPUTING THE TOTAL INCOME OF SUCH PERSON AS A RESULT THEREOF SHALL FOR THE PURPOSE OF CLAUSE (C) OF THE SUB SECTION, BE DEEMED T O REPRESENT THE INCOME IN RESPECT OF WHICH PARTICULARS HAVE BEEN CONCEALED. THE MOST IMPORTANT ASPECTS OF THE SECTION 271(1)(C) ARE CONCEALED AND INACCURATE. 7.1.1 CONCEALED THE FIRST PART OF THE SECTION CLEARLY STATES THAT T HE ASSESSEE SHOULD HAVE CONCEALED HIS INCOME WHICH BASICALLY MEAN TO HIDE. IT IS HUMBLY SUBMITTED A) THE.SUBJECT MATTER OF ADDITION I.E. GRATUITY WAS ONLY A MISTAKE. B) THAT EVERYTHING WAS DISCLOSED IN THE INCOME TAX RETURNS AND THE ACCOMPANYING DOCUMENTS SUCH AS BALANCE SHEET ETC. AND ONCE AN IT EM IS DISCLOSED IT CANNOT BE TAKEN AS UNDISCLOSED OR CONCEALED. AS BOTH THESE ARE DIAGONALLY OPPOSITE TO EACH OTHER. 7.1.2 OUR SUBMISSION ON EXPLANATION 1 A) WITH REFERENCE TO THE ABQVE MATTERS, THE ASSESSEE H AD OFFERED A COGENT EXPLANATION FOR THE FAILURE TO ADD BACK GRATUITY AN D A PLAIN READING OF THE ORDERS OF THE LD. AO CLEARLY SHOW THAT THE ASSESSEE HAD SUBMITTED VALID EXPLANATION AND THE LD. AO HAD NOT FOUND THE EXPLAN ATION TO BE FALSE. THE INTERPRETATION OF THE SECTION AS EXPLAINED ABOVE MA Y FALL UNDER THE PARAMETERS WRONG OR RIGHT BUT DEFINITELY NOT TRUE OR FALSE, THEREFORE, THIS PART OF THE EXPLANATION FAILS TO ATTRACT THE PENALTY. B. IN THIS CASE, BY SUBMITTING THE COMPUTATIO NS OF INCOME OF THE PAST AND FUTURE YEARS AND THUS THE ASSESSEE HAS OFFERED AN EXPLANATION AN D WAS ALSO ABLE TO SUBSTANTIATE IT NEITHER HAS THE BONA FIDE OF THE ASSESSEE'S SUBMISSION BEEN QUESTIONED BY THE LD. AO. FURTHER ALL FACTS RELATED AND MATERIAL TO THE COMPU TATION OF THE TOTAL INCOME HAVE BEEN DISCLOSED. THUS, THE PROVISIONS OF SECTION 271(1)FC ) ARE NOT ATTRACTED. 7.1.3 THE COMPANY'S CASE CONCEALMENT HAS TO BE DELIBERATE ACT. THE WORD 'CON CEALMENT', AS FOUND IN SHORTER OXFORD DICTIONARY IS AS FOLLOWS 'INTENTIONAL SUPPRE SSION OF TRUTH OR FACTS'. CONCEAL THE WORD CONCEAL IS DERIVED FROM THE LATIN WORD 'CON CELARE' WHICH IMPLIES 'TO HIDE' WEBSTERS DICTIONARY EQUATES ITS MEANING 'TO HIDE' O R WITHDRAW FROM OBSERVATION, TO COVER OR KEEP FROM SIGHT, TO PREVENT THE DISCOVERY OF, TO WITHHOLD KNOWLEDGE OF. THEREFORE, THERE MUST BE AN INTENTION TO CONCEAL. M ERELY MAKING A MISTAKE, SUCH AS NON- ADDITION OF GRATUITY, DOES NOT LEAD TO CONCEALMENT. 7.1.4 A MISTAKE OR ERROR - DOES NOT ATTRACT PENAL PROVISIONS. 