The ACIT, Baroda Circle-2, Baroda V. Shri Bharat V.Patel, Baroda

ITA 787/AHD/2005

• Counselvise Citation: [2009] 114 COUNSELVISE.COM (IT) 8950 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 6 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-09-2009
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 02-09-2009
• Assessment Year: 1998-1999
• Appeal Filed On: 11-03-2005
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHELLEY JINDAL
• Keywords: Difference of opinion; Capital Gains
• Section: 271(1)(c); 143(2)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD AHMEDABAD C BENCH (BEFORE S/SHRI R.V.EASWAR, VICE-PRESIDENT AND P.K. BANSAL, ACCOUNTANT MEMBER) ITA NO.787/AHD/2005 [ASSTT.YEAR : 1998-1999] ACIT, CIR.2 BARODA. VS. SHRI BHARAT V. PATEL, 13, SANDALWOOD B/H. KALPANA SOCIETY ALKAPURI, BARODA. REVENUE BY : SHELLEY JINDAL ASSESSEE BY : SHRI MILIN MEHTA O R D E R PER R.V.EASWAR, VICE-PRESIDENT : THIS APPEAL IS BY THE REVENUE AND IS DIRECTED AGAINST THE ORDER OF THE CIT(A) DAT ED 30-12-2004 BY WHICH HE CANCELLED THE PENALTY OF RS.1,50,00,000/- IMPOSED O N THE ASSESSEE UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT. 2. THE ASSESSEE IS AN INDIVIDUAL. AT THE MATERIAL TIME, WHICH IS THE YEAR ENDED 31-3-1998 RELEVANT TO THE ASSESSMENT YEAR 199 8-99 HE WAS THE CHAIRMAN AND THE MANAGING DIRECTOR OF PROCTOR & GAMBLE INDIA LTD. AND DERIVED SALARY FROM THE COMPANY. IN THE RETURN FILED FOR THE YEAR UNDER APPEAL HE INCLUDED A NOTE THERETO AS PART OF THE STATEMENT OF TOTAL INCO ME. THE NOTE IS REPRODUCED BELOW: THE ASSESSEE, BAHRAT V. PATEL (INDIVIDUAL) HAD RE CEIVED STOCK APPRECIATION RIGHTS (SAR) FROM AN AMERICAN COMPANY PROCTER & GAMBLE COMPANY (P&G), CINCINNATI, OHIO, USA IN THE YEARS 1991, 1992, 1993, 1994, 1995 AND 1996. UNDER THE PLANT F ORMULATED FOR GRANTING THESE SAR, THE ASSESSEE WAS ENTITLED TO RE CEIVE A SUM BEING THE DIFFERENCE BETWEEN GRANT PRICE OF SAR AND THE RULIN G MARKET PRICE OF P&GS SHARES QUOTED IN THE USA ON THE DATE OF REDEM PTION. THE RIGHT OF REDEMPTION WAS EXERCISABLE WITHIN A PERIOD OF 10 YEARS. DURING THE ASSESSMENT YEAR RELEVANT TO THE FINANCIAL YEAR 1997 -98, THE AMERICAN COMPANY P&G DECIDED TO EXTINGUISH ALL SAR GRANTED B Y IT TO VARIOUS INDIVIDUALS. ACCORDING, THE ASSESSEE RECEIVED A SU M OF US$17,58,156 PAGE - 2 ITA NO.787/AHD/2005 -2- EQUIVALENT TO RS.6,80,40,650 BEING THE DIFFERENCE B ETWEEN THE SAR GRANT PRICE AND THE RULING MARKET PRICE OF P&G SHARES ON THE DATE OF THE EXTINGUISHMENT OF THE SAR. THE ASSESSEE CONTENDS THAT IN THE ABSENCE OF ANY E MPLOYER-EMPLOYEE RELATIONSHIP BETWEEN THE AMERICAN COMPANY P&G AND T HE ASSESSEE, THE