Vishal Fashions Pvt.Ltd., Surat V. The ACIT.,Cent.Circle-3, Surat

ITA 2497/AHD/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 6329 (ITAT-AHMEDABAD)
• Duration Of Justice: 10 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-06-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 17-06-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 11-08-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: A K PATEL
• Assessee Lawyers: RASESH SHAH
• Keywords: Business income; Search and seizure; Corroborative evidences
• Section: 27; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH 'D' BEFORE SHRI BHAVNESH SAINI,JM & SHRI A N PAHUJA,AM ITA NO.2497/AHD/2010 (ASSESSMENT YEAR:-2004-05) VISHAL FASHIONS PVT. LTD., 102, VISHAL HOUSE, WORLD TRADE CENTRE, RING ROAD, SURAT V/S ASST. COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE- 3, AAYAKAR BHAVAN,MAJURA GATE, SURAT PAN: AAACV 8087 F [APPELLANT] [RESPONDENT] ASSESSEE BY :- SHRI RASESH SHAH, AR REVENUE BY:- SHRI A K PATEL, DR O R D E R A N PAHUJA: THIS APPEAL BY THE ASSESSEE AGAINST AN ORDER DATED 11- 06-2010 OF THE LD. CIT(APPEALS)-II, AHMEDABAD, FOR THE ASSESSMENT YEAR 2004-05, RAISES THE FOLLOWING GROUNDS:- [1] ON THE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS LAW ON THE SUBJECT, THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) HAS ERRED IN CONFIRMING THE ACTION OF ASSESSING OFF ICER IN LEVYING PENALTY OF RS.2,61,927/- U/S 271(1)(C) OF T HE ACT. [2] IT IS THEREFORE PRAYED THAT THE ABOVE PENALTY L EVIED BY THE ASSESSING OFFICER AND CONFIRMED BY COMMISSIONER OF INCOME- TAX (APPEALS) MAY PLEASE BE DELETED. [3] APPELLANT CRAVES LEAVE TO ADD, ALTER OR DELETE ANY GROUND(S) EITHER BEFORE OR IN THE COURSE OF HEARING OF THE AP PEAL. 2. FACTS, IN BRIEF, AS PER RELEVANT ORDERS ARE THAT THE RETURN DECLARING INCOME AT RS.26,32,130/- FILED ON 31-10-2 004 BY THE ASSESSEE-COMPANY, TRADING IN SAREES & DRESS MATERIA LS, AFTER BEING PROCESSED ON 17.3.2005 U/S 143(1) OF THE INCOME-TAX ACT, 1961 [HEREINAFTER REFERRED TO AS THE ACT], WAS SELECTE D FOR SCRUTINY WIT THE SERVICE OF A NOTICE U/S 143(2) OF THE ACT ON 16 -08-2005.DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER [AO IN 2 ITA NO.2497/AHD/2010 SHORT] NOTICED THAT THE CLAIM OF SALES COMMISSION INCREASED FROM RS.3,88,525/- IN THE PRECEDING YEAR TO RS.15,34,203 /- IN THE YEAR UNDER CONSIDERATION, EVEN WHEN THE TURNOVER OF THE ASSESSEE REMAINED ALMOST THE SAME. TO A QUERY BY THE AO, THE ASSESSEE REPLIED THAT TO SUSTAIN IN THE HIGHLY COMPETITIVE M ARKET, ONE HAS TO GIVE COMMISSION TO PERSON THROUGH WHOM SALES IS EFFECTED . DURING THE YEAR THERE WAS GENERAL RECESSION IN THE MARKET, BUT THE ASSESSEE-C OMPANY TRIED HARD TO MAINTAIN THE SALES AND ENGAGED SALES AGENT TO PROCU RE MARKET SHARE, THE ASSESSEE ADDED. ON PERUSAL OF DETAILS SUBMITTED BY THE ASSESSEE, THE AO NOTICED T HE ASSESSEE PRODUCED COPY OF ACCOUNTS OF THE SALES COMMISSION PAID TO ONLY REGULAR AGENTS THROUGH WHOM THE ASSESS EE EFFECTED SALES. HOWEVER, I N THE CASE OF THE FOLLOWING FOUR PERSONS, COMMISSION HAD BEEN CREDITED TO THE ACCOUNT OF THE PARTIES ON THE LAST DAY OF THE YEAR AND THE ENTIRE AMOUNT WAS SHOW N AS OUTSTANDING. THE ASSESSEE PLACED A REMARK '1% SALES COMMISSION ON TOTAL SALES DURING THE YEAR'. I. SHRI SANJIV A. SETHI R S. 1,24,800 II. SHRI TUSHAR SETHI RS. 1,43,100 III. SHRI JANKINATH SETHI RS. 93,400 IV. SHRI ASHISH SETHI RS. 87,900 TOTAL RS. 4,49,200 THE ASSESSEE DID NOT FILE ANY DETAILS OF SALES TO WHICH THE AFORESAID PAYMENT OF COMMISSION WAS ATTRIBUTED NOR ANY EVIDENCE OF SERVICES RENDERED BY THE SAID PERSONS . ACCORDINGLY, THE AO DISALLOWED THE COMMISSION TO THE EXTENT OF RS.4,49,200/- . 