High Court Of Delhi
CIT vs. Nath Bros. Exim International
Section 271(1)(c), Expln. 1
Asst. Year 1996-97
Madan B. Lokur & Vipin Sanghi, JJ.
IT Appeal No. 616 of 2006
12th September, 2006
Counsel Appeared
Sanjeev Sabharwal, for the Appellant : O.S. Bajpai, for the Respondent
ORDER
By the court :
The Revenue is aggrieved by an order dt. 2nd Sept., 2005, passed by the Tribunal, Delhi Bench “B”, in ITA No. 1555/Del/2005 relevant for the asst. yr. 1996-97.
2. The only question that has arisen in this case is whether the assessee is liable for penalty under s. 271(1)(c) r/w Expln. 1(B) of the IT Act, 1961. Learned counsel for the Revenue has taken us through the relevant provision and it appears on a reading thereof that before penalty can be imposed on the assessee, there are three requirements that have to be fulfilled, namely, that in respect of facts material to the computation of his total income, the assessee offers an explanation which he is not able to substantiate, that the assessee fails to prove that his explanation is bona fide and that the assessee has not disclosed all the facts relating to his income and material to the computation of his total income.
In this case, the Tribunal has proceeded on a consideration of the third ingredient, which was not satisfied and, therefore, the penalty imposed on the assessee has been deleted.
The assessee had claimed dividend income as his business income and according to the assessee it was entitled to a deduction under cl. (baa) of the Explanation to s. 80HHC(4C). In his return, in the computation of income a note was given by the assessee which read as follows : “Dividend Rs. 14,11,930 (UTI)—Rs. 14,10,474 and shares Rs. 1,456) and interest Rs. 15,15,808 (FDRs Rs. 9,89,062, inter-corporate deposit Rs. 57,269, certificate of deposit with banks Rs. 4,46,977, Bank of Baroda Bonds Rs. 1,619, IT Department Rs. 20,890) are claimed as business income chargeable under the head ‘Profits and gains of business or profession’ and profit derived from industrial undertaking at C-51, Sector-57, Noida.”
The Tribunal came to the conclusion that the assessee had disclosed all the facts, and therefore, even though it had made an erroneous claim which could not be justified in law, that by itself did not attract the penal provisions of the Act. What is required to be considered is whether there was any enquiry that was required to be made by the AO before concluding that the assessee had furnished inaccurate or false particulars. In this case, we are of the view that no such enquiry was required to be made but there was only the need for application of the law. On the legal position, the AO was not satisfied and did not agree with the assessee but that by itself is not a ground to invoke the penalty provision of the statute.
Learned counsel for the Revenue relied upon CIT vs. Vidyagauri Natverlal & Ors. (1999) 153 CTR (Guj) 546 : (1999) 238 ITR 91 (Guj). In that case the question that arose was of unexplained cash credit. The Gujarat High Court made a distinction between a wrong claim as opposed to a false claim. In that case, the AO needed to make an enquiry as to whether the claim of the assessee was right or not. Insofar as the present case is concerned, the decision cited by learned counsel for the Revenue is clearly distinguishable.
We find that there was full disclosure of all relevant material. It cannot be said that the conduct of the (assessee) attracted the provisions of s. 271(1)(c) of the Act.
In our opinion, no substantial question of law arises for our consideration.
[Citation : 288 ITR 670]