7.1.5 PENALTY ON CONCEALMENT [TYPE THE DOCUMENT TITLE] 8 PENALTY CAN BE LEVIED ONLY IF IT IS PROVED BEYOND D OUBT THAT THE ASSESSEE HAS CONCEALED INCOME OR FURNISHED INACCURATE PARTICULARS OF HIS I NCOME. IT IS NECESSARY FOR THE AUTHORITY LEVYING PENALTY TO PROVE THAT, A) THERE WAS A CONCEALMENT OF INCOME. B) THE ASSESSEE WAS CONSCIOUS OF HAVING CONCEALED OR FURNISHED INACCURATE PARTICULARS OF HIS INCOME. A MERE MISTAKE WILL NOT BE SUFFICIENT TO HOLD THAT THERE IS A CONCEALMENT OF INCOME WHICH MERITS LEVY OF PENALTY. EVEN IF THE AMOUNT OMITTED WAS LARGE AND SUBSTANTIAL, IT WILL NOT BE SUFFICIENT TO DRAW AN INFERENCE THAT THE MISTAKE WAS DELIBERATE AND DUE TO LACK OF BONA FIDES ON THE PART OF THE ASSESSEE. THE FOLLOWING CASE LAWS PROVE OUR POINT: IN BEERBAL KHAN CHANDAN KHAN V. ASST CIT [1995] 52 ITD476(JP)ITWASNELD. MENS REA MAY OR MAY NOT BE INGREDIENT OF A DEFAULT OR OFFEN CE, BUT IT ALWAYS HAS RELEVANCE IN THOSE ACTIONS, WHICH ARE INTENDED TO B E VISITED WITH PENAL CONSEQUENCES. IRRESPECTIVE OF WHOSE BURDEN IT IS TO PROVE ITS PRE SENCE OR ABSENCE IN SUCH ACTIONS. THE ASSESSEE HAS ONLY MADE AN ERROR OR MISTAKE AND NOT WITH ANY MAL-INTENTION. THEREFORE, PENALTY SHOULD NOT BE LEVIED. 7.1.6 AS STATED BY SALMOND ON JURISPRUDENCE', IF A PERSON COMMITS A FORBIDDEN ACT WITHOUT WRONGFUL INTENTION OR NEGLIGENCE AND DID HI S BEST AS A REASONABLE MAN TO AVOID IT, NO USEFUL PURPOSE CAN BE SERVED TO IN HOLDING S UCH AS PERSON LIABLE FOR IT AND ITS CONSEQUENCES. THUS, AN ACCUSED SHOULD NOT BE FOUND GUILTY OF AN OFFENCE AGAINST THE CRIMINAL LAW UNLESS HE HAS A GUILTY MIND. THE HON'BLE SUPREME COURT IN ANANTHARAM VERRASINGHASU & CO. V. CIT. (1980) 123 ITR 457 (SO HAS CONCLUDED THAT. 'BEFORE A PENALTY CAN BE IMPOSED IT, THE ENTIRETY OF THE CIRCUMSTANCES MUST BE TAKEN INTO ACCOUNT AND MUST POINT TO THE CONCLUSION THAT THE DISPUTED AMOUNT REPRESENTS INCOME AND THAT THE ASSESSEE HAS CONSCIOUSLY CONCEALED PARTICULARS OF HIS INCOME OR DELIBERATELY FURNISHED INACCURATE PARTICULARS. THE MERE FALSITY OF THE EXPLANATION GIVEN BY THE ASSESSEE IS INSUFFICIENT WITHOUT THERE BEING IN ADD ITION COGENT MATERIAL OR EVIDENCE FROM THE NECESSARY CONCLUSION ATTRACTING A PENALTY COULD BE DRAWN'. 7.1.7 IMPOSING OF PENALTY IS NOT MANDATORY IT IS HUMBLY PRAYED BEFORE YOUR HONOR THAT LIABILIT Y TO PENALTY IS INCURRED WHENEVER THERE IS A BREACH OR CONTRAVENTION OF A STATUTORY P ROVISION OR THERE IS A DEFAULT OR AN OMISSION TO PERFORM A STATUTORY DUTY FOR WHICH PROV ISIONS FOR LEVY OF PENALTY EXIST IN THE RELEVANT ENACTMENT. THE IMPOSING OF PENALTY IN EVER Y SUCH CASE IS HOWEVER NOT MANDATORY AND THE AUTHORITY EMPOWERED TO IMPOSE SUC H A PENALTY MAY IN HIS DISCRETION CHOOSE NOT TO LEVY A PENALTY IN APPROPRIATE CASES N OTWITHSTANDING EXISTENCE OF SUCH A DEFAULT, CONTRAVENTION, BREACH OR OMISSION. THIS GE NERAL PRINCIPLE WAS STATED BY THE SUPREME COURT IN HINDUSTAN STEEL V. STATE OF ORISSA [1992} 83 ITR 26 IN THE FOLLOWING WORDS: [TYPE THE DOCUMENT TITLE] 9 PENALTY WILL NOT ALSO 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 EXERCISED JUDICIALLY AND ON CONS IDERATION OF ALL THE RELEVANT CIRCUMSTANCES. EVEN IF A MINIMUM PENALTY