High Court Of Gujarat
CIT vs. Manibhai & Bros.
Section 271(1)(c)
Asst. Year 1983-84
Y.R. Meena, Actg. C.J. & A.S. Dave, J.
IT Ref. No. 9 of 1996
4th December, 2006
Counsel Appeared : Manish R. Bhatt, for the Applicant : None, for the Respondent
ORDER
By the court :
The following questions are referred for the opinion of this Court :
“(1) Whether, on the facts and in the circumstances of the case, the Tribunal is justified in law in upholding the decision of the CIT(A) cancelling the penalty levied under s. 271(1)(c) of the IT Act, 1961, holding that the decision of the Hon’ble Rajasthan High Court in the case of Badri Prasad Om Prakash relied upon by the AO cannot be ground for penalizing the assessee on the strength of the revised return, though in such circumstances, the Supreme Court has upheld the penalty under s. 271(1)(c) in the case of G.C. Agrawal vs. CIT (1991) 95 CTR (SC) 257 : (1990) 186 ITR 571 (SC) ?
(2) Whether, on the facts and in the circumstances of the case and that the assessee is in habit of making false claim of deduction on the machinery which was not put to use and in absence of any cogent reason for revising the return, whereas the Supreme Court’s decision in the case of G.C. Agrawal vs. CIT (supra) on the similar circumstances, penalty was upheld under s. 271(1)(c) holding that Explanation to that section is applicable, the Tribunal is right in upholding the decision of the CIT(A) ?
(3) Whether, on the facts and in the circumstances of the case, the Tribunal is right in accepting assessee’s plea that penalty under s. 271(1)(c) is not levied in the earlier year on the same issue and hence the penalty for the year under consideration should not be levied, when the assessee is in habit of making false claim of depreciation and investment allowance on the machinery not put to use and there is absence of any cogent reason for revising return in view of Supreme Court’s decision as mentioned in question Nos. 1 and 2 above ?”
Heard Shri M.R. Bhatt, learned counsel for the Revenue. Whether there is case of penalty under s. 271(1)(c) of the IT Act, 1961, the Tribunal has considered the aspects as under : “9. We have given our anxious consideration to the submissions made before us by the learned representatives of both the sides and also perused the concerned and relevant documents which have a bearing on the case. The judgments of the Rajasthan and Madras High Courts relied upon by both the lower authorities were also examined by us. In our view, the impugned order of the Appellate Commissioner deserves to be upheld. The Rajasthan High Court in the case of J.P. Sharma & Sons vs. CIT (1985) 151 ITR 333 (Raj) have laid down that : ‘Here non-disclosure of true particulars of income or furnishing of inaccurate particulars is not sufficient to attract the penalty provisions contained in s. 271(1)(c) of the IT Act, 1961. In order that penalty may be imposed, there should be conscious concealment of particulars or inaccurate particulars must have been furnished deliberately by the assessee. The entirety of the circumstances must be taken into consideration and the conduct of the assessee from the inception to the conclusion of the assessment proceedings must be viewed in order to find out whether a criminal intention of conscious concealment of true particulars of income or deliberate furnishing of inaccurate particulars by the assessee has been established. Where a revised return is filed, the crux of the matter is that if after examining the return and the accounts of the assessee in the course of the assessment proceedings, the ITO discovers an omission or wrong statement placed by the assessee and, therefore, a revised return is filed, then the assessee cannot be resolved (absolved) of the liability for imposition of penalty under s. 271(1)(c), but if the assessee himself voluntarily files a revised return before the order of assessment is made, after he has himself discovered an omission or wrong statement in the original return, then in such a case, penalty for concealment of particulars of income or for furnishing inaccurate particulars of such income, as contemplated under s. 271(1)(c), cannot be imposed.’ Thus, it is apparent and abundantly clear that mere filing of a revised return without any prior detection by the AO or before answer to any of the queries raised during the course of assessment proceedings cannot bring an assessee within the clutches or rigors of the penal provisions contained in s. 271(1)(c) of the Act. The entirety of the circumstances, as observed by the Hon’ble Rajasthan High Court, must be taken into consideration and the conduct of the assessee from the inception to the conclusion of the assessment proceedings must be viewed in order to find out whether a criminal in (intention) of conscious concealment of true particulars of income or deliberate furnishing of inaccurate particulars by the assessee has been established. In our view, the facts of the case before the Rajasthan High Court are more or less similar and identical to the facts existing in the present case and therefore, the ratio and principle laid down by the Rajasthan High Court in the case of J.P. Sharma & Sons (supra) clearly go to support the assessee’s case and the order passed by the AO. On going through the contents of the assessment order as well as the contents of the penalty order, we are unable to find out mens rea or guilty mind or intention on the part of the assessee in furnishing of inaccurate particulars relating to claim of depreciation and investment allowance and also in respect of interest which accrued on the FDRs.
The assessee had very clearly submitted in its reply dt. 5th April, 1986 which we have extracted elsewhere above that the reviewed (sic–revised) return has been filed in order to avoid probable litigation with the IT Department in respect of depreciation and investment allowance claimed on Dozer D3 plant, particularly keeping in mind the treatment meted out to the assessee in respect of similar claim of another machine purchased during S.Y. 2036 relating to asst. yr. 1981-82. We are also convinced with the submissions of the assessee in its letter dt. 5th April, 1986 that the assessee has very abnormal and high income, which is being disclosed year after year and it would hardly make any difference in respect of its tax liability or incidence whether the depreciation and investment allowance claim is either made in the asst. yr. 1983-84 or in the asst. yr. 1984-85. The assessee having been advised took a prudent step to file the revised return withdrawing the depreciation and investment allowance claim which was made while filing the original return though the same could have been allowed. We have also gone through the purchase invoice in respect of Dozer D3, which was purchased from Bharat Earth Movers Ltd., Bangalore, a copy of which is at p. 12 of the supplementary paper book filed on 10th Jan., 1995. The bill of the seller is dt. 9th Nov., 1982 and the same was brought to the Kandla Port site of the assessee through transport while bills are placed at pp. 13 and 14 of the said paper book filed on 10th Jan., 1995. Upon the letter dt. 13th Nov., 1982 of the assessee addressed to the Engineer-in-charge, Gujarat Electricity Board, the Dozer D3 was also inspected on 13th Nov., 1982 and a certificate to that effect has also been given by the Engineer-in-charge, Gujarat Electricity Board, which can be found at pp. 26 and 27 of the supplementary paper book filed on 10th Jan., 1995. We also find that the assessee also purchase diesel for Dozer D3, the details of which have been given placed from pp. 20 to 25 of the supplementary paper book.
These related evidences placed in the supplementary paper book filed on 10th Jan., 1995 amply go to establish that the claim for depreciation and investment allowance made in the original return was not a false claim but it was a bona fide and right claim and if contested could have been allowed by the Revenue authorities. However, the assessee did not wish to take any chance or risk with the IT Department, particularly seeing the attitude of the Department in relation to the proceedings for the asst. yr. 1981-82 in respect of a similar claim in respect of another machine purchased in that previous year. If the assessee has been overcautious and filed a revised return withdrawing its rightful claim made in the original return, then no motive can be distributed (sic–attributed) to the assessee nor can it be said that the assessee with mala fide intention made file when a claim these therein, in liable for bearing protected under s. 271(1) (c) on the ground that if deliberately furnished inaccurate particulars of such income. The decision of the Rajasthan High Court in the case of Badri Prasad Om Prakash (supra) relied upon by the AO cannot be a ground for penalising the assessee on the strength of the revised return. In that case, the assessee came forward and filed revised return after certain false claims were detected by the AO pursuant to queries raised by him in that case. This is not the case with the assessee. The assessee, as recorded by us above, has come forward and filed revised return voluntarily and suo motu without there being any detection by the AO who also cannot ignore the fact, which has also been taken by the AO, that the penalty proceedings under s. 271(1)(c) initiated on similar set of facts for the earlier two assessment years, namely, 1981-82 and 1982-83 were dropped as evident from the orders, which are placed at pp. 1 and 2 of the original paper book filed at the time of hearing. Thus, taking all the cumulative facts and circumstances into consideration, the only conclusion which can be arrived at is that the assessee is not liable or exigible for any penalty in accordance with the provisions of s. 271(1)(c) of the Act, more so, far the charge of furnishing inaccurate particulars in relation to the depreciation and investment allowance claim as also in respect of the accrued interest on FDRs. We, therefore, without any hesitation uphold the impugned order of the AO [sic–CIT(A)] in cancelling the penalty levied by the AO under s.271(1) (c) of the Act.”
There is no dispute on the facts that the assessee has claimed depreciation on the same line as he has claimed in the asst. yr. 1981-82 and that depreciation was not allowed in the asst. yr. 1981-82. Just thereafter, he has filed revised return for the year 1983-84 and not claimed the depreciation. To conceal the fact regarding the claim, and wrongly claimed deduction, they are two different types of cases. If somebody has wrongly claimed some deduction under some bona fide mistake that cannot be considered for penalty under s. 271(1)(c) of the IT Act. The CIT(A) and the Tribunal both have found that there was no intention to conceal the facts for claiming depreciation. In the result, we answer the question No. 1 in affirmative, meaning thereby, in favour of the assessee and against the Revenue. In view of our answer to question No. 1, question Nos. 2 and 3, since covered by question No. 1, they are also answered in favour of the assessee and against the Revenue. Reference stands disposed of accordingly.
[Citation : 294 ITR 501]
