The ACIT, Circle-2, JAMNAGAR V. M/s Tacon Infrastructure Pvt. Ltd., PORBANDAR

ITA 1210/RJT/2009

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 2996 (ITAT-RAJKOT)
• Duration Of Justice: 11 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-12-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2002-2003
• Appeal Filed On: 31-12-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JAI RAJ KUMAR
• Assessee Lawyers: PM MAHARSHI
• Keywords: Depreciation; Retrospective amendment; Wrong claim; Difference of opinion
• Section: 271(1)(c); 40A(3); 115JB; 80IA; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH, RAJKOT BEFORE SHRI A.L. GEHLOT (AM) AND SHRI D.T. GARASIA (JM) I.T.A. NO.1210/RJT/2010 - A.Y. 2002-03 I.T.A. NO.1211/RJT/2010 - A.Y. 2003-04 I.T.A. NO.1212/RJT/2010 - A.Y. 2004-05 ACIT, CIR.2 VS M/S TACON INFRASTRUCTRUE PVT LTD JAMNAGAR OLD CUSTOM HOUSE CHOWK KAMLABAUG, PORBANDAR PAN : AABCT4416D (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI JAI RAJ KUMAR RESPONDENT BY : SHRI PM MAHARSHI O R D E R GARASIA : THESE APPEALS FILED BY THE REVENUE ARE DI RECTED AGAINST THE IDENTICAL ORDERS OF CIT(A), JAMNAGAR ALL DATED 05-10-2009 FOR THE ASSESSMENT YEARS 2002- 03, 2003-04 AND 2005-06 WHEREBY THE LD.CIT(A) CANCE LLED THE PENALTIES IMPOSED U/S 271(1)(C) OF THE ACT. 2. THE ASSESSEE IS A PRIVATE LIMITED COMPANY CARRYI NG ON CIVIL CONTRACT WORK OF GOVERNMENT & SEMI GOVERNMENT, CORPORATION, GOVER NMENT UNDERTAKING, ETC. IT IS ENGAGED IN THE CONSTRUCTION OF ROADS, DAMS, BRID GES, CANALS ETC. 3. FOR THE ASSESSMENT YEAR 2002-03, IN THE RETURN O F INCOME FILED, THE ASSESSEE HAD CLAIMED DEDUCTION OF RS. 1,25,68,858 U /S 80IA(4) OF THE ACT. THE ASSESSING OFFICER DENIED THE CLAIM OF THE ASSESSEE BY OBSERVING THAT AS PER THE CONDITIONS LAID DOWN IN PROVISIONS OF SECTION 80IA, THE ASSESSEE SHOULD HAVE ENTERED INTO AN AGREEMENT WITH THE GOVERNMENT OR AU THORITY WHEREAS THE ASSESSEE HAD NOT BROUGHT ON RECORD ANY SUCH AGREEME NT. HE ALSO OBSERVED THAT IF THE ASSESSEE HAD ENTERED INTO AN AGREEMENT FOR C ONSTRUCTION OF NEW ROADS, SAME CANNOT BE COVERED BY THE DEFINITION OF DEVELO PMENT OF NEW INFRASTRUCTURE FACILITY. THEREFORE, SINCE THE ASSESSEE HAS MADE WRONG CLAIM FOR DEDUCTION U/S ITA NO.1210 TO 1212/RJT/2009 2 80IA OF THE ACT, PENALTY PROCEEDINGS U/S 271(1)(C) WERE INITIATED FOR FURNISHING INACCURATE PARTICULARS OF INCOME. THE ASSESSEE APP EALED AGAINST THE ACTION OF THE ASSESSING OFFICER AND THE CIT(A), ON VERIFICATI ON FOUND THAT THE ASSESSEE IS ENTITLED FOR DEDUCTION U/S 80IA(4), BUT ONLY TO THE EXTENT OF RS. 1,08,53,134. THE APPEAL FILED AGAINST THE ORDER OF THE CIT(A) BY THE DEPARTMENT HAS BEEN DISMISSED BY THE ITAT SUBSEQUENTLY. THE IMPUGNED P ENALTY OF RS. 6,12,600 IS LEVIED ON THE DIFFERENCE BETWEEN THE DEDUCTION CLAI MED BY THE ASSESSEE AND THAT ALLOWED BY THE CIT(A) U/S 80IA(4). ASSESSEE APPEAL ED AGAINST THE PENALTY ORDER. THE LD.CIT(A) CANCELLED THE PENALTY WITH THE FOLLOW ING OBSERVATIONS: 7. I HAVE CAREFULLY CONSIDERED THE ISSUE. THOUGH LD AO HAS DENIED FULL DEDUCTION CIT(A) IN HIS ORDER HAS CONSI DERED ALL THE ASPECTS OF THE EACH WORK DONE BY APPELLANT AND HAS ALLOWED DEDUCTION TO TUNE OF RS.1,08,53,134/-. THE DIFFERE NCE BETWEEN THE CLAIM MADE BY ASSESSEE AND CONFIRMED BY CIT(A) AND HON ITAT IS ONLY RS.1715724/-. THIS DIFFERENCE HAS ALSO ARISEN BECAUSE OF DIFFERENT INTERPRETATION GIVEN BY CIT(A) AND APPELL ANT TO PROVISION OF SECTION 80IA(4(I)_(B) OF THE ACT. LD CIT(A) HAS RE DUCED THIS AMOUNTS FROM PROFIT ELIGIBLE FOR DEDUCTION U/S 80IA (4) STATING THAT SOME WORK IN HIS OPINION DOES NOT AMOUNT TO DEVELO PMENT. THIS SHOWS THAT THERE IS DIFFERENCE OF OPINION BETWEEN T HE CIT(A) AND APPELLANT THAT WHETHER THOSE WORK AMOUNT TO DEVELO PMENT AS ENVISAGED U/S 80IA(4) OF THE ACT. APPELLANT CLAIMS THAT THERE IS NO DISTINCTION BETWEEN ELIGIBILITY OF DEDUCTION OF PRO FIT FROM WORK AWARDED BY MUNICIPAL CORPORATION AND OTHER BODIES A S THEY ARE ALSO COVERED IN THE SCOPE OF SECTION 80IA(4) (I)_(B ) AS THESE BODIES ARE ALSO GOVERNMENT AND ARE NOT EXCLUDED. THIS VIE W OF THE APPELLANT CANNOT BE BRUSHED ASIDE IN VIEW OF RETROS PECTIVE AMENDMENT TO THE SECTION BY INSERTION OF EXPLANATIO N IN SECTION 80IA(4). CLAIM MADE BY ASSESSEE CANNOT BE STATED T O BE BGUS OR WITHOUT ANY MATERIAL AS REDUCTION IN CLAIM IS MADE BECAUSE FO DIFFERENCE OF OPINION BETWEEN ASSESSEE AND LEARNED CIT(A). ON IDENTICAL FACTS VIDE ORDER DATED 5/10/09 IN APPEAL NO CIT(A)/JAM/34/08-09 I HAVE HELD IN THE CASE OF THE ASSESSEEE FOR AY 2001-02 THAT PENALTY U/S 271(1)(C) CANNOT BE LEV IED. IN VIEW, THIS DOES NOT RENDER ASSESSEE SUBJECT TO PENALTY U/ S 271(1)(C) OF THE ACT. THEREFORE, PENALTY OF RS.612600/- IS CANC ELLED. 