ACIT 33(1), MUMBAI V. BALAJI CONSTRUCTION, MUMBAI

ITA 217/MUM/2015

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 8247 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 1 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-02-2017
• Appeal Filed By: Department
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 09-01-2015
• Court: TRIBUNAL
• Department Lawyers: M C OMI NINGSHEN
• Assessee Lawyers: S SRIRAM; CHANDANI PATEL
• Keywords: Bogus purchase; Unexplained cash credit; Opportunity of cross examination
• Section: 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES H, MUMBAI BEFORE SHRI D.T. GARASIA, JUDICIAL MEMBER & SHRI ASHWANI TANEJA, ACCOUNTATN MEMBER I.T.A. NO. 217/MUM/2015 (ASSESSMENT YEAR: 2009-10) THE ACIT - 33 (1) ROOM NO. 308, 3 RD FLOOR, BLDG, NO. C-11, PRATYAKSHAKARBHAVAN, BANDRAKURLA COMPLEX, BANDRA (EAST), MUMBAI- 400051 V S M/S BALAJI CONSTRUCTION, F/803, PRUTHVI CLASSIQU, MODI PARK, IRANIWADI, ROAD NO. 03, KANDIVALI (W), MUMBAI - 400067 PAN : AAGFB7408P (APP ELLANT ) (RESPONDENT) APP ELLANT BY SHRI M.C. OMI NINGSHEN (DR) RESPONDENT BY MS. CHANDANI PATEL & SH. S. SRIRAM DATE OF HEARING : 02/02/2017 DATE OF ORDER : 15/02/2017 O R D E R PER ASHWANI TANEJA, AM: THIS APPEAL HAS BEEN FILED BY THE REVENUE AGAINST T HE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-35, M UMBAI (HEREINAFTER CALLED AS LD. CIT (A), IN SHORT) PASSE D AGAINST THE PENALTY ORDER U/S 271 (1) (C) OF THE ASSESSING OFFI CER ON THE FOLLOWING GROUNDS: 2 I.T.A. NO.217/MUM/2015 (I) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE PENALT Y LEVIED U/S. 271(1)(C) OF THE I.T. ACT. THE QUANTUM ADDITION WAS NOT DISPOSED OF BY LD. CIT(A) ON MERIT S. THE SUPPLIER WAS A HAWALA DEALER AND CHEQUE PAYMENT IS NOT CONCLUSIVE BY THE ASSESSEE. THE ASSESSEE FAILED TO DISCHARGE ONUS THAT THE PURCHASE WERE GENUINE. (II) ON THE FACTS OF THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN RELYING UPON JUDGEMENT IN THE CASE OF CIT VS. RELIANCE PETRO PRODUCTS (2010) 3 TAXMAN.COM47 WITHOUT APPRECIATING THE FACT THAT THE APPELLANT HAD EVADED THE TAX BY RAISING BOGUS BILLS OF PURCHASES AND AS SUCH THE FACTS ARE DIFFERENT FROM THE FACTS OF THE ABOVE CASE LAW. (III) THE APPELLANT PRAYS THAT THE ORDER OF THE LD. CIT( A) ON THE ABOVE GROUNDS BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. (IV) THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUND OR ADD A NEW GROUND. 