DCIT, v. M/s. Hardoi District Cooperative Bank,

ITA 172/LKW/2011 | 2005-2006
Pronouncement Date: 11-07-2011 | Result: Dismissed

Appeal Details

RSA Number 17223714 RSA 2011
Assessee PAN AABCH3798J
Bench Lucknow
Appeal Number ITA 172/LKW/2011
Duration Of Justice 3 month(s)
Appellant DCIT,
Respondent M/s. Hardoi District Cooperative Bank,
Appeal Type Income Tax Appeal
Pronouncement Date 11-07-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted A
Tribunal Order Date 11-07-2011
Assessment Year 2005-2006
Appeal Filed On 11-04-2011
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH A LUCKNOW BEFORE HONBLE SHRI H.L. KARWA AND HONBLE SHRI N.K. SAINI ITA NOS.172 & 173/LKW/2011 ASSESSMENT YEARS:2005-06 & 2006-07 DCIT SITAPUR V. M/S HARDOI DISTRICT CO-OPERATIVE BANK CIVIL LINES HARDOI PAN:AABCH3798J (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI. PRAVEEN KUMAR D.R. RESPONDENT BY: SHRI. M. L. AGRAWAL ADVOCATE O R D E R PER H. L. KARWA: THESE TWO APPEALS BY THE REVENUE ARE DIRECTED AGAINST SEPARATE ORDERS OF THE LD. CIT(A) BAREILLY EACH DATED 9.12.2010 RELATING ASSESSMENT YEARS 2005- 06 AND 2006-07. 2. IN THESE APPEALS THE REVENUE HAS CHALLENGED THE ACTION OF THE LD. CIT(A) IN CANCELLING THE PENALTY OF ` 58.85 LAKHS AND 61.92 LAKHS LEVIED BY THE ASSESSING OFFICER UNDER SECTION 271(1)(C) OF THE INCOME-TAX ACT 1961 (IN SHORT THE ACT) FOR THE ASSESSMENT YEARS 2005-06 AND 2006-07 RESPECTIVELY. 3. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT THE ASSESSEE ENJOYS INCOME FROM BANKING BUSINESS. FOR THE ASSESSMENT YEAR 2005-06 THE ASSESSEE HAS SHOWN TOTAL RECEIPTS (INTEREST DISCOUNT COMMISSION EXCHANGE PLUS OTHER RECEIPTS) AT ` 5 69 36 225.14 AS AGAINST TOTAL EXPENSES OF ` 96 95 971.68 RESULTING A LOSS OF ` 4 00 23 526.54. 3.1 FOR ASSESSMENT YEAR 2006-07 THE ORIGINAL RETURN WAS FILED ON 30.10.2006 IN THE STATUS OF CO-OPERATIVE SOCIETY ALONG WITH AUDIT REPORT UNDER SECTION 44AB OF THE ACT. THE TOTAL RECEIPTS (INTEREST DISCOUNT COMMISSION EXCHANGE PLUS OTHER RECEIPTS) HAVE BEEN SHOWN AT ` 5 72 17 776.57 AS AGAINST TOTAL EXPENSES OF ` 9 40 88 492.57 MEANING THEREBY A LOSS OF ` 3 68 70 716.03. :-2-: 3.2 WHILE FRAMING THE ASSESSMENT FOR ASSESSMENT YEAR 2005-06 THE ASSESSING OFFICER OBSERVED THAT A PERUSAL OF THE PROFIT AND LOSS ACCOUNT SHOWS THAT THE EXPENSES DEBITED UNDER THE HEAD ARE PROVISIONS TOWARDS DOUBTFUL ASSETS. THE EXPENSES DEBITED IN PROFIT AND LOSS ACCOUNT INCLUDE NPA OF ` 1 96 24 591. THE ASSESSEE WAS REQUIRED TO JUSTIFY DEDUCTION TOWARDS NPA. 3.3 SIMILARLY FOR ASSESSMENT YEAR 2006-07 THE EXPENSES DEBITED IN THE PROFIT AND LOSS ACCOUNT INCLUDED NPA OF ` 2 06 53 675. THIS DEDUCTION IS PROVISIONS TOWARDS DOUBTFUL ASSETS. 