Income Tax Appellate Tribunal - Mumbai
Walter Saldanha, Mumbai vs Assessee on 11 April, 1955
IN THE INCOME TAX APPELLATE TRIBUNAL
MUMBAI BENCH "G", MUMBAI
BEFORE SHRI D.K. AGAR WAL, J.M. AND SHRI A.L. GEHLOT, A.M.
ITA No. 444/M/2010
Assessment Year: 2006-07
Mr. Walter Saldhana, ... Appellant
Flat No. 2, Nirvana,
24/30 t h Road, TPS III,
Bandra (West), Mumbai - 400 050
(PAN - AAKPS9183Q)
Vs.
Dy. Commissioner of Income-tax, ...Respondent
Range 9(1), Mumbai
Appellant by : Mr. Yogesh Thar
Respondent by : Mr. A.K. Nayak
ORDER
PER A.L. GEHLOT, A.M.:
This appeal filed by the Assessee is directed against the order of CIT(A)-19, Mumbai, passed on 13/11/2009 for the assessment year 2006-07,
2. The ground raised by the assessee in this appeal is pertaining to levy of penalty u/s 271(1)(c) of the Act, on the adjustment made by the AO u/s 94(7) of the Act.
3. During the course of assessment proceedings, the AO made addition under the head 'short term capital gain on account of violation of provisions of section 94(7) of the Act by not ignoring losses. The AO levied penalty of Rs. 28,91,605/- being 100% of tax sought to be evaded u/s 271(1)(c) of the At in reaspect of income of Rs85,90,626/-. The CIT(A) confirmed the said penalty.
4. The learned AR submitted that the assessee has filed revised return saying that the said capital gain is u/s 94(7) of the Act. The learned AR referred page 2 of AO's order and submitted that the assessee has furnished complete details of the transactions and on 2 ITA NO.444/M/10 M/s Walter Saldhana the basis of the details the AO calculated 'short term capital gains' after taking into consideration of provisions of section 94(7) of the Act. The learned AR further submitted that the assessee was old and aged more than 75 years. He further submitted that the assessee has filed return on the advice of technical person J.D. Mehta & Co., C.A., in support of which the learned AR referred page 9 where a copy of receipt of payment of professional fee has been placed on record. The learned AR submitted that the AO did not point out any specific particulars, which were inaccurate or concealed particulars of income. It is also the submission of the learned AR that if there are two views on one issue, which is favourable to the assessee to be taken into consideration. The learned AR further submitted that section 94(7) is basically is in respect of equity linked security transactions and not for other securities transaction. The learned AR submitted that the assessee has taken one possible view at the time of filing the return of income. The learned AR further submitted that the assessee has disclosed full particulars. In support of his arguments, the learned AR has relied upon the judgment of Apex court in the case of Reliance Petroproducts Pvt.Ltd. (322 ITR 158) (SC).
5. The learned DR, on the other hand, relied upon the orders of AO & CIT(A).
6. We have heard the learned representatives of the parties and perused the record. The Apex Court in the case of Reliance Petroproducts Pvt.Ld. (322 ITR 158) ( at page 164 ) regarding the word 'particulars' used in this section, of the section 271(1) (C) has held as under:_ " 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".
7. Now coming to the meaning of words 'inaccurate' and 'conceal'. As stated above, these words have not been defined in the 3 ITA NO.444/M/10 M/s Walter Saldhana Act. However, in Webster's Dictionary, the word "inaccurate" has been defined as under:--
"not accurate, not exact or correct; not according to truth; erroneous; as an inaccurate statement, copy or transcript."
8. The word "conceal" is derived from the latin concelare which implies con+celare to hide. Webster in his New International Dictionary equates its meaning "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.
9. The Apex Court in the case of Reliance Petroproducts Pvt.Ld. (322 ITR 158) has considered some other cases of the Apex Court on the issue at page 164 and 165 and observed as under:-
"In Dilip N. Shroff v. Jt. CIT [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 accurate 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's case (supra) was upset. In Dharamendra Textile Processors' case (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 4 ITA NO.444/M/10 M/s Walter Saldhana 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, wilful 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's case (supra) was overruled by this Court in Dharamendra Textile Processors' case (supra), was that ccording 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 (supra). However, it must be pointed out that in DharamendraTextile Processors' case (supra), no fault was found with the reasoning in the decision in Dilip N. Shroff's case (supra), where the Court explained the meaning of the terms "conceal" and "inaccurate". It was only the ultimateinference in Dilip N. Shroff's case (supra) to the effect that mens rea wasan essential ingredient for the penalty under section 271(1)(c) that the decision in Dilip N. Shroff's case (supra) was overruled".
10. From above discussions we find that there is strict liability on the assessee for concealment or for giving inaccurate particulars while filing the return. The penalty under that provision is a civil liability. Willful concealment is not an essential ingredient for attracting civil liability. It is obvious that the penal provisions would operate when there is concealment of particulars of income or a failure of duty to disclose fully and truly particulars of income, imposed under the Act and the Rules there under. The duty is enjoined upon a person to make a correct and complete disclosure of particulars of his income and it is only when he fails in his duty by not disclosing particulars of his income or part thereof, he conceals the particulars of his income. The duty is enjoined upon him to make a complete disclosure of particulars of his income as well as a correct disclosure. Therefore, if the disclosure made of the particulars of income is incorrect, then also he commits breach of his duty. Such defaults entail the penal consequences contemplated by section 271(1) (c).