4. FOR ASSESSMENT YEAR 2003-04 THE FACTS ARE THAT U NDER SIMILAR SET OF FACTS AND CIRCUMSTANCES AS HAS BEEN NARRATED ABOVE FOR TH E ASSESSMENT YEAR 2002- ITA NO.1210 TO 1212/RJT/2009 3 03, THE LEARNED CIT(A) ON VERIFICATION FOUND THAT T HE ASSESSEE WAS ENTITLED FOR DEDUCTION U/S 80IA BUT ONLY TO THE EXTENT OF RS.1,0 2,94,835 AS AGAINST RS.1,06,55,589 CLAIMED BY THE ASSESSEE. IN THIS YE AR, DESPITE THE DISALLOWANCE OF DEDUCTION U/S 80IA(4) THERE WERE TWO OTHER DISAL LOWANCES, VIZ. (I) DISALLOWANCE U/S 40A(3) AND (II) DISALLOWANCE OF DEPRECIATION. WITH REGARD TO THE DISALLOWANCE U/S 40A(3), THE FACTS ARE THAT THE ASSESSING OFFICE R IN THE COURSE OF ASSESSMENT PROCEEDINGS HAS FOUND THAT THE ASSESSEE HAS INCURRE D EXPENDITURE IN CASH TO THE EXTENT OF RS.6,86,640 EXCEEDING RS.20,000 INDIVIDUA LLY. THE ASSESSEE CLARIFIED TO THE ASSESSING OFFICER THAT THE ASSESSEE PURCHASE D DIESEL, SPARE PARTS AND TYRE TUBES ETC FROM OUTSTATION FROM THE CONTRACT SITE. THE CONTRACT SITE IS SITUATE FAR FROM CITY ARE AND THE PARTIES FROM WHOM THESE PURCH ASES WERE EFFECTED WERE UNKNOWN AND THEREFORE THEY DID NOT ACCEPT CHEQUE OR DEMAND DRAFT OF OTHER BRANCHES AND IN THESE CIRCUMSTANCES, THE ASSESSEE H AD TO INCUR THE EXPENDITURE IN CASH. IT WAS ALSO SUBMITTED THAT WITHOUT INCURR ING SUCH EXPENDITURE IN CASH THE WORK COULD NOT HAVE BEEN DONE SMOOTHLY WITHOUT INTE RRUPTION AND WOULD HAVE SUFFERED LOSS AND SO THE CASH PAYMENTS WERE WARRANT ED OUT OF BUSINESS EXIGENCY. THESE EXPLANATION OF THE ASSESSEE WERE N OT ACCEPTABLE TO THE AUTHORITIES BELOW AND THE ASSESSING OFFICER MADE DI SALLOWANCE OF RS.1,37,328 BEING 1/5TH OF RS. 6,86,640 AND THE CIT(A) CONFIRME D THE DISALLOWANCE. THE OTHER ITEM CONSIDERED IN THE IMPOSITION OF CONCEALM ENT PENALTY IS RS.7,92,836 BEING THE DISALLOWANCE OF DEPRECIATION. THE FOLLOW ING ARE THE CONSTITUENTS IN THIS ITEM OF EXPENDITURE DISALLOWED: (A) SINGLE DRUM WHEEL VIBRATORY ROAD ROLLER RS. 4, 62,300 (B) CONCRETE PUMP RS. 2,83,405 SHORT CRANE MACHINE RS. 20,436 (D) FARM TRACTOR RS. 26,696 ----------------- RS. 7,92,836 ----------------- ITA NO.1210 TO 1212/RJT/2009 4 ON APPEAL, THE CIT(A) CONFIRMED THE DISALLOWANCE. THE ASSESSING OFFICER ACCORDINGLY LEVIED CONCEALMENT PENALTY OF RS. 2,97, 120 ON THE ABOVE DISALLOWANCES BY HOLDING THAT THE ASSESSEE HAS FURN ISHED INACCURATE PARTICULARS IN RESPECT OF THE ITEMS OF ADDITION CONSIDERED FOR IMPOSITION OF PENALTY. ON APPEAL, THE LD.CIT(A) CANCELLED THE PENALTY WITH TH E FOLLOWING OBSERVATIONS: 7. I HAVE CAREFULLY CONSIDERED THE ISSUE. HOWEVER , ON MERIT, REGARDING DISALLOWANCE OF DEPRECIATION, IT IS FOUND THAT ASSESSEE HAS GIVEN THE EXACT DETAILS OF PURCHASE OF MACHINER IES AND ITS USE HOWEVER, IT COULD NOT SUBSTANTIATE ITS CLAIM FOR US ER BECAUSE OF OPERATION OF THE COMPANY AT VARIOUS SITES BUT THE C LAIM OF THE ASSESSEE WAS NOT AT ALL PROVED TO BE FALSE. APPELL ANT PROVIDED ITS DATE OF ACQUISITION WITH FULL DETAILS OF ADDITION O F ASSETS, BUT SOMEHOW COULD NOT GATHER NECESSARY EVIDENCES TO PRO VE IT CLAIM BECAUSE OF OPERATION DIFFICULTIES, WHICH DOES NOT I NVITED PENALTY FOR CONCEALMENT. ABSENCE OF CLINCHING EVIDENCES DOES N OT PROVE THE CLAIM OF THE ASSESSEE AS BLATANTLY WRONG. REGARDIN G DISALLOWANCE U/S 40A(3) ASSESSEE RELIED ON VARIOUS DECISIONS CIT ED THEREIN. I FIND THAT DISALLOWANCE MADE U/S 40A(3) OF THE ACT DOES N OT INVITE PENALTY U/S 271(1)(C) OF THE ACT ESPECIALLY ALSO WHEN THERE IS NO CHANGE IN THE INCOME AS ASSESSED U/S 115JB OF THE ACT. ON ID ENTICAL FACTS AND CIRCUMSTANCES IN THE CASE OF THE ASSESSEE FOR A Y 2001-02 IN APPEAL NO.CIT(A)/JAM/34/08-09 ORDER DATED 5/10/09 P ENALTY HAS BEEN DELETED BY ME. 8. REGARDING CLAIM OF APPELLANT U/S 80IA(4), THOUGH LD AO HAS DENIED FULL DEDUCTION CIT(A) IN HIS ORDER HAS CONSI DERED ALL THE ASPECTS OF THE EACH WORK DONE BY APPELLANT AND HAS ALLOWED DEDUCTION TO TUNE OF RS.10294835/-. THE DIFFERENCE BETWEEN THE CLAIM MADE BY ASSESSEE AND CONFIRMED BY CIT(A) AND HON ITAT IS ONLY RS.361054/-. THIS DIFFERENCE HAS ALSO ARISEN BECAUSE OF DIFFERENT INTERPRETATION GIVEN BY CIT(A) AND APPELL ANT TO THE PROVISION OF SECTION 80IA(4)(I)(B) OF THE ACT. LD. CIT(A) HAS REDUCED THIS AMOUNTS FROM PROFIT ELIGIBLE FOR DEDUCTION U/S 80IA(4) STATING THAT SOME WORK IN HIS OPINION DOES NOT AMOUNT TO D EVELOPMENT. THIS SHOWS THAT THERE IS DIFFERENCE OF OPINION BETW EEN THE CIT(A) AND APPELLANT THAT WHETHER THOSE WORK AMOUNT TO DE VELOPMENT AS ENVISAGED U/S 80IA(4) OF THE ACT. APPELLANT CLAIMS THAT THERE IS NO DISTINCTION BETWEEN ELIGIBILITY OF DEDUCTION OF PRO FIT FROM WORK AWARDED BY MUNICIPAL CORPORATION AND OTHER BODIES A S THEY ARE ALSO COVERED IN THE SCOPE OF SECTION 80IA(4)(I)(B) AS THESE BODIES ARE ALSO GOVERNMENT BODIES AND ARE NOT EXCLUDED. T HIS VIEW OF THE APPELLANT CANNOT BE BRUSHED ASIDE IN VIEW OF RETROS PECTIVE ITA NO.1210 TO 1212/RJT/2009 5 AMENDMENT TO THE SECTION BY INSERTION OF EXPLANATIO N IN SECTION 80IA(4). CLAIM MADE BY ASSESSEE CANNOT BE STATED T O BE BOGUS OR WITHOUT ANY MATERIAL AS REDUCTION IN CLAIM IS MADE BECAUSE OF DIFFERENCE OF OPINION BETWEEN ASSESSEE AND LEARNED CIT(A). ON IDENTICAL FACTS VIDE ORDER DATED 5-10-09 IN APPEAL NO CIT(A)/JAM/34/08-09 I HAVE HELD IN THE CASE OF THE ASSESSEE FOR AY 2001-02 THAT PENALTY U/S 271(1)(C) CANNOT BE LEVIED . IN VIEW, THIS DOES NOT RENDER ASSESSEE SUBJECT