1. This order shall dispose of I. T. A. Nos. 427 and 428 of 2009, as, according to the learned counsel for the parties, the facts and the law point involved in both the appeals are identical. However, the facts are being taken from I. T. A. No. 428 of 2009.
2. I. T. A. No. 428 of 2009 has been preferred by the Revenue under section 260A of the Income-tax Act, 1961 (in short, "the Act"), against the order dated February 27, 2009, annexure A. 7 passed by the Income-tax Appellate Tribunal, Amritsar Bench, Amritsar (in short, "the Tribunal"), in I. T. A. No. 324 (ASR)/2007, for the assessment year 1996-97. Both the appeals were admitted on May 3, 2010, to consider the following substantial questions of law :
"(I) Whether, on the facts and in the circumstances of the case, the findings of the Tribunal that the assessee was not guilty of furnishing inaccurate particulars of income were made without properly appreciating the facts available on record ?
(II) Whether, on the facts and in the circumstances of the case and in view of the provisions contained in section 271(1)(c) of the Income-tax Act, 1961 and Explanations thereto, the Tribunal was right in law in confirming the deletion of penalty by the Commissioner of Income-tax (Appeals) without considering the judgment of the Supreme Court in the case of Union of India v. Dharamendra Textile Processors [2008] 306 ITR 277 (SC) ?"
3. Briefly, the facts necessary for adjudication of the controversy involved, as narrated in the appeal may be noticed. The assessee filed its income-tax return on September 30, 1996, declaring income of Rs. 2,83,340 and agriculture income at Rs. 18,800. It was processed under section 143(1)(a) of the Act. The assessee was earning rental income, interest from different firms and banks as well as agriculture income. Its case was selected for scrutiny and notices under sections 142(1) and 143(2) of the Act were issued to the assessee. During the assessment proceedings, it was noticed that the assessee had received compensation against acquisition of land at Village Kamaspur, Tehsil and District Sonepat at Rs. 30,96,724. The assessee annexed a note to the return claiming exemption from capital gains tax. The Assessing Officer asked the assessee to substantiate his claim for exemption. The assessee filed written submissions dated September 18, 1998, including a copy of the Gazette notification regarding acquisition of land. According to the assessee, the land was purchased between June 7, 1993, to July 6, 1993, through 13 different purchase deeds but the same were called for by the Land Acquisition Collector, Haryana, and were never returned. The land belonging to different persons was about 40 kanals and the value of investment of each person including the assessee was at Rs. 9,02,419. However, no copy of purchase deed was ever produced before the Assessing Officer. The Assessing officer collected the photo copy of the notification registered with the Halqa Patwari. The assessee pleaded before the Assessing Officer that the impugned property was situated beyond 8 kms. from the municipal limits of Sonepat and claimed exemption from capital gains tax. The assessee produced a letter dated June 19, 1996, from SDE, Maintenance Sub Division PWD (B&R), Sonepat, in this regard. The Assessing Officer also independently inquired from the Land Acquisition Collector, Haryana, Faridabad, as well as the Divisional and Town Planner, Haryana, regarding the distance of the land of the assessee from the municipal limits of Sonepat. After collecting information regarding the distance from various authorities, the Assessing Officer came to the conclusion that the impugned property was situated within 8 kms. of municipal limits of Sonepat. Thereafter, the Assessing Officer on the basis of this conclusion asked the assessee, vide letter dated October 13, 1998, to show cause as to why the amount of capital gains be not treated as shortterm capital gains liable to capital gains tax under the Act. The assessee submitted its reply dated November 26, 1998, stating that exemption was sought on the basis of certificate obtained from the PWD authorities Sonepat and as such the property could not be treated as capital asset for the purpose of determination of capital gain. Consequently, the Assessing Officer rejected the claim of the assessee and brought the impugned capital gains under the capital gains tax. Assessment was completed under section 143(3) of the Act at the total income of Rs. 56,31,400, vide order dated December 31, 1998, annexure A. 1 against the returned income of Rs. 2,83,330. The Assessing Officer