Imposition of penalty under section 271(1)(c)

18. We have considered the rival submissions and also perused the relevant material on record. It is observed that the impugned penalty u/s 271(1)(c) has been imposed by the learned CIT (A) in respect of addition of Rs. 3 crores made by him to the total income of the assessee by way of enhancement on account of security deposit received by it from DMIL under MoU treating the same as the income accrued to the assessee in the year under consideration. The said amount was undisputedly shown and declared by the assessee company in its books of account as well as in the return of income filed as security deposit and as pointed out by the learned counsel for the assessee, the treatment so given by the assessee to the said amount as security deposit was accepted by the AO after examining the memorandum of understanding between the assessee and DMIL especially clauses 8 to 11 thereof. It is no doubt true that the said treatment given by the assessee to the amount of Rs.3 crores received from DMIL as security deposit was not accepted by the learned CfT(A) and the said amount was held by him to be the income of the assessee accrued during the year under consideration on the basis of interpretation of the very same clauses of the MoU and this action of the learned CIT(A) was upheld even by the Tribunal in the quantum proceedings. However, as rightly contended by the learned counsel for the assessee before us, the findings given by the learned CIT(A) as well as by the Tribunal in their orders passed in the quantum proceedings in this context, cannot be taken as conclusive for the purpose of holding the assessee liable for concealment penalty u/s 271(l)(c). It is well settled that assessment proceedings and penalty proceedings are separate and distinct and as held by Hon'ble Supreme Court in the case of Ananthraman Veerasinghaiah & Co. Vs. CIT - 123 ITR 457, the finding in the assessment proceedings cannot be regarded as conclusive for the purposes of the penalty proceedings. It is, therefore, necessary to reappreciate and reconsider the matter so as to find out as to whether the addition made in the quantum proceedings actually represents the concealment on the part of the assessee as envisaged in Section 271(1 )(c) and whether it is a fit case to impose the penalty by invoking the said provisions. 19. As already observed, the claim of the assessee that the amount of Rs.3 crores received from DMIL was a security deposit insofar as the year under consideration is concerned was based on the interpretation of clauses 8 to 11 of the Memorandum of Understanding entered into by it with DMIL. The said clauses being relevant in the context are again extracted hereunder for ready reference: “8 That in consideration of the work, duties and functions undertaken by MIL to be performed under the Memorandum of Understanding, DMIL will pay to MIL fee in the sum equal to 1% of the value of the contract that may be awarded by the D.T.C. to DMIL pursuant to the D.T.C. Tender, subject to a minimum of Rs. 3 crores. 9. That the fee payable to DMIL to MIL in terms of clause 8 ante, will be deemed to accrue on the date on which the contract between the D.T.C. and DMIL is signed or on which the D.T.C. places an order on the DMIL for the supply of the buses, as the case may be, and DMIL undertake to make payment of the fee to MIL within J 5 days of its accrual. 10. That DMIL will make an interest free deposit of Rs. 3 crores with MIL within six months from the date of this Memorandum of Understanding, that this deposit will be adjusted against the fee that may become payable to MIL in terms of Clause $ ante. 11. That in the event of DMIL withdrawing from its offer against the D.T.C. Tender or no order is being placed on it by DT.C. for any reason whatsoever, the amount paid to MIL under Clause 10 ante, shall not be refundable by MIL". 20. A perusal of the aforesaid clauses shows that DMIL had agreed to pay to the assessee company a fee for the services to be rendered by the latter in connection with the DTC tender in the sum equal to 1% of the value of contract subject to a minimum of Rs. 3 crores as per clause 8. As per clause 9, the said fees receivable from DMIL was to be deemed as accrued to the assessee company on the date of signing of contract between the DTC and DMIL or on the date of placement of order by DTC on DMIL for the supply of the buses as the case may be and the payment of fees was to be made by DMIL to the assessee company within 15 days of such accrual. As per clause 10, DMIL had agreed to make an interest free deposit of Rs.3 crores with the assessee company and it was also agreed that the said deposit, which was non-refundable as per clause 11, would be adjusted against the fees finally payable by DMIL to the assessee company. As the said deposit of Rs.3 crores was equal to the amount of minimum fees agreed to be paid by the DMIL to the assessee company and the same was not refundable in any circumstances, it was held by the learned CIT(A) as well as by the Tribunal that the said deposit was nothing but a payment of minimum fees paid by DMIL to the assessee company which represented its income accrued during the year under consideration on the signing of MoU. It is no doubt true that this view of the learned CIT(A) as well as Tribunal was based on the interpretation as given by them to the relevant clauses of the MoU by reading the same in the combined manner and the same was upheld even by the Hon'ble Delhi High Court. However, a perusal of the said clauses of the MoU shows that the interpretation sought to be given by the assessee while taking a stand that the amount ~ of Rs.3 crores received by it from DMIL was purely a security deposit insofar as the year under consideration is concerned and the same did not represent any income accrued to it during the year under consideration, was also possible. 