TO PENALTY U/S 271 (1)(C) OF THE ACT. THEREFORE, PENALTY OF RS.297120/- IS CANCELLE D. 5. THE FACTS FOR ASSESSMENT YEAR 2005-06 ARE THAT T HE ASSESSEE CLAIMED DEDUCTION U/S 80IA(4) AT RS.1,08,43,996 WHEREAS THE ASSESSING OFFICER DENIED THE SAME TO THE ASSESSEE AND THE CIT(A) FOUND THAT A DEDUCTION OF RS.93,70,404 IS ALLOWABLE TO THE ASSESSEE U/S 80IA(4) OF THE ACT . THE OTHER ADDITIONS CONSIDERED FOR IMPOSITION OF CONCEALMENT PENALTY AR E AS BELOW: (A) LOSS ON SALE OF SCRAP ROLLER RS. 5,56,871 (B) ADDITION OF DONATION RS. 1,36,035 (C) DISALLOWANCE OF ADMINISTRATIVE EXPENSES RS. 90,000 WITH REGARD TO THE CLAIM OF LOSS ON SALE OF SCRAP R OLLER THE ASSESSEE BEFORE THE CIT(A) SUBMITTED THAT THE SAME WAS AN INADVERTENT M ISTAKE AND WAS REMAINED TO BE ADDED BACK TO THE TOTAL INCOME AND THE CIT(A) CO NFIRMED THE ADDITION. WITH REGARD TO ADDITION OF DONATION PAYMENT OF RS.1,36,0 35 THE ASSESSEE DID NOT CHALLENGE THE ADDITION IN APPEAL. WITH REGARD TO T HE DISALLOWANCE OF ADMINISTRATIVE EXPENSES, THE CIT(A) RESTRICTED THE DISALLOWANCE TO RS.90,000 OUT OF DISALLOWANCE OF RS. 21,10,440. THE ASSESSING OF FICER IMPOSED THE CONCEALMENT PENALTY OF RS. 8,25,800 HOLDING THAT TH E ASSESSEE HAS CONCEALED THE PARTICULARS OF INCOME TO THE EXTENT OF DISALLOW ANCES CONFIRMED BY THE CIT(A). ON APPEAL, THE CIT(A) CANCELLED THE PENALTY WITH TH E FOLLOWING OBSERVATIONS: 7. I HAVE CAREFULLY CONSIDERED THE ISSUE. REGARDI NG ADDITION OF CAPITAL LOSS OF RS.556871/-, THERE IS CORRESPONDING PROFIT ON SALE OF ASSETS ALSO WHICH HAS NOT BEEN REDUCED BY AO DESPIT E HIS ATTENTION BEING DRAWN. THE ASSESSEE HAS CREDITED R S.11,57,541/- ITA NO.1210 TO 1212/RJT/2009 6 BEING PROFIT ON SALE OF DUPLER (FIXED ASSETS), WHIC H IS CAPITAL PROFIT. BUT WHILE PREPARING ITS COMPUTATION OF INCOME APPELLANT HAS OMITTED TO REDUCE IT BY OVERSIGHT. SO THE NET PROFIT AFTER SETTING OFF CAPITAL LOSS OF RS.5,56,871/- WOULD BE RS.6,00,670/-, WHICH IS REQUIRED TO BE DEDUCTED FROM THE TOTAL PROFIT AS PER PROFIT & L OSS ACCOUNT. THEREFORE, THERE IS NO LOSS TO BE ADDED BACK BUT IN FACT THERE IS A CAPITAL PROFIT, WHICH IS REQUIRED TO BE DEDUCTED FR OM TOTAL INCOME. SO, THERE IS NO CONCEALMENT OR FURNISHING OF INACCU RATE PARTICULARS FOR NOT ADDING BACK THE CAPITAL LOSS ON THE PART OF THE APPELLANT. IN FACT THERE IS EXCESS INCOME SHOWN BY THE APPELLANT AND THEREFORE PENALTY U/S 271(1)(C) CANNOT BE LEVIED ON THIS ADDI TION. 8. REGARDING DONATION EXPENDITURE OF RS.1,36,035/-, IT IS SEEN THAT IT WAS INADVERTENTLY OMITTED TO ADD BACK WHILE PREPARING COMPUTATION OF TOTAL INCOME. THIS WAS DUE TO HUMAN ERROR AND THERE WAS NO INTENTION TO CONCEAL ANY INCOME OR FUR NISH INACCURATE PARTICULARS OF INCOME. HOWEVER, AS THE ASSESSEE IS ASSESSED ON PROFITS COMPUTED U/S 115JB THERE IS NO CHANGE IN TH E INCOME ON THIS ACCOUNT. DONATION HAS ALSO BEEN SHOWN VERY PR OMINENTLY IN PROFIT AND LOSS ACCOUNT AND DURING THE COURSE OF AS SESSMENT PROCEEDINGS ITSELF COUNSEL OF THE ASSESSEE SUBMITTE D THAT THIS AMOUNT IS REQUIRED TO BE ADDED BACK AS IT IS AN INA DVERTENT OMISSION WHILE PREPARING COMPUTATION OF TOTAL INCOM E. THEREFORE, THE APPELLANT REQUESTS TO YOUR HONOUR TO DELETE THE PENALTY LEVIED BY THE ASSESSING OFFICER. 9. REGARDING ADHOC ADDITION CONFIRMED BY CIT(A) BAS ED ON 10% OF VARIOUS EXPENSES ON ESTIMATE BASIS AMOUNTING TO RS.90000/-. THIS DISALLOWANCE HAS BEEN MADE ON THE BASIS OF INCREASE IN VARIOUS EXPENDITURE SUCH AS CANTEEN EXP ENSES STAFF WELFARE EXPENSES ETC. BUT THERE IS NO EVIDENCE THA T ASSESSEE HAS INFLATED THOSE EXPENDITURE. FOR WANT OF PROOF THES E DISALLOWANCE ARE MADE AND THEREFORE IN MY VIEW THEY DO NOT INVIT E PENALTY FOR CONCEALMENT. 10. REGARDING CLAIM OF APPELLANT U/S 80IA(4), THOUG H LD AO HAS DENIED FULL DEDUCTION CIT(A) IN HIS ORDER HAS CONSI DERED ALL THE ASPECTS OF THE EACH WORK DONE BY APPELLANT AND HAS ALLOWED DEDUCTION TO TUNE OF RS.9370405. THE DIFFERENCE BE TWEEN THE CLAIM MADE BY ASSESSEE AND CONFIRMED BY CIT(AQ) AND HON ITAT IS ONLY RS.1473591/-. THIS DIFFERENCE HAS ALSO ARI SEN BECAUSE OF DIFFERENT INTERPRETATION GIVEN BY CIT(A) AND APPELL ANT TO THE PROVISION OF SECTION 80IA(4)(I)(B) OF THE ACT. LD CIT(A) HAS REDUCED THIS AMOUNTS FROM PROFIT ELIGIBLE FOR DEDUCTION U/S 80IA(4) STATING THAT SOME WORK IN HIS OPINION DOES NOT AMOUNT TO D EVELOPMENT. THIS SHOWS THAT THERE IS DIFFERENCE OF OPINION BETW EEN THE CIT(A) ITA NO.1210 TO 1212/RJT/2009 7 AND APPELLANT THAT WHETHER THOSE WORK AMOUNT TO DE VELOPMENT AS ENVISAGED U/S 80IA(4) OF THE ACT. APPELLANT CLAIMS THAT THERE IS NO DISTINCTION BETWEEN ELIGIBILITY OF DEDUCTION OF PRO FIT FROM WORK AWARDED BY MUNICIPAL CORPORATION AND OTHER BODIES A S THEY ARE ALSO COVERED IN THE SCOPE OF SECTION 80IA(4)(I)(B) AS THESE BODIES ARE ALSO GOVERNMENT AND ARE NOT EXCLUDED. THIS VIEW OF THE APPELLANT CANNOT BE BRUSHED ASIDE IN VIEW OF RETROS PECTIVE AMENDMENT TO THE SECTION BY INSERTION OF EXPLANATIO N IN SECTION 80IA(4). CLAIM MADE BY ASSESSEE CANNOT BE STATED T O BE BOGUS OR WITHOUT ANY MATERIAL AS REDUCTION IN CLAIM IS MADE BECAUSE OF DIFFERENCE OF OPINION BETWEEN ASSESSEE AND LEARNED CIT(A). ON IDENTICAL FACTS VIDE ORDER DATED 5/10/09 IN APPEAL NO CIT(A)/JAM/34/08-09 I HAVE HELD IN THE CASE OF THE ASSESSEE FOR AY 2001-02 THAT PENALTY U/S 271(1)(C) CANNOT BE LEVIED . IN VIEW, THIS DOES NOT RENDER ASSESSEE SUBJECT TO PENALTY U/S 271 (1)(C) OF THE ACT. THEREFORE, PENALTY OF RS.825800 IS CANCELLED. 