Karnavati Infrastructure Pvt. Ltd., Ahmedabad V. The Dy.CIT., Circle-4, Ahmedabad

CO 132/AHD/2007

• Counselvise Citation: [2010] 122 COUNSELVISE.COM (IT) 4797 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 12 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 25-06-2010
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 16-06-2010
• Assessment Year: 2001-2002
• Appeal Filed On: 13-06-2007
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: K M MAHESH
• Keywords: Depreciation; Bonafide belief; Wrong claim; Difference of opinion

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH 'C' [BEFORE S/SHRI D T GARASIA,JM & A N PAHUJA,AM] ITA NO.1595 /AHD/2007 WITH C O NO.132 /AHD/2007 (ASSESSMENT YEAR:-2001-02) DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE-4, NAVJIVAN TRUST BUILDING,OFF ASHRAM ROAD,AHMEDABAD V/S KARNAVATI INFRASTRUCTURE PVT. LTD., D/501, STATUS OPP. T V TOWER, DRIVE-IN- ROAD, GURUKUL, AHMEDABAD [PAN: AAACK 4583 D] [APPELLANT] [RESPONDENT] REVENUE BY :- SHRI K M MAHESH, DR ASSESSEE BY:- SHRI SAKAR SHARMA, AR O R D E R A N PAHUJA: THIS APPEAL BY THE REVENUE AND THE CORRESPONDING CROSS OBJECTION(CO) BY THE ASSESSEE AGAINST AN ORDE R DATED 08-01- 2007 OF THE LD. CIT(APPEALS)-VII, AHMEDABAD, FOR TH E ASSESSMENT YEARS 2001-02 ,RAISES THE FOLLOWING GROUNDS: ITA NO.1595/AHD/2007[ AY 2001-02]: 1. THE LD. CIT(A) ERRED IN LAW AND ON THE FACTS OF THE CASE IN DIRECTING THE AO TO RECALCULATE THE PENALTY U/S 271(1)(C) OF THE INCOME-TAX ACT, 1961 (EARLIER LEVIED AT RS.4,16,660) AFTER EXCLUDING THE DISALLOWANCE OF RS.10,46,098/- BEING THE BANK GUARANTEE COMMISSION FROM CONCEALED INCOME AND HOLDING THAT NO PENALTY WAS LEVIABLE IN RESPECT OF DISALLOWANCE MADE ON ACCOUNT OF BANK GUARANTEE COMMISSION OF RS. 10,46,098/- IGNORING THE FACT THAT THE ASSESSEE COMPANY HAD CLA IMED WRONG DEDUCTION OF EXPENDITURE AND THE DISALLOWANCE WAS CONFIRMED I N QUANTUM APPEAL. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, THE LD. CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE AS SESSING OFFICER 3. IT IS ,THEREFORE PRAYED THAT THE ORDER OF THE LD . CIT(A) MAY BE CANCELLED AND THAT OF THE ASSESSING OFFICER MAY BE RESTORED TO THE ABOVE EFFECT. ITA NO.1595 /A/07 & C O NO.132 /A/07 KARNAVATI INFRASTRUCTURE PVT. LTD. 2 CO NO.132/AHD/2007 THE LD. CIT(A) ERRED ON FACTS AND IN LAW IN CONFIR MING LEVY OF PENALTY U/S 271(1)(C) ON DISALLOWANCE OF DEPRECIATION OF RS.1,2 1,185/-. 2. FACTS, IN BRIEF, AS PER RELEVANT ORDERS ARE THAT RETURN DECLARING INCOME OF RS.11,03,104/-FILED ON 30-10-2001 BY THE ASSESSEE CONTRACTOR, AFTER BEING PROCESSED ON 9.9.2002 U/S 1 43(1) OF THE INCOME-TAX ACT,1961[HEREINAFTER REFERRED TO AS THE ACT], WAS TAKEN UP FOR SCRUTINY WITH THE ISSUE OF NOTICE U/S 143(2) OF THE ACT ON29.10.2002. THE ASSESSMENT WAS FINALIZED VIDE OR DER DATED 24- 03-2004, DETERMINING INCOME OF RS.45,61,000/-.INTER ALIA, FOLLOWING DISALLOWANCES WERE MADE: (1) ADDITION ON ACCOUNT OF IT RETENTION MONEY AND ST RS.10,86,654 (2) SALARY RS. 2,03,958 (3) DEPRECIATION RS. 1,21,185 (4) DISALLOWANCE OF PRE PAID EXPENSES ON ACCOUNT OF BANK GUARANTEE COMMISSION RS.10,46,098 SIMULTANEOUSLY, PENALTY PROCEEDINGS U/S 271(1)(C) O F THE ACT WERE ALSO INITIATED. ON APPEAL, THE LD. CIT(A) CONFIRMED THE DISALLOWANCE OF RS.10,46,098/- ON ACCOUNT OF BANK GUARANTEE COM MISSION WHILE THE ASSESSEE DID NOT FILE ANY APPEAL AGAINST THE DI SALLOWANCE OF RS.1,21,185/- ON ACCOUNT OF DEPRECIATION. 2.1 AFTER THE RECEIPT OF ORDER OF THE LD. CIT (A), IN RESPONSE TO A SHOWCAUSE NOTICE BEFORE LEVY OF PENALTY U/S 271(1)(C) OF THE ACT, THE ASSESSEE REPLIED ON 11-01-2006 THAT WHILE MAKING THE DISALLOWANCE OF D EPRECIATION OR GUARANTEE COMMISSION, THE AO DID NOT INITIATE THE PENALTY PRO CEEDINGS UNDER SECTION 271(1)(C) OF THE ACT SPECIFICALLY AND AS SUCH QUES TION OF LEVY OF PENALTY DID NOT ARISE. IT WAS FURTHER SUBMITTED THAT DURING THE CO URSE OF ASSESSMENT PROCEEDINGS, IT WAS CATEGORICALLY EXPLAINED THAT THE DEPRECIATIO N ON THE ASSETS ACQUIRED AND PUT TO USE IN THE COURSE OF BUSINESS OF CIVIL CONS TRUCTION, WAS CLAIMED ON THE ITA NO.1595 /A/07 & C O NO.132 /A/07 KARNAVATI INFRASTRUCTURE PVT. LTD. 3 BASIS OF THE DELIVERY CUM DEBIT NOTE ISSUED BY M /S UNITECH LTD. AND ALSO ON THE BASIS OF THE PROVISIONAL STATEMENT OF ACCOUNT ISSUE D BY THEM. THE MACHINERY SO ACQUIRED, IN FACT, REMAINED WITH THE ASSESSEE COMPA NY SINCE THE DATE OF RECEIPT. IN THE