2. THE SOLITARY ISSUE TO BE DECIDED BY US IN THIS APP EAL IS WHETHER LD. CIT (A) WAS JUSTIFIED IN DELETING THE P ENALTY LEVIED BY THE AO. THE BRIEF BACKGROUNDS OF THIS CASE IS TH AT IN THIS CASE DURING THE COURSE OF ASSESSMENT PROCEEDINGS TH E AO MADE ADDITION ON THE PURCHASES MADE FROM ONE M/S CENTURIAN SALES CORPORATION TO THE TUNE OF RS. 16,7 5,677/- BY TREATING IT AS BOGUS. THEN, THE AO INITIATED PEN ALTY U/S. 271 (1) (C) AND ISSUED SHOW CAUSE NOTICE FOR IMPOSI TION OF 3 I.T.A. NO.217/MUM/2015 PENALTY WITH RESPECT TO THE SAME. IN REPLY TO THE S HOW CAUSE NOTICE ISSUED BY THE AO FOR THE IMPOSITION OF PENAL TY THE ASSESSEE SUBMITTED BEFORE THE AO THAT: WE HAVE TO DRAW YOUR ATTENTION THAT WE HAVE PRODUC ED ALL THE EVIDENCE FOR PURCHASE AND PAYMENT MADE BY ACCOUNT PAYEE CHEQUE IN BANK STATEMENT. YOU HAVE MA DE ADDITION WITHOUT GIVING US OPPORTUNITY TO PRODUCE T HE PARTY OR THEIR CONFIRMATION OR TO CROSS EXAMINE THE SUPPLIER ABOUT THE REFUSAL OF SUPPLY. YOU HAVE ALSO NOT VERIFIED THE CONSUMPTION OF MATERIAL WHICH IS PURCH ASED FROM SUCH PARTIES. THE IDENTITY OF MATERIAL AND REQUIREMENT OF MATERIAL TO CARRY OUT THE CONSTRUCTI ON WORK WITH USE OF SUCH MATERIAL ITSELF ESTABLISHES THE BO NAFIDE AND GENUINENESS OF PURCHASES. YOU HAVE MADE THE ADDITION WITHOUT VERIFYING CORROBORATIVE EVIDENCE O F SUPPLY AND USE OF MATERIAL FOR THE CONSTRUCTION OR WITHOUT IDENTIFYING THE NEED OF MATERIAL THROUGH RCC AS THE RCC CONSTRUCTION DOES NOT GIVE ANY INDICATION ABOUT THE INDIVIDUAL TRANSACTION AND DOES NOT IDENTIFY THE MO DE OF PAYMENT AND ON THE CONTRARY IT CONFIRMS THAT THE DE ALER IS IN EXISTENCE AND IT IS REGISTERED WITH SALES TAX DE PARTMENT AND THE SALE TAX DEPARTMENT HAS GRANTED THE REGISTR ATION ONLY AFTER PHYSICAL VERIFICATION AND VISIT OF PREMI SES OF SUPPLIER. THE SUPPLIER MAY NOT HAVE PAID THE SALE T AX OR VAT AND HENCE THE SALES TAX DEPARTMENT DEEMED SUCH SUPPLIER WHO IS AVOIDING THE VAT/SALE TAX PAYMENT. YOU HAVE MADE ADDITION WITHOUT HOLDING ANY AFFIDAVIT FR OM THE SUPPLIER OR ANY CERTIFIED COPY FROM THE SALES T AX DEPARTMENT OR YOU HAVE NOT PRODUCED ANY CONFIRMATIO N FROM THE SUPPLIER AS HAWALA TRANSACTION IF YOU HAVE SUBMITTED SUCH DECLARATION OF AFFIDAVIT THEN WE CAN TAKE APPROPRIATE LEGAL ACTION UNDER CIVIL LAW. YOUR PENA LTY PROCEEDING IS AGAINST THE PRINCIPLE OF NATURAL JUST ICE AS YOU HAVE NOT GIVEN ANY OPPORTUNITY TO CROSS EXAMINE THE SUPPLIER OR ANY AFFIDAVIT WHICH CONFIRM THE HAWALA TRANSACTION. 4 I.T.A. NO.217/MUM/2015 THE AO HOWEVER DID NOT ACCEPT THE SUBMISSIONS OF TH E ASSESSEE AND LEVIED THE PENALTY @ 200% OF TAX SOUGHT TO BE EVADED WHICH CAME TO RS. 10,35,568/-. 