6. AGGRIEVED BY THE ABOVE ORDERS, THE DEPARTMENT IS IN APPEALS. 7. THE LD DR RELIED ON THE ORDERS OF ASSESSING OFFI CER AND SUBMITTED THAT HAD IT BEEN NOT THE ASSESSING OFFICER LOOKED INTO THE D EDUCTIONS / EXPENDITURE CLAIMED BY THE ASSESSEE, THE ADDITION SUSTAINED BY THE LD.C IT(A) WOULD HAVE NEVER SURFACED AND THEREFORE THE ASSESSING OFFICER WAS JU STIFIED IN HOLDING THAT THE ASSESSEE FURNISHED INACCURATE PARTICULARS IN RESPEC T OF THE ADDITIONS CONFIRMED IN APPEAL. HE PRAYED THAT THE ORDERS OF THE CIT(A) MA Y BE VACATED AND THOSE OF THE ASSESSING OFFICER MAY BE RESTORED. 8. THE LD.AR ON THE OTHER HAND SUBMITTED THAT MERE CONFIRMATION OF ADDITION IS NOT A VALID REASON TO IMPOSE CONCEALMENT PENALTY . THERE SHOULD BE MATERIAL EVIDENCE THAT THERE WAS WILLFUL ATTEMPT FROM THE AS SESSEE TO CONCEAL THE INCOME. THE ASSESSING OFFICER HAS NOT MENTIONED ANY SUCH IN STANCE. THE ASSESSEE HAD PRODUCED BOOKS OF ACCOUNT IN THE COURSE OF ASSESSME NT PROCEEDINGS. ALL THE DETAILS WERE FURNISHED AND VERIFIED FROM THE BOOKS OF ACCOUNT ON RANDOM BASIS. WITH REGARD TO APPLICABILITY OF EXPLANATION 1 TO SE CTION 271(1)(C) IT IS SUBMITTED THAT THE ASSESSEE HAS NOT FURNISHED ANY FALSE FACTS OR MATERIAL NOR HAS ANY EXPLANATION GIVEN BY HIM FOUND TO BE FALSE. THE AS SESSEE WAS UNDER A BONA FIDE ITA NO.1210 TO 1212/RJT/2009 8 BELIEF THAT IT IS ENTITLED TO CLAIM THE DEDUCTIONS FOR THE EXPENSES AS SHOWN IN THE RETURN OF INCOME AS ALSO THE DEDUCTION U/S 80IA OF THE ACT. THE ASSESSEE HAD PRODUCED ALL THE EVIDENCE TO SUBSTANTIATE ITS CLAIM . LOOKING TO THE ASSETS OF UNIT AND VOLUME OF TRANSACTION SOME MEAGER DISCREPANCY C ANNOT BE HELD AS ASSESSEES INTENTION TO CONCEAL THE INCOME. REGARD ING THE CLAIM F DEDUCTION U/S 80IA(4) THE ASSESSEE HAS SUBMITTED ALL THE AGREEMEN TS ENTERED INTO WITH THE STATE GOVERNMENT, STATUTORY BODIES FOR DEVELOPMENT OF INFRASTRUCTURE FACILITIES CARRIED OUT BY IT AND SUBMITTED FULL PARTICULARS OF INCOME AND EXPENSES RELATING TO VARIOUS INFRASTRUCTURE FACILITY DEVELOPMENT BY THE ASSESSEE AND IT SHOWS THAT THE ASSESSEE WAS ENTITLED TO DEDUCTION. THE CLAIM OF A SSESSEE WAS DISALLOWED ON SOME CONTRACTS WHICH WERE ENTERED INTO WITH BHANWAD MUNICIPAL AUTHORITY, GUJARAT MARITIME BOARD AND THOSE PROJECTS WERE CERT IFIED BY THE CHARTERED ACCOUNT AS ELIGIBLE PROJECTS FOR CLAIMING DEDUCTION U/S 80IA(4) OF THE ACT. THEREFORE, MERE CLAIM OF THE ASSESSEE WAS EJECTED B UT IT DOES NOT MEAN THAT THE ASSESSEE HAS CONCEALED THE PARTICULARS OF INCOME OR HAS FURNISHED INACCURATE PARTICULARS OF INCOME. THE LD.AR HAS RELIED ON A P LETHORA OF DECISIONS TO CONTEND THAT IN THE GIVEN CIRCUMSTANCES, PENALTY FOR CONCEA LMENT IS NOT EXIGIBLE. 9. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL PLACED BEFORE US. WE HAVE ALSO GONE THROUGH THE DECISIONS RELIED UPON. THE ASSESSING OFFICER DENIED CLAIM OF DEDUCTION IN ALL THE YEARS UNDER CONSIDERATION AS, ACCORDING TO HIM, THE ASSESSEE WAS NOT ENTITLED FOR THE DEDUCTION U/S 80IA(4) FOR THE REASON THAT CONSTRUCTION OF ROADS DO NOT AMOUNT TO DEVELOPMENT OF INFRASTRUCTURE FACILITY AND THAT THERE WERE NO AGRE EMENTS ENTERED INTO WITH THE AUTHORITIES WHOSE WORK WAS CARRIED OUT BY THE ASSES SEE. BUT, IN VIEW OF THE RETROSPECTIVE AMENDMENT IN PROVISIONS OF SECTION 80 IA(4), THE CIT(A) FOUND THAT THERE WERE AGREEMENTS AND AFTER GOING THROUGH THEM HE HELD THAT THE ASSESSEE IS ENTITLED FOR DEDUCTION U/S 80IA. NOW, THE DIFFE RENCE IN THE AMOUNT CLAIMED BY THE ASSESSEE AND THAT ALLOWED BY THE CIT(A); THIS I S OCCURRED ONLY BECAUSE OF A DIFFERENCE OF OPINION BETWEEN THE ASSESSEE AND THE CIT(A). THE CIT(A) ON VERIFICATION OF EACH AND EVERY PROJECT THE ASSESSEE WAS ENGAGED IN FOUND THAT A ITA NO.1210 TO 1212/RJT/2009 9 PARTICULAR PROJECT WAS NOT ENTITLED FOR DEDUCTION A ND THEREFORE THE CLAIM PERTAINING TO THAT PROJECT WAS EXCLUDED. THESE FACTUAL ASPECT S OF THE MATTER REMAIN UNCONTROVERTED BEFORE US. 10. WITH REGARD TO IMPOSITION OF CONCEALMENT PENALT Y ON THE DISALLOWANCES RETAINED BY THE CIT(A), THE LD.CIT(A) FOUND THAT TH E ASSESSEE HAD GIVEN THE EXACT DETAILS OF PURCHASE OF MACHINERIES AND ITS USE, HOW EVER, COULD NOT SUBSTANTIATE ITS CLAIM FOR USER BECAUSE OF OPERATION OF THE COMP ANY AT VARIOUS SITES. WITH REGARD TO ANOTHER DISALLOWANCE U/S 40A(3) THE LD. C IT(A) HELD THAT DISALLOWANCE U/S 40A(3) OF THE ACT DOES NOT INVITED PENALTY U/S 271(1)(C) OF THE ACT ESPECIALLY WHEN THERE IS NO CHANGE IN THE INCOME ASSESSED U/S 115JB TO WHICH WE ALSO AGREE. IN RESPECT OF CLAIM OF CAPITAL LOSS OF RS.5 ,56,871 THE ASSESSEE HAS CREDITED RS.11,57,541 BEING PROFIT ON SALE OF DUPLE R (FIXED ASSETS), WHICH IS CAPITAL