M/S TULIP GLOBAL PVT LTD V. COMMISSIONER OF INCOME TAX JAIPUR

ITA/352/2017

AI Insights

The case revolves around an appeal by M/s Tulip Global Pvt. Ltd. against the decision of the ITAT, which had reversed the CIT(A)'s decision and upheld a penalty imposed by the assessing officer under Section 271(1)(c) of the Income Tax Act. The penalty was for alleged concealment of income and furnishing inaccurate particulars related to the computation of capital gains. The appellant argued that the error was a bona fide human mistake in selecting the tax computation head, which was rectified upon realization. The CIT(A) had found no merit in the penalty, noting that all necessary particulars were disclosed and the error was unintentional. However, the ITAT did not discuss these findings and upheld the penalty, leading to the High Court's intervention.

• Counselvise Citation: [2018] 140 COUNSELVISE.COM (IT) 769419 (HC-RAJASTHAN)
• Appeal Type: Others
• Pronouncement Date: 13-03-2018
• Assessment Year: misc
• Other Referred Cases: Price Waterhouse Coopers (P) Ltd. vs. Commissioner of Income Tax, Kolkata-I, Commissioner of Income Tax, Ahmedabad vs. Reliance Petroproducts Pvt. Ltd., Commissioner of Income Tax, Delhi vs. Atul Mohan Bindal, Union of India & Ors. vs. Dharmendra Textile Processors & Ors., Dilip N. Shroff vs. Joint Commissioner of Income Tax, Mumbai and Anr., Chairman, SEBI vs. Shriram Mutual Fund & Anr, M/s Gujarat Travancore Agency, Cochin vs. Commissioner of Income Tax, Kerala, Ernakulam, Sheveta Construction Co. Pvt. Ltd. vs. ITO, Ward 3(4), Chennakesava Pharmaceuticals vs. Commissioner of Income Tax
• Laws Referred To: Income Tax Act
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: SIDDHARTH BAPNA
• Assessee Lawyers: SANJAY JHANWAR; ARCHANA
• Keywords: Capital Gain; Concealment of income; Inaccurate particulars; Income tax appeal; Penalty
• Section: 271(1)(c)

Judgement Text

"HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR D.B. Income Tax Appeal No. 352/2017 M/s Tulip Global Pvt. Ltd., 305, Iiird Floor, Jaipur Tower, Opposite All India Radio, Jaipur Through Its Director Shri Prakash Chand Jain ----Appellant Versus Commissioner Of Income Tax, Jaipur ----Respondent For Appellant(s) : Mr. Sanjay Jhanwar with Ms. Archana For Respondent(s) : Mr. Siddharth Bapna for Mr. Anil Mehta HON'BLE MR. JUSTICE K.S.JHAVERI HON'BLE MR. JUSTICE VIJAY KUMAR VYAS Order 13/03/2018 1. By way of this appeal, the appellant has challenged the judgment and order of the Tribunal whereby the Tribunal has reversed the conclusion reached by the CIT(A) and allowed the appeal filed by the department. 2. This court while admitting the matter framed the following questions of law:- “1. Whether under the facts and circumstances of the case and in law the order passed by the Ld. ITAT reversing the order of CIT(A) and thereby confirming levy of penalty under section 271(1) (c) of the Act is not perverse? 2. Whether under the facts and circumstances of the case and in law the ITAT was correct in levying penalty u/s 271(1)(c) of Rs.30,63,280/- notwithstanding fact that the complete particulars necessary for the computation of capital gain were disclosed by the assessee in the return of income itself? (2 of 17) [ITA-352/2017] 3. Whether under the facts and circumstances of the case and in law the ITAT was correct in levying penalty under Section 271(1)(c) in the absence of any material on record to the effect disproving/rebutting the explanation of the assessee of having committed bona-fide human error in selecting the head for calculating capital gain? 4. Whether there can be a valid levy of penalty u/s 271(1) (c) of the Act for alleged “Concealment of income” as well as “furnishing inaccurate particulars of income”? 3. Counsel for the appellant contended that while imposing the penalty u/s 271(1)(c) in its notice dated 26th February, 2014 and its reply, the assessing officer has observed as under:- “The assessee has truly disclosed each and every details required to file ITR, which is evident form the fact that, right financial year(s) i.e. purchase year 2009-10 and sale year 2011-12, were selected to compute the capital gain. However, on the part of tax consultant of the assessee, while using the utility software for preparation of income tax return, the selection of head was wrongly taken as long term gain/loss instead of short term gain/loss. This erroneous selection of head has resulted indexation and consequently capital gain was converted in capital loss. It is further pertinent to note that, the assessee deposited due taxes in form of advance tax as per its own calculation of taxable income. Which included capital gain arising from sale of immovable property. Perusal of the above shows that the assessee did not had mala-fide intention and the mistake is due to incorrect selection of head.” 4. It is further contended that the concealing the particulars of income which was not there or furnishing inaccurate particulars of income is contrary to the decision rendered by the Supreme Court and he has also taken us to the observations made by the CIT(A) which reads as under:- “Copy of the letter dated 31.01.2014 (mentioned as dated 13.01.2014 in your honor’s letter) is enclosed for kind reference. The assessing officer has rightly pointed out in the penalty order that even at the time of assessment proceedings, the assessee through its A.R. categorically claimed that it had incurred Long term capital loss on sale of building. In order to (3 of 17) [ITA-352/2017] substantiate this categorical claim, copies of the purchase & sale deed were indeed submitted.” 