M/s Kesar Alloys & Metals Pvt.Ltd., Indore V. THE ACIT, Indore

ITA 690/IND/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 5972 (ITAT-INDORE)
• Duration Of Justice: 2 year(s) 6 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-06-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2005-2006
• Appeal Filed On: 28-11-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MOHD JAVED
• Assessee Lawyers: P D NAGAR
• Keywords: Initiation of penalty proceedings
• Section: 27

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL INDORE SMC BENCH, INDORE BEFORE SHRI D.T. GARASIA, JUDICIAL MEMBER ITA NO. 690/IND/2013 A.Y. 2005-06 KESAR ALLOYS & METALS PVT. LTD., INDORE PAN AACCK 9245 Q :: APPELLANT VS ACIT-5(1), INDORE :: RESPONDENT ASSESSEE BY SHRI P.D. NAGAR RESPONDENT BY SHRI MOHD. JAVED DATE OF HEARING 22.6.2016 DATE OF PRONOUNCEMENT 22.6.2016 O R D E R THIS APPEAL IS FILED BY THE ASSESSEE CHALLENGING T HE ORDER OF LD. CIT(A)-II, INDORE, DATED 20.9.2013 ON THE ISSUE OF CONFIRMATION OF IMPOSITION OF PENALTY U/S 271(1)(C) OF THE I.T. ACT . 2. SHORT FACTS OF THE CASE ARE THAT THE ASSESSING O FFICER OBSERVED THAT THE ASSESSEE CO. HAD ISSUED SHARE CAPITAL TO T WO COMPANIES NAMELY, M/S. HINDUSTAN CONTINENTAL LTD. AT RS.10 LA CS AND M/S. OPTIMATES TEXTILES INDUSTRIES AT RS.25 LACS. THE AS SESSING OFFICER ITA NO.690 OF 2013 KESAR ALLOYS & METALS P. LTD. 2 ASSESSED THESE AMOUNTS TO TAX ON THE GROUND THAT ID ENTITY, CREDIT WORTHINESS OR GENUINENESS WAS NOT ESTABLISHED. THE ADDITIONS WERE CONFIRMED BY THE LD. CIT(A). FOLLOWING THE DECISION IN CASE OF M/S. AGRAWAL COAL CORPORATION (ORDER DATED 31.10.2011), THE ITAT, INDORE ALSO, VIDE ITS ORDER DATED 09.11.2011, CONFIRMED TH E ADDITIONS ON THE GROUND THAT THE IDENTITY OF THE COMPANIES WAS NOT P ROVED. THE ASSESSING OFFICER, THEREAFTER, LEVIED PENALTY U/S 2 71(1)(C) OF THE ACT AT RS.13 LACS HOLDING THAT IT IS CLEAR THAT THE ASSESS EE HAS NOT SUBMITTED CORRECT FACTS ABOUT ITS INCOME. ASSESSEE HAS THEREF ORE, MADE CONCEALMENT OF ITS INCOME WITHIN THE MEANING U/S 27 1(1)(C) OF THE ACT. 3. MATTER CARRIED TO LD. CIT(A) AND LD. CIT(A) CONF IRMED THE ACTION OF THE ASSESSING OFFICER. BEING AGGRIEVED, THE ASSESSE E IS BEFORE THIS TRIBUNAL. 4. LD. AR FOR THE ASSESSEE SUBMITTED THAT DURING TH E COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE FILED VARIOUS EVIDENCES TO PROVE IDENTITY, CREDIT WORTHINESS AND GENUINENESS OF SHAR E CAPITAL ALONG WITH CONFIRMATORY LETTERS AND COPIES OF THE RETURN OF IN COME OF THE APPLICANT COMPANY, YET THE LD. CIT(A) HELD THAT IDENTITY OF S UCH COMPANIES WAS NOT PROVED. THE ITAT ALSO HELD SAME JUST BECAUSE NOTICE S COULD NOT BE SERVED ON THE DEPOSITORS. THERE BEING NO CONCLUSIVE EVIDENCES THAT THE ITA NO.690 OF 2013 KESAR ALLOYS & METALS P. LTD. 3 ASSESSEE INVESTED ITS OWN MONEY TOWARDS SUBSCRIPTIO N OF SUCH SHARES, THE LEVY OF PENALTY AND CONFIRMATION THEREOF IS NOT JUSTIFIED. ALTERNATIVELY, LD. AR FOR THE ASSESSEE SUBMITTED T HAT WHILE FRAMING THE ASSESSMENT, THE ASSESSING OFFICER HAS INITIATED THE PENALTY PROCEEDINGS FOR FURNISHING INACCURATE PARTICULARS O F INCOME WHEREAS IN THE PENALTY ORDER, THE ASSESSING OFFICER HELD THAT THAT PENALTY IS LEVIED