Smt. Rupalben R. Jhaveri, Surat V. The Income tax Officer, Ward-2(1), Surat

ITA 2382/AHD/2007

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 6444 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-06-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 19-04-2011
• Assessment Year: 2001-2002
• Appeal Filed On: 01-06-2007
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: J P SHAH
• Keywords: Gift; Question of law; Wrong claim; Onus to prove
• Section: 69C; 147; 131; 68; 144; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD, B BENCH (BEFORE S/SHRI G.D. AGARWAL, VICE-PRESIDENT AND T.K. SHARMA, JUDICIAL MEMBER) ITA NO.2382/AHD/2007 [ASSTT. YEAR : 2001-2002] SMT. RUPALBEN R. JHAVERI PROP: M/S.R.R. STEEL TRADERS PLOT NO.16-17, MAHATMA GANDHI ROAD NO.12 UDYOGNAGAR, UDHNA, SURAT. VS. ITO, WARD-2(1) SURAT. (PAN : ABHPJ 0684R) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI J.P. SHAH REVENUE BY : SHRI K. MADHUSUDAN O R D E R PER T.K. SHARMA, JUDICIAL MEMBER : THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMI SSIONER OF INCOME TAX(APPEALS)-II, SURAT 12.3.2007 ARISING OUT OF THE ORDER OF THE ASSESSING OFFICER PASSED UNDER SECTION 271(1)(C) OF THE INCOM E TAX ACT, 1961. 2. IN THIS APPEAL, THE ASSESSEE HAS RAISED FOLLOWIN G TWO EFFECTIVE GROUNDS FOR CANCELLATION OF PENALTY UNDER SECTION 2 71(1)(C) OF THE ACT. 1) THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE LEVYING OF PENALTY U/S.271(1)(C) OF THE ACT IN RESPECT OF ADDITION OF RS.3,00,000/- MADE ON THE GROUND OF ALLEGED BOGU S GIFTS. 2) THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE LEVYING OF PENALTY U/S.271(1)(C) OF THE ACT IN RESPECT OF ADDITION OF RS.3,64,099/- MADE ON THE GROUND OF DISALLOWANCE OF BROKERAGE AND COMMISSION EXPENSES. 3. THE FACTS IN BRIEF RELATING TO CONTROVERSY INVOL VED IN THE AFORESAID MATTER ARE THAT THE ASSESSEE IS PROPRIETOR OF M/S.R .R. STEEL TRADERS WHICH IS TRADING IN IRON & STEEL. IN THE RETURN OF INCOM E, THE ASSESSEE CLAIMED A GIFT OF RS.3,00,000/- RECEIVED FROM SIX PERSONS AND BROKERAGE AND SALES ITA NO.2382/AHD/2007 -2- COMMISSION OF RS.3,64,099/-. BOTH CLAIMS OF THE ASS ESSEE WERE DISALLOWED BY THE AO. THE AO REJECTED THE GIFT OF RS.3,00,000/- ON THE GROUND THAT THE IDENTITY AND GENUINENESS OF THE DON ORS HAVE NOT BEEN PROVED BY THE ASSESSEE. THAT THE ALLEGED DONORS WE RE NOT RELATIVES OF THE ASSESSEE AND THERE WERE NO RECIPROCAL DEALINGS BETW EEN THE ASSESSEE AND THE DONORS; THAT FROM THE COPIES OF THE RETURN FILE D BY THE ALLEGED DONORS INDICATED THAT THEIR TOTAL INCOME WERE BELOW RS.60, 000/- PER YEAR; THAT THESE PERSONS WERE HAVING MEAGRE INCOME OF RS.60,00 0/- AND SUCH PERSONS CANNOT GIVE GIFT OF RS.50,000/- EACH TO THE ASSESSEE; THAT THE ASSESSEE IS A RICH LADY AND IT COULD NOT BE BELIEVE D THAT SUCH PERSON WAS TAKING GIFT FROM THE MEAGRE INCOME DONORS WHO WERE LABOURERS; THAT THE ALLEGED DONORS WERE NOT FOUND AT THE ADDRESS GIVEN BY THE ASSESSEE AND SUMMONS ISSUED UNDER SECTION 131 OF THE ACT COULD N OT BE SERVED BY THE POSTAL AUTHORITIES AND THE ASSESSEE DID NOT FURNISH CORRECT ADDRESS OR COULD NOT PRODUCE THE DONORS OR COULD GIVE SATISFACTORY E XPLANATION FOR NON- APPEARANCE OF THE DONORS BEFORE THE AO. ACCORDINGL Y, THE AO MADE ADDITION OF RS.3,00,000/- ON ACCOUNT OF UNSUBSTANTI ATED GIFTS RECEIVED FROM THE DONORS AND ALSO INITIATED PENALTY PROCEEDI NGS UNDER SECTION 271(1)(C) OF THE ACT. 4. SIMILARLY, IN RESPECT OF BROKERAGE AND SALES COM MISSION OF RS.3,64,099/- CLAIMED BY THE ASSESSEE, NO EVIDENCE OR SATISFACTORY EXPLANATION WAS OFFERED BY THE ASSESSEE WITH REGARD TO THE IDENTITY AND GENUINENESS OF THE EXPENDITURE CLAIMED BY THE ASSES SEE, DESPITE SEVERAL OPPORTUNITIES ALLOWED TO THE ASSESSEE BY THE AO IN THIS BEHALF. THE ASSESSEE HAS ALSO NOT OFFERED ANY EXPLANATION AS TO THE NATURE OF SERVICE RENDERED BY THE BROKERS/COMMISSION AGENTS TO THE AS SESSEE. ACCORDINGLY, ITA NO.2382/AHD/2007 -3- THE SAME WAS ADDED TO THE TOTAL INCOME OF THE ASSES SEE AND ALSO INITIATED PENALTY PROCEEDINGS FOR FURNISHING OF ACCURATE PART ICULARS OF INCOME. 5. THE MATTER WAS CHALLENGED BEFORE THE CIT(A). TH E CIT(A) WHILE CONFIRMING THE ABOVE TWO ADDITIONS GAVE GLARING IRR EGULARITIES AND INGENUITY IN THE CLAIMS OF THE ASSESSEE. WITH REGA RD TO THE GIFTS, BESIDES THE FINDINGS OF THE AO ON VARIOUS COUNTS, THE CIT(A ) ALSO OBSERVED ON GOING THROUGH THE BANK ACCOUNTS OF THE ALLEGED DONO RS THAT THE ONLY APPARENT TRANSACTION IN THE ACCOUNTS TOOK PLACE, WH ENEVER THE ASSESSEE WAS TO BE GIVEN CHEQUE TO SOMEBODY; THAT THE BANK A CCOUNT REVEALS TWO TRANSACTIONS IN TWO YEARS INCLUDING THE GIFT DURING THE YEAR. IT WAS FURTHER OBSERVED THAT THE BANK ACCOUNT DID NOT REVEAL REGUL AR BANK TRANSACTIONS; THAT THE VERY FACT THAT THE DONORS REFUSED TO APPEA R BEFORE THE AO PROVED THAT THEY HAD NO LOVE AND AFFECTION FOR THE ASSESSE E AND THAT THE AMOUNT OF GIFT IN FACT WAS A QUID PRO QUO TRANSACTION; THAT T HE ASSESSEE WOULD GIVE CREDIT THE GIFT IN THE CAPITAL ACCOUNT OF SUCH TRAN SACTION IN EXCHANGE FOR GIVING SOME AMOUNT TO THE DONEE. ACCORDINGLY, THE CIT(A) CONFIRMED THE ADDITION. SIMILARLY, IN THE BROKERAGE AND COMM ISSION ALSO THE CIT(A) FOUND THAT THE TRANSACTION TO BE NOT GENUINE AND HE NCE CONFIRMED THE ADDITION. 