2.1 THE AO ALSO NOTICED THAT THE ASSESSEE PAID COM MISSION OF RS.2,67,300/- TO SHRI LALITBHAI B. SHAH, A LEADING BUILDER OF SURAT. THE ENTRY OF COMMISSION WAS MADE ON THE LAST DAY OF THE ACCOUNTING YEAR AND THE AMOUNT REMAINED OUTSTANDING SINCE THE ASSESSEE DID NOT FURNISH ANY EVIDENCE OF SERVICES RENDERED BY TH E SAID PERSON OR THE EVIDENCE AND DETAILS OF SALES EFFECTED THROUGH HIM, THE AO DISALLOWED THE AFORESAID AMOUNT OF COMMISSION ALSO. 3 ITA NO.2497/AHD/2010 2.2 BESIDES, COMMISSION OF RS.13,612/- WAS DEBIT ED TO THE P&L ACCOUNT ON ACCOUNT OF SALES COMMISSION PAYABLE TO M /S. NILESH SILK MILLS (HUF) PERTAINING TO THE F.Y. 2002-03. SINCE T HE EXPENSES RELATED TO EARLIER YEAR, THE AO DISALLOWED THE AMOU NT OF RS.13,612/-. 2.3 THUS, TOTAL DISALLOWANCE ON ACCOUNT OF COMMIS SION WAS MADE TO THE EXTENT OF RS.7,30,112/-.INTER ALIA, PENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT WERE INITIATED. IN RESPONSE TO NOTICE DATED 30.11.2006 U/S 274 READ WITH SEC. 271(1)(C) OF THE ACT, THE ASSESSEE DID NOT SUBMIT ANY REPLY. 3. ON APPEAL, THE LD. CIT(A) UPHELD THE DISALLOWANC E OF COMMISSION VIDE ORDER DATED 01-10-2007,INTER ALIA, ON THE GROUND THAT THE ASSESSEE DID NOT FURNISH ANY CONFIRMATION OF THE PARTIES TO WHOM THE COMMISSION WAS ALLEGED TO HAVE BEEN PAID . ON FURTHER APPEAL BY THE ASSESSEE, THE ITAT MAINTAINED THE DIS ALLOWANCE IN THEIR ORDER DATED 30-04-2008 IN ITA NO. 4348/AHD/2007, HO LDING AS UNDER: 'THE FACTS EMERGE, EXCEPT BOOK ENTRIES, THERE IS NO SUPPORTING EVIDENCE. THE ASSESSEE DID NOT PRODUCE CONFIRMATION FROM PARTIES IN RESPECT OF 1% SALE COMMISSION. THE SERVI CES RENDERED HAVE NOT BEEN ESTABLISHED. IN VIEW THEREOF , WE HOLD THAT THE ASSESSEE FAILED TO ESTABLISH THE RENDERING OF SERVICES BY THE ALLEGED COMMISSION AGENTS.' 4. AFTER THE RECEIPT OF ORDER OF THE ITAT, IN R ESPONSE TO A SHOWCAUSE NOTICE DATED 07-10-2008, THE ASSESSEE DID NOT FURNISH ANY REPLY OR EXPLANATION. ACCORDINGLY, INVOKING EXP LANATION 1 TO SEC. 271(1)(C) OF THE ACT AND RELYING UPON THE DECISIONS IN B.A. BALASUBRAMANIUM BROS. CO. VS. CIT (1999) 236 ITR 97 7 (SC) ;CIT VS. NEW BHARAT TRADERS (2001) 248 ITR 255 (P.M.) AND CIT VS . GURBACHANLAL (2001) 250 ITR ITR 157 (DELHI), THE AO IMPOSED A PENALTY OF RS.2,61,927/- @ 100% OF THE TAX SOUGHT TO BE EVADED ON THE INCOME RS. 7,30,112/ -. 5. ON APPEAL, THE LEARNED CIT(A) UPHELD THE LEVY OF PENALTY . 4 ITA NO.2497/AHD/2010 6. THE ASSESSEE IS NOW IN APPEAL BEFORE US AGAINST THE AFORESAID FINDINGS OF THE LEARNED CIT(A). THE LEARNED AR ON B EHALF OF THE ASSESSEE CONTENDED THAT THEY HAD SUBMITTED COPIES O F LEDGER ACCOUNTS OF THE AFORESAID PERSONS AND HAD ALSO DEDU CTED TAX AT SOURCE WHILE CREDITING THE AMOUNT OF COMMISSION TO THE ACCOUNT OF THE AFORESAID PARTIES. TO A QUERY BY THE BENCH, THE LD. AR ADMITTED THAT THE ASSESSEE DID NOT SUBMIT ANY EXPLANATION B EFORE THE AO IN RESPONSE TO A SHOWCAUSE NOTICE ISSUED BEFORE LEVY O F PENALTY. THE LD. DR ON THE OTHER HAND SUPPORTED THE LEVY OF PENALTY UPHELD BY