3.4 THE ASSESSING OFFICER REQUIRED THE ASSESSEE TO JUSTIFY THE DEDUCTION UNDER NPA IN BOTH THE YEARS UNDER CONSIDERATION. IN THIS REGARD THE ASSESSEE STATED IN ITS REPLY THAT DETAILED GUIDELINES OF RBI HAVE BEEN FILED IN THE PRECEDING ASSESSMENT YEAR AND THERE IS NO CHANGE IN METHOD OF CALCULATION OF NPA. THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEES SUBMISSIONS HAVE BEEN CONSIDERED AND THE FOLLOWING VIEW HAS BEEN DRAWN:- THE RBI HAS ISSUED DIRECTIONS WITH A VIEW FOR PREPARING PROFIT & LOSS ACCOUNT & BALANCE SHEET REFLECTING BANK'S ACTUAL FINANCIAL HEALTH. A PROPER SYSTEM FOR RECOGNITION OF INCOME CLARIFICATION OF ASSETS & PROVISIONING ON A PRUDENTIAL BASIS IS NECESSARY. THE PRUDENTIAL NORMS SHOULD BE OBJECTIVE AND BASED ON RECORDS OF RECOVERY RATHER THAN ON ANY SUBJECTIVE CONSIDERATION. ACCORDINGLY RBI HAS DIRECTED TO PREPARE A CLASSIFICATION OF ASSETS AND RATE OF PROVISIONS. RBI HAS ALSO DIRECTED TO MAKE PROVISIONS OF A FIXED RATES ON THE ABOVE CLASSIFIED ASSETS TO KNOW THE ACTUAL FINANCIAL HEALTH OF THE BANK. IN THE YEAR UNDER CONSIDERATION SUCH CLASSIFICATION HAS BEEN PREPARED. 3.5 THE ASSESSING OFFICER FURTHER REPRODUCED PROVISIONS OF SECTION 36(1)(VIIA) OF THE ACT WHICH READ AS UNDER:- IN RESPECT OF ANY PROVISIONS FOR BAD AND DOUBTFUL DEBTS MADE BY (A) A SCHEDULED BANK (NOT BEING A BANK INCORPORATED BY OR UNDER THE LAWS OF A COUNTRY OUTSIDE INDIA] OR A NON SCHEDULED BANK AN AMOUNT [NOT EXCEEDING SEVEN AND ONE-HALF PERCENT] OF THE TOTAL :-3-: INCOME 9COMPUTED BEFORE MAKING ANY DEDUCTION UNDER THIS CLAUSE AND CHAPTER VIA) AND AN AMOUNT NOT EXCEEDING [TEN] PERCENT OF THE AGGREGATE AVERAGE ADVANCES MADE BY THE RURAL BRANCHES OF SUCH BANK COMPUTED IN THE PRESCRIBED MANNERS. 3.6 IN VIEW OF THE ABOVE THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF HIS INCOME/LOSS. HE THEREFORE HELD THAT IT IS A FIT CASE FOR LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT. CONSEQUENTLY THE ASSESSING OFFICER LEVIED A PENALTY OF ` 58.85 LAKHS FOR ASSESSMENT YEAR 2005-06 AND ` 61.92 LAKHS FOR ASSESSMENT YEAR 2006-07. 4. AGGRIEVED BY THE ORDERS OF THE ASSESSING OFFICER THE ASSESSEE FILED TWO SEPARATE APPEALS BEFORE THE LD. CIT(A). THE MAIN CONTENTION OF THE ASSESSEE BEFORE THE LD. CIT(A) WAS THAT THIS IS A CASE OF COOPERATIVE SOCIETY CARRYING ON BUSINESS OF PROVIDING BANKING AND CREDIT FACILITIES TO ITS MEMBERS. THE WHOLE OF ITS INCOME IS EXEMPT UNDER SECTION 80P(2) OF THE ACT. IT WAS ALSO STATED THAT THE ASSESSEE HAS NOT CONCEALED ANY PARTICULARS OF FACTS AND THE NPA CLAIMED AS PER DIRECTION OF RBI AND WHICH WAS CLEARLY MENTIONED IN PROFIT AND LOSS ACCOUNT. THE ASSESSING OFFICER HAS NOT DETECTED ANY CONCEALMENT IN THE ACCOUNT OF THE SOCIETY. 5. THE LD. CIT(A) CANCELLED THE PENALTY FOR BOTH THE YEARS UNDER CONSIDERATION BY PASSING SEPARATE ORDERS EACH DATED 9.12.2010. IN SUM AND SUBSTANCE THE ORDERS OF THE LD. CIT(A) FOR BOTH THE YEARS ARE IDENTICAL AND THE SAME IS REPRODUCED HEREUNDER IN VERBATIM:- THE FACTS IN BRIEF ARE THAT THE ASSESSEE CLAIMED DEDUCTION OF NPA ON THE BASIS OF RBI INSTRUCTIONS. THE ASSESSING OFFICER DISALLOWED THE CLAIM OF THE ASSESSEE AND INITIATED PENALTY PROCEEDINGS FOR