Commissioner of Income Tax vs The Udaipur Central Cooperative Bank Ltd.

The respondent assessee is carrying out business of banking and providing credit facility to its members. The assessee while filing return of income on 29.9.2008 declared no taxable income. A revised return was subsequently filed on 25.11.2009 showing taxable income of Rs. 93,13,296/-. Suffice to mention that in the original return dated 29.9.2008 the assessee claimed deduction of Rs. 93,13,296/- as per provisions of Section 80-P(2)(d) of the Income Tax Act, 1961 (hereinafter referred to as ''the Act of 1961'').

The Assessing Officer by a notice, as per provisions of Section 271(1)(c) of the Act of 1961, dated 5.12.2011 called upon the assessee respondent to explain as to why penalty be not imposed upon it for concealment of particulars of income for the assessment year 2008-09.

The assessee responded the notice with assertion that it disclosed full particulars of the income and did not conceal any particulars of income, as such no action as per Section 271(1)(c) of the Act of 1961 was desirable.

The Assessing Officer under the order of assessment dated 20.6.2012 imposed a penalty upon the assessee respondent. A challenge to the same was given by the assessee respondent by way of filing an appeal before the Commissioner of Income Tax (Appeals), Udaipur that came to be accepted vide the order dated 11.1.2011. Learned Commissioner of Income Tax (Appeals), Udaipur while cancelling the penalty arrived at the conclusion that the claim of deduction under Section 80-P(2)(d) of the Act of 1961 was not with any ulterior motive, hence a revised return was filed, as such, the action of the assessee does not fall in the category of concealment or furnishing inaccurate income. An appeal preferred by the revenue before the Income Tax Appellate Tribunal also came to be dismissed by judgment dated 21.1.2013.

Before us, the argument advanced by learned counsel for the revenue is that the Commissioner of Income Tax (Appeals), Udaipur as well as the Income Tax Appellate Tribunal failed to appreciate that the assessee at the first instance claimed deduction by concealing taxable income and the accurate taxable income was disclosed by a revised return, therefore, an effort was certainly made to furnish inaccurate details to conceal taxable income and that demands penalty.

We do not find any merit in the argument advanced.

It is the position admitted that the respondent assessee by submitting a revised return declared complete and accurate taxable income. No information given in the revised return was found incorrect or inaccurate. No material is also available on record to establish that any conscious effort was made by the assessee respondent to conceal its income. To impose a penalty as per Section 271(1)(c) the Assessing Officer is required to get himself satisfied about existence of the conditions stated therein.

Hon''ble Supreme Court in Commissioner of Income Tax, Ahmedabad Vs. Reliance Petroproducts Pvt. Ltd., AIR 2010 SC 1881 : (2010) 230 CTR 320 : (2010) 3 JT 88 : (2010) 3 SCALE 1 : (2010) 11 SCC 762 : (2010) 3 SCR 510 : (2010) 189 TAXMAN 322 , while examining the issue as to what does concealment of particulars of income or submission of inaccurate particulars of income mean under Section 271(1)(c) of the Act of 1961, held as under:--

"A glance at this provision would suggest that in order to be covered, 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 present is not a case of concealment of the income. That is not the case of the Revenue either. However, the learned counsel for Revenue suggested that by making incorrect claim for the expenditure on interest, the assessee has furnished inaccurate particulars of the income. As per Law Lexicon, the meaning of the word "particular" is a detail or details (in plural sense); the details of a claim, or the separate items of an account. Therefore, the word "particulars" used in the section 271(1)(c) would embrace the meaning of the details of the claim made. It is an admitted position in the present case that no information given in the return was found to be incorrect or inaccurate. It is not as if any statement made or any detail supplied was found to be factually incorrect. Hence, at least, prima facie, the assessee cannot be held guilty of furnishing inaccurate particulars. The learned counsel argued that "submitting an incorrect claim in law for the expenditure on interest would amount to giving inaccurate particulars of such income". We do not think that such can be the interpretation of the concerned words. The words are plain and simple. In order to expose the assessee to the penalty unless the case is strictly covered by the provision, the penalty provision cannot be invoked. By any stretch of imagination, making an incorrect claim in law cannot tantamount to furnishing inaccurate particulars. In Commissioner of Income Tax, Delhi Vs. Atul Mohan Bindal, (2009) 225 CTR 248 : (2009) 317 ITR 1 : (2009) 11 JT 465 : (2009) 11 SCALE 592 : (2009) 9 SCC 589 : (2009) 13 SCR 464 : (2009) 183 TAXMAN 444 : (2009) 9 UJ 4172 , where this court was considering the same provision, the court observed that the Assessing Officer has to be satisfied that a person has concealed the particulars of his income or furnished inaccurate particulars of such income. This court referred to another decision of this court in Union of India (UOI) and Others Vs. Dharamendra Textile Processors and Others, (2008) 219 CTR 617 : (2008) 133 ECC 247 : (2008) 159 ECR 247 : (2008) 231 ELT 3 : (2008) 306 ITR 277 : (2008) 11 JT 255 : (2008) 13 SCALE 233 : (2008) 13 SCC 369 : (2008) 174 TAXMAN 571 : (2009) 11 Vat Reporter 63 : (2008) 18 VST 180 as also, the decision in Union of India (UOI) Vs. Rajasthan Spinning and Weaving Mills, (2009) 224 CTR 1 : (2009) 165 ECR 93 : (2009) 238 ELT 3 : (2009) 7 JT 314 : (2009) 8 SCALE 231 : (2009) 13 SCC 448 : (2009) 10 SCR 58 : (2009) 20 STT 481 : (2009) 180 TAXMAN 609 : (2009) 4 UJ 1637 : (2009) 11 Vat Reporter 210 and reiterated in paragraph 13 that:

"13. It goes without saying that for applicability of section 271(1)(c), conditions stated therein must exist."