FINAL ACCOUNTS SO PREPARED, M/S UNITECH LTD. , HOWEVER, MADE ACCOUNTING ENTRY FOR THE VALUE OF MACHINERY AND EQUIPMENTS IN THE SUBSEQUENT YEAR DUE TO WHICH DEPRECIATION WAS DISALLOWED IN THEIR HANDS. THE AO DISALLOWED THE DEPRECIATION MERELY ON THE BASIS OF THE CONFIRMATIO N OF CLAIM OF DEPRECIATION ON THE SAID EQUIPMENT BY M/S UNITECH LTD. IN THE YEAR UNDER CONSIDERATION. THE AO DID NOT CONSIDER THE ARGUMENT ADVANCED BY THEM AS TO HOW UNITECH LTD, REMAINED OWNER OF THE MACHINERY AND EQUIPMENTS, ALR EADY TRANSFERRED TO THE OTHER PARTY BY WAY OF DEBIT NOTE, REMAINED THEIR AS SET, MAKING THEM ELIGIBLE FOR THE DEPRECIATION. THE AO HAS GIVEN BENEFIT OF DEFAU LT OF NON-MAKING OF ACCOUNTING ENTRY IN RESPECT OF VALUE OF MACHINERY A ND EQUIPMENTS BY M/S UNITECH LTD. IN FAVOUR OF THE SAID COMPANY, WITHOUT APPRECI ATING THE FACTUAL POSITION. IN THESE CIRCUMSTANCES, WHEN THE ASSESSEE DID NOT PREF ER ANY APPEAL AGAINST THE ACTION OF THE AO, CONSIDERING THE SMALLNESS OF THE QUANTUM OF THE ADDITION MADE, THERE WAS NO GROUND FOR LEVY OF PENALTY. 2.2 AS REGARDS DISALLOWANCE OF RS.10,46,098/- IN RESPECT OF BANK GUARANTEE COMMISSION PAID ON THE BASIS OF INTERPRETATION OF M ETHOD OF ACCOUNTING EMPLOYED BY THE ASSESSEE COMPANY, THE ASSESSEE PLEADED THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS AS WELL AS BEFORE THE LD. C1 T(A.), IT WAS SUBMITTED THAT THERE WAS NO STIPULATION IN THE TERMS OF CONTRACT AS TO THE CONTINUITY OF THE BANK GUARANTEES, WHICH COULD BE INVOKED AND ENCASHED AT ANY TIME DURING THE CURRENCY OF THE CONTRACT AND ONCE ENCASHED, THERE W AS NO CONTINUITY OF THE GUARANTEE FOR THE REMAINING PERIOD. IN VIEW OF THIS , IT WAS SUBMITTED THAT THE BANK GUARANTEE COMMISSION WAS ELIGIBLE FOR DEDUCTION UND ER THE MERCANTILE SYSTEM OF ACCOUNTING AS AND WHEN PAID TO THE BANK. THE ASSESS EE, BEING IN THE BUSINESS OF CIVIL CONTRACT FOR MORE THAN 20 YEARS, HAD BEEN CL AIMING DEDUCTION OF BANK GUARANTEE COMMISSION IN THE YEAR OF PAYMENT ITSELF , IN ACCORDANCE WITH THE MERCANTILE SYSTEM OF ACCOUNTING AND THEREFORE, THER E WAS A BONAFIDE BELIEF THAT THE ASSESSEE COMPANY WAS ELIGIBLE FOR DEDUCTION, IT WAS ARGUED. CONTINUING, IT ITA NO.1595 /A/07 & C O NO.132 /A/07 KARNAVATI INFRASTRUCTURE PVT. LTD. 4 WAS FURTHER SUBMITTED THAT THE LD. CIT(A) WHILE DI SPOSING OF THEIR APPEAL FOR THE YEAR UNDER CONSIDERATION DIRECTED THE AO TO CONSIDE R THE BANK GUARANTEE COMMISSION SO DISALLOWED IN THE SUBSEQUENT YEARS ON PROPORTIONATE BASIS, WHICH WAS NOT ALLOWED IN THIS YEAR. DUE TO THIS REASON, T HE ASSESSEE COMPANY DID NOT PREFER ANY APPEAL BEFORE THE ITAT BECAUSE IN ULTIM ATE RESULT, DEDUCTION WAS GRANTED TO THE ASSESSEE COMPANY ALBEIT IN THE DIFFE RENT ASSESSMENT YEARS, IT WAS SUBMITTED. THE ASSESSEE FURTHER POINTED OUT THAT DE SPITE DIRECTIONS OF THE LD. CIT(A), DEDUCTION OF THE BANK GUARANTEE COMMISSION DISALLOWED IN THIS YEAR WAS NOT GRANTED IN THE AY 2002-03. MOREOVER, DIRECTION S TO ISSUE NOTICE U/S.271(L)(C) OF THE ACT WERE ISSUED IN A MECHANICAL MANNER ,WITH OUT SPECIFYING AS TO WHETHER PENALTY PROCEEDINGS WERE INITIATED FOR CONCEALMENT OF PARTICULARS OF INCOME OR FOR FURNISHING INACCURATE PARTICULARS THEREOF .IN NUTS HELL, THE ASSESSEE PLEADED THAT THEIR CASE DOES NOT FALL IN THE CATEGORY ON WHICH P ENALTY U/S.271(1)(C) COULD BE LEVIED . 3. HOWEVER, THE AO DID NOT ACCEPT THE AFORESAID EXPLANATION OF THE ASSESSEE WITH THE OBSERVATIONS THAT THE ASSESSEE CLAIMED DEPRECIATION ON LAB EQUIPMENT OF RS.7,61,068/- AND OFFICE EQUIPM ENT OF RS.2,08,417/-, TOTALLING TO RS.9,69,485/- ON THE STRENGTH OF JV ENTRY DATED 31.3.2001 ONLY WHILE M/S UNITECH LTD. STATED THAT DEPRECIATION ON SUCH PLAN T AND MACHINERY WAS CLAIMED BY THEM, THE OWNERSHIP OF THESE ASSETS BEING WITH T HEM. AS REGARDS DISALLOWANCE OF BANK GUARANTEE COMMISSION, THE AO OBSERVED THAT SINCE THE BANK GUARANTEE ISSUED BY THE BANK WAS FOR A PARTICULAR PERIOD OF T IME I.E. FOR A PERIOD OF ONE YEAR, THE ASSESSEE OUGHT TO HAVE RESTRICTED THEIR CLAIM I N PROPORTION TO THE PERIOD AND THE REMAINING AMOUNT SHOULD HAVE BEEN TREATED AS PR E PAID EXPENSES AND NOT AT ALL CLAIMED AS EXPENDITURE FOR THE YEAR UNDER CONSI DERATION. THEREFORE, OUT OF THE TOTAL CLAIM OF RS.21,36.810/-, ACTUAL ELIGIBLE COMM ISSION AMOUNT ALLOWABLE WORKED OUT TO RS.10,90,712/- AND THE REMAINING AMOU NT OF RS.10,46,098/- WAS DISALLOWED, BEING THE COMMISSION ATTRIBUTABLE TO T HE LATER PERIOD . IN THE LIGHT OF THESE FACTS, RELYING UPON DECISIONS IN THE CASE OF BANARAS TEXTORIUM VS CIT (1988) 169 ITR 782(ALL.) AND ZEEKOO SHOE FACTORY VS CIT (1981)127 ITR 837(ALL.), MOTOR GENERAL FINANCE LTD VS CIT 254 ITR 449(DEL.) AND JAMNADAS & ITA NO.1595 /A/07 & C O NO.132 /A/07 KARNAVATI INFRASTRUCTURE PVT. LTD. 5 CO VS CIT (1994) 210 ITR 218(GUJ) AND INVOKING TH E EXPLANATION 1 TO SECTION 271(1)(C) OF THE ACT, THE AO IMPOSED A PENALTY OF RS.4,61,660/- U/S. 271 (1)( C) OF THE ACT @ 100% OF THE TAX SOUGHT TO EVADED ON TH E INCOME OF RS.11,67,283/- ON THE GROUND THAT THE ASSESSEE FURNISHED INACCURAT E PARTICULARS OF INCOME LEADING TO CONCEALMENT OF INCOME. 