AMOUNT RECEIVED IS NOT LIABLE TO TAX UNDER THE HEAD INCOME FROM SALARIES. THE ASSESSEE CONTENDS THAT SAR RECEIVED BY THE ASSESSEE CONSTITUTED A RIGHT WHICH IS IN THE NATURE OF AN C APITAL ASSET. THE ASSESSEE RELIES INTERALIA ON THE DECISION OF THE PU NJAB HIGH COURT IN THE CASE OF HARI BROTHERS PVT. LTD., REPORTED IN 52 ITR 339 AND THE DECISION OF THE SUPREME COURT IN THE CASE OF ANARKALI SARABH AI REPORTED IN 224 ITR 422. THE ASSESSEE FURTHER CONTENDS THAT THE SA R RECEIVED CONSTITUTED A RIGHT WHICH IS AN ASSET IN THE ACQUIS ITION OF WHICH IT IS NOT POSSIBLE TO ENVISAGE A COST. ACCORDINGLY THE AMOUN T RECEIVED HAS BEEN TREATED AS NOT LIABLE TO INCOME-TAX. THE ASSESSEE RELIES ON SETTYS CASE 128 ITR 294 (SC). FURTHER, THE ASSESSEE HAS ALSO BEEN GRANTED CERTAI N STOCK OPTIONS ENTITLING HIM TO OPT FOR PURCHASING SHARES OF THE A MERICAN COMPANY P&G. IT IS SUBMITT4ED THAT THE GRANT OF THE STOCK OPINION IS NOT LIABLE TO TAX. THE ASSESSEE RELIES INTERALIA ON CIRCULAR NO. 710 DATED JULY 24, 1995 ISSUED BY THE CBDT AND THE DECISION OF THE HOU SE OF LORDS IN THE CASE OF ABBOTT V. PHILBIN (INSPECTOR OF TAXES) REPO RTED IN 44 ITR 144. IT MAY BE SEEN FROM THE NOTE THAT THE ASSESSEE TOO K TWO CONTENTIONS WITH REGARD TO THE RECEIPT OF RS.6,80,40,650/-. THE FIR ST IS THAT THE RECEIPT IS NOT TAXABLE AS PART OF HIS SALARY IN THE ABSENCE OF ANY EMPLOYER-EMPLOYEE RELATIONSHIP BETWEEN THE AMERICAN COMPANY AND HIMSE LF. THE SECOND CONTENTION WAS THAT THE STOCK APPRECIATION RIGHT WA S AN ASSET IN THE ACQUISITION OF WHICH IT IS NOT POSSIBLE TO ENVISAGE A COST AND THEREFORE NO CAPITAL GAINS TAX IS PAYABLE ON THE SAME. IT MAY ALSO BE SEEN FROM THE NOTE THAT IN SUPPORT OF BOTH THE CONTENTIONS THE ASSESSEE HAS RELIED ON CER TAIN JUDGMENTS OF THE PUNJAB HIGH COURT AND THE SUPREME COURT. 3. IN THE ASSESSMENT HOWEVER THE ASSESSING OFFICER TOOK THE VIEW THAT THERE WAS EMPLOYER-EMPLOYEE RELATIONSHIP BETWEEN TH E AMERICAN COMPANY WHICH WAS PART OF THE PROCTOR AND GAMBLE GROUP OF C OMPANIES AND THE ASSESSEE AND THEREFORE THE AMOUNT WAS TAXABLE AS PERQUISITES UNDER SECTION 17(2)(III) OF PAGE - 3 ITA NO.787/AHD/2005 -3- THE ACT. HE TAXED THE ASSESSEE ACCORDINGLY. THE A SSESSEE CARRIED THE MATTER UPTO THE TRIBUNAL IN ITA NO.2241/AHD/2002. THE TRI BUNAL ACCEPTED THE ASSESSEES CONTENTION THAT THE RECEIPT WAS NOT TAXA BLE AS PERQUISITE BUT HELD THAT IT WAS TAXABLE AS CAPITAL GAINS ON THE FOOTING THAT IT IS POSSIBLE TO ENVISAGE A COST IN TERMS OF MONEY IN RESPECT OF THE STOCK APPR ECIATION RIGHT. ACCORDINGLY AO WAS DIRECTED TO ASSESS THE CAPITAL GAIN SUBJECT TO VERIFICATION OF THE ASSESSEES CLAIM FOR RELIEF UNDER SECTION 54EA OF T HE ACT. THIS ORDER WAS PASSED BY THE TRIBUNAL ON 27-6-2003. IT IS STATED THAT APPEALS AGAINST THE ORDER OF THE TRIBUNAL BOTH BY THE ASSESSEE AND THE DEPART MENT HAVE BEEN ADMITTED BY THE HONBLE GUJARAT HIGH COURT AND SUBSTANTIAL QUES TION OF LAW HAS BEEN FRAMED. 