SMT. CHHAYA A. RAJE, Bhopal V. THE ITO 1(1), Bhopal

ITA 878/IND/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 5730 (ITAT-INDORE)
• Duration Of Justice: 1 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-10-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2008-2009
• Appeal Filed On: 23-08-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MOHD JAVED
• Keywords: Deemed to accrue or arise in india; Initiation of penalty proceedings; Deemed dividend

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE .., .., % BEFORE SHRI D.T. GARASIA, JUDICIAL MEMBER AND SHRI O.P. MEENA, ACCOUNTANT MEMBER SMT. CHHAYA A.RAJE, E-2/57, ARERA COLONY, BHOPAL. .. ./ PAN: AAUPR8392Q VS. ITO, 1(1), BHOPAL / APPELLANT / RESPONDENT SHRI AMIT A. RAJE, E-2/57, ARERA COLONY, BHOPAL. .. ./ PAN: AASPR69061P VS. ITO, 1(1), BHOPAL / APPELLANT / RESPONDENT SHRI ANIL ANAT RAJE, E-2/57, ARERA COLONY, BHOPAL. .. ./ PAN: AAUPR8628K VS. ITO, 2(3), BHOPAL .. . / I.T.A. NO.878/IND/2016 / ASSESSMENT YEAR: 2008-09 .. ./ I.T.A. NO.879/IND/2016 / ASSESSMENT YEAR: 2008-09 .. ./ I.T.A. NO.880/IND/2016 / ASSESSMENT YEAR: 2008-09 I.T.A.NOS.878, 879 & 880/IND/2016 A.YS.2008-09 SMT.CHHAYA A RAJE, SHRI AMIT A. RAJE & SH ANIL ANAN T RAJE PAGE 2 OF 28 / APPELLANT / RESPONDENT / APPELLANT BY SHRI HITESH CHIMNANI, C. A. / RESPONDENT BY SHRI MOHD. JAVED, SR. DR DATE OF HEARING 05.10.2016 # DATE OF PRONOUNCEMENT 05.10.2016 / O R D E R PER O.P. MEENA, ACCOUTANT MEMEBR. THESE THREE APPEALS ARE FILED BY THE ASSESSEES OF S AME GROUP AGAINST THE SEPARATE ORDERS OF LD. COMMISSION ER OF INCOME-TAX (APPEALS)-I, BHOPAL [HEREINAFTER REFERRE D TO AS THE CIT(A)] ALL DATED 30.06.2016 AND PERTAIN TO ASSESSM ENT YEAR 2008-09 AS AGAINST IMPOSITION OF PENALTY ORDERS PAS SED IN THE CASE OF RESPECTIVE ASSESSEES BY THE ITO, 1(1), BHO PAL. [HEREINAFTER REFERRED TO AS THE AO]. SINCE THE FACT S ARE COMMON IN ALL THE ABOVE CASES, WE, FOR THE SAKE OF CONVENI ENCE, ARE DISPOSING OF ALL THESE APPEALS BY THIS COMMON ORDER . 2. THE FOLLOWING GROUNDS HAVE BEEN TAKEN:- I.T.A.NOS.878, 879 & 880/IND/2016 A.YS.2008-09 SMT.CHHAYA A RAJE, SHRI AMIT A. RAJE & SH ANIL ANAN T RAJE PAGE 3 OF 28 I.T.A.NO. 878/IND/2016: THAT THE LD. CIT(A) ERRED IN SUSTAINING LEVY OF PE NALTY OF RS. 3,10,000/- U/S 271(1)(C) ON ACCOUNT OF ADDITION MADE U/S 2(22)(E) OF THE INCOME-TAX ACT, 1961, BY THE LD. A O. I.T.A.NO. 879/IND/2016: THAT THE LD. CIT(A) ERRED IN SUSTAINING LEVY OF PE NALTY OF RS. 3,30,000/- U/S 271(1)(C) ON ACCOUNT OF ADDITION MADE U/S 2(22)(E) OF THE INCOME-TAX ACT, 1961, BY THE LD. A O. I.T.A.NO. 880/IND/2016: THAT THE LD. CIT(A) ERRED IN SUSTAINING LEVY OF PE NALTY OF RS. 2,50,000/- U/S 271(1)(C) ON ACCOUNT OF ADDITION MADE U/S 2(22)(E) OF THE INCOME-TAX ACT, 1961, BY THE LD. A O. 3. SINCE THE FACTS ARE COMMON IN ALL THE APPEALS, WE F OR THE SAKE OF BREVITY SHALL DISCUSS THE FACTS IN THE CASE OF SMT. CHHAYA A. RAJE AND THE DECISION SHALL BE BINDING ON OTHER TWO ASSESSEES ALSO. 4. FACTS OF THE CASE ARE THAT THE ASSESSEE HAD FILED I TS INCOME TAX RETURN FOR THE ASSESSMENT YEAR 2008-09 O N 27.07.2008 DECLARING TOTAL INCOME OF RS. 3,25,400/- . DURING I.T.A.NOS.878, 879 & 880/IND/2016 A.YS.2008-09 SMT.CHHAYA A RAJE, SHRI AMIT A. RAJE & SH ANIL ANAN T RAJE PAGE 4 OF 28 THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO FOUND THAT THE ASSESSEE RECEIVED LOAN OF RS. 9,00,000/-. THE AO, T HEREFORE, MADE ADDITION OF RS. 8,97,500/- AS DEEMED DIVIDEND U/S 2(22)(E) OF THE ACT. THEREAFTER, THE AO INITIATED P ENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT ON ACCOUNT OF FURNISHING OF INACCURATE PARTICULARS. SINCE THE AO WAS NOT SATI SFIED WITH THE EXPLANATION OF THE ASSESSEE, HE LEVIED PENALTY U/S 271(1)(C) OF THE ACT OF RS. 3,10,000/-. 5. THE MATTER CARRIED TO THE LD. CIT(A) AND THE LD. CI T(A) HAS CONFIRMED THE PENALTY. 6. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED WRITTEN SYNOPSIS, WHICH IS ON RECORD. HE CONTENDED THAT THE ASSESSEE HAS TAKEN LOAN FOR REPAYMENT OF HER HOUSING LOAN. A T THE TIME OF TAKING LOAN FROM COMPANY, SHE WAS NOT AWARE OF TH E TECHNICAL PROVISIONS OF THE ACT. IT IS ALSO SUBMITT ED THAT IN THE NORMAL PROVISION, LOAN TAKEN FROM A COMPANY CANNOT BE INCOME, IT IS ONLY BECAUSE OF THE DEEMING PROVISION THAT THE SAID LOAN HAS BEEN TAXED AS INCOME U/S 2(22)(E) OF THE ACT. AS SOON AS THE ASSESSEE WAS MADE AWARE OF THIS DEEMING I.T.A.NOS.878, 879 & 880/IND/2016 A.YS.2008-09 SMT.CHHAYA A RAJE, SHRI AMIT A. RAJE & SH ANIL ANAN T RAJE PAGE 5 OF 28 PROVISION OF SECTION 2(22)(E) OF THE ACT BEING APPL ICABLE IN HER CASE. THE ASSESSEE ACCEPTED THE SAME AND HAS ALSO D EPOSITED THE TAX ALONG WITH INTEREST DUE UNDER THE INCOME TAX ACT AS RAISED. IT IS UNDISPUTED FACT THAT ASSESSING OFFICE R NOTICED ABOUT THE SAID LOAN TRANSACTION FROM THE AUDITED BA LANCE SHEET OF AARTECH SOLONICS LIMITED. THE ASSESSEE IS SUBSTANTIAL SHAREHOLDER OF THE SAID COMPANY AND IF INTENTION OF ASSESSEE WAS CONCEALMENT OF INCOME, SHE COULD HAVE HIDDEN THE SAID TRANSACTION BUT THE ASSESSEE HAD DISCLOSED ALL THE PARTICULARS OF TRANSACTION. THE TAX LAWS IN OUR COUNTRY ARE SO C OMPLEX AND COMPLICATED THAT EVEN A PERSON SPECIALIZING IN THIS FIELD, INCLUDING TAX ADMINISTRATORS, MAY NOT UNDERSTAND TH E LAW IN THE CORRECT PERSPECTIVE OR A PARTICULAR PROVISION M AY GO UNNOTICED BECAUSE OF NUMBER OF AMENDMENTS MADE TO T HE TAX ENACTMENTS FROM YEAR TO YEAR. UNDER THESE CIRCUMSTA NCES, IT WOULD BE A TRAVESTY OF TRUTH AND JUSTICE TO HOLD THA T AN ASSESSEE (NOT EXPERT IN TAX LAWS) OUGHT TO HAVE KNOWN THE CORRECT LAW AND COMPLY THEREWITH, EVEN THOUGH SHE WAS NOT AWARE OF THE PROVISIONS. THE ASSESSEE FILED HER INCO ME TAX I.T.A.NOS.878, 879 & 880/IND/2016 A.YS.2008-09 SMT.CHHAYA A RAJE, SHRI AMIT A. RAJE & SH ANIL ANAN T RAJE PAGE 6 OF 28 RETURN WITH THE HELP OF TAX CONSULTANT AND THE SAID (THEN) TAX CONSULTANT DID NOT ADVISE PROPERLY ABOUT INCLUSION OF LOAN RECEIVED FROM THE COMPANY AS DEEMED DIVIDEND IN HER RETURN. A RETURN CANNOT BE SAID TO BE 'FALSE' UNLESS THERE IS AN ELEMENT OF DELIBERATENESS IN IT. BUT WHERE THE ASSES SEE DOES NOT INCLUDE A PARTICULAR ITEM IN THE TAXABLE INCOME UNDER A BONA FIDE BELIEF THAT SHE IS NOT LIABLE SO TO INCLUDE IT, IT WOULD NOT BE RIGHT TO CONDEMN THE RETURN AS A 'FALSE' RET URN INVITING IMPOSITION OF PENALTY. FURTHER, THE INCOME WAS NOT A CTUALLY ACCRUED TO THE APPELLANT AND ONLY BECAUSE OF THE DE EMING PROVISION IT WAS TREATED AS INCOME AND IT IS ALSO SU BMITTED THAT IN THE FORM OF RETURN THERE WAS NO PROVISION FO R DISCLOSING DEEMED DIVIDENDS UNDER 2(22)(E) OF THE ACT. A CONSP ECTUS OF THE EXPLANATION TO SECTION 271(1)( C) MAKES IT CLEA R THAT THE STATUTE VISUALIZED THE ASSESSMENT PROCEEDINGS AND P ENALTY PROCEEDINGS TO BE WHOLLY DISTINCT AND INDEPENDENT OF EACH OTHER. THAT THE DEEMING FICTION AS TO 'INCOME' SHOU LD NOT BE EXTENDED TO 'CONCEALMENT' ALSO. THAT PART A OF THE EXPLANATION TO SECTION 271(1)(C) COMES INTO OPERATION WHEN, IF T HE ASSESSE I.T.A.NOS.878, 879 & 880/IND/2016 A.YS.2008-09 SMT.CHHAYA A RAJE, SHRI AMIT A. RAJE & SH ANIL ANAN T RAJE PAGE 7 OF 28 FAILS TO OFFER AN EXPLANATION OR OFFERS AN EXPLANAT ION WHICH IS FOUND BY THE ASSESSING OFFICER OR THE COMMISSIONER (APPEALS) OR THE COMMISSIONER TO BE FALSE THEN THE AMOUNT ADD ED OR DISALLOWED WOULD BE DEEMED TO BE CONCEALED INCOME. T HIS EXPLANATION CAN, THEREFORE, BE APPLIED ONLY WHERE TH E ASSESSEE HAS EITHER NOT OFFERED ANY EXPLANATION OR WHERE HE H AS OFFERED AN EXPLANATION, THE SAME IS FOUND TO BE FALSE BY TH E AO. THE ITO MUST HAVE SOME DEFINITE EVIDENCE TO REFUSE THE ASSESSEE'S CLAIM OR EVIDENCE OR EXPLANATION. THE ASSESSING OFF ICER CANNOT INVOKE PROVISION OF SECTION 271(1)(C) ON THE BASIS OF ROUTINE AND GENERAL PRESUMPTIONS. THE ASSESSING OFFICER HAS NOT GIVEN ANY REASONS REGARDING HIS SATISFACTION ABOUT THE CO NCEALMENT OF PARTICULARS OF INCOME OR FURNISHING INACCURATE P ARTICULARS OF INCOME. THE ESSENCE OF PART