4. ON APPEAL, THE ASSESSEE CONTENDED THAT THEY WERE JUSTIFIED IN CLAIMING DEDUCTION FOR THE ENTIRE AMOUNT OF BANK GU ARANTEE COMMISSION IN THE YEAR IN WHICH IT HAS BEEN INCURRED IN VIEW OF DECIS IONS IN THE CASE OF ADDL. CIT VS. AKKAMBA TEXTILES LTD., 227 ITR 464 (SC); CIT VS. SH IVAKAMI MILLS LTD., 227 ITR 465 (SC); MIHIR TEXTILES LTD VS. CIT, 251 ITR 686 ( GUJ) AND KINETIC ENGINEERING LTD. V. CIT, 233 ITR 762 (BOM). THE DISALLOWANCE HA D BEEN SUSTAINED MERELY ON ACCOUNT OF DIFFERENCE IN THE OPINION OF THE AO AND THE ASSESSEE. THIS CANNOT BE SAID TO BE A CASE OF FURNISHING OF INACCURATE PARTI CULARS OF INCOME AND THEREFORE, NO PENALTY OUGHT TO HAVE BEEN LEVIED BY THE AO. AS REGARDS DISALLOWANCE OF DEPRECIATION AMOUNTING TO RS.1,21,185/- , THE ASSES SEE CONTENDED THAT THE SAME CAME TO BE DISALLOWED MERELY BECAUSE MACHINERY WAS ACCOUNTED FOR IN THE BOOKS BY THE PRINCIPAL CONTRACTOR IN THEIR BOOKS IN THE SUBSEQUENT YEAR WHEREAS THE ASSESSEE ACCOUNTED FOR IN THEIR BOOKS IN THE YEAR UNDER CONSIDERATION, ON THE BASIS OF THE TRANSFER ADVICE RECEIVED DURING TH E YEAR. THIS CANNOT BE HELD TO BE A CASE OF FURNISHING OF INACCURATE PARTICULARS O F INCOME BECAUSE OWNERSHIP IN THE HANDS OF THE ASSESSEE HAS NEVER BEEN DISPUTED F ROM THE DATE OF DEBIT OF ACCOUNT OF THE ASSESSEE BY THE PRINCIPAL CONTRACTOR IN THE SUBSEQUENT YEAR. EVEN DEPRECIATION HAS BEEN ALLOWED THEREON BY THE AO IN THE SUBSEQUENT YEARS ON THIS ASSET. IN THESE CIRCUMSTANCES, THE ASSESSEE PLEADED THAT THE PENALTY AMOUNTING TO RS.4,61,660/- BE DELETED. 5. IN THE LIGHT OF AFORESAID SUBMISSIONS, T HE LD. CIT(A) CANCELLED THE PENALTY IN RELATION TO DISALLOWANCE OF BANK GUARANTEE COMMISSION OF RS.10,46,098/- WHILE UPHOLDING THE P ENALTY ON ACCOUNT OF DISALLOWANCE OF DEPRECIATION OF RS.1,21 ,185/-. AS REGARDS PENALTY IN RESPECT OF DISALLOWANCE OF BANK GUARANTEE COMMISSION, THE LEARNED CIT(A) WHILE RELYING UPON D ECISIONS IN THE ITA NO.1595 /A/07 & C O NO.132 /A/07 KARNAVATI INFRASTRUCTURE PVT. LTD. 6 CASE OF DCIT VS. PROJECT TECHNOLOGISTS P. LTD. (ITA NO.2200/A/L 997 ITAT 'C' BENCH., AHMEDABAD DATED 16/11 /2004.),JAL LTD., VS . ACIT (ITA NO.2780/A/2003 DATED 7/1 /2005., ITAT 'C BENCH, AHMEDABAD.),DEVID ASS SUKHANI VS.LTO, IN ITAT NO.387/2005 DATED 21.4.2006 AND CIT VS. INDEN BISLERS, 240 ITR 943 (MAD) CONCLUDED THAT DISALLOWANCE OF A WRONG CLAIM DID NO T AMOUNT TO CONCEALMENT, DISALLOWANCE HAVING BEEN MADE DUE TO DIFFERENCE IN OPINION REGARDING PERIOD OF ALLOWABILITY OF CLAIM WHILE THE ASSESSEE HAD DISC LOSED ALL THE PARTICULARS. 5.1 REGARDING PENALTY IN RELATION TO DISALLOWANCE O F DEPRECIATION, THE LD.. CIT(A) UPHELD THE CONCLUSION OF THE AO ON THE GROU ND THAT THE ASSESSEE CLAIMED DEPRECIATION WITHOUT BEING OWNER OF THE ASS ETS AND WITHOUT USING THESE ASSETS FOR ITS BUSINESS AND THEREFORE, DISALLOWANCE OF DEPRECIATION ON THE BASIS OF FACTS ESTABLISHED BY THE AO AMOUNTED TO FILING OF I NACCURATE PARTICULARS OF INCOME. 6 THE REVENUE IS NOW IN APPEAL BEFORE US AGAINST TH E FINDINGS OF THE LD. CIT(A) CANCELLING LEVY OF PENALTY IN RELATI ON TO DISALLOWANCE OF BANK GUARANTEE COMMISSION WHILE THE ASSESSEE IN THEIR CO CHALLENGED THE CONFIRMATION OF PENALTY ON ACCOUNT O F DISALLOWANCE OF DEPRECIATION. THE LEARNED DR SUPPORTED THE ORDER OF THE AO. ON THE OTHER HAND, THE THE LD. AR ON BEHALF OF THE ASSESSE E WHILE SUPPORTING THE FINDINGS OF THE LD. CIT(A) IN RESPEC T OF CANCELLATION OF PENALTY IN RELATION TO DISALLOWANCE OF BANK GUARANT EE COMMISSION, CONTENDED THAT THE LD. CIT(A) WAS NOT JUSTIFIED IN UPHOLDING PENALTY ON THE AMOUNT OF DEPRECIATION DISALLOWED BY THE AO . 