4. THE AO INITIATED PENALTY PROCEEDINGS AND CALLED UPON THE ASSESSEE TO EXPLAIN WHY PENALTY CANNOT BE IMPOSED UNDER SECTION 271(1)(C). THE ASSESSEE SUBMITTED IN WRITING THAT THERE WAS ONLY A DIFFEREN CE OPINION REGARDING THE LEGAL POSITION AS TO THE TAXABILITY OF THE RECEIPT WHICH WOULD NOT ATTRACT PENALTY AND THAT THERE WAS NO CONCEALMENT OF INCOME OR FURN ISHING OF INACCURATE PARTICULARS THEREOF. IT WAS ALSO POINTED OUT THAT THE ASSESSEES STAND, EXPLAINED IN THE NOTE ATTACHED TO THE RETURN OF INCOME, WAS S UPPORTED BY LEGAL OPINION AND THE ASSESSEE ACTED BONA FIDE ON THE BASIS OF THE SA ME. THIS EXPLANATION WAS NOT ACCEPTED BY THE AO WHO HELD THAT DESPITE BEING FULL Y AWARE OF THE TAXABILITY OF THE RECEIPT ON REDEMPTION OF THE STOCK APPRECIATION RIGHT THE ASSESSEE DID NOT INCLUDE THE SAME IN THE RETURN. HE FURTHER HELD TH AT THE ASSESSEE WAS IN THE KNOWLEDGE OF FULL FACTS AND HAD EVEN PAID ADVANCE T AX OF RS.61.25 LAKHS IN THE LAST INSTALMENT BUT STILL CLAIMED EXEMPTION IN THE RETURN. IT WAS FURTHER OPINED BY THE AO THAT BUT FOR THE SCRUTINY OF THE RETURN B Y ISSUE OF SECTION 143(2) NOTICE, AFTER THE RETURN WAS PROCESSED UNDER SECTIO N 143(1)(A), THE RECEIPT WOULD HAVE GONE UNTAXED. HE ULTIMATELY HELD THAT THE ASSESSEE WAS GUILTY OF FURNISHING INACCURATE PARTICULARS OF INCOME AND LEV IED THE PENALTY OF RS.1.50 CRORES. PAGE - 4 ITA NO.787/AHD/2005 -4- 5. ON APPEAL THE CIT(A) EXAMINED THE MATTER IN DETA IL AND AFTER REFERENCE TO SEVERAL AUTHORITIES, CONCLUDED THAT THIS IS A CA SE OF A MERE DIFFERENCE OPINION BETWEEN THE ASSESSEE AND THE AO WITH REGARD TO THE TAXABILITY OF THE RECEIPTS, THAT THE CHARGEABILITY OF THE RECEIPT WAS DEBATABLE AS CAN BE SEEN FROM THE ASSESSMENT ORDER AND THE ORDER OF THE TRIBUNAL (SUP RA) AND IN THESE CIRCUMSTANCES NO PENALTY CAN BE IMPOSED ON THE ASSE SSEE FOR FURNISHING INACCURATE PARTICULARS OF INCOME OR HAVING CONCEALE D THE INCOME. HE ACCORDINGLY CANCELLED THE PENALTY. 6. THE REVENUE IS IN APPEAL TO CONTEND THAT THE ASS ESSEE DID NOT GIVE THE FULL FACTS RELATING TO THE RECEIPT ON REDEMPTION OF THE STOCK APPRECIATION RIGHT AND THAT THE ISSUE REGARDING THE TAXABILITY THEREOF WAS NOT EVEN CLARIFIED BY HIM IN THE COURSE OF THE ASSESSMENT PROCEEDINGS. IT WAS F URTHER CONTENDED THAT THE RECEIPT WOULD HAVE GONE SCOT-FREE WITHOUT BEING TAX ED BUT FOR THE NOTICE ISSUED BY THE AO. IT WAS FURTHER SUBMITTED THAT THIS IS A CASE OF FURNISHING INACCURATE PARTICULARS OF INCOME AND THE AO WAS RIGHT IN IMPOS ING THE PENALTY. STRONG RELIANCE WAS PLACED ON THE JUDGMENT OF THE SUPREME COURT IN UNION OF INDIA & OTHERS VS. DHARAMENDRA TEXTILES PROCESSORS AND OTHE RS, 306 ITR 277. 