PROFIT. BUT WHILE PREPARING ITS COMPUTATIO N OF INCOME THE ASSESSEE HAD OMITTED TO REDUCE IT BY OVERSIGHT. SO THE NET PROF IT AFTER SETTING OFF CAPITAL LOSS OF RS.5,56,871 WOULD BE RS.6,00,670 WHICH WAS REQUIRED TO BE DEDUCTED FROM THE TOTAL PROFIT AS PER PROFIT & LOSS ACCOUNT. THEREFO RE, THERE WAS NO LOSS TO BE ADDED BACK BUT IN FACT THERE IS A CAPITAL PROFIT WHICH WA S REQUIRED TO BE DEDUCTED FROM TOTAL INCOME. THE LD.CIT(A) FOUND THAT IN THE GIVE N CIRCUMSTANCES THERE WAS NO CONCEALMENT OR FURNISHING OF INACCURATE PARTICULARS OF INCOME. INA THE ABSENCE OF ANY CONTRARY MATERIAL OR SUBMISSION WE AGREE WIT H THE LD.CIT(A). LIKEWISE WITH REGARD TO DONATION EXPENDITURE OF RS.1,36,035 THE CIT(A) FACTUALLY FOUND THAT THE SAME WAS INADVERTENTLY OMITTED TO ADD BACK I N THE COMPUTATION OF INCOME AND THAT SUCH MISTAKE ONLY CONSTITUTES A HUM AN ERROR AND THERE WAS NO INTENTION TO CONCEAL ANY INCOME OR FURNISHING OF IN ACCURATE PARTICULARS OF INCOME. FURTHER, SINCE THE INCOME OF THE ASSESSEE HAS BEEN ASSESSED U/S 115JB OF THE ACT THERE IS NO MATERIAL CHANGE IN THE INCOME BECAU SE OF THIS OMISSION. AS REGARDS THE DISALLOWANCE OUT OF ADMINISTRATIVE EXPE NSES OF RS.90,000 CONFIRMED BY THE CIT(A) WE FIND THAT THIS IS AN ADHOC DISALLO WANCE OUT OF CANTEEN EXPENSES, STAFF WELFARE EXPENSES, ETC. PENALTY U/S 271(1)(C) CANNOT BE THRUST ON SUCH DISALLOWANCE. ITA NO.1210 TO 1212/RJT/2009 10 11. DISALLOWANCE OF VARIOUS EXPENSES / CLAIM OF DED UCTION BY NURTURING DIFFERENT OPINIONS WOULD NOT PER SE AMOUNT TO CONCE ALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME. SI MILARLY EACH AND EVERY ADDITION RESORTED TO BY THE REVENUE AUTHORITIES ALSO WOULD N OT PER SE AMOUNT TO CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE P ARTICULARS OF INCOME. THERE ARE EVERY SCOPE AND CHANCE FOR HUMAN ERROR WHILE PR EPARING THE RETURN OF INCOME. SO, THERE CANNOT BE A STRAIGHT JACKET FORM ULA IN DETERMINING WHETHER AN ASSESSEE HAS INDULGED IN CONCEALMENT OF INCOME OR H AS CONCEALED THE PARTICULARS OF INCOME WITH AN INTENT TO CONCEAL THE INCOME. IN THE INSTANT CASE THE LEARNED CIT(A) HAS FACTUALLY FOUND THAT THERE W AS NO DELIBERATE ATTEMPT FROM THE SIDE OF THE ASSESSEE TO CONCEAL THE INCOME. TH E EXPLANATION FURNISHED BY THE ASSESSEE WAS NOT PROVED TO BE FALSE OR WAS NOT BONA FIDE. THEREFORE, SCOPE OF EXPLANATION 1 TO SECTION 2711)(C) OF THE ACT COM ING INTO PLAY IS VERY MINIMAL. 12. LOOKING THE CASE FROM THE LEGAL ANGLE WE FIND THAT THE PROCEEDINGS UNDER SECTION 271(1) (C) CAN BE INITIAT ED ONLY IF THE A.O OR THE FIRST APPELLATE AUTHORITY IS SATISFIED IN THE C OURSE OF ANY PROCEEDINGS UNDER THE ACT AS PER CLAUSE (C) OF THE SECTION 271(1) THAT ANY PERSON HAS CONCEALED THE PARTICULARS OF HIS INC OME OR HAS FURNISHED INACCURATE PARTICULARS OF SUCH INCOME, HE MAY DIRECT THAT SUCH PERSON SHALL PAY BY WAY OF PENALTY THE SUM MEN TIONED IN SUB- CLAUSE (III) OF CLAUSE (C) OF THE SECTION 271(1). T HE EXPRESSION USED IN CLAUSE (C) OF THE SECTION 271(1) IS HAS CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHED INACCURATE PARTICULARS OF SUC H INCOME. THEREFORE, BOTH IN CASES OF CONCEALMENT AND INACCURACY THE PHR ASE PARTICULARS OF INCOME ARE USED. IT WILL BE NOTED THAT AS REGARDS CONCEALMENT, THE EXPRESSION IN CLAUSE (C) OF THE SECTION 271(1) IS HAS CONCEALED THE PARTICULARS OF HIS INCOME AND NOT HAS CONCEALED H IS INCOME. THE EXPRESSIONS 'HAS CONCEALED THE PARTICULARS OF INCOM E' AND 'HAS FURNISHED INACCURATE PARTICULARS OF INCOME' HAVE NO T BEEN DEFINED ITA NO.1210 TO 1212/RJT/2009 11 EITHER IN SECTION 271(1)(C) OR ELSEWHERE IN THE ACT . TWO WORDS ARE IMPORTANT WORDS FOR CONSIDERING A MATTER FOR LEVY O F PENALTY UNDER SECTION 271(1) OF THE ACT . THESE WORDS ARE CONCE ALED' AND 'INACCURATE PARTICULARS' .THE APEX COURT IN THE CAS E OF RELIANCE PETROPRODUCTS PVT.LD. (322 ITR 158) ( AT PAGE 164 ) REGARDING THE WORD PARTICULARS USED IN THIS SECTION, OF THE SECTION 271(1) (C) HAS HELD AS UNDER:_ THERE CAN BE NO DISPUTE THAT EVERYTHING WOULD DEPEN D UPON THE RETURN FILED BECAUSE THAT IS THE ONLY DOCUMENT, WHERE THE ASSESSEE CAN FURNISH THE PARTICULARS OF HIS INCOME. WHEN SUCH PARTICULARS ARE FOUND TO BE INACCURATE, THE LI ABILITY WOULD ARISE. 13. NOW COMING TO THE MEANING OF WORDS INACCURATE AND CONCEAL. AS STATED ABOVE, THESE WORDS HAVE NOT BEEN DEFINED IN THE ACT. HOWEVER, IN WEBSTERS DICTIONARY, THE WORD 'INACCUR ATE' HAS BEEN DEFINED AS UNDER: 'NOT ACCURATE, NOT EXACT OR CORRECT; NOT ACCORDING TO TRUTH; ERRONEOUS; AS AN INACCURATE STATEMENT, COPY OR TRAN SCRIPT.' 14. THE WORD 'CONCEAL' IS DERIVED FROM THE LATIN CO NCELARE WHICH IMPLIES CON+CELARE TO HIDE. WEBSTER IN HIS NEW INTE RNATIONAL DICTIONARY EQUATES ITS MEANING 'TO HIDE OR WITHDRAW FROM OBSER VATION, TO COVER OR KEEP FROM SIGHT; TO PREVENT THE DISCOVERY OF; TO WI THHOLD KNOWLEDGE OF'. THE OFFENCE OF CONCEALMENT IS THUS A DIRECT ATTEMPT TO HIDE AN ITEM OF INCOME OR A PORTION THEREOF FROM THE KNOWLEDGE OF T HE INCOME-TAX AUTHORITIES. 