7 WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH T HE FACTS OF THE CASE. WE FIND THAT PENALTY U/S 271(1)(C) HAD BE EN LEVIED BY THE AO ON THE GROUND THAT THE ASSESSEE FURNISHED INACCURATE PART ICULARS OF AN AMOUNT ATTRIBUTABLE TO DISALLOWANCE OF BANK GUARANTEE COMM ISSION, WHICH WAS NOT ADMISSIBLE IN THE YEAR UNDER CONSIDERATION AND PE RTAINED TO THE SUBSEQUENT YEAR AS ALSO ON ACCOUNT OF DISALLOWANCE OF DEPRECIA TION ON ASSETS ACQUIRED THROUGH JV ENTRY DATED 31.3.2001 ON THE BASIS OF A DELIVERY CUM DEBIT NOTE ITA NO.1595 /A/07 & C O NO.132 /A/07 KARNAVATI INFRASTRUCTURE PVT. LTD. 7 ISSUED BY UNITECH LTD. AS ALSO ON THE BASIS OF A PR OVISIONAL STATEMENT OF ACCOUNT ISSUED BY THE LATTER. THE AO IN HIS ORDER HAS NOT BROUGHT OUT AS TO HOW THE ASSESSEE FURNISHED INACCURATE PARTICULARS OF INCOME IN RESPECT OF AMOUNT CLAIMED TOWARDS BANK GUARANTEE COMMISSION WHEN UNDISPUTEDLY , A SIMILAR CLAIM OF THE ASSESSEE HAD BEEN ALLOWED IN THE PRECEDING YEARS. T HE EXPRESSION 'HAS CONCEALED THE PARTICULARS OF INCOME' AND 'HAS FURNI SHED INACCURATE PARTICULARS OF INCOME' HAVE NOT BEEN DEFINED EITHER IN SECTION 271 OR ELSEWHERE IN THE ACT. HOWEVER, NOTWITHSTANDING THE DIFFERENCE IN THE TWO CIRCUMSTANCES, IT IS NOW WELL ESTABLISHED THAT THEY LEAD TO THE SAME EFFECT NAMEL Y, KEEPING OFF A CERTAIN PORTION OF THE INCOME FROM THE RETURN. ACCORDING TO LAW LEX ICON, THE WORD 'CONCEAL' MEANS: 'TO HIDE OR KEEP SECRET. THE WORD 'CONCEAL' IS C ON+CELARE WHICH IMPLIES TO HIDE. IT MEANS TO HIDE OR WITHDRAW FROM OBSERVATION; TO C OVER OR KEEP FROM SIGHT; TO PREVENT THE DISCOVERY OF ; TO WITHHOLD KNOWLEDGE OF . THE OFFENCE OF CONCEALMENT IS, THUS, A DIRECT ATTEMPT TO HIDE AN ITEM OF INCOM E OR A PORTION THEREOF FROM THE KNOWLEDGE OF THE INCOME-TAX AUTHORITIES.' IN WEBSTER'S DICTIONARY, 'INACCURATE' HAS BEEN DEFI NED AS : 'NOT ACCURATE, NOT EXACT OR CORRECT; NOT ACCORDING TO TRUTH; ERRONEOUS ; AS AN INACCURATE STATEMENT, COPY OR TRANSCRIPT.' 7.1 THE PENALTY U/S 271(1)(C) OF THE ACT I S LEVIABLE IF THE AO IS SATISFIED IN THE COURSE OF ANY PROCEEDINGS UNDER TH IS ACT THAT ANY PERSON HAS CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHED INACCURATE PARTICULARS OF SUCH INCOME. IT IS WELL S ETTLED THAT ASSESSMENT PROCEEDINGS AND PENALTY PROCEEDINGS ARE SEPARATE AN D DISTINCT AND AS HELD BY HON'BLE SUPREME COURT IN THE CASE OF ANANTHRAMAN VE ERASINGHAIAH & CO. VS. CIT - 123 ITR 457; THE FINDING IN THE ASSESSMENT PR OCEEDINGS CANNOT BE REGARDED AS CONCLUSIVE FOR THE PURPOSES OF THE PENA LTY 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 PROC EEDINGS ACTUALLY REPRESENTS ITA NO.1595 /A/07 & C O NO.132 /A/07 KARNAVATI INFRASTRUCTURE PVT. LTD. 8 THE CONCEALMENT ON THE PART OF THE ASSESSEE AS ENVI SAGED IN SEC. 271(1 )(C) OF THE ACT AND WHETHER IT IS A FIT CASE TO IMPOSE THE PENALTY BY INVOKING THE SAID PROVISIONS. THE ISSUE AS TO WHETHER OR NOT THE ASSE SSEE IS ENTITLED TO CLAIM DEDUCTION OF BANK GUARANTEE COMMISSION IN THE YEAR UNDER CONSIDERATION IS HIGHLY DEBATABLE. IN THE CASE UNDER CONSIDERATION, IT IS APPARENT THAT ALL THE RELEVANT FACTS HAVE BEEN DISCLOSED BY THE ASSESSEE IN RESPECT OF THEIR CLAIM TOWARDS BANK GUARANTEE COMMISSION . THE EXPLANATION GIVEN BY THE ASSESSEE IN SUPPORT OF THEIR CLAIM FOR DEDUCTION OF BANK GUARAN TEE COMMISSION, HAVING BEEN ALLOWED IN THE PRECEDING ASSESSMENT YEARS, WAS NOT FOUND TO BE FALSE. IT IS WELL SETTLED THAT THE CRITERION AND YARDSTICKS FOR THE P URPOSE OF IMPOSING PENALTY U/S 271(L)(C) ARE DIFFERENT THAN THOSE APPLIED FOR MAKI NG OR CONFIRMING THE ADDITIONS. WHEN THE ASSESSEE HAS MADE A PARTICULAR CLAIM IN TH E RETURN OF INCOME AND HAS ALSO FURNISHED ALL THE MATERIAL FACTS RELEVANT THER ETO, THE DISALLOWANCE OF SUCH CLAIM CANNOT AUTOMATICALLY LEAD TO THE CONCLUSION T HAT THERE WAS CONCEALMENT OF PARTICULARS OF HIS INCOME BY THE ASSESSEE OR FURNIS HING OF INACCURATE PARTICULARS THEREOF . WHAT IS TO BE SEEN IS WHETHER THE SAID CL AIM MADE BY THE ASSESSEE WAS BONA-FIDE AND WHETHER ALL THE MATERIAL FACTS RELEVA NT THERETO HAVE BEEN FURNISHED AND ONCE IT IS SO ESTABLISHED, THE ASSESSEE CANNOT BE HELD LIABLE FOR CONCEALMENT PENALTY U/S 271(L)(C) OF THE ACT. SINCE ALL THE MAT ERIAL FACTS RELEVANT TO THE SAID CLAIM OF BANK GUARANTEE COMMISSION HAD BEEN FURNISH ED BY THE ASSESSEE, IN OUR OPINION ,IT IS NOT A FIT CASE TO ATTRACT THE LE VY OF PENALTY U/S 271(L)(C) OF THE ACT ON THAT SCORE. A MERE REJECTION OF THE CLAIM OF THE ASSESSEE BY RELYING ON DIFFERENT INTERPRETATIONS DOES NOT AMOUNT TO CONCEALMENT OF T HE PARTICULARS OF INCOME OR FURNISHING INACCURATE PARTICULARS