6. THE ASSESSEE, THEREAFTER, HAS NOT PUT ANY CHALLE NGE TO THE ORDERS OF THE REVENUE AUTHORITIES AND THEREFORE, THE ADDITION S MADE BY THE AO AND CONFIRMED BY THE CIT(A) IN FIRST APPEAL, ATTAINED F INALITY. 7. THEREAFTER, THE AO INITIATED PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) FOR CONCEALMENT OF INCOME AND FURNISHING OF INACCURATE PARTICULARS OF INCOME. THE ASSESSEE IN THE PENALTY PROCEEDINGS ALSO REPEATED THE SAME SET OF ARGUMENTS, THAT IS, THE DO NORS WERE NOT CO- ITA NO.2382/AHD/2007 -4- OPERATING; THAT THE ASSESSEE HAD NO LEGAL AUTHORITY FOR FORCING THE DONORS TO REMAIN PHYSICALLY APPEAR BEFORE THE AO. THE ASS ESSEE FURNISHED NO FURTHER EVIDENCES OR SATISFACTORY EXPLANATION TO CO NVINCE THE AO THAT THE PROVISIONS OF SECTION 271(1)(C) WAS NOT VITIATED. THE AO ACCORDINGLY IMPOSED PENALTY ON BOTH THE ADDITIONS, WHICH WERE A LSO CONFIRMED BY THE CIT(A) IN THE FIRST APPEAL. THE OBSERVATIONS MADE BY THE CIT(A) ARE WORTH NOTING AND WE REPRODUCE THE RELEVANT PARAS RU NNING FROM 5 TO 6.10 AS UNDER: 5. I HAVE CAREFULLY CONSIDERED THE VIEW TAKEN BY T HE AO AS WELL AS THE DETAILED SUBMISSIONS OF THE AR. I HAVE ALSO PER USED THE ORDER OF THE CIT(A) DTD. 18/10/2004 IN APPEAL NO.CAS/11/12/09-05 . AS FAR AS THE GIFTS WERE CONCERNED, THE CIT(A) CLEARLY HELD THAT THE GIFTS WERE GIVEN BY PEOPLE WHO WERE NOT EVEN DISTANTLY RELATED. THEY DI D NOT HAVE SUFFICIENT INCOME OR EVEN ANY CAPITAL BALANCE TO GIVE THE GIFT S OF RS.50,000 EACH. PRIOR TO THE GIVING OF THE GIFTS, EACH OF THEM HAD ALMOST NEGLIGIBLE BALANCE IN THE BANK. THE CASH WAS DEPOSITED IN THE RESPECTIVE BANK ACCOUNTS ONLY A FEW DAYS BEFORE THE GIFTS WERE GIVE N THROUGH CHEQUES. SOME OF THE BANK ACCOUNTS WERE OPENED ONLY FOR THE PURPOSE OF DEPOSITING CASH AND GIVING THE GIFTS. THIS CLEARLY SHOWED THAT NONE OF THE DONORS HAD ANY CREDITWORTHINESS TO GIVE THE GIF TS AND THE TRANSACTIONS WERE ALL STRUCTURED TO GIVE IT AN APPE ARANCE OF CREDITWORTHINESS. MOREOVER, THE ACCOUNTS OF THE ALL THE DONORS HAD BEEN COMPILED BY ONE SHRI SURESH N. THAKKAR, A TAX CONSU LTANT AND THE SOFTWARE USED WAS MONARCH. THE CIT(A) THEREFORE, TO OK THE VIEW THAT NEITHER THE IDENTITY OF THE DONORS NOR THEIR GENUIN ENESS HAD BEEN PROVED. NOR WAS THE GENUINENESS OF THE TRANSACTIONS ESTABLI SHED. THE ASSESSEE HAD CONTENDED THAT SHE HAD NO CONTROL OVER THE DONO RS TO BE ABLE TO PRODUCE THEM BEFORE THE AO. THE CIT(A) OBSERVED THA T THE GIFTS WERE SUPPOSED TO HAVE BEEN GIVEN OUT OF NATURAL LOVE AND AFFECTION AND THEREFORE, THERE WAS NO REASON WHY THE DONORS SHOUL D NOT HAVE COOPERATED WITH THE ASSESSEE. THIS CLEARLY SHOWED T HAT THERE WAS ABSOLUTELY NO LOVE AND AFFECTION OF THE DONORS TOWA RDS (LIE ASSESSEE AND THEREFORE, THE GIFTS WERE MERELY QUID-PRO-QUO TRANS ACTIONS. IN REALITY, SINCE THE ALLEGED DONORS WERE ALL MEN OF VERY LITTL E MEANS DOING LABOUR JOBS, THEY WERE NOT PRODUCED BEFORE THE AO FOR FEAR OF BEING EXPOSED. THE AO'S ACTION OF TREATING THE GIFTS AS BOGUS WAS THUS SUSTAINED BY THE CIT(A). 6. AS REGARDS THE BROKERAGE AND COMMISSION PAYMENT S, THE CIT(A) TOOK THE VIEW THAT IT WAS THE PRIME RESPONSIBILITY OF THE ASSESSEE TO PROVE THE GENUINENESS OF THE CLAIM. THE SIMPLE FILI NG OF COMPUTATION OF ITA NO.2382/AHD/2007 -5- INCOME ETC. OF THE ALLEGED RECIPIENTS OF THE PAYMEN TS, DID NOT ESTABLISH THE EXPENSES TO BE GENUINE. IN MOST OF THE CASES, T HE SUMMONS COULD NOT BE SERVED. WHILE IN THE REMAINING, THERE WAS NO RES PONSE FROM THE ALLEGED BROKERS. THE RENDERING OF SPECIFIC SERVICES BY THESE BROKERS WAS NOT PROVED. ALL THE RETURNS OF INCOME OF THE BROKER S HAD BEEN FILED BY SHRI C. P. JHARIA & CO. CHARTERED ACCOUNTANTS. THES E TRANSACTIONS, AS IN THE CASE OF THE GIFTS, WERE ALSO ORGANISED IN A MANNER SO AS TO MAKE THEM APPEAR TO BE GENUINE WITH THE SOLE PURPOSE OF REDUCING THE TAXABLE INCOME OF THE ASSESSEE BY MANIPULATION. FROM THE AC COUNTS OF SOME OF THE BROKERS WHICH WERE FURNISHED BY THE ASSESSEE, I T WAS SEEN THAT EITHER NO TAX WAS PAYABLE BY THEM OR VERY LITTLE TAX WAS P AYABLE SINCE THEY DID NOT HAVE SUFFICIENT INCOME OF THERE OWN. FURTHER, T HE PAYMENT OF BROKERAGE TO THREE ENTITIES WAS CLAIMED TO HAVE BEE N MADE AFTER THREE YEARS AND THAT TOO BY THE SAME PAY ORDER. NO BROKER WOULD ALLOW A CREDIT PERIOD OF THREE YEARS OR MORE. THE AMOUNTS P AYABLE TO THE SAME BROKERS IN THE EARLIER YEARS WERE NEGLIGIBLE AND SU DDENLY DURING THE YEAR UNDER CONSIDERATION AND THE PRECEDING YEAR, TH E ALLEGED PAYMENTS HAD INCREASED CONSIDERABLY. THE PURPOSE FOR WHICH T HE COMMISSION AND BROKERAGE BECAME PAYABLE WAS NOT ESTABLISHED. THUS, ONCE AGAIN, THE CIT(A) SUSTAINED THE ACTION OF THE AO AND CONFIRMED THE ADDITION ON ACCOUNT OF UNEXPLAINED BROKERAGE AND COMMISSION PAY MENTS. 