FOR CONCEALMENT OF INCOME. THUS, PENALTY CANNOT BE INITIATED ON ONE LIMB AND IMPOSED ON ANOTHER LIMB. THEREFORE, THE PENALTY IS NOT JUSTIFIED IN VIEW OF THE DECISION IN CASES OF ACIT VS. GRAND ORG ANICS (P) LTD., 85 DTR 142 (PANAJI TRIBUNAL), ACIT VS. M.P. STATE TOUR ISM DEVELOPMENT CORPORATION LTD. (2015) 26 ITJ 225 (INDORE TRIBUNAL ) AND ALSO NEW SORATHIA ENGINEERING LTD. VS. CIT (2006) 282 IYT 64 2 (GUJ). ON THE OTHER HAND, THE LD. DR RELIED ON THE ORDERS OF REVENUE AUTHORITIES. 5. I HAVE HEARD RIVAL CONTENTIONS OF BOTH THE PARTI ES. I FIND THAT ASSESSING OFFICER INITIATED THE PENALTY PROCEEDINGS U/S 271(1)(C) WITHOUT BRINGING ON RECORD WHAT SPECIFIC DEFAULT U/S 271(1) WAS COMMITTED BY THE ASSESSES. THE ASSESSING OFFICER HAS NOT BROUGHT OUT ANY SPECIFIC CHARGE, THEREFORE, WHEN ASSESSING OFFICER HAS FAILE D TO BRING ON RECORD THAT ASSESSEES HAD EITHER CONCEALED PARTICULARS OF INCOME OR HAD FURNISHED INACCURATE PARTICULARS OF INCOME, THE PEN ALTY CANNOT BE LEVIED ITA NO.690 OF 2013 KESAR ALLOYS & METALS P. LTD. 4 U/S 271(1) OF THE I.T. ACT. IN THE INSTANT CASE, I FIND THAT THE ASSESSING OFFICER HAS, ON ONE LIMB, INITIATED THE PENALTY PRO CEEDINGS FOR FURNISHING INACCURATE PARTICULARS OF INCOME WHEREAS WHILE IMPO SING THE PENALTY, THE ASSESSING OFFICER, ON ANOTHER LIMB, HELD THAT THAT PENALTY IS LEVIED FOR CONCEALMENT OF INCOME. THUS, THE ASSESSING OFFICER WAS NOT CLEAR IT HIS STAND, WHICH IS NOT JUSTIFIED. THEREFORE, I AM OF T HE VIEW THAT THE ASSESSING OFFICER HAS GIVEN NO SPECIFIC DIRECTION. IT IS WELL SETTLED THAT PENALTY PROCEEDINGS AND ASSESSMENT PROCEEDINGS ARE DIFFERENT. THE PENALTY PROCEEDINGS CAN BE INITIATED ON CONCEALMENT OF PARTICULARS OF INCOME AND FURNISHING INACCURATE PARTICULARS OF INC OME AND IF THE ASSESSING OFFICER FAILED TO SPECIFY THE CHARGE, THE PENALTY CANNOT BE LEVIED. I FIND THAT SIMILAR ISSUE HAD COME UP IN TR IBUNAL IN CASE OF ACIT VS. GRAND ORGANICS (P) LTD. (SUPRA), WHEREIN TRIBUN AL HAS DEALT THIS ISSUE IN DETAIL. 6. I HAVE GONE THROUGH THE PROVISIONS OF SEC. 271(1 )(C). I NOTED THAT PENALTY U/S 271(1)(C) IS LEVIABLE IF AO IS SATISFIE D IN THE COURSE OF ANY PROCEEDINGS UNDER THE INCOME TAX ACT THAT ANY PERSO N HAS CONCEALED PARTICULARS OF HIS INCOME OR FURNISHED INACCURATE P ARTICULARS OF INCOME. FROM THE ASSESSMENT ORDER, I NOTED THAT THERE IS NO INDICATION WHICH SPEAKS OF AO BEING SATISFIED DURING THE COURSE OF T HE ASSESSMENT THAT THE ASSESSEE HAS COMMITTED DEFAULT AS STIPULATED U/ S 271(1)(C). NO ITA NO.690 OF 2013 KESAR ALLOYS & METALS P. LTD. 5 DOUBT, LEGISLATURE HAS INSERTED SUB-SECTION (1B) IN SEC. 271 BY FINANCE ACT, 2008 W.R.E.F. 1.4.1989 PROVIDED THAT DIRECTION FOR INITIATION OF PENALTY PROCEEDINGS IN THE ORDER OF ASSESSMENT SHALL BE DEE MED TO CONSTITUTE SUCH SATISFACTION. IN THE ASSESSMENT ORDER, I FIND THAT THERE IS NO SUCH DIRECTION. DIRECTION IS GIVEN ONLY TO THE STAFF TO ISSUE AO, DN & CHALLAN & PEN. NOTICE U/S 271(1)(C). THIS, IN MY OPINION, DOES NOT TANTAMOUNT TO A DIRECTION FOR INITIATION OF PENALTY PROCEEDINGS U /S 271(1)(C) AS THE AO HAS NOT UTTERED ANYTHING IN THE ASSESSMENT ORDER IN THIS REGARD. THE ACTION OF THE AO, IN MY OPINION, IS TOTALLY ILLEGAL AND DOES NOT