THE LD. CIT(A) IN VIEW OF FINDINGS OF THE ITAT AND ON THE G ROUND THAT THE ASSESSEE DID NOT SUBMIT ANY EVIDENCE OF SERVICES RENDERED BY THE RECIPIENTS OF COMMISSION. THE LD. DR, INTER ALIA, REFERRED TO DECISIONS IN LA CHMINARAYAN MADAN LAL VS. CIT (1972) 86 ITR 439 (SC) AND SWADESHI COTTON MILL S CO. LTD. VS. CIT (1967) 63 ITR 57 (SC). HE ADDED THAT THE ASSESS EE HAVING FAILED TO DISCHARGE ONUS IN TERMS OF EXPLANATION 1 TO SEC. 271(1)(C) OF THE ACT, LEVY OF PENALTY IS REQUIRED TO BE UPHE LD, PARTICULARLY WHEN THE ASSESSEE DID NOT FILE ANY EXPLANATION BEFO RE THE AO DURING THE PENALTY PROCEEDINGS. 7. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE FACTS OF THE CASE AS ALSO THE DECISIONS RELIED UPON BY THE L EARNED DR. AS IS APPARENT FROM THE AFORESAID FACTS AND FINDINGS OF T HE ITAT, EXCEPT BOOK ENTRIES THERE IS NO EVIDENCE IN RESPECT OF SER VICES RENDERED BY THE RECIPIENTS OF AFORESAID AMOUNT OF COMMISSION NO R THE ASSESSEE SUBMITTED CONFIRMATION FROM THE SAID PARTIES BEFORE THE LOWER AUTHORITIES AND EVEN BEFORE THE ITAT IN QUANTUM APP EAL. ADMITTEDLY, THE ASSESSEE DID NOT FURNISH ANY EXPLA NATION WHATSOEVER BEFORE THE AO IN RESPONSE TO A SHOWCAUSE NOTICE BEFORE LEVY OF PENALTY AND THUS, FAILED TO DISCHARGE THE O NUS LAID DOWN UPON HIM IN TERMS OF EXPLANATION 1 TO SEC. 271(1)(C) OF THE ACT. IN NUTSHELL, THE ASSESSEE DID NOT SUBMIT RELEVANT DE TAILS AND DOCUMENTS SOUGHT BY THE AO DURING THE ASSESSMENT PR OCEEDINGS NOR 5 ITA NO.2497/AHD/2010 SUBMITTED ANY EXPLANATION DURING THE PENALTY PROCEE DINGS, DESPITE SUFFICIENT OPPORTUNITY ALLOWED. BEFORE PROCEEDING F URTHER, WE MAY HAVE A LOOK AT THE RELEVANT PROVISIONS OF SECTION 2 71(1)(C) OF THE ACT, WHICH READ AS UNDER: 271.FAILURE TO FURNISH RETURNS, COMPLY WITH NOTICE S, CONCEALMENT OF INCOME, ETC. (1) IF THE ASSESSING OFFICER OR THE COMMISSIONER (A PPEALS) OR THE COMMISSIONER IN THE COURSE OF ANY PROCEEDINGS UNDER THIS ACT, IS SATISFIED THAT ANY PERSON- .. (C) HAS CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHED INACCURATE PARTICULARS OF SUCH INCOME, HE MAY DIRECT THAT SUCH PERSON SHALL PAY BY WAY OF PENALTY,- (III) IN THE CASES REFERRED TO IN CLAUSE (C) , IN ADDITION TO ANY TAX PAYABLE BY HIM, A SUM WHICH SHALL NOT BE LESS THAN, BUT WHICH SHALL NOT EXCEED THREE TIMES, THE AMOUNT OF TAX SOU GHT TO BE EVADED BY REASON OF THE CONCEALMENT OF PARTICULARS OF HIS INCOME OR THE FURNISHING OF INACCURATE PARTICULARS OF SUCH INCOME EXPLANATION 1.-WHERE IN RESPECT OF ANY FACTS MATERI AL 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 DEPUTY COMMISSIONER (APPEALS) OR THE COMMISSIONER ( APPEALS) TO BE FALSE, OR (B) SUCH PERSON OFFERS AN EXPLANATION WHICH HE IS N OT ABLE TO SUBSTANTIATE AND FAILS TO PROVE THAT SUCH EXPLANATI ON IS BONAFIDE 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 COMPUTING 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 REP RESENT THE INCOME IN RESPECT OF WHICH PARTICULARS HAVE BEEN CO NCEALED. 