OF INCOME, BY THE ASSESSEE.. HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. AJAIB SIN GH & CO. (2001) 170 CTR (P&H) 489 : (2002) 253 ITR 630 (P&H) HAVE OBSERVED THAT MERELY BECAUSE CERTAIN EXPENSES CLAIMED BY THE ASSESSEE ARE DISALL OWED BY AN AUTHORITY, IT CANNOT MEAN THAT PARTICULARS FURNISHED BY THE ASSES SEE WERE WRONG. IT WAS HELD THAT MERE DISALLOWANCE OF EXPENSES PER SE CANNOT MEAN THAT ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF ITS INCOME. IN THE CASE UNDER CONSIDERATION, AS POINTED OUT BY THE LD. CIT(A), THE ASSESSEE HAD GIVEN ALL THE PARTICULARS OF INCOME AND HAD DISCLOSED ALL FACTS TO THE AO. IN SU CH CIRCUMSTANCES, HONBLE ITA NO.1595 /A/07 & C O NO.132 /A/07 KARNAVATI INFRASTRUCTURE PVT. LTD. 9 DELHI HIGH COURT HELD IN THE CASE OF COMMISSIONER OF INCOME-TAX.VS BACARDI MARTINI INDIA LIMITED.,288 ITR 585(DEL) THAT NO PEN ALTY WAS LEVIABLE. IN CIT VS. HARSHVARDHAN CHEMICALS & MINERALS LTD. (259 ITR 212 ) (RAJ),HONBLE RAJASTHAN HIGH COURT UPHELD THE FINDING OF THE TRIBUNAL THAT WHEN THE ASSESSEE HAS CLAIMED SOME AMOUNT THOUGH THAT IS DEBATABLE, IN SUCH CASES , IT CANNOT BE SAID THAT THE ASSESSEE HAS CONCEALED ANY INCOME OR FURNISHED INAC CURATE PARTICULARS FOR EVASION OF THE TAX. RECENTLY, HONBLE APEX COURT I N CIT VS. RELIANCE PETRO PRODUCTS, ARISING OUT OF SLP (C) NO.27161 OF 2008, VIDE THEIR ORDER DATED 17.3.2010 , REPORTED IN 322 ITR 158(SC) HELD THAT M ERELY BECAUSE THE ASSESSEE HAD CLAIMED THE EXPENDITURE, WHICH CLAIM WAS NOT AC CEPTED OR WAS NOT ACCEPTABLE TO THE REVENUE, THAT BY ITSELF WOULD NOT , ATTRACT THE PENALTY U/S 271(1)(C) OF THE ACT. HONBLE APEX COURT HELD IN T HE SAID CASE THAT AS THE ASSESSEE HAD FURNISHED ALL THE DETAILS OF ITS EXPEN DITURE AS WELL AS INCOME IN ITS RETURN, WHICH DETAILS, IN THEMSELVES, WERE NOT FOUN D TO BE INACCURATE NOR COULD BE VIEWED AS THE CONCEALMENT OF INCOME ON ITS PART. IT WAS UP TO THE AUTHORITIES TO ACCEPT ITS CLAIM IN THE RETURN OR NOT. 7.2. IN VIEW OF THE FOREGOING, ESPECIALLY WHEN NO MATERIAL HAS BEEN BROUGHT TO OUR NOTICE BY THE REVENUE, CONTROVERTING THE FINDIN GS OF THE LD. CIT(A) WHILE CANCELLING THE PENALTY IN RELATION TO AMOUNT DISALL OWED ON ACCOUNT OF BANK GUARANTEE COMMISSION NOR ANY CONTRARY DECISION HAS BEEN BROUGHT TO OUR NOTICE IN THIS CONNECTION , WE HAVE NO ALTERNATIVE BUT TO UPHOLD THE FINDINGS OF THE LD. CIT(A),CANCELING THE PENALTY LEVIED UNDER SECTION 271 (1)(C) OF THE ACT IN RESPECT OF AMOUNT DISALLOWED TOWARDS BANK GUARANTEE COMMIS SION. THEREFORE, GROUND NO.1 IN THE APPEAL OF THE REVENUE IS DISMISSED . 8. NOW ADVERTING TO PENALTY UPHELD BY THE LD. CIT(A) ON THE AMOUNT OF DEPRECIATION DISALLOWED BY THE AO, WE FIND THAT UND ISPUTEDLY, THE ASSESSEE CLAIMED DEPRECIATION ON LAB EQUIPMENTS-RS.7,61,068 & OFFICE EQUIPMENT- RS.2,08,417/- ON THE STRENGTH OF A JV ENTRY DATED 31.3.2001. THE ASSESSEE CLAIMED THAT ENTRY WAS MADE AND MACHINES WERE USED, ON THE BASIS OF THE DELIVERY NOTE CUM DEBIT NOTE ISSUED BY M/S UNITECH LTD. AND ALSO ON THE BASIS OF ITA NO.1595 /A/07 & C O NO.132 /A/07 KARNAVATI INFRASTRUCTURE PVT. LTD. 10 THE PROVISIONAL STATEMENT OF ACCOUNT ISSUED BY THEM . HOWEVER, ON ENQUIRIES WITH M/S UNITECH LTD., THE AO OBTAINED A COPY OF ACCOU NT OF THE ASSESSEE IN THE BOOKS OF M/S UNITECH LTD. AND FOUND THAT NO SUCH CO RRESPONDING ENTRY APPEARED IN THE BOOKS OF THE SAID COMPANY AND INSTEAD, M/S U NITECH LTD. CLAIMED TO BE THE OWNER OF THE ASSETS AND CONSEQUENTLY, CLAIMED DEPRE CIATION ON THE AFORESAID ASSETS FOR THE YEAR UNDER CONSIDERATION.. THE REPLY OF M/S UNITECH LTD. WAS ALSO CONFRONTED TO THE ASSESSEE. IN THESE CIRCUMSTANCES, THE ASSESSEE COULD NOT SUBSTANTIATE THE EXPLANATION IN SUPPORT OF THEIR CL AIM OF DEPRECIATION EITHER DURING THE ASSESSMENT PROCEEDINGS OR EVEN DURING THE PENAL TY PROCEEDINGS. AS IS EVIDENT FROM THE PROVISIONS OF CL. (C) OF S. 271(1 ) OF THE ACT, THE WORDS USED ARE 'HAS CONCEALED THE PARTICULARS OF HIS INCOME' OR FU RNISHED 'INACCURATE PARTICULARS OF SUCH INCOME'. THUS, BOTH IN CASE OF CONCEALMENT AND INACCURACY, THE PHRASE 'PARTICULARS OF INCOME' HAS BEEN USED. THE LEGISLAT URE HAS NOT USED THE WORDS 'CONCEALED HIS INCOME'. FROM THIS IT WOULD BE APPAR ENT THAT PENAL PROVISION WOULD OPERATE WHEN THERE IS A FAILURE TO DISCLOSE FULLY O R TRULY ALL THE PARTICULARS. THE WORDS 'PARTICULARS OF INCOME' REFER TO THE FACTS WH ICH LEAD TO THE CORRECT COMPUTATION OF INCOME IN ACCORDANCE