Commissioner of Income Tax vs Premier Proteins Ltd.

A.M. Sapre, J.—This is an appeal filed by the CIT u/s 260A of the IT Act against an order dt. 26th Feb., 1999, passed by the Tribunal in ITA No. 467/Ind/1995. This appeal was admitted for final hearing on the following substantial question of law :

"Whether, on the facts and in the circumstances of the case and in law, the Tribunal was justified in holding that because of the note left in return regarding cash compensatory support, the penalty u/s 271(1)(c) is not leviable in the case in spite of amendment to Section 28 of IT Act by way of insertion of Clause (iiib) ?"

Heard Shri R.L. Jain, learned senior counsel with Ku. Veena Mandlik for the appellant and Shri G.M. Chaphekar, learned senior counsel with Shri D.S. Kale for respondent.

The question arises out of asst. yr. 1989-90. It relates to imposition of penalty on the assessee (a limited company) u/s 271(1)(c) of the IT Act.

In the opinion of AO, since the assessee, while submitting the return for the year in question, did not disclose the details of what is called "cash compensatory support" earned on account of some export transactions and hence it amounted to furnishing of inaccurate particulars within the meaning of Section 271(1)(c) of the Act rendering the assessee to pay penalty. Accordingly, the AO imposed the penalty by not accepting the explanation offered by the assessee. In an appeal filed by the assessee, the CIT(A) allowed the appeal and set aside the order of AO. In further appeal filed by CIT to Tribunal, the same was dismissed resulting in upholding of the order passed by the CIT(A). It is against this order the CIT(A), Revenue has felt aggrieved and filed this appeal.

Having heard learned counsel for the parties and having perused the record of the case, we are of the considered view that appeal has no merit. As a consequence, it is liable to be dismissed resulting in upholding of the view taken by the Tribunal.

In our considered opinion, the explanation offered by the assessee did make out a case for dropping the penalty proceedings initiated against them. In other words, it was not a case of furnishing any inaccurate or false particulars in the return so as to empower the AO to initiate penalty proceedings u/s 271(1)(c) ibid. Firstly, there was justification on the part of assessee in not including the disputed item, i.e., cash compensatory support, because at the relevant time there was a decision of Tribunal in favour of assessee holding that it is not so taxable. Secondly, on the date of return, the law was in favour of assessee and it was brought in force retrospectively by way of amendment in Section 28 ibid much after filing of the return. Thirdly, and even with all this, the assessee did mention these facts in the return by way of ''note''. All the three factors go to show that assessee had made full disclosure regarding disputed claim in his return and hence, the AO had no jurisdiction to initiate the penalty proceedings treating it to be a case of either suppression of material fact or furnishing of inaccurate material with a view to evade payment of tax. In our considered view, the CIT(A) and Tribunal were justified in concluding in favour of assessee that explanation offered by them deserves to be accepted. We concur with the view so taken by the two appellate authorities as it does not call for any interference in our appellate jurisdiction.

In order to impose any penalty u/s 271(1)(c) of the Act, it is necessary for AO to show that assessee has deliberately and with an oblique motive suppressed material claim or/and furnished inaccurate particulars to obtain the benefit of evading the lawful tax payable by them. The motive must be proved without which no case for penalty is made out for every breach. In our considered view, the explanation offered by the assessee was not only bona fide but legally justified. It was rightly accepted by the CIT(A) and affirmed by the Tribunal.

Learned counsel for appellant submitted that since the assessee did not file the revised return and hence, it must be presumed that a case of penalty is made out. We do no agree. The filing of revised return has nothing to do so far as claim in question is concerned. It was a case of disclosure in the return itself by way of note and secondly, the legal position being in favour of assessee, there did not arise any occasion for assessee to file revised return. In any event, when the explanation offered by the assessee was acceptable, then his subsequent conduct in not filing the revised return could not be made basis for imposing the penalty.

In view of aforesaid discussion, we find no merit in the appeal which fails and is hereby dismissed. No cost.