7.1 AS IS EVIDENT FROM THE AFORESAID CL. (C) OF S. 271(1) OF THE ACT, THE WORDS USED ARE 'HAS CONCEALED THE PARTICUL ARS OF HIS INCOME' OR FURNISHED 'INACCURATE PARTICULARS OF SUCH INCOME '. THUS, BOTH IN CASE OF CONCEALMENT AND INACCURACY, THE PHRASE 'PAR TICULARS OF INCOME' HAS BEEN USED. THE LEGISLATURE HAS NOT USED THE WORDS 'CONCEALED HIS INCOME'. FROM THIS IT WOULD BE APPAR ENT THAT PENAL PROVISION WOULD OPERATE WHEN THERE IS A FAILURE TO DISCLOSE FULLY OR 6 ITA NO.2497/AHD/2010 TRULY ALL THE PARTICULARS. THE WORDS 'PARTICULARS O F INCOME' REFER TO THE FACTS WHICH LEAD TO THE CORRECT COMPUTATION OF INCO ME IN ACCORDANCE WITH THE PROVISIONS OF THE ACT. SO WHEN ANY FACT M ATERIAL TO THE DETERMINATION OF AN ITEM AS INCOME OR MATERIAL TO T HE CORRECT COMPUTATION IS NOT FILED OR THAT WHICH IS FILED IS NOT ACCURATE, THEN THE ASSESSEE WOULD BE LIABLE TO PENALTY UNDER S. 27 1(1)(C) OF THE ACT. THE EXPRESSION 'HAS CONCEALED THE PARTICULARS OF INCOME' AND 'HAS FURNISHED INACCURATE PARTICULARS OF INCOME' HA VE NOT BEEN DEFINED EITHER IN SECTION 271 OR ELSEWHERE IN THE A CT. HOWEVER, NOTWITHSTANDING THE DIFFERENCE IN THE TWO CIRCUMSTA NCES, IT IS NOW WELL ESTABLISHED THAT THEY LEAD TO THE SAME EFFECT NAMELY, KEEPING OFF A CERTAIN PORTION OF THE INCOME FROM THE RETURN . ACCORDING TO LAW LEXICON, THE WORD 'CONCEAL' MEANS: 'TO HIDE OR KEEP SECRET. THE WORD 'CONCEAL' IS C ON+CELARE WHICH IMPLIES TO HIDE. IT MEANS TO HIDE OR WITHDRAW FROM OBSERVATION; TO COVER OR KEEP FROM SIGHT; TO PREVENT THE DISCOVERY OF ; TO WITHHOLD KNOWLEDGE OF. THE OFFENCE OF CONCEALMENT IS, THUS, A DIRECT ATTEMPT TO HIDE AN ITEM OF INCOME OR A PORTION THEREOF FROM THE KNOWLEDGE OF THE INCOME-TAX AUTHORITIES.' IN WEBSTER'S DICTIONARY, 'INACCURATE' HAS BEEN DEFI NED AS : 'NOT ACCURATE, NOT EXACT OR CORRECT; NOT ACCORDING TO TRUTH; ERRONEOUS ; AS AN INACCURATE STATEMENT, COPY OR TRANSCRIPT.' 7.2 IF THE DISCLOSURE OF FACTS IS INCORRECT OR FALSE TO THE KNOWLEDGE OF THE ASSESSEE AND IT IS ESTABLISHED, THEN SUCH DI SCLOSURE CANNOT TAKE IT OUT FROM THE PURVIEW OF THE ACT OF CONCEALM ENT OF PARTICULARS OR FURNISHING INACCURATE PARTICULARS THEREOF FOR TH E PURPOSE OF LEVY OF PENALTY. THE PENALTY U/S 271(1)(C) OF THE ACT IS LEVIABLE IF THE AO IS SATISFIED IN THE COURSE OF ANY PROCEEDINGS UNDER TH IS ACT THAT ANY PERSON HAS CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHED INACCURATE PARTICULARS OF SUCH INCOME. IN THIS CONT EXT, HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF AM SHAH & CO. VS. CIT,238 ITR 415(GUJ) OBSERVED THAT THERE CANNOT BE A STRAIGHT JACKET FORMULA FOR DET ECTION OF THESE DEFAULTS OF CONCEALMENT OR OF FURNISHING INACCURATE PARTICULARS OF INCOME AND INDEED CONCEALMENT OF PARTICULARS OF INC OME AND 7 ITA NO.2497/AHD/2010 INACCURATE PARTICULARS OF INCOME MAY AT TIMES OVERL AP, AS FOR EXAMPLE WHEN HALF OF THE INCOME UNDER A PARTICULAR HEAD IS NOT AT ALL DISCLOSED, THAT WOULD BE CONCEALED TO THAT EXTENT W HILE THE REMAINING HALF WHICH IS IN FACT DISCLOSED WOULD, NO T BEING HIS COMPLETE DISCLOSURE AMOUNT TO INACCURATE PARTICULAR S OF INCOME AS REGARDS THAT CONSTITUENT ITEM OF THE RETURN. BY THE VERY NATURE OF THE ASSESSMENT PROCEEDINGS THE ITO WHILE ASCERTAINING T HE TOTAL INCOME CHARGEABLE TO TAX WOULD BE IN A POSITION TO DETECT THE SPECIFIC OR DEFINITE PARTICULARS OF INCOME CONCEALED OR OF WHIC H FALSE PARTICULARS ARE FURNISHED. WHERE IN THE CONSTITUENTS OF INCOME RETURNED, SUCH SPECIFIC OR DEFINITE PARTICULARS OF INCOME ARE DETE CTED AS CONCEALED, THEN EVEN IN THE TOTAL INCOME FIGURE TO THAT EXTENT THEY REFLECT, IT WOULD AMOUNT TO CONCEALMENT TO THAT EXTENT. IN THE SAME WAY WHERE SPECIFIC AND DEFINITE PARTICULARS OF INCOME ARE DET ECTED AS