ITAT, JODHPUR BENCH

ITA No. 120/Jd/2013; Asst. yr. 2007-08

Hari Om Maratha, J.M. & N.K. Saini, A.M.

Shailendra Baradia, for the Assessee :
Deepak Sehgal. for. the Revenue

This appeal of the assessee, for asst. yr. 20'0'7-0'8. is directed against the order of learned CIT(A) Central, Jaipur, dt. 2nd Jan., 20'13 and has emanated from the penalty order of Dy. CIT. Central Circle-I. Jodhpur. passed under s. 271(1)(c) of IT Act, 1961 ('the Act' for short). dt. 30 th Dec., 2008.

2. The relevant facts. in brief. leading to this appeal are that the assessee derived his income from business. from house property and from interest. A search under s. 132 of the Act was carried out at his residential/business premises on 18th Jan., 20'0'7. During this search various incriminating evidence/documents. cash and jewellery were found. In response to notice issued in consequence of search under s. 132(1) of the Act. the assessee filed return declaring total income of Rs. 14.95.730' for asst. yr. 2007-08 on 30th  Sept., 2008. The assessment was completed under s. 153A r/w s. 143(3) on 30th Dec., 2008 at a total income of Rs. 15,08.690'. A notice under s. 271(l)(c) r/w s. 274 of the Act was issued on 30th  Dec., 2008 for concealing the particulars of income. This notice along with a copy of assessment order was served on the assessee on 31st Dec., 2008. The assessee filed an application under s. 154 of the Act and the assessment order was rectified by amending the total income at Rs. 15.0'5.890' on 5th March. 20'0'9. The assessee did not file any appeal against the assessment order. In compliance of notice under s. 271(1)(c) dt. 30th  Dec., 2008 and subsequent notice dt. 13th May. 20'0'9. the learned Authorised Representative of the assessee filed written submission on 16th June. 20'0'9. stating therein that the ass~ssee has not concealed any particulars of income or has not furnIshed inaccurate particulars of his income. However. the AO has found that the then AO while completing assessment under s. 153A r /w s. 143(3) of the Act on 30th  Dec .. 20'0'8. has made the following additions:

The AO has also made some addition on account of disallowance. The AO has found that the assessee has concealed the particulars of his Income to the extent of Rs. 6.18,950'. Thus, the AO has imposed a penalty of Rs. 2.30'.380' @ 10'0' per cent of the tax sought to be evaded by him.

2.1 The learned CIT(A) has reduced penalty to Rs. 1.69.350'. Now the assessee is further aggrieved and has filed this second appeal.

2 2 Both the parties have reiterated their earlier arguments. After considering rival submissions. perusal of the records and the paper books we are of the considered opinion that this is not fit case for imposition of penalty under s. 271 (l)(c) of the Act. Before we consider the factual matrix of this case to ascertain as to whether in the eyes of the provisions of the Act as explained by numerous judicial pronouncements, penalty can be levied in this case or not, we would like to discuss in nutshell the relevant legal position regarding levy of penalty under s. 271(I)(c) of the Act and as to how and when such penalty can be levied under this section. There are no two opinions about the settled position of law that regular assessment proceedings and penalty proceedings are two entirely different subjects which operate in distinct and separate spheres so much so that entirely different parameters 'are applicable for making quantum addition and for levying penalty under s. 271(l)(c) of the Act. There can be no dispute with regard to the position of law that under s. 271 (l)(c) penalty can be levied only if either the act of "concealment of particulars of income" or "furnishing of inaccurate particulars of income" is found to have been committed by the assessee: These are two different omissions or defaults albeit they refer to deliberate act on the part of the assessee. A mere omission or negligence would not constitute a deliberate act of either suppressio ueri or suggestio falsy. By the mere reason of such concealment or of furnishing of inaccurate particulars alone, the assessee does not, ipso facto become liable to a penalty", Imposition of penalty is not at all automElti~aning thereby, any addition in quantum would not AO to automatic levy of penalty and this is also true in respect of furnishing of inaccurate particulars of income. Not only is the levy of penalty discretionary in nature but the discretion has to be exercised keeping the relevant factors in mind and the approach of the taxman must be fair and objective. This subject has been a matter of great controversy. Finally, after referring to the decisions in the cases of Dilip N. Shroff us. Jt. CIT & Anr. (2007) 210 CTR (SC) 228 : (2007) 291 ITR 519 (SC), Union of India us. Dharamendra Textile Processors (2007) 212 CTR (SC) 432 : (2008) 13 SCC 369 as well as Union of India us. Rqjasthan Spinning & Weauing Mills (2009) 224 CTR (SC) 1 : (2009) 23 DTR (SC) 158: (2009) 13 SCC 448. the Hon'ble Supreme Court in the case of CIT us. Reliance Petroproducts (P) Ltd. (2010) 230 CTR (SC) 320 : (2010) 36 DTR (SC) 449 : (2010) 322 ITR 158 (SC), has recently held as under:

"A glance at the provisions of s. 271(l)(c) of the IT Act, 1961, suggests that in order to be covered by it, 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. The meaning of the word 'particulars' used in s. 271(l)(c) would embrace the details of the claim made. Where no information given in the return is found to be incorrect or inaccurate, the assessee cannot be held guilty of furnishing inaccurate particulars. In order to expose the assessee to penalty, unless the case is strictly covered by the provision, the penalty provision cannot be invoked. By no stretch of imagination can making an incorrect claim tantamount to furnishing inaccurate particulars. There can be no dispute that everything would depend upon the return filed by the assessee, because that is the only document where the assessee can furnish the particulars of his income. When such particulars are found to ?e inaccurate, the liability would arise. To attract penalty, the detaIls supplied in the return must not be accurate, not exact or correct, not according to the truth or erroneous.

Where there is no finding that any details supplied by the assessee in its return are found to be incorrect or erroneous or false there is no question of inviting the penalty under s. 271(l)(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. "

2.3 Adverting to the facts of this case, when we apply the above law to the facts of this case we are of the considered opinion that no penalty under s. 271 (l)(c) can survive. The assessee has made certain claims which could not be found to be plausible and additions have been made. But levy of penalty under s. 271 (l)(c) is not automatic. In fact the assessee has not concealed any particulars of income as has been alleged. Therefore, we cannot sustain the impugned penalty and thus, hold that this penalty cannot survive and has to be deleted. We order the deletion of this penalty. Therefore, we allow this appeal.

3. In the result, the appeal of the assessee stands allowed.