Case: Commissioner of Income Tax Vs. Rucha Engineers Private Limited

be labelled as inaccurate merely because the revenue on strenuous reasonings accepted the same as capital receipt, rejecting the claim of the respondent- assessee that the same was capital receipt. The facts of the matter show that, the A.O., after he passed the earlier order dated 30.12.2005, waited till the order in appeal was passed on 24.3.2006, and only thereafter on 27.3.2007, passed present impugned order (Exhibit B), imposing penalty in the proceedings, which had been started earlier. Thus, even the A.O. appears to have harboured doubts whether his order would be interfered with. We agree with the orders in the first appeal as well as the orders of the tribunal that the amount claimed by the assessee was debatable and when the assessee had given all the necessary particulars, it could not be construed as concealing the income or furnishing inaccurate particulars for evasion of tax. The issue whether prepayment of loan at a discounted value constitutes taxable event or not, is debatable and we agree with the judgment in the first appeal and the judgment of the Tribunal that the facts of the case of "Thirumaliaswamy", there was scope to distinguish.A legal contention raised bonafide by the respondent- assessee claiming the amounts to be capital receipt, only because the same was not accepted, by itself cannot be said to be act of fraud or gross or willful negligence. Record shows that, the respondent- assessee was relying on decisions of various Courts to support its claim. Merely because the claim was rejected, the same cannot be branded as concealment. Before proceeding to the explanation below Section 271 and putting the responsibility on the assessee, it is necessary for the A.O. to first demonstrate that the explanation of the assessee or the conduct of the assessee was not reasonable on human probabilities, or that it was in the nature of violating settled legal positions. It cannot be said that, the explanations given by the respondent- assessee were fanciful, baseless or unacceptable.15. With reference to Section 271(1)(c) reproduced above, it would be appropriate to refer to observations of the Honble the Supreme Court in the matter of Commissioner of Income Tax, Ahmedabad Vs. Reliance Petroproducts Pvt. Ltd., reported in [(2010) 11 Supreme Court Cases 762] . In this regard, in para Nos.10 and 11, the observations were as under:"10. . . . . .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. Present is not the case of concealment of the income. That is not the case of the Revenue either. However, the learned counsel for the 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 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.""11. 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 words concerned. 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 para Nos.17 and 20, the Honble Supreme Court observed as follows :"17. We are not concerned in the present case with 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 Websters Dictionary, the word "inaccurate" has been defined as :"not accurate, not exact or correct: not according to truth; erroneous, as an inaccurate statement, copy of 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.""20. . . . . Merely because the assessee had claimed the expenditure, which claim was not accepted or was not acceptable to the revenue, that by itself would not, in our opinion, attract the penalty under section 271(1)(c). If we accept the contention of the Revenue then in case of every return where the claim made is not accepted by the assessing officer for any reason, the assessee will invite penalty under Section 271(1)(c). That is clearly not the intendment of the legislature."16. For reasons mentioned above, we do not find any error in the orders passed by the appellate Tribunal maintaining deletion of the penalty as was imposed by the A.O. The two courts of appeal below rightly held that the act of the assessee was bonafide even though the assessee may have failed to substantiate its claim that the amount was capital receipt. The assessee had not concealed and had disclosed necessary particulars in the form of notes to the statement of8909364905 _ 97f179e3d5 _ o income and it could not be said that, the assessee made wrong claims which could be branded as inaccurate particulars. The substantial questions of law raised on the basis of facts of the present matter are answered against the revenue.17. There is no substance in the Appeal.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]13. It is quite clear that the respondent had not concealed the particulars of its income. The necessary particulars had been furnished in more than one way. The issue whether the concerned amount was revenue receipt or capital receipt is clearly debatable and separate proceedings in that regard are already pending in this High Court, which is not disputed fact. In this judgment, we are not deciding if the said amount was capital receipt or revenue receipt. Material here is only if there was a debatable issue. The respondentassessee submitted necessary particulars by way of audited accounts and also statement of total income and even added necessary notes with the returns and took a stand. We find that, there is no substance in the arguments of the appellantRevenue