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Showing contexts for: dharmendra textile processor in P.C. Bhandari & Co. Pvt. Ltd, New Delhi vs Department Of Income Tax on 23 April, 2010Matching Fragments
This is Department's appeal for the assessment year 2005-06 taking the following ground:-
"The ld. CIT(A) erred in law and on facts of the case in deleting the penalty of Rs. 2,26,619/- imposed by the Assessing Officer u/s 271(1)(c) of the Income Tax Act, 1961 without appreciating that the latest decision of the Apex Court in the case of "Dharmendra Textiles Processors And Others", 306 ITR 277(SC) squarely supports the stand of the AO in levying penalty u/s 271(1)(c) of the Act."
3. By virtue of the impugned order, the learned CIT(A) deleted the penalty. This brings the Department in appeal before us.
4. Challenging the impugned order, the ld. DR has contended that the ld. CIT(A) has erred in deleting the penalty rightly imposed by the AO; that while doing so, the ld. CIT(A) did not appreciate the decision of the Hon'ble Supreme Court in "Union of India And Others v. Dharmendra Textiles Processors And Others", 306 ITR 277(SC), which squarely supports the stand of the AO in levying the concealment penalty. It has also been contended that the fact that no appeal was preferred by the assessee against the addition made by the AO in the assessment proceedings further goes to prove that the penalty was correctly levied.
5. The learned counsel for the assessee, on the other hand, has placed strong reliance on the impugned order. It has been submitted that firstly, it was a loss case, and it was therefore, that the assessee did not file any appeal against the assessment order; that the assessee had made a bona fide claim of certain expenditure which was necessary for the day to-day running of the company; that these expenses were disallowed by the AO;
4 ITA 1431(Del)09 that it was a clear case of difference in opinion regarding the claim of the assessee; that the assessee considered these claims to be allowable, whereas the AO was of the view that they were not allowable; that even though there was no business income, the assessee company had, during the year, income from different sources like interest, tax free dividends and capital gains, etc.; that this goes to show that the company was very much in existence during the year; that the company had, for survival, to incur various expenses; that these expenses were necessitated for continuation of the assessee company so as to enable it to make efforts for business, which is also evident from the nature of the expenditure claimed; that the AO nowhere made it out to be a case of claim of bogus expenditure; that the sole basis for the disallowance was that during the year, the assessee company had not carried out any business activity; and that it was in these circumstances that the ld. CIT(A) deleted the penalty, and rightly so. The learned counsel, as against "Dharmendra Textiles Processors And Others"
8. "Dharmendra Textiles Processors And Others" (supra), it is seen, has been considered in "Reliance Petroproducts Pvt. Ltd."(supra), It has been held in "Reliance Petroproducts Pvt. Ltd."(supra), that in order to be 6 ITA 1431(Del)09 covered by the provisions of section 271(1)(c) of the Act, there has to be a concealment of particulars of its income by the assessee; that further, the assessee must have furnished inaccurate particulars of its income; that where, as in that case, a statement made or details supplied were not found to be factually incorrect, at least, prima facie, the assessee could not be guilty of furnishing inaccurate particulars; that unless this case is strictly covered by the provision, the penalty provision cannot be invoked; that by any stretch of imagination, making an incorrect claim in law cannot tantamount to furnishing of inaccurate particulars; that the AO has to be satisfied that a person has concealed the particulars of his income, or has furnished inaccurate particulars of such income; that as such, it is obvious that it must be shown that the conditions u/s 271 (1)(c) must exist before the penalty is imposed; that everything would depend upon the return filed because that is the only document where the assessee can furnish the particulars of its income; that when such particulars are found to be incorrect, the liability would arise; that the assessee must be found to have failed to prove that the explanation is not only bona fide but that all the facts relating to the same and material to the computation of its income were not disclosed by it; that the explanation must be preceded by a finding as to how and in what manner the assessee has furnished the 7 ITA 1431(Del)09 particulars of its income; that in "Dharmendra Textiles Processors And Others" (supra), it was concluded 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 the return, there was no mens rea, that the object behind the enactment of section 271(1)(c) read with the Explanation thereto was for providing remedy for the loss of revenue and such a penalty was a civil liability and therefore, willful concealment is not an essential ingredient for attracting civil liability; and that in "Dharmendra Textiles Processors And Others" (supra), no fault was found with the reasoning in the decision of the Hon'ble Supreme Court in "Dilip N. Shroff v. Joint CIT, Bombay And Another", 207 6 SCC 329, wherein, the meaning of the terms "conceal" and "inaccurate" was explained; that it was only the ultimate inference in "Dilip N. Shroff"(supra), to the effect that mens rea was an essential ingredient for the penalty u/s 271(1)(c); that the decision in "Dilip N. Shroff" (supra) was overruled basically since the effect and difference between sections 271(1)(c) and 276-C of the Act was lost sight of in "Dilip N. Shroff"; that "inaccurate particulars" must mean the details supplied in the return which are not actual, not exact or correct, not according to truth or erroneous; that in that case [in Reliance Petroproducts Pvt. Ltd.], there was no finding that the details supplied by 8 ITA 1431(Del)09 the assessee in its return were found to be inaccurate or erroneous or false; that such not being the case, there would be no question of inviting the penalty u/s 271(1)(c) of the Act; and that 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 and such claim made in the return cannot amount to inaccurate particulars.