also initiated penalty proceedings under section 271(1)(c) of the Act for furnishing inaccurate particulars of income. Notice under section 274 read with section 271(1)(c) of the Act was issued on January 18, 1999. Aggrieved by the order, the assessee filed an appeal before the Commissioner of Income-tax (Appeals) (CIT(A)). Vide order dated September 28, 1999, annexure A. 2, the Commissioner of Income-tax (Appeals) dismissed the appeal. Not satisfied with the order, the assessee filed an appeal before the Tribunal. Vide order dated December 28, 2000, annexure A. 3, the Tribunal allowed the appeal, set aside the order of the Commissioner of Income-tax (Appeals) and restored the matter for fresh adjudication by the Commissioner of Income-tax (Appeals). The Commissioner of Income-tax (Appeals), after considering the matter, vide order dated June 21, 2001, annexure A. 4 held that capital gains with reference to transfer of land in question was chargeable to tax confirming the action of the Assessing Officer in making the addition of Rs. 30,96,724. The assessee did not prefer any appeal before the Tribunal against the order passed by the Commissioner of Income-tax (Appeals). Thereafter, the Assessing Officer proceeded to complete the penalty proceedings already initiated under section 271(1)(c) of the Act for furnishing inaccurate particulars of its income by issuing show-cause notice on February 17, 2006. After considering the explanation furnished by the assessee, penalty of Rs. 17,82,750 was imposed under section 271(1)(c) of the Act, vide order dated March 24, 2006. Aggrieved by the order, the assessee went in appeal before the Commissioner of Income-tax (Appeals) who, vide order dated March 29, 2007, deleted penalty of Rs. 17,82,750. Not satisfied with the order, the Revenue filed an appeal before the Tribunal. Vide order dated February 27, 2009, annexure A.7, impugned herein, the Tribunal dismissed the appeal. Hence, the present appeal by the Revenue.
4. Learned counsel for the appellant-Revenue submitted that an addition of Rs. 17,11,065 was sustained in the income of the assessee on account of capital gains arising from acquisition of agricultural land which was within 8 kms. from the municipal limits of Sonepat. It was urged that the Assessing Officer had rightly levied penalty under section 271(1)(c) of the Act as the assessee had furnished inaccurate particulars inasmuch as certificate furnished by the assessee that the land was beyond 8 kms. from the limits of the Municipal Committee, Sonepat, was not correct. Relying upon the judgment of the apex court in Dharamendra Textile Processors' case (supra), it was submitted that the Commissioner of Income-tax (Appeals) as well as the Tribunal were in error in deleting the penalty.
5. Opposing the prayer made by learned counsel for the Revenue, learned counsel for the assessee, besides supporting the order passed by the Commissioner of Income-tax (Appeals) and the Tribunal, submitted that the assessee had appended photo copy of the cheque received from the Land Acquisition Collector dated November 22, 1995, and the certificate dated June 19, 1996, obtained from the Sub Divisional Engineer, PWD wherein it was shown that the distance of the village in which the land of the assessee was situated was 8.2 kms. from the municipal limits of Sonepat. Relying upon the judgments reported in CIT v. Sidhartha Enterprises [2010] 322 ITR 80 (P&H), CIT v. Reliance Petroproducts P. Ltd. [2010] 322 ITR 158 (SC), CIT v. B. B. Singhal, I. T. A. No. 725 of 2010 dated January 5, 2011 (P&H), CIT v. Raj Overseas [2011] 336 ITR 261 (P&H), CIT v. Dabwali Transport Co. I. T. A. No. 872 of 2010, dated March 15, 2011 (P&H)-since reported in [2013] 1 ITR-OL 577 (P & H), CIT v. Deep Tools P. Ltd. [2005] 274 ITR 603 (P&H) and Price Waterhouse Coopers P. Ltd. v. CIT [2012] 348 ITR 306 (SC), it was argued that there was no intention of furnishing inaccurate particulars on the part of the assessee and the Tribunal as well as the Commissioner of Income-tax (Appeals) had rightly deleted the penalty. The reliance was placed upon the following observations recorded by the apex court in Price Waterhouse Coopers Pvt. Limited's case (supra) (page 318) :
17. Having heard learned counsel for the parties, we are of the view that the facts of the case are rather peculiar and somewhat unique. The assessee is undoubtedly a reputed firm and has great expertise available with it. Notwithstanding this, it is possible that even the assessee could make a 'silly' mistake and indeed this has been acknowledged both by the Tribunal as well as by the High Court.