8. ON BEHALF OF THE ASSESSEE THE SUBMISSION WAS THA T THE ASSESSEE HAD DISCLOSED ALL THE FACTS IN THE RETURN OF INCOME AND RAISED A LEGAL CONTENTION THAT THE RECEIPT WAS NOT TAXABLE EITHER A SALARY OR AS C APITAL GAINS, THAT THIS LEGAL CONTENTION WAS NOT ACCEPTED BY THE AO, THAT THERE W AS THUS A DIFFERENCE OF OPINION AS TO THE TAXABILITY OF THE RECEIPT ON ACCO UNT OF DIFFERENT INTERPRETATIONS OF THE LEGAL POSITION AND THAT IN SUCH CIRCUMSTANCE S THE ASSESSEE WAS NOT GUILTY OF FURNISHING INACCURATE PARTICULARS. IT WAS FURT HER SUBMITTED THAT WHEREAS THE AO HAD ASSESSED THE RECEIPT AS SALARY, THE TRIBUNAL DID NOT AGREE WITH THE SAME BUT BROUGHT TO TAX THE RECEIPT AS CAPITAL GAINS WHI CH SHOWED THAT THE LEGAL POSITION WAS NOT CLEAR. IT WAS ALSO ARGUED THAT TH E ASSESSEES STAND ARTICULATED IN THE NOTE APPENDED TO THE RETURN WAS SUPPORTED BY SEVERAL AUTHORITIES, INCLUDING THOSE OF THE SUPREME COURT AND THEREFORE IT CANNOT BE SAID THAT THE PAGE - 5 ITA NO.787/AHD/2005 -5- CLAIM WAS FRIVOLOUS OR MALA FIDE. THE ASSESSEES S TAND WAS ALSO BASED ON LEGAL OPINION. IT WAS THUS CONTENDED THAT THE PENALTY WA S RIGHTLY CANCELED BY THE CIT(A). RELIANCE WAS PLACED ON THE JUDGMENT OF THE SUPREME COURT IN UOI VS. RAJASTHAN SPINNING & WEAVING MILLS, (2009) 23 DTR 158 (SC). THE ASSESSEE ALSO POINTED OUT BEFORE US THAT THE FACT T HAT THE APPEALS AGAINST THE ORDER OF THE TRIBUNAL WERE ADMITTED BY THE HONBLE HIGH COURT SHOWS THAT THE LEGAL POSITION IS NOT SETTLED AND IN SUPPORT OF THI S CONTENTION RELIANCE WAS PLACED ON THE ORDER OF THE THIRD MEMBER IN THE CASE OF RUPAM MERCANTILE LTD. VS. DCIT, 91 ITD 237(TM)(AHD). 9. ON A CAREFUL CONSIDERATION OF THE FACTS AND RIVA L CONTENTIONS, IT SEEMS TO US THAT THE PENALTY WAS RIGHTLY CANCELLED BY THE CI T(A). THE FACTS RELATING TO THE RECEIPT WERE FULLY DISCLOSED IN THE NOTE APPEND ED TO THE RETURN OF INCOME. THE ASSESSMENT ORDER DOES NOT SHOW THAT ANY FACTS R ELATING TO THE RECEIPT WERE SUPPRESSED BY THE ASSESSEE OR THAT THE AO UNEARTHED ANY FACTS WITHHELD BY THE ASSESSEE IN RELATION TO THE RECEIPT, WHICH, HAD IT BEEN DISCLOSED, WOULD HAVE MADE THE ASSESSEES STAND, TAKEN IN THE NOTE APPEND ED TO THE RETURN, UNTENABLE. THE AO TAXED THE RECEIPT AS PERQUISITE BUT THE TRIB UNAL TAXED THE SAME AS CAPITAL GAINS. THE ASSESSEES CLAIM WAS SUPPORTED BY THE AUTHORITIES MENTIONED BY HIM IN THE NOTE. IT WAS ALSO