B OF THE EXPLANATION IS THAT THE PERSON MUST PROVIDE AN EXPLANATION WHICH IS BONA FID E AND HE SHOULD SUBSTANTIATE THAT EXPLANATION BY SOME EVIDEN CE WITH HIM. IF HE FAILS TO DO SO, HIS EXPLANATION MAY BE T REATED AS UNTENABLE. BUT WHEN THE ASSESSEE IS ABLE TO OFFER A REASONABLE EXPLANATION BASED ON SOME EVIDENCE, THE ITO CANNOT INVOKE I.T.A.NOS.878, 879 & 880/IND/2016 A.YS.2008-09 SMT.CHHAYA A RAJE, SHRI AMIT A. RAJE & SH ANIL ANAN T RAJE PAGE 8 OF 28 PART B OF THE EXPLANATION UNLESS HE HAS GIVEN A FIN DING BASED ON SOME CONTRADICTORY EVIDENCE TO DISAPPROVE THAT E XPLANATION OFFERED BY THE ASSESSEE WHICH THE ASSESSEE IS NOT AB LE TO SUBSTANTIATE AND FAILS TO PROVE THAT SUCH EXPLANATI ON IS BONA FIDE AND THAT ALL THE FACTS RELATING TO THE SAME AN D MATERIAL TO THE COMPUTATION OF HIS TOTAL INCOME HAVE BEEN DISCL OSED BY HIM. HENCE, THE ASSESSE HAD DISCLOSED ALL THE RELEV ANT MATERIAL FACTS FOR THE PURPOSE OF COMPUTATION OF TOTAL INCOM E. WHEN THE ASSESSEE HAD FURNISHED ALL THE MATERIAL FACTS F OR THE PURPOSE OF COMPUTATION OF TOTAL INCOME THE ASSESSIN G OFFICER WAS DUTY BOUND TO CALCULATE CORRECT TOTAL INCOME IN ACCORDANCE WITH LAW, WHICH MIGHT HAVE BEEN DIFFERENT T HAN THE TOTAL INCOME CALCULATED BY THE ASSESSEE. MERE FACT THAT THE ASSESSING OFFICER WHILE DISCHARGING HIS DUTY WAS RECA LCULATING THE TOTAL INCOME IN ACCORDANCE WITH LAW WHICH WAS NOT T HE SAME AS CALCULATED BY THE ASSESSEE, IT COULD NOT BE HELD THAT THE ASSESSEE HAD CONCEALED THE PARTICULARS OF HIS I NCOME OR HAD FURNISHED INACCURATE PARTICULARS OF SUCH INCOME OR THERE WAS A DEEMED CONCEALMENT IN ACCORDANCE WITH THE I.T.A.NOS.878, 879 & 880/IND/2016 A.YS.2008-09 SMT.CHHAYA A RAJE, SHRI AMIT A. RAJE & SH ANIL ANAN T RAJE PAGE 9 OF 28 EXPLANATION I TO SECTION 271(1)(C). THAT FROM THE A BOVE FACTS, IT IS CLEARLY ESTABLISHED THAT ASSESSEE HAD NO INTENTI ON TO CONCEAL ANY PARTICULARS OF HER INCOME OR FURNISH INACCURATE PARTICULARS THEREOF WITHIN MEANING OF SECTION 271 (1)( C) OF THE ACT. THE ASSESSEE ALSO REFUTED THE FINDING OF THE A O THAT THERE WAS ANY GROSS NEGLECT ON THE PART OF THE ASSESSEE I N RETURNING THE CORRECT INCOME AS THE ASSESSEE HAD PLACED ALL T HE FACTS WITHOUT WITHHOLDING ANY MATERIAL FROM THE AO. THE DEE MED DIVIDEND IS A FICTION CREATED BY LAW. IT HAS HELD IN THE CASE OF CIT V. BARODA TIN WORKS [221 ITR 661 (GUJ)] 'THAT T HE FICTION OF DEEMED INCOME IS NOT ACCEPTABLE TO PENALTY PROCE EDINGS SO AS TO RAISE A PRESUMPTION ABOUT CONCEALMENT OF SUCH INCOME.' THE INITIATION OF PENALTY HAS BEEN ON COUNT OF FURN ISHING OF INACCURATE PARTICULARS, BUT THE PENALTY HAS BEEN LE VIED ON ACCOUNT OF 'CONCEALMENT' AND THUS THE PENALTY SO LE VIED DESERVES TO BE DELETED ON THIS COUNT ALONE. THE LD. COUNSEL FOR THE ASSESSEE FURTHER PLACED RELIANCE ON THE FOLLOWIN G DECISIONS :- I.T.A.NOS.878, 879 & 880/IND/2016 A.YS.2008-09 SMT.CHHAYA A RAJE, SHRI AMIT A. RAJE & SH ANIL ANAN T RAJE PAGE 10 OF 28 SR. NAME OF THE CASE CITATION NO 1 ITO V PRAKASH NARAIN 2691/DELHI/2013 2 SADANA BROTHERS SALES (P.) 18 ITJ 547 (20LL)( TRIB - I NDORE ) 3 CIT V SADANA BROTHERS SALES 23 ITJ 260 (2014)(MP) 4 GITANJALI GHATE V DC I T 6560/MUM/2010 5 ITO V (LATE) DR. 564/MADRAS/20LL 6 CIT V BARODA TIN 2211TR 661 ( GUJARAT ) 7 CIT V RELIANCE PETRO PRODUCTS 322 ITR 158 (SC) 8 LAXMIBAI V CIT (1982) 11 TAXMAN 147 (MP) 9 SUNIL CHANDRA VOHRA 127 J 100 (MUMBAI - TRIB) 7. THE LD. COUNSEL FOR THE ASSESSEE CONCLUDED HIS ARGUMENTS AND FINALLY SUBMITTED THAT THE AO AT THE STAGE OF ASSESSMENT INITIATED PENALTY PROCEEDINGS ON ACCOUNT OF FURNISHING INACCURATE PARTICULARS OF INCOME, WHILE A T THE TIME OF COMPLETION OF PENALTY ORDER, HE LEVIED THE PENAL TY ON ACCOUNT OF CONCEALMENT OF INCOME, WHICH IS NOT JUST IFIED AND, THEREFORE, PRAYED THAT THE PENALTY SO LEVIED MAY VERY KINDLY BE DELETED IN ALL THESE APPEALS, AS THE FACTS ARE I DENTICAL. 