15. THE APEX COURT IN THE CASE OF RELIANCE PETROPRODUCTS PVT.LD. (322 ITR 158) HAS CONSIDERED SOME OTHER CASES OF THE APEX COURT ON THE ISSUE AT PAGE 164 AND 165 AND OBSERVED AS UNDE R:- ITA NO.1210 TO 1212/RJT/2009 12 IN DILIP N. SHROFF V. JT. CIT [2007] 6 SCC 329, TH IS COURT EXPLAINED THE TERMS 'CONCEALMENT OF INCOME' AND 'FU RNISHING INACCURATE PARTICULARS'. THE COURT WENT ON TO HOLD THEREIN THAT IN ORDER TO ATTRACT THE PENALTY UNDER SECTION 271(1 )( C), MENS REA WAS NECESSARY, AS ACCORDING TO THE COURT, THE W ORD 'INACCURATE' SIGNIFIED A DELIBERATE ACT OR OMISSION ON BEHALF OF THE ASSESSEE. IT WENT ON TO HOLD THAT CLAUSE (II I) OF SECTION 271(1) PROVIDED FOR A DISCRETIONARY JURISDICTION UP ON THE ASSESSING AUTHORITY, INASMUCH AS THE AMOUNT OF PENA LTY COULD NOT BE LESS THAN THE AMOUNT OF TAX SOUGHT TO BE E VADED BY REASON OF SUCH CONCEALMENT OF PARTICULARS OF INCOME , BUT IT MAY NOT EXCEED THREE TIMES THEREOF. IT WAS POINTED OUT THAT THE TERM 'INACCURATE PARTICULARS' WAS NOT DEFINED A NYWHERE IN THE ACT AND, THEREFORE, IT WAS HELD THAT FURNISHING OF AN ASSESSMENT OF THE VALUE OF THE PROPERTY MAY NOT BY ITSELF BE FURNISHING ACCURATE PARTICULARS. IT WAS FURTHER HE LD THAT THE ASSESSEE MUST BE FOUND TO HAVE FAILED TO PROVE THAT HIS EXPLANATION IS NOT ONLY NOT BONA FIDE BUT ALL THE F ACTS RELATING TO THE SAME AND MATERIAL TO THE COMPUTATION OF HIS INCOME WERE NOT DISCLOSED BY HIM. IT WAS THEN HELD THAT T HE EXPLANATION MUST BE PRECEDED BY A FINDING AS TO HOW AND IN WHAT MANNER, THE ASSESSEE HAD FURNISHED THE PARTICU LARS OF HIS INCOME. THE COURT ULTIMATELY WENT ON TO HOLD TH AT THE ELEMENT OF MENS REA WAS ESSENTIAL. IT WAS ONLY ON T HE POINT OF MENS REA THAT THE JUDGMENT IN DILIP N. SHROFFS CAS E (SUPRA) WAS UPSET. IN DHARAMENDRA TEXTILE PROCESSORS CASE (SUPRA), AFTER QUOTING FROM SECTION 271 EXTENSIVELY AND ALSO CONSIDERING SECTION 271(1)( C), THE COURT CAME TO T HE CONCLUSION THAT SINCE SECTION 271(1)( C) INDICATED THE ELEMENT OF STRICT LIABILITY ON THE ASSESSEE FOR THE CONCEAL MENT OR FOR GIVING INACCURATE PARTICULARS WHILE FILING RETURN, THERE WAS NO NECESSITY OF MENS REA. THE COURT WENT ON TO HOLD TH AT THE OBJECTIVE BEHIND ENACTMENT OF SECTION 271(1)( C) RE AD WITH EXPLANATIONS INDICATED WITH THE SAID SECTION WAS FO R PROVIDING REMEDY FOR LOSS OF REVENUE AND SUCH A PENALTY WAS A CIVIL LIABILITY AND, THEREFORE, WILFUL CONCEALMENT IS NOT AN ESSENTIAL INGREDIENT FOR ATTRACTING CIVIL LIABILITY AS WAS TH E CASE IN THE MATTER OF PROSECUTION UNDER SECTION 276C OF THE ACT . THE BASIC REASON WHY DECISION IN DILIP N. SHROFFS CASE (SUPRA) WAS OVERRULED BY THIS COURT IN DHARAMENDRA TEXTILE PROCESSORS CASE (SUPRA), WAS THAT CCORDING TO THI S COURT THE EFFECT AND DIFFERENCE BETWEEN SECTION 271(1)(C) AND SECTION 276C OF THE ACT WAS LOST SIGHT OF IN CASE OF DILIP N.SHROFF (SUPRA). HOWEVER, IT MUST BE POINTED OUT THAT IN DHARAMENDRATEXTILE PROCESSORS CASE (SUPRA), NO FAU LT WAS FOUND WITH THE REASONING IN THE DECISION IN DILIP N . SHROFFS ITA NO.1210 TO 1212/RJT/2009 13 CASE (SUPRA), WHERE THE COURT EXPLAINED THE MEANING OF THE TERMS 'CONCEAL' AND 'INACCURATE'. IT WAS ONLY THE ULTIMATEINFERENCE IN DILIP N. SHROFFS CASE (SUPRA) TO THE EFFECT THAT MENS REA WASAN ESSENTIAL INGREDIENT FOR THE PE NALTY UNDER SECTION 271(1)(C) THAT THE DECISION IN DILIP N. SHROFFS CASE (SUPRA) WAS OVERRULED. 16 FROM ABOVE DISCUSSIONS WE FIND THAT THERE IS STRICT LIABILITY ON THE ASSESSEE FOR CONCEALMENT OR FOR GIVING INACCURATE P ARTICULARS WHILE FILING THE RETURN. THE PENALTY UNDER THAT PROVISION IS A CIVIL LIABILITY. WILFUL CONCEALMENT IS NOT AN ESSENTIAL INGREDIENT F OR ATTRACTING CIVIL LIABILITY. IT IS OBVIOUS THAT THE PENAL PROVISIONS WOULD OPERATE WHEN THERE IS CONCEALMENT OF PARTICULARS OF INCOME OR A FAILURE OF DUTY TO DISCLOSE FULLY AND TRULY PARTICULARS OF INCOME, IMP OSED UNDER THE ACT AND THE RULES THERE UNDER. THE DUTY IS ENJOINED UPO N A PERSON TO MAKE A CORRECT AND COMPLETE DISCLOSURE OF PARTICULARS OF HIS INCOME AND IT IS ONLY WHEN HE FAILS IN HIS DUTY BY NOT DISCLOSING PA RTICULARS OF HIS INCOME OR PART THEREOF, HE CONCEALS THE PARTICULARS OF HIS INCOME. THE DUTY IS ENJOINED UPON HIM TO MAKE A COMPLETE DISCLO SURE OF PARTICULARS OF HIS INCOME AS WELL AS A CORRECT DISCLOSURE. THER EFORE, IF THE DISCLOSURE MADE OF THE PARTICULARS OF INCOME IS INC ORRECT, THEN ALSO HE COMMITS BREACH OF HIS DUTY. SUCH DEFAULTS ENTAIL TH E PENAL CONSEQUENCES CONTEMPLATED BY SECTION 271(1) (C). 