SUPPORTED BY LEGA L OPINION, A COPY OF WHICH IS PLACED AT PAGE 94 OF THE PAPER BOOK. THUS, WHEN TH E ASSESSEE FILED THE RETURN IT CANNOT BE SAID THAT THE CLAIM FOR EXEMPTION OF THE RECEIPT FROM TAX WAS NOT BONA FIDE. IT HAS BEEN HELD IN SEVERAL CASES THAT WHEN THE ASSESSEE DISCLOSES ALL THE RELEVANT FACTS AND TAKES A LEGAL CONTENTION THA T THE RECEIPT IS NOT TAXABLE, MERELY BECAUSE THE AO, ON THE VERY SAME FACTS, TAKE S A DIFFERENT VIEW OF THE MATTER DOES NOT AUTOMATICALLY MEAN THAT THE ASSESSE E CONCEALED HIS INCOME OR FURNISHED INACCURATE PARTICULARS THEREOF TO WARRANT THE LEVY OF PENALTY. REFERENCE IN THIS CONNECTION MAY BE MADE TO THE FOL LOWING JUDGMENTS: I) ADDL. CIT VS. DELHI CLOTH & GENERAL MILLS CO. LTD., 157 ITR 822 (DEL) PAGE - 6 ITA NO.787/AHD/2005 -6- II) ITO VS. BURMA SHELLS OIL STORAGE AND DISTRIBUTING C O. 163 ITR 496 CAL) III) CIT VS. G.D.NAIDU, 165 ITR 63, (MAD) IN THE LIGHT OF THE ABOVE AUTHORITIES WE ARE OF THE VIEW THAT THE ASSESSEE CANNOT BE SAID TO HAVE FURNISHED INACCURATE PARTICU LARS OF HIS INCOME MERELY BECAUSE HE RAISED A LEGAL PLEA THAT THE RECEIPT WAS NOT TAXABLE EITHER AS SALARY OR AS CAPITAL GAINS, ON FACTS WHICH ARE NOT DISPUTED. IT IS ALSO PERTINENT TO REFER TO THE JUDGMENT OF THE SUPREME COURT IN CEMENT MARKETI NG CO. OF INDIA LTD. ASSTT.COMMISSIONER OF SALES TAX & OTHERS, 124 ITR 1 5 (SC), WHICH AROSE UNDER THE SALES TAX LAW WHERE IT WAS HELD THAT IF T HE ASSESSEE DOES NOT INCLUDE A PARTICULAR ITEM IN TAXABLE TURNOVER UNDER A BONA FI DE BELIEF THAT HE IS NOT LIABLE TO INCLUDE IT, IT WOULD NOT BE RIGHT TO CONDEMN THE RETURN WAS AS A FALSE RETURN INVITING IMPOSITION OF PENALTY. IN THAT CASE THE C ONTENTION OF THE REVENUE WAS THAT THE ASSESSEE SHOULD HAVE INCLUDED THE ITEM IN THE TURNOVER, PAID THE TAX AND THEN QUESTIONED THE ASSESSMENT. REJECTING THIS CON TENTION, THE SUPREME COURT OBSERVED AS FOLLOWS: IF THE VIEW CANVASSED ON BEHALF OF THE REVENUE WERE ACCEPTED, THE RESULT WOULD BE THAT EVEN IF THE ASSE SSEE RAISES A BONA FIDE CONTENTION THAT A PARTICULAR ITEM IS NOT LIABLE TO BE INCLUDED IN THE TAXABLE TURNOVER, HE WOULD HAVE TO SHOW IT AS FORMING PART OF THE TAXABLE TURNOVER IN HIS RETURN AND PAY TAX UPON IT ON PAIN OF BEING HELD LIABLE FOR PENALTY IN CASE HIS CONTENTIONS ULTIMATELY FOUND BY THE COURT TO BE NOT ACCEPTABLE. THAT SURELY COULD NEVER HAVE BEEN INTENDED BY THE L EGISLATURE. THOUGH THE CASE BEFORE THE SUPREME COURT AROSE UNDE R THE SALES TAX LAW, THE RATIO IN OUR OPINION IS EQUALLY APPLICABLE TO C ASES OF PENALTY IMPOSED UNDER THE INCOME TAX LAW FOR CONCEALMENT OF INCOME. 