8. WE HAVE GONE THROUGH THE PROVISIONS OF SEC. 271(1)( C). WE NOTED THAT PENALTY U/S 271(1)(C) IS LEVIABLE IF AO IS SATISFIED I.T.A.NOS.878, 879 & 880/IND/2016 A.YS.2008-09 SMT.CHHAYA A RAJE, SHRI AMIT A. RAJE & SH ANIL ANAN T RAJE PAGE 11 OF 28 IN THE COURSE OF ANY PROCEEDINGS UNDER THE INCOME T AX ACT THAT ANY PERSON HAS CONCEALED PARTICULARS OF HIS IN COME OR FURNISHED INACCURATE PARTICULARS OF INCOME. FROM TH E ASSESSMENT ORDER WE NOTED THAT THERE IS NO INDICATIO N 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 DOUBT, LEGISLATURE HAS INSERTED SUB-SECTION (1B) IN SEC. 271 BY FINANCE ACT, 2008 W. 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 WE F IND 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 OUR 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. TH E ACTION OF THE AO, IN OUR 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. MADHUS HREE I.T.A.NOS.878, 879 & 880/IND/2016 A.YS.2008-09 SMT.CHHAYA A RAJE, SHRI AMIT A. RAJE & SH ANIL ANAN T RAJE PAGE 12 OF 28 GUPTA BRITISH AIRWAYS PLC VS. UNION OF INDIA, 317 I TR 107 (DEL), THE SCOPE OF AMENDMENT WAS EXPLAINED BY THE H ON'BLE DELHI HIGH COURT AS UNDER : IN OUR OPINION, THE IMPUGNED PROVISION ONLY PROVIDES THAT AN ORDER INITIATING PENALTY CANNOT BE DECLARED BAD IN LAW BECAUSE IT STATES THE PENALTY PROCEEDINGS ARE INITIATED, IF OTHERWISE IT IS DISCE RNIBLE FROM RECORD THAT THE AO HAS ARRIVED AT PRIMA FACIE SATISFACTION FOR INITIATION OF PENALTY PROCEEDINGS. THE ISSUE IS OF DISCERNIBILITY OF THE SATISFACTION AR RIVED AT BY THE AO DURING THE COURSE OF PROCEEDING BEFORE HIM. THE PRESENCE OF PRIMA FACIE SATISFACTION FOR INITI ATION OF PENALTY PROCEEDINGS WAS AND REMAINS A JURISDICTIONAL FACT WHICH CANNOT BE WISHED AWAY AS THE PROVISION STANDS EVEN TODAY, I.E. POST AMENDMENT. I.T.A.NOS.878, 879 & 880/IND/2016 A.YS.2008-09 SMT.CHHAYA A RAJE, SHRI AMIT A. RAJE & SH ANIL ANAN T RAJE PAGE 13 OF 28 IF THERE IS NO MATERIAL TO INITIATE PENALTY PROCEE DINGS; AN ASSESSEE WILL BE ENTITLED TO RECOURSE TO A COURT OF LAW. 9. THIS IS THE SETTLED LAW THAT THE PENALTY PROCEEDINGS AND ASSESSMENT PROCEEDINGS ARE DIFFERENT. THE PENAL TY PROCEEDINGS CAN BE INITIATED ON TWO CHARGES I.E. I) CONCEALMENT OF PARTICULARS OF INCOME AND II) FURNISHING OF INAC CURATE PARTICULARS OF INCOME. BOTH THE CHARGES ARE ENTIREL Y DIFFERENT. IF THE PROCEEDINGS ARE INITIATED ON CHARGE OF CONCE ALMENT, THEN PENALTY CANNOT BE LEVIED ON THE CHARGE OF FURNISHIN G OF INACCURATE PARTICULARS OF INCOME AND VICE VERSA. TH US, THERE MUST BE A CLEAR FINDING ABOUT THE CHARGE FOR WHICH P ENALTY IS IMPOSED OR INITIATED. IT IS INCUMBENT UPON THE AO T O STATE WHETHER PENALTY WAS BEING LEVIED FOR CONCEALMENT OF I NCOME OR FOR FURNISHING OF INACCURATE 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 6 42, HONBLE GUJARAT HIGH COURT HAS HELD AS UNDER: - I.T.A.NOS.878, 879 & 880/IND/2016 A.YS.2008-09 SMT.CHHAYA A RAJE, SHRI AMIT A. RAJE & SH ANIL ANAN T RAJE PAGE 14 OF 28 IT IS INCUMBENT UPON THE ASSESSING OFFICER TO STAT E WHETHER THE PENALTY WAS BEING LEVIED FOR CONCEALMENT OF PARTICULARS OF INCOME BY THE ASSESSE E OR WHETHER ANY INACCURATE PARTICULARS OF INCOME 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 T O APPRECIATE THIS LEGAL ISSUE. THE RATION IN CIT V. M ANU ENGINEERING WORKS 132 ITR 306 (GUJ) WAS APPLICABLE AND THE ORDER OF PENALTY COULD NOT BE UPHELD BY THE TRIBUNAL. THE ORDER WAS INVALID. 10. 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 APPLICATION 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 WA S CONCEALMENT OF INCOME OR THAT INCORRECT PARTICULARS HAD BEEN I.T.A.NOS.878, 879 & 880/IND/2016 A.YS.2008-09 SMT.CHHAYA A RAJE, SHRI AMIT A. RAJE & SH ANIL ANAN T RAJE PAGE 15 OF 28 FURNISHED BY THE ASSESSEE WITH THE INTENTION TO AVOI D PAYMENT OF TAXES. THIS VIEW IS SUPPORTED BY VARIOUS DECISION S OF HIGH COURT THEREFORE IT IS NOT NECESSARY TO DISCUSS THE OTHER JUDGMENT ON THE ISSUE. 