MEET THE REQUIREMENT OF SEC. 271(1)(C) EVEN AFTER THE AMENDM ENT MADE BY THE FINANCE ACT, 2008. IN THE CASE OF MS. MADHUSHREE GU PTA BRITISH AIRWAYS PLC VS. UNION OF INDIA, 317 ITR 107 (DEL), THE SCO PE OF AMENDMENT WAS EXPLAINED BY THE HON'BLE DELHI HIGH COURT AS UNDER : IN OUR OPINION, THE IMPUGNED PROVISION ONLY PROVI DES THAT AN ORDER INITIATING PENALTY CANNOT BE DECLARED BAD IN LAW BE CAUSE IT STATES THE PENALTY PROCEEDINGS ARE INITIATED, IF OTHERWISE IT IS DISCERNIBLE FROM RECORD THAT THE AO HAS ARRIVED AT PRIMA FACIE SATIS FACTION FOR INITIATION OF PENALTY PROCEEDINGS. THE ISSUE IS OF DISCERNIBILITY OF THE SATISFACTION ARRIVED AT BY THE AO DURING THE COURSE OF PROCEEDIN G BEFORE HIM. THE PRESENCE OF PRIMA FACIE SATISFACTION FOR INITI ATION OF PENALTY PROCEEDINGS WAS AND REMAINS A JURISDICTIONAL FACT W HICH CANNOT BE WISHED AWAY AS THE PROVISION STANDS EVEN TODAY, I.E . POST AMENDMENT. IF THERE IS NO MATERIAL TO INITIATE PENALTY PROCEE DINGS; AN ASSESSEE WILL BE ENTITLED TO RECOURSE TO A COURT OF LAW. 7. THIS IS THE SETTLED LAW THAT THE PENALTY PROCEE DINGS AND ASSESSMENT PROCEEDINGS ARE DIFFERENT. THE PENALTY P ROCEEDINGS CAN BE ITA NO.690 OF 2013 KESAR ALLOYS & METALS P. LTD. 6 INITIATED ON TWO CHARGES I.E. I) CONCEALMENT OF PAR TICULARS OF INCOME AND II) FURNISHING OF INACCURATE PARTICULARS OF INCOME. BOTH THE CHARGES ARE ENTIRELY DIFFERENT. IF THE PROCEEDINGS ARE INITIATE D ON CHARGE OF CONCEALMENT, THEN PENALTY CANNOT BE LEVIED ON THE C HARGE OF FURNISHING OF INACCURATE PARTICULARS OF INCOME AND VICE VERSA. THUS, THERE MUST BE A CLEAR FINDING ABOUT THE CHARGE FOR WHICH PENALTY IS IMPOSED OR INITIATED. IT IS INCUMBENT UPON THE AO TO STATE WHETHER PENALT Y WAS BEING LEVIED FOR CONCEALMENT OF INCOME OR FOR FURNISHING OF INAC CURATE PARTICULARS OF INCOME. IN THE ABSENCE OF SUCH FINDINGS, THE ORDER WOULD BE BAD IN LAW. THE CASE OF NEW SORATHIA ENGINEERING CO. LTD., 282 ITR 642, HONBLE GUJARAT HIGH COURT HAS HELD AS UNDER: - IT IS INCUMBENT UPON THE ASSESSING OFFICER TO STAT E WHETHER THE PENALTY WAS BEING LEVIED FOR CONCEALMENT OF PARTICULARS OF INCOME BY THE ASSESSEE OR WHETHER ANY INACCURATE PARTICULARS OF I NCOME HAD BEEN FURNISHED BY THE ASSESSEE. HELD, THAT THE PENALTY ORDER AND THE ORDER OF THE COMMISSIONER (APPEALS) SHOWED THAT NO CLEAR CUT FINDING HAD BEEN REACHED. THE TRIBUNAL HAD FAILED TO APPRECIATE THIS LEGAL ISSUE. THE RATION IN CIT V. MANU ENGINEERING WORKS 132 ITR 306 (GUJ) WAS APPLIC ABLE AND THE ORDER OF PENALTY COULD NOT BE UPHELD BY THE TRIBUNA L. THE ORDER WAS INVALID. IN THE CASE OF COMMISSIONER OF INCOME TAX V. RAJAN AND CO., 291 ITR 340 (DEL), WHEREIN IT IS HELD THAT THE PROVISION OF SECTION 271 (1) (C) OF THE INCOME TAX 1961 WOULD REQUIRE PROPER APPLICATIO N OF MIND AND RECORDING OF AT LEAST A BARE MINIMUM OPINION ON THE PART OF AO THAT A CASE FOR INITIATION OF PENALTY PROCEEDING WAS MADE AS THERE WAS ITA NO.690 OF 2013 KESAR ALLOYS & METALS P. LTD. 7 CONCEALMENT OF INCOME OR THAT INCORRECT PARTICULARS HAD BEEN FURNISHED BY THE ASSESSEE WITH THE INTENTION TO AVOID PAYMENT OF TAXES. THIS VIEW IS SUPPORTED BY VARIOUS DECISIONS OF HIGH COURT THE REFORE IT IS NOT NECESSARY TO DISCUSS THE OTHER