IS PRESCRI BED, THE AUTHORITY COMPETENT TO IMPOSE THE PENALTY WILL BE JUSTIFIED IN REFUSING TO IMPOSE PENALTY, WHERE THERE IS A TECHNICAL OR VENIAL BREACH OF THE PROVISIONS OF THE ACT OR WERE T HE BREACH FLOWS FROM A BONA FIDE BELIEF THAT THE -OFFENDER IS NOT LIABLE TO ACT IN THE MANNE R PRESCRIBED IN THE STATUE. THE PATNA HIGH COURT IN JAGANNATH SINGH V. CWT [1980] 122 ITR 114, AFTER QUOTING THE OBSERVATIONS OF THE SUPREME COURT (SUPRA) IN THE CASE OF HINDUSTAN STEEL V. STATE OFORISSA [1972] 83 ITR 26 OBSERVED. 'FROM WHAT I HAVE QUOTED ABOVE IT FOLLOWS- A) THAT A PROCEEDING FOR IMPOSING A PENALTY FOR FAILUR E TO CARRY OUT A STATUTORY OBLIGATION IS A QUASI-CRIMINAL PROCEEDING; B) PENALTY WILL NOT ORDINARILY BE IMPOSED UNLESS A P ARTY OBLIGED, EITHER ACTED DELIBERATELY IN DEFIANCE OF LAW OR WAS GUILTY OF CON DUCT CONTUMACIOUS OR DISHONEST OR ACTED IN CONSCIOUS DISREGARD OF ITS OBLIGATION; A ND C) WHEN THERE IS A TECHNICAL OR VENIAL BREACH OF THE P REVISIONS OF THE ACT OR WHERE THE BREACH FLOWS FROM A BONA FIDE BELIEF THAT THE OFFENDER IS NOT LIABLE TO ACT IN THE MANNER PRESCRIBED BY STATUTE., IT WOULD BE JUSTIFIED IN REFU SING TO IMPOSE PENALTY.' PRAYER TO DELETE PENALTY SIR, IT IS A WELL SETTLED LAW THAT PENALTIES ARE NO T TO BE IMPOSED MERELY BECAUSE THERE IS A PROVISION FOR IMPOSING THEM. PENALTIES ARE A HARSH PUNISHMENT AND SHOULD BE IMPOSED ONLY IF THERE IS A WILLFUL CONTRAVENTION OF ANY LAW AND NOT WHERE THE LAW MAY HAVE BEEN CONTRAVENED BY MISINTERPRETATIONS OR INADVERTENTLY OR BY MISTAKE, ESPECIALLY WHERE THE PERSON IS NOT AWARE OF THE CIRCUMSTANCES LEADING TO THE MISTAKE. IN PROF. C. DAS GUPTA V. ASST CIT [1997] 611 ITD 1 (CAL.) IT WAS HELD THAT IMPOSITION OF PENALTY IS PURELY DISCRETIONARY PENALTY PROCEEDINGS ARE QUASI-CRIMINAL PROCEEDINGS IN NATURE AND HENCE PENALTY NEED NOT ORDINARY BE LEVIED UNLESS THE ASSESSEE EITHER ACTED IN DEFIANCE OF LAW OR ACTED IN CONSCIOUS DISREGARD OF ITS OBLIGATION. WE PRAY BEFORE YOUR HONOR TO KINDLY DROP THE PENALT Y PROCEEDING IN THIS MATTER. 4. ON THE OTHER HAND, THE LD. DR RELIED ON THE ORDE RS OF THE LOWER AUTHORITIES AND SUBMITTED THAT THE AUTHORITIES BELOW ARE JUSTIF IED IN IMPOSING PENALTY U/S. 271(1)(C) OF THE IT ACT FOR FILING INACCURATE PARTI CULARS OF INCOME. IT IS SUBMITTED THAT IF REASSESSMENT PROCEEDINGS HAD NOT BEEN TAKEN UP, THE ASSESSEE WOULD HAVE [TYPE THE DOCUMENT TITLE] 10 ESCAPED LEVY OF TAX. THE CASE LAWS RELIED BY THE AS SESSEE ARE NOT APPLICABLE BEING DISTINGUISHABLE ON FACTS. 