11. AO HAS NOT MADE OUT ANY SPECIFIC CHARGE EITHER OF CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME. THE PENALTY U/S 2 71(1) (C) CAN BE LEVIED FOR EITHER OF THE CHARGE. THE PENALTY ORDER SIMPLY STATES THAT PENALTY IS ATTRACTED ON THIS ADDITION A S IT IS MANDATORY AND AUTOMATIC. IT DOES NOT STATE FOR WHAT DEFAULT PENALTY IS LEVIED SEC. 271(1) (C) (III) IS EXPRESSL Y CLEAR THAT THE PENALTY CAN BE LEVIED FOR CONCEALMENT OF PARTICULAR S OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME. IT IS THE PARTICULARS OF INCOME WHICH IS THE COMMON SUBJECT MA TTER OF BOTH THE CHARGES. THE WORD CONCEAL AS PER WEBSTER S 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 PARTICULARS OF INCOME. ON THE OTHER HAND, WHERE PART ICULARS I.T.A.NOS.878, 879 & 880/IND/2016 A.YS.2008-09 SMT.CHHAYA A RAJE, SHRI AMIT A. RAJE & SH ANIL ANAN T RAJE PAGE 16 OF 28 ARE DISCLOSED BUT SUCH DISCLOSURE IS NOT CORRECT, T RUE OR ACCURATE, IT WOULD AMOUNT TO FURNISHING OF INACCURAT E 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 LESSER VALUE, IT WOULD AMOUNT TO FURNISHING OF INACCURATE PARTICULARS OF INCOME. 12. IT IS PERTINENT TO NOTE THAT THRUST OF THE LEGISLAT URE IS UPON THE PARTICULARS OF INCOME WHICH ARE EITHER CON CEALED OR FURNISHED INACCURATELY BY THE ASSESSEE. THEREFORE, ONE MUST UNDERSTAND THE MEANING OF THE WORDS PARTICULARS OF INCOME. THE INCOME TAX TRIBUNAL HAD TO CONSIDER THE MEANING OF THE EXPRESSION FURNISHING OF INACCURATE PARTICULARS OF INCOME APPEARING IN SECTION 271(1) (C) IN THE CASE OF KANB AY SOFTWARE INDIA (P) LTD, 122 TTJ 721 (PUNE). IT WAS HELD THAT THE EXPRESSION PARTICULAR REFERS TO FACTS, DETAILS, SPECIFICS OR THE INFORMATION ABOUT SOMEONE OR SOMETHING. THUS, THE D ETAILS OR INFORMATION ABOUT THE INCOME WOULD DEAL WITH FACTUAL DETAILS OF INCOME AND CANNOT BE EXTENDED TO AREAS WHICH ARE I.T.A.NOS.878, 879 & 880/IND/2016 A.YS.2008-09 SMT.CHHAYA A RAJE, SHRI AMIT A. RAJE & SH ANIL ANAN T RAJE PAGE 17 OF 28 SUBJECTIVE SUCH AS STATUS OF THE TAXABILITY OF AN I NCOME ADMISSIBILITY OF A DEDUCTION AND INTERPRETATION OF LAW. ACCORDINGLY, IT WAS HELD THAT MERE REJECTION OF A LE GAL CLAIM WOULD NOT AMOUNT TO FURNISHING OF INACCURATE PARTICU LARS OF INCOME. THIS VIEW IS FORTIFIED BY THE SUPREME COURT JUDGMENT IN THE CASE OF RELIANCE PETROPRODUCTS, 322 ITR 158 SC. IN THIS CASE, THE CLAIM OF ASSESSEE U/S 36(1) (III) WAS RE JECTED BY THE AO AND THE ORDER OF AO WAS UPHELD BY THE TRIBUNAL. A S A RESULT THEREOF, THE PENALTY U/S 271(1) (C) WAS IMPOS ED ON ACCOUNT OF FURNISHING OF INACCURATE PARTICULARS OF INCOME. THE PENALTY WAS HELD TO BE ILLEGALLY IMPOSED BY THE TRIB UNAL SINCE FACTUAL DETAILS OF INCOME FURNISHED BY THE ASSESSE E WERE FOUND TO BE CORRECT. THE MATTER ULTIMATELY REACHED THE SC AND THE HONBLE COURT UPHELD THE VIEW OF THE TRIBUNAL B Y HOLDING THAT MERE MAKING OF THE CLAIM, WHICH IS NOT SUSTAIN ABLE IN LAW, BY ITSELF, WILL NOT AMOUNTING TO FURNISHING INAC CURATE CLAIM OF FURNISHING INACCURATE PARTICULARS REGARDIN G THE INCOME OF THE ASSESSEE. I.T.A.NOS.878, 879 & 880/IND/2016 A.YS.2008-09 SMT.CHHAYA A RAJE, SHRI AMIT A. RAJE & SH ANIL ANAN T RAJE PAGE 18 OF 28 13. EXPLANATION 1 TO SECTION 271(1) (C) CANNOT BE APPLI ED WHERE CHARGE AGAINST THE ASSESSEE IS FURNISHING OF INACCURATE PARTICULARS OF INCOME SINCE IT PROVIDES A DEEMING F ICTION QUA CONCEALMENT OF PARTICULARS OF INCOME ONLY AND CONSE QUENTLY CANNOT BE EXTENDED TO A CASE WHERE CHARGE AGAINST TH E ASSESSEE IS FURNISHING OF INACCURATE PARTICULARS OF INCOME. 14. ON THE OTHER HAND, WHERE CHARGE AGAINST THE ASSESSEE IS FURNISHING INACCURATE PARTICULARS OF INCOME, THE AO HAS TO ESTABLISH EITHER THAT ASSESSEE HAS NOT DISCLOSED THE PARTICULARS OF INCOME UNDER THE MAIN PROVISIONS OR THE CASE OF ASSESSEE FALLS WITHIN THE SCOPE OF THE DEEMING FIC TIONS CREATED UNDER THE EXPLANATIONS. FOR EXAMPLE, THE ASSESSEE MIGHT NOT DISCLOSE PARTICULAR SALES OR DIVIDEND INCOME OR INC OME FROM ANY SOURCE. SUCH INSTANCES WOULD FALL UNDER THE MAI N 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. 