JUDGMENT ON THE ISSU E. 8. AO HAS NOT MADE OUT ANY SPECIFIC CHARGE EITHER OF CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING OF INACCURATE P ARTICULARS OF INCOME. THE PENALTY U/S 271(1) (C) CAN BE LEVIED FOR EITHER OF THE CHARGE. THE PENALTY ORDER SIMPLY STATES THAT PENALTY IS ATTRACT ED ON THIS ADDITION AS IT IS MANDATORY AND AUTOMATIC. IT DOES NOT STATE FOR W HAT DEFAULT PENALTY IS LEVIED SEC. 271(1) (C) (III) IS EXPRESSLY CLEAR THA T THE PENALTY CAN BE LEVIED FOR CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME. IT IS THE PARTICU LARS OF INCOME WHICH IS THE COMMON SUBJECT MATTER OF BOTH THE CHARGES. THE WORD CONCEAL AS PER WEBSTERS DICTIONARY MEANS TO HIDE, WITHDRAW, OR REMOVE FROM OBSERVATION; COVER OR KEEP FROM SIGHT; TO KEEP SECR ET; TO AVOID DISCLOSING OR DIVULGING. THAT MEANS NON DISCLOSURE OF PARTICUL ARS OF INCOME. ON THE OTHER HAND, WHERE PARTICULARS ARE DISCLOSED BUT SUC H DISCLOSURE IS NOT CORRECT, TRUE OR ACCURATE, IT WOULD AMOUNT TO FURNI SHING OF INACCURATE PARTICULARS OF INCOME. FOR EXAMPLE, IN CASE OF BUSI NESSMAN, IF A PARTICULAR TRANSACTION OF SALE IS NOT SHOWN IN THE BOOKS, IT WOULD AMOUNT TO CONCEALMENT OF PARTICULARS OF INCOME WHILE SALE IS SHOWN BUT AT A ITA NO.690 OF 2013 KESAR ALLOYS & METALS P. LTD. 8 LESSER VALUE, IT WOULD AMOUNT TO FURNISHING OF INAC CURATE PARTICULARS OF INCOME. 9. IT IS PERTINENT TO NOTE THAT THRUST OF THE LEGI SLATURE IS UPON THE PARTICULARS OF INCOME WHICH ARE EITHER CONCEALED OR FURNISHED INACCURATELY BY THE ASSESSEE. THEREFORE, ONE MUST U NDERSTAND THE MEANING OF THE WORDS PARTICULARS OF INCOME. THE I NCOME TAX TRIBUNAL HAD TO CONSIDER THE MEANING OF THE EXPRESSION FURN ISHING OF INACCURATE PARTICULARS OF INCOME APPEARING IN SECTION 271(1) (C) IN THE CASE OF KANBAY SOFTWARE INDIA (P) LTD, 122 TTJ 721 (PUNE). IT WAS HELD THAT THE EXPRESSION PARTICULAR REFERS TO FACTS, DETAILS, SPECIFICS OR THE INFORMA TION ABOUT SOMEONE OR SOMETHING. THUS, THE DETAILS OR IN FORMATION ABOUT THE INCOME WOULD DEAL WITH FACTUAL DETAILS OF INCOME AN D CANNOT BE EXTENDED TO AREAS WHICH ARE SUBJECTIVE SUCH AS STAT US OF THE TAXABILITY OF AN INCOME ADMISSIBILITY OF A DEDUCTION AND INTERPRE TATION OF LAW. ACCORDINGLY, IT WAS HELD THAT MERE REJECTION OF A L EGAL CLAIM WOULD NOT AMOUNT TO FURNISHING OF INACCURATE PARTICULARS OF I NCOME. THIS VIEW IS FORTIFIED BY THE SUPREME COURT JUDGMENT IN THE CASE OF RELIANCE PETROPRODUCTS, 322 ITR 158 SC. IN THIS CASE, THE CL AIM OF ASSESSEE U/S 36(1) (III) WAS REJECTED BY THE AO AND THE ORDER OF AO WAS UPHELD BY THE TRIBUNAL. AS A RESULT THEREOF, THE PENALTY U/S 271( 1) (C) WAS IMPOSED ON ACCOUNT OF FURNISHING OF INACCURATE PARTICULARS OF INCOME. THE PENALTY ITA NO.690 OF 2013 KESAR ALLOYS & METALS P. LTD. 9 WAS HELD TO BE ILLEGALLY IMPOSED BY THE TRIBUNAL SI NCE FACTUAL DETAILS OF INCOME FURNISHED BY THE ASSESSEE WERE FOUND TO BE CORRECT. THE MATTER ULTIMATELY REACHED THE SUPREME COURT AND THE HONBL E COURT UPHELD THE VIEW OF THE TRIBUNAL BY HOLDING THAT MERE MAKING O F THE CLAIM, WHICH IS NOT SUSTAINABLE IN LAW, BY ITSELF, WILL NOT AMOUNTI NG TO FURNISHING INACCURATE CLAIM OF FURNISHING INACCURATE PARTICULA RS REGARDING THE INCOME OF THE ASSESSEE. 