Appeal details
Counselvise Citation
[2014] 140 COUNSELVISE.COM (IT) 73096 (ITAT-AHMEDABAD)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
2 year(s) 4 month(s) 23 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
28-02-2014
Appeal Filed By
Assessee
Bench Allotted
D
Next Hearing Date
17-02-2014
Assessment Year
2008-2009
Appeal Filed On
05-10-2011
Judgement Text
, , , , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD . .. . . . . . , , , , !' !' !' !' # $% # $% # $% # $%, , , , & & & & BEFORE SHRI N.S. SAINI, ACCOUNTANT MEMBER AND SHRI KUL BHARAT, JUDICIAL MEMBER ITA NO. ASSESSMENT YEAR APPELLANT RESPONDENT 2498/AHD/2011 2008-09 SH. SANJAY M. MEHTA, AHMEDABAD. PAN: ALYPM0485G INCOME TAX OFFICER, WARD-6(3), AHMEDABAD. 2639/AHD/2011 2008-09 REVENUE ASSESSEE 2902/AHD/2012 2008-09 REVENUE ASSESSEE #!' ( %/ // / DATE OF HEARING : 20/02/2014 *+, ( % / DATE OF PRONOUNCEMENT: 28/02/2014 - - - -/ // / O R D E R PER SHRI N.S. SAINI, ACCOUNTANT MEMBER: ITA NOS. 2498/AHD/2011 AND 2639/AHD/2011 ARE CROSS APPEALS F ILED BY THE ASSESSEE AND THE REVENUE AGAINST THE ORDER O F LD. CIT(A)-XI, AHMEDABAD DATED 09.08.2011. ITA NO. 2902/AHD/2012 IS THE APPEAL OF REVENUE AGAINST THE ORDER OF LD. CIT(A) DATED 08.10 .2012. 2. IN THE APPEAL OF THE ASSESSEE, THE SOLE GROUND O F APPEAL IS THAT THE LD. CIT(A) ERRED IN CONFIRMING THE ADDITION OF RS 9,70,000/- U/S 68 OF THE ACT. 3. IN THE APPEAL OF THE REVENUE, THE SOLE GROUND OF APPEAL IS THAT THE LD. CIT(A) ERRED IN FACTS AND ON LAW IN RESTRICTING THE ADDITION U/S 68 ON REVENUE BY : SH. K.C. MATHEWS, SR.D.R. ASSESSEE(S) BY : SH. M.K. PATEL, AR ITA NOS. 2498 & 2639 OF 2011 AND ITA NO. 2902 OF 2012 SANJAY M. MEHTA VS ITO, WD-6(3), AHD FOR A.Y. 2008-09 - 2 - ACCOUNT OF UNEXPLAINED CASH CREDIT OF RS 9,70,000/- OUT OF TOTAL ADDITION OF RS 20,96,325/-, THEREBY DELETING THE ADDITION OF RS 11,26,325/-. 4. AS THE FACTS AND ISSUE INVOLVED IN BOTH THE APPE ALS OF THE ASSESSEE AND REVENUE ARE COMMON, THEY ARE BEING DISPOSED OF TOGETHER AS UNDER; 5. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSI NG OFFICER OBSERVED THAT THE ASSESSEE FILED RETURN OF INCOME ON 16.09.2 008 U/S 44AF OF THE ACT SHOWING INCOME OF RS 96,000/-. THE ASSESSING O FFICER BY INVOKING THE PROVISIONS OF SECTION 133(6) OF THE ACT CALLED FOR THE BANK STATEMENT OF THE ASSESSEE FROM KALUPUR COMMERCIAL COOPERATIVE BANK LIMITED AND FOUND THERE WERE CASH DEPOSITS OF RS 20,96,325/-. SINCE THE ASSESSEE COULD NOT EXPLAIN THE NATURE AND SOURCE OF THE CASH DEPOSIT IN THE BANK, THE ASSESSING OFFICER TREATED RS 20,96,325/- AS UNE XPLAINED CASH CREDIT AND ADDED THE SAME TO THE INCOME OF THE ASSESSEE. 6. ON APPEAL BEFORE THE LD. CIT(A), THE LD. AR OF T HE ASSESSEE MADE THE FOLLOWING SUBMISSION: 1. AT THE OUTSET, IT IS SUBMITTED THAT THE VARIOUS OBS ERVATIONS, WHICH HAVE BEEN MADE BY THE A.O. FOR MAKING ADDITION ARE BASED PURELY ON SURMISES, CONJECTURES AND PERSONAL PRESUMPTIONS AS WELL AS WITHOUT PROPER VERIFICATION/CONSIDERATION OF MATERIAL AND D ETAILS AVAILABLE ON RECORD. THAT APART, THE FACTS AND BASIS ON WHICH TH E SAID OBSERVATIONS HAVE BEEN MADE ARE ITSELF BASED ON MERE HYPOTHESIS AND PROBABILITIES DEVOID OF MERITS AND HARD FACTS AND REALISTIC SITUA TION. THUS, IT IS CONTENDED THAT MERE HYPOTHETICAL SITUATION BASED ON A.O.'S OWN BELIEF CANNOT BE CONSTRUED AS UNEXPLAINED CREDITS AS ALLEG ED SO AS TO REJECT THEM WHILE INVOKING THE PROVISIONS OF SECTION 68 OF THE ACT SINCE THE ADDITION HAS BEEN MADE ON THE BASIS OF HYPOTHETICAL SITUATION WITHOUT PROVIDING SUFFICIENT OPPORTUNITY TO APPELLANT IS NO T PERMISSIBLE TO ARRIVE AT SUCH A CONCLUSION. 3. THE OBSERVATIONS OF THE A.O. BASED ON THE SAME A RE FAR FROM REALITIES AS WELL AS WITHOUT PROPER VERIFICATION/CO NSIDERATION AS WELL AS UNDERSTANDING OF THE MATERIAL AND DETAILS AVAILABLE ON RECORD. THE OBSERVATIONS MADE BY THE A.O. ARE NOT ONLY WITHOUT PROPER APPRECIATION ITA NOS. 2498 & 2639 OF 2011 AND ITA NO. 2902 OF 2012 SANJAY M. MEHTA VS ITO, WD-6(3), AHD FOR A.Y. 2008-09 - 3 - OF THE FACTS AND CIRCUMSTANCES OF THE CASE AND THE APPELLANT'S DETAILED SUBMISSIONS BUT HAVE BEEN MADE ON THE BASIS OF PIEC EMEAL DETAILS WITHOUT OBTAINING OR CALLING FOR FROM THE APPELLANT THE COMPLETE DETAILS PRIMA FACIE WITH THE SOLE INTENTION OF SOMEHOW JUST IFYING THE PRE- DETERMINED ADDITION MADE BY HIM. IN THIS RESPECT, F OLLOWING FACTS AND CHRONOLOGY OF EVIDENCES REQUIRES TO BE TAKEN DUE CO GNIZANCE OF:- (A) THE APPELLANT IS SMALL RETAIL TRADER OF KARIYAN A, PROVISION ITEMS RESIDING AT SANAND. FOR THE YEARS UNDER CONSIDERATI ON, THE APPELLANT FILED THE RETURN OF INCOME SHOWING TOTAL INCOME AT RS.96,0007- UNDER PRESUMPTIVE TAXATION UNDER THE PROVISIONS OF SECTIO N 44AF OF THE INCOME TAX ACT. (B) SINCE THE APPELLANT BEING, SMALL TRADER, HIS E NTIRE SALES IS IN CASH. AND THAT FACT WAS COMMUNICATED TO THE ID AO VIDE AP PELLANTS LETTER DATED 16/12/2010. THE COPY OF LETTER IS ENCLOSED VI DE ANNEXURE 1 (C) SINCE THE APPELLANT WAS NOT MAINTAINING ANY BOO KS OF ACCOUNT LOOKING TO THE NATURE AND SIZE OF BUSINESS, HE WAS OFFERING INCOME IN THE RETURN OF INCOME ON PRESUMPTIVE BASIS. THE APPELLAN T IS CONSISTENTLY FOLLOWING THIS PRACTICE OF FILING RETURNS OF INCOME ON PRESUMPTIVE BASIS SINCE THE VERY BEGINNING. PLEASE REFER TO STATEMENT OF TOTAL INCOME AND ACKNOWLEDGEMENT OF INCOME FROM ASSESSMENT YEAR 2009 -10, AY 2008- 09, AY 2007-08, AY 2006-07, AY 2005-06 , AY 2004-05 VIDE ANNEXURE 2, ANNEXURE 3, ANNEXURE 4, ANNEXURE 5, ANNEXURE 6 A ND ANNEXURE 7 RESPECTIVELY. IT IS SUBMITTED THAT AS MENTIONED IN GROUND OF APPE AL NO. 1 HEREINABOVE, THE A.O. HAS GROSSLY ERRED IN NOT GIVI NG OPPORTUNITY TO THE APPELLANT TO FORWARD AND JUSTIFY ITS CASE AFTER FUR NISHING OF REPLY DATED 16/12/2010. FURTHER, THE A.O. ALSO DID NOT CARE TO CONVEY THE BASIS OF THE IMPUGNED ADDITION AND INTERPRETED THE DETAILS F URNISHED IN HIS OWN MANNER WITHOUT CONFRONTING THE APPELLANT TO EXPLAIN THE ALLEGED DISCREPANCIES. THUS, THE ASSESSMENT ORDER IN DISPUT E HAS BEEN PASSED IN GROSS VIOLATION OF PRINCIPLES OF NATURAL JUSTICE AN D EQUITY WHICH SPEAKS VOLUMES OF THE PREDETERMINED AND BIASED MANNER IN W HICH THE ASSESSMENT HAS BEEN FINALIZED WITH HUGE ADDITIONS. THUS AS EVIDENT FROM THE ABOVE FACT, THE APPELLANT HAD DULY FURNISHED THE REQUISITE DETAILS AS SPECIFICALLY REQUIRED BY THE A .O. AND MAINTAINED BY THE APPELLANT. 4. SINCE THE APPELLANT IS TAXED UNDER PRESUMPTIVE S CHEME OF TAXATION AND THEREFORE HE IS NOT REQUIRED TO MAINTAIN ANY BOOKS OF ACCOUNT. UNDER THE CIRCUMSTANCES, APPELLANT CAN NOT BE EXPECTED TO EXP LAIN ANY CREDIT AND THEREFORE ADDITION MADE U/S 68 ON ACCOUNT OF UNEXPL AINED CREDIT IS ILLEGAL. THE ASSESSING OFFICER BEFORE INVOKING THE POWER UNDER S ECTION 68 MUST BE SATISFIED THAT THERE ARE BOOKS OF ACCOUNT MAINTAINED BY THE A SSESSEE AND THE CASH CREDIT RECORDED IN THE SAID BOOKS OF ACCOUNT. THE E XISTENCE OF BOOKS OF ACCOUNT IS A CONDITION PRECEDENT FOR INVOKING THE POWER. FU RTHER, AS HELD IN SMT.SHANTA DEVI VS CIT [1988] 171 ITR 532 (PUNJ & HAR.), ANNEX URE 8 A PERUSAL OF SECTION 68 OF THE ACT SHOWS THAT IN RELATION TO EXPRESSION 'BOOKS' THE EMPHASIS ON THE ITA NOS. 2498 & 2639 OF 2011 AND ITA NO. 2902 OF 2012 SANJAY M. MEHTA VS ITO, WD-6(3), AHD FOR A.Y. 2008-09 - 4 - WORD 'ASSESSEE' MEANING THEREBY THAT SUCH BOOKS HAV E TO BE BOOKS OF THE ASSESSEE HIMSELF AND NOT OF ANY OTHER ASSESSEE. 