6.1 QUITE INTERESTINGLY, NO REFERENCE HAS BEEN MAD E BY THE AR TO THE FINDINGS OF THE CIT(A) IN QUANTUM PROCEEDINGS. NOR HAS HE MADE ANY ATTEMPT TO REFUTE OR TO REBUT SUCH FINDINGS EITHER IN PENALTY PROCEEDINGS OR IN APPELLATE PROCEEDINGS BEFORE ME. THE FINDINGS OF THE CIT(A) CLEARLY SHOWED THAT AS FAR AS THE GIFTS WERE CONCER NED, THE ALLEGED DONORS SIMPLY DID NOT HAVE THE MEANS TO GIVE THE GI FTS AND THAT, ALL THE TRANSACTIONS WERE CAREFULLY ORGANISED AND STRUCTURE D SO AS TO GIVE THEM AN APPEARANCE OF GENUINENESS. THE DETAILED ANALYSIS MADE BY THE CIT(A) SHOWED HOW IN RESPECT OF EACH DONOR, BANK AC COUNTS WERE EITHER FRESHLY OPENED, OR EVEN IN EXISTING BANK ACCOUNTS, CASH OF SPECIFIC AMOUNTS WERE DEPOSITED PRIOR TO THE GIVING OF THE G IFTS. MOST OF THEM DID NOT HAVE SUFFICIENT INCOME SO AS TO BE TAXABLE. SIM ILARLY, IN THE CASE OF THE BROKERAGE AND COMMISSION PAYMENTS ALSO, ALL THE TRANSACTIONS WERE CAREFULLY ORGANISED. IT THEREFORE CLEARLY APPEARS T O HAVE BEEN A CASE OF PROVIDING ENTRIES TO THE ASSESSEE, FIRSTLY IN THE F ORM OF BOGUS CASH- CREDITS AND SECONDLY IN THE FORM OF BOGUS EXPENDITU RE. THE IDENTITIES OF NEITHER THE DONORS NOR THE ALLEGED RECIPIENTS OF BR OKERAGE AND COMMISSION COULD BE ESTABLISHED EVEN THOUGH CONFIRM ATION LETTERS WERE FURNISHED FROM THE ALLEGED RECIPIENTS OF BROKERAGE AND COMMISSION PAYMENTS. EVEN THOUGH THE MERE FAILURE OF EITHER TH E DONORS OR THE ALLEGED RECIPIENTS OF BROKERAGE AND COMMISSION TO A PPEAR IN PERSON BEFORE THE AO MAY NOT HAVE BEEN SUFFICIENT TO TREAT EITHER THE GIFTS OR THE EXPENDITURE AS UNEXPLAINED YET, GIVEN THE OVERALL F ACTS AND ITA NO.2382/AHD/2007 -6- CIRCUMSTANCES OF THE CASE, AS DISCUSSED BY THE CIT( A), ESPECIALLY THE FACT THAT THE SAME TAX CONSULTANT HAD ORGANISED THE ACCO UNTS OF THE DONORS WHILE ANOTHER HAD PREPARED THE ACCOUNTS OF THE ALLE GED RECIPIENTS OF BROKERAGE AND COMMISSION, THE FAILURE OF THE DONORS AS WELL AS THE RECIPIENTS OF THE EXPENDITURE TO APPEAR BEFORE THE AO TAD BECOME AN IMPORTANT ISSUE FOR ESTABLISHING NOT ONLY THE IDENT ITIES BUT ALSO THE GENUINENESS OF THE TRANSACTIONS. IN THE CASE OF POO NJABHAI VANMALI & SONS V/S. ITO (1989) 33 TTJ 91 (AHD.) THE HON. ITAT AHMEDABAD BENCH HELD THAT - ' IT IS QUITE EVIDENT THAT IN ORD ER TO DISCHARGE HIS BURDEN UNDER SECTION 68, AN ASSIGNEE IS REQUIRED TO OFFER AN EXPLANATION ABOUT THE (I) NATURE OF THE CASH CREDIT AND (II) TH E SOURCE OF SUCH CREDIT. ONCE AN ASSESSEE HAS DONE THAT HIS JOB IS OVER. THE ONUS OF PROOF SHIFTS TO THE ITO. NOW, IT IS FOR THE ITO TO SHOW THAT THE EXPLANATION OFFERED BY THE ASSESSEE IS NOT UPTO HIS SATISFACTION. IT IS TH E SUBJECTIVE SATISFACTION OF THE ITO ABOUT THE NATURE AND SOURCE OF A CASH CR EDIT, WHICH IS REQUIRED TO BE MADE UNDER THE SECTION. IT IS THE SA TISFACTION OF A MAN ORDINARY PRUDENCE. IF THE EXPLANATION OFFERED BY AN ASSESSEE ABOUT THE NATURE AND SOURCE OF A CASH CREDIT PROBABILISES THE EXISTENCE OF THE FACTS, WHICH MUST ATTEND ON THE CASH CREDIT IN DISP UTE IN DUE COURSE OF THE NATURE OF THE THINGS, THE ASSESSEE MAY BE SAID TO HAVE OFFERED A SATISFACTORY EXPLANATION. THE ITO CANNOT INSIST UPO N FOR MORE. BUT AT THE SAME TIME AN ASSESSEE CANNOT GET HIMSELF RID OF HIS BURDEN UNDER THIS SECTION BY OFFERING ANY SORT OF EXPLANATION, W HICH MIGHT SUIT HIM. IN ORDER TO BE 'SATISFACTORY' AND AS SUCH ACCEPTABLE, AN EXPLANATION UNDER SECTION 68 SHOULD BE 'REASONABLE' PROBABILISING THE HAPPENING OF THE THINGS IN THE MANNER TOLD BY THE ASSESSEE. IT IS NO T EACH AND EVERY SORT OF EXPLANATION OFFERED BY AN ASSESSEE ABOUT THE NATURE AND SOURCE OF A CASH CREDIT, WHICH IS REQUIRED TO BE ACCEPTED BY TH E ITO UNDER SECTION 68. IT IS ONLY SUCH EXPLANATION WHICH APPEALS TO HU MAN REASONS, WHICH REFERS TO SUCH HAPPENINGS THAT ARE QUITE PROBABLE T O TAKE PLACE IN THE NORMAL COURSE OF THE THINGS AND WHICH A PRUDENT MIN D WOULD FEEL INCLINED TO ACCEPT UNDER THE GIVEN CIRCUMSTANCES, T HAT WOULD FULFILL THE REQUIREMENT OF THE WORD 'SATISFACTORY' QUALIFYING T HE REQUIRED EXPLANATION OF THE ASSESSEE UNDER SECTION 68.' 6.2 IN THE CASE OF OUR ASSESSEE, THE EXPLANATION PR OVIDED WAS CLEARLY QUITE IMPROBABLE AND COULD NOT BE EXPECTED TO TAKE PLACE IN THE NORMAL COURSE OF THINGS WHICH A PRUDENT MIND WOULD FEEL IN CLINED TO ACCEPT UNDER NORMAL CIRCUMSTANCES. IN THE CASE OF DHANESHK UMAR D. SHAH V, ACIT, 52 TTJ 185, THE HON. ITAT TREATED CASH-CREDIT S AS UNEXPLAINED SINCE, APART FROM OTHER FACTS, THE CREDITS FROM AGR ICULTURISTS WERE NOT SUBSTANTIATED AS NO EVIDENCE OF THEIR OWNERSHIP OF LAND OR SALE OF AGRICULTURAL PRODUCE WAS SUBMITTED BEFORE THE AO. I N THE CASE OF THE ASSESSEE NO EVIDENCE WAS PRODUCED BEFORE THE AO TO ESTABLISH THE CREDITWORTHINESS OF THE DONORS ON ONE HAND WHILE ON THE OTHER, THE ITA NO.2382/AHD/2007 -7- SERVICES THAT WERE RENDERED FOR THE BROKERAGE AND T HE COMMISSION TO BECOME PAYABLE. THE AR HAS PLACED RELIANCE ON THE D ECISION OF THE AHMEDABAD BENCH OF THE ITAT IN THE CASE OF SAVJIBHA I BHIMSINHBHAI VS. ITO, IN ITA NO. 400/AHD/2004, ORDER DID. 21/7/2006. 