17. THERE CANNOT BE A STRAIGHT JACKET FORMULA FOR D ETECTION OF THESE DEFAULTS OF CONCEALMENT OR OF FURNISHING INACCURATE PARTICULARS OF INCOME AND INDEED CONCEALMENT OF PARTICULARS OF INC OME AND IN ACCURATE PARTICULARS OF INCOME MAY AT TIMES OVERLAP . IT DEPENDS UPON THE FACTS OF THE EACH CASE. IN THE ASSESSMENT PROCE EDINGS THE AO WHILE ASCERTAINING THE TOTAL INCOME CHARGEABLE TO T AX WOULD BE IN A POSITION TO DETECT THE SPECIFIC OR DEFINITE PARTICU LARS OF INCOME CONCEALED OR OF WHICH FALSE PARTICULARS ARE FURNISH ED. WHERE IN THE CONSTITUENTS OF INCOME RETURNED, SUCH SPECIFIC OR D EFINITE PARTICULARS OF INCOME ARE DETECTED AS CONCEALED, THEN EVEN IN THE TOTAL INCOME FIGURE ITA NO.1210 TO 1212/RJT/2009 14 TO THAT EXTENT THEY REFLECT, IT WOULD AMOUNT TO CON CEALMENT TO THAT EXTENT. IN THE SAME WAY WHERE SPECIFIC AND DEFINITE PARTICULARS OF INCOME ARE DETECTED AS INACCURATE, THEN SUCH FIGURE WILL ALSO MAKE THE TOTAL INCOME INACCURATE IN PARTICULARS TO THE EXTEN T IT DOES NOT INCLUDE SUCH INCOME. IN OTHER WORDS THE AO CANNOT INVOKE PR OVISION OF SECTION271 (1) (C) ON THE BASIS ROUTINE AND GENERAL PRESUMPTIONS. WHETHER IT BE A CASE OF ONLY CONCEALMENT OR OF ONLY INACCURACY OR BOTH, THE PARTICULARS OF INCOME SO VITIATED WOULD BE SPEC IFIC AND DEFINITE AND BE KNOWN IN THE ASSESSMENT PROCEEDINGS BY THE ITO, WHO ON BEING SATISFIED ABOUT EACH CONCEALMENT OR INACCURACY OF P ARTICULARS OF INCOME WOULD BE IN A POSITION TO INITIATE THE PENAL TY PROCEEDINGS ON ONE OR BOTH OF THE GROUNDS OF DEFAULT AS MAY HAVE B EEN SPECIFICALLY AND DIRECTLY DETECTED. 18. IN ADDITION TO MAIN PROVISIONS OF CONCEALMENT HAS CONCEALED THE PARTICULARS OF HIS INCOME OR HAS FURNISHED INACCU RATE PARTICULARS OF SUCH INCOME THERE ARE DEEMED TO REPRESENT THE INCO ME IN RESPECT OF WHICH PARTICULARS HAVE BEEN CONCEALED .THE DEEMED C ONCEALMENT IS PROVIDED IN EXPLANATIONS. OFTEN A QUESTION AROSE WH ETHER IN CASES WHERE ADDITIONS OR DISALLOWANCES MADE BY THE ITO TH E PENAL PROVISIONS OF SECTION 271(1)(C) WOULD ATTRACT. EXPLANATION 1 T AKES CARE OF THIS SITUATION. THE EXPLANATION 1 TO SECTION 271(1) OF T HE ACT READS AS UNDER:- EXPLANATION 1.-WHERE IN RESPECT OF ANY FACTS MATE RIAL TO THE COMPUTATION OF THE TOTAL INCOME OF ANY PERSON UNDER THIS ACT,- (A) SUCH PERSON FAILS TO OFFER AN EXPLANATION OR OF FERS AN EXPLANATION WHICH IS FOUND BY THE ASSESSING OFFICER OR THE COMMISSIONER (APPEALS) OR THE COMMISSIONER TO BE FA LSE, OR (B) SUCH PERSON OFFERS AN EXPLANATION WHICH HE IS N OT ABLE TO SUBSTANTIATE AND FAILS TO PROVE THAT SUCH EXPLANATI ON IS BONA FIDE AND THAT ALL THE FACTS RELATING TO THE SAME AN D MATERIAL TO THE COMPUTATION OF HIS TOTAL INCOME HAVE BEEN DISCL OSED BY HIM, THEN, THE AMOUNT ADDED OR DISALLOWED IN COMPUT ING THE TOTAL INCOME OF SUCH PERSON AS A RESULT THEREOF SHA LL, FOR THE PURPOSES OF CLAUSE (C) OF THIS SUB-SECTION, BE DEEM ED TO ITA NO.1210 TO 1212/RJT/2009 15 REPRESENT THE INCOME IN RESPECT OF WHICH PARTICULAR S HAVE BEEN CONCEALED. 19. A CONSPECTUS OF THE EXPLANATION MAKES IT CLEAR THAT THE STATUTE VISUALISED THE ASSESSMENT PROCEEDINGS AND PENALTY P ROCEEDINGS TO BE WHOLLY DISTINCT AND INDEPENDENT OF EACH OTHER. IN E SSENCE, THE EXPLANATION IS A RULE OF EVIDENCE. PRESUMPTIONS WHI CH ARE REBUTTING TABLE IN NATURE ARE AVAILABLE TO BE DRAWN. THE INIT IAL BURDEN OF DISCHARGING THE ONUS OF REBUTTAL IS ON THE ASSESSEE . THE RATIONALE BEHIND THIS VIEW IS THAT THE BASIC FACTS ARE WITHIN THE SPECIAL KNOWLEDGE OF THE ASSESSEE. SECTION 106 OF THE INDIAN EVIDENCE ACT, 1872, GIVES STATUTORY RECOGNITION TO THIS UNIVERSALLY ACCEPTED RULE OF EVIDENCE. THERE IS NO DISCRETION CONFERRED ON THE ASSESSING O FFICER AS TO WHETHER HE CAN INVOKE THE EXPLANATION OR NOT. EXPLANATION 1 COMES INTO OPERATION WHEN, IN RESPECT OF ANY FACTS MATERIAL TO THE COMPUTATION OF TOTAL INCOME OF ANY PERSON, THERE IS FAILURE TO OFF ER AN EXPLANATION OR AN EXPLANATION IS OFFERED WHICH IS FOUND TO BE FALSE B Y THE ASSESSING OFFICER OR THE FIRST APPELLATE AUTHORITY, OR AN EXP LANATION IS OFFERED WHICH IS NOT SUBSTANTIATED. IN SUCH A CASE, THE AMO UNT ADDED OR DISALLOWED IN COMPUTING THE TOTAL INCOME IS DEEMED TO REPRESENT THE INCOME IN RESPECT OF WHICH PARTICULARS HAVE BEEN CO NCEALED. AS PER THE PROVISION OF EXPLANATION 1, THE ONUS TO ESTABLISH T HAT THE EXPLANATION OFFERED WAS BONA FIDE AND ALL FACTS RELATING TO THE SAME AND MATERIAL TO THE COMPUTATION OF HIS INCOME HAVE BEEN DISCLOSED B Y HIM WILL BE ON THE PERSON CHARGED WITH CONCEALMENT. 20. THE ISSUE RELATING TO BONAFIDE AND FALSE RE TURNS IN IMPOSING PENALTY ON THE ASSESSEE UNDER SECTION 43 OF THE MAD HYA PRADESH GENERAL SALES TAX ACT, 1958, AND SECTION 9(2) OF TH E CENTRAL SALES TAX ACT, 1956 HAVE BEEN EXAMINED BY THE APEX COURT IN T HE CASE OF CEMENT MARKETING CO. OF INDIA LTD. V .ASSISTANT COM MISSIONER OF SALES TAX [1980] 4 TAXMAN 44 (SC), 124 ITR 15 (SC). FACTS IN BRIEF OF THIS CASE WERE THAT THE ASSESSEE-COMPANY EFFECTED CERT AIN TRANSACTIONS OF ITA NO.1210 TO 1212/RJT/2009 16 SALE OF CEMENT IN ACCORDANCE WITH THE PROVISIONS OF THE CEMENT CONTROL ORDER DURING THE ASSESSMENT PERIOD 1-8-1971 TO 31-7 -1972. THE AMOUNT OF FREIGHT INCLUDED IN THE 'FREE ON RAIL DES TINATIONS RAILWAY STATION' WAS PAID BY THE PURCHASERS AND HENCE THE A SSESSEE DEDUCTED FROM THE PRICE SHOWN IN THE INVOICES SENT TO THE PU RCHASERS. IN THE COURSE OF ITS ASSESSMENT TO SALES TAX UNDER THE MAD HYA PRADESH GENERAL SALES TAX ACT, 1958 AND THE CENTRAL SALES T AX ACT, 1956, THE ASSESSEE DID NOT INCLUDE THE SAID AMOUNT OF FREIGHT IN ITS TAXABLE TURNOVER ON THE GROUND THAT IT DID NOT FORM PART OF