$~10-11
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ ITA 480/2012
% Date of Decision: 29th July, 2013
CIT ..... Appellant
Through Mr. Rohit Madan, Advocate.
versus
HCIL KALINDEE ARSSPL ..... Respondent
Through None.
+ ITA 481/2012
CIT ..... Appellant
Through Mr. Rohit Madan, Advocate.
versus
HCIL ARSSPL TRIVENI (JV) ..... Respondent
Through None.
CORAM:
HON'BLE MR. JUSTICE SANJIV KHANNA
HON'BLE MR. JUSTICE SANJEEV SACHDEVA
SANJIV KHANNA, J. (Oral)
1. These two appeals by the Revenue arise out of a common
order of Income Tax Appellate Tribunal dated 25.11.2011 in the
case of M/s. HCIL ARSSPL TRIVENI (JV) vs. ACIT and M/s.
HCIL KALINDEE ARSSPAL (JV) vs. ACIT. The appeals
ITA 480/2012 Page 1 of 11
relate to Assessment Year 2007-2008.
2. By order dated 30.10.2012, the following substantial
question of law was framed in these two appeals.
"Whether the ITAT erred in law and on
merits in deleting the penalty levied u/s 271
(1) (c) of the Income Tax Act, 1961?
3. The respondent assessees had claimed deduction under
Section 80IA of the Act. They had also filed a copy of Form
No.3CB and 3CD and Form No.10CCB in support. In the
regular assessment proceedings, the Assessing Officer collected
details from M/s. Rail Vikas Nigam Ltd and M/s. Rites Ltd. and
came to the conclusion that HCIL ARSSPL TRIVENI (JV) had
not executed the work but had given sub-contract to M/s. HCIL.
Respondent assessee M/s. HCIL Kalindee ARSSPL similarly
had not done any work but sub-contracted the work to M/s HCIL
and M/s Kalindee Rail Nirman Project Ltd.
4. The aforesaid factual position was put to the respondent
assessees and they were asked to reply and explain. Reply
furnished was not accepted by the Assessing Officer, who also
relied on Explanation to sub-Section 13 of Section 80IA of the
Act which stipulates that the Section 80IA is not applicable to an
assessee engaged in the execution of works contract.
ITA 480/2012 Page 2 of 11
Deduction under Section 80IA was denied and an addition of
Rs.70,07,615/- and Rs.41,83,622 was made in the case of M/s.
HCIL Kalindee ARSSPL (JV) and HCIL ARSSPL Triveni (JV)
respectively. The assessees accepted the quantum order and did
not file any appeal. Additions made attained finality.
5. Concealment penalty proceedings under Section 271(1)(c)
were initiated and penalty of Rs.23,02,665/- imposed on M/s.
HCIL Kalindee ARSSPL (JV) and Rs.13,52,107 on M/s. HCIL
ARSSPL Triveni (JV), were upheld by the CIT (Appeals).
They specifically rejected the contention that the assessees had
acted bonafidely and were not liable as they had relied upon
opinion in view of the forms which had been filled up by the
Chartered Accountant.
6. The Tribunal in the impugned order dated 25.11.2011
while deleting the penalty has held:-
"7.4 In the light of aforesaid observations of
the Hon'ble Apex Court, what is to be seen in the
instant case, is whether the claim for deduction u/s
801A of the Act, on the basis of certificate of the
accountant, made by the assessee was bona-fide and
whether all the material facts relevant thereto have
been furnished and once it is so established, the
assessee cannot be held liable for concealment
penalty u/s 271 (i) (c) of the Act. The Assessing
Officer has not been able to establish that the claim
ITA 480/2012 Page 3 of 11
of the assessee for deduction under section 801A of
the Act was not bona fide. A mere rejection of the
claim of the assessee by relying on difference
interpretations does not amount to concealment of
the particulars of income of furnishing inaccurate
particulars thereof by the assessee. Hon'ble Apex
Court in CIT V. Reliance Petroproducts (P) Ltd.
[2010] 322 ITR 158/189 Taxman 322, after
considering various decisions including Dilip N.