1 HAVE GONE THROUGH THIS ORDER, THE FACTS OF THE CASE HAVE NOT BEEN DISCUSSED BY THE HON. ITAT, APART FROM OBSERVING THAT THE CONFIRMATI ON LETTERS AND COPY OF ACCOUNTS HAD BEEN FURNISHED IN RESPECT OF THE CA SH-CREDITS SHOWN BY THE ASSESSEE. THEREFORE, THE RATIO OF THIS CASE CAN NOT STRAIGHT AWAY BE APPLIED TO THE FACTS OF THE ASSESSEE'S CASE SINCE, IN THE CASE OF THE ASSESSEE, THE FACTS CLEARLY SHOWED THAT BOTH THE GI FTS AND THE EXPENDITURE ON ACCOUNT OF BROKERAGE AND COMMISSION WERE BOGUS. WHETHER THESE FACTS WERE THE SAME AS IN THE CASE OF SAVJIBHNI BHI MSINGHBHAI IS NOT VERIFIABLE FROM THE COPY OF THE ORDER OF THE HON. I TAT THAT HAS BEEN FURNISHED BY THE AR. 6.3 IT HAS BEEN ARGUED BY THE AR THAT THE ASSESSEE HAD DISCHARGED THE INITIAL BURDEN WHICH LAY ON HER WITH THE HELP OF SU FFICIENT EVIDENCE, AND EVEN ON THE GROUND OF PREPONDERANCE OF PROBABILITIE S. THE AR HAS RELIED UPON SEVERAL CASE-LAWS WHICH HAVE BEEN LISTED ABOVE . HOWEVER, FROM THE DISCUSSION ABOVE, IT MAY BE CLEARLY SEEN THAT T HE ASSESSEE HAD COMPLETELY FAILED TO DISCHARGE THE INITIAL BURDEN. UNLESS SUCH BURDEN HAD BEEN DISCHARGED IN ACCORDANCE WITH THE PROVISIO NS OF THE EXPLANATION-1 BELOW SECTION 271(1)(C) THE BURDEN CO ULD NOT SHIFT TO THE REVENUE. HERE IT BECOMES IMPORTANT TO EXAMINE THE P ROVISIONS OF SECTION 271(1)(C) R.W. THE EXPLANATION-1 BELOW HE SAID SECT ION AND ITS IMPLICATIONS AS ANALYSED AND UNDERSTOOD BY VARIOUS COURTS OF LAW. BY THE FINANCE ACT OF 1964, THE EXPLANATION WAS INT RODUCED TO SECTION 271(1)(C) WITH EFFECT FROM 1/1/1964, WHICH STOOD AS UNDER: EXPLANATION WHERE THE TOTAL INCOME RETURNED BY A NY PERSON IS LESS THAN EIGHTY PERCENT OF THE TOTAL INCOME (HEREI NAFTER IN THIS EXPLANATION REFERRED TO AS THE CORRECT INCOME) AS A SSESSED UNDER SECTION 143 OR SECTION 144 OR SECTION 147 (REDUCED BY THE EXPENDITURE INCURRED BONA FIDE BY HIM FOR THE EXPEN DITURE INCURRED BONA FIDE BY HIM FOR THE PURPOSE OF MAKING OR EARNING ANY INCOME INCLUDED IN THE TOTAL INCOME BUT WHICH H AS BEEN DISALLOWED AS A DEDUCTION), SUCH PERSON SHALL, UNLE SS HE PROVES THAT THE FAILURE TO RETURN THE CORRECT INCOME DID N OT ARISE FROM INY FRAUD OR ANY GROSS OR WILFUL NEGLECT ON HIS PART, B E DEEMED TO HAVE CONCEALED THE PARTICULARS OF HIS INCOME OR FUR NISHED INACCURATE PARTICULARS OF SUCH INCOME FOR THE PURPO SES OF CLAUSE (C) OF THIS SUB-SECTION.' VIDE THE TAXATION LAWS (AMENDMENT) ACT, 1975, THE EXPLANATION WAS AMENDED TO EXPLANATION-1, W.E.F. 1/4/1976 WHICH CAME TO BE READ AS UNDER: ITA NO.2382/AHD/2007 -8- (A) SUCH PERSON FAILS TO OFFER AN EXPLANATION OR OFFERS AN EXPLANATION WHICH IS FOUND BY THE INCOME TAX OFFICER OR THE APP ELLATE ASSISTANT COMMISSIONER TO BE FALSE, OR (B)SUCH PERSON OFFERS AN EXPLANATION WHICH LIE IS N OT ABLE TO SUBSTANTIATE, THEN, THE AMOUNT ADDED OR DISALLOWED IN COMPUTING T HE TOTAL INCOME OF SUCH PERSON AS A RESULT THEREOF SHA LL, FOR THE PURPOSE OF CLAUSE (C) OF THIS SUB-SECTION, BE DEEMED TO REPRES ENT THE INCOME IN RESPECT OF WHICH PARTICULARS HAVE BEEN CONCEALED: PROVIDED THAT NOTHING CONTAINED IN THIS EXPLANATION SHALL APPLY TO A CASE REFERRED TO IN CLAUSE (B) IN RESPECT OF ANY AM OUNT ADDED OR DISALLOWED AS A RESULT OF THE REJECTION OF ANY EXPL ANATION OFFERED BY SUCH PERSON, IF SUCH EXPLANATION IS BONA FIDE AND ALL TH E FACTS RELATING TO THE SAME AND MATERIAL TO THE COMPUTATION OF HIS TOTAL I NCOME HAVE BEEN DISCLOSED BY HIM.' VIDE THE TAXATION LAWS (AMENDMENT & MISCELLANEOUS P ROVISIONS) ACT OF 1986, THE PROVISO BELOW EXPLANATION-1 WAS DELETE D W.E.F. 10/9/1986, BUT ITS CONTENTS WERE INCLUDED IN THE EXPLANATION, WHICH NOW 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 FAL SE, OR (B) SUCH PERSON OFFERS AN EXPLANATION WHICH HE IS NOT A BLE TO SUBSTANTIATE AND FAILS TO PROVE THAT SUCH EXPLANATI ON IS BONA FIDE AND THAT ALL THE FACTS RELATING TO THE SAME AND MAT ERIAL TO THE COMPUTATION OF HIS TOTAL INCOME HAVE BEEN DISCLOSED BY HIM THEN, THE AMOUNT ADDED OR DISALLOWED IN COMMUTING T HE TOTAL INCOME OF SUCH PERSON AS A RESULT THEREOF SHALL, FO R THE PURPOSES OF CLAUSE(C) OF THIS SUB-SECTION, BE DEEMED TO REPR ESENT THE INCOME IN RESPECT OF WHICH PARTICULARS HAVE BEEN CO NCEALED.' 6.4 THE AMENDED CLAUSE (B) TO EXPLANATION-1 FU RTHER THRUST THE ONUS ON THE ASSESSEE TO PROVE THAT THE EXPLANATION PROVI DED IS BONAFIDE AND THAT ALL THE FACTS RELATING TO THE SAME AND MATERIA L TO THE COMPUTATION OF HIS TOTAL INCOME HAS BEEN DISCLOSED BY HIM. WHAT TH E SECTIONS 68, 69, 69A, 69B AND 69C DEEM FOR THE PURPOSE OF ASSESSMENT , SUCH AMENDMENT INJECTED THE DEEMING FOR THE PURPOSE OF PENALTY AS WELL. WHAT WAS INSERTED BY THE TAXATION LAWS (A & M.P.) OF 1986 WA S EARLIER CONTAINED ITA NO.2382/AHD/2007 -9- IN THE PROVISO BELOW THE EXPLANATION, WHICH WAS OMI TTED AFTER THE SAME WORDS WERE INSERTED IN CLAUSE (B) TO EXPLANATION 1. THUS, THE EXPLANATION 1 BELOW SECTION 271(L)(C) AUTOMATICALLY COMES INTO OPERATION WHEN, IN RESPECT OF ANY FACTS MATERIAL TO THE COMPUTATION OF THE TOTAL INCOME OF ANY PERSON, THERE IS A FAILURE TO OFFER AN EXPLANATION OR AN EXPLANATION IS OFFERED WHICH IS FOUND TO BE F ALSE BY 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. THE ONUS IS CLEARLY ON THE ASSESSEE TO ESTABLISH THAT THE EXPLA NATION OFFERED IS BONAFIDE AND ALL FACTS RELATING TO THE SAME AND MAT ERIAL TO THE COMPUTATION OF HIS INCOME HAVE BEEN DISCLOSED BY HI M. 6.5 THE IMPORT OF THESE AMENDMENTS TO THE EXPLANAT ION WAS ELOQUENTLY PRONOUNCED BY JUSTICE ARIJIT PASAYAT WHILE WRITING THE JUDGEMENT IN THE CASE OF CIT V. GURBACHHAN LAL IN 250 ITR 157, 161 : 'A CONSPECTUS OF THE EXPLANATION ADDED BY THE FINANCE ACT, 1964, AND THE SUBSEQUENT SUBSTITUTED EXPLANATIONS MAKES IT CLEAR THAT THE ST ATUTE VISUALIZED ASSESSMENT PROCEEDINGS AND PENALTY PROCEEDINGS TO B E WHOLLY DISTINCT AND INDEPENDENT OF EACH OTHER. IN ESSENCE, THE EXPL ANATION (AFTER 1964) IS A RULE OF EVIDENCE. PRESUMPTIONS WHICH ARE REBUT TABLE IN NATURE ARE AVAILABLE TO BE DRAWN. THE INITIAL BURDEN OF DISCHA RGING THE ONUS OF REBUTTAL IS ON THE ASSESSEE. THE