10. THE AO HAS OBSERVED IN PAGE-8 OF THE PENALTY OR DER THAT THE ASSESSEE HAS PAID ADVANCE TAX OF RS.61.25 LAKHS IN THE LAST INST ALMENT AND THIS SHOWS THAT HE KNEW THAT THE RECEIPT WAS TAXABLE AND THEREFORE PEN ALTY WAS EXIGIBLE. WE ARE UNABLE TO AGREE. WE WOULD HAVE THOUGHT THAT THE PA YMENT OF ADVANCE TAX WAS A PAGE - 7 ITA NO.787/AHD/2005 -7- FACT WHICH ESTABLISHED THE BONA FIDE OF THE ASSESSE E. THERE IS NOTHING IN THE INCOME TAX LAW PROHIBITING THE ASSESSEE FROM CLAIMI NG EXEMPTION FROM TAX IN RESPECT OF A RECEIPT NOTWITHSTANDING THAT HE HAS PA ID THE TAX THEREON. THE PAYMENT OF ADVANCE TAX MIGHT HAVE BEEN MADE TO AVOI D INTEREST UNDER SECTION 234A TO 234C OR OTHER PENAL CONSEQUENCES. EVEN ASS UMING THAT SUCH PAYMENT DOES NOT ADVANCE THE ASSESSEES CASE, IT CERTAINLY DOES NOT JEOPARDIZE THE CASE OF THE ASSESSEE IN PENALTY PROCEEDINGS. IT IS QUIT E SURPRISING THAT THE PAYMENT OF ADVANCE TAX OF A SUBSTANTIAL SUM SHOULD BE HELD AGAINST THE ASSESSEE IN PENALTY PROCEEDINGS. 11. THE JUDGMENT OF THE SUPREME COURT IN DHARMENDRA PROCESSORS (SUPRA) CITED BY THE DEPARTMENT HAS BEEN CONSIDERED BY THE MUMBAI AND PUNE BENCHES OF THE TRIBUNAL. IN THE CASE OF M/S.VIP INDUSTRIES LTD. IN ITA NOS.4524 AND 4383/MUM/2006, A.Y.2000-2001, THE ASSESSEE HAD GIVE N FULL DETAILS ABOUT THE CAR PURCHASED BY IT, THE COST OF WHICH WAS CLAIMED AS DEDUCTION UNDER SECTION 35 AS IT WAS RELATED TO THE RESEARCH AND DEVELOPMEN T ACTIVITY. THE CLAIM OF DISALLOWED AND PENALTY WAS ALSO IMPOSED FOR CONCEAL MENT OF INCOME. WHEN THE MATTER REACHED THE TRIBUNAL, THE DEPARTMENT REL IED ON THE AFORESAID JUDGMENT OF THE SUPREME COURT TO CONTEND THAT A DEL IBERATE AND CONSCIOUS ACT ON THE PART OF THE ASSESSEE TO CONCEAL THE INCOME W AS NOT NECESSARY AND PENALTY CAN BE LEVIED EVEN WHERE A CLAIM FOR DEDUCTION IS D ISALLOWED. IN ITS ORDER DATED 28-3-2009 THE TRIBUNAL REJECTED THE CONTENTION AND HELD THAT THE TRUE RATIO OF JUDGMENT IS CONFINED TO HOLDING THAT WILFUL CONCEAL MENT WAS NOT VITAL FOR IMPOSING PENALTY AND THAT IT WAS NOT THE RATIO THAT IN ALL CASES WHERE AN ADDITION OR DISALLOWANCE IS CONFIRMED PENALTY MECHANICALLY F OLLOWS, PROVIDED THAT THE ASSESSEE HAS DISCLOSED ALL NECESSARY FACTS RELATING TO THE CLAIM. IN KANBAY SOFTWARE INDIA (P) LTD. VS. DCIT, (2009) 31 SOT 153 = (2009) 122 TTJ 721, THE PUNE BENCH CONSIDERED THE JUDGMENT OF THE SUPRE ME COURT IN DHARAMENDRA PROCESSORS (SUPRA) EXHAUSTIVELY AND HEL D IN PARAGRAPH-48 AS UNDER: PAGE - 8 ITA NO.787/AHD/2005 -8- 48. THE VIEWS EXPRESSED BY THIRD LORDSHIPS IN DHAR AMENDRA TEXTILE PROCESSORS CASE (SUPRA) CANNOT BE VIEWED AS AN AUT HORITY FOR THE PROPOSITION THAT A PENALTY UNDER SECTION 271(1)(C) IS AN AUTOMATIC CONSEQUENCE OF AN ADDITION BEING