CONCEALMENT UNDER SECTION 271(1)(C). PENALTY WAS LEVIED @ 100% OF THE TAX SOUGHT TO BE EVADED. IT WAS SUBMITTED BY THE ASSESSEE IN THE PENALTY PROCEEDINGS THAT ALL THE PARTICULARS OF DEDUCTIONS WERE FURNISHED IN THE COMPUTATION OF INCOME REGARDING MAKING OF PROVISION FOR NPA IN COMPLIANCE TO THE GUIDELINES OF RBI. THE SIMILAR FACTS WERE INVOLVED IN THE A.Y. 2003-04 AND THERE IS NO CHANGE IN THE METHOD OF CALCULATION OF NPA IN THE A.Y. 2005-06. :-4-: THE PENALTY LEVIED IN THAT A.Y. WAS DELETED BY THE CIT (APPEALS) BAREILLY AND ITAT LUCKNOW BENCH. THE ASSESSEE SUBMITTED COPY OF ORDER OF THE CIT (APPEALS) BAREILLY AND ITAT LUCKNOW BENCH. PERUSAL OF THESE ORDERS REVEAL THAT THE PENALTY WAS DELETED BY GIVING A FINDING THAT THERE WAS NO CONCEALMENT OF INCOME EITHER IN THE MAIN PROVISIONS OF SECTION 271(1)(C) OR ITS EXPLANATION-I (A) AND B. IT WAS HELD BY THE TRIBUNAL THAT EXPLANATION-I(A) IS NOT APPLICABLE IN THE CASE BECAUSE THE EXPLANATION FURNISHED BY THE ASSESSEE IS NOT FOUND FALSE EXPLANATION-I(B) WAS ALSO NOT APPLICABLE BECAUSE THE ASSESSEE SUBSTANTIATED HIS EXPLANATION AND HIS EXPLANATION WAS BONAFIDE. IN THE CASE OF RELIANCE PETROPRODUCTS (P.) LTD. 322 ITR 158 (SC) THE APEX COURT HELD THAT IT IS UPTO THE REVENUE AUTHORITIES TO ACCEPT THE CLAIM MADE IN THE RETURN OF INCOME OR NOT. MERELY THE FACT THAT THE ASSESSEE HAD CLAIMED THE EXPENDITURE OR DEDUCTION WHICH WAS NOT ACCEPTED OR ACCEPTABLE TO THE REVENUE THAT BY ITSELF WOULD NOT ATTRACT THE PENALTY U/S 271(1)(C). OTHERWISE IN CASE OF EVERY RETURN WHERE THE CLAIM MADE IS NOT ACCEPTED BY THE A.O FOR ANY REASON THE ASSESSEE WILL INVITE PENALTY U/S 271(1)(C). WHEN THE ASSESSEE FURNISHED ALL THE DETAILS OF ITS INCOME AND EXPENDITURE IN ITS RETURN AND THE DETAILS IN THEMSELVES WERE NOT FOUND TO BE INACCURATE WOULD NOT ATTRACT PENALTY. RELIANCE MAY ALSO BE PLACED IN THE DECISION OF THE CASE OF MAHAVIR IRRIGATION PVT. LTD. 31-1 ITR 150 (DELHI) HARYANA WARE HOUSING CORP. 314 ITR 215 (P&H) ANIL DHARAMPAL PREMCHAND LTD 329 ITR 572 (DELHI). IN THE PRESENT CASE THE ASSESSING OFFICER DID NOT FIND ANY DETAILS FURNISHED BY THE ASSESSEE IN ITS RETURN AS INCORRECT OR ERRONEOUS OR FALSE. THEREFORE THERE WOULD BE IN MY OPINION NO QUESTION OF INVITING PENALTY U/S 271(1)(C). 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 :-5-: ASSESSEE AND THE CLAIM MADE IN THE RETURN CANNOT AMOUNT TO THE INACCURATE PARTICULAR. IN VIEW OF THE ABOVE POSITION OF LAW AND THE DECISION OF THE CIT (APPEALS) BAREILLY AND TRIBUNAL IN THE ASSESSEE'S OWN CASE IN THE A.Y. 2003-04 AND LOOKING TO THE FACT THAT THE FACTS IN THE YEAR UNDER CONSIDERATION WERE IDENTICAL TO FACTS OF THE CASE IN THE A.Y. 2003-04 THE GROUND OF APPEAL IS ALLOWED. 5.1 IN VIEW OF THE ABOVE FINDINGS THE LD. CIT(A) CANCELLED THE PENALTY FOR BOTH THE YEARS UNDER CONSIDERATION. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE ALSO PERUSED THE MATERIALS AVAILABLE ON RECORD. SHRI. M.L. AGRAWAL ADVOCATE THE LD. COUNSEL FOR THE ASSESSEE AT THE VERY OUTSET POINTED OUT THAT THE ISSUE UNDER CONSIDERATION IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE BY THE ORDER OF ITAT LUCKNOW BENCH A LUCKNOW DATED 16.5.2008 IN ASSESSEES OWN CASE IN ITA NO. 68/LUC/2008 RELATING TO ASSESSMENT YEAR 2003-04. HE THEREFORE SUBMITTED THAT IN VIEW OF THE ABOVE ORDER OF THE TRIBUNAL DEPARTMENTAL APPEALS MAY BE DISMISSED. ON THE OTHER HAND SHRI. PRAVEEN KUMAR LD. D.R. STRONGLY SUPPORTED THE ORDER OF THE ASSESSING OFFICER. 6.1 IT IS OBSERVED THAT WHILE DECIDING A SIMILAR ISSUE THIS BENCH OF THE TRIBUNAL VIDE ORDER DATED 16.5.2008 IN ASSESSEES OWN CASE IN ITA NO. 68/LUC/2008 RELATING TO ASSESSMENT YEAR 2003-04 UPHELD THE ORDER OF THE LD. CIT(A) BAREILLY IN CANCELLING THE PENALTY UNDER SECTION 271(1)(C) OF THE ACT OF ` 73 73 700. IN THE SAID ORDER ALSO THE ASSESSING OFFICER LEVIED A PENALTY OF ` 73 73 700 UNDER SECTION 271(1)(C) OF THE ACT ON A SIMILAR SET OF FACTS. IN FURTHER APPEAL THE LD. CIT(A) CANCELLED THE PENALTY AND THE REVENUE CHALLENGED THE ORDER LD. CIT(A) BAREILLY BEFORE THE TRIBUNAL IN ITA NO. 68/LUC/2008 FOR ASSESSMENT YEAR 2003-04. FOR ASSESSMENT YEAR 2003-04 THE TRIBUNAL PASSED A DETAILED ORDER AFTER CONSIDERING THE FACTS AND ALSO VARIOUS DECISIONS OF THE COURTS. THE RELEVANT FINDINGS OF THE TRIBUNAL ARE AS UNDER:- :-6-: 8. AFTER CONSIDERING THE SUBMISSIONS OF THE ID. DR AND CAREFULLY PERUSING THE MATERIAL ON RECORD WE ARE OF THE OPINION THAT THERE IS NO CASE FOR INTERFERENCE IN THE ORDER OF LD. CIT(A). FOR THE SAKE OF BENEFIT WE REPRODUCE EXPLANATION 1 AND EXPLANATION 4 TO SECTION 271(1)(C) OF THE ACT AS UNDER:- EXPLANATION 1 .--WHERE IN RESPECT OF ANY FACTS MATERIAL TO THE COMPUTATION OF THE TOTAL INCOME OF ANY PERSON UNDER THIS ACT - (A) SUCH PERSON FAILS TO OFFER AN EXPLANATION OR OFFERS AN EXPLANATION WHICH IS FOUND BY THE ASSESSING OFFICER OR THE COMMISSIONER (APPEALS) 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. EXPLANATION 4.FOR THE PURPOSES OF CLAUSE (III) OF THIS SUB-SECTION THE EXPRESSION 'THE AMOUNT OF TAX SOUGHT TO BE EVADED' -- (A) IN ANY CASE WHERE THE AMOUNT OF INCOME IN RESPECT OF WHICH PARTICULARS HAVE BEEN CONCEALED OR INACCURATE PARTICULARS HAVE BEEN FURNISHED EXCEEDS THE TOTAL INCOME ASSESSED MEANS THE TAX THAT WOULD HAVE BEEN CHARGEABLE ON THE INCOME IN RESPECT OF WHICH PARTICULARS :-7-: HAVE BEEN CONCEALED OR INACCURATE PARTICULARS HAVE BEEN FURNISHED HAD SUCH INCOME BEEN THE TOTAL INCOME ; (B) IN ANY CASE TO WHICH EXPLANATION 3 APPLIES MEANS THE TAX ON THE TOTAL INCOME ASSESSED ; (C) IN ANY OTHER CASE MEANS THE DIFFERENCE BETWEEN THE TAX ON THE TOTAL INCOME ASSESSED AND THE TAX THAT WOULD HAVE BEEN CHARGEABLE HAD SUCH TOTAL INCOME BEEN REDUCED BY THE AMOUNT OF INCOME IN RESPECT OF WHICH PARTICULARS HAVE BEEN CONCEALED OR INACCURATE PARTICULARS HAVE BEEN FURNISHED. 