5. SINCE, THE APPELLANT IS NOT MAINTAINING ANY BOOK S OF ACCOUNT, THERE IS NO QUESTION OF ANY CREDIT RECORDED IN THE BOOKS AND HE NCE ADDITION MADE ON THIS GROUND IS ILLEGAL AND THEREFORE REQUIRES TO BE DELE TED. THE LEARNED ASSESSING OFFICER IN HER ENTHUSIASM OF MAKING ADDITION HAS NO T INVESTIGATED AS TO HOW THE APPELLANT IS ASSESSED AND UNDER WHICH PROVISION HE HAS FILED THE RETURN OF INCOME. THE LEARNED ASSESSING OFFICER HAS NOT APPLI ED HER MIND AND WITHOUT VERIFYING OR INVESTIGATING ABOUT BOOKS OF ACCOUNT H AS MADE THE ADDITION U/S 68 OF THE ACT WHICH IS NOT PERMISSIBLE IN CASE OF NON- MAINTENANCE OF BOOKS OF ACCOUNT. THE LEARNED ASSESSING OFFICER HAS ADOPTED THE BANK STATEMENT AS BASIS OF EVIDENCE OF ADDITION. YOUR APPELLANT SUBMI TS THAT BANK PASS BOOK OR A BANK STATEMENT SUPPLIED BY A BANK TO THE ASSESSEE C AN NOT BE REGARDED AS A BOOK OF THE ASSESSEE, THAT IS, A BOOK MAINTAINED BY THE ASSESSEE OR UNDER HIS INSTRUCTIONS AND FOR THIS CONTENTION, THE APPELLANT RELIES ON THE DECISION OF CIT V BHAICHAND S GANDHI. [1983] 141 ITR 67 (BOM). UNDE R THE CIRCUMSTANCES, THERE IS NO CREDIT AT ALL IN THE BOOKS OF THE APPEL LANT AND THEREFORE THE QUESTION OF UNEXPLAINED CREDIT U/S 68 DOES NOT ARISE. THE AP PELLANT, BEING SMALL RETAILER SINCE THE VERY BEGINNING OF FILING RETURN OF INCOME HAS BEEN TAXED UNDER PRESUMPTIVE TAXATION AND THEREFORE ADDITION MADE U/ S 68 IS BIASED, MECHANICAL AND WITH PREJUDICIAL MIND TOWARDS THE AP PELLANT. IT IS THEREFORE SUBMITTED BEFORE YOUR HONOUR TO PLEASE DELETE THE A DDITION. IT IS SUBMITTED THAT THE APPELLANT HAD DULY FURNISH ED COMPLETE DETAILS OF SOURCE OF FUND FROM WHOM AMOUNT HAVE BEEN RECEIVED VIDE SU BMISSIONS MADE BEFORE AO. THE LEARNED ASSESSING OFFICER HAS ERRED IN MAKI NG THE ADDITION WITHOUT ISSUING SHOW CAUSE NOTICE PROPOSING DISALLOWANCE ON THIS GROUND. AND THEREFORE THE DISALLOWANCE IN ITS ENTIRETY IS ILLEG AL AND THEREFORE BE SCRAPPED DOWN. 6. IT IS THEN THE AO 'S DUTY TO ESTABLISH WITH EVID ENCES THAT THE FACTS STATED BY THE PARTIES IN THEIR STATEMENTS ARE NOT CORRECT SINCE THE LAW OF BURDEN IS CANONIZED IN COMMON LAW DOCTRINE 'INCUMBIT PROBATIO QUL DIGIT NON QUI NEGAT', I.E. BURDEN LIES UPON ONE WHO ALLEGES AND N OT UPON ONE WHO DENY THE EXISTENCE OF THE FACT. 7. NEVERTHELESS, THE A.O. APART FROM RAISING SUSPIC IONS ABOUT THE CREDIT WORTHINESS OF THE PARTIES BASED ON PURE ASSUMPTIONS HAS NOT BROUGHT ON RECORD ANY MATERIAL TO JUSTIFY SUCH SUSPICIONS AND ASSUMPTIONS. IN THE INSTANT CASE, THE A.O. DID NOT CARRY ANY OF HIS DOUBTS TO A LOGICAL CONCLUSION BY CONVERTING THEM INTO HARD FACTS ON THE BASIS OF EVI DENCES DURING THE ASSESSMENT PROCEEDINGS. 8. ANOTHER INTERESTING POINT TO NOTE IS THAT THERE WAS STILL TIME LEFT FOR COMPLETING ASSESSMENT BUT THE LEARNED ASSESSING OFF ICER HAD PASSED THE ORDER IN HURRIED MANNER WITHOUT INVESTIGATING IN TO THE F ACTS THE APPELLANT CASE. THE LEARNED ASSESSING OFFICER HAS FAILED TO DISCHARGE H IS DUTIES IN PROPERLY INVESTIGATING THE FACTS OF THE CASE. THE LEARNED AS SESSING OFFICER HAS POWERS TO ISSUE SUMMONS TO PARTIES TO WHOM SALES CLAIMED TO H AVE BEEN MADE AND COULD HAVE OBTAINED THE CONFIRMATIONS AS WELL AS STATEMEN T OF THE PARTIES. IN STEAD ITA NOS. 2498 & 2639 OF 2011 AND ITA NO. 2902 OF 2012 SANJAY M. MEHTA VS ITO, WD-6(3), AHD FOR A.Y. 2008-09 - 5 - OF DOING THESE EXERCISE, HE PASSED THE ORDER IN HUR RIED MANNER WITH PRE- DETERMINED MIND SET AND MADE THE ADDITION WHICH IS WHOLLY ILLEGAL, UNJUSTIFIED AND THEREFORE REQUIRES TO BE DELETED. 9. WITHOUT PREJUDICE TO OUR GROUND THAT NO ADDITION SHOULD BE MADE, YOUR APPELLANT SUBMITS THAT THE LEARNED AO OUGHT TO HAVE CONSIDERED AND ACCEPTED THE FACT THAT CREDIT ENTRIES ARE NOTHING BUT SALES MADE IN CASH BY THE APPELLANT PARTICULARLY CONSIDERING THE NATURE OF BUSINESS OF THE APPELLANT. IT IS FURTHER SUBMITTED THAT OUT OF TOTAL AMOUNT RECEIVED IN THE MONTH OF JUNE 2007 FOR RS.9,96,7007-, AN AMOUNT OF RS.9,70,000/- ARE RECEI VED FROM VARIOUS AGRICULTURISTS WHO ARE NOT HAVING ANY BANK ACCOUNT. THE APPELLANT IS SUBMITTING HEREWITH PROOF OF BEING AGRICULTURISTS B EING IN NAMUNA 7 AND 12 NAJIRKHAN PATHAN ANNEXURE 9, MIRKHAN VALIKHAN ANNEX URE 10 AND PRAHALADBHAI ANNEXURE 11 AND CONFIRMATION FROM VARIOUS PARTIES N AJIRKHAN PATHAN ANNEXURE 12, MIRKHAN VALIKHAN ANNEXURE 13 AND PRAHALADBHAI A NNEXURE 14.LT IS THEREFORE SUBMITTED THAT ONLY RS.21,600/- PERTAINS TO SALES AND CAN BE CONSIDERED AS PART OF TURNOVER ON WHICH PRESUMPTIVE TAXATION PROVISION WILL BE APPLICABLE. 10. WITHOUT PREJUDICE TO OUR GROUND THAT NO ADDITIO N SHOULD BE MADE, YOUR APPELLANT SUBMITS THAT THE LEARNED AO OUGHT TO HAVE CONSIDERED AND ACCEPTED THE FACT THAT CREDIT ENTRIES ARE NOTHING BUT SALES MADE IN CASH BY THE APPELLANT PARTICULARLY CONSIDERING THE NATURE OF BUSINESS OF THE APPELLANT. IT IS FURTHER SUBMITTED THAT THE AMOUNT OF RS.20,96,5257- OUGHT T O HAVE BEEN ACCEPTED AS SALES AND NET PROFIT @ 5% OF THE TURNOVER COMES TO RS. 1,04,8167- AND THEREFORE IN ANY EVENT THE ADDITION CAN NOT BE MADE MORE THAN RS.8,8167- (RS.1,04,816 @ 5% OF RS.20,96,3257- MINUS RS.96,000 OFFERED AS INCOME IN RETURN OF INCOME). 7. ON APPEAL, THE LD. CIT(A) OBSERVED THAT CASH DEP OSITS IN THE BANK ACCOUNT EXCLUDING THE LOANS OF RS 9,70,000/- IS TO BE TREATED AS SALES AND THE ASSESSEE WILL GET THE BENEFIT ACCORDINGLY O F RS 11,26,325/-. WITH REGARD TO RS 9,70,000/-, HE OBSERVED THAT THE ASSESSEE FAILED TO FURNISH EVIDENCE TO PROVE THE GENERATION OF INCOME BY AGRICULTURAL OPERATION BY THE CASH CREDITORS AND ALSO TO PROVE T HAT THEY HAD ENOUGH INCOME TO ADVANCE THE LOAN TO THE ASSESSEE CONFIRME D THE ADDITION ON ACCOUNT OF LOAN OF RS 4,00,000/- FROM NAZIR KHAN JI VAN KHAN PATHAN, RS 2,70,000/- FROM MEER KHAN WALI KHAN, RS 3,00,000/- FROM SHRI PRAHLADBHAI RAJABHAI AND MADE ADDITION OF THE SAME TO THE INCOME OF THE ASSESSEE. ITA NOS. 2498 & 2639 OF 2011 AND ITA NO. 2902 OF 2012 SANJAY M. MEHTA VS ITO, WD-6(3), AHD FOR A.Y. 2008-09 - 6 - 8. BEING AGGRIEVED BY THIS ORDER, THE ASSESSEE IS I N APPEAL AGAINST SUSTAINING OF ADDITION OF RS 9,70,000/- BY THE LD. CIT(A) AND THE REVENUE IS IN APPEAL AGAINST DELETION OF THE ADDITI ON OF RS 11,26,325/- BY THE LD. CIT(A). 9. THE LD. AR OF THE ASSESSEE SUBMITTED BEFORE US T HAT IN THE BANK ACCOUNT IN QUESTION, APART FROM CASH DEPOSITS, THER E WERE ALSO DEPOSITS BY CHEQUE. THE ASSESSING OFFICER HAS ACCEPTED THE SOURCE OF CHEQUE DEPOSITS AS EXPLAINED AND HAS MADE ADDITION IN RESP ECT OF CASH DEPOSITS ONLY. THE LD. CIT(A) MADE ADDITION OF RS 9,70,000/ - WHICH WERE PART OF CHEQUE DEPOSITS FOR WHICH NO ADDITION WAS MADE BY T HE ASSESSING OFFICER. THEREFORE, THE LD. CIT(A) HAS MADE ADDITI ON FOR A NEW SOURCE FOR WHICH NO ADDITION WAS MADE BY THE ASSESSING OFF ICER AND CONSEQUENTLY, THE ADDITION OF RS 9,70,000/- WAS MAD E WITHOUT JURISDICTION. THE LD. CIT(A) SHOULD HAVE DIRECTED THE ASSESSING OFFICER TO TREAT THE ENTIRE CASH DEPOSIT OF RS 20,96,325/- AS SALE PROCEEDS OF THE ASSESSEE. 10. ON THE OTHER HAND, THE LD. DR VEHEMENTLY OBJECT ED TO THE SUBMISSIONS OF THE ASSESSEE. HE ARGUED THAT NO EVI DENCE WAS PRODUCED BY THE ASSESSEE TO SUBSTANTIATE THAT THE CASH DEPOS IT OF RS 20,96,325/- WAS THE SALE PROCEEDS OF THE ASSESSEE. THEREFORE, WITHOUT ANY EVIDENCE, THE SAID EXPLANATION OF THE ASSESSEE CANN OT BE ACCEPTED. HE FURTHER ARGUED THAT IF RS 20,96,325/- REPRESENTED T HE SALE PROCEEDS OF THE ASSESSEE WHICH WERE DEPOSITED IN THE BANK, THEN WHY THE ASSESSEE IN THE RETURN INCOME FILED HAD COMPUTED PROFITS U/S 44AF ON RS 8,00,000/-. HE THEREFORE PLEADED THAT THE ENTIRE A MOUNT OF ADDITION OF RS 20,96,325/- SHOULD BE SUSTAINED. 11. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF LOWER AUTHORITIES AND MATERIAL AVAILABLE ON RECORD. WE FIND THAT IN THE ITA NOS. 2498 & 2639 OF 2011 AND ITA NO. 2902 OF 2012 SANJAY M. MEHTA VS ITO, WD-6(3), AHD FOR A.Y. 2008-09 - 7 - BANK ACCOUNT MAINTAINED WITH KALUPUR COMMERCIAL COO PERATIVE BANK LIMITED, THE OPENING BALANCE AS ON 01.04.2007 WAS R S 2283.72 AND TOTAL DEPOSIT DURING THE YEAR WAS RS 36,15,415/- CO MPRISING OF CASH DEPOSITS OF RS 20,96,325/- AND CHEQUE DEPOSIT OF RS 15,19,090/- AND AFTER WITHDRAWAL ON SOME DATES, THE CLOSING BALANCE AS ON 31.03.2008 WAS RS 65,834.38. 