5. He contended that the bonafide of the assessee is very clear that the total income declared was Rs. 19,92,54,834/- together with income from capital gains Rs. 21,91,843/- on which tax was already paid and immediately the response to the notice has been filed which has already been referred hereinabove. 6. The CIT(A) while considering the matter has observed as under:- “3.4. I have also taken a note of the enquiry report submitted by the AO and also duly considered assessee’s submission along with rejoinder on enquiry reported submitted by the AO. It is fact that the details of indexed cost of acquisition with dates are available in the ITR and during the assessment proceeding assessee had suo moto provided copies of sale deed and purchase deed to the AO which is evident from foregoing scanned copy. Further, AO has not also asked any working of long term capital loss as claimed by the assessee. Ao in the assessment order has given the observation that said claim has been made falsely as claimed in the penalty order which is not true as evident from the foregoing scanned copy of the assessment order. It is also a fact that assessee’s return was processed and refund after adjustment was received by it after passing of assessment order. All these details relevant for computation of STCG are already available with the AO in ITR itself, therefore, AO’s contention for penalty proceeding for furnishing of inaccurate particulars as well as concealment of particulars of income cannot be legally sustained as nowhere assessee’s intention of selecting the wrong head for calculating Capital Gain is neither doubted by the AO in the assessment order nor facts available on record lead to such conclusion.” 7. The Tribunal while considering the matter without discussing the observations made by the CIT(A) has observed as under:- 7. We have heard the rival contention, perused the material available on record and gone through the order of the authorities below. Undisputed facts in the case are that the assessee had claimed loss on the sale of the property; the assessee has also carried forward such loss. The explanation of the assessee for doing so before the ld. CIT(A) was that inadvertently the wrong (4 of 17) [ITA-352/2017] key of Computer was pressed which resulted into this mistake. Ld. CIT(A) accepted this explanation on the basis that all details relevant for computation of capital gain was duly disclosed in the Income tax Return. The factum of disclosing the material facts relevant to the computation of capital gain is not disputed by the Revenue. It is settled position of law that a penalty cannot be imposed where the assessee has a bonafide explanation. Now, the question is whether the assessee in present case has bonafide explanation. The contention of the assessee is that due to human error, a wrong key of Computer was pressed consequently, in place short term gain, long term capital loss was computed. However, when pointed out by the AO this mistake was detected. There is no dispute if it is a human error the explanation can be termed as bonafide, no penalty can be attracted. However, in present case no material is placed on record to infer conclusively that it was a human error. The inference that it was human error or not would depend upon circumstances of each case. The Hon’ble Supreme Court under the similar facts in the case of N.G. Technologies (In Liquidiation) vs. CIT(supra) has upheld the levy of penalty. We therefore, respectfully following the same set aside the order of ld. CIT(A) and restore the penalty order. Thus, appeal of the Revenue is allowed.” 