Case: C.I.T,Delhi Vs. Atul Mohan Bindal

4. Atul Mohan Bindal - assessee filed return of his income for Assessment Year 2002-03 on August 8, 2002 declaring his total income Rs.1,98,50,021/-. In the assessment proceedings u/s 143, a notice alongwith questionnaire was issued to him by the Assessing Officer on November 29, 2002. Pursuant thereto, assessee attended the assessment proceedings and furnished the requisite details. During the assessment proceedings, it transpired that assessee worked with M/s DHL International(S) PTE Ltd., Singapore during the previous year and was paid salary in Singapore amounting to US$ 36,680.79 equivalent to Rs.17,81,952/-. The assessee explained that an amount of US $ 8199.87 (Rs.3,98,350/-) was deducted as tax from the aforesaid salary income and having paid tax on salary income earned in Singapore, he was of the view that the said income was not liable to be included in the total income in India. He however, offered salary income of Rs. 17,81,952/- to be included in his total income. The assessee was also found to have received an amount of Rs. 5,00,000/- from his erstwhile employer M/s Honeywell International (India) Pvt. Ltd. in the previous year. His explanation was that the said amount was exempted under Section 10(10 B) of the Act being retrenchment compensation. According to the Assessing Officer, that amount could not be exempted u/s 10 (10B) as the assessee was not a workman. The assessee also earned interest income of Rs. 22,812/- from Bank of India which was not included by him in the total income but he offered for tax the said amount. The Assessing Officer, accordingly, added Rs.17,81,952/-, Rs.5,00,000/- and Rs.22,812/- to the income declared by the assessee in the return and assessed the total income of assessee at Rs.2,21,54,785/-. Penalty proceedings under Section 271(1)(c) were initiated separately and penalty of Rs.7,75,211/- was imposed under Section 271(1)(c) by the Assessing Officer vide Order dated March 16, 2003.5. The assessee accepted the order of assessment but challenged the order of penalty in appeal before the CIT (Appeals) XXV, New Delhi.6. After hearing the assessee and the departmental representative, the CIT (Appeals) XXV, New Delhi allowed the appeal and set aside the order of penalty vide his order dated August 22, 2005. The CIT (appeals) held that the assessee has neither concealed the particulars of his income nor he furnished any inaccurate particulars thereof. This is what the CIT (Appeals)I believe that this is a case of unintentional and inadvertent omission and therefore, it is not a fit case for levy of penalty u/s. 271(1)(c) of the Act as the assessee has not concealed the particulars of his income; nor has he furnished any inaccurate particulars thereof. As can be seen from a perusal of the impugned order, the penalty has been levied with reference to firstly, the addition disallowing the claim of Retrenchment compensation of Rs.5,00,000/- made u/s 10(10B) of the Act, secondly, the salary received in Singapore for services rendered outside India from December to March 2002 amounting to Rs. 17,81,952/- offered by the appellant in the course of assessment proceedings and thirdly the interest income of Rs. 22,812/- also offered for tax in the revised return filed during the course of assessment proceedings. As regards the former, the AO appears to be completely satisfied as regard the genuineness of the reasons that necessitated the revision. As regard the second, the issue involved difference of opinion even between two different benches of the Apex Court, and thirdly, the A.O. again seems to be satisfied about the appellants reply in this connection. In any case, the additions were made on the basis of the particulars furnished by the appellant and not discovered independently by the A.O.5.1 That the appellant had a bona fide belief of the non-taxability of the salary income earned in Singapore where tax- withholding had taken place and India had DTAA with Singapore, so he did not include this receipt in his salary income cannot be rejected out of hand. During assessment proceedings however, assessee offered this salary receipt for taxation as per IT Act, 1961. Therefore, an amount of Rs. 17,81,952/- was included in the total income of the assessee. In such setting of facts, I am afraid, the impugned addition may not lead to concealment of income or furnishing of inaccurate particulars thereof.The Revenue challenged the order of CIT (Appeals) before the Income Tax Appellate Tribunal, Delhi (for short, "the Tribunal").8. The Tribunal heard the departmental representative and the authorized representative of the assessee and by its order dated December 22, 2006 upheld the order of CIT (Appeals). The Tribunal considered the matter12. On a careful consideration of the rival submissions, we are of the view that the CIT (Appeals) was justified in canceling the penalty in respect of all the three items. So far as the salary received in Singapore from DHL is concerned, it is true that since the assessee was a resident of India, the salary received in Singapore should be taxed in his hands. The claim of the assessee was that he was under a bona fide though mistaken impression that because of the existence of the DTAA between India and Singapore, if taxes are deducted from salary income in Singapore than the said income cannot be taxed by the Indian Income tax authorities. Though, considering the position occupied by the assessee ( as vice-president/general manager of a multinational company drawing a huge salary) it is expected that he would have been advised by a professional with regard to his