3. AGGRIEVED, THE ASSESSEE FILED APPEAL BEFORE LD. CI T (A) AND CONTESTED THE PENALTY VEHEMENTLY. THE SUBMISSIO NS OF THE ASSESSEE IN A NUTSHELL WERE THAT THE ASSESSEE H AS SUBMITTED COMPLETE DOCUMENTARY EVIDENCES DURING THE COURSE OF ASSESSMENT PROCEEDINGS IN SUPPORT OF ITS CLAIM. BUT THE ASSESSING OFFICER DISREGARDED THESE EVIDENCES A ND WITHOUT BRINGING ON RECORD ANY ADVERSE MATERIAL HEL D THE PURCHASES AS BOGUS. BUT, THE AO WAS NOT ABLE TO PRO VE OR ESTABLISH THAT THE PURCHASES WERE BOGUS. UNDER THES E CIRCUMSTANCES LEVY OF PENALTY WAS NOT JUSTIFIED. LD . CIT (A) CONSIDERED THE SUBMISSIONS OF THE ASSESSEE AND EXAM INED THE EVIDENCES AND HELD THAT PENALTY WAS NOT LEVIABLE IN THIS CASE AND THEREFORE HE DELETED THE PENALTY. NOW, BEING AG GRIEVED, REVENUE FILED BEFORE THE TRIBUNAL. 4. DURING THE COURSE BEFORE US, MR. M.C. OMI NINGSHE N, LD. DR APPEARING ON BEHALF OF THE REVENUE VEHEMENTLY SU PPORTED THE PENALTY ORDER PASSED BY THE AO AND ARGUED THAT SINCE IT IS A CASE OF BOGUS PURCHASES, PENALTY SHOULD HAVE B EEN CONFIRMED BY LD. CIT (A). THUS, HE REQUESTED FOR RE VERSING THE ACTION OF LD. CIT (A) AND CONFIRMING THE PENALTY LE VIED BY THE AO @ 200% OF TAX SOUGHT TO BE EVADED BY THE ASSESSE E. 5. PER CONTRA, MS. CHANDANI PATEL, LD. COUNSEL OF THE ASSESSEE VEHEMENTLY SUPPORTED ORDER OF THE LD. CIT (A). IT WAS SUBMITTED BY HER THAT THE ASSESSEE SUBMITTED IN DETAIL 5 I.T.A. NO.217/MUM/2015 THAT EXHAUSTIVE EVIDENCES WERE FILED IN SUPPORT OF CLAIM OF PURCHASE MADE BY THE ASSESSEE BEFORE THE LOWER AUTH ORITIES. HOWEVER, THE AO ALLEGED THAT PURCHASES WERE BOGUS. BUT THE ALLEGATIONS OF THE AO WERE WITHOUT SUPPORT OF ANY A DVERSE MATERIAL HAVING BEEN BROUGHT ON RECORD. NEITHER AN Y MATERIAL WAS PROVIDED TO THE ASSESSEE INDICATING TH AT PURCHASES MADE BY THE ASSESSEE WERE BOGUS NOR ANY OPPORTUNITY OF CROSS EXAMINATION WAS GIVEN BY THE A O TO THE ASSESSEE. THE AO MERELY ALLEGED THAT SUPPLIER WAS N OT PRODUCED BY THE ASSESSEE, BUT MERE NON-PRODUCTION O F THE SUPPLIER WOULD NOT PROVE THAT PURCHASES WERE BOGUS AND INCOME WAS CONCEALED. THUS, LEVY OF PENALTY WAS NOT LEGALLY POSSIBLE ON THAT GROUND ALONE. SHE PLACED RELIANCE ON THE FOLLOWING JUDGMENTS IN SUPPORT OF HER ARGUMENT THAT NO PENALTY WAS LEVIABLE IN THE GIVEN FACTS OF THIS CAS E: 1. CIT V. RELIANCE PETROPRODUCTS (P.) LTD. 2010] 322 ITR 158 (SC). 2. ACIT V. MANISH ORGANICS INDIA LTD. [2012] 17 TAXMAN.COM 25 (AHMEDABAD). 