WITH THE PROVIS IONS OF THE ACT. SO WHEN ANY FACT MATERIAL TO THE DETERMINATION OF AN ITEM AS IN COME OR MATERIAL TO THE CORRECT COMPUTATION IS NOT FILED OR THAT WHICH IS FILED IS NOT ACCURATE, THEN THE ASSESSEE WOULD BE LIABLE TO PENALTY UNDER S. 271(1)(C) OF TH E ACT. IN THE INSTANT CASE, THE LD. CIT(A) UPHELD THE LEVY OF PENALTY 271(1)(C) OF THE ACT SINCE THE ASSESSEE FURNISHED INACCURATE PARTICULARS OF THE INCOME BY C LAIMING DEPRECIATION ON THE AFORESAID ASSETS ON THE BASIS OF AN ENTRY MADE ON 3 1.3.2001 EVEN WHEN M/S UNITECH LTD. WERE OWNER OF THE SAID ASSETS. ON ENQU IRIES WITH UNITCEH LTD., IT WAS REVEALED THAT THEY HAD CLAIMED DEPRECIATION ON THES E ASSETS. THE EXPRESSION 'HAS CONCEALED THE PARTICULARS OF INCOME' AND 'HAS FURNISHED INACCURATE PARTICULARS OF INCOME' HAVE NOT BEEN DEFINED EITHER IN SECTION 271 OR ELSEWHERE IN THE ACT. HOWEVER, NOTWITHSTANDING THE DIFFERENCE IN THE TWO CIRCUMSTANCES, IT IS NOW WELL ESTABLISHED THAT THEY LEAD TO THE SAME EFF ECT NAMELY, KEEPING OFF A CERTAIN PORTION OF THE INCOME FROM THE RETURN. IF THE DISCLOSURE OF FACTS IS INCORRECT OR FALSE TO THE KNOWLEDGE OF THE ASSESSEE AND IT IS ESTABLISHED, THEN SUCH DISCLOSURE CANNOT TAKE IT OUT FROM THE PURVIEW OF THE ACT OF CONCEALMENT OF ITA NO.1595 /A/07 & C O NO.132 /A/07 KARNAVATI INFRASTRUCTURE PVT. LTD. 11 PARTICULARS OR FURNISHING INACCURATE PARTICULARS TH EREOF FOR THE PURPOSE OF LEVY OF PENALTY. THE PENALTY U/S 271(1)(C) OF THE ACT IS LEVIABLE IF THE AO IS SATISFIED IN THE COURSE OF ANY PROCEEDINGS UNDER TH IS ACT THAT ANY PERSON HAS CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHED INACCURATE PARTICULARS OF SUCH INCOME. EXPLANATION 1 TO SECTION 271(1)(C) IN RESPECT OF ANY FACT RELATING TO THE CO MPUTATION OF TOTAL INCOME STATES THAT THE AMOUNT ADDED OR DISALLOWED I N COMPUTING THE TOTAL INCOME OF AN ASSESSEE SHALL BE DEEMED TO BE T HE INCOME IN RESPECT OF WHICH PARTICULARS HAVE BEEN CONCEALED. T HIS DEEMING PROVISION FOR CONCEALMENT IS NOT ABSOLUTE ONE. THE PRESUMPTION UNDER THE EXPLANATION 1 IS REBUTTABLE AND NOT CONCL USIVE. THE ASSESSEE CAN SUBMIT THE EXPLANATION AS THE ONUS SHI FTS ON TO THE ASSESSEE TO PROVE THAT HE HAS NOT CONCEALED THE PAR TICULARS OF THE INCOME. THE ASSESSEE IN THE INSTANT CASE SUBMITTED AN EXPLANATION ABOUT THEIR CLAIM OF DEPRECIATION ON THE STRENGTH O F A JV ENTRY DATED 31.3.2001 WHILE ON ENQUIRIES IT WAS FOUND BY THE AO THAT NO SUCH CORRESPONDING ENTRY APPEARED IN THE BOOKS OF M/S UN ITECH LTD. AND INSTEAD IT WAS REVEALED THAT THEY ALONE HAD CLAIMED DEPRECIATION ON THE AFORESAID ASSETS IN THE YEAR UNDER CONSIDERATIO N. IN THESE CIRCUMSTANCES , IT IS APPARENT THAT THE ASSESSEE DE LIBERATELY MADE AN INCORRECT CLAIM IN THEIR RETURN OF INCOME AND THEREFORE, THE EXPLANATION THAT THEY CLAIMED DEPRECIATION ON THE BASIS OF A JV ENTRY DATED 31.3. 2001 WAS FOUND TO BE FALSE IN THE WAKE OF ENQUIRIES FROM UNITECH LTD. APPARENTLY , IN THE COMPUTATION OF INCOME UNDER THE HEAD 'BUSINESS,' THE ASSESSEE MADE AN INC ORRECT CLAIM NOT SUPPORTED BY ANY PROVISION OF LAW. IT IS WELL ESTABLISHED THA T SO LONG AS THE ASSESSEE HAS NOT CONCEALED ANY MATERIAL FACT OR THE FACTUAL INFORMAT ION GIVEN BY HIM HAS NOT BEEN FOUND TO BE INCORRECT, HE WILL NOT BE LIABLE TO IMP OSITION OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT, EVEN IF THE CLAIM MADE BY HIM IS NOT SUSTAINABLE IN LAW, PROVIDED THAT HE EITHER SUBSTANTIATES THE EXPLANATI ON OFFERED BY HIM OR THE EXPLANATION, EVEN IF NOT SUBSTANTIATED, IS FOUND TO BE BONAFIDE. IF THE EXPLANATION IS NEITHER SUBSTANTIATED NOR SHOWN TO BE BONAFIDE, EXPLANATION 1 TO SECTION 271(1)(C) WOULD COME IN TO PLAY AND THE ASSESSEE WI LL BE LIABLE TO FOR THE ITA NO.1595 /A/07 & C O NO.132 /A/07 KARNAVATI INFRASTRUCTURE PVT. LTD. 12 PRESCRIBED PENALTY. IT IS TRUE THAT MERE SUBMITTING A CLAIM WHICH IS INCORRECT IN LAW WOULD NOT AMOUNT TO GIVING INACCURATE PARTICULARS O F THE INCOME OF THE ASSESSEE, BUT IT CANNOT BE DISPUTED THAT THE CLAIM MADE BY TH E ASSESSEE NEEDS TO BE BONAFIDE. IF THE CLAIM BESIDES BEING INCORRECT IN L AW IS MALAFIDE, EXPLANATION 1 TO SECTION 271(1) COMES INTO PLAY AND WORK TO THE DIS ADVANTAGE OF THE ASSESSEE. IN THE PRESENT CASE, THE ASSESSEE CLAIMED DEPRECIATION ON ASSETS, WITHOUT BEING OWNER OF THE SUCH ASSETS AND WITHOUT EVEN USING TH ESE ASSETS DURING THE YEAR, MERELY BY MAKING A JV ENTRY ON THE LAST DAY OF THE ACCOUNTING YEAR. THERE IS NO EVIDENCE