10. EXPLANATION 1 TO SECTION 271(1) (C) CANNOT BE APPLIED WHERE CHARGE AGAINST THE ASSESSEE IS FURNISHING OF INAC CURATE PARTICULARS OF INCOME SINCE IT PROVIDES A DEEMING FICTION QUA CONC EALMENT OF PARTICULARS OF INCOME ONLY AND CONSEQUENTLY CANNOT BE EXTENDED TO A CASE WHERE CHARGE AGAINST THE ASSESSEE IS FURNISH ING OF INACCURATE PARTICULARS OF INCOME. 11. ON THE OTHER HAND, WHERE CHARGE AGAINST THE A SSESSEE IS FURNISHING INACCURATE PARTICULARS OF INCOME, THE AO HAS TO ESTABLISH EITHER THAT ASSESSEE HAS NOT DISCLOSED THE PARTIC ULARS OF INCOME UNDER THE MAIN PROVISIONS OR THE CASE OF ASSESSEE FALLS WITHIN THE SCOPE OF THE DEEMING FICTIONS CREATED UNDER THE EXPLANATIONS . FOR EXAMPLE, THE ASSESSEE MIGHT NOT DISCLOSE PARTICULAR SALES OR D IVIDEND INCOME OR INCOME FROM ANY SOURCE. SUCH INSTANCES WOULD FALL U NDER THE MAIN ITA NO.690 OF 2013 KESAR ALLOYS & METALS P. LTD. 10 PROVISIONS ITSELF. IN SUCH CASES, THE BURDEN IS ON THE AO TO ESTABLISH THE EXISTENCE OF THE CHARGE ON THE BASIS OF MATERIAL ON RECORD. 12. EXPLANATION 1 TO SECTION 271(1) (C) STATES THAT THE AMOUNT ADDED OR DISALLOWED IN COMPUTING THE TOTAL INCOME OF THE ASS ESSEE SHALL BE DEEMED TO BE THE INCOME IN RESPECT OF WHICH PARTICU LARS HAVE BEEN CONCEALED. THIS DEEMING PROVISION IS NOT ABSOLUTE O NE BUT IS REBUTTABLE ONE. IT ONLY SHIFTS THE ONUS ON THE ASSESSEE. EXPLA NATION 1 REFERS TO THE TWO SITUATIONS IN WHICH PRESUMPTION OF THE CONCEALM ENT OF THE PARTICULARS OF INCOME IS DEEMED. IT IS NOT APPLICABLE WHERE THE CHARGE AGAINST THE ASSESSEE IS FURNISHING INACCURATE PARTICULARS OF TH E INCOME. THE FIRST SITUATION IS WHERE THE ASSESSEE IN RESPECT OF ANY F ACT MATERIAL TO THE COMPUTATION OF HIS TOTAL INCOME FAILS TO OFFER AN E XPLANATION OR OFFERS AN EXPLANATION, WHICH IS FOUND BY THE AO OR THE COMMIS SIONER TO BE FALSE. THE SECOND SITUATION IS WHERE THE ASSESSEE IN RESPE CT OF ANY FACTS MATERIAL TO THE COMPUTATION OF HIS TOTAL INCOME OFF ERS AN EXPLANATION, WHICH, THE ASSESSEE IS NOT ABLE TO SUBSTANTIATE AND ALSO FAILS TO PROVE THAT SUCH EXPLANATION WAS BONA FIDE ONE AND THAT AL L THE FACTS RELATING TO THE COMPUTATION OF TOTAL INCOME HAVE BEEN DISCLOSED BY HIM. THE PRESUMPTION AVAILABLE UNDER EXPLANATION TO SECTION 271(1) (C), CANNOT BE DRAWN UNLESS THE CASE OF THE ASSESSEE FALLS UNDER E ITHER OF THE CLAUSES (A) OR (B). ITA NO.690 OF 2013 KESAR ALLOYS & METALS P. LTD. 11 13. IN THE PRESENT CASES, AS NARRATED ABOVE, THE A O HAS NOT BROUGHT OUT ANY SPECIFIC CHARGE FOR WHICH THE PENALTY HAS B EEN IMPOSED ON THE ASSESSEE U/S 271(1) (C) OF THE ACT. HE HAS NOT BROU GHT OUT WHETHER THE ASSESSEE HAS CONCEALED THE PARTICULARS OF INCOME OR WHETHER THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF IN COME. 14. IN THE CASE OF CIT V. ATUL MOHAN BINDAL (2009) 9 SCC 589, WHERE HONBLE SUPREME COURT WAS CONSIDERING THE SAME PROV ISION, IT OBSERVED THAT THE ASSESSING OFFICER HAS TO BE SATISFIED THAT A PERSON HAS CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHE D INACCURATE PARTICULARS OF SUCH INCOME. THUS THE SATISFACTION O F THE AO ABOUT THE CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF SUCH INCOME IS ESSENTIAL BEFORE LEVY ING ANY PENALTY U/S 271(1)(C). THE AO AS IS APPARENT FROM THE PENALTY O RDER HAS NOT SATISFIED ABOUT THE CONCEALMENT OF PARTICULARS OF INCOME OR F URNISHING OF INACCURATE PARTICULARS OF INCOME ON THE PART OF THE ASSESSEE. ON THIS BASIS ITSELF THE PENALTY STAND DELETED. 