RATIONALE BEHIND T INS VIEW IS THAT THE BASIC FACTS ARE WITHIN THE SPECIAL KNOWLEDGE OF THE ASSESSEES. SECTION 106 OF THE INDIAN EVIDENCE ACT, 1872 (IN SHORT, THE 'EVIDENCE ACT'), GIVES STATUTORY RECOGNITION TO THIS UNIVERSALLY ACC EPTED 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 , WHICH PRIMARILY CONCERNS THE CASE AT HAND, AUTOMATICALLY COMES INTO OPERATION WHEN, IN RESPECT OF ANY FACTS MATERIAL TO THE COMPUTATION OF THE TOTAL INCOME OF ANY PERSON, THERE IS FAILURE TO OFFER AN EXPLANATIO N OR THE EXPLANATION IS OFFERED WHICH IS FOUND TO BE FALSE BY THE ASSESSING OFFICER OR THE FIRST APPELLATE AUTHORITY, OR AN EXPLANATION IS OFFERED W HICH IS NOT SUBSTANTIATED. IN SUCH A CASE, THE AMOUNT ADDED OR DISALLOWED IN COMPUTING THE TOTAL INCOME IS DEEMED TO REPRESENT T HE INCOME IN RESPECT OF WHICH THE PARTICULARS HAVE BEER CONCEALED. AS PE R THE PROVISO TO EXPLANATION 1, THE ONUS TO ESTABLISH THAT THE EXPLA NATION OFFERED WAS BONA FIDE AND ALL FACTS RELATING TO THE SAME AND MA TERIAL ON THE COMPUTATION OF HIS INCOME HAVE BEEN DISCLOSED BY HI M WILL BE ON THE PERSON CHARGED WITH CONCEALMENT. MERE FAILURE TO SU BSTANTIATE THE EXPLANATION IS NOT ENOUGH TO WARRANT PENALTY. THE R EVENUE HAS TO ESTABLISH THAT THE EXPLANATION OFFERED WAS NOT SUBSTANTIATED. THE PROVISO TO EXPLANATION T IS CONCERNED ONLY WITH CASES COMING UNDER CLAUSE (B) OF THE EXPLANATION WHERE THE ASSESSEE OFFERED AN EX PLANATION WHICH HE ITA NO.2382/AHD/2007 -10- WAS NOT ABLE TO SUBSTANTIATE. THE EXPLANATION OF TH E ASSESSEE_FOR PURPOSES OF_THC AVOIDANCE OF PENALTY MUST BE AN ACC EPTABLE EXPLANATION; IT SHOULD NOT BE A FANTASTIC, OR FANCI FUL ONE. AS INDICATED ABOVE, THE CONSEQUENCE FOLLOW AS A MATTER OF LAW. T HE BURDEN IS ON THE ASSESSEE. IF HE FAILS TO DISCHARGE THAT BURDEN, THE PRESUMPTION THAT LIE HAD CONCEALED INCOME OR FURNISHED INACCURATE PARTIC ULARS THEREOF IS AVAILABLE TO BE DRAWN. THE PRINCIPAL LOGICAL IMPORT OF THE EXPLANATION IS TO SHIFT THE BURDEN OF PROOF FROM THE REVENUE ONTO THE ASSESSEE. REBUTTAL MUST BE ON MATER AL RELEVANT AND COGENT. IT IS FOR THE FACT-FINDING BODY TO JUDGE THE RELEVA NCY AND SUFFICIENT Y OF THE MATERIALS. IF SUCH A FACT-F INDING BODY, BEARING THE AFORESAID PRINCIPLES IN MIND, COMES TO THE CONCLUSI ON THAT THE ASSESSEE HAS DISCHARGED THE ONUS, IT BECOMES A CONCLUSION OF FACT, AND NO QUESTION OF LAW ARISES. AS OBSERVED EARLIER, THE IN ITIAL BURDEN IS ON THE ASSESSEE. ONCE THE INITIAL BURDEN IS DISCHARGED, TH E ASSESSEE WOULD BE OUT OF MISCHIEF UNLESS FURTHER EVIDENCE IS ADDUCED. IT IS PLAIN ON PRINCIPLE THAT IT IS NOT THE_LAW THAT THE MOMENT AN Y FANTASTIC OR UNACCEPTABLE EXPLANATION_IS_OFFERED, THE BURDEN PLACED WOULD BE DISCHARGED AND THE PRESUMPTION REBUTTED. AS POINTED OUT BY THE APEX COURT IN THE CASE OF CIT V. MUSSADILAL RAM BHAROSE (1987) 165 ITR 14, THE BURDEN PLACED UPON THE ASSESSEE IS NOT DISCHARG ED BY ANY FANTASTIC EXPLANATION. IT MUST E AN EXPLANATION ACCEPTABLE TO THE FACT-FINDING BODY. THESE ASPECTS WERE HIGHLIGHTED BY ONE OF US ( ARIJIT PASAYAT, CHIEF JUSTICE) IN THE CASES OF CIT V. SREENIVASA PAI (200 0) 242 ITR 29 (KER) AND CITV. KISHOREKUMAR SHAMNJI (2000) 244ITR 702 (K ER). THE APEX COURT HAD CONSIDERED THE EFFECT OF CHANGE OF LAW BY THE FINANCE ACT, 1964, IN THE CASE OF CIT(ADDL) V. JEEVAN LAL S AH (1994) 205 ITR 244. WITH REFERENCE TO THE CASE OFCITV. MUSSADILAL RAM BHAROSE (1987) 165 ITR 14, THE APEX COURT HAD APPROVED THE INTERPR ETATION PLACED UPON THE EXPLANATION BY A FULL BENCH OF THE PUNJAB FIND HARYANA HIGH COURT IN VISHWAKARMA INDUSTRIES V. CIT (1982) 135 ITR 652 . THE SAME ISSUE WAS ALSO DEALT WITH BY THE APEX COURT IN THE CASE O F CIT V. K. R. SADAYAPPAN (1990) 185 ITR 49, 54.' (EMPHASIS PROVIDED). 6.6 THE HON. JUSTICE FURTHER OBSERVED: 'ULTIM ATELY, IT WAS OBSERVED THAT THE PRINCIPLE INITIATED IN ANWAR ALI'S CASE (1 970) 76 ITR 696 (SC) THAT MERE REJECTION OF THE CASE IS NOT SUFFICIENT F OR LEVYING PENALTY AND REVENUE MUST GO FURTHER AND ESTABLISH THAT THERE HA S BEEN CONCEALMENT OF PARTICULARS OF INCOME OR A DELIBERATE FAILURE TO FURNISH ACCURATE PARTICULARS IS NO LONGER NECESSARY. THE CASES TO WH ICH THE SAID EXPLANATION IS ATTRACTED HAVE TO BE DECIDED IN THE LIGHT OF THE LAW ENUNCIATED IN MUSSADILTIL RAM BHAROSE'S CASE (1987) 165 ITR 14 (SC) AND K. R. SADAYAPPAN'S CASE (1990) 185 ITR 49 (SC). UNDISPUTEDLY, IN ITA NO.2382/AHD/2007 -11- THE CASE AT HAND, THE TRIBUNAL HAS PROCEEDED TO PLA CE THE ONUS ON THE REVENUE TO PROVE BY SOME POSITIVE MATERIAL OR POSIT IVE CIRCUMSTANCE TO SUGGEST THAT THE ASSESSEE. HAD CONCEALED HIS INCOME . THAT WAS NOT NECESSARY TO BE DONE BY THE REVENUE IN VIEW OF THE EXPLANATION TO SECTION 271(L)(C). WHAT THE REVENUE WAS REQUIRED TO DO WAS TO CONSIDER THE EXPLANATION, IF ANY, OFFERED BY THE_ASSESSEE AN D DECIDE UPON ITS ACCEPTABILITY. THE BURDEN WAS ON THE_ASSESSEE TO PR OVE THAT THERE WAS NO CONCEALMENT. THAT IS THE MAIN IMPORT OF THE EXPL ANATION ADDED TO_SECTION_271(1) (C) OF THE ACT WITH EFFECT FROM A PRIL 1,1964 . (EMPHASIS PROVIDED). 