18. The fact that the tax audit report was filed along with the return and that it unequivocally stated that the provision for payment was not allowable under section 40A(7) of the Act indicates that the assessee made a computation error in its return of income. Apart from the fact that the assessee did not notice the error, it was not even noticed even by the Assessing Officer who framed the assessment order. In that sense, even the Assessing Officer seems to have made a mistake in overlooking the contents of the tax audit report.
19. The contents of the tax audit report suggest that there is no question of the assessee concealing its income. There is also no question of the assessee furnishing any inaccurate particulars. It appears to us that all that has happened in the present case is that through a bona fide and inadvertent error, the assessee while submitting its return, failed to add the provision for gratuity to its total income. This can only be described as a human error which we are all prone to make. The calibre and expertise of the assessee has little or nothing to do with the inadvertent error. That the assessee should have been careful cannot be doubted, but the absence of due care, in a case such as the present, does not mean that the assessee is guilty of either furnishing inaccurate particulars or attempting to conceal its income.
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."
6. After hearing learned counsel for the parties, we do not find any merit in these appeals.
7. The Tribunal, while upholding deletion of penalty by the Commissioner of Income-tax (Appeals), noticed that the assessee had furnished a certificate dated June 19, 1996, from the Sub Divisional Engineer Maintenance Sub Division, B&R wherein it was specified that the distance from the Sonepat Municipal Committee to Village Kamaspur, Tehsil and District Sonepat was 8.2 kms. It was also noticed that there were various certificates wherein different distances had been mentioned. After considering the matter, the Tribunal came to the conclusion that there was no intention on the part of the assessee to furnish inaccurate particulars. It was recorded as under :
" . . . There is no evidence to prove that there was deliberate concealment of income by the assessee because the certificate relied upon by the assessee is not acted upon and that itself cannot lead to levy of penalty and it cannot be said that the assessee has committed an offence under section 271(1)(c) of the Act. The Department has not proved that the certificate furnished by the assessee was found to be false and thus it is not possible to infer that the assessee has furnished inaccurate particulars of income. The proceedings under section 271(1)(c) of the Act being in the nature of penal proceedings, the onus is on the Revenue to prove that the assessee was guilty of offence of deliberate non-disclosure and procurement of the multiple certificates from the various authorities, there was no evidence brought on record to show that the certificates produced by the assessee were bogus. Admittedly, the certificate produced by the assessee is from Government agency, who has also given a certificate that he is a competent authority to issue certificate. This being the position, the Department has not brought on record anything to show that the authority who has given a certificate is not competent to issue the certificate. The Assessing Officer procured certificates from different authorities and he has never questioned the authority who has issued a certificate with SDE, Maintenance, Sub Division, PWD (B&R), Sonepat, where he stated that the distance of the property from the municipal limit is beyond 8 kms. was not examined. The Assessing Officer never questioned the authority who has given the certificate. It was held in the case of CIT v. Khoday Easwarsa and Sons [1972] 83 ITR 369 (SC) that penalty proceedings being penal in character, the Revenue itself has to establish that the receipt of the amount in dispute constitutes income of the assessee. Apart from the falsity of the explanation given by the assessee, the Department must have before it before levying penalty cogent material or evidence from which it could be inferred that the assessee has consciously concealed the particulars of his income or had deliberately furnished inaccurate particulars in respect of the same and that the disputed amount is a revenue receipt. No doubt, in the original assessment proceedings for computing the tax the evidence with the Assessing Officer may be a good item of evidence but not in the penalty proceedings. Further, it is to be noted that very mere fact the explanation of the assessee was found to be false in the assessment, but for levy of penalty there should be material to establish that the assessee had consciously concealed the particulars of income or had deliberately furnished inaccurate particulars of income. In the present case, penalty has been levied on the basis of rejection