15. EXPLANATION 1 TO SECTION 271(1) (C) STATES THAT THE AMOUNT ADDED OR DISALLOWED IN COMPUTING THE TOTAL I NCOME OF I.T.A.NOS.878, 879 & 880/IND/2016 A.YS.2008-09 SMT.CHHAYA A RAJE, SHRI AMIT A. RAJE & SH ANIL ANAN T RAJE PAGE 19 OF 28 THE ASSESSEE SHALL BE DEEMED TO BE THE INCOME IN RE SPECT OF WHICH PARTICULARS HAVE BEEN CONCEALED. THIS DEEMING PROVISION IS NOT ABSOLUTE ONE BUT IS REBUTTABLE ONE . IT ONLY SHIFTS THE ONUS ON THE ASSESSEE. EXPLANATION 1 REFE RS TO THE TWO SITUATIONS IN WHICH PRESUMPTION OF THE CONCEALMEN T OF THE PARTICULARS OF INCOME IS DEEMED. IT IS NOT APPLICAB LE WHERE THE CHARGE AGAINST THE ASSESSEE IS FURNISHING INACCURAT E PARTICULARS OF THE INCOME. THE FIRST SITUATION IS WH ERE THE ASSESSEE IN RESPECT OF ANY FACT MATERIAL TO THE COM PUTATION OF HIS TOTAL INCOME FAILS TO OFFER AN EXPLANATION OR O FFERS AN EXPLANATION, WHICH IS FOUND BY THE AO OR THE COMMISS IONER TO BE FALSE. THE SECOND SITUATION IS WHERE THE ASSESSE E IN RESPECT OF ANY FACTS MATERIAL TO THE COMPUTATION OF HIS TOT AL INCOME OFFERS AN EXPLANATION, WHICH, THE ASSESSEE IS NOT AB LE TO SUBSTANTIATE AND ALSO FAILS TO PROVE THAT SUCH EXPL ANATION WAS BONA FIDE ONE AND THAT ALL THE FACTS RELATING TO TH E COMPUTATION OF TOTAL INCOME HAVE BEEN DISCLOSED BY HIM. THE PRE SUMPTION AVAILABLE UNDER EXPLANATION TO SECTION 271(1) (C), CANNOT BE I.T.A.NOS.878, 879 & 880/IND/2016 A.YS.2008-09 SMT.CHHAYA A RAJE, SHRI AMIT A. RAJE & SH ANIL ANAN T RAJE PAGE 20 OF 28 DRAWN UNLESS THE CASE OF THE ASSESSEE FALLS UNDER EI THER OF THE CLAUSES (A) OR (B). 16. IN THE PRESENT CASE, THE AO HAS NOT BROUGHT OUT ANY SPECIFIC CHARGE FOR WHICH THE PENALTY HAS BEEN IMPOS ED ON THE ASSESSEE U/S 271(1) (C) OF THE ACT. HE HAS NOT BROU GHT OUT WHETHER THE ASSESSEE HAS CONCEALED THE PARTICULARS O F INCOME OR WHETHER THE ASSESSEE HAS FURNISHED INACCURATE PAR TICULARS OF INCOME. THE AO HAS NOT INITIATED THE PROCEEDINGS FOR ANY PARTICULAR CHARGE. 17. THE AO INITIATED THE PENALTY WITHOUT ANY MENTION OF ANY PARTICULAR DEFAULT AND LEVIED THE SAME AGAIN WIT HOUT MENTIONING ANY SPECIFIC CHARGE. IN CIT V. ATUL MOHA N BINDAL (2009) 9 SCC 589, WHERE HONBLE SUPREME COURT WAS CONSIDERING THE SAME PROVISION, IT OBSERVED THAT TH E ASSESSING OFFICER HAS TO BE SATISFIED THAT A PERSON HAS CONCE ALED THE PARTICULARS OF HIS INCOME OR FURNISHED INACCURATE P ARTICULARS OF SUCH INCOME. THUS THE SATISFACTION OF THE AO ABO UT THE CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF SUCH INCOME IS ESSENTIAL BEFORE I.T.A.NOS.878, 879 & 880/IND/2016 A.YS.2008-09 SMT.CHHAYA A RAJE, SHRI AMIT A. RAJE & SH ANIL ANAN T RAJE PAGE 21 OF 28 LEVYING ANY PENALTY U/S 271(1)(C). THE AO AS IS APP ARENT FROM THE PENALTY ORDERS HAS NOT SATISFIED ABOUT THE CONC EALMENT OF PARTICULARS OF INCOME OR FURNISHING OF INACCURATE P ARTICULARS OF INCOME ON THE PART OF THE ASSESSEE. ON THIS BASIS I TSELF THE PENALTY STAND DELETED. 18. THE LD. DR SIMPLY RELIED ON THE DECISION OF UNION O F INDIA VS. DHARMENDRA TEXTILE PROCESSORS 306 ITR 277 AS WELL AS DILIP N SHROFF V JCIT 291 ITR 519 AND PLEADED TH AT THE LEVY OF THE PENALTY IS AUTOMATIC AND MANDATORY, THUS THE ASSESSING OFFICER WAS JUSTIFIED IN IMPOSITION OF THE PENALTY. WE FIND THAT IN THE CASE OF DHARMENDRA TEXTILES PROCESSORS (SUPR A), THE HONBLE SUPREME COURT HAS HELD THAT PENALTY U/S 271 (1) (C) IS A CIVIL LIABILITY AND THAT WILFUL CONCEALMENT AND MENS REA ARE NOT ESSENTIAL INGREDIENTS FOR ATTRACTING THE CI VIL LIABILITY AS IS THE CASE IN THE MATTER OF PROSECUTION U/S 276 OF THE ACT. IT HAS FURTHER BEEN HELD IN THAT CASE THAT MENS REA IS NOT AN ESSENTIAL INGREDIENT FOR IMPOSING THE PENALTY. THE HONBLE SUPREME COURT IN THIS CASE NOWHERE HELD THAT IF THE ADDITION IS MADE, PENALTY IS AUTOMATIC. EVEN IN UNION OF IND IA V. I.T.A.NOS.878, 879 & 880/IND/2016 A.YS.2008-09 SMT.CHHAYA A RAJE, SHRI AMIT A. RAJE & SH ANIL ANAN T RAJE PAGE 22 OF 28 DHARMENDRA TEXTILE PROCESSORS REPORTED IN (2008) 30 6 ITR 277 (SC), THE SUPREME COURT HAS OBSERVED THAT THE FINDI NG AS