6.7 GIVEN THE PRESENT POSITION OF LAW, THE RELIANCE PLACED BY THE AR ON THE CASE OF NATIONAL TEXTILES (SUPRA), AND SARABHNI CHEMICALS PI T. LTD. (SUPRA) BOTH DECIDED BY THE HON. GUJARAT HIGH COURT , IS CLEARLY MISPLACED SINCE, IN BOTH THESE CASES, RELIANCE HAD BEEN PLACED ON THE CASES OF ANWAR ALI (1970) 76 ITR 696 AND KHODAY ESW ARASA & SONS (2972) 83 ITR 369 (S.C.) WHICH RELIED ON THE CASE O F ANWAR ALI. IN THE CASE OF NATIONAL TEXTILES (SUPRA) THE LEVY OF PENAL TY PERTAINED TO THE A.Y. 1974-75. THE HON. COURT TOOK THE VIEW THAT THE ADDI TION MADE U/S. 68 AS A RESULT OF THE FAILURE ON THE PART OF THE ASSESSEE TO PROVIDE AN EXPLANATION OR, WHERE THE EXPLANATION WAS NOT TO TH E SATISFACTION OF THE AO, WOULD NOT AUTOMATICALLY JUSTIFY THE IMPOSITION OF PENALTY U/S. 271(L)(C) BY TAKING RECOURSE ONLY TO EXPLANATION 3 .BELOW THE SAID SECTION. THE COURT THUS TOOK THE VIEW THAT, IN ORDE R TO JUSTIFY THE LEVY OF PENALTY, TWO FACTORS MUST CO-EXIST. FIRSTLY, THERE MUST BE SOME MATERIAL OR CIRCUMSTANCE LEADING TO THE CONCLUSION THAT THE AMOUNT DID REPRESENT THE ASSESSEE'S INCOME, IT BEING NOT SUFFICIENT THAT THE AMOUNT WAS ONLY ASSESSED AS SUCH. SECONDLY, THE CIRCUMSTANCES MUST SHOW THAT THERE WAS ANIMUS I.E. A CONSCIOUS CONCEALMENT OR ACT OF FURNI SHING OF INACCURATE PARTICULARS OF INCOME ON THE PART OF THE ASSESSEE. THE EXPLANATION BELOW THE SAID SECTION HAD NO BEARING ON THE FIRST FACTOR, BUT HAD A BEARING ONLY ON THE SECOND FACTOR, SO THAT, IT DID NOT MAKE THE ASSESSMENT ORDER A CONCLUSIVE EVIDENCE THAT THE AMO UNT ASSESSED WAS IN FACT INCOME OF THE ASSESSEE. NO PENALTY COULD BE IM POSED IF THE FACTS AND CIRCUMSTANCES WERE EQUALLY CONSISTENT WITH ME HYPOT HESIS THAT THE AMOUNT DID NOT REPRESENT CONCEALED INCOME AS WITH T HE HYPOTHESIS THAT IT DID. IF THE ASSESSEE PROVIDED AN EXPLANATION, WH ICH WAS UNPROVED BUT WAS NOT DISPROVED, THEN NO REASONABLE OR POSITIVE I NFERENCE COULD BE DRAWN THAT THE ASSESSEE'S CASE WAS FALSE. THEREFORE , THE EXPLANATION COULD COME TO THE RESCUE OF THE AO SINCE, THERE WOU LD BE NO MATERIAL TO SHOW THAT, THE AMOUNT IN QUESTION REPRESENTED THE A SSESSEE'S INCOME. ON THE OTHER HAND, IF THE EXPLANATION WAS HELD TO BE D EALING WITH BOTH THE FACTORS, THEN ALSO NO POSITIVE INFERENCE COULD BE D RAWN THAT THE ASSESSEE'S EXPLANATION WAS FALSE OR THAT THERE WAS ANY MENS-REA OR GUILTY MIND ON HIS PART. EVEN IN THIS VIEW OF THE M ATTER, THE EXPLANATION ITA NO.2382/AHD/2007 -12- ALONE COULD NOT JUSTIFY THE PENALTY. THE ABSENCE OF PROOF ACCEPTABLE TO THE DEPARTMENT CANNOT BE EQUATED WITH FRAUD OR WILF UL DEFAULT. 6.8 THE POINT TO NOTE HERE IS THAT, THE EXPLANATION THAT THE HON. COURT WAS REFERRING TO, WAS THE ONE THAT EXISTED PRIOR TO THE INTRODUCTION OF THE NEW EXPLANATION I BROUGHT INTO THE STATUTE W.E.F. 1 /4/1976 BY VIRTUE OF THE TAXATION LAWS (AMENDMENT ACT) OF 1975. IN ANY C ASE, WHILE REJECTING THE LEVY OF PENALTY, THE HON. COURT RELIE D UPON THE DECISION OF THE SUPREME COURT IN THE CASE OF CIT V/S. ANWAR ALI (1970) 76 ITR 896 AND IN THE CASE OF C/T R/S. KHODAY ESWARSA & SONS 8 3 1TR 369. IN THE CASE OF ANWAR ALI, THE HON. SUPREME COURT HAD LAID DOWN THAT BEFORE PENALTY U/S. 271(1 )(C) IS LEVIED FOR CONCEALMENT, THE REVENUE MUST PROVE THAT THE AMOUNT IN QUESTION WAS THE INCOME OF THE A SSESSEE AND THAT HE HAD CONCEALED IT WITH A MOTIVE. THIS VIEW WAS BASED ON THE PROVISIONS OF SECTION 271(L)(C) AS IT STOOD PRIOR TO 1/4/1976. AN D THE HON. GUJARAT HIGH COURT JUSTIFIABLY BASED ITS DECISION ON ANWAR ALI'S CASE. HOWEVER, WITH THE INSERTION OF THE NEW EXPLANATION W.E.F. 1/ 4/1976, THE ONUS HAD SHIFTED FROM THE REVENUE TO THE ASSESSEE. THIS CAME TO BE REFLECTED IN THE DECISION OF THE HON. SUPREME COURT, IN CIT V/S. MUSSADILAL RAM BHAROSE (SUPRA), IN CIT V/S. K. R. SADAYAPPAN (SUPR A) AND IN ADDL. CIT V/S JEEVNNLAL SHAH (SUPRA). THE HON. COURT TOOK THE VIEW THAT WITH THE INCORPORATION OF THE EXPLANATION TO SECTION 271(L)( C) THE VIEW EARLIER TAKEN IN ANWAR ALI'S CASE NO LONGER HELD THE FIELD AND IT WAS FOR THE ASSESSEE TO DISCHARGE THE ONUS AS CONTEMPLATED IN T HE SAID EXPLANATION. THIS WAS FURTHER AFFIRMED BY THE COURT IN B.A. BALA SUBRAMANIUM & BROS. CO. V/S. CIT (SUPRA). THIS VIEW OF THE HON. S UPREME COURT WAS FOLLOWED BY THE HON. KERALA HIGH COURT IN CIT V/S. A. SREENIVASA PAI (SUPRA), AND ALSO IN CIT V/S. GEO SEA FOODS (2000) 244 ITR 44, 51-52. 6.9 IN THE CASE OF THE ASSESSEE, SHE HAD PROVIDED AN EXPLANATION, WHICH SHE WAS UNABLE TO SUBSTANTIATE. NOR WAS SHE A BLE TO ESTABLISH THAT THE EXPLANATION PROVIDED WAS BONA/DE, AND THAT, ALL THE FACTS RELATING TO THE SAME AND MATERIAL TO THE COMPUTATION OF HER TOT AL INCOME HAD BEEN DISCLOSED BY HER. THUS, THE SUMS OF RS.3,00,000 AND RS.3,64,099 WERE DEEMED TO REPRESENT THE ASSESSEE'S INCOME IN RESPEC T OF WHICH PARTICULARS HAD BEEN CONCEALED GIVEN THE PREVAILING PROVISIONS OF THE ACT IN SECTION 271(1)(C) R.W, EXPLANATION I BELOW T HE SAID SECTION, THERE WAS CLEARLY A BURDEN ON THE ASSESSEE TO ESTABLISH T HE GENUINENESS OF THE EXPLANATION. THE ASSESSEE FAILED TO DISCHARGE THIS BURDEN. CONSEQUENTLY, THE PRESUMPTION THAT HE HAD CONCEALED HIS INCOME TO SUCH EXTENT, WAS CLEARLY AVAILABLE TO BE DRAWN BY THE AO . 6.10 TAKING INTO ACCOUNT THE TOTALITY OF THE FACTS OF THE CASE, THE JUDICIAL PRONOUNCEMENTS AS WELL AS THE CLEAR PROVISIONS OF L AW, THERE CANNOT BE ANY DOUBT ABOUT THE FACT THAT THE AO WAS FULLY JUST IFIED IN LEVYING ITA NO.2382/AHD/2007 -13- PENALTY U/S.271(1)(C) R.W. THE EXPLANATION-1, OF TH E IT ACT. THE LEVY OF PENALTY OF THE SUM OF RS.2,34,000 IS THEREFORE, CON FIRMED. 