12. THE MONTH-WISE BREAK-UP OF CASH DEPOSIT AND CHE QUE DEPOSIT ARE AS UNDER: CHART SHOWING DESCRIPTION OF CASH DEPOSITED IN BANK ACCOUNT DURING FINANCIAL YEAR 2007-08 IN CASE OF SANJAY M. MEHTA MONTH CASH DEPOSIT IN BANK CHEQUE DEPOSIT IN BANK TOTAL DEPOSIT IN BANK A B C D APRIL 3,13,025 3,13,025 MAY 1,24,700 1,24,700 JUNE 5,96,700 4,00,000 (NAJIRKHAN) 9,96,700 JULY 5,200 5,200 AUGUST 1,00,000 1,00,000 SEPTEMBER 50,000 50,000 OCTOBER 1,04,600 1,04,600 NOVEMBER 1,20,000 2,00,000 (MIRKHAN) 1,50,000 (PRAHABDBHAI) 92,400 IPO REFUND 5,62,400 DECEMBER 2,32,100 92,400 IPO REFUND 77,6 10 IPO REFUND 4,02,110 JANUARY 1,69,000 PRAHALADBHAI LOAN 1,69,000 FEBRUARY 4,00,000 97.920 IPO 18,565 IPO 5,16,485 MARCH 50,000 77,000 MIRKHAN 81,795 IPO 62,400 LOAN 2,71,195 TOTAL 20,96,325 15,19,090 36,15,415 ITA NOS. 2498 & 2639 OF 2011 AND ITA NO. 2902 OF 2012 SANJAY M. MEHTA VS ITO, WD-6(3), AHD FOR A.Y. 2008-09 - 8 - 12. WE FIND THAT IN THE ARGUMENT OF THE ASSESSEE AS QUOTED BY THE LD. CIT(A), THE ASSESSEE EXPLAINED THAT OUT OF TOTAL DE POSITS OF RS 9,96,700/- IN THE MONTH OF JUNE 2007, RS 26,700/- WAS OUT OF SALE PROCEEDS AND RS 9,70,000/- WERE LOANS FROM 3 PERSON S COMPRISING OF RS 4,00,000/- FROM NAZIR KHAN JIVAN KHAN PATHAN, RS 2, 70,000/- FROM MIR KHAN WALI KHAN AND RS 3,00,000/- FROM PRAHLADBHAI R AJABHAI. FROM THE COPY OF THE BANK STATEMENT FILED BEFORE US, WE FIND THAT OUT OF RS 9,96,700/-, RS 5,96,700/- WAS BY CASH DEPOSIT AND R S 4,00,000/- WAS BY TRANSFER ENTRY. THUS IT IS OBSERVED THAT RS 4,0 0,000/- THOUGH DEPOSITED IN THE MONTH OF JUNE 2007 BUT ITS SOURCE WAS ACCEPTED BY THE ASSESSING OFFICER AND WAS NOT PART OF ADDITION OF R S 20,96,325/- MADE BY THE ASSESSING OFFICER. THEREFORE, WE FIND THAT THE ASSESSEE WAS NOT FULLY JUSTIFIED IN CONTENDING THAT ENTIRE RS 9,70,0 00/- WHICH WAS CONFIRMED BY THE LD. CIT(A) WAS NOT PART OF RS 20,9 6,325/- WHICH WAS ADDED BY THE ASSESSING OFFICER. WE FIND THAT ONLY RS 4,00,000/- WAS NOT PART OF ADDITION OF RS 20,96,325/- WHICH WAS MA DE BY THE ASSESSING OFFICER AND BALANCE AMOUNT OF RS 5,70,000/- COMPRIS ED OF RS 2,70,000/- DEPOSITED IN THE BANK ON 23.06.2007 AND RS 3,00,000 /- DEPOSITED IN THE BANK ON 28.06.2007 WERE CASH DEPOSITS AND WERE PART OF RS 20,96,325/- WHICH WAS ADDED BY THE ASSESSING OFFICE R TO THE INCOME OF THE ASSESSEE. THEREFORE, THE ASSESSEES CONTENTION THAT TO THE EXTENT OF RS 4,00,000/- IS FOUND TO BE CORRECT AND IN RESPECT OF RS 4,00,000/- WHICH WAS DEPOSITED BY CHEQUE ON 28.06.2007 IN THE BANK ACCOUNT OF THE ASSESSEE AND AS THE SOURCE OF THE SAME WAS ACCE PTED BY THE ASSESSING OFFICER AND NO ADDITION WAS MADE IN RESPE CT OF THE SAME BY THE ASSESSING OFFICER, IN OUR CONSIDERED OPINION, T HE LD. CIT(A) WAS NOT JUSTIFIED IN TREATING RS 4,00,000/- AS PART OF ADDI TION OF RS 20,96,325/- MADE BY THE ASSESSING OFFICER. WE, THEREFORE, REST RICT THE ADDITION MADE BY THE LD. CIT(A) TO THE EXTENT OF RS 5,70,000 /- AND DELETE THE BALANCE AMOUNT OF ADDITION OF RS 4,00,000/-. KEEPI NG IN VIEW THE ITA NOS. 2498 & 2639 OF 2011 AND ITA NO. 2902 OF 2012 SANJAY M. MEHTA VS ITO, WD-6(3), AHD FOR A.Y. 2008-09 - 9 - NATURE OF TRANSACTIONS IN THE BANK ACCOUNT, WE DO N OT FIND ANY ERROR IN THE ORDER OF THE LD. CIT(A) IN TREATING THE BALANCE AMOUNT OF CASH DEPOSITS OUT OF SALE PROCEEDS OF THE BUSINESS OF TH E ASSESSEE AS NO MATERIAL IS BOUGHT ON RECORD BY THE REVENUE TO SHOW THAT THE DEPOSITS COULD NOT HAVE BEEN OUT OF THE SALE PROCEEDS OF THE ASSESSEE. IN VIEW OF OUR ABOVE FINDINGS, RS 4,00,000/- WAS NOT PART O F CASH DEPOSIT, CONSEQUENTLY, WE MODIFY THE ORDER OF THE LD. CIT(A) AND DIRECT THE ASSESSING OFFICER TO TREAT RS 15,26,325/- AS SALE P ROCEEDS OF THE ASSESSEE. WE, ACCORDINGLY, MODIFY THE ORDER OF THE LD. CIT(A). THUS, THE GROUND OF APPEAL OF THE ASSESSEE IS PARTLY ALLO WED AND THAT OF THE REVENUE IS DISMISSED. 13. IN ITA NO. 2902/AHD/2012, THE SOLE GROUND OF AP PEAL TAKEN BY THE REVENUE IS THAT THE LD. CIT(A) ERRED IN LAW AND ON FACTS IN DELETING THE PENALTY OF RS 3,05,000/- LEVIED ON THE ADDITION MAD E BY THE ASSESSING OFFICER AND SUBSEQUENTLY CONFIRMED BY THE LD. CIT(A ) IN QUANTUM APPEAL FILED BY THE ASSESSEE. 14. THE LD. CIT(A) HAS DECIDED THE ISSUE AS UNDER: 2. THE ONLY EFFECTIVE GROUND OF APPEAL IS AGAINST L EVY OF PENALTY U/S.271(1)(C) OF RS. 3.05.000/-. THE A.O. LEVIED PE NALTY U/S.271(1)(C) OF RS. 3.05.000/- THE FOLLOWING AGAINST AN ADDITION MADE U/S.68 OF THE I.T. ACT OF RS. 9.70.000/-. THIS ADDITION HAS BEEN MADE IN RESPECT OF FOLLOWING LOANS:- (1) NAZIRKHAN JIVANKHAN PATHAN RS. 4,00,000 (2) MIRKHAN VALIKHAN RS. 2,70,000 (3) PRAHLADBHAI RAJABHAI TOTAL RS. 3.00.000 TOTAL RS. 9,70,000 A COPY OF THE PENALTY ORDER IS ENCLOSED AS ANNEXURE -A TO THIS ORDER FOR READY REFERENCE:- 2.1 ON THIS ISSUE APPELLANT VIDE ITS LETTER DATE D 4.10.2012 SUBMITTED AS UNDER:- ITA NOS. 2498 & 2639 OF 2011 AND ITA NO. 2902 OF 2012 SANJAY M. MEHTA VS ITO, WD-6(3), AHD FOR A.Y. 2008-09 - 10 - '1. AT THE OUTSET, IT IS SUBMITTED THAT THE ADDITIO NS MADE BY THE A.O. ARE ON ACCOUNT OF REJECTION OF PLAUSIBLE EXPLANATION FU RNISHED BEFORE HIM DURING THE COURSE OF ASSESSMENT. THUS, IT IS SUBMITTED THAT IN THE GIVEN CIRCUMSTANCES AND FACTS OF THE APPELLANT'S CASE, IT S CASE DOES NOT FALL WITHIN THE AMBIT, SCOPE AND RIGORS OF THE PROVISION S OF SECTION 271(L)(C) OF THE ACT. 2. THAT APART, IT MAY BE PERTINENT TO NOTE THAT THE APPELLANT FURNISHED COMPLETE DETAILS, EXPLANATION AND DISCLOSURE DURING THE COURSE OF ASSESSMENT PROCEEDINGS. THUS, IT IS NOT A CASE OF NO N-FURNISHING OF ANY DETAILS. IT IS MERELY A CASE OF A PLAUSIBLE EXPLANATION WITH EVIDENCES FURNISHED BY THE APPELLANT BEING REJECTED BY THE A.O. THUS, IT IS CONTENDED THAT ON FACTS AND MERITS OF THE ADDITI ON MADE, IT IS NEITHER A CASE OF FURNISHING OF EITHER INACCURATE PARTICULA RS OF INCOME NOR CONCEALMENT OF INCOME SO AS TO BRING THE APPELLANT' S CASE WITHIN THE SCOPE AND AMBIT OF THE PROVISIONS OF SECTION 271(L) (C) OF THE ACT. 3. YOUR HONOURS ATTENTION IS INVITED TO THE SHOW CA USE NOTICE FOR LEVY OF PENALTY DATED 21/12/2010 (ANNEXURE 6 PAGE 42) AND A NOTHER NOTICE BY THE SUCCESSOR AO DATED 16/05/2011. (COPY ENCLOSED A NNEXURE 8 PAGE NO.44) NEITHER OF THE NOTICES ABOVE WERE CONTAINING FINDING ABOUT CHARGE OF PENALTY. THE ID AO HAS NOT SPECIFIED AND WAS CONFUSED ABOUT CHARGE OF PENALTY AND THEREFORE FAILED TO STATE ANY FINDING ABOUT CHARGE OF PENALTY. FOR LEVY OF PENALTY U/S 271(L)(C), THER E IS PRECONDITION FOR AO AND IN FACT AO IS DUTY BOUND TO GIVE FINDING ABOUT THE CHARGE OF PENALTY. IN OTHER WORDS, THERE MUST BE A CLEAR FINDING ABOUT THE CHARGE OF PENALTY. IT IS INCUMBENT UPON THE AO TO STATE WHETH ER PENALTY WAS BEING LEVIED FOR CONCEALMENT OF INCOME OR FOR FURNISHING OF INACCURATE PARTICULARS OF INCOME. IN THE ABSENCE OF SUCH FINDI NG, THE ORDER WOULD BE BAD IN LAW.MANU ENGG. WORKS 122 ITR 306(GUJ), NEW SORATHIA ENGG. CO 282 ITR, 642(GUJ), PADMA RAM BHARALI 110 ITR 54(GAU). IN VIEW OF THE JURISDICTIONAL HIGH COURT DECISION, THE PENALTY LEVIED IN THE CASE OF APPELLANT IS ILLEGAL, BAD IN LAW AND THEREF ORE REQUIRES TO BE DELETED. 4. THE APPELLANT FURTHER SUBMITS THAT PENALTY PROCE EDING CAN BE INITIATED ON TWO CHARGES I.E. (1) CONCEALMENT OF PA RTICULARS OF INCOME AND (2) FURNISHING OF INACCURATE PARTICULARS OF INC OME. IF PROCEEDINGS ARE INITIATED ON CHARGE OF CONCEALMENT THEN PENALTY CAN NOT BE LEVIED ON THE CHARGE OF FURNISHING OF INACCURATE PARTICULARS OF I NCOME AND VICE VERSA.( CTT-V- LAKHDHIR LALJI 85 ITR 77(GUJ)). IN THE FACTS OF YOUR APPELLANT'S CASE, THE ASSESSMENT ORDER (ANNEXURE 1 PAGE 17 TO 19) STATES ABOUT INITIATION OF PENALTY PROCEEDINGS ON GROUND OF FURNISHING OF INACCURATE PARTICULARS OF INCOME WHEREAS THE PENALTY IS LEVIED ON THE GROUND OF CONCEALMENT OF PARTICULARS OF INCOME WHICH IS NOT PERMISSIBLE U NDER THE LAW AND THEREFORE PENALTY SHOULD BE DELETED. 