8. Counsel for the appellant has relied upon the following decisions:- Price Waterhouse Coopers (P) Ltd. vs. Commissioner of Income Tax, Kolkata-I; [2012] 348 ITR 306 “20. We are of the opinion, given the peculiar facts of this case, that the imposition of penalty on the Assessee is not justified. We are satisfied that the Assessee had committed an inadvertent and bona fide error and had not intended to or attempted to either conceal its income or furnish inaccurate particulars.” Commissioner of Income Tax, Ahmedabad vs. Reliance Petroproducts Pvt. Ltd.; [2010] 322 ITR 158 (SC) “7. As against this, Learned Counsel appearing on behalf of the respondent pointed out that the language of Section 271(1)(c) had to be strictly construed, this being a taxing statute and more particularly the one providing for penalty. It was pointed out that unless the wording directly covered the assessee and the fact situation herein, there could not be any penalty under the Act. It was pointed out that there was no concealment or any inaccurate particulars regarding (5 of 17) [ITA-352/2017] the income were submitted in the Return. Section 271(1)(c) is as under: 271(1) If the Assessing Officer or the Commissioner (Appeals) or the Commissioner in the course of any proceedings under this Act, is satisfied that any person- (c) has concealed the particulars of his income or furnished inaccurate particulars of such income. A glance at this provision would suggest that in order to be covered, there has to be concealment of the particulars of the income of the assessee. Secondly, the assessee must have furnished inaccurate particulars of his income. Present is not the case of concealment of the income. That is not the case of the Revenue either. However, the Learned Counsel for Revenue suggested that by making incorrect claim for the expenditure on interest, the assessee has furnished inaccurate particulars of the income. As per Law Lexicon, the meaning of the word \"particular\" is a detail or details (in plural sense); the details of a claim, or the separate items of an account. Therefore, the word \"particulars\" used in the Section 271(1)(c) would embrace the meaning of the details of the claim made. It is an admitted position in the present case that no information given in the Return was found to be incorrect or inaccurate. It is not as if any statement made or any detail supplied was found to be factually incorrect. Hence, at least, prima facie, the assessee cannot be held guilty of furnishing inaccurate particulars. The Learned Counsel argued that \"submitting an incorrect claim in law for the expenditure on interest would amount to giving inaccurate particulars of such income\". 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 v. Atul Mohan Bindal MANU/SC/1496/2009 : 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 v. Dharamendra Textile Processors MANU/SC/4448/2008 : 2008 (13) SCC 369 as also, the decision in Union of India v. Rajasthan Spg. & Wvg. Mills MANU/SC/0786/2009 : 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 (6 of 17) [ITA-352/2017] 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 Commissioner of Income Tax, Mumbai and Anr. MANU/SC/3182/2007 : 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. It went on to hold that Clause (iii) of Section 271(1) 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 assessee 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 Commissioner of Income Tax, Mumbai and Anr. was upset. In Union of India v. Dharamendra Textile Processors (cited supra), 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 no necessity of mens rea. The Court went on to hold that the objective behind enactment of Section 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 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 Commissioner of Income Tax, Mumbai and Anr. (cited supra) was overruled by this Court in Union of India v. Dharamendra Textile Processors (cited supra), 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 case of Dilip N. Shroff v. Joint Commissioner of Income (7 of 17) [ITA-352/2017] Tax, Mumbai and Anr. (cited supra). However, it must be pointed out that in Union of India v. Dharamendra Textile Processors (cited supra), no fault was found with the reasoning in the decision in Dilip N. Shroff v. Joint Commissioner of Income Tax, Mumbai and Anr. (cited supra), where the Court explained the meaning of the terms \"conceal\" and inaccurate\". It was only the ultimate inference in Dilip N. Shroff v. Joint Commissioner of Income Tax, Mumbai and Anr . (cited supra) 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 Commissioner of Income Tax, Mumbai and Anr. (cited supra) was overruled. 9. We are not concerned in the present case with the mens rea. However, we have to only see as to whether in this case, as a matter of fact, the assessee has given inaccurate particulars. In Webster's Dictionary, the word \"inaccurate\" has been defined as: not accurate, not exact or correct; not according to truth; erroneous; as an inaccurate statement, copy or transcript. We have already seen the meaning of the word \"particulars\" in the earlier part of this judgment. Reading the words in conjunction, they must mean the details supplied in the Return, which are not accurate, not exact or correct, not according to truth or erroneous. We must hasten to add here that in this case, there is no finding that any details supplied by the assessee in its Return were found to be incorrect or erroneous or false. Such not being the case, there would be no question of inviting the penalty under Section 271(1)(c) of the Act. 