THE SALE PRICE. IN HIS TWO SEPARATE ASSESSMENT ORDERS, ONE UNDER THE CENTR AL SALES TAX ACT, 1956, AND THE OTHER UNDER THE MADHYA PRADESH GENERA L SALES TAX ACT, 1958, THE ASSISTANT COMMISSIONER, HOWEVER, INCLUDED THE SAME IN THE TAXABLE TURNOVER FOR LEVYING TAX. HE ALSO IMPOSED H EAVY PENALTY ON ACCOUNT OF THE ASSESSEE'S FAILURE TO DISCLOSE THE S AME IN ITS TAXABLE RETURNS. ON DIRECT APPEAL TO THE SUPREME COURT HELD THAT IT IS DIFFICULT TO SEE HOW THE ASSESSEE COULD BE SAID TO HAVE FILED 'F ALSE' RETURNS, WHEN WHAT THE ASSESSEE DID, NAMELY, NOT INCLUDING THE AM OUNT OF FREIGHT IN THE TAXABLE TURNOVER, WAS UNDER A BONA FIDE BELIEF THAT THE AMOUNT OF FREIGHT DID NOT FORM PART OF THE SALE PRICE AND WAS NOT INCLUDIBLE IN THE TAXABLE TURNOVER. THE CONTENTION OF THE ASSESSEE TH ROUGHOUT WAS THAT ON A PROPER CONSTRUCTION OF THE DEFINITION OF 'SALE PRICE' IN SECTION 2(O) OF THE MADHYA PRADESH GENERAL SALES TAX ACT, 1958, AND SECTION 2(H) OF THE CENTRAL SALES TAX ACT, 1956, THE AMOUNT OF F REIGHT DID NOT FALL WITHIN THE DEFINITION AND WAS NOT LIABLE TO BE INCL UDED IN THE TAXABLE TURNOVER. THIS WAS THE REASON WHY THE ASSESSEE DID NOT INCLUDE THE AMOUNT OF FREIGHT IN THE TAXABLE TURNOVER IN THE RE TURNS FILED BY IT. THE COURT FURTHER HELD THAT IT WAS A HIGHLY ARGUABLE CO NTENTION WHICH REQUIRED SERIOUS CONSIDERATION BY THE COURT AND THE BELIEF ENTERTAINED BY THE ASSESSEE THAT IT WAS NOT LIABLE TO INCLUDE T HE AMOUNT OF FREIGHT IN THE TAXABLE TURNOVER, COULD NOT BE SAID TO BE MALA FIDE OR UNREASONABLE. WHAT SECTION 43 OF THE MADHYA PRADESH GENERAL SALES ITA NO.1210 TO 1212/RJT/2009 17 TAX ACT, 1958, REQUIRES IS THAT THE ASSESSEE SHOULD HAVE FILED A 'FALSE' RETURN. WHERE THE ASSESSEE DOES NOT INCLUDE A PARTI CULAR ITEM IN THE TAXABLE TURNOVER UNDER A BONA FIDE BELIEF THAT HE I S NOT LIABLE SO TO INCLUDE IT, IT WOULD NOT BE RIGHT TO CONDEMN THE RE TURN AS A 'FALSE' RETURN INVITING IMPOSITION OF PENALTY. THE COURT HE LD THAT IF THE VIEW CANVASSED ON BEHALF OF THE REVENUE WERE ACCEPTED, T HE RESULT WOULD BE THAT EVEN IF THE ASSESSEE RAISES A BONA FIDE CONTEN TION THAT A PARTICULAR ITEM IS NOT LIABLE TO BE INCLUDED IN THE TAXABLE TU RNOVER, HE WOULD HAVE TO SHOW IT AS FORMING PART OF THE TAXABLE TURNOVER IN HIS RETURN AND PAY TAX UPON IT ON PAIN OF BEING HELD LIABLE FOR PENALT Y IN CASE HIS CONTENTION IS ULTIMATELY FOUND BY THE COURT TO BE N OT ACCEPTABLE. THAT SURELY COULD NEVER HAVE BEEN INTENDED BY THE LEGISL ATURE. UNDER THE CIRCUMSTANCE OF THE CASE THE COURT WAS OF THE VIEW THAT THE ASSESSEE COULD NOT BE SAID TO HAVE FILED 'FALSE' RETURNS WHE N IT DID NOT INCLUDE THE AMOUNT OF FREIGHT IN THE TAXABLE TURNOVER SHOWN IN THE RETURNS AND THE ASSISTANT COMMISSIONER WAS NOT JUSTIFIED IN IMP OSING PENALTY ON THE ASSESSEE UNDER SECTION 43 OF THE MADHYA PRADESH GENERAL SALES TAX ACT, 1958, AND SECTION 9(2) OF THE CENTRAL SALE S TAX ACT, 1956. 21. FROM THE ABOVE DISCUSSION OF SCHEME OF THE ACT, TWO IMPORTANT THINGS COME OUT ARE THAT IT IS THE DUTY OF THE ASSE SSEE TO FURNISH PARTICULARS OF INCOME SIMULTANEOUSLY HE HAS RIGHT T O CLAIM ALL EXEMPTIONS AND DEDUCTIONS PROVIDED IN THE ACT, ACCO RDING TO THE ASSESSEE FOR WHICH HE IS ENTITLED. THE DUTY OF THE ASSESSING OFFICER IS TO ASSESS REAL AND CORRECT INCOME IN ACCORDANCE WIT H LAW. THE CBDT IN ITS CIRCULAR NO. 14(XL35) OF 1955 DATED 11.04.1955 REGARDING DEPARTMENTAL ATTITUDE TOWARDS STATED THAT THE CB DT IN ITS CIRCULAR NO. 14(XL35) OF 1955 DATED 11.04.1955 REGARDING DE PARTMENTAL ATTITUDE TOWARDS STATED THAT OFFICERS OF THE DEP ARTMENT MUST NOT TAKE ADVANTAGE OF IGNORANCE OF AN ASSESSEE AS TO HIS RIG HTS. IT IS ONE OF THEIR DUTIES TO ASSIST A TAXPAYER IN EVERY REASONAB LE WAY, PARTICULARLY IN ITA NO.1210 TO 1212/RJT/2009 18 THE MATTER OF CLAIMING AND SECURING RELIEFS AND IN THIS REGARD THE OFFICERS SHOULD TAKE THE INITIATIVE IN GUIDING A TA XPAYER WHERE PROCEEDINGS OR OTHER PARTICULARS BEFORE THEM INDICA TE THAT SOME REFUND OR RELIEF IS DUE TO HIM. IT IS FURTHER STATED THAT OFFICERS SHOULD, WHEN REQUESTED, FREELY ADVISE ASSESSEES THE WAY IN WHICH ENTRIES SHOULD BE MADE IN VARIOUS FORMS, THEY SHOULD NOT THEMSELVES M AKE ANY IN THEM ON THEIR BEHALF. WHERE SUCH ADVICE IS GIVEN, IT SHO ULD BE CLEARLY EXPLAINED TO THEM THAT THEY ARE RESPONSIBLE FOR THE ENTRIES MADE IN ANY FORM AND THAT THEY CANNOT BE ALLOWED TO PLEAD THAT THEY WERE MADE UNDER OFFICIAL INSTRUCTIONS. 22. IN VIEW OF THE ABOVE DISCUSSION, WE HOLD THAT T HERE WAS NO CASE WITH THE ASSESSING OFFICER FOR IMPOSITION OF CONCEA LMENT PENALTY FOR THE ASSESSMENT YEARS UNDER CONSIDERATION AND THE LEARNE D CIT(A) WAS JUSTIFIED IN CANCELING THEM. 23. IN THE RESULT, APPEALS FILED BY THE REVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 16-12-2010 SD/- SD/- (A.L. GEHLOT) (D.T. GARASIA) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DT : 16 TH DECEMBER, 2010 PK/- COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A), JAMNAGAR 4. THE CIT, JAMNAGAR 5. THE DR (TRUE COPY) BY ORDER ASSTT.REGISTRAR, ITAT, RAJKOT