5. IN SO FAR AS THE CONFIRMATION OF ADDITION OF RS. 9,70,000/- ON ACCOUNT OF ADDITION OF UNEXPLAINED CREDIT U/S 68 OF THE INCOME TAX ACT, IT IS SUBMITTED THAT THOUGH THE APPELLANT HAD FURNI SHED ELABORATE SUBMISSIONS ON MERITS OF THE SAID ADDITION, THE ID CTT(A) CONFIRMED THE ITA NOS. 2498 & 2639 OF 2011 AND ITA NO. 2902 OF 2012 SANJAY M. MEHTA VS ITO, WD-6(3), AHD FOR A.Y. 2008-09 - 11 - SAME, (PLEASE REFER FURTHER WRITTEN SUBMISSION AT ANNEXURE 3 PAGE 32 TO 34) YOUR APPELLANT SUBMITS THAT HE HAS NOT CONCEALED AN YTHING SINCE HE WAS FILING HIS RETURN OF INCOME UNDER PRESUMPTIV E SCHEME OF TAXATION US/ 44AF AND HENCE WAS NOT REQUIRED TO MAINTAIN BOO KS OF ACCOUNT. NEVERTHELESS, THE FACTS AND CONTENTIONS PUT FORTH B EFORE THE ITO VIDE APPELLANT S LETTER DATED 16-12-2010 (ANNEXURE 12 PA GE 50-51) AND THE SUBMISSIONS MADE BEFORE HON'BLE CIT(A) WHILE DEALIN G WITH QUANTUM APPEAL AND THE CHRONOLOGY OF THE FACTS ARE REPRODUC ED HEREUNDER SO TO PROPERLY APPRECIATE THE FACTS OF THE CASE MORE PART ICULARLY THE FACT THAT NO PENALTY IS WARRANTED ON THE SAID ADDITION. (A) THE APPELLANT IS SMALL RETAIL TRADER OF KARIYA NA, PROVISION ITEMS RESIDING AT SANAND. FOR THE YEARS UNDER CONSIDERATI ON, THE APPELLANT FILED THE RETURN OF INCOME SHOWING TOTAL INCOME AT RS.96,000/- UNDER PRESUMPTIVE TAXATION UNDER THE PROVISIONS OF SECTIO N 44AF OF THE INCOME TAX ACT. (B) SINCE THE APPELLANT BEING, SMALL TRADER, HIS EN TIRE SALES IS IN CASH. AND THAT FACT WAS COMMUNICATED TO THE ID AO VIDE AP PELLANTS LETTER DATED 16/12/2010. THE COPY OF LETTER IS ENCLOSED (C) SINCE THE APPELLANT WAS NOT MAINTAINING ANY BOO KS OF ACCOUNT LOOKING TO THE NATURE AND SIZE OF BUSINESS, HE WAS OFFERING INCOME IN THE RETURN OF INCOME ON PRESUMPTIVE BASIS. THE APPELLAN T IS CONSISTENTLY FOLLOWING THIS PRACTICE OF FILING RETURNS OF INCOME ON PRESUMPTIVE BASIS SINCE THE VERY BEGINNING. (D) THE LD. AO CALLED FOR BANK STATEMENT WHICH WAS SUBMITTED. IT WAS REVEALED BY AO FROM THE BANK STATEMENT OF KCCB THAT ASSESSEE HAS DEPOSITED CASH OF RS.20,96,325/-IN BANK ACCOUNT ON VARIOUS DATES. THE ID AO ASKED VIDE ORDER SHEET DTD. 14/10/2010 TO EXP LAIN CASH DEPOSITS IN BANK ACCOUNT. THE APPELLANT VIDE HIS LETTER DATE D 16/12/2010 SUBMITTED THAT THE SAID CASH IS NOTHING BUT CASH SA LES. SOME OTHER CREDITS BY CHEQUES WERE IN RESPECT OF LOANS FROM FR IENDS AND RELATIVES. THE APPELLANT IS NOT HAVING ANY OTHER SOURCE OF INC OME. HOWEVER, ID AO REJECTED THE EXPLANATION GIVEN BY THE APPELLANT AND MADE ADDITION OF RS.20,96,325/- TO THE EXTENT OF CASH DEPOSITS IN BA NK ACCOUNT. SINCE THE APPELLANT IS TAXED UNDER PRESUMPTIVE SCHEME OF TAXA TION AND THEREFORE HE IS NOT REQUIRED TO MAINTAIN ANY BOOKS OF ACCOUNT . UNDER THE CIRCUMSTANCES, APPELLANT CANNOT BE EXPECTED TO EXPL AIN ANY CREDIT AND THEREFORE ADDITION MADE U/S 68 ON ACCOUNT OF UNEXPL AINED CREDIT IS ILLEGAL. THE ASSESSING OFFICER BEFORE INVOKING THE POWER UNDER SECTION 68 MUST BE SATISFIED THAT THERE ARE BOOKS OF ACCOUNT M AINTAINED BY THE ASSESSEE AND THE CASH CREDIT RECORDED IN THE SAID B OOKS OF ACCOUNT. THE EXISTENCE OF BOOKS OF ACCOUNT IS A CONDITION PRECED ENT FOR INVOKING THE POWER. FURTHER, AS HELD IN SMT SHANTA DEVI VS CIT [ 1988] 171 ITR 532 (PUNJ & HAR.), ANNEXURE 8 A PERUSAL OF SECTION 68 O F THE ACT SHOWS THAT IN RELATION TO EXPRESSION 'BOOKS' THE EMPHASIS ON T HE WORD 'ASSESSEE' MEANING THEREBY THAT SUCH BOOK'S HAVE TO BE BOOKS O F THE ASSESSEE HIMSELF AND NOT OF ANY OTHER ASSESSEE. (E) IT IS THEN THE AOS DUTY TO ESTABLISH WITH EVID ENCES THAT THE FACTS STATED BY THE PARTIES IN THEIR STATEMENTS ARE NOT C ORRECT SINCE THE LAW OF BURDEN IS CANONIZED IN COMMON LAW DOCTRINE 'INCUMBI T PROBATIO QUI ITA NOS. 2498 & 2639 OF 2011 AND ITA NO. 2902 OF 2012 SANJAY M. MEHTA VS ITO, WD-6(3), AHD FOR A.Y. 2008-09 - 12 - DIGIT NON QUI NEGAT', I.E. BURDEN LIES UPON ONE WHO ALLEGES AND NOT UPON ONE WHO DENY THE EXISTENCE OF THE FACT. (F) NEVERTHELESS, THE A.O. APART FROM RAISING SUSPI CIONS ABOUT THE CREDIT WORTHINESS OF THE PARTIES BASED ON PURE ASSU MPTIONS HAS NOT BROUGHT ON RECORD ANY MATERIAL TO JUSTIFY SUCH SUSP ICIONS AND ASSUMPTIONS. IN THE INSTANT CASE, THE A.O. DID NOT CARRY ANY OF HIS DOUBTS TO A LOGICAL CONCLUSION BY CONVERTING THEM I NTO HARD FACTS ON THE BASIS OF EVIDENCES DURING THE ASSESSMENT PROCEEDING S. (G) ANOTHER INTERESTING POINT TO NOTE IS THAT THERE WAS STILL TIME LEFT FOR COMPLETING ASSESSMENT BUT THE LEARNED ASSESSING OFFICER HAD PASSED THE ORDER IN HURRIED MANNER WITHOUT INVESTIGATING I N TO THE FACTS THE APPELLANT CASE. THE LEARNED ASSESSING OFFICER HAS F AILED TO DISCHARGE HIS DUTIES IN PROPERLY INVESTIGATING THE FACTS OF THE C ASE. THE LEARNED ASSESSING OFFICER HAS POWERS TO ISSUE SUMMONS TO PA RTIES TO WHOM SALES CLAIMED TO HAVE BEEN MADE AND COULD HAVE OBTAINED T HE CONFIRMATIONS AS WELL AS STATEMENT OF THE PARTIES. INSTEAD OF DOI NG THESE EXERCISES, SHE PASSED THE ORDER IN HURRIED MANNER WITH PRE-DET ERMINED MIND SET AND MADE THE ADDITION WHICH IS WHOLLY ILLEGAL, UNJU STIFIED AND THEREFORE PENALTY ON THIS COUNT IS UNJUSTIFIED. (H) THE APPELLANT SUBMITS THAT THE LEARNED AO OUGHT TO HAVE CONSIDERED AND ACCEPTED THE FACT THAT CREDIT ENTRIE S ARE NOTHING BUT SALES MADE IN CASH BY THE APPELLANT PARTICULARLY CO NSIDERING THE NATURE OF BUSINESS OF THE APPELLANT. 6. ALL THE ABOVE SUBMISSIONS WERE MADE BEFORE ID CI T(A) WHILE DEALING WITH QUANTUM APPEAL VIDE APPELLANT'S LETTER DATED 22/07/2011 (ANNEXURE 3 PAGE 32 TO 34) 7. THE ID CTT(A) ALLOWED AN AMOUNT OF RS. 11,96,525 /- ACCEPTING THAT IT IS CASH SALES BUT CONFIRMED THE BALANCE ADD ITION OF RS.9,70,000/- ON ACCOUNT OF UNEXPLAINED CASH CREDIT VIDE HIS ORDE R DATED 09-08-2011 ( ANNEXURE 2 PAGE 20 TO 31) 8. THE APPELLANT MADE RECTIFICATION APPLICATION DAT ED 16-08-2011 (ANNEXURE 4 PAGE 35-36) STATING THAT THERE WAS MIST AKE APPARENT ON RECORD AS THE LOAN FROM VARIOUS PARTIES ARE THROUGH CHEQUES ONLY WHICH ARE NOT SUBJECT PART OF ADDITION AND ONLY CASH DEPO SITS ARE ADDED TO THE TOTAL INCOME. SINCE THE LOANS WHICH ARE CREDITED TO BANK ACCOUNT AND WHICH ARE RECEIVED THROUGH CHEQUES ARE ACCEPTED BY AO ARE NOT TO BE DECIDED AND ONLY QUESTION OF CASH DEPOSITS ARE UNDE R CONSIDERATION. HOWEVER, THE ID CIT(A) TREATED IT AS LOANS AND REJE CTED APPELLANTS CONTENTION VIDE HIS ORDER DATED 24-08-2011 (ANNEXUR E 5 PAGE 37 TO 41) 9. ON THE BASIS OF THE ABOVE ORDER, THE ID AO PROCE EDED TO LEVY PENALTY ON THE GROUND THAT THERE IS CONCEALMENT OF INCOME. THE APPELLANT SUBMITS THAT IT HAS SUBMITTED THE DETAILS AS REQUIRED BY AO, AND IT BANK STATEMENT AS WELL AS EXPLANATION OF EAC H AND EVERY ENTRY WAS MADE BEFORE AO VIDE LETTER DATED 16-12-2010. (A NNEXURE 12 PAGE 50-51) THERE IS NO CASE OF FURNISHING OF INACCURATE PARTICULARS OF INCOME OR CONCEALMENT OF INCOME BUT MERELY A CASE OF REJEC TION OF PLAUSIBLE EXPLANATION ON PART OF THE A.O. AND HON'BLE CIT(A) IN SPITE OF THE FACT ITA NOS. 2498 & 2639 OF 2011 AND ITA NO. 2902 OF 2012 SANJAY M. MEHTA VS ITO, WD-6(3), AHD FOR A.Y. 2008-09 - 13 - THAT THE APPELLANT HAD FULLY DISCLOSED THE PARTICUL ARS REQUIRED. IN CASE, WHERE THERE IS MERE REJECTION OF EXPLANATION, NO PE NALTY CAN BE LEVIED. APPELLANT RELIES ON THE FOLLOWING CASE LAWS MERE REJECTION OF THE PLAUSIBLE EXPLANATION FURNISH ED BY THE ASSESSEE DOES NOT WARRANT PENALTY U/S 271(1)(C) OF THE ACT IT IS CONTENTED THAT IN ORDER TO IMPOSE PENALTY U/S . 