9. FOR THE SAKE OF ARGUMENT WE AGREE WITH ID. DR THAT WHERE THERE IS ASSESSED LOSS THE QUESTION OF ALLOWING ANY DEDUCTION U/S 80P DOES NOT ARISE DEDUCTION UNDER THAT SECTION WOULD BE ALLOWABLE ONLY WHEN THERE IS A POSITIVE INCOME. HOWEVER EVERY ADDITION DOES NOT REFLECT CONCEALMENT OF INCOME OR FILING INACCURATE PARTICULARS OF INCOME. WHEREVER EXPLANATIONS ARE APPLICABLE IT DOES NOT MEAN AUTOMATIC INFERENCE THAT ASSESSEE IS LIABLE TO PENALTY IF ON THE FACTS AND CIRCUMSTANCES OF THE CASE AN EXPLANATION CAN BE INVOKED. THE PURPOSE OF EXPLANATION TO SECTION 271(1 )(C) OF THE ACT IS ONLY TO SHIFT BURDEN TO ASSESSEE. THE EXPLANATIONS ONLY RAISE A REBUTTABLE PRESUMPTION AND DOES CREATE A CONCLUSIVE PROOF. IN FACT IN RESPECT OF PENAL PROVISIONS UNDER INCOME-TAX ACT THERE IS NO CASE FOR HOLDING THAT A CONCLUSIVE PROOF HAS BEEN LAID DOWN BY THE LEGISLATURE. EXPLANATIONS TO SECTION 271 (1)(C) OF THE ACT ONLY CREATE A REBUTTABLE PRESUMPTION AND SHIFT THE ONUS TO THE ASSESSEE. UNDER THE CIRCUMSTANCES MENTIONED IN THESE EXPLANATIONS CERTAIN ADDITIONS ARE DEEMED AS CONCEALED INCOME AND IT IS FOR THE ASSESSEE TO EXPLAIN THAT HIS CASE IS NOT COVERED IN THE EXPLANATION OR THAT INSPITE OF ITS CASE BEING COVERED IN THE EXPLANATION TO SECTION 271(1)(C) OF THE ACT HE HAS SATISFACTORILY DISCHARGED THE ONUS CAST ON HIM. IN FACT WHERE CONDITIONS LAID DOWN IN SECTION :-8-: 271(1)(C) OF THE ACT ARE SATISFIED I.E WHERE THE CASE OF THE ASSESSEE IS COVERED EITHER UNDER THE MAIN PROVISION OF SECTION 271(1)(C) OF THE ACT OR IS COVERED IN ANY OF THE EXPLANATION U/S 271(1)(C) OF THE ACT THEN BEFORE LEVYING PENALTY ASSESSEE HAS TO BE GIVEN AN OPPORTUNITY AS PROVIDED U/S 274 OF THE ACT. THIS OPPORTUNITY IS NOT MERE A FORMALITY BUT HAS TO BE REASONABLE WHICH MEANS THAT THE EXPLANATION OF THE ASSESSEE IN REGARD TO CASE AGAINST HIM FOR LEVY OF PENALTY EITHER UNDER MAIN SECTION OR IN ANY OF THE EXPLANATIONS HAS TO BE CONSIDERED OBJECTIVELY. IF THE EXPLANATION OF THE ASSESSEE IS SATISFACTORY THEN NO PENALTY IS TO BE LEVIED. 10. IN THE PRESENT CAUSE THE REVENUE HAS ATTEMPTED TO MADE OUT A CASE THAT PENALTY HAS TO BE LEVIED UNDER EXPLANATION 4 OR UNDER EXPLANATION 1(A). IN OUR CONSIDERED VIEW PENALTY UNDER EXPLANATION IA CANNOT BE LEVIED BECAUSE CONDITION LAID DOWN THEREIN ARE NOT SATISFIED. FOR LEVYING PENALTY UNDER EXPLANATION I(A) THE CONDITIONS ARE THAT THE ASSESSEE HAS NOT FURNISHED AN EXPLANATION OR WHERE EXPLANATION IS FURNISHED THEN SUCH EXPLANATION IS FOUND FALSE. HERE ASSESSEE HAS FURNISHED AN EXPLANATION ACCORDING TO WHICH HIS ENTIRE INCOME IS EXEMPT U/S 80P AND ADDITION SO MADE BY THE AO WILL ALSO GET EXEMPTION IT COULD NOT BE SAID TO BE FALSE BECAUSE ASSESSEE IS A COOPERATIVE SOCIETY AND ITS INCOME IS EXEMPT U/S 80P. THE- EXPLANATION IS ALSO BONAFIDE BECAUSE THE CLAIM OF THE ASSESSEE U/S 80P CANNOT BE DOUBTED. IT IS DIFFERENT MATTER THAT ON ACCOUNT OF THERE BEING ASSESSED LOSS ASSESSEE CANNOT BE GIVEN ACTUAL DEDUCTION BUT FOR THAT MATTER ALONE IT CANNOT BE SAID THAT ASSESSEE IS NOT ENTITLED TO DEDUCTION U/S 80P OR THAT HIS EXPLANATION IS FALSE OR NOT BONAFIDE. 