The order of the Bench was delivered by
1. S. V. Mehrotra (Accountant Member).-These appeals, preferred by the Revenue in respect of the aforementioned assessees assailing the orders of the Commissioner of Income-tax (Appeals), cancelling penalty levied under section 271(1)(c) of the Act were heard together and are being disposed of by this consolidated order for the sake of convenience.
I. T. A. No. 4364/Del/2013 :
2. The assessee is a non-banking finance company. The main source of income being from capital gains, interest income, rental income, dividend from sale of mutual funds. The assessee had filed return of income declaring total income at Rs. 2,83,25,511. The Assessing Officer noticed that the assessee had shown dividend income to the tune of Rs. 2,43,67,057 but no separate expenses incurred by it in lieu of this income had been shown. The assessee further submitted that the expenditure had been incurred as administrative expenses and they were statutory or necessary expenses, hence should not be disallowed. The Assessing Officer computed the disallowance under section 14A at Rs. 35,71,608 and after reducing the disallowance of Rs. 2,43,670 made by the assessee in its computation, disallowed Rs. 32,27,938. He, accordingly, initiated penalty proceedings under section 271(1)(c).
3. In the penalty proceedings the assessee, inter alia, relied on the decision of the hon'ble Supreme Court in the case of CIT v. Reliance Petroproducts P. Ltd. [2010] 322 ITR 158 (SC). The Assessing Officer pointed out that the decision of the hon'ble Supreme Court in the case of Reliance Petroproducts Pvt. Ltd. (supra) is of no rescue to the assessee for the reason that rule 8D was inserted by the Income-tax (Fifth amendment) Rules, 2008 with effect from March 24, 2008 and he relied upon the judgment pertained to the assessment year 2001-02, i.e., when rule 8D was not inserted. The Assessing Officer observed that the assessee-company had not correctly disallowed the expenses required to be disallowed under section 14A of the Act as per rule 8D. Therefore, the assessee had furnished inaccurate particulars of income. Relying on the decision of the hon'ble Supreme Court in the case of Union of India v. Dharamendra Textile Processors [2008] 306 ITR 277 (SC) he levied penalty of Rs. 11,31,162.
4. The learned Commissioner of Income-tax (Appeals) following the decision of the hon'ble Supreme Court in the cases of Reliance Petroproducts P. Ltd., deleted the penalty, inter alia, observing that since the assessee itself had made disallowance of Rs. 2,43,670, this was only a case of difference of opinion, as according to the Assessing Officer rule 8D was applicable whereas as per the assessee rule 8D was not applicable.
5. We have considered the submissions of both parties and have perused the record of the case. Admittedly the assessee on its own had disallowed a sum of Rs. 2,43,670 under section 14A but the Assessing Officer computed the disallowance as per rule 8D at Rs. 35,71,608. The provision of rule 8D comes into play only when the Assessing Officer records a finding that having regard to the accounts of the assessee he is not satisfied with the correctness of the claim of the assessee in respect of such expenditure in relation to income, which does not form part of the total income under this Act. There are decisions as per which unless the necessary satisfaction is recorded by the Assessing Officer rule 8D cannot be invoked. Therefore, once the assessee has advanced its claim, the Assessing Officer may reject the same but that does not lead to the conclusion that the claim advanced by the assessee was a false claim. The Assessing Officer in the assessment order or in the penalty order nowhere states that the assessee's claim was false and he has invoked rule 8D for computing the disallowance under section 14A. Therefore, this was merely a difference of opinion between the assessee and the Department on the computation of disallowance under section 14A. The decision of the hon'ble Supreme Court in the case of Reliance Petroproducts Pvt. Ltd. (supra) is squarely applicable to the facts of the case, wherein it has been held that where there is no finding that any details supplied by the assessee in its return are found to be incorrect or erroneous or false, there is no question of inviting penalty under section 271(1)(c). Mere making of a claim, which is not sustainable in law by itself will not amount to furnishing of inaccurate particulars regarding the income of the assessee. Such a claim made in the return cannot amount to furnishing of inaccurate particulars. It is not the claim of the Department that any of the details furnished by the assessee in the return on the basis of which computation made under rule 8D was made by the Assessing Officer was false. We further find that the learned Commissioner of Income-tax (Appeals) in paras 5.1 to para 5.4 of his order has held as under:
"5.1 Section 271(1)(c), provides for imposition of penalty in case the Assessing Officer, in the course of any proceeding under the Act, is satisfied that :
(i) any person had concealed particulars of his income, or
(ii) had furnished inaccurate particulars of such income.