15. THE LD. DR RELIED ON THE DECISION OF UNION OF I NDIA VS DHARMENDRA TEXTILE PROCESSORS 306 ITR 277 AS WELL AS DILIP N S HROFF V JCIT 291 ITR 519 AND PLEADED THAT THE LEVY OF THE PENALTY IS AUT OMATIC AND MANDATORY. I FIND THAT IN THE CASE OF DHARMENDRA TE XTILES PROCESSORS (SUPRA), THE HONBLE SUPREME COURT HAS HELD THAT PE NALTY U/S 271(1) (C) ITA NO.690 OF 2013 KESAR ALLOYS & METALS P. LTD. 12 IS A CIVIL LIABILITY AND THAT WILFUL CONCEALMENT AND MEANS REA ARE NOT ESSENTIAL INGREDIENTS FOR ATTRACTING THE CIVIL LIAB ILITY AS IS THE CASE IN THE MATTER OF PROSECUTION U/S 276 OF THE ACT. IT HAS FU RTHER BEEN HELD IN THAT CASE THAT MENS REA IS NOT AN ESSENTIAL INGREDIENT F OR IMPOSING THE PENALTY. THE HONBLE SUPREME COURT IN THIS CASE NOW HERE HELD THAT IF THE ADDITION IS MADE, PENALTY IS AUTOMATIC. EVEN IN UNI ON OF INDIA V. DHARMENDRA TEXTILE PROCESSORS REPORTED IN (2008) 30 6 ITR 277 (SC), THE SUPREME COURT HAS OBSERVED THAT THE FINDING AS TO SUPPRESSION OR INACCURATE PARTICULARS IN THE RETURN ARE NECESSARY FOR ATTRACTING THE PENAL PROVISION UNDER SECTION 271(1) (C) OF THE INCOME TA X ACT, 1961. THIS JUDGMENT DOES NOT OVERRULE THE EXPLANATIONS APPENDE D TO SECTION 271(1) (C). IT EVEN HELD THAT THE OBJECT BEHIND THE ENACTMENT OF SECTION 271(1) (C) READ WITH EXPLANATIONS INDICATES THAT TH E SAID SECTION HAS BEEN ENACTED TO PROVIDE FOR A REMEDY FOR LOSS OF RE VENUE. THE PENALTY UNDER THAT PROVISION IS A CIVIL LIABILITY. THUS, TH E RATIO LAID DOWN IN THIS JUDGMENT WAS CONFINED TO TREATING THE WILFUL CONCEA LMENT IS NOT ESSENTIAL FOR IMPOSING THE PENALTY U/S 271(1) (C) OF THE ACT. WHERE AN ASSESSEE GENUINELY MAKES A CLAIM FOR A PARTICULAR DEDUCTION BY DISCLOSING ALL THE NECESSARY FACTS RELATING TO THE SAME, THAT CANNOT B E REGARDED TO BE CONCEALMENT EVEN IF THE ASSESSEES CLAIM IS REJECTE D. THIS IS THE SETTLED LAW THAT PENALTY PROCEEDINGS ARE DISTINCT FROM THE ASSESSMENT PROCEEDINGS AND, THEREFORE, IF ANY ADDITION IS MADE , IT DOES NOT MEAN ITA NO.690 OF 2013 KESAR ALLOYS & METALS P. LTD. 13 THAT THE PENALTY WILL AUTOMATICALLY BE LEVIED. IN T HE PENALTY PROCEEDINGS THE ASSESSEE IS GIVEN AN OPPORTUNITY TO EXPLAIN HIS CASE IF HE SUCCESSFULLY EXPLAINS HIS POSITION AND IS NOT TRAPP ED WITHIN THE PARAMETERS OF SECTION 271(1) (C) ALONG WITH THE EXP LANATIONS DEEMING THE CONCEALMENT OF INCOME, PENALTY CANNOT BE IMPOSE D. IN THIS CASE, THE PENALTY HAS BEEN IMPOSED MERELY OBSERVING THAT THE PENALTY IS AUTOMATIC AND MANDATORY. SECTION 271(1) (C) DEALS W ITH THE TWO SITUATIONS FOR IMPOSING THE PENALTY; HAS CONCEALED THE PARTICULARS OF HIS INCOME; OR HAS FURNISHED THE INACCURATE PARTICULARS OF SUCH INCOME. EXPLANATION 1 IS APPLICABLE ONLY IN CASE OF FIRST S ITUATION I.E. AMOUNT ADDED OR DISALLOWED IN THE TOTAL INCOME BE DEEMED T O REPRESENT THE INCOME IN RESPECT OF WHICH THE PARTICULARS HAVE BEE N CONCEALED. 