INACCURATE, THEN SUCH FIGURE WILL ALSO MAKE THE TOT AL INCOME INACCURATE IN PARTICULARS TO THE EXTENT IT DOES NOT INCLUDE SUCH INCOME. WHETHER IT BE A CASE OF ONLY CONCEALMENT OR OF ONLY INACCURACY OR BOTH, THE PARTICULARS OF INCOME SO VI TIATED WOULD BE SPECIFIC AND DEFINITE AND BE KNOWN IN THE ASSESSMEN T PROCEEDINGS BY THE ITO, WHO ON BEING SATISFIED ABOUT EACH CONCE ALMENT OR INACCURACY OF PARTICULARS OF INCOME WOULD BE IN A P OSITION TO INITIATE THE PENALTY PROCEEDINGS ON ONE OR BOTH OF THE GROUN DS OF DEFAULT AS MAY HAVE BEEN SPECIFICALLY AND DIRECTLY DETECTED. T HE OPPORTUNITY OF HEARING GIVEN BY THE NOTICE UNDER SECTION 271(1)(C) , OBVIOUSLY IS AGAINST SUCH CONCEALMENT AND INACCURACY AS IS DETEC TED IN THE ASSESSMENT PROCEEDINGS. 7.3. INDISPUTABLY, THE ASSESSEE DID NOT SUBMIT A NY EVIDENCE OF SERVICES RENDERED BY THE RECIPIENTS OF AFORESAID AM OUNT OF COMMISSION BEFORE THE AO/LD. CIT(A) OR EVEN THE IT AT IN QUANTUM PROCEEDINGS. EVEN DURING THE PENALTY PROCEEDINGS, THE ASSESSEE DID NOT SUBMIT ANY EXPLANATION AT ALL BEFORE THE AO . IN THESE CIRCUMSTANCES, IT DOES NOT LIE IN THE MOUTH OF THE ASSESSEE THAT IT WAS NOT CONCEALING ITS INCOME BY FURNISHING INACCU RATE PARTICULARS THEREOF IN THE RETURN FILED ORIGINALLY. IN THE COUR SE OF PENALTY PROCEEDINGS , THE ASSESSEE DID NOT BRING ANY MATERI AL BEFORE THE ASSESSING OFFICER TO REBUT THE INFERENCES DRAWN BY THE ASSESSING OFFICER IN THE COURSE OF ASSESSMENT PROCEEDINGS. IN TERMS OF PROVISIONS OF SEC. 271(1)(C) OF THE ACT READ WITH E XPLANATION 1 THERETO AND THE JUDICIAL PRONOUNCEMENTS IN THE CASE OF B.A. BALASUBRAMANIAM & BROS. CO. V. CIT [1999] 157 CTR 5 56(SC), CIT V. B.A. BALASUBRAMANIAM & BROS. [1984] 40 CTR (MAD. )/[1985] 152 8 ITA NO.2497/AHD/2010 ITR 529 (MAD.) , CIT V. MUSSADILAL RAM BHAROSE [198 7] 60 CTR (SC) 34/[ 1987] 165 ITR 14 (SC); TC 50 R. 474; CIT V. K.R. SADAYAPPAN [1990] 86 CTR (SC) 120; [1990] 185 ITR 4 9 (SC); TC 50 R. 795, ADDL. CIT V. JEEVAN LAL SAH [1994] 117 C TR (SC) 130; [1994] 205 ITR 244 (SC); TC 50 R. 973 AND K.P.MAD HUSUDANAN VS. CIT,251 ITR 99(SC), IT IS WELL ESTABLISHED THAT WHE NEVER THERE IS DIFFERENCE BETWEEN THE RETURNED AND ASSESSED INCOME , THERE IS INFERENCE OF CONCEALMENT. THE EXPLANATION 1 TO SEC. 271(1)(C) OF THE ACT RAISES A PRESUMPTION THAT CAN BE REBUTTED BY TH E ASSESSEE WITH REFERENCE TO FACTS OF THE CASE. THUS, THE ONUS IS O N THE ASSESSEE TO REBUT THE INFERENCE OF CONCEALMENT. THE ABSENCE OF EXPLANATION ITSELF WOULD ATTRACT PENALTY. IN THE CASE OF NEW BI JLI FOUNDRY VS. CIT,135 ITR 593, HONBLE PUNJAB AND HARYANA HIGH CO URT HAVE HELD THAT THE FINDINGS RECORDED IN THE ASSESSMENT PROCEE DINGS ARE CERTAINLY RELEVANT IN THE PENALTY PROCEEDINGS. IN T HE ABSENCE OF ANY FRESH MATERIAL DURING THE COURSE OF PENALTY PROCEED INGS, SPECIALLY ESTABLISHING THAT THE AFORESAID FINDINGS OF THE TRI BUNAL IN QUANTUM APPEAL WERE BASED ON CERTAIN IMPROPER FACTS OR WRON G APPRECIATION OF THE FACTS, WE ARE AFRAID THAT IN THE PENALTY PRO CEEDINGS WE ARE UNABLE TO TAKE A DIFFERENT VIEW, PARTICULARY WHEN N O EXPLANATION HAS BEEN SUBMITTED BEFORE THE AO DURING THE PENALTY PRO CEEDINGS. THE ONUS LAID DOWN UPON THE ASSESSEE TO REBUT THE PRESU MPTION RAISED UNDER EXPLANATION 1 WOULD NOT BE DISCHARGED BY ANY FANTASTIC OR FANCIFUL EXPLANATION. IT IS NOT THE LAW THAT ANY AN D EVERY EXPLANATION HAS