MADE TO INCOME OF THE TAXPAYER, FOR THE REASON THAT WHETHER IT IS A CIVIL LIABILITY OR A CRIMINAL LIABILITY, PENALTY UNDER SECTION 271(1)(C) CAN ONLY COME INTO PLAY WHEN THE CONDITIONS LAID DOWN UNDER THAT SECTION ARE TO BE S ATISFIED. IN VIEW OF THE ELABORATE DISCUSSIONS IN THE PRECEDING PARAGRAP HS, BY NO STRETCH OF LOGIC OR RATIONALE IT COULD BE SAID THAT IMPOSITION OF PENALTY UNDER SECTION 271(1)(C) HAS A CAUSE AND EFFECT RELATIONSH IP WITH ADDITION BEING MADE TO THE RETURNED INCOME PER SE. AN ADDITION BE ING MADE TO INCOME DOES, BECAUSE OF IMPACT OF EXPLANATION 1, EFFECTIVE LY DOES ARISE A PRESUMPTION AGAINST THE ASSESSEE BUT THAT IS AN ENT IRELY REBUTTABLE PRESUMPTION AND THE SCHEME OF REBUTTAL IS PROVIDED IN THE EXPLANATION ITSELF. THE AHMEDABAD BENCH OF THE TRIBUNAL HAS ALSO TAKEN A SIMILAR VIEW IN AAISHWARIYA PRINTS D&P MILL PVT. LTD. VS. ITO IN TH E APPEAL ITA.NO.905/AHD/2008 TO WHICH ONE OF US (VICE-PRESID ENT) WAS PARTY. WE ALSO FIND THAT THE PUNJAB AND HARYANA HIGH COURT IN THE CASE OF CIT VS. M/S.SIDHARTH ENTERPRISES, ITA NO.908 OF 2008 (O&M) DATED 14-7-2009 HAS REFERRED TO THE JUDGMENT OF THE SUPREME COURT IN TH E DHARMENDRA PROCESSORS (SUPRA) AND HAS OBSERVED AS FOLLOWS: THE JUDGMENT IN DHARMENDRA TEXTILE CANNOT BE READ AS LAYING DOWN THAT IN EVERY CASE WHERE PARTICULARS OF INCOME ARE INACCURATE, PENALTY MUST FOLLOW. WHAT HA S BEEN LAID DOWN IS THAT QUALITATIVE DIFFERENCE BETWE EN CRIMINAL LIABILITY U/S 276C AND PENALTY U/S 271(1) ( C) HAD TO BE KEPT IN MIND AND APPROACH ADOPTED TO THE TRIA L OF A CRIMINAL CASE NEED NOT BE ADOPTED WHILE CONSIDERING THE LEVY OF PENALTY. EVEN SO, THE CONCEPT OF PENALTY HA S NOT UNDERGONE CHANGE BY VIRTUE OF THE SAID JUDGMENT. PE NALTY IS IMPOSED ONLY WHEN THERE IS SOME ELEMENT OF DELIB ERATE DEFAULT AND NOT A MERE MISTAKE. IN VIEW OF THE FIND ING THAT THE FURNISHING OF INACCURATE PARTICULARS WAS SIMPLY A MISTAKE AND NOT A DELIBERATE ATTEMPT TO EVADE TAX, PENALTY WAS NOT LEVIABLE. PAGE - 9 ITA NO.787/AHD/2005 -9- THUS, IN THE LIGHT OF THE ABOVE AUTHORITIES, THE J UDGMENT OF THE SUPREME COURT IN DHARMENDRA PROCESSORS (SUPRA) CITED BY THE LEARNED SR-DR IS NOT APPLICABLE TO THE PRESENT CASE. 12. FOR THE ABOVE REASONS, WE CONFIRM THE ORDER OF THE CIT(A) CANCELLING THE PENALTY AND DISMISS THE APPEAL FILED BY THE REV ENUE WITH NO ORDER AS TO COSTS. ORDER PRONOUNCED IN THE OPEN COURT 18 TH SEPTEMBER, 2009. SD/- SD/- (P.K. BANSAL) ACCOUNTANT MEMBER (R.V.EASWAR) VICE-PRESIDENT PLACE : AHMEDABAD DATE : 18-09-2009 COPY OF THE ORDER FORWARDED TO: 1) : ASSESSEE 2) : RESPONDENT 3) : CIT(A) 4) : CIT CONCERNED 5) : DR, ITAT. BY ORDER DR, ITAT, AHMEDABAD