16. NOW THE QUESTION ARISES WHETHER IN THIS CASE CA N ONE SAY THAT THE ASSESSEE HAS FILED INACCURATE PARTICULARS OF INCOME . INACCURATE PARTICULARS MEANS THAT THE PARTICULARS ARE INCORRE CT OR NOT ACCURATE OR NOT CORRECT. THAT MEANS, THE PARTICULARS HAVE NOT B EEN FURNISHED IN CORRECT/EXACT MANNER AS IS REQUIRED TO BE FURNISHED TO DETERMINE THE CORRECT INCOME CHARGEABLE TO TAX OF THE ASSESSEE. 17. HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS M. S. BINDRA & SONS P. LTD 336 ITR 125 (DELHI) HAS OBSERVED AS UNDER IN RESPECT OF ITA NO.690 OF 2013 KESAR ALLOYS & METALS P. LTD. 14 DHARMENDRA TEXTILES PROCESSOR DECISION AND DILIP N SHROFF DECISION AS RELIED ON BY THE LD. DR:- IN FACT, SECTION 271(1) (C) CAME TO BE INTERPRETED BY THE APEX COURT IN DHARMENDRA TEXTILE PROCESSORS CASE (SUPRA). THE THR EE JUDGE BENCH OF THE APEX COURT OVER-RULED THE DECISION IN DILIP N. SHROFF V. JT. CIT (2007) 291 ITR 519 (SC) AND APPROVED THE DECISION I N CHAIRMAN, SEBI V. SHRIRAM MUTUAL FUND (2006) 5 SSC 361. IN THE SAI D CASE, THE SUPREME COURT HELD: - 27. THE EXPLANATION APPENDED TO SECTION 271(1) (C) OF THE INCOME-TAX ACT ENTIRELY INDICATE THE ELEMENT OF STRICT LIABILI TY ON THE ASSESSEE FOR CONCEALMENT OR FOR GIVING INACCURATE PARTICULARS WH ILE FILING THE RETURN. THE JUDGMENT IN DILIP N. SHROFFS CASE (2007) 8 SCAL E 304 (SC) HAS NOT CONSIDERED THE EFFECT AND RELEVANCE OF SECTION 276C OF THE INCOME TAX ACT. THE OBJECT BEHIND THE ENACTMENT OF SECTION 271(1) (C) READ WITH THE EXPLANATIONS INDICATES THAT THE SAID SECTI ON HAS BEEN ENACTED TO PROVIDE FOR A REMEDY FOR LOSS OF REVENUE. THE PE NALTY UNDER THAT PROVISION IS A CIVIL LIABILITY AS IS THE CASE IN TH E MATTER OF PROSECUTION UNDER SECTION 276C OF THE INCOME-TAX ACT. 18. THE AFORESAID DECISION HAS TAKEN NOTE OF IN CIT V. RELIANCE PETROPRODUCTS (P) LTD. (2010) 322 ITR 158 (SC). WHI LE CONSIDERING THE PHRASE CONCEALMENT OF PARTICULARS, THE APEX COURT R EFERRED TO SECTION 271 AND HELD AS FOLLOWS: - 9. THEREFORE, IT IS OBVIOUS THAT IT MUST BE SHOWN THAT THE CONDITIONS UNDER SECTION 271 (1) (C) MUST EXIST BEFORE THE PEN ALTY IS IMPOSED. THERE CAN BE NO DISPUTE THAT EVERYTHING WOULD DEPEN D UPON THE RETURN FILED BECAUSE THAT IS THE ONLY DOCUMENT, WHERE THE ASSESSEE CAN FURNISH THE PARTICULARS OF HIS INCOME. WHEN SUCH PA RTICULARS ARE FOUND TO BE INACCURATE, THE LIABILITY WOULD ARISE. IN DIL IP N. SHROFF V. JOINT CIT (2007) 6 SSC 329, THIS COURT EXPLAINED THE TERMS CO NCEALMENT OF INCOME AND FURNISHING INACCURATE PARTICULARS. THE C OURT WENT ON TO HOLD THEREIN THAT IN ORDER TO ATTRACT THE PENALTY U NDER SECTION 271(1) (C), MENS REA WAS NECESSARY, AS ACCORDING TO THE COURT, THE WORD INACCURATE SIGNIFIED A DELIBERATE ACT OR OMISSION O N BEHALF OF THE ASSESSEE. IT WENT ON TO HOLD THAT CLAUSE (III) OF S ECTION 271(1) (C) PROVIDED FOR A DISCRETIONARY JURISDICTION UPON THE ASSESSING AUTHORITY, INASMUCH AS THE AMOUNT OF PENALTY COULD NOT BE LESS THAN THE AMOUNT OF TAX SOUGHT TO BE EVADED BY REASON OF SUCH CONCEA LMENT OF PARTICULARS OF INCOME, BUT IT MAY NOT EXCEED THREE TIMES THEREOF. IT WAS POINTED OUT THAT THE TERM INACCURATE PARTICULARS WA S NOT DEFINED ITA NO.690 OF 2013 KESAR ALLOYS & METALS P. LTD. 15 ANYWHERE IN THE ACT AND, THEREFORE, IT WAS HELD THA T