3. RUCHI DEVELOPERS V. ITO [ITA 1170/AHD/2014, DECISION DATED 05.06.2015]. 4. DCIT V. RAJEEV G. KALATHIL[[2014] 51 TAXMAN.CO M 514 (MUMBAI-TRIB.) 5. CHEMPURE V. ITO [2010] 40 SOT 164 (MUM) 6. HOE LEATHER GARMENTS LTD. V. DY. COMMISSIONER OF INCOME TAX [2010] 39 SOT 210 (HYDERABAD). 6. WE HAVE GONE THROUGH THE ORDERS PASSED BY THE LOWE R AUTHORITIES. IT IS NOTED BY US THAT LD. CIT (A) EXA MINED ALL THE 6 I.T.A. NO.217/MUM/2015 FACTS AND CIRCUMSTANCES OF THIS CASE AS WELL AS EVI DENCES BROUGHT ON RECORD BY THE AO AS ALSO BY THE ASSESSEE AND THEREAFTER HELD THAT PENALTY WAS NOT LEVIABLE IN TH IS CASE, WITH FOLLOWING OBSERVATIONS: I HAVE GONE THROUGH THE FACTS OF THE CASE AND THE CONTENTIONS OF THE AO AND THE APPELLANT IN THIS REG ARD. THE QUANTUM ADDITION HAS BEEN MADE ON THE BASIS OF INFORMATION RECEIVED FROM THE SALES TAX DEPARTMENT. IT IS ALSO A PART OF THE OFFICE RECORD THAT THE APPELLANT FILED APPEAL AGAINST THAT ORDER BEYOND TIME AND THE SAID APPEAL HAS BEEN DISMISSED BY THIS OFFICE. HOWEVER, LOOKING INTO THE FACTS OF THE CASE FOR THE PURPOSE OF IMPOSITION OF PENALTY IT IS FOUND THAT IT IS A CASE WHERE THE APPELLANT HAS PURCHASE EXPENSES FOR WHICH, NAME OF THE PARTIES IS GIVEN AND ALSO PAYMENTS HAVE BEEN MA DE THROUGH ACCOUNT PAYEE CHEQUE. IT IS ONLY THE ENQUIR Y MADE BY THE SALES TAX DEPARTMENT WHICH HAS LED THE AO TO BELIEVE THAT THE SAID TRANSACTION NEEDED TO BE F URTHER ENQUIRED INTO. CONSIDERING THE RATIO OF THE DECISIO N OF HONBLE APEX COURT IN THE CASE OF RELIANCE PETRO PR ODUCTS I AM OF THE CONSIDERED VIEW THAT SINCE PENALTY PROCEEDINGS ARE SEPARATE FROM ASSESSMENT PROCEEDING S, IN THE PRESENT CASE IT CANNOT BE SAID THAT THE ASSE SSEE HAS FURNISHED INACCURATE PARTICULARS OR HAS CONCEAL ED INCOME. IN TERMS OF DISCHARGING HIS ONUS, THE ASSES SEE HAS GIVEN THE DETAILS, THE SELLERS HAVE NOT BEEN FO UND ON GIVEN ADDRESSES AND THAT HAS LED TO ADDITIONS IN HA NDS OF THE APPELLANT. IT CANNOT STRICTLY BE CONSTRUED AS A CASE OF CONCEALMENT ON PART OF APPELLANT SINCE THERE IS NO POSITIVE FINDING TO THAT EFFECT. IN LIGHT OF THE ABOVE DECIS ION THE APPEAL OF THE APPELLANT IS ALLOWED. 