8. AGGRIEVED WITH THE ORDER OF THE LD. CIT(A), THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 9. AT THE TIME OF HEARING BEFORE US, ON BEHALF OF T HE ASSESSEE, SHRI J.P.SHAH APPEARED AND FILED A PAPER BOOK CONTAINING 78 PAGES, WHICH, INTER ALIA , INCLUDE WRITTEN SUBMISSIONS DATED 03.10.2006 AND 19.10.2006 FILED BEFORE THE LD. CIT(A), DETAILS OF BROKERAGE A ND COMMISSION FOR THE ASSESSMENT YEAR 2001-02 AND PHOTO COPIES OF VARIOUS CASE LAWS. THE LD. COUNSEL OF THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE LD. CIT(A), IN RESPECT OF GIFT OF RS. 3 LAKHS AND PENAL TY LEVIED UNDER SECTION 271(1)(C). IN THIS CONTEXT, THE LD. COUNSEL OF THE ASSESSEE RELIED ON THE DECISION DATED 24.07.2009 OF THE ITAT A BENCH, AH MEDABAD IN THE CASE OF NISHABEN H. JARIWALA VS- ITO IN ITA NO.761 /AHD/2009 WHEREIN IT WAS HELD THAT THE ASSESSEE IS UNABLE TO PROVE TH E GIFTS IN THE MANNER, REQUIRED BY THE DEPARTMENT, PENALTY CANNOT BE LEVIE D UNDER SECTION 271(1)(C). THE LD. COUNSEL FURTHER SUBMITTED THAT T HE ASSESSEE HAD REQUESTED THE AO TO SERVE THESE SUMMONS TO THE DONO RS. FOR THIS PURPOSE, SHE HAD ALSO VOLUNTEERED TO ACCOMPANY THE INSPECTOR TO ENSURE THE SERVICE OF SUMMONS. THIS OFFER WAS REJECTED BY THE AO. THE NAME AND ADDRESS OF THE DONORS AS WELL AS RECEIPT OF BROKERAGE AND COMM ISSION WERE FURNISHED ALONG WITH THEIR CAPITAL ACCOUNT, PROFIT & LOSS A/C . AND THE BALANCE-SHEET, BANK PASS-BOOK, COMPUTATION OF TOTAL INCOME AND COP Y OF ACKNOWLEDGEMENT FOR RETURN FILED. THE CONFIRMATION OF BROKERS AND COPY OF THEIR ACKNOWLEDGEMENT OF RETURN OF INCOME WERE A LSO FILED. THE AO FAILED TO BRING ON RECORD ANY COGENT EVIDENCE OR MA TERIAL TO SHOW THAT BOTH THE GIFTS RECEIVED AND BROKERAGE/COMMISSION PA ID WERE NOT GENUINE AND HAVE REPRESENTED THE SUPPRESSED INCOME OF THE A SSESSEE. SIMPLY ITA NO.2382/AHD/2007 -14- BECAUSE THE DONORS AND RECIPIENT OF BROKERAGE AND C OMMISSION FAILED TO APPEAR BEFORE THE AO, NEITHER ESTABLISH NOR THE EXP ENSES INCURRED COULD BE TREATED AS UNEXPLAINED OR BOGUS. CONSEQUENTLY, N O PENALTY FOR CONCEALMENT IS LEVIABLE. 10. ON THE OTHER HAND, SHRI K. MADHUSUDAN, APPEARIN G ON BEHALF OF THE REVENUE, VEHEMENTLY SUPPORTED THE ORDER OF THE LD. CIT(A). THE LD. D.R. POINTED OUT THAT THE DECISION OF THE ITAT A BENCH IN THE CASE OF NISHABEN H. JARIWALA ( SUPRA ), RELIED ON BY THE LD. COUNSEL OF THE ASSESSEE, IS NOT APPLICABLE TO THE FACTS OF ASSESSE ES CASE BECAUSE IN THAT CASE, THE INCOME-TAX AUTHORITIES HAVE NOT DISPUTED THE MONEY WHICH WAS RECEIVED BY THE ASSESSEE FROM OVERSEAS THROUGH BANK ING CHANNEL. THE ASSESSEE HAS ALSO ADDUCED THE CERTIFICATE ISSUED BY THE BANK OF BARODA CONFIRMING THE RECEIPT OF MONEYS FROM THEIR INTERNA TIONAL BUSINESS BRANCH, COPY OF SALARY SLIP OF DONOR SHOWING EARNIN G, COPY OF GIFT CHEQUE RECEIVED FROM THE DONOR, OCCASION AND PURPOSE OF GI FT AND IT WAS CONTENDED THAT ALL THESE MATERIALS HAVE BEEN FURNIS HED AND THE GENUINENESS OF THE GIFT STOOD PROVED. ON THIS BASIS , THE LD. D.R. POINTED OUT THAT THE FACTS OF THAT CASE ARE DIFFERENT THAN THE CASE BEFORE US BECAUSE IN THIS CASE, THE GIFTS WERE GIVEN BY PEOPLE WHO AR E NOT EVEN DISTANTLY RELATIVES. THEY DID NOT HAVE SUFFICIENT INCOME OR E VEN CAPITAL BALANCE TO GIVE THE GIFT OF RS.50,000/-. PRIOR TO GIVING THE G IFT, EACH OF THEM HAD ALMOST NEGLIGIBLE BALANCE IN THE BANK. CASH WAS DEP OSITED IN RESPECT BANK ACCOUNTS ONLY A FEW DAYS BEFORE THE GIFTS WERE GIVE N THROUGH CHEQUE. SOME OF THE BANK ACCOUNTS WERE OPENED ONLY FOR THE PURPOSE OF DEPOSITING CASH AND GIVING GIFTS. ALL THESE CLEARLY SHOW THAT NONE OF THE DONORS HAD ANY CREDITWORTHINESS TO GIVE THE GIFT AN D TRANSACTIONS WERE ALL STRUCTURED TO GIVE IT APPEARANCE OF CREDITWORTHINES S. ACCOUNTS OF ALL THE ITA NO.2382/AHD/2007 -15- DONORS WERE COMPILED BY ONE SHRI SURESH N. THAKKAR, A TAX CONSULTANT AND THE SOFTWARE USED WAS MONARCH. IN QUANTUM APPEA L, THE LD. CIT(A), THEREFORE, TOOK THE VIEW THAT NEITHER THE IDENTITY OF THE DONOR NOR THEIR GENUINENESS HAD BEEN PROVED. NOR THE GENUINENESS OF THE TRANSACTIONS HAS BEEN ESTABLISHED. THE LD. D.R. FURTHER POINTED OUT THAT BEFORE THE LD. CIT(A), IT WAS CONTENDED THAT SHE HAD NO CONTROL OV ER THE DONORS TO BE ABLE TO PRODUCE THEM BEFORE THE AO. HE POINTED OUT THAT THIS FACT ALONE INDICATES THAT THERE WAS NO LOVE AND AFFECTION. HAD THERE BEEN LOVE AND AFFECTION AND GIFT BEING GENUINE, DONORS SHOULD HAV E COOPERATED WITH THE ASSESSEE. ALL THE DONORS ARE MEN OF VERY LITTLE MEA NS DOING LABOUR JOBS AND THE ASSESSEE NEVER PRODUCED THE DONORS FOR FEAR OF BEING EXPOSED. THE LD. D.R. CONCLUDED THAT IN PENALTY PROCEEDINGS BEFORE THE AO, ASSESSEE PROVIDED AN EXPLANATION, WHICH SHE WAS UNA BLE TO SUBSTANTIATE. NOW WAS SHE ABLE TO ESTABLISH THAT THE EXPLANATIONS ARE NOT BONAFIDE. THEREFORE, SUM OF RS.3 LAKHS AND RS.3,64,099/- WERE DEEMED TO REPRESENT ASSESSEES INCOME IN RESPECT OF WHICH, PARTICULARS HAVE BEEN CONCEALED. AS PER EXPLANATION-I BELOW SECTION 271(1)(C), THE B URDEN IS ON THE ASSESSEE TO ESTABLISH GENUINENESS OF THE EXPLANATIO N. THE ASSESSEE FAILED TO DISCHARGE THIS BURDEN. HENCE, THE VIEW TAKEN BY THE LD. CIT(A) BE UPHELD. 