FURNISHING OF AN ASSESSMENT OF THE VALUE OF THE PROPERTY MAY NOT BY ITSELF BE FURNISHING INACCURATE PARTICULARS, IT WAS FURTHER HELD THAT TH E AO MUST BE FOUND TO HAVE FAILED TO PROVE THAT HIS EXPLANATION IS NOT ON LY NOT BONA FIDE BUT ALL THE FACTS RELATING TO THE SAME AND MATERIAL TO THE COMPUTATION OF HIS INCOME WERE NOT DISCLOSED BY HIM. IT WAS THEN HELD THAT THE EXPLANATION MUST BE PRECEDED BY A FINDING AS TO HOW AND IN WHAT MANNER, THE ASSESSEE HAD FURNISHED THE PARTICULARS OF HIS INCOM E. THE COURT ULTIMATELY WENT ON TO HOLD THAT THE ELEMENT OF MENS REA WAS ESSENTIAL. IT WAS ONLY ON THE POINT OF MENS REA THAT THE JUDGM ENT IN DILIP N. SHROFF V. JOINT CIT WAS UPSET. IN UNION OF INDIA V. DHARME NDRA TEXTILE PROCESSORS AFTER QUOTING FROM SECTION 271 EXTENSIVE LY AND ALSO CONSIDERING SECTION 271(1) (C), THE COURT CAME TO T HE CONCLUSION THAT SINCE SECTION 271(1) (C) INDICATED THE ELEMENT OF S TRICT LIABILITY ON THE ASSESSEE FOR THE CONCEALMENT OR FOR GIVING INACCURA TE PARTICULARS WHILE FILING RETURN, THERE WAS NOT NECESSITY OF MENS REA. THE 271(1) (C) READ WITH EXPLANATIONS INDICATED WITH THE SAID SECTION W AS FOR PROVIDING REMEDY FOR LOSS OF REVENUE AND SUCH A PENALTY WAS A CIVIL LIABILITY AND, THEREFORE, WILLFUL CONCEALMENT IS NOT AN ESSENTIAL INGREDIENT FOR ATTRACTING CIVIL LIABILITY AS WAS THE CASE IN THE M ATTER OF PROSECUTION UNDER SECTION 276C OF THE ACT. THE BASIC REASON WHY DECISION IN DILIP N SHROFF V. JOINT CIT WAS OVERRULED BY THIS COURT I N UNION OF INDIA V. DHARMENDRA TEXTILE PROCESSORS WAS THAT ACCORDING TO THIS COURT THE EFFECT AND DIFFERENCE BETWEEN SECTION 271(1) (C) AN D SECTION 276C OF THE ACT WAS LOST SIGHT OF IN THE CASE OF DILIP N SH ROFF V. JOINT CIT. HOWEVER, IT MUST BE POINTED OUT THAT IN UNION OF IN DIA V. DHARMENDRA TEXTILE PROCESSORS, NO FAULT WAS FOUND WITH THE REA SONING IN THE DECISION IN DILIP N. SHROFF V. JOINT CIT, WHERE THE COURT EXPLAINED THE MEANING OF THE TERMS CONCEAL AND INACCURATE. IT WAS ONLY THE ULTIMATE INFERENCE IN DILIP N. SHROFF V. JOINT CIT TO THE EF FECT THAT MENS REA WAS AN ESSENTIAL INGREDIENT FOR THE PENALTY UNDER SECTI ON 271(1) (C) THAT THE DECISION IN DILIP N. SHROFF V. JOINT CIT WAS OVERRU LED. 19. FROM THE PERUSAL OF THE AFORESAID DECISIONS, I T IS APPARENT THAT IN NONE OF THE DECISION OF HONBLE SUPREME COURT AS RE LIED BY THE LD. DR, IT HAS BEEN HELD THAT THE PENALTY U/S 271 (1) (C) IS M ANDATORY OR AUTOMATIC WHEREVER THE ADDITION OR DISALLOWANCES ARE MADE BY THE AO. ON THIS BASIS ALSO, THE PENALTY WAS WRONGLY LEVIED JUST FOR THE PURPOSE OF LEVYING THE PENALTY. ITA NO.690 OF 2013 KESAR ALLOYS & METALS P. LTD. 16 20. ON CONSIDERATION OF THE FACTS AND SUBMISSIONS I N THE LIGHT OF AFORESAID JUDICIAL PRONOUNCEMENTS, I AM OF THE VIEW THAT LD. CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE PENALTY IN THE PRES ENT APPEAL AS THE ASSESSING OFFICER FAILED TO BRING ON RECORD THE SPE CIFIC CHARGE. ACCORDINGLY, I DELETE THE PENALTY. 21. FINALLY, THE APPEAL FILED BY THE ASSESSEES IS A LLOWED. ORDER WAS PRONOUNCED IN THE OPEN COURT ON 22.6.201 6. SD/- (D.T. GARASIA) JUDICIAL MEMBER DATED: 22.6.2016 COPY TO: APPELLANT, RESPONDENT, CIT, CIT(A), CIT/DR , GUARD FILE !VYS!