TO SUPPRESSION OR INACCURATE PARTICULARS IN THE RETURN ARE NECESSARY FOR ATTRACTING THE PENAL PROVISION UNDER SECTION 271(1) (C) OF THE INCOME TAX ACT, 1961. THIS JUDGME NT DOES NOT OVERRULE THE EXPLANATIONS APPENDED TO SECTION 271(1 ) (C). IT EVEN HELD THAT THE OBJECT BEHIND THE ENACTMENT OF S ECTION 271(1) (C) READ WITH EXPLANATIONS INDICATES THAT THE SAID SECTION HAS BEEN ENACTED TO PROVIDE FOR A REMEDY FO R LOSS OF REVENUE. THE PENALTY UNDER THAT PROVISION IS A CIVI L LIABILITY. THUS, THE RATIO LAID DOWN IN THIS JUDGMENT WAS CONFIN ED TO TREATING THE WILFUL CONCEALMENT IS NOT ESSENTIAL FOR IMPOSING THE PENALTY U/S 271(1) (C) OF THE ACT. WHERE AN ASS ESSEE GENUINELY MAKES A CLAIM FOR A PARTICULAR DEDUCTION BY DISCLOSING ALL THE NECESSARY FACTS RELATING TO THE SAME, THAT CANNOT BE REGARDED TO BE CONCEALMENT EVEN IF THE AS SESSEES CLAIM IS REJECTED. THIS IS THE SETTLED LAW THAT PENA LTY PROCEEDINGS ARE DISTINCT FROM THE ASSESSMENT PROCEE DINGS AND, THEREFORE, IF ANY ADDITION IS MADE, IT DOES NOT MEA N THAT THE I.T.A.NOS.878, 879 & 880/IND/2016 A.YS.2008-09 SMT.CHHAYA A RAJE, SHRI AMIT A. RAJE & SH ANIL ANAN T RAJE PAGE 23 OF 28 PENALTY WILL AUTOMATICALLY BE LEVIED. IN THE 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 EXPLANATIONS DEEMING THE CONCEALMENT OF INCOME, PEN ALTY CANNOT BE IMPOSED. SECTION 271(1) (C) DEALS WITH THE TWO SITUATIONS FOR IMPOSING THE PENALTY; HAS CONCEALED THE PARTICULARS OF HIS INCOME; OR HAS FURNISHED THE INA CCURATE PARTICULARS OF SUCH INCOME. EXPLANATION 1 IS APPLIC ABLE ONLY IN CASE OF FIRST SITUATION I.E. AMOUNT ADDED OR DISALL OWED IN THE TOTAL INCOME BE DEEMED TO REPRESENT THE INCOME IN R ESPECT OF WHICH THE PARTICULARS HAVE BEEN CONCEALED. NOW THE QU ESTION ARISES WHETHER IN THIS CASE CAN ONE SAY THAT THE ASS ESSEE HAS FILED INACCURATE PARTICULARS OF INCOME. INACCURATE PARTICULARS MEANS THAT THE PARTICULARS ARE INCORRECT OR NOT ACC URATE OR NOT CORRECT. THAT MEANS, THE PARTICULARS HAVE NOT BEEN FURNISHED IN CORRECT/EXACT MANNER AS IS REQUIRED TO BE FURNIS HED TO DETERMINE THE CORRECT INCOME CHARGEABLE TO TAX OF T HE ASSESSEE. I.T.A.NOS.878, 879 & 880/IND/2016 A.YS.2008-09 SMT.CHHAYA A RAJE, SHRI AMIT A. RAJE & SH ANIL ANAN T RAJE PAGE 24 OF 28 19. HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS M. S . BINDRA & SONS P. LTD 336 ITR 125 (DELHI) HAS OBSERV ED AS UNDER IN RESPECT OF DHARMENDRA TEXTILES PROCESSOR D ECISION AND DILIP N SHROFF DECISION AS RELIED BY THE A.O. 20. IN FACT, SECTION 271(1) (C) CAME TO BE INTERPRETED BY THE APEX COURT IN DHARMENDRA TEXTILE PROCESSORS CAS E (SUPRA). THE THREE JUDGE BENCH OF THE APEX COURT OVER-RULED THE DECISION IN DILIP N. SHROFF V. JT. CIT (2007) 291 I TR 519 (SC) AND APPROVED THE DECISION IN CHAIRMAN, SEBI V. SHRI RAM MUTUAL FUND (2006) 5 SSC 361. IN THE SAID 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 LIABILITY ON THE ASSESSEE FOR CONCEALMENT OR FOR GIVING INACCURATE PARTICULARS WHILE FILING THE RETURN. THE JUDGMENT IN DILIP N. SHROFFS CASE (2007) 8 SCALE 304 (SC) HAS NOT CONSIDERED THE EFFECT AND RELEVANCE OF SECTION I.T.A.NOS.878, 879 & 880/IND/2016 A.YS.2008-09 SMT.CHHAYA A RAJE, SHRI AMIT A. RAJE & SH ANIL ANAN T RAJE PAGE 25 OF 28 276C OF THE INCOME TAX ACT. THE OBJECT BEHIND THE ENACTMENT OF SECTION 271(1) (C) READ WITH THE EXPLANATIONS INDICATES THAT THE SAID SECTION HAS BEEN ENACTED TO PROVIDE FOR A REMEDY FOR LOSS OF REVENUE. THE PENALTY UNDER THAT PROVISION IS A CIVIL LIABILITY AS IS THE CASE IN THE MATTER OF PROSECUTION UNDER SECTION 276C OF THE INCOME- TAX ACT. 21. THE AFORESAID DECISION HAS TAKEN NOTE OF IN CIT V. RELIANCE PETROPRODUCTS (P) LTD. (2010) 322 ITR 158 (SC). WHILE CONSIDERING THE PHRASE CONCEALMENT OF PARTICULARS, THE APEX COURT REFERRED 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 PENALTY IS IMPOSED. THERE CAN BE NO DISPUTE THAT EVERYTHING WOULD DEPEND UPON THE RETURN FILED BECAUSE THAT IS THE ONLY DOCUMENT, WHERE THE ASSESSEE CAN FURNISH THE PARTICULARS OF HIS INCOME. WHEN SUCH PARTICULARS ARE FOUND TO BE INACCURATE, THE LIABILITY WOULD ARISE. IN DILIP N. SHROFF V. JOINT CIT (2007) 6 SSC 329, THIS COURT EXPLAINED THE TERMS CONCEALMENT OF INCOME AND FURNISHING INACCURATE PARTICULARS. THE COURT WENT ON TO HOLD THEREIN THAT IN ORDER TO ATTRACT THE PENALTY UNDER SECTION 271(1) (C), MENS REA I.T.A.NOS.878, 879 & 880/IND/2016 A.YS.2008-09 SMT.CHHAYA A RAJE, SHRI AMIT A. RAJE & SH ANIL ANAN T RAJE PAGE 26 OF 28 WAS NECESSARY, AS ACCORDING TO THE COURT, THE WORD INACCURATE SIGNIFIED A DELIBERATE ACT OR OMISSION ON BEHALF OF THE ASSESSEE. IT WENT ON TO HOLD THAT CLAUSE (III) OF SECTION 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 CONCEALMENT OF PARTICULARS OF INCOME, BUT IT MAY NOT EXCEED THREE TIMES THEREOF. IT WAS POINTED OUT THAT THE TERM INACCURATE PARTICULARS WAS NOT DEFINED ANYWHERE IN THE ACT AND, THEREFORE, IT WAS HELD THAT FURNISHING OF AN ASSESSMENT OF THE VALUE OF THE PROPERTY MAY NOT BY ITSELF BE FURNISHING INACCURATE PARTICULARS, IT WAS FURTHER HELD THAT THE AO MUST BE FOUND TO HAVE FAILED TO PROVE THAT HIS EXPLANATION IS NOT ONLY 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 INCOME. 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 JUDGMENT IN DILIP N. SHROFF V. JOINT CIT WAS UPSET. IN UNION OF INDIA V. DHARMENDRA TEXTILE PROCESSORS AFTER QUOTING FROM SECTION 271 EXTENSIVELY AND ALSO CONSIDERING SECTION 271(1) (C), THE COURT CAME TO THE CONCLUSION THAT SINCE SECTION 271(1) (C) INDICATED THE ELEMENT OF STRICT LIABILITY ON THE ASSESSEE FOR THE CONCEALMENT OR FOR GIVING INACCURATE PARTICULARS WHILE FILING RETURN, THERE WAS NOT NECESSITY OF MENS REA. THE 271(1) (C) READ WITH EXPLANATIONS INDICATED WITH THE SAID SECTION WAS FOR PROVIDING REMEDY FOR LOSS OF REVENUE AND SUCH A PENALTY WAS A I.T.A.NOS.878, 879 & 880/IND/2016 A.YS.2008-09 SMT.CHHAYA A RAJE, SHRI AMIT A. RAJE & SH ANIL ANAN T RAJE PAGE 27 OF 28 CIVIL LIABILITY AND, THEREFORE, WILLFUL CONCEALMENT IS NOT AN ESSENTIAL INGREDIENT FOR ATTRACTING CIVIL LIABILITY AS WAS THE CASE IN THE MATTER 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 IN UNION OF INDIA V. DHARMENDRA TEXTILE PROCESSORS WAS THAT ACCORDING TO THIS COURT THE EFFECT AND DIFFERENCE BETWEEN SECTION 271(1) (C) AND SECTION 276C OF THE ACT WAS LOST SIGHT OF IN THE CASE OF DILIP N SHROFF V. JOINT CIT. HOWEVER, IT MUST BE POINTED OUT THAT IN UNION OF INDIA V. DHARMENDRA TEXTILE PROCESSORS, NO FAULT WAS FOUND WITH THE REASONING 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 EFFECT THAT MENS REA WAS AN ESSENTIAL INGREDIENT FOR THE PENALTY UNDER SECTION 271(1) (C) THAT THE DECISION IN DILIP N. SHROFF V. JOINT CIT WAS OVERRULED. 22. FROM THE PERUSAL OF THE AFORESAID DECISIONS, IT IS APPARENT THAT IN NONE OF THE DECISION OF HONBLE SU PREME COURT AS RELIED BY THE LD. DR, IT HAS BEEN HELD THA T THE PENALTY U/S 271 (1) (C) IS MANDATORY OR AUTOMATIC WHEREVER THE ADDITION OR DISALLOWANCES ARE MADE BY THE AO. THE AS SESSING OFFICER MERELY OBSERVED THAT THE PENALTY IS MANDATO RY AS HE WAS FULLY AWARE OF THAT NO CHARGE AS SPECIFIED U/S 27 1 (1) (C) WAS LEVIABLE AGAINST THE ASSESSEE. ON THIS BASIS ALS O, THE I.T.A.NOS.878, 879 & 880/IND/2016 A.YS.2008-09 SMT.CHHAYA A RAJE, SHRI AMIT A. RAJE & SH ANIL ANAN T RAJE PAGE 28 OF 28 PENALTY WAS WRONGLY LEVIED JUST FOR THE PURPOSE OF LE VYING THE PENALTY. WE, ACCORDINGLY REVERSE THE ORDER OF LD. C IT(A) AND CONSEQUENTLY, DELETE THE PENALTY ORDER PASSED BY TH E ASSESSING OFFICER U/S 271(1)(C). 23. IN THE RESULT, ALL THE APPEALS FILED BY THE ASSESSE ES ARE ALLOWED. THE ORDER HAS BEEN PRONOUNCED IN OPEN COURT ON THE 5 TH OCTOBER, 2016. SD/- (..) (D.T.GARASIA) JUDICIAL MEMBER SD/- (..) (O.P.MEENA) ACCOUNTANT MEMBER * / DATED : 5 TH OCTOBER, 2016. CPU* COPY OF THE ORDER FORWARDED TO : THE ASSESSEE/ PCIT- INDORE/ CIT(A)-I, INDORE, AO/ D R- INDORE BENCH/ GUARD FILE BY ORDER ASSISTANT REGISTRAR OF ITAT, INDORE BENCH