Shroff v. Jt. CIT [2007] 291 ITR 519/161 Taxman
218 (SC) and Union of India V. Dharmendra Textile
Processors [2008] 306 ITR 277/174 Taxman 571
(SC) concluded that 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. Following this decision,
Hon'ble jurisdictional High Court in M/S Dharpal
Premchand (Supra) upheld the cancellation of
penalty levied in relation to incorrect claim of
deduction u/s 801A & 801B of the Act. Mere
disallowance of a claim will not amount to filing of
inaccurate particulars of income. It can at best be a
"wrong calim"not a "false claim". In such
circumstances, Hon'ble Delhi High Court held in the
case of Commissioner of Income-Tax vs Bacardi
Martini India Limited, 288 ITR 585 (Del) that no
penalty was leviable. In the case under
consideration, there is nothing to suggest that the
assessee furnished any inaccurate particulars or
concealed the particulars. Admittedly, the claim for
deduction u/s 801A was duly supported by the
certificate of the chartered accountant in the
prescribed form. In these circumstances no fault can
be found with the claim of the assessee that it had
claimed the deduction in a bona fide manner. In
somewhat similar circumstances. Hon'ble Punjab
and Haryana High Court cancelled the penalty levied
in respect of disallowance of deduction u/s. 801 in
the case of CIT Vs SD Rice Mills, 275 ITR 206 (P &
H). Similar view was taken in ACIT Vs. Arisudana
Spinning Mills Ltd., 19 DTR.1 (Chd) and Model
ITA 480/2012 Page 4 of 11
Footwear P Ltd. Vs. ITO, 124 ITD 353(Del.).
Moreover, mere fact that the report prepared by the
CA in the form 10 CCB was not in accordance with
the provisions of section 801A(7) of the Act, was
not enought to hold that the mistake was not bona
fide. This view is supported by the decision in the
case of CIT Vs. Deep Tools Pvt. Ltd., 274 ITR 603
(P&H), where in also levy of penalty was held to be
unjustified. In CIT Vs. Caplin Point Laboratories
Ltd., 298 ITR 524 (Mad) Hon''ble High Court while
adjudicating the levy of penalty in relation to
incorrect claim for deduction u/s 80 HHC & 801 of
the Act held in the light of aforesaid decision of the
Hon'ble Apex Court in Dilip N. Shroff (supra) that a
mere rejection of the claim of the assessee by relying
on different interpretations does not amount to
concealment of the particulars of income furnishing
inaccurate particulars of income by the assessee."
7. Penalty provisions are not criminal and do not require
culpable mens rea. Whether or not the assessee had acted
malafidely is not the relevant question to be asked and answered.
The relevant question to be asked and answered is whether the
assessee has discharged the onus and satisfied the conditions
mentioned in Explanation 1 to Section 271(1)(c) of the Act.
The said explanation reads as :
"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 falls to offer an explanation or
offers an explanation which is found by the
Assessing Officer or the Commissioner
(Appeals) or the Commissioner to be false, or
(B)Such person offers an explanation which he is
ITA 480/2012 Page 5 of 11
not able to substantiate and fails to prove that
such explanation is bone 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."
8. Penalty under Section 271(1)(c) of the Act is imposed
when an assessee has concealed his income or furnished
inaccurate particulars. In terms of the explanation quoted above,
we have to examine whether the case falls within sub-clause (A)
or (B) and the effect thereof. Sub-clause (A) applies when the
assessee fails to furnish any explanation or when an explanation
is found to be false. In the present case, sub-clause (A) would
not be applicable as assessee has furnished an explanation, and
the explanation has not been found to be "factually" false. The
assessee had made a wrong claim for deduction under Section
80IA and, therefore, had furnished inaccurate particulars as the
claim was not admissible. Sub-clause (B) of the explanation is,
therefore, applicable and we have to examine the two conditions
whether: (1) The assessee has been able to show that the
explanation was bonafide; and (2) Facts and material relating to
computation of his income had been disclosed.
ITA 480/2012 Page 6 of 11
9. Onus of establishing that the assessee satisfied the two
conditions is on him i.e. the assessee. We shall examine the first
condition i.e. whether the explanation of the assessee was
bonafide. The second condition is satisfied.
10. In the present case, we note that Tribunal has proceeded
on the premise that the claim for deduction under Section 80IA
of the Act was duly supported by the Chartered Accountant 's
Certificate and prescribed forms signed by the Chartered
Accountant. For claiming deduction under Section 80IA of the
Act, filing of certificate and forms signed by the Chartered
Accountant is mandatory and a requirement of law. All returns,
where deduction under Section 80IA is claimed, must have such
certificates and forms. Mere filing of the said forms/certificate
cannot absolve and protect an assessee who furnishes in-accurate
particulars. If the explanation and the reasoning of the Tribunal
is accepted, then in all cases where a form/certificate is furnished
by the Chartered Accountant but a wrong claim of deduction is
made, no penalty under Section 271(1)(c) can be imposed.
Merely because the assessee complies with the statutory
procedural requirement of filing the prescribed form and
certificate of the Chartered Accountant, cannot absolve the
assessee of its liability if the act or attempt in claiming the
ITA 480/2012 Page 7 of 11
deduction was not bonafide.
11. Two reasons were given by the Assessing Officer why the
claim for deduction under Section 80IA of the Act was rejected
and should be denied. The first reason was that the respondent
assessees were involved in works contracts and Explanation to
Section 80IA (13) stipulates that benefit under the said Section
was/is not available to a contractor carrying on works contract.
The said "clarificatory" explanation was inserted by the Finance
Act, 2007 with retrospective effect from 01.04.2000. The CIT
(Appeals) in the first appellate order has specifically mentioned
that the Finance Act, 2007 received the Presidential assent on
11.05.2007 [(2007) 291 ITR (St.) 1]. The returns of income were
filed by M/s. HCIL Kalindee ARSSPL (JV) and M/s. HCIL
ARSSPL Triveni (JV) on 01.11.2007. An amendment of this
nature invariably attracts attention and is seldom missed. Such
amendments become topic of discussion and conversation in the
professional circles. To show and establish bonafides, the
assessees had to show some more "tangible material" or basis as
to why a clear statutory provision which excludes works
contracts was ignored.
12. We are not stating or holding that penalty for concealment
ITA 480/2012 Page 8 of 11
can be imposed and is justified merely because interpretation or
claim of the assessee is rejected. For interpretation and
understanding tax laws assessees necessarily and do rely on
professional or expert opinion and they cannot be subjected to
penalty when the assessee discharges the onus that the claim was
bonafide [see Devsons Logistics Pvt. Ltd. vs. CIT (2010)329
ITR 483 (Del.) and decision of this court dated 28th May, 2013
in ITA 804/2011 titled Shervani Hospitalities Ltd. vs. CIT].
The Act i.e. the Income Tax Act, 1961 is one of most vexed and
complicated legislation. It has been subjected to numerous
amendments from time to time. It requires highest degree of
interpretative skills and divergent views on interpretation of tax
provisions have been subject matter of plethora of judgments. It
is not necessary that there should be uniformity or consistency of
opinion on aspects of law. Law does not postulate that an
assessee must accept an interpretation against him, even when a
favourable view is credible and tenable. Penalty of concealment
cannot be imposed because the assessee has taken a particular
stand or had preferred an interpretation which was plausible and
reasonable, but has not been accepted, unless the assessee had
not disclosed facts before the authorities. Such cases have to be
distinguished from cases where the claim of the assessee is
ITA 480/2012 Page 9 of 11
farcical or farfetched. Dubious and fanciful claims under the
garb of interpretation, are a mere pretence and not bonafide.
13. It is not the case of the respondent assessee that there
were conflicting decisions of High Court or there was a recent
decision of the Supreme Court which had escaped attention or
was not understood or an appeal or review etc. was pending
before the Supreme Court. The explanation added was clear and
categorical. The Tribunal has not referred to the Explanation to
Section 80IA as to why and on what basis divergent
interpretations were possible. Absurd or illogical interpretations
cannot be pleaded and become pretence and excuses to escape
penalty. "Bonafides" have to be shown and cannot be assumed.
In the present case, the respondents have not been able to
discharge the said onus and establish that they had acted
bonafidely.
14. We also notice that the Tribunal has not dealt with the
second reasoning given by the Assessing Officer to make the
said addition; that the assessees had not carried out the work but
had sub-contracted the same to a third party/parties.
15. In view of the aforesaid position, we answer the question
of law in affirmative i.e. in favour of the Revenue and against
ITA 480/2012 Page 10 of 11
the respondent assessees. Order of the Tribunal deleting penalty
is held to be contrary to law. Penalty imposed is upheld.
The appeals are disposed of. No costs.
(SANJIV KHANNA)
JUDGE
(SANJEEV SACHDEVA)
JUDGE
JULY 29, 2013
st/kkb
ITA 480/2012 Page 11 of 11
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