TO BE ACCEPTED. IN OUR CONSIDERED VIEW, THE PROVISIONS OF CLAUSE (A ) OF EXPLANATION 1 TO SECTION 271(1)(C) O F THE ACT, WHEN THE ASSESSEE DID NOT SUBMIT ANY EXPLANATION DURING PENALTY PROCEEDINGS NOR RELEVANT EVIDENCE OF SERVICES REND ERED BY THE RECIPIENTS OF COMMISSION OR EVEN THEIR CONFIRMATION S DESIRED BY THE AO DURING THE ASSESSMENT PROCEEDINGS, IS CLEARLY AT TRACTED AND THE ASSESSEE MISERABLY FAILED TO DISCHARGE THE ONUS LA ID DOWN IN THIS EXPLANATION. IN SUCH CIRCUMSTANCES, WE HAVE NO HES ITATION IN 9 ITA NO.2497/AHD/2010 UPHOLDING THE LEVY OF PENALTY. THIS VIEW OF OURS IS SUPPORTED BY THE DECISION IN CIT VS. SMT. CHANCHAL KATYAL,173 TAXMAN 71(ALL.) 7.4 WE FIND THAT THE LEGAL POSITION IS SQUARELY COVERED BY THE DECISION OF THE HONBLE APEX COURT IN K.P. MADHUSUD ANAN V. CIT [2001] 251 ITR 99. THEREIN, THE HONBLE COURT AFFIR MED THE DECISION OF THE KERALA HIGH COURT IN CIT V. K.P. MADHUSUDANA N [2000] 246 ITR 218. CONSIDERING THE EFFECT OF THE ADDITION OF THE EXPLANATION TO SECTION 271(1) OF THE ACT AND THE AMENDMENT TO SECT ION 271(1)(C) OF THE ACT BY DELETION OF THE WORD 'DELIBERATELY', THE KERALA HIGH COURT CAME TO THE CONCLUSION THAT WHETHER PENALTY WAS LIA BLE TO BE IMPOSED IN A CASE WHERE THE ASSESSEE COULD OFFER NO ACCEPTABLE EXPLANATION FOR THE INCOME NOT DISCLOSED OR THE INA CCURATE PARTICULARS HE HAD FURNISHED IN HIS RETURN, HAD TO BE EXAMINED AND IF FOUND UNACCEPTABLE, PENALTY WAS LIABLE TO BE IMPOSE D. THE HONBLE KERALA HIGH COURT OBSERVED AS FOLLOWS: 'SECTION 271(1)(C) OF THE INCOME-TAX ACT, 1961, IS ATTRACTED WHERE, IN THE COURSE OF ANY PROCEEDINGS UNDER THE A CT, THE ASSESSING OFFICER OR THE FIRST APPELLATE AUTHORITY IS SATISFIED THAT: (A) ANY PERSON HAS CONCEALED THE PARTICULARS OF HIS INCOME; OR (B) HAS FURNISHED INACCURATE PARTICULARS OF SUCH IN COME. THE EXPRESSIONS 'HAS CONCEALED' AND 'HAS FURNISHED INAC CURATE PARTICULARS' HAVE NOT BEEN DEFINED EITHER IN THE SE CTION OR ELSEWHERE IN THE ACT. HOWEVER, NOTWITHSTANDING DIFF ERENCES IN THE TWO CIRCUMSTANCES, THEY LEAD TO THE SAME EFFECT , VIZ., KEEPING OFF A CERTAIN PORTION OF INCOME. THE FORMER IS DIRECT WHILE THE LATTER MAY BE INDIRECT IN ITS EXECUTION. A CONSPECTUS OF THE EXPLANATION ADDED BY THE FINANC E ACT, 1964, AND THE SUBSEQUENT SUBSTITUTED EXPLANATIONS MAKES I T CLEAR THAT THE STATUTE VISUALIZED THE ASSESSMENT PROCEEDINGS A ND PENALTY PROCEEDINGS TO BE WHOLLY DISTINCT AND INDEPENDENT O F EACH OTHER. IN ESSENCE, THE EXPLANATION (BOTH AFTER 1964 AND 19 76) IS A RULE OF EVIDENCE. PRESUMPTIONS WHICH ARE REBUTTABLE IN N ATURE ARE AVAILABLE TO BE DRAWN. THE INITIAL BURDEN OF DISCHA RGING THE ONUS OF REBUTTAL IS ON THE ASSESSEE. EXPLANATION 1 AUTOM ATICALLY COMES INTO OPERATION WHEN, IN RESPECT OF ANY FACTS MATERIAL TO THE COMPUTATION OF TOTAL INCOME OF ANY PERSON, THER E IS FAILURE TO OFFER AN EXPLANATION OR AN EXPLANATION IS OFFERED W HICH IS FOUND TO BE FALSE BY THE ASSESSING OFFICER OR THE FIRST A PPELLATE AUTHORITY, OR AN EXPLANATION IS OFFERED WHICH IS NO T SUBSTANTIATED. IN SUCH A CASE, THE AMOUNT ADDED OR DISALLOWED IN C OMPUTING THE 10 ITA NO.2497/AHD/2010 TOTAL INCOME IS DEEMED TO REPRESENT THE INCOME IN R ESPECT OF WHICH PARTICULARS HAVE BEEN CONCEALED. AS PER THE P ROVISION OF EXPLANATION 1, THE ONUS TO ESTABLISH THAT THE EXPLA NATION OFFERED WAS BONA FIDE AND ALL FACTS