taxation matters and therefore, it somewhat difficult to accept the explanation, more particularly when the assessee knew of the existence of a double taxation avoidance agreement between India and Singapore, still one can perhaps extend the benefits of doubt to him because the moment he was informed by the Assessing Officer that is not the correct legal position, the assessee included the salary in the total income. Further, there is no dispute that the assessee was eligible to get credit for the taxes paid in Singapore. In fact, the Assessing Officer has acknowledge the same in the assessment order itself. As regards the claim for exemption of the retrenchment compensation received by the assessee, the CIT Appeals) is right in saying that the claim was on account of the opinion bona fide and honestly entertained by the assessee that he is a workman and, therefore, the exemption is available. The assessees claim that he is a workman was disputed by the Assessing Officer and he referred to the definition of the workman as per the Industrial Dispute act, 1947 to reject the assessees claim. Here also, it is a case of a difference of opinion as regards the interpretation of the work `workman for which no penalty is imposable. At best, it can only be said that the assessee did not take pains to study the Industrial Disputes act and to find out how the work `workman is defined therein. Lastly, with regard to the claim of interest banks, since the bank certificates were initially not available to the assessee, it was not included in the return. The omission thus seems to be due to reasons beyond the assessees control. Moverover, in respect of all the three items, the CIT (Appeals) has recorded a finding in paragraph 6 of his order that all the facts were disclosed by the assessee in the annexure to the return and the information leading to the additions was taken by the Assessing Officer only from the return filed by the assessee and that such information was not found to be false. Thus, there has been no failure on the part of the assessee to declare all the facts before the Assessing Officer. We are, therefore, in agreement with the view taken by the CIT (Appeals) that this is not a case where the assessee can be said to have concealed his income or furnished inaccurate particulars even within the meaning of Explanation 1 to Section 271(1)(c).The revenue filed appeal u/s 260A before the High Court of Delhi. The High Court considered the question whether the Assessing Officer had recorded a valid satisfaction for initiating penalty proceedings under Section 271(1)(c) of the Act. Inter alia, relying upon a decision of that Court in Commissioner of Income Tax vs. Ram Commercial Enterprises Ltd. and noticing that Ram Commercial Enterprises has been approved by this Court in Dilip N. Shroff vs. Joint Commissioner of Income Tax (((2007) 291 ITR 519 (SC) , and T. Ashok Pai vs. Commissioner of Income Tax ((2007) 292 ITR 11 (SC)) , held that from the reading of the assessment order, it was not discernible as to why the Assessing Officer chose to initiate proceedings against the assessee and under which part of Section 271(1)(c). The High Court, therefore, accepted the view of the Tribunal and CIT (Appeals) and dismissed the appeal of the Revenue with cost of Rs.

Reasoning:
11. A close look at Section 271(1) (c) and Explanation (1) appended thereto would show that in the course of any proceedings under the Act, inter alia, if the Assessing Officer is satisfied that a person has concealed the particulars of his income or furnished inaccurate particulars of such income, such person may be directed to pay penalty. The quantum of penalty is prescribed in Clause (iii). Explanation 1, appended to section 271(1) provides that if that person fails to offer an explanation or the explanation offered by such person is found to be false or the explanation offered by him is not substantiated and he fails to prove that such explanation is bona fide and that all the facts relating the same and material to the computation of his total income has been disclosed by him, for the purposes of Section 271(1)(c), the amount added or disallowed in computing the total income is deemed to represent the concealed income. The penalty spoken of in Section 271(1)(c) is neither criminal nor quasi criminal but a civil liability; albeit a strict liability. Such liability being civil in nature, mens rea is not essential.12. In the case of Union of India and Ors. vs. Dharamendra Textile Processors and Ors ((2008) 306 ITR 277 ), a three judge Bench of this Court held that Dilip N. Shroff did not lay down correct law as the difference between Section 271(1)(c) and Section 276(c) of the Act was lost sight of. The Court held that the explanation appended to Section 271(1)(c) indicates element of strict liability on the assessee for concealment or for giving inaccurate particulars while filing the return.It goes without saying that for applicability of Section 271(1)(c), conditions stated therein must exist.15. Insofar as the present case is concerned, as noticed above, the High Court relied upon its earlier decision in Ram Commercial Enterprises which is said to have been approved by this Court in Dililp N. Shroff. However, Dillip N. Shroff has been held to be not laying down good law in Dharamendra Textiles. Dharamendra Textiles is explained by this Court in Rajasthan Spining and Weaving Mills. Having thoughtfully considered the matter, in our judgment, the matter needs to be reconsidered by the High Court in the light of the decisions of this Court in Dharamendra Textiles and Rajasthan Spinning and Weaving Mills.