NAURATA RAM KARTA OF HUF V. CIT LUDHIANA ETC.

ITA/2/1999

AI Insights

The case revolves around the imposition of a penalty on the appellant, Naurata Ram Karta, by the Assessing Officer for alleged concealment of income. The penalty was based on the grounds that the appellant did not disclose the receipt of enhanced compensation in the return filed for the assessment year 1993-94, despite having received it in 1991-92. The appellant contested the penalty, arguing that the compensation was duly disclosed in the earlier assessment year and that there was no intention to evade tax. The revenue argued that the non-disclosure in the later return constituted furnishing inaccurate particulars with mens rea. The court examined whether the imposition of the penalty was justified under these circumstances, focusing on the presence or absence of mens rea and the accuracy of the particulars furnished in the tax returns.

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 746324 (HC-MISC)
• Appeal Type: Others
• Pronouncement Date: 24-10-2013
• Assessment Year: misc
• Other Referred Cases: Commissioner of Income Tax v. Reliance Petroproducts Pvt. Ltd., Commissioner of Income Tax, Delhi Vs. Atul Mohan Bindal, Union of India Vs. Dharamendra Textile Processors, Union of India Vs. Rajasthan Spg. & Wvg. Mills, Dilip N. Shroff Vs. Joint Commissioner of Income Tax, Mumbai & Anr.
• Laws Referred To: Income Tax Act
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: SAVITA SAXENA
• Assessee Lawyers: AALOK MITTAL
• Keywords: Concealment of income; Inaccurate particulars; Mens Rea; Penalty; Compensation receipt
• Section: 271(1)(c)

Judgement Text

"ITA No.2 of 1999 -: 1 :- IN THE HIGH COURT FOR THE STATES OF PUNJAB AND HARYANA AT CHANDIGARH ITA No.2 of 1999 Date of decision: October 24, 2013. Naurata Ram Karta dead (through LRs) ... Appellant v. Commissioner of Income Tax, Ludhiana and another ... Respondent CORAM: HON'BLE MR. JUSTICE RAJIVE BHALLA HON'BLE MR. JUSTICE DR. BHARAT BHUSHAN PARSOON Present: Shri Aalok Mittal, Advocate, for the appellant. Ms. Savita Saxena, Advocate for the respondents. Rajive Bhalla , J. (Oral): The controversy in this appeal, falls within a narrow compass, namely, whether the Assessing Officer was justified in imposing penalty. Counsel for the appellant submits that the Assessing Officer was aware that the appellant has received compensation as receipt of compensation is referred to in assessment order for assessment year 1991-92. Even otherwise, the impugned assessment order which led to imposition of penalty itself makes reference to receipt of compensation in the year 1991-92. It is further submitted that the account statement contained full disclosure of the appellant's accounts, including the amount received as compensation. The absence of any mens rea much Kadyan Vinod Kumar 2013.11.15 17:37 I attest to the accuracy and integrity of this document Chandigarh ITA No.2 of 1999 -: 2 :- less a finding recorded in respect thereof, renders the penalty imposed upon the appellant, illegal and void. Counsel for the revenue submits that the return filed by the appellant for assessment year 1993-94 does not refer to receipt of enhanced compensation thereby clearly furnishing inaccurate particulars with mens-rea to evade payment of tax. The order passed by the Assessing Officer affirmed by the Income Tax Appellate Tribunal is, therefore, legal and valid. We have heard counsel for the parties. The substantial question of law that arises for adjudication reads as follows:- “Whether in the facts and circumstances of the case, the order of ITAT levying penalty is legally sustainable especially when there was no mens rea for concealment or in fact there was no willful concealment of income at all?” It is trite law, repeatedly reiterated by the Hon'ble Supreme Court as well as by this Court, that penalty does not necessarily follow rejection of a claim. A penalty is by its very nature penal in consequence and, therefore, must be preceded by proof of inaccurate particulars and mens rea. The absence of a finding of inaccurate particulars or a finding of guilt based upon relevant facts, would necessarily vitiate an order imposing penalty. A reference in this regard may be made to a judgment of the Supreme Court in Commissioner of Income Tax v. Reliance Petroproducts Pvt. Ltd., Kadyan Vinod Kumar 2013.11.15 17:37 I attest to the accuracy and integrity of this document Chandigarh ITA No.2 of 1999 -: 3 :- [2010] 322 ITR 158 (SC) may be made:- “... We do not think that such can be the interpretation of the concerned words. The words are plain and simple. In order to expose the assessee to the penalty unless the case is strictly covered by the provision, the penalty provision cannot be invoked. By any stretch of imagination, making an incorrect claim in law cannot tantamount to furnishing inaccurate particulars. In Commissioner of Income Tax, Delhi Vs. Atul Mohan Bindal [2009(9) SCC 589], where this Court was considering the same provision, the Court observed that the Assessing Officer has to be satisfied that a person has concealed the particulars of his income or furnished inaccurate particulars of such income. This Court referred to another decision of this Court in Union of India Vs. Dharamendra Textile Processors [2008(13) SCC 369], as also, the decision in Union of India Vs.Rajasthan Spg. & Wvg. Mills [2009(13) SCC 448] and reiterated in para 13 that:- “13. It goes without saying that for applicability of Section 271(1) (c), conditions stated therein must exist.” 8. 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 Vs. Joint Commissioner of Income Tax, Mumbai & Anr. [2007(6) SCC 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 was necessary, as according to the Court, the word “inaccurate” signified a deliberate act or omission on behalf of the assessee. ... Xxx xxx xxx xxx ... A mere making of the claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee. Such claim made in the Return cannot amount to the inaccurate particulars.” A perusal of the above extracts reveals that it is not every rejection of a claim for exemption or deduction that invites penalty but Kadyan Vinod Kumar 2013.11.15 17:37 I attest to the accuracy and integrity of this document Chandigarh ITA No.2 of 1999 -: 4 :- only such claims as are based upon inaccurate particulars furnished with intent to evade tax as are incorrect to the knowledge of the assessee. The assessee had already disclosed receipt of compensation in assessment year 1991-92. The Assessing Officer was aware of the return filed in 1991-92. The mere fact that this amount was not shown in the return or was subsequently disallowed by the Assessing Officer would not raise inference of mens-rea to conceal income, sufficient to invite penalty. The question of law is consequently answered in favour of the assessee and against the revenue and the appeal is disposed of accordingly. [ Rajive Bhalla ] Judge [Dr. Bharat Bhushan Parsoon] October 24, 2013. Judge kadyan Kadyan Vinod Kumar 2013.11.15 17:37 I attest to the accuracy and integrity of this document Chandigarh "