271(L)(C) ON THE BASIS OF FINDINGS IN THE ASSESSMENT PROCEEDINGS SOM ETHING MORE THAN THAT REQUIRES TO BE BROUGHT ON RECORD TO CONCLUSIVE LY ESTABLISH THAT THE AMOUNT OF ADDITION IS IN FACT AND TRUTH THE CONCEAL ED INCOME OF THE ASSESSEE. MERE REJECTION OF AN OTHERWISE PLAUSIBLE EXPLANATION OF THE ASSESSEE DOES NOT WARRANT/ ATTRACTS PENALTY U/S 271 (1) (C) OF THE ACT. IN SUPPORT OF THE PROPOSITION OF LAW THAT MERE REJE CTION OF THE PLAUSIBLE EXPLANATION FURNISHED BY THE ASSESSEE DOES NOT WARR ANT PENALTY U/S. 271(L)(C) OF THE ACT, RELIANCE IS PLACED ON THE FOL LOWING DECISIONS : (A) CIT VS. RELIANCE PETROPRODUCTS PVT. LTD. (2010) 322 ITR 158 (SC) 'A GLANCE AT THE PROVISIONS OF SECTION 271(L)(C) OF THE INCOME-TAX ACT, 1961, SUGGESTS THAT IN ORDER TO BE COVERED BY IT, T HERE HAS TO BE CONCEALMENT OF THE PARTICULARS OF THE INCOME OF THE ASSESSEE. SECONDLY, THE ASSESSEE MUST HAVE FURNISHED INACCURATE PARTICU LARS OF HIS INCOME. THE MEANING OF THE WORD 'PARTICULARS' USED IN SECTI ON 271(L)(C) WOULD EMBRACE THE DETAILS OF THE CLAIM MADE. WHERE NO INF ORMATION GIVEN IN THE RETURN IS FOUND TO BE INCORRECT OR INACCURATE, THE ASSESSEE CANNOT BE HELD GUILTY OF FURNISHING INACCURATE PARTICULARS. I N ORDER TO EXPOSE THE ASSESSEE TO PENALTY, UNLESS THE CASE IS STRICTLY CO VERED BY THE PROVISION, THE PENALTY PROVISION CANNOT BE INVOKED. BY NO STRE TCH OF IMAGINATION CAN MAKING AN INCORRECT CLAIM TANTAMOUNT TO FURNISH ING INACCURATE PARTICULARS. THERE CAN BE NO DISPUTE THAT EVERYTHIN G WOULD DEPEND UPON THE RETURN FILED BY THE ASSESSEE, BECAUSE THAT IS T HE ONLY DOCUMENT WHERE THE ASSESSEE CAN FURNISH THE PARTICULARS OF H IS INCOME. WHEN SUCH PARTICULARS ARE FOUND TO BE INACCURATE, THE LIABILI TY WOULD ARISE. TO ATTRACT PENALTY, THE DETAILS SUPPLIED IN THE RETURN MUST NOT BE ACCURATE, NOT EXACT OR CORRECT, NOT ACCORDING TO THE TRUTH OR ERRONEOUS. WHERE THERE IS NO FINDING THAT ANY DETAILS SUPPLIED BY THE ASSESSEE IN ITS RETURN ARE FOUND TO BE INCORRECT OR ERRONEOUS OR FA LSE THERE IS NO QUESTION OF INVITING THE PENALTY UNDER SECTION 271( L)(C). A MERE MAKING OF A CLAIM, WHICH IS NOT SUSTAINABLE IN LAW, BY ITS ELF, WILL NOT AMOUNT TO FURNISHING INACCURATE PARTICULARS REGARDING THE INC OME OF THE ASSESSEE. SUCH A CLAIM MADE IN THE RETURN CANNOT AMOUNT TO FU RNISHING INACCURATE PARTICULARS.' 'MERELY BECAUSE THE ASSESSEE HAD CLAIMED THE EXPEND ITURE, WHICH CLAIM WAS NOT ACCEPTED OR WAS NOT ACCEPTABLE TO THE REVEN UE, THAT BY ITSELF WOULD NOT, IN OUR OPINION, ATTRACT THE PENALTY UNDE R SECTION 271(L)(C). IF WE ACCEPT THE CONTENTION OF THE REVENUE THEN IN CAS E OF EVERY RETURN WHERE THE CLAIM MADE IS HOT ACCEPTED BY THE ASSESSI NG OFFICER FOR ANY ITA NOS. 2498 & 2639 OF 2011 AND ITA NO. 2902 OF 2012 SANJAY M. MEHTA VS ITO, WD-6(3), AHD FOR A.Y. 2008-09 - 14 - REASON, THE ASSESSEE WILL INVITE PENALTY UNDER SECT ION 271(L)(C). THAT IS CLEARLY NOT THE INTENDMENT OF THE LEGISLATURE.' [EMPHASIS SUPPLIED] B) HONBLE RAJASTHAN HIGH COURT IN THE CASE OF SHIV LAL TAK VS. CIT (2010) 251 ITR 373 (RAJ.) WHEREIN INTER ALIA, IT IS HELD AS UNDER: 'THOUGH THE EXPRESSION 'FAILURE TO RETURN THE TOTAL ASSESSED INCOME AS NOT ARISING ON ACCOUNT OF ANY FRAUD OR WILFUL NEGLI GENCE ON PART OF THE ASSESSEE' DOES NOT FIND PLACE IN EXPLANATION 1 TO S ECTION 271(L)(C) OF THE INCOME TAX ACT, 1961, YET CLAUSE (B) READ WITH THE PROVISO (II) TO SECTION 271(1) MAKES IT CLEAR THAT WHERE THE DIFFERENCE BET WEEN THE ASSESSED INCOME AND THE RETURNED INCOME DOES NOT ARISE ON AC COUNT OF ANY GROSS OR WILFUL NEGLIGENCE ON THE PART OF THE ASSESSEE, N O PENALTY IS LEVIABLE. THE STATUTE HAS CLEARLY DRAWN A DISTINCTION BETWEEN A DELIBERATE FALSE EXPLANATION FURNISHED BY THE ASSESSEE AND AN EXPLAN ATION, WHICH MAY NOT BE FALSE BUT IS NOT ACCEPTED BECAUSE THE ASSESS EE WAS NOT ABLE TO SUBSTANTIATE IT. WHILE THERE IS NO RELAXATION IN TH E RIGOUR OF THE EXPLANATION IN RAISING A PRESUMPTION AGAINST THE AS SESSEE IN THE FORMER CASE, IN THE LATTER CLASS OF CASES, THE STATUTE ITS ELF RELAXES ITS RIGOUR BY DIRECTING THAT WHERE IN RESPECT OF ANY AMOUNT, ADDE D OR DISALLOWED AND ANY EXPLANATION IS OFFERED BY SUCH PERSON WHICH IS NOT ACCEPTED BECAUSE THE ASSESSEE HAS FAILED TO SUBSTANTIATE THE SAME, B UT SUCH EXPLANATION IS BONAFIDE AND ALL THE FACTS RELATING TO THE SAME AND MATERIAL TO THE COMPUTATION OF THE TOTAL INCOME HAVE BEEN DISCLOSED BY HIM, THE EXPLANATION SHALL NOT APPLY'. C) REFERENCE IS ALSO INVITED TO THE RECENT DECISION OF THE JURISDICTIONAL COURT OF LAW I.E. HON'BLE ITAT, AHMEDABAD BENCH IN THE CASE OF G.ULARAT CREDIT CORPORATION LTD, VS. ASSTT CIT (2008> 113 IT D 133 F AHCU. WHEREIN INTER ALIA IT IS HELD AS UNDER: 'IT IS TRITE LAW THAT CONCEALMENT PROCEEDINGS ARE P ENAL IN CHARACTER AND UNDER THE SUBSTANTIVE PROVISIONS OF SECTION 271(L)( C), IT IS FOR THE DEPARTMENT TO PROVE THAT THE ASSESSEE HAD CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHED INACCURATE PARTICULARS THER EOF TO BRING THE CASE OF THE ASSESSEE WITHIN THE MISCHIEF OF THE MAIN PRO VISIONS OF SECTION 271(L)(C). MERE REJECTION OFF ASSESSEE'S CLAIM WOUL D NOT BE SUFFICIENT TO HOLD THE ASSESSEE TO BE GUILTY OF CONCEALMENT. IF THERE IS NO EVIDENCE ON RECORD EXCEPT THE EXPLANATION OF THE ASSESSEE WHICH EXPLANATION IS EITHER FOUND TO BE FALSE OR IS UNACCEPTABLE, IT DOE S NOT FOLLOW THAT CONCEALMENT HAS BEEN ESTABLISHED. . IT IS BY VIRTUE OF EXPLANATION ONLY THAT THE ASSESS ING OFFICER HAS BEEN GIVEN A RIGHT TO RAISE A PRESUMPTION TO DEEM CERTAI N SUM ADDED TO INCOME OR DISALLOWED IN COMPUTING THE INCOME OF A P ERSON, TO REPRESENT THE INCOME IN RESPECT OF WHICH PARTICULARS HAVE BEE N CONCEALED, IF THE ASSESSEE DID NOT FURNISH AN EXPLANATION OR WHEN EXP LANATION FURNISHED WAS FOUND FALSE; AND ALSO WHEN SUCH PERSON OFFERS A N EXPLANATION WHICH HE IS NOT ABLE TO SUBSTANTIATE AND FAILS TO PROVE T HAT SUCH EXPLANATION IS ITA NOS. 2498 & 2639 OF 2011 AND ITA NO. 2902 OF 2012 SANJAY M. MEHTA VS ITO, WD-6(3), AHD FOR A.Y. 2008-09 - 15 - BONA FIDE AND THAT ALL THE FACTS RELATING TO THE SA ME AND MATERIAL TO THE COMPUTATION OF HIS TOTAL INCOME HAVE BEEN DISCLOSED BY HIM. IN OTHER WORDS, IN A LATER CASE, THE EXPLANATION EX ONERATES AN ASSESSEE, IF THAT HE IS BONA FIDE AND ALL THE FACTS RELATING TO THE SAME AND MATERIAL TO THE COMPUTATION OF HIS TOTAL INCOME HAVE BEEN DI SCLOSED BY HIM. IN THE INSTANT CASE, IT WAS NOT THE CASE OF THE REV ENUE THAT THE ASSESSEE HAD FAILED TO OFFER AN EXPLANATION OR THAT ITS EXPL ANATION WAS FOUND FALSE AND, THEREFORE, PART X A' OF THE EXPLANATION DID NOT HIT THE ASSESSEE. THE CASE OF THE REVENUE AGAINST THE ASSESSEE WAS TH AT IT FURNISHED INACCURATE PARTICULARS OF ITS INCOME BY MAKING A WR ONG CLAIM. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, IT WAS MERE RE JECTION OF ASSESSEE'S CLAIM FOR LOSS THAT TOO ON A DIFFERENT GROUND BY TH E APPELLATE AUTHORITY AND, THEREFORE, IT COULD NOT IN ANY CASE BE EQUATED WITH CONCEALMENT.' [EMPHASIS SUPPLIED] 10. THE LEARNED ASSESSING OFFICER HAS ERRED IN STAT ING THAT APPELLANT HAS CONCEALED THE PARTICULARS OF INCOME IN VIEW OF THE FACT THAT THE CREDIT ENTRIES ARE NOTHING BUT CASH SALES MADE BY T HE APPELLANT AND THIS FACT WAS CONVEYED TO ID AO AS WELL AS HON'BLE CIT(A ), AND SINCE APPELLANT IS NOT MAINTAINING ANY BOOKS OF ACCOUNT, QUESTION OF FURNISHING EVIDENCE DOES NOT ARISE. THE COPY OF BANK STATEMENT IS ENCLOSED HEREWITH FOR YOUR HONOURS' KIND PERUSAL (ANNEXURE 1 1 - PAGE 47 TO 49). THE ID AO HAS ERRED IN LEVYING PENALTY ON CONCEALME NT GROUND BECAUSE ALL RELEVANT DISCLOSURES WERE MADE AND ALL DETAILS REQUIRED BY AO WERE FURNISHED. THE DETAILS OF CASH ENTRIES WERE ALSO GI VEN TO AO VIDE APPELLANT'S LETTER DATED 16-12-2010 (ANNEXURE 12 PA GE 50-51) UNDER THE FACTS AND CIRCUMSTANCES, THERE IS NO JUSTIFICAT ION IN LEVY OF PENALTY. RELIANCE IS PLACED UPON HON'BLE SUPREME COURT DECIS ION IN THE CASE OF 3CIT VS SAHELI LEASING & FINANCE LTD 191 TAXMANN 16 5. ONE OF THE BASIC PRINCIPLES LAID DOWN BY THE COURT WAS THE AO MUST PROVE THAT A) THERE WAS CONCEALMENT OF INCOME B) THE RETURN OF INCOME FURNISHED BY THE ASSESSEE OR DOCUM ENTS SUBMITTED BY THE ASSESSEE DURING SCRUTINY PROCEEDINGS IS BASED O N INCORRECT FACT, FALSITY AND UNTRUTH. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE ID AO HAS FAILED TO PROVE THAT THE APPELLANT HAS CONCEALED ITS INCOME AND HAS FAILED TO BRING ON RECORD ANY SORT OF NON DISCLOSURE OR CONCEALMENT AN D THEREFORE PENALTY IS REQUIRES TO BE DELETED. 11. IT MUST BE NOTED THA T APPELLANT, AT ANY STAGE OF PROCEEDINGS, NEVER TRIED TO HIDE THIS FACT AND HAS PROPERLY DISCLOSED THE SAME. THE ID CIT(A) HAS TREATED THE B ALANCE CREDIT AS UNEXPLAINED LOANS PARTICULARLY IN VIEW OF THE FACT THAT APPELLANT HAS EXPLAINED IT AS CASH SALES DURING ASSESSMENT PROCEE DINGS VIDE LETTER DATED 16-12-2010 (ANNEXURE 12 PAGE 50-51) AND IN AP PELLATE PROCEEDINGS VIDE HIS LETTER DATED 22/07/2011 (ANNEX URE 3 PAGE 32 TO34). SINCE THE APPELLANT HAD NEVER INTENTION TO C ONCEAL ITS INCOME, THE PENALTY ON THIS ACCOUNT IS REQUIRED TO BE DELETED. FROM THE ABOVE FACTS, ITA NOS. 2498 & 2639 OF 2011 AND ITA NO. 2902 OF 2012 SANJAY M. MEHTA VS ITO, WD-6(3), AHD FOR A.Y. 2008-09 - 16 - IT IS PROVED THAT APPELLANT HAS NEITHER FURNISHED I NACCURATE PARTICULARS OF INCOME NOR TRIED TO CONCEAL THE INCOME. THE APPELLA NT HAS CONTENDED THE AMOUNT OF RS.9,70,000/- AS CASH SALES BUT IT IS TRE ATED AS LOANS BY CIT(A) AND ADDED U/S 68 OF THE ACT. THE ISSUE IS DE BATABLE AND APPELLANT HAS NOT ACCEPTED THE ORDER OF CIT(A) AND THE APPEAL IS PENDING BEFORE HON'BLE ITAT, AHMEDABAD. IN VIEW OF THE FACT THAT THE ITEM OF ADDITION IS DEBATABLE, NO PENALTY CAN BE LE VIED. RELIANCE IS PLACED UPON THE FOLLOWING CASE LAW: 1. 'S. 271 (L)(C): PENALTY AND DEBATABLE ADDITION - ASSESSEE HAVING RECEIVED ONLY THE INITIAL PAYMENT OFRS.6 CRORES AND NOT THE LAST INSTALLMENT AS PER THE TERMS OF THE PROPERTY DEVELO PMENT AGREEMENT WITH THE DEVELOPER IN THE RELEVANT ASSESSMENT YEAR 2002-03, IT WAS JUSTIFIED IN NOT OFFERING THE CAPITAL GAINS TO TAX IN THIS ASSESSMENT YEAR MORE WHEN THE ASSESSEE HAS DISCLOSED THE SAID AMOUN T IN RETURN AS ADVANCE AND THE AQ HIMSELF WAS NOT SURE TILL THE DA TE OF PASSING OF THE ASSESSMENT ORDER AS TO WHETHER THE ASSESSEE IS LIAB LE TO PAY TAX ON THE IMPUGNED AMOUNT AND IF SO, IN WHICH ASSESSMENT YEA R AND UNDER WHICH HEAD OF INCOME, AND ACCORDINGLY PENALTY UNDER S. 27 1(L)(C) IS NOT LEVIABLE. METAL ROLLING WORKS LTD VS CIT (2011) 245 CTR (BOM) 113' 2. ACIT V. ENPACK MOTORS PVT. LTD. - ITAT 'E' BENCH , MUMBAI BEFORE D. MANMOHAN (VP) AND R.K. PANDA (AM) ITA NO. 914/MUM./2008 AY: 2004-05; DECIDED ON: 23/1 0/2009 COUNSEL FOR ASSESSEE / REVENUE: ARVIND DALAI / S. K . SINGH S. 271(L)(C) PENALTY FOR CONCEALMENT OF INCOME ADDITIONS/DISALLOWANCES SUSTAINED BY THE APPELLATE AUTHORITY WHETHER SUFFICIENT GROUND FOR LEVY OF PENALTY SINCE FULL DISCLOSURE OF PARTICULARS OF TRANSACTIONS WERE MADE AND ADDITIONS WERE ON ACC OUNT OF DIFFERENT VIEW ADOPTED, PENALTY CANNOT BE IMPOSED. COPY OF THE ABOVE DECISION IS AT ANNEXURE 14 PAGE 5 3. FROM THE ABOVE, IT BECOMES APPARENT AND UNDERSTANDABLE THAT THE APP ELLANT HAD NEVER THE INTENTION OF HIDING ITS INCOME AND IN FACT DISC LOSED ALL RELEVANT INFORMATION AND PARTICULARS OF INCOME. THIS IN ITSE LF DOES NOT LEAD TO PENALTY AND THEREFORE PENALTY OF RS.3,05,000/- ON T HIS GROUND IS REQUIRED TO BE DELETED. 12. NO PENALTY IN CASE OFF BONAFIDE MISTAKE RELIANCE IS PLACED ON THE FOLLOWING DECISIONS IN SU PPORT OF THE PROPOSITION OF TAW THAT (A) CIT VS. SKYLINE AUTO PROJECTS P. LTD.(2004) 271 ITR 335 (MP) THE QUESTION, WHICH WAS INVOLVED IN THE APPEAL, WAS WHETHER THE TRIBUNAL WAS JUSTIFIED IN DELETING THE PENALTY IMPO SED UPON THE ASSESSEE BY THE ASSESSING OFFICER UNDER SECTION 271(L)(C). IN THE OPINION OF THE TRIBUNAL, IT WAS A CASE OF A BONA FIDE MISTAKE RATHE R THAN A ITA NOS. 2498 & 2639 OF 2011 AND ITA NO. 2902 OF 2012 SANJAY M. MEHTA VS ITO, WD-6(3), AHD FOR A.Y. 2008-09 - 17 - DELIBERATE MISTAKE ON THE PART OF THE ASSESSEE WHIT E CALCULATING DEPRECIATION ON THE ASSETS OF THE ASSESSEE. IT WAS FOUND THAT THE ASSESSEE WAS A NEW BUSINESSMAN AND HE COULD ONLY CL AIM DEPRECIATION FOR A FRACTION OF THE YEAR AND NOT FOR THE FULL YEA R THAT BEING THE FIRST YEAR OF STARTING THE PRODUCTION AS CLAIMED BY THE A SSESSEE. HELD THAT THERE WAS NO GOOD GROUND FOR IMPOSITION OF PENALTY BY THE TAXING AUTHORITIES. THUS, THE TRIBUNAL'S ORDER DELE TING PENALTY DID NOT INVOLVE A SUBSTANTIAL QUESTION OF LAW. (B) CIT VS. NATH BROS. EXIM INTERNATIONAL LTD. 288 I TR 670 (DELHD 'THE TRIBUNAL CAME TO THE CONCLUSION THAT THE ASSES SEE HAD DISCLOSED ALL THE FACTS AND THEREFORE, EVEN THOUGH IT HAD MADE AN ERRONEOUS CLAIM WHICH COULD NOT BE JUSTIFIED IN LAW THAT BY ITSELF DID NOT ATTRACT THE PENAL PROVISIONS OF LAW. WHAT IS REQUIRED TO BE CONSIDERED IS WHETHER THERE WAS ANY ENQUIRY THAT WAS REQUIRED TO BE MADE BY THE ASSESSING OFFICER BE FORE CONCLUDING THAT THE ASSESSEE HAD FURNISHED INACCURATE OR FALSE PART ICULARS. IN THIS CASE WE ARE OF THE VIEW THAT NO SUCH ENQUIRY WAS REQUIRE D TO BE MADE BUT THERE WAS ONLY THE NEED FOR APPLICATION OF THE LAW. ON THE LEGAL POSITION, THE ASSESSING OFFICER WAS NOT SATISFIED AND DID NOT AGREE WITH THE ASSESSEE BUT THAT BY ITSELF IS NOT A GROUND TO INVO KE THE PENALTY PROVISION OF THE STATUTE.' (C) CIT VS. MILEX CABLE INDUSTRIES (20031 261 ITR 67 5 (GUJ.) HELD THAT IT WAS NOT IN DISPUTE THAT BEFORE THE PRO CEEDINGS WITH REGARD TO INITIATION OF PENALTY AND RECTIFICATION STARTED, THE ASSESSEE HAD INFORMED THE ASSESSING OFFICER, UNDER HIS LETTER, T HAT HE HAD COMMITTED MISTAKES IN TOTALING AND THIS FACT DENOTED THAT THE ASSESSEE WAS NOT HAVING GUILTY MIND. IT WAS TRUE THAT THE ASSESSEE H AD ALREADY RECEIVED THE NOTICE, AT THE RELEVANT TIME, BUT WHEN THE TRIB UNAL HAD COME TO A CONCLUSION THAT THE ASSESSEE HAD NO INTENTION OF CO NCEALING PARTICULARS OF HIS INCOME OR MISGUIDING THE ASSESSING OFFICER B Y MAKING INCORRECT TOTALS, IT WOULD NOT BE PROPER FOR THE COURT TO COM E TO A DIFFERENT CONCLUSION. IT WAS NOT IN DISPUTE THAT WHETHER A PE RSON IS HAVING GUILTY MIND OR WHAT STATE OF MIND THE PERSON IS HAVING AND DETERMINATION THEREOF IS A QUESTION OF FACT AND AS THE TRIBUNAL H AD ALREADY OPINED THAT THE ASSESSEE HAD NOT MADE ANY EFFORT TO CONCEAL PAR TICULARS OF HIS INCOME, IT WOULD BE DIFFICULT FOR THE COURT TO SET ASIDE THE SAID FINDING SO AS TO ACCEPT THE VIEW EXPRESSED BY THE REVENUE BEFO RE THE COURT IN THE INSTANT CASE, MISTAKES WERE COMMITTED IN TOTALING A ND THE MOMENT THE ASSESSEE CAME TO KNOW ABOUT THE MISTAKES COMMITTED IN THE BOOKS OF ACCOUNT, WHILE PREPARING THE ACCOUNTS FOR THE SUBSE QUENT YEAR, INFER HIS LETTER, THE ASSESSEE INFORMED THE ASSESSING OFFICER ABOUT THE MISTAKES COMMITTED. LOOKING TO THE FADS STATED HEREINABOVE AND MORE PARTICULARLY IN VIEW OF THE FACT THAT THE TRIBUNAL HAD COME TO A FINAL CONCLUSION THAT THERE WAS NO CASE FOR IMPOSING PENA LTY AND THE MENTAL ITA NOS. 2498 & 2639 OF 2011 AND ITA NO. 2902 OF 2012 SANJAY M. MEHTA VS ITO, WD-6(3), AHD FOR A.Y. 2008-09 - 18 - STATE OF THE ASSESSEE BEING A QUESTION OF FACT, IT WOULD NOT BE PROPER TO TAKE A DIFFERENT VIEW FROM THE ONE WHICH HAD BEEN T AKEN BY THE TRIBUNAL. (D) CIT VS. DEEP TOOLS (P.) LTD. (2004) 191 CTR 25 7 (P & H) THE ASSESSEE HAD MADE A CLAIM FOR DEDUCTION UNDER S ECTION 80HHC AS PER CERTIFICATE IN FORM NO. 1OCCAC ISSUED BY ITS CA . THE ASSESSING OFFICER POINTED OUT ERRORS IN THE SAID CLAIM. THE A SSESSEE FILED A REVISED RETURN BY REVISING THE COMPUTATION STATEMENT. HOWEV ER, THE ASSESSING OFFICER IMPOSED PENALTY ON THE ASSESSEE. THE TRIBUN AL CANCELLED THE PENALTY. HELD THAT THERE WAS NOTHING TO SHOW THAT MISTAKE BY THE CA WAS NOT BONA FIDE AND MERE FACT THAT CERTIFICATE ISSUED BY THE CA WAS NOT IN ACCORDANCE WITH SECTION 80HHC(4), WAS NOT ENOUGH TO HOLD THAT THE MISTAKE WAS NOT BONA FIDE. AT ANY RATE, AS FAR AS T HE ASSESSEE WAS CONCERNED, NO MALAFIDES COULD BE ATTRIBUTED TO IT, AS THE CLAIM FOR DEDUCTION WAS BASED ON THE CERTIFICATE OF THE CA WI TH WHOM NO COLLUSION HAD BEEN PROVED. IN VIEW OF FINDINGS RECORDED BY TH E TRIBUNAL THAT ERROR OF THE CA WAS INADVERTENT AND DID NOT LACK BONA FID ES, CANCELLATION OF ORDER OF PENALTY WAS CLEARLY JUSTIFIED. (E) SMT. BEENA KAK VS. HO (20011 70 TT3 375 PODH.) HELD THAT IN THE INSTANT CASE, WHILE CLAIMING DEPRE CIATION THE COST OF BUILDING WAS TAKEN INCLUSIVE OF COST OF LAND COVERE D WITHIN BUILDING WHEREAS THE DEPRECIATION WAS ALLOWABLE ON CONSTRUCT ED STRUCTURE OF BUILDING ONLY, THUS EXCLUDING THE COST OF LAND. THE ASSESSEE'S PLEA THAT THE ACCOUNTANT MAINTAINING THE ACCOUNTS OF THE ASSE SSEE DID NOT SEGREGATE THE COST OF LAND AND CONSTRUCTION AND OPE NED ONE SINGLE LEDGER ACCOUNT FOR THE SAME HAD NOT BEEN CONTROVERT ED ON RECORD. THIS FACT HAD ALSO NOT BEEN CONTROVERTED THAT WHEN THE A SSESSEE CAME TO KNOW THAT THE CLAIM WAS ERRONEOUS SHE DID NOT PURSU E THE MATTER FURTHER AND AGREED FOR THE DISALLOWANCE OF THE SAME . THE COST OF LAND WAS UNDISPUTEDLY TAKEN INTO CONSIDERATION ALONG WIT H THE COST OF STRUCTURE OF BUILDING FOR THE PURPOSES OF DETERMINI NG ANNUAL VALUE OF THE BUILDING FOR THE PURPOSES OF INCOME FROM HOUSE PROP ERTY. IT HAD ALSO BEEN THE PLEA OF THE ASSESSEE THAT SHE BEING AN MLA AND ALSO A MINISTER OF STATE AND SO BEING BUSY IN PUBLIC SERVICE AT JAI PUR COULD NOT DEVOTE PROPER ATTENTION TO HER ACCOUNTS. IN THAT VIEW OF T HE MATTER, CONSIDERING ALL THE FACTS AND CIRCUMSTANCES OF THE CASE AS ALSO THE LEGAL POSITION, IT WAS CLEAR THAT IT WAS A MATTER OF BONA FIDE MISTAKE AND NOT A CONSCIOUS CONCEALMENT CONSTITUTING DELIBERATE DEFIANCE OF THE PROVISIONS OF LAW. AS SUCH, THE LEVY OF PENALTY UNDER SECTION 271(L)(C) W AS NOT JUSTIFIABLE. (F) MAHADESWARA MOVIES V. CIT (1983) 144 ITR 127 (KA R.) 'ALONG WITH THE RETURN, A PROFIT AND LOSS ACCOUNT H AD BEEN FILED AS ALSO A STATEMENT OF ADJUSTMENT. IN REGARD TO THE AMORTIZAT ION, THE NAMES OF THE FILMS WERE SPECIFIED AND AMOUNTS WERE MENTIONED IN RESPECT OF EACH ONE OF THE FILMS. A COMPARISON OF THE PROFIT AND L OSS ACCOUNT AND THE AMORTIZATION STATEMENT WOULD READILY POINT OUT THE DISCREPANCY. NO SOONER IT WAS POINTED OUT, IT WAS ACCEPTED AS A MIS TAKE. THE BASIC FACTS ITA NOS. 2498 & 2639 OF 2011 AND ITA NO. 2902 OF 2012 SANJAY M. MEHTA VS ITO, WD-6(3), AHD FOR A.Y. 2008-09 - 19 - HAD BEEN DISCLOSED AND THERE WAS NO ATTEMPT AT SUPP RESSION OF ANY MATERIAL FACT.' (G) CIT V. PADMA RANI BHARALI F19831139ITR 759 (GA UHATI)_ HELD THAT NO PENALTY U/S. 271(L)(C) OF THE ACT WAS EXIGIBLE IN RESPECT OF A SUM OF RS.24,591/- WHICH WAS DOUBLY DEBITED IN PURC HASE ACCOUNT IN RESPECT OF HINDUSTAN LEVER GOODS AS A BONA FIDE MIS TAKE WAS POSSIBLE AND THERE APPEARED TO BE NO INTENTION OF THE ASSESS EE FOR CONCEALMENT. (H) CIT V. ASK ENTERPRISES F19981 230 ITR 48 F BO M. 'THE COMMISSIONER (APPEALS) CANCELLED THE PENALTIES LEVIED U/S. 271(L)(C) OF THE ACT HOLDING THAT THE MISTAKE OF NO T INCLUDING THE VALUE OF TITANIUM DIOXIDE IN THE CLOSING STOCK WAS INADVE RTENT AND BONA FIDE, AND THE TRIBUNAL UPHELD THE CANCELLATION OF PENALTY . THE BOMBAY HIGH COURT REJECTED THE APPLICATION OF REVENUE UNDER SEC TION 256(2) OBSERVING THAT THE DECISION OF TRIBUNAL AFFIRMING T HE ORDER OF COMMISSIONER (APPEALS) CANCELING PENALTY WAS BASED ON AN UNCONTROVERTED FINDING OF FACT.' THAT APART, THE FOLLOWING DECISIONS ARE ALSO REQUIR ED TO BE TAKEN COGNIZANCE OF: 1. CIT VS. SURESH CHANDRA MITTAL (2001) 251 I TR 9 (SC) 2. GIT VS. P. GOVINDASAMY (2003) 263 ITR 509 (MAD.) 3. CHARAN BROS. VS. ITO (2002) 120 TAXMAN 25 (HYD.) 4. HARI OM KUMAR UMESH CHAND VS. ITO (2002) 124 TAXMAN 213 (AGRA)(MAG.) 13. THAT APART, THE FOLLOWING LEGAL SUBMISSION ALSO REQUIRES TO BE TAKEN COGNIZANCE OF BY YOUR HONOUR PRIOR TO ANY ADV ERSE INFERENCE. PENALTY PROCEEDINGS AND THE ASSESSMENT PROCEEDINGS ARE DISTINCT AND SEPARATE AND LEVY OF PENALTY IS NOT AUTOMATIC I RRESPECTIVE OF THE FACTS AND CIRCUMSTANCES OF THE CASE 1. IT IS A SETTLED LAW THAT THE PENALTY PROCEEDINGS AND THE ASSESSMENT PROCEEDINGS ARE DISTINCT AND SEPARATE. T HE FINDINGS IN THE ASSESSMENT PROCEEDINGS THOUGH RELEVANT AND GOOD FOR MAKING THE QUANTUM ADDITION DOES NOT AUTOMATICALLY JUSTIFY THE IMPOSITION OF PENALTY AS THE REGULAR ASSESSMENT ORDER IS NOT THE FINAL WORD IN PENALTY PROCEEDINGS AND HOWSOEVER RELEVANT AND GOOD THE FIN DINGS IN THE ASSESSMENT ORDER MAY BE THEY ARE NOT CONCLUSIVE SO FAR AS THE PENALTY PROCEEDINGS ARE CONCERNED. FOR THE ABOVE PROPOSITIO N RELIANCE IS PLACED ON THE FOLLOWING DECISIONS: (I) BANARAS TEXTORIUM VS. OT (1988) 169 ITR 782 (AL L.) (II) CIT VS. DHARAMCHANDL SHAH (1993) 204 ITR 462 ( BOM.) (III) NATIONAL TEXTILE CORPORATION VS. CIT(2000) 16 4 OR 209 (GUJ.) 2. REFERENCE IS ALSO INVITED TO THE DECISION OF ITAT, MUMBAI BENCH IN THE CASE OF INCOME-TAX OFFICER. WARD-143(31IL_V L -GMT I PRAMILA ITA NOS. 2498 & 2639 OF 2011 AND ITA NO. 2902 OF 2012 SANJAY M. MEHTA VS ITO, WD-6(3), AHD FOR A.Y. 2008-09 - 20 - PRATAP SHAH R20061100ITD 160 (MUM.V WHEREIN INTER ALIA IT IS HELD AS UNDER: 'THE BASIC QUESTION TO BE CONSIDERED WAS AS TO WHET HER LEVY OF PENALTY WAS AUTOMATIC IRRESPECTIVE OF THE FACTS AND CIRCUMS TANCES OF THE CASE. SUCH EXTREME VIEW COULD NOT BE ACCEPTED. THERE ARE CERTAIN FUNDAMENTAL PRINCIPLES WITH REFERENCE TO THE LEVY O F PENALTY, WHICH MUST BE LOOKED INTO AND CONSIDERED BEFORE LEVY OF ANY PE NALTY. THE FIRST PRINCIPLE IS THAT PENALTY PROCEEDINGS BEING QUASI-C RIMINAL IN NATURE, ARE QUITE DISTINCT, SEPARATE AND INDEPENDENT OF ASSESSM ENT PROCEEDINGS, AND, CONSEQUENTLY, FINDINGS RECORDED IN ASSESSMENT PROCEEDINGS THOUGH RELEVANT, ARE NOT CONCLUSIVE FOR LEVY OF PENALTY. T HE SECOND PRINCIPLE IS THE FOREMOST PRINCIPLE OF RULE OF NATURAL JUSTICE, I.E. NO PERSON SHOULD BE PENALIZED OR CONDEMNED WITHOUT GIVING A REASONABLE OPPORTUNITY OF BEING HEARD. THAT PRINCIPLE IS NORMALLY INCORPORATE D IN PENAL PROVISIONS. HOWEVER, SUCH PRINCIPLE IS BOUND TO BE OBSERVED EVE N THOUGH NOT INCORPORATED. THE THIRD PRINCIPLE IS THAT LEVY OF P ENALTY IS DISCRETIONARY. THE CONJOINT READING OF ABOVE PRINCIPLES LEADS TO O NLY ONE CONCLUSION THAT LEVY OF PENALTY CAN NEVER BE AUTOMATIC IRRESPE CTIVE OF THE FACTS AND CIRCUMSTANCES OF THE CASE. THE TAX AUTHORITIES MUST TAKE INTO CONSIDERATION THE ENTIRE FACTS AND CIRCUMSTANCES OF THE CASE BEFORE LEVYING ANY PENALTY. THE OPPORTUNITY OF BEING HEARD IS NOT A MERE FORMALITY. EVERY PERSON, AGAINST WHOM PENAL ACTION IS SOUGHT, HAS AN INHERENT RIGHT TO EXPLAIN THE FACTS AND CIRCUMSTANC ES OF THE CASE TO PROVE HIS INNOCENCE AND, CONSEQUENTLY, THE TAX AUTH ORITIES ARE BOUND TO CONSIDER THE SAME. THE DISCRETION IS VESTED IN THE TAX AUTHORITIES AND THE SAME MUST BE EXERCISED JUDICIOUSLY AFTER CO NSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE. THE TECHNICALI TIES SHOULD NOT COME IN THE WAY OF JUSTICE. THE BENEFIT OF DOUBT MUST BE GIVEN TO THE ASSESSEE. ACCORDINGLY, DISCRETION MUST BE EXERCISED IN FAVOUR OF THE ASSESSEE, IF FACTS AND CIRCUMSTANC ES OF THE CASE, PRIMA FACIE, SHOW THE INNOCENCE OF THE PERSON AGAIN ST WHOM PENAL ACTION IS SOUGHT. IF THE FACTS AND CIRCUMSTANCES OF THE CASE SHOW THE BONA FIDE OF THE ASSESSEE IN NOT DISCLOSING THE INCOME IN THE RETURN , THEN PENALTY SHOULD NOT BE IMPOSED AND THE TECHNICALITIES, IF ANY, SHOU LD NOT COME IN THE WAY OF JUSTICE. THE SUPREME COURT IN THE CASE OF HI NDUSTAN STEELS LTD. V. STATE OF ORISSA [1972] 83 ITR 26 HAS CLEARLY HEL D THAT AUTHORITY COMPETENT TO IMPOSE THE PENALTY WOULD BE JUSTIFIED IN REFUSING TO IMPOSE PENALTY WHEN THERE IS TECHNICAL OR VENIAL BR EACH OF THE PROVISIONS OF THE ACT. THAT JUDGMENT FURTHER PROVIDES IN DEAR TERMS THAT ALL RELEVANT CIRCUMSTANCES SHOULD BE TAKEN INTO CONSIDERATION BEFORE EXERCISING THE DISCRETION VESTED IN THE AUTHORITY.' 