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.” Union of India & Ors. vs. Dharmendra Textile Processors & Ors.: (2008) 306 ITR 0277 “24. It is of significance to note that the conceptual and contextual difference between Section 271(1)(c) and Section 276C of the IT Act was lost sight of in Dilip Shroff's case (supra). 25. The Explanations appended to Section 272(1)(c) of the IT Act entirely indicates the element of strict liability on the assessee for concealment or for giving inaccurate particulars while filing return. The judgment in Dilp N. Shroof's case (supra) has not considered the effect and relevance of Section 276C of the I.T. Act. Object behind enactment of Section 271(1)(e) read with Explanations indicate 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. Wilful concealment is not an essential (8 of 17) [ITA-352/2017] ingredient for attracting civil liability as is the case in the matter of prosecution under Section 276C of the I.T. Act.” Dilip N. Shroff vs. Joint Commissioner of Income Tax, Special Range, Mumbai; [2007] 291 ITR 519 (SC) 31. Section 271(1)(c) of the Act is in two parts. Whereas the first part refers to concealment of income, the second part refers to furnishing of inaccurate particulars thereof. In the instant case, the penalty has been levied upon the Appellant under the second part of Section 271(1)(c) of the Act. One of the questions which arises for consideration is as to whether Explanation 1 is applicable in respect of both the parts or in respect of the first part only. 43. The expression \"conceal\" is of great importance. According to Law Lexicon, the word \"conceal\" means: “to hide or keep secret. The word \"conceal\" is con+celare which implies to hide. It means to hide or withdraw from observation; to cover or keep from sight; to prevent the discovery of; to withhold knowledge of. The offence of concealment is, thus, a direct attempt to hide an item of income or a portion thereof from the knowledge of the income tax authorities. In Webster's Dictionary, \"inaccurate\" has been defined as: not accurate, not exact or correct; not according to truth; erroneous; as an inaccurate statement, copy or transcript. 46. The explanation, having regard to the decisions of this Court, must be preceded by a finding as to how and in what manner he furnished the particulars of his income. It is beyond any doubt or dispute that for the said purpose the Income Tax Officer must arrive at a satisfaction in this behalf. [See Commissioner of Income Tax v. Ram Commercial Enterprises Ltd. MANU/DE/1081/1998 : [2000]246ITR568(Delhi) and Diwan Enterprises v. Commissioner of Income Tax MANU/DE/0306/1998 : [2000]246ITR571(Delhi)]” 8.1. He has relied upon the decision of this Court in case of Sheveta Construction Co. Pvt. Ltd. vs. ITO, Ward 3(4) (DBITA No. 534/2008) decided on 6th December, 2016 wherein it has been held as under:- “6. Another decision of Supreme Court in case of Dilip N. Shroff Vs. Joint Commissioner of Income Tax & Anr . (2007) 291 ITR 519 (SC) it has been held as under “It is of some significance that in the standard (9 of 17) [ITA-352/2017] proforma used by the Assessing Officer in issuing a notice despite the fact that the same postulates that inappropriate words and paragraphs were to be deleted, but the same had not been done. Thus, the Assessing Officer himself was not sure as to whether he had proceeded on the basis that the assessee had concealed his income or he had furnished inaccurate particulars. Even before us, the learned Additional Solicitor General while placing the order of assessment laid emphasis that he had dealt with both the situations. The impugned order, therefore, suffers from non-application of mind. It was also bound to comply with the principles of natural justice. The Income Tax Officer had merely held that the assessee is guilty of furnishing of inaccurate particulars and not of concealment of income; which finding was arrived at also by the Commissioner of Income Tax and the Income Tax Appellate Tribunal. In the facts and circumstances of the case, there are enough material to show that the action on the part of the appellant may not be said to be such which would attract the penal provision under s. 271 (1)(c). For the reasons aforementioned, the impugned judgment cannot be sustained.” 7. He contended that while concluding the assessment order the officer must be clear whether it is the concealment of income or furnishing of inaccurate detail. He cannot have both the things. 