RELATING TO THE SAME AN D MATERIAL TO THE COMPUTATION OF HIS INCOME HAVE BEEN DISCLOSED B Y HIM WILL BE ON THE PERSON CHARGED WITH CONCEALMENT. THE ASSE SSING OFFICER IS NOT OBLIGED TO INTIMATE THE ASSESSEE THA T EXPLANATION 1 TO SECTION 271(1)(C) IS PROPOSED TO BE APPLIED. THE SCHEME OF THE PROVISIONS DOES NOT PROVIDE FOR SUCH A REQUIREM ENT EITHER DIRECTLY OR INFERENTIALLY. IN SIR SHADILAL'S CASE [ 1987] 168 ITR 705, WHAT THE SUPREME COURT OBSERVED WAS THAT THERE MAY BE SEVERAL REASONS FOR WHICH THE ASSESSEE MAY HAVE OFF ERED AN AMOUNT FOR ADDITION, BUT THAT ITSELF IS NOT SUFFICI ENT TO INFER CONCEALMENT. IT HAS NOT LAID DOWN AS A RULE OF GENE RAL APPLICATION THAT WHENEVER SUCH IS THE CASE, PENALTY CANNOT BE IMPOSED. ON THE CONTRARY, IN SUCH CASES ALSO THE AS SESSEE IS REQUIRED TO DISCHARGE THE BURDEN PLACED BY THE EXPL ANATION APPENDED TO SECTION 271(1)(C). IN CASE AN EXPLANATI ON IS OFFERED, THE ASSESSING OFFICER IS TO EXAMINE IT AND FIND OUT WHETHER THE ASSESSEE HAS BEEN ABLE TO ESTABLISH THAT THERE WAS NO CONCEALMENT. HELD, THAT, IN THE CASE AT HAND, NO EXPLANATION WOR TH THE NAME WAS OFFERED BY THE ASSESSEE. THE STATEMENT MADE BY THE ASSESSEE WAS TO THE EFFECT THAT HAND LOANS WERE OBT AINED WHICH WERE INTENDED TO BE REFUNDED IMMEDIATELY AND, THERE FORE, THE ENTRIES WERE NOT MADE, BUT, LATER ON, THE ARRANGEME NT DID NOT WORK OUT. THEREFORE, THE AMOUNT WAS OFFERED FOR TAX ATION. THERE WAS A CLEAR ADMISSION THAT THE ENTRIES WERE NOT MAD E ON THE RELEVANT DATES. IT WAS NOT A CASE WHERE ENTRIES WER E MADE ON THE RELEVANT DATES AND THE SOURCE OF MONEY WAS OMIT TED. THE ENTRIES ON THE CONTRARY WERE MADE ON DATES WHEN THE RE WAS SUFFICIENT CASH BALANCE. THE INTENTION TO HIDE THE ACTUAL STATE OF AFFAIRS WAS CLEAR. THE EXPLANATION OFFERED WAS FANC IFUL AND VAGUE. THE IMPOSITION OF PENALTY WAS VALID AND THE TRIBUNAL ERRED IN CANCELLING IT.' 7.5 HONBLE SUPREME COURT IN THE CASE OF K.P.MA DHUSUDANAN VS. CIT,251 ITR 99(SC) WHILE AFFIRMING THE AFORESAID VI EW HELD THAT WE FIND IT DIFFICULT TO ACCEPT AS CORRECT THE TWO JUDGMENTS AFOREMENTIONED. THE EXPLANATION TO SECTION 271(1)(C ) IS A PART OF SECTION 271. WHEN THE INCOME-TAX OFFICER OR THE APP ELLATE ASSISTANT COMMISSIONER ISSUES TO AN ASSESSEE A NOTI CE UNDER SECTION 271, HE MAKES THE ASSESSEE AWARE THAT THE P ROVISIONS THEREOF ARE TO BE USED AGAINST HIM. THESE PROVISION S INCLUDE THE EXPLANATION. BY REASON OF THE EXPLANATION, WHERE TH E TOTAL INCOME RETURNED BY THE ASSESSEE IS LESS THAN 80 PER CENT. OF THE TOTAL INCOME ASSESSED UNDER SECTION 143 OR 144 OR 1 47, REDUCED 11 ITA NO.2497/AHD/2010 TO THE EXTENT THEREIN PROVIDED, THE ASSESSEE IS DEE MED TO HAVE CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHE D INACCURATE PARTICULARS THEREOF, UNLESS HE PROVES THAT THE FAIL URE TO RETURN THE CORRECT INCOME DID NOT ARISE FROM ANY FRAUD OR NEGL ECT ON HIS PART. THE ASSESSEE IS, THEREFORE, BY VIRTUE OF THE NOTICE UNDER SECTION 271 PUT TO NOTICE THAT IF HE DOES NOT PROVE , IN THE CIRCUMSTANCES STATED IN THE EXPLANATION, THAT HIS F AILURE TO RETURN HIS CORRECT INCOME WAS NOT DUE TO FRAUD OR NEGLECT, HE SHALL BE DEEMED TO HAVE CONCEALED THE PARTICULARS OF HIS INC OME OR FURNISHED INACCURATE PARTICULARS THEREOF AND, CONSE QUENTLY, BE LIABLE TO THE PENALTY PROVIDED BY THAT SECTION. NO EXPRESS INVOCATION OF THE EXPLANATION TO SECTION 271 IN THE NOTICE UNDER SECTION 271 IS, IN OUR VIEW, NECESSARY BEFORE THE P ROVISIONS OF THE EXPLANATION THEREIN ARE APPLIED. THE HIGH COURT AT BOMBAY WAS, THEREFORE, IN ERROR IN THE VIEW THAT IT TOOK A ND THE DIVISION BENCH IN THE IMPUGNED JUDGMENT WAS RIGHT. 