7. WE HAVE CAREFULLY EXAMINED THE FINDINGS RECORDED B Y THE LD. CIT(A). WITH THE ASSISTANCE OF THE PARTIES, IT WAS NOTED BY US THAT ASSESSEE HAD FILED AMPLE EVIDENCES TO DISCH ARGE ITS PRIMARY ONUS. OUR ATTENTION WAS DRAWN UPON THE INVO ICE AS WELL AS DELIVERY CHALLANS ISSUED BY THE SUPPLIER ES TABLISHING 7 I.T.A. NO.217/MUM/2015 DELIVERY OF THE GOODS PURCHASED BY THE ASSESSEE. O UR ATTENTION WAS ALSO DRAWN UPON THE WEIGHMENT SLIP WH EREIN PARTICULARS OF THE VEHICLE NUMBER AND WEIGHT OF THE MATERIAL PURCHASED WAS MENTIONED. OUR ATTENTION WAS ALSO DR AWN UPON QUALITY INSPECTION REPORT ISSUED BY M/S BHAGWA TI STEEL CAST LTD., WHEREIN CHEMICAL COMPOSITION AND MECHANI CAL PROPERTIES PURCHASED BY ASSESSEE ARE NARRATED. THIS REPORT NOT ONLY CONTAINED PARTICULARS ABOUT THE QUALITY OF PRODUCT CONFORMED TO THE STANDARD ROLLING AND MASS TOLERANC ES BUT ALSO CONFIRMED THE FACT THAT THE MATERIAL WAS SUPPL IED TO THE ASSESSEE. OUR ATTENTION WAS ALSO DRAWN UPON THE BAN K STATEMENT ESTABLISHING THAT PAYMENT WAS MADE BY CHE QUE. WE HAVE ALSO BEEN SHOWN CONFIRMED COPY OF ACCOUNT I SSUED BY THE SUPPLIER TO THE ASSESSEE, WHEREIN COMPLETE E NTRIES OF TRANSACTIONS DONE BY THE ASSESSEE WITH THE SAID SUP PLIER WERE MENTIONED. THESE EVIDENCES ESTABLISH THAT ASSESSEE HAD SUCCESSFULLY DISCHARGED ITS PRIMARY ONUS IN SUPPORT OF HIS CLAIM. HOWEVER, THE AO HAD MADE THE ADDITION ON THE GROUND THAT ASSESSEE WAS NOT ABLE TO PRODUCE THE SAID SUPP LIER AND AS PER THE WEBSITE OF THE SALES TAX DEPARTMENT, THE NAME OF THE SAID SUPPLIER IS PLACED IN THE LIST OF HAWALA DEALERS. IN OUR OPINION, THE BASIS ADOPTED BY THE ASSESSING OFF ICER FOR MAKING ADDITION OR DISALLOWANCE MAY OR MAY NOT BE J USTIFIED AS FAR AS LEGALITY OF THE ADDITION MADE IN THE QUAN TUM PROCEEDINGS IS CONCERNED, BUT FOR LEVY OF PENALTY T HESE BASIS ARE INDEED INSUFFICIENT AND NOT TENABLE IN THE EYES OF LAW. IT IS WELL ESTABLISHED LAW THAT PARAMETERS FOR MAKING THE ADDITION/DISALLOWANCES ARE A DIFFERENT FROM LEVY OF THE PENALTY 8 I.T.A. NO.217/MUM/2015 U/S 271 (1) (C) OF THE ACT. THERE MAY BE CASES WHER E CLAIM OF THE ASSESSEE MAY REMAIN UNPROVED DURING THE COURSE OF ASSESSMENT PROCEEDINGS FOR WANT OF SUBSTANTIATION, BUT FOR THE PURPOSE OF LEVY OF PENALTY THE AO IS REQUIRED T O DISPROVE THE CLAIM OF ASSESSEE. THE AO MUST SHOW THAT THE CL AIM OF THE ASSESSEE IS BOGUS OR FALSE. IN THE FACTS OF THI S AS WERE BROUGHT BEFORE US, IN OUR OPINION, THE CLAIM OF THE ASSESSEE WAS NOT PROVED AS BOGUS OR FALSE. THE AO LEVIED TH E PENALTY MERELY ON THE BASIS OF HIS ALLEGATIONS WHICH WERE UNSUPPORTED WITH ANY COGENT MATERIAL OR EVIDENCES. WE FIND THAT IN THE FACTS AS HAVE BEEN BROUGHT OUT BEFORE U S, THE CASE OF THE ASSESSEE SHOULD NOT HAVE BEEN VISITED WITH L EVY OF PENALTY. THE ASSESSEE BROUGHT ON RECORD ALL THE PR IMARY EVIDENCES AS COULD HAVE BEEN ADDUCED BY THE HIM, BU T AO DID