11. REGARDING EXPLANATION 4 WE ARE OF THE VIEW THAT THE ADDITION PROPOSED BY THE AO TO THE DECLARED LOSS SHOULD BE THE ONE IN RESPECT OF WHICH PARTICULARS HAVE BEEN CONCEALED OR INACCURATE PARTICULARS HAVE BEEN FURNISHED AND WHICH HAVE THE EFFECT OF REDUCING THE LOSS DECLARED IN THE RETURN. ''CONCEALMENT' HERE MEANS :-9-: SOMETHING WHICH HAS BEEN CONCEALED FROM THE EYES OF THE DEPARTMENT I.E AO HAS TO POINT OUT THAT CERTAIN RELEVANT MATERIAL FACTS WERE CONCEALED BY THE ASSESSEE OR WERE NOT DECLARED BY THE ASSESSEE. NO SUCH CASE HAS BEEN MADE OUT BY THE REVENUE. SIMILARLY IT IS NOT MADE OUT BY THE REVENUE THAT ASSESSEE HAS FILED INACCURATE PARTICULARS. MERELY CLAIMING A PROVISION OF BAD DEBT AT A FIGURE HIGHER THAN WHAT IS OTHERWISE ADMISSIBLE TO THE ASSESSEE CANNOT BE SAID THAT PARTICULARS ARE INACCURATE. HERE PARTICULARS MEANS CERTAIN BASIC FACTS WHICH LEAD TO DETERMINATION OF TOTAL INCOME AND NOT THE CLAIM AS SUCH. ALL THE PARTICULARS ARE ADMITTEDLY FILED BY THE ASSESSEE BEFORE THE AUTHORITIES EXCEPT CLAIMING HIGHER PROVISION FOR BAD DEBTS. ON THE FACTS OF THE EASE IT CANNOT BE SAID THAT ASSESSEE HAS FILED INACCURATE PARTICULARS. ON THE CONCEPT OF INACCURATE PARTICULARS' AND 'CONCEALMENT' WE REFER TO THE DECISION OF HON'BLE ORISSA HIGH COURT IN THE CASE OF CIT VS INDIAN METALS AND FERRO ALLOYS LTD. 211 ITR 35 WHEREIN IT WAS HELD AS UNDER: 'THE EXPRESSIONS 'HAS CONCEALED THE PARTICULARS OF INCOME' AND 'HAS FURNISHED INACCURATE PARTICULARS OF INCOME' HAVE NOT BEEN DEFINED EITHER IN SECTION 271(1)(C) OR ELSEWHERE IN THE ACT. ONE THING IS CERTAIN THAT THESE TWO CIRCUMSTANCES ARE NOT IDENTICAL IN DETAIL ALTHOUGH THEY MAY LEAD TO THE SAME EFFECT NAMELY KEEPING OFF A CERTAIN PORTION OF INCOME. THE FORMER IS DIRECT AND THE LATTER MAY BE INDIRECT IN ITS EXECUTION. THE WORD 'CONCEAL' IS DERIVED FROM THE LATIN CONCELARE WHICH IMPLIES 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. IN FURNISHING ITS RETURN OF INCOME AN ASSESSEE IS REQUIRED TO FURNISH PARTICULARS AND ACCOUNTS ON WHICH SUCH RETURN INCOME HAS BEEN ARRIVED AT. THESE MAY BE PARTICULARS AS PER ITS BOOKS OF ACCOUNT IF IT HAS MAINTAINED THEM OR ANY OTHER BASIS UPON WHICH IT HAD ARRIVED AT THE RETURNED FIGURE OF INCOME. ANY INACCURACY MADE IN SUCH BOOKS OF ACCOUNT OR OTHERWISE WHICH RESULTED IN KEEPING OFF OR HIDING A PORTION OF ITS INCOME IS PUNISHABLE AS FURNISHING INACCURATE PARTICULARS OF ITS INCOME.' :-10-: 12. THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF SARABHAI CHEMICALS PVT. LTD VS CIT 257 ITR 355 HELD THAT DEEMING SECTION CONTAINED IN EXPLANATION I TO SECTION 271(1)(C) OF THE ACT THAT THE ADDED/DISALLOWED AMOUNT SHOULD REPRESENT THE INCOME IN RESPECT OF WHICH PARTICULARS HAVE BEEN CONCEALED WILL NOT APPLY IF THE EXPLANATION THAT WAS GIVEN BY THE ASSESSEE IN THE QUANTUM PROCEEDINGS WHICH HE COULD NOT SUBSTANTIATE IN THOSE PROCEEDINGS WAS (I) BONAFIDE AND(II) DISCLOSED ALL THE FACTS RELATING TO THE SAME AND MATERIAL TO THE COMPUTATION OF HIS TOTAL INCOME. 13. THE HON'BLE MP HIGH COURT IN THE CASE OF CIT VS SPK STEELS PVT. LTD 270 ITR 156 HELD THAT WHEN ALL THE FACTS ARE ON RECORD THERE IS NEITHER CONCEALMENT OF PARTICULARS OF INCOME NOR FILING OF INACCURATE PARTICULARS THEN NO PENALTY CAN BE LEVIED. FURTHER WE REFER TO THE DECISION OF HON'BLE GUJARAT HIGH COURT IN THE CASE OF NATIONAL TEXTILES VS CIT 249 ITR 125 WHEREIN IT IS HELD THAT THERE MUST BE CIRCUMSTANCES TO SHOW THAT THERE WAS ANIMUS. IN THIS REGARD WE REFER TO THE RELEVANT PORTION OF THE DETAILS AS UNDER: 'IN ORDER TO JUSTIFY THE LEVY OF PENALTY TWO FACTORS MUST CO-EXIST (I) THERE MUST BE SOME MATERIAL OR CIRCUMSTANCES LEADING TO THE REASONABLE CONCLUSION THAT THE AMOUNT DOES REPRESENT THE ASSESSEE'S INCOME. IT IS NOT ENOUGH FOR THE PURPOSE OF PENALTY THAT THE AMOUNT HAS BEEN ASSESSED AS INCOME AND (II) THE CIRCUMSTANCES MUST SHOW THAT THERE WAS ANIMUS I.E. CONSCIOUS CONCEALMENT OR ACT OF FURNISHING OF INACCURATE PARTICULARS ON THE PART OF THE ASSESSEE. THE EXPLANATION HAS NO BEARING ON FACTOR NO.1 BUT IT HAS A BEARING ONLY ON FACTOR NO. 2. THE EXPLANATION DOES NOT MAKE THE ASSESSMENT ORDER CONCLUSIVE EVIDENCE THAT THE AMOUNT ASSESSED WAS IN FACT THE INCOME OF THE ASSESSEE. NO PENALTY CAN BE IMPOSED IF THE FACTS AND CIRCUMSTANCES ARE EQUALLY CONSISTENT WITH THE HYPOTHESIS THAT THE AMOUNT DOES NOT REPRESENT CONCEALED INCOME AS WITH THE HYPOTHESIS THAT IT DOES. IF THE ASSESSEE GIVES AN EXPLANATION WHICH IS UNPROVED BUT NOT DISPROVED I.E. IT IS NOT ACCEPTED BUT CIRCUMSTANCES DO NOT LEAD TO THE REASONABLE AND POSITIVE INFERENCE THAT THE ASSESSEE'S CASE IS FALSE THE EXPLANATION CANNOT HELP THE DEPARTMENT BECAUSE THERE WILL BE NO MATERIAL TO SHOW THAT THE AMOUNT IN QUESTION WAS THE INCOME OF THE ASSESSEE. :-11-: ALTERNATIVELY TREATING THE EXPLANATION AS DEALING WITH BOTH THE INGREDIENTS (I) AND (II) ABOVE WHERE THE CIRCUMSTANCES DO NOT LEAD TO THE REASONABLE AND POSITIVE INFERENCE THAT THE ASSESSEE'S EXPLANATION IS FALSE THE ASSESSEE MUST BE HELD TO HAVE PROVED THAT THERE WAS NO MENS REA OR GUILTY MIND ON HIS PART. EVEN IN THIS VIEW OF THE MATTER THE EXPLANATION ALONE CANNOT JUSTIFY LEVY OF PENALTY. ABSENCE OF PROOF ACCEPTABLE TO THE DEPARTMENT CANNOT BE EQUATED WITH FRAUD OR WILFUL DEFAULT. AS WE FIND NO MATERIAL DIFFERENCE BETWEEN THE ORIGINAL EXPLANATION 1 AND EXPLANATION 1 AS SUBSTITUTED IN OUR OPINION IT HAS TO BE SO CONSTRUED AS TO HARMONISE IT WITH THE BASIC PRINCIPLES OF JUSTICE AND FAIRNESS AS IN THE CASE OF THE ORIGINAL EXPLANATION. WE ARE GUIDED BY THE COMMENTARIES OF THE LEARNED AUTHORS KANGA AND PALKHIWALA LAW AND PRACTICE OF INCOME-TAX VOLUME 1 PAGES 1637 1639 AND 1640.' 