5. AFTER HEARING BOTH THE SIDES AND PERUSING THE EN TIRE MATERIAL AVAILABLE ON RECORD AND ALSO GOING THROUGH THE DETAILED SUBMISSI ONS OF THE ASSESSEE INCLUDING VARIOUS CASE LAWS, WE FIND NO JUSTIFICATION TO SUST AIN THE PENALTY IMPOSED IN THE INSTANT CASE. IT IS NOTABLE THAT THOUGH THE PROVISI ON FOR GRATUITY WAS NOT ADDED BACK WHILE COMPUTING THE INCOME OF THE ASSESSEE, BU T IN THE BALANCE SHEET, THE ASSESSEE HAD DISCLOSED IT, AS PROVISION FOR GRATUIT Y. WHILE PREPARING THE IT RETURN OF THE ASSESSEE, THE CHARTERED ACCOUNTANT DID NOT A DD BACK IT AS INCOME DUE TO BONA FIDE MISTAKE. WE FURTHER OBSERVE FROM THE COMP UTATION OF INCOME SUBMITTED BY THE ASSESSEE FOR PRECEDING AND SUBSEQUENT ASSESS MENT YEARS THAT THE ASSESSEE HAS CORRECTLY ADDED BACK THE PROVISION FOR GRATUITY AND IT WAS OFFERED AS INCOME. THEREFORE, IT APPEARS THAT THERE WAS NO MALAFIDE IN TENTION OF THE ASSESSEE FOR FILING INACCURATE PARTICULARS OF INCOME. IT IS OBSE RVED THAT THE CASE WAS ORIGINALLY ASSESSED U/S. 143(3) OF THE IT ACT AND ALL THE INFO RMATION INCLUDING THE PROVISION FOR GRATUITY WERE AVAILABLE WITH THE ASSESSING OFFI CER, AS THE PROVISION FOR GRATUITY STOOD ADDED BACK AS INCOME OF THE ASSESSEE IN THE B ALANCE SHEET FILED WITH THE RETURN OF INCOME. THE DISCLOSURE OF PROVISION FOR G RATUITY AS INCOME IN THE BALANCE SHEET OF THE CURRENT YEAR FILED WITH THE RETURN OF INCOME AND OFFERING SUCH PROVISION FOR GRATUITY AS INCOME IN PRECEDING YEAR S COMPUTATION OF INCOME, INSPIRE CONFIDENCE ON THE SUBMISSION OF THE ASSESSE E THAT IT WAS DUE TO THE MISTAKE OF CHARTERED ACCOUNTANT NOT TO ADD BACK SUC H PROVISION IN THE COMPUTATION OF INCOME OF THE YEAR UNDER CONSIDERATI ON. THEREFORE, IN VIEW OF THE DECISION OF HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. RICE MILLS (SD) (2205) 275 ITR 206, WHERE IT HAS BEEN HELD THA T THE FAULT OF CHARTERED ACCOUNTANT CANNOT BE VISITED ON THE ASSESSEE, IN OU R CONSIDERED OPINION, NO ADVERSE INFERENCE CAN BE DRAWN AGAINST THE ASSESSEE . VARIOUS DECISIONS RELIED BY [TYPE THE DOCUMENT TITLE] 11 THE ASSESSEE ALSO MAKE OUT THE CASE OF THE ASSESSEE . THIS BEING A BONA FIDE MISTAKE, THE ASSESSEE DID NOT CHALLENGE THE QUANTUM ADDITION MADE BY THE ASSESSING OFFICER. THIS, HOWEVER, WOULD NOT BE PROP ER IN THE INTEREST OF JUSTICE TO SADDLE PENALTY AGAINST THE ASSESSEE IN THE PECULIAR FACTS AND CIRCUMSTANCES OF THE CASE AND THE CIRCUMSTANTIAL EVIDENCES AVAILABLE TO PROVE THE BONA FIDE MISTAKE WITH NO ULTERIOR MOTIVE ON THE PART OF ASSESSEE, AS ASSESSMENT PROCEEDINGS AND PENALTY PROCEEDINGS ARE TWO SEPARATE AND DISTINCT P ROCEEDINGS. ACCORDINGLY, THE PENALTY IMPOSED BY THE ASSESSEE AND CONFIRMED BY LD . CIT(A) DESERVE TO BE CANCELLED. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH JULY, 2018. SD/- SD/- (BHAVNESH SAINI) (L.P. SAHU) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 30 TH JULY, 2018 *AKS* COPY OF ORDER FORWARDED TO: (1) THE APPELLANT (2) THE RESPONDENT (3) COMMISSIONER (4) CIT(A) (5) DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES, NEW DELHI