ON RECORD EVEN WITH REGARD TO USER OF THES E ASSETS WHILE M/S UNITECH CLAIMED DEPRECIATION ON THESE VERY ASSETS. THE LD. AR DID NOT PLACE ANY MATERIAL BEFORE US, CONROVERTING THE FINDINGS OF THE LD. CIT (A) THAT THE ASSESSEE MADE A CLAIM WITHOUT BEING OWNER OF ASSETS AND WITHOUT USI NG THESE ASSETS FOR ITS BUSINESS. THUS , THE ASSESSEE COULD NOT SUBSTANTIAT E THEIR OWN EXPLANATION AND INSTEAD IT WAS FOUND TO BE FALSE AS A RESULT OF EN QUIRIES FROM M/S UNITECH LTD.. WE CANNOT OVERLOOK THE FACT THAT ONLY A SMALL PERCE NTAGE OF THE INCOME-TAX RETURNS ARE PICKED UP FOR SCRUTINY. IF THE ASSESSEE MAKES A CLAIM WHICH IS NOT ONLY INCORRECT IN LAW BUT IS ALSO WHOLLY WITHOUT ANY BAS IS AND THE EXPLANATION FURNISHED BY HIM FOR MAKING SUCH A CLAIM IS NOT FOUND TO BE B ONAFIDE, IT WOULD BE DIFFICULT TO SAY THAT HE WOULD STILL NOT BE LIABLE TO PENALTY U/ S 271(1)(C) OF THE ACT. IF WE TAKE THE VIEW THAT A CLAIM WHICH IS WHOLLY UNTENABLE IN LAW AND HAS ABSOLUTELY NO FOUNDATION ON WHICH IT COULD BE MADE, THE ASSESSEE WOULD NOT BE LIABLE TO IMPOSITION OF PENALTY, EVEN IF HE WAS NOT ACTING BO NAFIDE WHILE MAKING A CLAIM OF THIS NATURE, THAT WOULD GIVE A LICENSE TO UNSCRUPUL OUS ASSESSEES TO MAKE WHOLLY UNTENABLE AND UNSUSTAINABLE CLAIMS WITHOUT THERE BE ING ANY BASIS FOR MAKING THEM, IN THE HOPE THAT THEIR RETURN WOULD NOT BE PI CKED UP FOR SCRUTINY AND THEY WOULD BE ASSESSED ON THE BASIS OF SELF ASSESSMENT U /S 143(1) OF THE ACT AND EVEN IF THEIR CASE IS SELECTED FOR SCRUTINY, THEY C AN GET AWAY MERELY BY PAYING THE TAX, WHICH IN ANY CASE, WAS PAYABLE BY THEM. THE CO NSEQUENCE WOULD BE THAT THE PERSONS WHO MAKE CLAIMS OF THIS NATURE, ACTUATED BY AN INTENTION TO EVADE TAX OTHERWISE PAYABLE BY THEM WOULD GET AWAY WITHOUT PA YING THE TAX LEGALLY PAYABLE BY THEM, IF THEIR CASES ARE NOT PICKED UP FOR SCRUT INY. THIS WOULD TAKE AWAY THE DETERRENT EFFECT, WHICH THESE PENALTY PROVISIONS IN THE ACT HAVE. WE FIND THAT THE ITA NO.1595 /A/07 & C O NO.132 /A/07 KARNAVATI INFRASTRUCTURE PVT. LTD. 13 ASSESSEE BEFORE US COULD NOT SUBSTANTIATE THEIR EXP LANATION BEFORE THE AO DURING THE ASSESSMENT PROCEEDINGS. EVEN DURING PENALTY PRO CEEDINGS BEFORE THE AO/CIT(A), THE ONUS LAID DOWN UPON THE ASSESSEE IN TERMS OF EXPLANATION 1 WAS NOT DISCHARGED. WE CANNOT IGNORE THE FACT THAT THE ASSESSEE IS A COMPANY, WHICH IS HAVING PROFESSIONAL ASSISTANCE IN COMPUTAT ION OF ITS INCOME, AND ITS ACCOUNTS ARE COMPULSORILY SUBJECTED TO AUDIT. IN TH ESE CIRCUMSTANCES, ESPECIALLY WHEN EXPLANATION GIVEN BY THE ASSESSEE DURING THE PENALTY PROCEEDINGS HAS NOT BEEN SUBSTANTIATED NOR FOUND TO BE BONAFIDE AN D THERE IS NO MATERIAL BEFORE US TO TAKE A DIFFERENT VIEW IN THE MATTER, WE ARE O F THE OPINION THAT THE LD. CIT(A) WAS JUSTIFIED IN UPHOLDING THE LEVY OF PENALTY ON A CCOUNT OF FURNISHING OF INACCURATE PARTICULARS OF INCOME IN RELATION TO C LAIM OF DEPRECIATION. IN TERMS OF PROVISIONS OF SEC. 271(1)(C) OF THE ACT READ WITH E XPLANATION 1 THERETO AND THE JUDICIAL PRONOUNCEMENTS IN THE CASE OF B.A. BALASU BRAMANIAM & BROS. CO. V. CIT [1999] 157 CTR 556(SC), CIT V. B.A. BALASUBRAMANIAM & BROS. [1984] 40 CTR (MAD.)/[1985] 152 ITR 529 (MAD.) , CIT V. MUSSADILAL RAM BHAROSE [1987] 60 CTR (SC) 34/[ 1987] 165 ITR 14 (SC); TC 50 R. 474; CIT V. K.R. SADAYAPPAN [1990] 86 CTR (SC) 120; [1990] 185 ITR 49 (SC); TC 50 R. 795, ADDL. CIT V. JEEVAN LAL SAH [1994] 117 CTR (SC) 130; [1994] 205 ITR 244 (SC); TC 50 R. 973 AND K.P.MADHUSUDANAN VS. CIT,251 ITR 99(SC), IT IS WELL ESTABLISHED THAT WHENEVER THERE IS DIFFERENCE BETWEEN THE RETURNED A ND ASSESSED INCOME, THERE IS INFERENCE OF CONCEALMENT. THE EXPLANATION 1 TO SEC. 271(1)(C) OF THE ACT RAISES A PRESUMPTION THAT CAN BE REBUTTED BY THE ASSESSEE WI TH REFERENCE TO FACTS OF THE CASE. THUS, THE ONUS IS ON THE ASSESSEE TO REBUT TH E INFERENCE OF CONCEALMENT. THE ABSENCE OF EXPLANATION ITSELF WOULD ATTRACT PEN ALTY. THE EXPLANATION OFFERED BY THE ASSESSEE SHOULD NOT BE FALSE. THE ONUS LAID DOWN UPON THE ASSESSEE TO REBUT THE PRESUMPTION RAISED UNDER EXPLANATION 1 WO ULD NOT BE DISCHARGED BY ANY FANTASTIC OR FANCIFUL EXPLANATION. IT IS NOT TH E LAW THAT ANY AND EVERY EXPLANATION HAS TO BE ACCEPTED . SINCE THE ASSESSEE FAILED TO SUBSTANTIATE THEIR EXPLANATION IN RESPECT OF A THEIR CLAIM OF DEPRECIA TION, THE ONUS LAID DOWN UPON THE ASSESSEE IN TERMS OF EXPLANATION 1 TO SEC. 271( 1)(C) OF THE ACT REMAINS UNDISCHARGED. THE ASSESSEE