14. THE HON'BLE SUPREME COURT IN THE EASE OF K.C. BUILDERS AND ANOTHER VS ACIT 265 ITR 562 HELD THAT AO HAS TO SHOW THAT OMISSION TO DISCLOSE MATERIAL FACT WAS ATRIBUTABLE TO AN INTENTION OR DESIRE ON THE PART OF THE ASSESSEE TO HIDE OR CONCEAL INCOME SO AS TO AVOID THE IMPOSITION OF TAX THEREON. 15. IN THE PRESENT CASE THE REVENUE HAS NOT FOUND THAT ASSESSEE HAS CONCEALED ANY MATERIAL FACT OR FILED INACCURATE PARTICULARS OF INCOME. EXPLANATION 1(A) IS CLEARLY NOT APPLICABLE AS EXPLANATION FURNISHED BY THE ASSESSEE IS NOT FOUND FALSE. EVEN THOUGH TECHNICALLY THE CASE OF THE ASSESSEE IS COVERED UNDER EXPLANATION 4 TO SECTION 271(1)(C) OF THE ACT THE EXPLANATION THEREON THAT ITS ENTIRE INCOME IS EXEMPT U/S 80P AND THEREFORE IT IS NOT LIABLE TO INCOME-TAX NOW OR SUBSEQUENTLY WHEN THE PRESENT LOSS CARRIED FORWARD IS ADJUSTED AGAINST INCOME IN LATER ASSESSMENT YEARS IS REASONABLE AND BONAFIDE AND THEREFORE WITHIN THE MEANING OF SECTION 274 NO PENALTY IS LEVIABLE ON THE ASSESSEE. 16. AS A RESULT WE UPHOLD THE ORDER OF THE LD. CIT(A) AND DISMISS THE APPEAL FILED BY THE DEPARTMENT. CONSEQUENTLY THE CROSS OBJECTION FILED BY THE ASSESSEE IS ALLOWED. 6.2 IT IS ALSO OBSERVED THAT WHILE CANCELLING THE IMPUGNED PENALTY THE LD. CIT(A) HAS PLACED RELIANCE ON THE DECISION OF THE HON'BLE SUPREME COURT IN THE :-12-: CASE OF CIT V. RELIANCE PETROPRODUCTS PVT. LTD. [2010] 322 ITR 158 WHEREIN THE HON'BLE SUPREME COURT HELD AS UNDER(HEAD NOTE):- A GLANCE AT THE PROVISIONS OF SECTION 271(1)(C) OF THE INCOME-TAX 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 SECTION 271(1)(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 BE 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 SECTION 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. 6.3 IN THE INSTANT CASE THE REVENUE HAS NOT FOUND THAT THE ASSESSEE HAS CONCEALED ANY MATERIAL FACT OR FILED INACCURATE PARTICULARS OF INCOME. EXPLANATION I(A) OF SECTION 271(1)(C) OF THE ACT IS NOT APPLICABLE TO THE FACTS OF THE PRESENT :-13-: CASE AS THE EXPLANATION FURNISHED BY THE ASSESSEE WAS NOT FOUND FALSE. IN OUR CONSIDERED VIEW THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF CIT V. RELIANCE PETROPRODUCTS PVT. LTD. (SUPRA) IS ALSO APPLICABLE TO THE FACTS OF THE PRESENT CASE. IF THE RATIO OF THE SAID DECISION IS CONSIDERED IN TRUE SPIRIT IT IS NOT A FIT CASE WHERE PENALTY UNDER SECTION 271(1)(C) OF THE ACT CAN BE VALIDLY LEVIED. 6.4 RESPECTFULLY FOLLOWING THE DECISION OF THE TRIBUNAL REFERRED TO ABOVE IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2003-04 AND ALSO THE RATIO LAID DOWN BY THE HON'BLE SUPREME COURT IN THE CASE OF CIT V. RELIANCE PETROPRODUCTS PVT. LTD. (SUPRA) WE DO NOT FIND ANY MERIT IN BOTH THE APPEALS OF THE REVENUE. CONSEQUENTLY WE DISMISS BOTH THE APPEALS. 7. IN THE RESULT BOTH THE APPEALS ARE DISMISSED. ORDER WAS PRONOUNCED IN THE OPEN COURT ON 11.7.2011. SD/- SD/- [ N. K. SAINI] [H. L. KARWA] ACCOUNTANT MEMBER VICE PRESIDENT DATED:11.7.2011 JJ:1107 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR ASSISTANT REGISTRAR