7.1 However, Mr. Singhi appearing for the department submits that a perusal of the order of penalty makes it amply clear that both the things are fulfilled. In that view of the matter the view taken by the Tribunal is required to be accepted. “ 8.2. He has also relied upon the decision of Andhra Pradesh High Court in case of Chennakesava Pharmaceuticals vs. Commissioner of Income Tax reported in (2012) 349 ITR 0196 wherein it has been held as under:- “19. In Dilip N. Shroff's case (10 supra), the Supreme approved the judgment in Ram Commercial Enterprises Ltd.'s case (supra 6) and also held that Section 271(1) (c) being a penal provision must be strictly construed and that mens rea is necessary ingredient for penalty under Section 271(1)(c) of the Act. 20. But in Commissioner of Income Tax vs. Dharmendra Textile Processors MANU/SC/4448/2008 : (2008) 306 ITR 277 (SC), the Supreme Court held that the penalty u/s. 271(1)(c) is a civil liability and \"wilful\" concealment is not an essential ingredient for attracting civil liability. It over ruled only that portion of the judgment in Dilip N. Shroff's case (10 supra )wherein the Supreme Court had held that the mens rea was essential ingredient for imposing penalty under Section 271(1)(c) of the Act. (10 of 17) [ITA-352/2017] This was pointed out in Reliance Petroproducts Pvt. Ltd's case (1 supra). 21. In Reliance Petroproducts Pvt. Ltd's case (1 supra), the Supreme Court also held that imposition of penalty is unwarranted when there is no finding in the assessment order that details supplied by the assessee were found to be false. This indicates that the view taken by the Delhi High Court in Ram Commercial Enterprises Ltd.'s case (6 supra ) which has been approved in Dilip N. Shroff's case (10 supra) continues to be valid and this part of the judgment in Dilip N. Shroff's case (10 supra) has not been over ruled and continues to be good law.” 9. Counsel for the respondents Mr. Siddharth Bapna has contested the claim and contended that the view taken by the Tribunal is just and proper and in view of the series of decisions of Supreme Court right from 1989-2009 and the recent decision of Delhi High Court, it is clearly established that the view taken by it is well designed and was not a human error, therefore, he contended mens rea in view of the decisions of Supreme Court:- Union of India & Ors. vs. Dharmendra Textile Processors & Ors.: (2008) 306 ITR 0277 “26. In Union Budget of 1996-97, Section 11AC of the Act was introduced. It has made the position clear that there is no scope for any discretion. In para 136 of the Union Budget reference has been made to the provision stating that the levy of penalty is a mandatory penalty. In the Notes on Clauses also the similar indication has been given. 27. Above being the position, the plea that the Rules 96ZQ and 96ZO have a concept of discretion inbuilt cannot be sustained. Dilip Shroff's case (supra) was not correctly decided but Chairman, SEBI's case (supra) has analysed the legal position in the correct perspectives. The reference is answered. The mater shall now be placed before the Division Bench to deal with the matter in the light of what has been stated above, only so far as the cases where challenge to vires of Rule 967Q(5). In all other cases the orders of the High Court or the Tribunal, as the case may be, are quashed and the matter remitted to it for disposal in the light of present judgments. Appeals except Civil Appeal Nos. 3388 of 2006, 3397 of 2003, 3398-99 of 2003, 4096 of 2004, 4316 of 2007, 4317 of 2007, 5277 of 2006, 675 of 2007, 1420 (11 of 17) [ITA-352/2017] of 2007 and appeal relating to SLP (C) No. 21751 of 2007 are allowed and the excepted appeals shall now be placed before the Division Bench for disposal.” M/s Gujarat Travancore Agency, Cochin vs. Commissioner of Income Tax, Kerala, Ernakulam; (1989) 3 SCC 52 4. Learned Counsel for the assesses has addressed an exhaustive argument before us on the question whether a penalty imposed under Section 271(l)(a) of the Act involves the element of mens rea and in support of his submission that it does he has placed before us several cases decided by this Court and the High Courts in order to demonstrate that the proceedings by way of penalty under Section 271(l)(a) of the Act are quasi criminal in nature and that therefore the element of mens rea is a mandatory requirement before a penalty can be imposed under Section 271(l)(a). We are relieved of the necessity of referring to all those decisions. Indeed, many of them were considered by the High Court and are referred to in the judgment under appeal. It is sufficient for us to refer to Section 271(1)(a), which provides that a penalty may be imposed if the Income-tax Officer is satisfied that any person has without reasonable cause failed to furnish the return of total income, and to Section 276C which provides that if a person wilfully fails to furnish in due time the return of income required under Section 139(1), he shall be punishable with rigorous imprisonment for a term which may extend to one year or with fine. It is clear that in the former case what is intended is a civil obligation while in the latter what is imposed is a criminal sentence. There can be no dispute that having regard to the provisions of Section 276C, which speaks of wilful failure on the part of the defaulter and taking into consideration the nature of the penalty, which is punitive, no sentence can be imposed under that provision unless the element of mens rea is established. In most cases of criminal liability, the intention of the Legislature is that the penalty should serve as a deterrent. The creation of an offence by Statute proceeds on the assumption that society suffers injury by the act or omission of the defaulter and that a deterrent must be imposed to discourage the repetition of the offence. In the case of a proceeding under Section 271(1)(a), however, it seems that the intention of the legislature is to emphasise the fact of loss of Revenue and to provide a remedy for such loss, although no doubt an element of coercion is present in the penalty. In this connection the terms in which the penalty falls to be measured is significant. Unless there is something in the language of the statute indicating the need to establish the element of mens rea it is generally sufficient to prove that a default in complying with the statute has occurred. In (12 of 17) [ITA-352/2017] our opinion, there is nothing in Section 271(l)(a) which requires that mens rea must be proved before penalty can be levied under that provision. We are supported by the statement in Corpus Juris Secundum, Volume 85, page 580, paragraph 1023: A penalty imposed for a tax delinquency is a civil obligation, remedial and coercive in its nature, and is far different from the penalty for a crime or a fine or forfeiture provided as punishment for the violation of criminal or penal laws.” Chairman, SEBI vs. Shriram Mutual Fund & Anr; (2006) 5 SCC 361 29. The Tribunal set aside the order passed by the Adjudicating Officer on the ground that the penalty to be imposed for failure to perform a statutory obligation is a matter of discretion which has to be exercised judicially and on a consideration of all the relevant facts and circumstances. The Tribunal also held that the Adjudicating Officer has to be satisfied with the material placed before him that the violation deserves punishment. It was held that the penalty is warranted by the quantum which has to be decided by taking into consideration the factors stated in Section 15J of SEBI Act. In our opinion, the Tribunal has miserably failed to appreciate that by setting aside the order of the Adjudicating Officer the Tribunal was setting a serious wrong precedent whereby every offender would take shelter of alleged hardships to violate the provisions of the Act. In our opinion, mens rea is not an essential ingredient for contravention of the provisions of a civil act. In our view, the penalty is attracted as soon as contravention of the statutory obligations as contemplated by the Act is established and, therefore, the intention of the parties committing such violation becomes immaterial. In other words, the breach of a civil obligation which attracts penalty under the provisions of an Act would immediately attract the levy of penalty irrespective of the fact whether the contravention was made by the defaulter with any guilty intention or not. This apart that unless the language of the statute indicates the need to establish the element of mens rea, it is generally sufficient to prove that a default in complying with the statute has occurred. Under a close scrutiny of Section 15D(b) and 15E of the Act, there is nothing which requires that mens rea must be proved before penalty can be imposed under these provisions. Hence, we are of the view that once the contravention is established, then the penalty has to follow and only the quantum of penalty is discretionary. Discretion has been exercised by the Adjudicating Officer as is evident from imposition of lesser penalty than what could have been imposed under the provisions. The intention of the parties is wholly irrelevant since there has been a clear violation of the statutory Regulations and provisions repetitively, covering a period of 6 quarters. Hence we hold that the respondents have wilfully violated (13 of 17) [ITA-352/2017] statutory provisions with impunity and hence the imposition of penalty was fully justified. The Tribunal, in this context, failed to appreciate that every Mutual Fund has to redeem the units as per terms and conditions of the scheme on the request of the unit holders and this cannot, in any manner, be considered as an extraordinary circumstance or something which was not known to the respondents. The facts and circumstances of the present case in no way indicate the existence of special circumstances so as to waive the penalty imposed by the Adjudicating Officer. A perusal of the order passed by the Adjudicating Officer would clearly go to show that factors such as small size of the funds, low volume of transactions, thinly traded securities, administrative and operational exigencies were duly considered and appreciated by the Adjudicating Officer while passing the order and that is why the Adjudicating Officer did not impose the maximum permissible penalty. The Tribunal failed to appreciate that the objective behind imposing certain limit on the business that can be conducted by mutual fund through the associate broker is to eliminate any undue advantage to the class of brokers by virtue of their close association with the Asset Management Company, sponsors etc. In other words, the object of imposing such limits is to ensure that there is no concentration of business only in such entities, so that there is an indirect pecuniary advantage to the person associated with the Asset Management Company, sponsors etc. Any undue concentration on the business of the mutual fund with its affiliated brokers by paying huge commissions to such brokers is neither desirable nor in the interest of the unit holders. It is a matter of record that in the 12 admitted instances of violation by the respondents, the percentage of the business through the associated brokers was as high as 91.68% and 52.2% in certain factors. This apart, the respondent's excessive exposure to the associate brokers is not only established from the record, but has also been admitted by respondents. 35. In our considered opinion, penalty is attracted as soon as the contravention of the statutory obligation as contemplated by the Act and the Regulation is established and hence the intention of the parties committing such violation becomes wholly irrelevant. A breach of civil obligation which attracts penalty in the nature of fine under the provisions of the Act and the Regulations would immediately attract the levy of penalty irrespective of the fact whether contravention must made by the defaulter with guilty intention or not. We also further held that unless the language of the statute indicates the need to establish the presence of mens rea, it is wholly unnecessary to ascertain whether such a violation was intentional or not. On a careful perusal of Section 15D(b) and Section 15E of the Act, there is nothing which requires that mens rea must be proved before penalty can be imposed under these provisions. Hence once the (14 of 17) [ITA-352/2017] contravention is established then the penalty is to follow.” Commissioner of Income Tax, Delhi vs. Atul Mohan Bindal; (2009) 9 SCC 589 10. The quantum of penalty is prescribed in Clause (iii). Explanation 1, appended to Section 271(1)(c) provides that if that person fails to offer an explanation or the explanation offered by such person is found to be false or the explanation offered by him is not substantiated and he fails to prove that such explanation is bona fide and that all the facts relating to the same and material to the computation of his total income has been disclosed by him, for the purposes of Section 271(1)(c), the amount added or disallowed in computing the total income is deemed to represent the concealed income. The penalty spoken of in Section 271(1)(c) is neither criminal nor quasi- criminal but a civil liability; albeit, a strict liability. Such liability being civil in nature, mens rea is not essential. 11. In the case of Union of India and Ors. v. Dharamendra Textile Processors and Ors. MANU/SC/4448/2008 : (2008) 306 ITR 277, a three judge Bench of this Court held that Dilip N. Shroff did not lay down correct law as the difference between Section 271(1)(c) and Section 276(c) of the Act was lost sight of. The Court held that the explanation appended to Section 271(1)(c) indicates element of strict liability on the assessee for concealment or for giving inaccurate particulars while filing the return. The Court held thus: The Explanations appended to Section 271(1)(c) of the Income Tax Act, 1961, indicate the elements of strict liability on the assessee for concealment or for giving inaccurate particulars while filing the return. The judgment in Dilip N. Shroff case (supra) has not considered the effect and relevance of Section 276(c) of the I.T. Act. The object behind the enactment of Section 271(1)(c) read with Explanations indicates that the Section has been enacted to provide for a remedy for loss of revenue. The penalty under that provision is a civil liability. Willful concealment is not an essential ingredient for attracting civil liability as is the case in the matter of prosecution under Section 276(c).” 9.1. He has also relied upon the decision of Delhi High Court in Tax Appeal No. 82/2012 (Commissioner of Income vs. NG Technologies Ltd.) decided on 1st December, 2014 against which the SLP was dismissed it has been observed as under:- (15 of 17) [ITA-352/2017] “15. We have recorded the findings of the Tribunal on the aforesaid aspect in paragraphs quoted from the impugned order. The reasoning of the Tribunal is two- fold. Firstly, the assessee had relied upon the report submitted by the Chartered Accountant and the return of income prepared by the said Chartered Accountant. The mistake or error had occurred due to lack of proper legal advice. Secondly, the error or mistake in claiming capital loss in the profit and loss account was rectified and corrected by filing the revised return, before detection or erratum being discovered. 16. We have examined the aforesaid reasoning, but are unable to accept the said finding. All claims or deductions wrongly made cannot be treated as bona fide and protected by Explanation 1 to section 271(1) (c) of the Act. Whether or not the conduct of the assessee was legitimate or mere legerdemain would depend upon facts of each case, nature and character of the claim, whether the legal provision applicable was capable of two interpretations, whether the claim/exemption was plausible and conceivable etc. In cases where interpretive skills and divergent views are plausible, penalty for concealment should not be imposed. Assessee need not be asked to pay penalty if he has taken a particular legal stand and preferred an interpretation in his favour. However, at the same time, the interpretation put forward or the claim made should not be banal or a ruse, per se or ex facie incorrect or wrong. Platitudinous conduct or claim is not a bonafide conduct. 17. In the facts of the present case, it is noticeable that the assessee had claimed loss on account of sale of plant and machinery i.e. the fixed assets, in the profit and loss account. This should not have been obviously claimed. It was without any debate and discussion a capital loss. The claim cannot be explained and justified by any argument and reasoning. The claim was positively and meaningfully incorrect and contrary to the principles of straight forward and primary accountancy. It is true and correct that an assessee would normally rely upon legal opinion of a Chartered Accountant, who is required to audit accounts of the company and also submit an audit report, but penalty cannot be deleted on guise or pretence of legal opinion as a smokescreen and facade. The claim or the entry in the present case was contrary to elementary and well- known basic principles of accountancy. The present case is not a case of a debatable issue relating to legal or accountancy principle which could have been interpreted differently. 18. It is mandatory and compulsory for a company to get their accounts audited from a Chartered Accountant, who is required to submit an audit report to be filed with the return. We cannot, therefore, accept the contention of the assessee as universal and comprehensive that all claims howsoever untenable, (16 of 17) [ITA-352/2017] once certified by a Chartered Accountant or the Directors of the company, cannot be made a subject matter of penalty proceedings. This will be stretching and making the requirement to prove bona fide conduct illusionary and ineffective and would fail to, check and stop fanciful and incredible claims. It is noticeable that most of the income tax returns are accepted without scrutiny or regular assessment and self-compliance of tax provisions is a rule required to be followed. The view, which we have taken, is in consonance with the ratio expounded in Reliance Petro Products Pvt. Ltd. (supra).” 10. We have heard counsel for both the sides. 11. Before proceeding with the matter, it will not be out of place to mention that the appellant has already paid advance tax and under the bonafide impression, his claim was wrongly rejected therefore, while issuing notice, the view of ITO whether the inaccurate information and concealment of income is there is required to be viewed very seriously. 12. From the record, it is very clear that the income was declared in which the claim was wrongly claimed because of the wrong particulars of the income therefore, even the ITO was not clear whether it amounts to inaccurate information and concealment of income. Even the submissions made by the representative of the department was after initiation of proceedings. The appellant clearly contended that the advance tax is already paid and it was wrongly deprived by the mistake and claim was wrongly shown for the amount. 13. In that view of the matter, even from the contention which has been raised it is clear that there is difference. In view thereof, the Tribunal has committed serious error in reversing the view taken by the CIT(A) inasmuch as the CIT(A) while deciding the matter, specifically held that it is mandatory that the AO has not considered the contention for penalty for furnishing of inaccurate (17 of 17) [ITA-352/2017] particulars as well as concealment of particulars of income which cannot be legally sustained and the same has not been reversed but the Tribunal has in a mechanically engineered technology which was referred in the judgment, has wrongly reversed the finding of the CIT(A). 14. In our considered opinion there is error committed by the Tribunal, therefore, the view taken by the CIT(A) is required to be affirmed and that of the Tribunal is required to be reversed. 15. In that view of the matter, the issues are answered in favour of the assessee and against the department. 16. The appeal stands allowed. (VIJAY KUMAR VYAS),J (K.S.JHAVERI),J A.Sharma/54 "