11. There cannot be a straight jacket formula for detection of these defaults of concealment or of furnishing inaccurate partic-
5 ITA NO.444/M/10M/s Walter Saldhana ulars of income and indeed concealment of particulars of income and in accurate particulars of income may at times overlap. It depends upon the facts of the each case. In the assessment proceedings the AO while ascertaining the total income chargeable to tax would be in a position to detect the specific or definite particulars of income concealed or of which false particulars are furnished. Where in the constituents of income returned, such specific or definite particulars of income are detected as concealed, then even in the total income figure to that extent they reflect, it would amount to concealment to that extent. In the same way where specific and definite particulars of income are detected as inaccurate, then such figure will also make the total income inaccurate in particulars to the extent it does not include such income. In other words the AO cannot invoke provision of section271 (1) (c) on the basis routine and general presumptions. Whether it be a case of only concealment or of only inaccuracy or both, the particulars of income so vitiated would be specific and definite and be known in the assessment proceedings by the ITO, who on being satisfied about each concealment or inaccuracy of particulars of income would be in a position to initiate the penalty proceedings on one or both of the grounds of default as may have been specifically and directly detected.
12. In addition to main provisions of concealment "has concealed the particulars of his income" or "has furnished inaccurate particulars of such income" there are deemed to represent the income in respect of which particulars have been concealed .The deemed concealment is provided in explanations. Often a question arose whether in cases where additions or disallowances made by the ITO the penal provisions of section271(1)(c) would attract. Explanation 1 takes care of this situation. The explanation 1 to section 271(1) of the Act reads as under:-
" Explanation 1.-Where in respect of any facts material to the computation of the total income of any person under this Act,-6 ITA NO.444/M/10
M/s Walter Saldhana (A) such person fails to offer an explanation or offers an explanation which is found by the Assessing Officer or the Commissioner (Appeals) or the Commissioner to be false, or (B) such person offers an explanation which he is not able to substantiate and 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 have been disclosed by him, then, the amount added or disallowed in computing the total income of such person as a result thereof shall, for the purposes of clause (c) of this sub-section, be deemed to represent the income in respect of which particulars have been concealed."
13. A conspectus of the Explanation makes it clear that the statute visualised the assessment proceedings and penalty proceedings to be wholly distinct and independent of each other. In essence, the Explanation is a rule of evidence. Presumptions which are rebutting table in nature are available to be drawn. The initial burden of discharging the onus of rebuttal is on the assessee. The rationale behind this view is that the basic facts are within the special knowledge of the assessee. Section 106 of the Indian Evidence Act, 1872, gives statutory recognition to this universally accepted rule of evidence. There is no discretion conferred on the Assessing Officer as to whether he can invoke the Explanation or not. Explanation 1 comes into operation when, in respect of any facts material to the computation of total income of any person, there is failure to offer an explanation or an explanation is offered which is found to be false by the Assessing Officer or the first appellate authority, or an explanation is offered which is not substantiated. In such a case, the amount added or disallowed in computing the total income is deemed to represent the income in respect of which particulars have been concealed. As per the provision of Explanation 1, the onus to establish that the explanation offered was bona fide and all facts relating to the same and material to the computation of his income have been disclosed by him will be on the person charged with concealment.