NOT PLACE ON RECORD EVEN A SINGLE PIECE OF EVID ENCE TO CONTROVERT OR NEGATE THE EVIDENCES BROUGHT ON RECOR D BY THE ASSESSEE. THUS, THE PECULIAR FACTS OF THIS CASE DO NOT PERMIT THE AO TO LEVY PENALTY ON THE ASSESSEE. WE ALSO FIN D SUPPORT FROM THE JUDGEMENT OF HONBLE GUJARAT HIGH COURT IN THE CASE OF NATIONAL TEXTILES VS. CIT 249 ITR 125 (GUJ), WHEREIN AFTER ANALYSING FUNDAMENTAL ASPECTS OF JURI SPRUDENCE WITH RESPECT TO LEVY OF PENALTY AS ENVISAGED IN SEC TION 271(1)(C), IT WAS OBSERVED AS UNDER: THE PROVISIONS OF S. 68 PERMITTING THE AO TO TREAT UNEXPLAINED CASH CREDIT AS INCOME ARE ENABLING PROV ISIONS FOR MAKING CERTAIN ADDITIONS, WHERE THERE IS FAILUR E BY THE ASSESSEE TO GIVE AN EXPLANATION OR WHERE THE EXPLAN ATION IS NOT TO THE SATISFACTION OF THE AO. HOWEVER, THE ADDITION MADE ON THIS COUNT WOULD NOT AUTOMATICALLY JUSTIFY IMPOSITION OF PENALTY UNDER S. 271(1)(C) BY RECOURS E ONLY TO 9 I.T.A. NO.217/MUM/2015 EXPLANATION 1 BELOW S. 271(1)(C). IN ORDER TO JUSTI FY THE LEVY OF PENALTY, TWO FACTORS MUST CO-EXIST, (I) THERE MU ST BE SOME MATERIAL OR CIRCUMSTANCES LEADING TO THE REASO NABLE CONCLUSION THAT THE AMOUNT DOES REPRESENT THE ASSES SEES INCOME. IT IS NOT ENOUGH FOR THE PURPOSE OF PENALTY THAT THE AMOUNT HAS BEEN ASSESSED AS INCOME, AND (II) THE CIRCUMSTANCES MUST SHOW THAT THERE WAS ANIMUS I.E., CONSCIOUS CONCEALMENT OR ACT OF FURNISHING OF INACC URATE PARTICULARS ON THE PART OF THE ASSESSEE. THE EXPLAN ATION HAS NO BEARING ON FACTOR NO. 1 BUT IT HAS BEARING O NLY ON FACTOR NO. 2. THE EXPLANATION DOES NOT MAKE THE ASSESSMENT ORDER CONCLUSIVE EVIDENCE THAT THE AMOUN T ASSESSED WAS IN FACT THE INCOME OF THE ASSESSEE. NO PENALTY CAN BE IMPOSED IF THE FACTS AND CIRCUMSTANCES ARE EQUALLY CONSISTENT WITH THE HYPOTHESIS THAT THE AMOUNT DOES NOT REPRESENT CONCEALED INCOME AS WITH THE HYPOTHESIS THAT IT DOES. IF AN ASSESSEE GIVES AN EXPLANATION WHICH IS UNPROVED BUT NOT DISPROVED I.E., IT IS NOT ACCEPTED BUT CIRCUMSTANCES DO NOT LEAD TO THE REASONABLE AND POSITIVE INFERENCE THAT THE ASSESSEES CASE IS FALS E, THE EXPLANATION CANNOT HELP THE DEPARTMENT BECAUSE THERE WILL BE NO MATERIAL TO SHOW THAT THE AMOUNT IN QUES TION WAS THE INCOME OF THE ASSESSEE. ALTERNATIVELY, TREA TING THE EXPLANATION AS DEALING WITH BOTH THE INGREDIENTS (I ) AND (II) ABOVE, WHERE THE CIRCUMSTANCES DO NOT LEAD TO THE REASONABLE AND POSITIVE INFERENCE THAT THE ASSESSEE S EXPLANATION IS FALSE, THE ASSESSEE MUST BE HELD TO HAVE PROVED THAT THERE WAS NO MENS REA