7.6 THEREFORE, IN VIEW OF THE FACTS AND CIR CUMSTANCES AND IN THE LIGHT OF ABOVE NOTED AUTHORITATIVE PRONOUNCEMEN TS, WHEN THE ASSESSEE FAILED TO DISCHARGE THE ONUS LAID DOWN UPO N HIM IN TERMS OF EXPLANATION 1 TO SECTION 271(1)(C) OF THE ACT AN D DID NOT OFFER ANY EXPLANATION DURING THE THE PENALTY PROCEEDINGS , WE HAVE NO OPTION BUT TO UPHOLD THE FINDINGS OF THE LD. CIT( A), CONFIRMING THE LEVY OF PENALTY . EVEN OTHERWISE THE BREACH OF CI VIL OBLIGATION WHICH ATTRACTS A PENALTY UNDER THE PROVISIONS OF AN ACT W OULD IMMEDIATELY ATTRACT THE LEVY OF PENALTY IRRESPECTIVE OF THE FAC T WHETHER THE CONTRAVENTION WAS MADE BY THE DEFAULTER WITH ANY GU ILTY INTENTION OR NOT, VIDE CHAIRMAN, SEBI V. SHRIRAM MUTUAL FUND [20 06] 131 COMP CAS 591 (SC) ; [2006] 5 SCC 361. THIS VIEW HAS BEEN REITERATED BY THE HONBLE SUPREME COURT IN THEIR DECISION DATED 2 9.9.2008 IN THE CASE OF UNION OF INDIA AND OTHERS VS. DHARMENDRA T EXTILE PROCESSORS AND OTHERS, IN CIVIL APPEAL NOS.10289 -1 0303 OF 2003. 7.7 . A VERY HEAVY ONUS WAS PLACED ON THE ASSESSEE TO EXPLAIN THE DIFFERENCE BETWEEN THE ASSESSED INCOME AND RETURNED INCOME AND THE ASSESSEE DID NOT DISCHARGE THE SAID ONUS. SINC E THE ASSESSEE FAILED TO ESTABLISH THE BONAFIDE OF THEIR CLAIM, TH EREFORE, IN TERMS OF EXPLANATION 1 TO SECTION 271(1)(C) OF THE ACT, THE ONUS IS NOT 12 ITA NO.2497/AHD/2010 DISCHARGED BY THE ASSESSEE, DESPITE SUFFICIENT OPPO RTUNITY ALLOWED BY THE LOWER AUTHORITIES. THUS, LEVY OF PENALTY IS JUSTIFIED.[CIT VS. ALTRON ELECTRONICS INDIA LTD.,301 ITR 66(KAR)]. 8. IN THE LIGHT OF THE DISCUSSION MADE ABOVE, I T IS THUS CLEAR THAT ALL THE MATERIAL FACTS AND PARTICULARS RELATING TO THE ASSESSEE'S COMPUTATION OF INCOME WERE NEVER DISCLOSED BY THE A SSESSEE, AND IT IS FURTHER CLEAR THAT THE ASSESSEE DID NOT OFFER AN Y EXPLANATION AT ALL DURING THE PENALTY PROCEEDINGS. IN THIS VIEW OF THE MATTER AND IN THE LIGHT OF DECISIONS OF THE HONBLE SUPREME COURT AN D JURISDICTIONAL HIGH COURT REFERRED TO ABOVE, WE ARE OF THE OPINIO N THAT THE ASSESSEE HAS NOT BEEN ABLE TO DISCHARGE THE BURDEN THAT LAY UPON THEM BY EXPLANATION 1 TO S. 271(1)(C) OF THE ACT. T HEREFORE, WE HAVE NO HESITATION IN UPHOLDING THE ORDER OF THE LD. CIT (A) IN CONFIRMING THE PENALTY IMPOSED BY THE AO UNDER S. 271(1)(C) OF THE ACT . CONSEQUENTLY, GROUND NOS.1 & 2 IN THE APPEAL ARE DI SMISSED. 9. NO ADDITIONAL GROUND HAVING BEEN RAISED BEFOR E US IN TERMS OF RESIDUARY GROUND NO.3 IN THE APPEAL, ACCORDINGLY, T HIS GROUND IS DISMISSED. 10. IN THE RESULT, APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE COURT TODAY ON 24 -06-2011 SD/- SD/- (BHAVNESH SAINI) JUDICIAL MEMBER (A N PAHUJA) ACCOUNTANT MEMBER DATED : 24-06-2011 COPY OF THE ORDER FORWARDED TO: 1. VISHAL FASHIONS PVT. LTD., 102, VISHAL HOUSE, WO RLD TRADE CENTRE, RING ROAD, SURAT 2. THE ASST. COMMISSIONER OF INCOME-TAX, CENTRAL CI RCLE-3, 13 ITA NO.2497/AHD/2010 SURAT 3. CIT CONCERNED 4. CIT(A)-II, AHMEDABAD 5. DR, ITAT, AHMEDABAD BENCH-D, AHMEDABAD 6. GUARD FILE BY ORDER DEPUTY REGISTRAR ASSISTANT REGISTRAR ITAT, AHMEDABAD