of the explanation/certificate given by the assessee regarding distance of the property from the Municipal limits of Sonepat. On the facts set out above, we find that the inference drawn by the Assessing Officer that the assessee has consciously concealed the particulars is not based on the falsity of the explanation given by the assessee. We are saying this because the Assessing Officer though collected the multiple certificates which are showing different distance of the property from the municipal limit of Sonepat, there was a confusion regarding the correct distance of the property from the municipal limit of Sonepat. Because of this the Tribunal directed the learned Commissioner of Income-tax (Appeals) to once again determine the correct distance of the property from the municipal limits of Sonepat and thereafter assessment was completed. There was no positive and definite material with the Assessing Officer to show that the certificate was bogus. The SDE, Maintenance Sub Division, PWD (B&R) is a Government authority and this was procured by the assessee for the purpose of assessment which was not acted upon and there was no finding regarding the fact that the authority is not competent person to issue the certificate and there was no finding that the assessee has followed the devices to reduce the tax burden by procuring the certificate from the wrong authority. Further, there was no fresh material apart from the material procured in the course of assessment proceedings. Penalty proceedings and assessment proceedings are two independent proceedings and the penalty order cannot be solely based on the reasons given in the original order of assessment. The authorities are expected to consider the fresh material at the time of penalty proceedings. The Assessing Officer cannot proceed penalty proceedings merely on the basis of findings given in the assessment proceedings. The assessee's inability to explain the discrepancies cannot be the reason for levy of penalty. The material already gathered or inference already drawn by the Assessing Officer did not find any further support from further enquiries in the penalty proceedings. On the other hand, the assessee was able to produce certificate from the authority who has issued a certificate that the distance of the impugned property is more than 8 kms. from the municipal limit of Sonepat and the District Town Planner is a competent authority to issue a certificate. The Assessing Officer has never alleged in the assessment order of penalty order that the Government authority who has issued a certificate to the assessee is not a competent authority to issue the certificate or the certificate is bogus or it was obtained through unfair means. Being so, in our opinion, penalty cannot be levied. The Assessing Officer treated the penalty proceedings as mere continuance of the assessment proceedings and did not bother to make its penalty proceedings as self-contained one, as such penalty order is not sustainable. Mere cross-reference to the compliance to levy penalty and the Assessing Officer is duty bound to consider the entire material at the item or levying the penalty afresh, independently of the assessment proceedings to levy penalty. This has not been done by the Assessing Officer. As such, penalty cannot be sustained. The evidence on record has not spelt out a case of penalty ambiguously and as such penalty cannot be levied. Hence, we confirm the deletion of penalty."
8. Further, this court in Sidhartha Enterprises's case (supra) held as under (page 82 of 322 ITR) :
"The judgment of the hon'ble Supreme Court in Dharamendra Textile (supra) cannot be read as laying down that in every case where particulars of income are inaccurate, penalty must follow. What has been laid down is that qualitative difference between criminal liability under section 276C and penalty under section 271(1)(c) had to be kept in mind and approach adopted to the trial of a criminal case need not be adopted while considering the levy of penalty. Even so, the concept of penalty has not undergone change by virtue of the said judgment. Penalty is imposed only when there is some element of deliberate default and not a mere mistake. This being the position, the finding having been recorded on facts that the furnishing of inaccurate particulars was simply a mistake and not a deliberate attempt to evade tax, the view taken by the Tribunal cannot be held to be perverse."
9. Still further, the hon'ble apex court in CIT v. Reliance Petroproducts P. Ltd. [2010] 322 ITR 158 (SC) had held that mere making of a claim which was ultimately found to be unsustainable may not by itself amount to furnishing of inaccurate particulars regarding the income. It was recorded as under (page 165 of 322 ITR) :
"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."
10. In view of the above, the substantial questions of law are answered against the Revenue and in favour of the assessee. Consequently, both the appeals are dismissed.