OR GUILTY MIND ON HIS PART. EVEN IN THIS VIEW OF THE MATTER, THE EXPLANAT ION ALONE CANNOT JUSTIFY LEVY OF PENALTY. ABSENCE OF PROOF ACCEPTABLE TO THE DEPARTMENT CANNOT BE EQUATED WITH FRAUD OR WILFUL DEFAULT. AS THERE IS NO MATERIAL DIFFERENCE BETWEEN THE ORIGINAL EXPLANATION 1 AND EXPLANATION 1 AS SUBSTITUTED, IT HAS TO BE SO CONST RUED AS TO HARMONISE IT WITH BASIC PRINCIPLES OF JUSTICE AN D FAIRNESS, AS IN THE CASE OF ORIGINAL EXPLANATION. O N THE STATE OF ACCOUNTS AND EVIDENCE IN THE QUANTUM PROCEEDINGS, THE DEPARTMENT WAS JUSTIFIED IN TREATI NG THE CASH CREDIT AS INCOME OF THE ASSESSEE BUT MERELY ON THAT BASIS BY RECOURSE TO EXPLANATION 1, PENALTY UNDER S . 271(1)(C) COULD NOT HAVE BEEN IMPOSED WITHOUT THE 10 I.T.A. NO.217/MUM/2015 DEPARTMENT MAKING ANY OTHER EFFORT TO COME TO A CONCLUSION THAT THE CASH CREDITS COULD IN NO CIRCUM STANCES WOULD HAVE BEEN AMOUNTS RECEIVED AS TEMPORARY LOANS FROM VARIOUS PARTIES. THE ASSESSEE IN THE QUANTUM PROCEEDINGS FAILED TO PRODUCE THE ACCOUNTANT BUT TH E DEPARTMENT ALSO IN PENALTY PROCEEDINGS MADE NO EFFO RT TO SUMMON HIM. APPLYING THE TEST (II) DISCUSSED ABOVE, THEREFORE, IT WAS A CASE WHERE THERE WAS NO CIRCUMS TANCE TO LEAD TO A REASONABLE AND POSITIVE INFERENCE THAT THE ASSESSEES CASETHAT THE CASH CREDITS WERE ARRANGED AS TEMPORARY LOANS, WAS FALSE. THE FACTS AND CIRCUMSTA NCES ARE EQUALLY CONSISTENT WITH THE HYPOTHESIS THAT IT COULD HAVE BEEN SUNDRY LOANS IN SMALL AMOUNTS OBTAINED FR OM DIFFERENT PARTIES. THEREFORE, EVEN TAKING RECOURSE TO EXPLANATION 1, SAME CIRCUMSTANCES OR STATE OF EVIDE NCE ON WHICH THE CASH CREDIT WERE TREATED AS INCOME, COULD NOT BY THEMSELVES JUSTIFY IMPOSITION OF PENALTY WITHOUT AN YTHING MORE ON RECORD PRODUCED BY THE ASSESSEE OR THE DEPARTMENT. THEREFORE, KEEPING IN VIEW THE PECULIAR FACTS AND CIRCUMSTANCES OF THIS CASE AND LEGAL POSITION AS DI SCUSSED ABOVE, WE FIND THAT PENALTY HAS BEEN RIGHTLY DELETE D BY LD. CIT (A). NO INTERFERENCE IS CALLED FOR IN HER ORDER AND THEREFORE, SAME IS UPHELD. 8. AS A RESULT, APPEAL FILED BY THE REVENUE IS DISMIS SED. ORDER WAS PRONOUNCED IN THE OPEN COURT AT THE CONCL USION OF THE HEARING. SD/- SD/- (D.T. GARASIA) (ASHWANI TANEJA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI; DATED: 15/02/2017 ALINDRA. PS 11 I.T.A. NO.217/MUM/2015 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A)- 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE. / BY ORDER, //TRUE COPY// / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI