|CORAM:||Beena Pillai (JM), N. K. Saini (AM)|
|CATCH WORDS:||concealment of income, furnishing inaccurate particulars of income, penalty|
|DATE:||September 7, 2015 (Date of pronouncement)|
|DATE:||October 9, 2015 (Date of publication)|
|FILE:||Click here to download the file in pdf format|
|S. 271(1)(c): The deeming provision of Explanation 1 to s. 271(1)(c) applies only to a case of "concealment of income" and not to a case of "furnishing inaccurate particulars of income"|
(i) In the assessment order passed u/s.143(3), the AO initiated penalty for concealing the particulars of income. However, at the time of passing penalty order the AO levied penalty for filing of inaccurate particulars of income under the virtue of Explanation 1 to Section 271(1)(c) of the Act. From a reading of Explanation 1 to Section 271(1)(c) of the Act, it is apparent that, if the AO in the course of assessment proceedings is satisfied that, any person has concealed the particulars of income or furnished inaccurate particulars of such income, then he may levy penalty on the assessee. Thus, there are two different charges i.e. concealment of particulars of income or furnishing of inaccurate particulars of income. The penalty can be imposed only for a specific charge. Furnishing inaccurate particulars of income means, when the assessee has not disclosed the particulars correctly or the particulars disclosed by the assessee are found to be incorrect whereas, concealment of particulars of income means, when the assessee has concealed the income and has not shown the income in its return or in its books of accounts. Explanation 1 is a deeming provision and is applicable when an amount is added or disallowed in computation of total income which is deemed to represent the income in respect of which particulars have been concealed. Explanation 1 cannot be applied in a case where the assessee furnishes inaccurate particulars of income.
(ii) In the present case, the AO initiated penalty proceeding u/s 271(1)(c) on the basis that the assessee has concealed the particulars of income and the penalty ultimately levied on the assessee has been for furnishing inaccurate particulars by observing that the case of the assessee is covered by the Explanation 1 to Section 271(1)(c).
(iii) It is also observed that mistake of the assessee was bonafide which has been corrected by filing revised return before completion of assessment. Merely because there were some discrepancies, it cannot be held that the assessee intended to evade tax. The assessee had rectified the same and had accepted the mistake before the AO. The assessee also chose not to prefer appeal before the first appellate authority, itself shows that the mistakes were not wilfull (Reliance Petro Products 322 ITR 158, Price WaterHouse Coopers Pvt. Ltd. vs. CIT reported in (2012) 348 ITR 306 and DCIT vs. Nepa Limited (2015) 58 Taxmann.com 137 followed)
Problem is there is abundant confusion in the law maker in his explanation, just because he did not define what is concealment and what is error or inaccurate particulars on ROI?
Similarly when some income is not shown on ROI, it may mean ‘inaccuracy’ or ‘bonafide error of the tax payer’;
Therefore without ‘mens rea’ element, idea of penalty cannot surface under Law of crimes.
When so Ld AO apparently equally confused like the law maker misreads inaccuracy as concealment or vice versa.
So the section 271(1)(c) should be correctly worded, that is AO cannot proceed under this section if he cannot prove ‘mens rea’ in the tax payer, then a lot of messed up cases by AOs or by revenue would be short circuited, and besides tribunals’ and courts’ time would not be wasted, besides unnecessary litiagation expenditure would be saved both by the exchequer as also that of tax payer,
it would be obvious law making art must be sharpen to produce better and meaningful law making is my sincere observation.
i do not want the government involve in waste of tax payers time, as every tax payer is not a lawyer but just a lay person and so revenue need to be honorable in its approach on him or her, after all most tax payers approach CAs or similarly qualified professional’s help, before filing returns of income, after all finance acts are some bush of confusion created by worthy finance minister with his great understanding of law as also social obligations ; but in fact most of these ‘worthies’ are such a lot who over estimate themselves and they with their so called knowledge as also that of the department of finance just take the legislators for granted, after all any legislator could be an ‘illiterate’ or ‘illiterate of law’ or illiterate of economics of taxation methodology, they are just some ‘Aye’ or ‘Noes’ type persons. But these great law makers upset the ship of state to sail on ocean of governance.
I do not blame these worthies, after all constitution never expected them to be so over bearing legislators; constitution is for the people, by the people and to the people indeed (people) trusts its representatives and grants defacto powers but if they misuse whom we will blame the public servants in the department of revenue collections for their irresponsibility of not meaningfully understanding sections if section is suffering from some abnormalities these persons need to go for meaningful clarifications from their own supervising ministry and till get meaningful clarification they should not use like ‘Casabianca’, misstated sections.
Anyway i recommend the tax payer move for liquidated damages on the department, so that the revenue would be careful in issuing irrelevant notices on tax payer, now under ‘vicarious liability’ the government need to bear the damages subject to deducting from the salaries of all the relevant officers, including the relevant ministry, besides the finance minister too, involved in promoting such irresponsible notices, after all why the tax payers moneys in exchequer be squandered for the irresponsible defacto representatives besides relevant public servants concerned is my second observation.
my third observation is that if the courts see such kind of future irresponsible actions of officers, the honorable court as custodian of the constitution, in due appreciation of Art 265, as also duties under Art 51A of Part IVA, levy penalties on all the concerned so as to ensure irresponsibility is duly accounted by those worthies, after all one has to punish so as to ensure ‘no repeats’ again and again, after all, English man’s idea of ‘cats paw’ is indeed relevant, is my humble suggestion, with ‘No Malice to Anyone’!
What is the purpose of scrutiny?
This is the duty of the department, to verify the details as furnished with the return and if have doubt of any excess claim or wrong claim and find after due application of mind that more revenue can be generated or collected from the assessee the Assessing Authority, ask for verification only subject to the point. However, this can’t be done because of bad policies of our Government and they have selected thousands no. of cases on rendum basis without application of mind. They have issued a questionnaire having several unnecessary points, nothing to do with the case or after due scrutiny they have found nothing or any tax effect. This create a headache in the mind of the assessee that they have made harassment only to honest tax payer and nothing to do with the corrupt.
We have read from the reports of the CAG that 90% of addition made assessment deleted by the Appellate Authorities and no major revenue is collected through scrutiny. They have waste their time in preparation of reports or collecting unnecessary documents from the assessee in their chambers even they can’t provide batter response to the assessee when ever required for business needs.
The most crucial proceeding faced by the assessee after scrutiny is penalty for that the assessee goes in appeal against the additions without paying any tax to the Government and get successes.
The department take the shelter that very small percentage of returns are picked up for scrutiny and therefore, any omission/wrong claim therein would mean loss of due Revenue to the Government without making any efforts.
There is procedure of self assessment wherein the assessees assessed their income with the help of professional and paid taxes. There is no involvement of the department at all at that stage.
My dear friend Gurubalakrishna righty raise that “the revenue would be careful in issuing irrelevant notices on tax payer, now under ‘vicarious liability’ the government need to bear the damages subject to deducting from the salaries of all the relevant officers, including the relevant ministry, besides the finance minister too, involved in promoting such irresponsible notices, after all why the tax payers moneys in exchequer be squandered for the irresponsible defacto representatives besides relevant public servants concerned is my second observation.”
In the light of observations rightly brought out by CAG that 90% cases since lost in appeals by the revenue, in random scrutiny cases, rightly brought out by my dear friend Neem Singh here:
– i would like to recommend to CBDT to do away with invalid ‘random scrutiny idea’:
(when in time not rightly handled by AOs on the
ROIs in appropriate Assessment Years, the same
notices under sec/141,now would be subject to
sec 141 (1)(ii), within six months or twelve
months need to be applied on relevant ROIs filing
dates, the notices now issued under random
scrutiny is to be treated ‘void ab initio’)
which scrutiny notices are waste of a lot of executive time of the department;
besides that of tax payer’s executive time too;
as also scarce funds of money are wasted:
besides affecting the economy as such.
Also tax payers exchequer funds are wasted that is unpardonable, indeed even whoever under whatever authority can never waste govt exchequer funds.
So forthwith, Ministry of finance should instruct to stop all random scrutiny notices, that action could save the country, from wastage of scarce resources.
If the government fails, the hon supreme court or high court, under judicial review might cancel and stop, all random scrutiny cases, as that wastes all govt executive time and tax payers’ money in exchequer, under very article 265 r/w art.14.
That way justice has to prevail and need to prevail, is my considered opinion.
After all, same sections would apply on all random scrutiny sec 141 Notices.
you cannot have two different system of tax procedure.
PERSONAL VIEW FOR FRAMERS/ ARCHITECT OF INDIAN CONSTITUTION:
1. INCOME TAX ACT SHOULD BE REPEALED/ABOLISHED SINCE CITIZENS EARN BUT GOVT STEAL FROM JOHN TO PAY JOHNSON. AS AN INDIVIDUAL TO BECOME PROSPEROUS THEY INVEST THEIR LIFE, TIME, MONEY, ALL THEIR YOUTHFULNESS ON THE HOPE THAT THEIR RETIREMENT LIFE SHOULD BE SAFE AND SECURE.
2. AN ENTREPRENEUR NEEDS LAND, CAPITAL, LABOUR, INFRASTRUCTURE TO RAISE THEIR ENTERPRISES. FOR USING LAND, THEY PAY RENT/LEASE TO GOVT IF LAND PROVIDED, USING LABOUR , WE PAY WAGES, CAPITAL PROVIDED BY GOVT BANKS, CHARGES INTEREST, FOR USING INFRASTRUCTURE. GOVT CHARGES VARIOUS CHARGES, FOR GETTING UTILITIES, WE PAY ALL KIND OF CHARGES, THEN WITHOUT PROVIDING ANY OTHER SERVICE/ PROTECTION, GOVT CLAIMS INCOME WITHOUT GIVING ANY UTILITY/SERVICES, THEN ON WHAT DOCTRINE GOVT ASKS TAX FROM MY INCOME WHERE I INVESTED MY LIFE. IF GOVT WANTS THEY CAN DO GOVERNANCE BY ESTABLISHING SO MANY INSTITUTIONS/ MANUFACTURING UNITS AND THEREBY THEY EARN MAKE INDIA PROSPEROUS, BUT FOR COLLECTING INCOME TAX, GOVT COLLECTS TAX TO ADMINISTER IT’S INCOME TAX INFRASTRUCTURE AND FOR STAFF SALARY.
3. since govt can get lands in free of cost, labour at reasonable rate, infrastructure at it’s own will, why don’t govt can do business better than citizens who pays for all. so you penalise me for my talent to make profit that govt can’t do it by itself, though govt in better position.
43. IN INDIA, WHEN G.VENKATESAN, FAMOUSLY KNOWN AS GV IN TAMILNADU FILM CIRCLE PAID 3 CRORES UNDER VOLUNTARY SCHEME HAS HANGED HIMSELF FOR NOT PAYING 30 LAKHS TO HIS CREDINCOME TAX OFFICERRS, NOWHERE DEPT., HAS COME TO HELP HIM TO TIDE OVER HIS WOES. THERE ARE NUMEROUS INSTANCES WHEREIN DEPT HAS COME FOR HARASSING THE ASSESSEE NOT TO HELP INDIVIDUAL/ NOR ECONOMY TO REVIVE.
4. BY HARASSING CITIZENS, INCOME TAX DEPT., IS PENALISING CITIZENS FOR THEIR EFFICIENCY TO EARN PROFIT. GOVT., OF INDIA MAY CHARGE EVERYTHING THEY PROVIDE AT MARKET PRICE AND DON’T PENALISE HER OWN CITIZENS FOR THEIR EFFICIENCY TO EARN PROFIT AND MINIMISE THE COST OF DOING BUSINESS.