HAS NEITHER SUBSTANTIATE D HIS EXPLANATION NOR PROVED THAT SUCH AN EXPLANATION IS BONAFIDE BEFORE THE LOWER AUTHORITIES. AS ITA NO.1595 /A/07 & C O NO.132 /A/07 KARNAVATI INFRASTRUCTURE PVT. LTD. 14 ALREADY STATED ,THE ASSESSEE HAS NOT PLACED BEFORE US ANY MATERIAL IN ORDER TO CONTROVERT THE FINDINGS OF THE LD. CIT(A) THAT THE ASSESSEE MADE CLAIM OF DEPRECIATION WITHOUT BEING OWNER OF ASSETS AND WITH OUT USING THESE ASSETS FOR HIS BUSINESS. THUS, IT CANNOT BE SAID THAT IN SUCH A CA SE, THERE COULD BE NO SCOPE FOR SAYING THAT THE ASSESSEE IS GUILTY OF FURNISHING OF INACCURATE PARTICULARS OF INCOME , WARRANTING PENALTY UNDER SECTION 271(1)(C) OF THE ACT. EVEN IF THE AO/CIT(A) HAVE NOT SPECIFICALLY INVOKED THE EXPLANATION 1 TO SEC. 271(1)(C), IT HAD TO BE CONSIDERED AT THE APPELLATE STAGE IN VIEW OF DECISI ON OF HONBLE BOMBAY HIGH COURT IN CIT VS. SMJ BUILDERS,262 ITR 60(BOM.) AND OF HONBLE APEX COURT IN K.P.MADHUSUDANAN,251 ITR 99(SC). THERE IS NO DISCRE TION ON THE ASSESSING OFFICER AS TO WHETHER HE CAN INVOKE THE EXPLANATION OR NOT. 8.1. IN THEIR DECISION IN THE CASE OF USHA FERTI LISERS VS. CIT,269 ITR 591(GUJ), THE HONBLE JURISDICTIONAL HIGH COURT, WHILE UPHOLD ING THE LEVY OF PENALTY OBSERVED THAT THE SUPREME COURT IN THE CASE OF MUSSADILAL RAM BH AROSE [1987] 165 ITR 14 HAS SPECIFICALLY LAID DOWN THE SCOPE OF THE EXPLANA TION IN THE FOLLOWING WORDS: 'THE POSITION, THEREFORE, IN LAW IS CLEAR. IF THE R ETURNED INCOME IS LESS THAN 80 PER CENT, OF THE ASSESSED INCOME, THE PRESUMPTION IS RA ISED AGAINST THE ASSESSEE THAT THE ASSESSEE IS GUILTY OF FRAUD OR GROSS OR WI LLFUL NEGLECT AS A RESULT OF WHICH HE HAS CONCEALED THE INCOME BUT THIS PRESUMPTION CA N BE REBUTTED. THE REBUTTAL MUST BE ON MATERIALS RELEVANT AND COGENT.' AS TO WHAT COULD BE THE EXPLANATION BY WHICH THE AS SESSEE CAN REBUT THE PRESUMPTION RAISED AGAINST IT, IS STATED BY THE APE X COURT IN THE SAME DECISION IN THE FOLLOWING WORDS WHILE CONFIRMING THE VIEW EXPRE SSED BY THE FULL BENCH OF THE PATNA HIGH COURT IN THE CASE OF CIT V. NATHULAL AGA RWALA AND SONS [1985] 153 ITR 292 : 'THE PATNA HIGH COURT EMPHASISED THAT AS TO THE NAT URE OF THE EXPLANATION TO BE RENDERED BY THE ASSESSEE, IT WAS PLAIN ON PRINCIPLE THAT IT WAS NOT THE LAW THAT THE MOMENT ANY FANTASTIC OR UNACCEPTABLE EXPLANATION WA S GIVEN, THE BURDEN PLACED UPON HIM WOULD BE DISCHARGED AND THE PRESUMPTION RE BUTTED WE AGREE. WE FURTHER AGREE THAT IT IS NOT THE LAW THAT ANY AND E VERY EXPLANATION BY THE ASSESSEE MUST BE ACCEPTED. IT MUST BE AN ACCEPTABLE EXPLANAT ION, ACCEPTABLE TO A FACT- FINDING BODY. WE ARE AWARE THAT IT WOULD NOT BE POSSIBLE FOR THE HIGH COURT TO ENTER INTO A FACT- FINDING EXERCISE OR REAPPRECIATE THE EVIDENCE AND W E DO NOT PROPOSE TO DO SO. ITA NO.1595 /A/07 & C O NO.132 /A/07 KARNAVATI INFRASTRUCTURE PVT. LTD. 15 HOWEVER, AT THE SAME TIME, IT IS APPARENT THAT THE BURDEN WHICH IS CAST ON THE ASSESSEE REMAINS UNDISCHARGED WHEN ONE APPLIES THE PRINCIPLES LAID DOWN BY THE APEX COURT. AS OBSERVED, THE EXPLANATION HAS TO BE ONE WHICH IS NOT FANTASTIC OR UNACCEPTABLE. IT IS NOT THE LAW THAT ANY AND EVERY EXPLANATION BY THE ASSESSEE MUST BE ACCEPTED. .' 8.2 IN THE LIGHT OF AFORESAID DECISIONS OF HON BLE APEX COURT AND JURISDICTIONAL HIGH COURT, THE BURDEN WHICH LIES ON THE ASSESSEE H AS NOT BEEN DISCHARGED BY CONVINCING EXPLANATION AND EVIDENCE NOR IT IS LAW T HAT ANY EXPLANATION OFFERED BY THE ASSESSEE MUST BE ACCEPTED. IN THESE CIRCUMSTANC ES, WE, THEREFORE, HAVE NO ALTERNATIVE BUT TO UPHOLD THE ORDER OF THE LD. CIT (APPEALS) INSOFAR AS LEVY OF PENALTY ON THE AMOUNT IN RELATION TO CLAIM FOR DEP RECIATION IS CONCERNED. THUS, GROUND RAISED IN THE CO IS DISMISSED. 9. GROUND NOS. 2 & 3 IN THE APPEAL OF THE REVENUE, BEING GENERAL IN NATURE, DO NOT REQUIRE ANY SEPARATE ADJUDICATION AN D ARE, THEREFORE, DISMISSED. 10. IN THE RESULT, BOTH THE APPEAL OF THE REVENUE AND CO FILED BY THE ASSESSEE, ARE DISMISSED. ORDER PRONOUNCED IN THE COURT TODAY ON 25-6-2010 SD/- SD/- (D T GARASIA) JUDICIAL MEMBER A N PAHUJA) ACCOUNTANT MEMBER DATE : 25-6-2010 COPY OF THE ORDER FORWARDED TO: 1. M/S KARNAVATI INFRASTRUCTURE PVT. LTD., D/501, STATUS OPP. T V TOWER, DRIVE-IN-ROAD, GURUKUL, AHMEDABAD 2. DCIT, CIRCLE-4, AHMEDABAD 3. CIT CONCERNED 4. CIT(A)-VII, AHMEDABAD 5. THE DR,C BENCH, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER DEPU TYREGISTRAR/ASSISTANT REGISTRAR ITAT, AHMEDABAD