Therefore, it is obvious that it must be shown that the conditions under section 271(1)(c) must exist before the penalty is imposed. There can be no dispute that everything would depend upon the return filed 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. In Dilip N. Shroff Karta of N.D. Shroff Vs. Joint Commissioner of Income Tax, Special Range Mumbai and Another, (2007) 210 CTR 228 : (2007) 291 ITR 519 : (2007) 8 SCALE 256 : (2007) 6 SCC 329 : (2007) 7 SCR 499 , this court explained the terms "concealment of income" and "furnishing inaccurate particulars". The court went on to hold therein that in order to attract the penalty under section 271(1)(c), mens rea was necessary, as according to the court, the word "inaccurate" signified a deliberate act or omission on behalf of the assessee. It went on to hold that clause (iii) of section 271(1)(c) provided for a discretionary jurisdiction upon the assessing authority, inasmuch as the amount of penalty could not be less than the amount of tax sought to be evaded by reason of such concealment of particulars of income, but it may not exceed three times thereof. It was pointed out that the term "inaccurate particulars" was not defined anywhere in the Act and, therefore, it was held that furnishing of an assessment of the value of the property may not by itself be furnishing inaccurate particulars. It was further held that the Assessing Officer must be found to have failed to prove that his explanation is not only not bona fide but all the facts relating to the same and material to the computation of his income were not disclosed by him. It was then held that the explanation must be preceded by a finding as to how and in what manner, the assessee had furnished the particulars of his income. The court ultimately went on to hold that the element of mens rea was essential. It was only on the point of mens rea that the judgment in Dilip N. Shroff v. Joint CIT was upset. In Union of India v. Dharamendra Textile Processors, after quoting from section 271 extensively and also considering section 271(1)(c), the court came to the conclusion that since section 271(1)(c) indicated the element of strict liability on the assessee for the concealment or for giving inaccurate particulars while filing return, there was no necessity of mens rea. The court went on to hold that the objective behind the enactment of section 271(1)(c) read with Explanations indicated with the said section was for providing remedy for loss of revenue and such a penalty was a civil liability and, therefore, wilful concealment is not an essential ingredient for attracting civil liability as was the case in the matter of prosecution under section 276C of the Act. The basic reason why decision in Dilip N. Shroff v. Joint CIT was overruled by this court in Union of India v. Dharamendra Textile Processors, was that according to this court the effect and difference between section 271(1)(c) and section 276C of the Act was lost sight of in the case of Dilip N. Shroff v. Joint CIT However, it must be pointed out that in Union of India v. Dharamendra Textile Processors, no fault was found with the reasoning in the decision in Dilip N. Shroff v. Joint CIT, where the court explained the meaning of the terms "conceal" and "inaccurate". It was only the ultimate inference in Dilip N. Shroff v. Joint CIT to the effect that mens rea was an essential ingredient for the penalty under section 271(1)(c) that the decision in Dilip N. Shroff v. Joint CIT was overruled.

We are not concerned in the present case with the mens rea. However, we have to only see as to whether in this case, as a matter of fact, the assessee has given inaccurate particulars. In Webster''s Dictionary, the word "inaccurate" has been defined as:

"not accurate, not exact or correct; not according to truth; erroneous; as an inaccurate statement, copy or transcript."

We have already seen the meaning of the word "particulars" in the earlier part of this judgment. Reading the words in conjunction, they must mean the details supplied in the return, which are not accurate, not exact or correct, not according to truth or erroneous. We must hasten to add here that in this case, there is no finding that any details supplied by the assessee in its return were found to be incorrect or erroneous or false. Such not being the case, there would be no question of inviting the penalty under section 271(1)(c) of the Act. A 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 assessee. Such claim made in the return cannot amount to the inaccurate particulars."

In the case in hand the applicant submitted the revised return and on basis of that tax was recovered. True it is, at the fist instance the assessee claimed exemption as per provisions of Section 80-P(2)(d) of the Act of 1961 but immediately on knowing about its non-applicability a revised return was filed disclosing accurate income. Under Section 271(1)(c) of the Act of 1961 it is required to be seen as to whether the assessee has concealed the income or the details supplied by him in return were found incorrect, erroneous, not accurate, not according to the truth or not exact depiction of the taxable income. No such eventuality in the instant matter exists. The Commissioner of Income Tax as well as the Income Tax Appellate Tribunal after examining the entire record arrived at the conclusion that first return submitted by assessee Udaipur Central Cooperative Bank Ltd. was a bona fide error and that was immediately rectified by submitting a revised return.

In this factual background we do not find any substantial question of law that may demand adjudication by us by entertaining an appeal as per provisions of Section 260-A of the Income Tax Act, 1961.

The appeal is dismissed accordingly.