11. HAVING HEARD BOTH THE SIDES, WE HAVE CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. IT IS PERTINENT TO NOTE THAT EACH AND EVERY CONTENTION OF THE ASSESSEE HAS BEEN DULY CONSIDERED BY THE LD. CIT(A), IN THE IMPUGNED ORDER. IN THE QUANTUM PROCEEDING, IT W AS FOUND THAT THE GIFT OF RS.50,000/- RECEIVED FROM SIX DONORS, WHO ARE LA BOURERS, NOT RELATED WITH THE ASSESSEE AND WITHOUT ANY OCCASION WAS BOGU S. FOR BROKERAGE AND COMMISSION ALSO, IN QUANTUM PROCEEDING, THE LD. CIT (A) HELD THAT ITA NO.2382/AHD/2007 -16- RENDERING OF SPECIFIC SERVICES BY ALLEGED BROKERS W AS NOT PROVED. ALL THE RETURNS OF INCOME OF BROKERS WERE FILED BY SHRI C.P .JHARIA & CO., CHARTERED ACCOUNTANTS. THESE TRANSACTIONS, AS IN TH E CASE OF THE GIFTS, WERE ALSO ORGANIZED IN A MANNER SO AS TO MAKE THEM APPEAR TO BE GENUINE WITH THE SOLE PURPOSE OF REDUCING THE TAXABLE INCOM E OF THE ASSESSEE BY MANIPULATION. IT IS ALSO PERTINENT TO NOTE THAT ACC OUNTS OF SOME BROKERS WHICH WERE FURNISHED BY THE ASSESSEE INDICATE THAT EITHER NO TAX WAS PAYABLE BY THEM OR VERY LITTLE TAX WAS PAYABLE BECA USE THEY DID NOT HAVE SUFFICIENT INCOME OF THEIR OWN. 11.1 THE LD. CIT(A)-II, SURAT IN QUANTUM APPEAL, VI DE ORDER DATED 18.10.2004, WHILE CONFIRMING THE DISALLOWANCE OF CO MMISSION, HELD THAT THIS PAYMENT HAS BEEN MADE IN AN ORGANIZED WAY ON T HE FOLLOWING GROUNDS: I) BROKERS WERE NEVER PRODUCED BEFORE THE AO II) ALL RETURNS OF INCOME OF THE BROKERS WERE FILED BY SHRI C.P.JHARIA & CO., WHICH INDICATES THAT IT HAS BEEN DONE FOR HELPING CERTAIN ASSESSES WHO HAVE SHOWN INCLINATION OF REDU CING THEIR INCOME BY SUCH MEANS. THIS HAS BEEN DONE IN EXCHANG E OF SOME CONSIDERATION. III) THE BROKERS HAVE PAID EITHER NEGLIGIBLE TAX OR HAVE NOT PAID TAX AT ALL. IN SPITE OF REPEATED REQUESTS, THE ASSESSEE DID NOT GIVE ADDRESSES OF BROKERS, WHERE NECESSARY ENQUIRY COULD BE MADE. IV) THE PAYMENT OF ALLEGED BROKERAGE OF SHRI S.K.A GARWAL (HUF), SHRI S.K.AGARWAL AND SHRI ANUJ AGARWAL, WHICH IS CL AIMED TO BE MADE AFTER THREE YEARS, THAT TOO BY SAME PAY ORDER, WHICH IS AGAINST THE COMPANY PRACTICE. NO BROKER WILL ALLOW CREDIT OF THREE YEARS OR MORE. ON THIS GROUND ALSO, THE CLAIM APPEA RS TO BE NON- GENUINE. 11.2 FROM THE ABOVE FINDING OF FACT RECORDED IN QUA NTUM PROCEEDING AND NO FRESH EXPLANATION FILED IN PENALTY PROCEEDIN GS, WE ARE CONVINCED ITA NO.2382/AHD/2007 -17- THAT IT WAS RIGHTLY HELD THAT CLAIM OF BONUS WAS BO GUS. IT IS ALSO PERTINENT TO NOTE THAT PAYMENT TO ABOVE-NAMED THREE BROKERS W AS MADE ON 31.03.2004 I.E. AFTER THE DATE OF ASSESSMENT ORDER DATED 21.03.2004 11.3 UNDER THE CIRCUMSTANCES, WE ARE CONVINCED THAT , THE FINDINGS GIVEN IN THE ASSESSMENT ORDER WHICH ARE CONFIRMED BY THE LD. CIT(A) IN QUANTUM APPEAL CLEARLY PROVE THAT GIFTS RECEIVED AN D BROKERAGE AND COMMISSION CLAIM WERE BOGUS. FURTHER, THE EXPLANATI ON, WHICH HAS BEEN PROVIDED BEFORE THE AO, COULD NOT BE SUBSTANTIATED BY THE ASSESSEE NOR SHE WAS ABLE TO ESTABLISH THAT EXPLANATION WAS BONA FIDE. THUS, SUM OF RS.3,00,000/- AND RS.3,64,099/- WERE DEEMED TO REPR ESENT ASSESSEES INCOME IN RESPECT OF WHICH, PARTICULARS HAVE BEEN C ONCEALED. AS PER EXPLANATION-I BELOW SECTION 271(1)(C), THE BURDEN I S ON THE ASSESSEE TO ESTABLISH GENUINENESS OF THE EXPLANATION. THE ASSES SEE FAILED TO DISCHARGE THIS BURDEN. EXPLANATION 1 TO SECTION 271(1)(C) IS PART OF SECTION 271(1)(C) AND WAS CLEARLY ATTRACTED IN THE CASE OF THE ASSESS EE. THE ASSESSE HAS FAILED TO OFFER ANY EXPLANATION AND WHATEVER EXPLAN ATION WAS OFFERED IS FOUND TO BE FALSE BY THE AUTHORITIES BELOW. SINCE T HE ASSESSEE HAD MADE FALSE CLAIM OF DEDUCTION OF THE EXPENDITURE, THEREF ORE, EXPLANATION OF THE ASSESSEE COULD NOT BE CONSIDERED TO BE BONA FIDE. T HE ASSESSEE HAS MADE A FALSE CLAIM OF DEDUCTION OF THE EXPENDITURE, THEREF ORE, AUTHORITIES BELOW ARE JUSTIFIED IN HOLDING THAT THE ASSESSEE HAS CONC EALED PARTICULARS OF INCOME OR FILED INACCURATE PARTICULARS OF INCOME. T HE FINDINGS RECORDED BY THE AUTHORITIES BELOW CLEARLY PROVE THAT THE DET AILS SUPPLIED BY THE ASSESSEE IN THE RETURN OF INCOME ARE INCORRECT AND FALSE. THEREFORE, THE LD. CIT(A) IS LEGALLY AND FACTUALLY CORRECT IN CONFIRMI NG THE PENALTY LEVIED UNDER SECTION 271(1)(C) READ WITH EXPLANATION 1 OF THE I.T. ACT, 1961. ITA NO.2382/AHD/2007 -18- THEREFORE, THE PENALTY OF RS.2,34,000/- LEVIED BY T HE AO AND CONFIRMED BY THE LD. CIT(A) IS HEREBY UPHELD. 12. IN RESULT, THE APPEAL OF THE ASSESSEE IS DISMIS SED. ORDER PRONOUNCED IN OPEN COURT ON 10 TH JUNE, 2011 SD/- SD/- (G.D. AGARWAL) VICE-PRESIDENT (T.K. SHARMA) JUDICIAL MEMBER PLACE : AHMEDABAD DATE : 10-06-2011 C OPY OF THE ORDER FORWARDED TO: 1) : APPELLANT 2) : RESPONDENT 3) : CIT(A) 4) : CIT CONCERNED 5) : DR, ITAT. BY ORDER DR/AR, ITAT, AHMEDABAD 1. DATE OF DICTATION : 05-05-2011 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER. : 10-05-2011 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P.S./P.S : 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT. : 5. DATE ON WHICH FAIR ORDER PLACED BEFORE OTHER MEMBER : 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P.S./P.S. : 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK. : 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . : 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER. : 10. DATE OF DESPATCH OF THE ORDER :