14. The issue relating to "bonafide" and "false" returns in imposing penalty on the assessee under section 43 of the Madhya Pradesh General Sales Tax Act, 1958, and section 9(2) of the 7 ITA NO.444/M/10 M/s Walter Saldhana Central Sales Tax Act, 1956 have been examined by the Apex Court in the case of Cement Marketing Co. of India Ltd. V .Assistant Commissioner of Sales Tax [1980] 4 Taxman 44 (SC), 124 ITR 15 (SC). Facts in brief of this case were that the assessee-company effected certain transactions of sale of cement in accordance with the provisions of the Cement Control Order during the assessment period 1-8-1971 to 31-7-1972. The amount of freight included in the "free on rail destinations railway station" was paid by the purchasers and hence the assessee deducted from the price shown in the invoices sent to the purchasers. In the course of its assessment to sales tax under the Madhya Pradesh General Sales Tax Act, 1958 and the Central Sales Tax Act, 1956, the assessee did not include the said amount of freight in its taxable turnover on the ground that it did not form part of the sale price. In his two separate assessment orders, one under the Central Sales Tax Act, 1956, and the other under the Madhya Pradesh General Sales Tax Act, 1958, the Assistant Commissioner, however, included the same in the taxable turnover for levying tax. He also imposed heavy penalty on account of the assessee's failure to disclose the same in its taxable returns. On direct appeal to the Supreme Court held that it is difficult to see how the assessee could be said to have filed "false" returns, when what the assessee did, namely, not including the amount of freight in the taxable turnover, was under
a bona fide belief that the amount of freight did not form part of the sale price and was not includible in the taxable turnover. The contention of the assessee throughout was that on a proper construction of the definition of "sale price" in section 2(o) of the Madhya Pradesh General Sales Tax Act, 1958, and section 2(h) of the Central Sales Tax Act, 1956, the amount of freight did not fall within the definition and was not liable to be included in the taxable turnover. This was the reason why the assessee did not include the amount of freight in the taxable turnover in the returns filed by it. The court further held that it was a highly arguable contention which required serious consideration by the court and the belief entertained by the assessee that it was not liable to include the amount of freight in the taxable turnover, could not be 8 ITA NO.444/M/10 M/s Walter Saldhana said to be mala fide or unreasonable. What section 43 of the Madhya Pradesh General Sales Tax Act, 1958, requires is that the assessee should have filed a "false" return. Where the assessee does not include a particular item in the taxable turnover under a bona fide belief that he is not liable so to include it, it would not be right to condemn the return as a "false" return inviting imposition of penalty. The court held that if the view canvassed on behalf of the revenue were accepted, the result would be that even if the assessee 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 contention is ultimately found by the Court to be not acceptable. That surely could never have been intended by the Legislature. Under the circumstance of the case the Court was of the view that the assessee could not be said to have filed "false" returns when it did not include the amount of freight in the taxable turnover shown in the returns and the Assistant Commissioner was not justified in imposing penalty on the assessee under section 43 of the Madhya Pradesh General Sales Tax Act, 1958, and section 9(2) of the Central Sales Tax Act, 1956.
15. From the above discussion of scheme of the Act, two important things come out are that it is the duty of the assessee to furnish particulars of income simultaneously he has right to claim all exemptions and deductions provided in the Act, according to the assessee for which he is entitled. The duty of the Assessing Officer is to assess real and correct income in accordance with law. The CBDT in its Circular No. 14(XL35) of 1955 dated 11.04.1955 'regarding departmental attitude towards' - stated that The CBDT in its Circular No. 14(XL35) of 1955 dated 11.04.1955 'regarding departmental attitude towards' - stated that Officers of the department must not take advantage of ignorance of an assessee as to his rights. It is one of their duties to assist a taxpayer in every reasonable way, particularly in the matter of claiming and securing reliefs and in this regard the officers should take the initiative in 9 ITA NO.444/M/10 M/s Walter Saldhana guiding a taxpayer where proceedings or other particulars before them indicate that some refund or relief is due to him. It is further stated that officers should, when requested, freely advise assessees the way in which entries should be made in various forms, they should not themselves make any in them on their behalf. Where such advice is given, it should be clearly explained to them that they are responsible for the entries made in any form and that they cannot be allowed to plead that they were made under official instructions.
16. In the light of above discussion we consider the facts of the case under consideration. On perusal of the orders of revenue authorities, we find that the penalty u/s 271(1)(c) was levied on the ground that the assessee violated of provisions of section 94(7) of the Act by not ignoring losses while computing short term capital gains on transactions related to section 94(7) of the Act. It is important to state here that the AO made the addition only on the basis of material and informations furnished by the assessee. The Apex Court in the case of Reliance Petroproducts Pvt. Ld. (322 ITR
158) ( at page 164 ) regarding the word 'particulars' used in section 271(1) (C) has held that 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. But in the case under consideration we find that the assessee has furnished full detail and has not concealed any particulars of income or has furnished any inaccurate particular of income. Further, we noticed that that there were no such specific requirements in the return form applicable to the year under consideration. Such requirement of the column in the return has been inserted by amendment in return form, ITR-6, at page 17, "Schedule CG capital gain" SNo3 (d) which is applicable from AY 2007-08. In the case of Reliance Petroproducts Pvt.Ltd. (322 ITR 158) (SC) the Hon'ble Supreme Court held that where there is no finding that any details supplied by the assessee in its return 10 ITA NO.444/M/10 M/s Walter Saldhana are found to be incorrect or erroneous or false there is no question of inviting the penalty u/s 271(1)(c). A mere making of a claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee. Such a claim made in the return cannot amount to furnishing inaccurate particulars. The case of the assessee under consideration is squarely covered by thee above judgment of the Apex court. The assessee demonstrated that their claim was bonafide claim. In the light of above discussion, we don't find that the case under consideration is a fit case for levy penalty under section 271(1)(c) of the Act we therefore cancelled the penalty levied.
17. In the result, the appeal of the assessee is allowed.
Pronounced in the open court on this 20 t h day of
August, 2010.
Sd/- Sd/-
(D. K. AGARWAL) (A.L. GEHLOT)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated: 20 t h August, 2010
Copy to:-
1) The Appellant.
2) The Respondent.
3) The CIT (A) concerned.
4) The CIT concerned.
5) The Departmental Representative, "G" Bench, I.T.A.T.,
Mumbai.
By Order
//true copy//
Asst. Registrar,
I.T.A.T., Mumbai.
Kv