21. As per clause 8, the fees agreed to be paid by DMJL to the assessee company including the minimum fees of Rs.3 crores was payable for the functions to be performed by them in connection with the DTC tender and there was nothing to show that such functions had been actually performed by the assessee as defined in the MoU so as to make it entitled for the said fees. As a matter of fact, the MoU having been signed on 23.2.1998, there was hardly any possibility of such functions being actually performed by the assessee company during the year under consideration ending 31.3.1.998 making it entitled to receive any fees much less the fees to the tune of Rs.3 crores. Moreover, the fees so receivable by the assessee from DMIL under the MoU was to accrue to it on the date of signing of contract between DTC and DMIL or on the placement of an order by DTC on DMIL for the supply of buses as the case may be as stipulated specifically in clause 9. Although this basis was adopted as a deemed basis as mentioned in clause 9, the fact remains that the amount of fees was agreed to be paid by DMIL to the assessee within 15 days of such deemed accrual and this material aspect cannot be overlooked while giving an interpretation to the relevant clauses of the MoU in order to decide the date or period of accrual of income to the assessee on account of fees. Undisputedly , none of these two events i.e. signing of contract between the DTC and DMIL or placement of order by DTC on DMIL for the supply of buses had taken place during the year under consideration and this being so, it can reasonably be claimed that no fees had become payable to the assessee in the .year-trader consideration and there was no accrual of income on account of such fees as per clause 9 of the MoU as was done by the assessee company in the return of income filed for the year under consideration. The said claim of the assessee, in our opinion, thus was based on an interpretation given to the relevant clauses and after perusing the relevant clauses of MoU has well as going by the fact that the said claim of the assessee was accepted by the AO while completing the assessment, it definitely gives an impression that the interpretation so given by the assessee was a possible one. Moreover, all the relevant particulars relating to the said claim were duly furnished by the assessee alongwith its return of income and even the copy of relevant MoU was also produced before the AO for his examination during the course of assessment proceedings. Although the said claim was not finally found to be acceptable in the quantum proceedings, we are of the view that the same was made bona-fide on the basis of possible interpretation given to the relevant clauses of the MoU and the assessee having furnished all the material particulars relevant thereto, it cannot be said that it was a case of concealment as envisaged in Section 271(1 )(c) attracting levy of penalty. 22. The impugned order of the learned CIT(A) shows that he, however, laid much emphasis on the observations recorded by the Tribunal in its order passed in the quantum proceedings in support of his action to impose penalty u/s 271(J)(c). In this regard, he placed heavy reliance on the observations made by the Tribunal about the clever piece of drafting which, as held by the Tribunal, could not have changed the real nomenclature and real interpretation of a particular document. The learned CIT(A) held that the interpretation given by the Tribunal to the relevant clauses of the MoU thus lead to one and only one conclusion that the amount of security deposit received by the assessee was in the nature of income being accrued to the assessee in AY 1998-99. As already discussed by us with reference to the relevant clauses of the MoU that the claim made by the assessee about the nature of the said receipt on the basis of different interpretation given to the said clauses was also reasonably possible and the learned CIT(A) thus, in our opinion, was not correct to say that there was only and only one interpretation which could possibly be given to the relevant clauses as done by the Tribunal. As a matter of fact, the submissions made on behalf of the assessee about such other possible interpretation were neither considered nor appreciated by the learned CIT(A) in the penalty proceedings and the assessee was held liable for penalty u/s 271(l)(c) by him relying mainly on the order of the Tribunal passed in the quantum proceedings. The treatment given by the assessee to the amount of Rs.3 crores in question as security deposit was also held by the learned CIT(A) as furnishing of inaccurate particulars of its income by the assessee company which, in our opinion, again was not justified. As already noted, a specific stand was taken by the assessee about the said amount being its security deposit on the basis of a possible interpretation given to the relevant clauses of the MoU and going by this stand, it cannot be said that by showing the said amount as security deposit, the assessee had furnished inaccurate particulars of its income. The allegation made by the learned CIT(A) in this regard thus was not well founded and we find it very difficult to agree with the same. 23. It is well settled that the criterion and yardsticks for the purpose of imposing penalty u/s 271(l)(c) are different than those applied for making or confirming the additions. When the assessee has made a particular claim in the return of income and has also furnished all the material facts relevant thereto, the disallowance of such claim cannot automatically lead to the conclusion that there was concealment of particulars of his income by the assessee or furnishing of inaccurate particulars of such income. What is to be seen is whether the said claim made by the assessee was bona-fide and whether all the material facts relevant thereto have been furnished and once it is so established, the assessee cannot be held liable for payment of concealment penalty u/s 271(l)(c). In the present case, the claim of the assessee about the amount in question being security deposit, in our opinion, was bona fide as the same was based on the possible interpretation of the relevant clauses of the MOU as well as the other aspects of the matter as already discussed and since all the material facts relevant to the said claim had been furnished by it, it was not a fit case to attract the levy of penalty u/s 271(l)(c). As submitted on behalf of the assessee before the authorities below as well as before us, the amount of Rs. 3 crores in question paid to the assessee was treated as security deposit even by DMIL and since this position was found to be correct by the AO on enquiry made with DMIL, it further supports the stand of the assessee that its claim made in the return treating the same amount as security deposit was bona fide and was based on a possible view: In the case of CIT v/s. Roop Lai Poddar (Supra) cited by the Id. Counsel for the assessee, Hon'ble Calcutta High Court has held that adopting one of the possible views can scarcely be viewed as mala fide with an intent to evade payment of tax. In the case of Devsons Logistics Pvt. Ltd. (Supra) Delhi Bench of ITAT has held that when all the facts had been placed by the assessee before the AO and a particular legal stand was taken on the relevant issue which was not found to be acceptable, it could not be said that assessee was guilty of concealment of income.