that explanation (1) of Section 271 is attracted. It will be necessary to first show that, either the particulars were "concealed" or that the particulars were "inaccurate". Unless this requirement of section 271(1)(c) gets attracted, the question of going to the explanation will not arise.14. Apart from this, even if the explanation is perused, it cannot be said that, explanation offered by thewas false. The respondentassessee did put up an explanation along with necessary notes. Only because the stand taken was not accepted by the A.O., relying on reasonings from different rulings does not make the explanation false. Both the courts in appeal below have found the explanation of the respondentassessee as bonafide. In such situation, in the present appeal, we would not like to enter into that question which must be said to be question of fact. The particulars furnished by the assessee cannot be labelled as inaccurate merely because the revenue on strenuous reasonings accepted the same as capital receipt, rejecting the claim of the respondentassessee that the same was capital receipt. The facts of the matter show that, the A.O., after he passed the earlier order dated 30.12.2005, waited till the order in appeal was passed on 24.3.2006, and only thereafter on 27.3.2007, passed present impugned order (Exhibit B), imposing penalty in the proceedings, which had been started earlier. Thus, even the A.O. appears to have harboured doubts whether his order would be interfered with. We agree with the orders in the first appeal as well as the orders of the tribunal that the amount claimed by the assessee was debatable and when the assessee had given all the necessary particulars, it could not be construed as concealing the income or furnishing inaccurate particulars for evasion of tax. The issue whether prepayment of loan at a discounted value constitutes taxable event or not, is debatable and we agree with the judgment in the first appeal and the judgment of the Tribunal that the facts of the case of "Thirumaliaswamy", there was scope to distinguish.A legal contention raised bonafide by the respondentassessee claiming the amounts to be capital receipt, only because the same was not accepted, by itself cannot be said to be act of fraud or gross or willful negligence. Record shows that, the respondentassessee was relying on decisions of various Courts to support its claim. Merely because the claim was rejected, the same cannot be branded as concealment. Before proceeding to the explanation below Section 271 and putting the responsibility on the assessee, it is necessary for the A.O. to first demonstrate that the explanation of the assessee or the conduct of the assessee was not reasonable on human probabilities, or that it was in the nature of violating settled legal positions. It cannot be said that, the explanations given by the respondentassessee were fanciful, baseless or unacceptable.15. With reference to Section 271(1)(c) reproduced above, it would be appropriate to refer to observations of the Honble the Supreme Court in the matter of Commissioner of Income Tax, Ahmedabad Vs. Reliance Petroproducts Pvt. Ltd., reported in [(2010) 11 Supreme Court Cases 762] . In this regard, in para Nos.10 and 11, the observations were as under:"10. . . . . .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. Present is not the case of concealment of the income. That is not the case of the Revenue either. However, the learned counsel for the 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 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.""11. 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 words concerned. 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 para Nos.17 and 20, the Honble Supreme Court observed as follows :"17. We are not concerned in the present case with 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 Websters Dictionary, the word "inaccurate" has been defined as :"not accurate, not exact or correct: not according to truth; erroneous, as an inaccurate statement, copy of 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.""20. . . . . Merely because the assessee had claimed the expenditure, which claim was not accepted or was not acceptable to the revenue, that by itself would not, in our opinion, attract the penalty under section 271(1)(c). If we accept the contention of the Revenue then in case of every return where the claim made is not accepted by the assessing officer for any reason, the assessee will invite penalty under Section 271(1)(c). That is clearly not the intendment of the legislature."16. For reasons mentioned above, we do not find any error in the orders passed by the appellate Tribunal maintaining deletion of the penalty as was imposed by the A.O. The two courts of appeal below rightly held that the act of the assessee was bonafide even though the assessee may have failed to substantiate its claim that the amount was capital receipt. The assessee had not concealed and had disclosed necessary particulars in the form of notes to the statement of8909364905 _ 97f179e3d5 _ o income and it could not be said that, the assessee made wrong claims which could be branded as inaccurate particulars. The substantial questions of law raised on the basis of facts of the present matter are answered against the revenue.17. There is no substance in the Appeal.