Further, after insertion of Explanation 1 to section 271(1)(c), the onus is on the assessee to show that there was no intention of concealment and not on the Revenue.
5.2 Mens rea was considered to be a necessary ingredient for levy of penalty as laid down by the Supreme Court in CIT v. Anwar Ali [1970] 76 ITR 696 (SC). But after the introduction of Explanation 1 to section 271(1)(c), the Supreme Court held that the requirement of proof of mens rea on the part of the Revenue, would no longer be necessary as held in Addl. CIT v. Jeevan Lal Sah [1994] 205 ITR 244 (SC) and B. A. Balasubramaniam and Bros. Co. v. CIT [1999] 236 ITR 977 (SC). The role of the Explanation it was pointed out, was only to place the burden of proof squarely on the taxpayer.
5.3 In this context two landmark judgments were given by the apex court in Dilip N. Shroff v. Joint CIT [2007] 291 ITR 519 (SC) and T. Ashok Pai v. CIT [2007] 292 ITR 11 (SC), which spell out mainly the following rules for the purpose of penalty imposable :
(i) Both the expressions 'concealment of income' and 'furnishing of inaccurate particulars' indicate some deliberation on the part of the assessee, though the word 'deliberately' and the word 'willfully' are no longer part of the statute.
(ii) Mere omission or negligence would not constitute a deliberate act of suppressiio veri or suggestio falsi.
(iii) Primary burden of proof is on the Revenue : The statute requires satisfaction on the part of the Assessing Officer. He is required to arrive at a satisfaction so as to show that there is primary evidence to establish that the assessee had concealed the amount or furnished inaccurate particulars and this onus is to be discharged by the Department.
(iv) The Assessing Officer while considering levy of penalty should consider whether the assessee has been able to discharge his part of the burden. He should not begin with the presumption that the assessee is guilty.
(v) Though penalty proceedings under the Income-tax law may not be criminal in nature, they are still quasi-criminal requiring the Department to establish that the assessee has concealed his income.
(vi) It has to be understood that the Explanation to section 271(1)(c) is an exception to the general rule raising a legal fiction by which the burden which is ordinarily with the Department is sought to be placed on the assessee. This burden on the assessee is subject to 'conditions precedent', which are required to be satisfied before the Explanation could be applied.
It was also pointed out as held by the Supreme Court in K. C. Builders v. Asst. CIT [2004] 265 ITR 562 (SC) that 'deliberateness' is implied in the concept of concealment.
5.4 However after the decision laid down in Dilip N. Shroff v. Joint CIT [2007] 291 ITR 519 (SC), T. Ashok Pai v. CIT [2007] 292 ITR 11 (SC) in a dispute under the Central Excise Law the apex court in the case of Union of India v. Dharamendra Textile Processors [2008] 306 ITR 277 (SC) held that 'default merited penalty without having to consider any intend of the assessee to evade tax. The mens rea is essential only for matters of prosecutor and not penalty'. Thus after the decision in the case of Dharamendra Textile Processors (supra) 'Mens rea is not necessary to be proved by Revenue for civil penalties'."
6. We are in agreement with the findings recorded by the learned Commissioner of Income-tax (Appeals) on the import of decision of the hon'ble Supreme Court in the case of Dharamendra Textile Processors (supra). In view of the above, the order of the learned Commissioner of Income-tax (Appeals), deleting the penalty in question is upheld.
7. The same facts are involved in I. T. A. No. 4365/Del/2013. Therefore, for the same reasons as given by us in I. T. A. No. 4364/Del/2013, the order of the learned Commissioner of Income-tax (Appeals) deleting the penalty in question is upheld.
8. In the result, both appeals filed by the Revenue stand dismissed.
The order pronounced in the open court on April 17, 2015.