3. IT IS CONTENDED THAT, IT IS BY NOW SETTLED LAW T HAT AN ORDER IMPOSING PENALTY FOR FAILURE TO CARRY OUT A STATUTO RY OBLIGATION IS THE RESULT OF A QUASI CRIMINAL PROCEEDING AND IS SEPARA TE AND DISTINCT FROM THE ASSESSMENT PROCEEDINGS. SINCE THE BURDEN OF PRO OF IN A PENALTY PROCEEDINGS VARIES FROM THAT INVOLVED IN AN ASSESSM ENT PROCEEDING, A ITA NOS. 2498 & 2639 OF 2011 AND ITA NO. 2902 OF 2012 SANJAY M. MEHTA VS ITO, WD-6(3), AHD FOR A.Y. 2008-09 - 21 - FINDING IN AN ASSESSMENT PROCEEDING, THAT A PARTICU LAR RECEIPT IS INCOME CANNOT AUTOMATICALLY BE ADOPTED AS A FINDING TO THA T EFFECT IN THE PENALTY PROCEEDING. IN SUPPORT OF THE ABOVE PROPOSITION, RELIANCE IS PL ACED ON THE FOLLOWING DECISIONS APART FROM NUMEROUS OTHER DECISIONS ON TH E SAME LINE: (I) NATIONAL TEXTILE CORPORATION VS. CIT (2000) 164 CTR 209 (GUJ.). (II) CIT VS. JATARAM OIL MILLS (2001) 171 CTR 426 ( GUJ.) THE HON'BLE GUJARAT HIGH COURT IN THE ABOVE MENTIONE D CASE OF NATIONAL TEXTILE CORPORATION HAS INTER ALIA HELD AS UNDER. '...HOWEVER, THE ADDITION MADE ON, THIS COUNT WOULD NOT AUTOMATICALLY JUSTIFY IMPOSITION OF PENALTY UNDER S.271(L)(C) BY RECOURSE ONLY TO EXPLANATION 1 BELOW S.271(L)(C). NO PENALTY CAN BE IMPOSED IF THE FACTS AND CIRCUMSTANCES ARE EQUALLY CONSISTENT WITH THE H YPOTHESIS THAT THE AMOUNT DOES NOT REPRESENT CONCEALED INCOME AS WITH THE HYPOTHESIS THAT IT DOES. IF AN ASSESSEE GIVES AN EXPLANATION W HICH IS UNPROVED BUT NOT DISPROVED I.E., IT IS NOT ACCEPTED BUT CIRCUMST ANCES DO NOT LEAD TO THE REASONABLE AND POSITIVE INFERENCE THAT THE ASSE SSEE'S CASE IS FALSE, THE EXPLANATION CANNOT HELP THE DEPARTMENT BECAUSE THERE WILL BE NO MATERIAL TO SHOW THAT THE AMOUNT IN QUESTION WAS TH E INCOME OF THE ASSESSEE. ' 14. GENERAL PRINCIPLES IN RESPECT OF LEVY OF PENALTY U/ S. 271(1)(C) OF THE ACT 1. FURTHER, PENALTY WILL NOT ORDINARILY BE IMPOSED UNLESS THE PARTY OBLIGED, EITHER ACTED DELIBERATELY IN DEFIANCE OF L AW OR WAS GUILTY OF CONDUCT, CONTUMACIOUS OR ACTED IN CONSCIOUS DISREGA RD OF ITS OBLIGATIONS. PENALTY WILL NOT ALSO BE IMPOSED MERELY BECAUSE IT IS LAWFUL TO DO SO. WHETHER PENALTY SHOULD BE IMPOSED FOR FAILURE TO PE RFORM A STATUTORY OBLIGATION IS A MATTER OF DISCRETION OF THE AUTHORI TY TO BE EXERCISED JUDICIALLY; AND ON A CONSIDERATION OF ALL THE RELEV ANT CIRCUMSTANCES. IN THE INSTANT CASE, THE EXPLANATION OFFERED BY THE APPELLANT IN SUPPORT OF ITS CONTENTION IS BONAFIDE. THERE IS NO FRAUD OR ANY GROSS OR WILLFUL NEGLECT ON PART OF THE APPELLANT, THE ADDITIONS WER E MADE BY THE A.O. AND CONFIRMED BY THE CIT(A) ONLY ON ACCOUNT OF NON- CONSIDERATION AND NON-APPRECIATION OF THE CORRECT FACTS OF THE APPELL ANT'S CASE AS WELL AS LEGAL POSITION AS STATED HEREINABOVE. THE ABOVE CON TENTION IS PLACED WITHOUT PREJUDICE TO THE FACT THAT THE A.O. HAVING NOT INVOKED THE EXPLANATION-1 TO SECTION 271(L)(C) IN THE ASSESSMEN T ORDER OR IN THE SHOW CAUSE NOTICE PROPOSING TO LEVY THE PENALTY, NO OPPORTUNITY WAS GRANTED TO THE APPELLANT TO SPECIFICALLY REBUT THE SAID EXPLANATION. 2. AS REGARDS DISCHARGE OF NEGATIVE BURDEN BY THE A PPELLANT AS LAID DOWN IN EXPLANATION-1 TO SECTION 271(L)(C) OF THE A CT, IT IS SUBMITTED THAT ASSUMING FOR A WHILE THAT THE SAID EXPLANATION IS ATTRACTED, THE BROAD PROBABILITIES OF THE EXPLANATION OFFERED BY T HE APPELLANT ARE SUCH AS MAY BE BELIEVED, THOUGH NOT SUFFICIENT FOR CONCL USIVE PROOF, THE INITIAL ITA NOS. 2498 & 2639 OF 2011 AND ITA NO. 2902 OF 2012 SANJAY M. MEHTA VS ITO, WD-6(3), AHD FOR A.Y. 2008-09 - 22 - ONUS TO PROVE SUCH A NEGATIVE FACT CAN WELL BE SAID TO HAVE BEEN DISCHARGED BY THE APPELLANT AS HELD BY THE HON'BLE PATNA HIGH COURT IN THE CASE OF CIT VS. NIPANI TOBACOO STORES (1984) 145 ITR 128 (PAT.). IT IS CONTENDED HERE THAT THE DEGREE OR STANDARD OF PROOF REQUIRED IN CRIMINAL OR QUASI-CRIMINAL CASES IS HIG HER OR STRICTER THAN THAT REQUIRED IN A CIVIL CASE. IN CIVIL PROCEEDINGS, THE NORMAL RULE IS THAT A FACT CAN BE SAID TO BE ESTABLISHED IF IT IS PROVED BY A PREPONDERANCE OF PROBABILITIES. THE BURDEN IS ON THE DEPARTMENT TO PROVE THE CONCEA LMENT UNDER THE MAIN SECTION OF 271(L)(C) AND IT IS ONLY WHEN THE E XPLANATION APPLIES THAT THE ONUS SHIFTS TO THE APPELLANT TO PROVE THAT HIS EXPLANATION IS NOT FALSE. IN SUPPORT OF THE SAID PROPOSITION, RELIANCE IS PLA CED ON THE DECISION OF ITAT, CHENNAI BENCH IN THE CASE OF T.N. SRIDHARAN VS . IAC (1999) 70 ITD 48/65 TTJ 367 (CHENNAI) (T.M.) 3. IT IS FURTHER CONTENDED THAT IN THE INSTANT CASE , IT IS NEITHER A CASE OF CULPABLE OR WILFUL OMISSION NOR DELIBERATE CONCE ALMENT. A MERE FACT, THAT THE COGENT AND REASONABLE EXPLANATION GIVEN BY THE ASSESSEE WAS NOT ACCEPTABLE TO THE A.O. OR THE LEARNED CIJ(A) IS NOT SUFFICIENT TO LEAD TO THE IRRESISTIBLE INFERENCE THAT THERE WAS A DELI BERATE CONCEALMENT OR FURNISHING OF INACCURATE PARTICULARS OF INCOME ON P ART OF THE ASSESSEE. 4. IT IS CONTENDED THAT THE SAME CIRCUMSTANCES OR S TATE OF EVIDENCES ON WHICH AN AMOUNT IS TREATED AS INCOME IN THE QUAN TUM ASSESSMENT COULD NOT BY ITSELF JUSTIFY IMPOSITION OF PENALTY W ITHOUT ANYTHING MORE BROUGHT ON RECORD BY THE DEPARTMENT SO AS TO LEAD T O A CONCLUSION THAT THE AMOUNT REPRESENTS ASSESSEE'S INCOME COUPLED WIT H THE FACT THAT THERE WAS CONSCIOUS CONCEALMENT OR ACT OF FURNISHIN G OF INACCURATE PARTICULARS. 5. THUS, IN ORDER TO JUSTIFY LEVY OF PENALTY U/S. 2 71(L)(C) OF THE ACT, THERE MUST BE CONCRETE MATERIAL/EVIDENCE OR CIRCUMS TANCES LEADING TO A CONCLUSION THAT THE AMOUNT OF ADDITION DOES REPRESE NT ASSESSEE'S INCOME AND THE CIRCUMSTANCES MUST SHOW THAT THERE W AS CONSCIOUS CONCEALMENT OR ACT OF FURNISHING OF INACCURATE PART ICULARS. EXPLANATION 1 OF SECTION 271(L)(C) OF THE ACT DOES NOT MAKE THE A SSESSMENT ORDER A CONCLUSIVE EVIDENCE SO AS TO ESTABLISH THAT THE AMO UNT ASSESSED WAS IN FACT THE INCOME OF THE ASSESSEE. IN VIEW OF THE ABOVE FACTS, CONTENTIONS AND LEGAL P OSITION, THE IMPUGNED PENALTY OF RS.3,05,000/- LEVIED U/S. 271(L)(C) OF T HE ACT REQUIRES TO BE CANCELLED/QUASHED. WE HOPE THE ABOVE SUBMISSIONS WILL BE TAKEN DUE COG NIZANCE OF BY YOUR HONOUR WHILE DECIDING THE APPEAL IN QUESTION FOR WH ICH WE SHALL EVER REMAIN GRATEFUL.' 2.2 I HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIO NS. I HAVE ALSO PERUSED VARIOUS CASE LAWS RELIED UPON BY THE APPELL ANT. IT IS SEEN THAT THE A.O. HAS NOT MADE MUCH DISCUSSION ABOUT THE UNS ECURED LOANS IN THE ASSESSMENT ORDER. THE FIRST APPEAL IN THIS CASE WAS COMPLETED VIDE APPEAL NO. CIT(A)-XI/282/10-11 DATED 9.8.2011. IN T HE APPELLATE ORDER ITA NOS. 2498 & 2639 OF 2011 AND ITA NO. 2902 OF 2012 SANJAY M. MEHTA VS ITO, WD-6(3), AHD FOR A.Y. 2008-09 - 23 - IT IS CLEARLY MENTIONED THAT THE APPELLANT HAS FURN ISHED AFFIDAVITS FROM THESE CREDITORS AS WELL AS PROOF OF IDENTITY LIKE C OPY OF VOTER I.D.CARD ETC. THE APPELLANT HAS SUBMITTED THE SOURCE OF THE THESE LOANS AS AGRICULTURAL INCOME WHICH THE APPELLANT WAS NOT ABL E TO SUBSTANTIATE AND ACCORDINGLY THESE UNSECURED LOANS WERE CONFIRMED AS THE APPELLANT HAS FAILED TO DISCHARGE THE ONUS CAST UPON HIM BY THE P ROVISIONS OF SEC.68 TO PROVE THE CREDITWORTHINESS OF THE CREDITORS. TAKING THE ENTIRETY OF THE FACTS IN VIEW, I AM OF THE CONSIDERED VIEW THAT THE FACTS AVAILABLE ON RECORD MAY JUSTIFY THE ADDITION U/S.68 AND COLLECTI ON OF HIGHER REVENUE, HOWEVER, THESE FACTS ARE NOT SUFFICIENT FOR LEVY OF PENALTY. IN THIS REGARD THE APPELLANT HAS RIGHTLY PLACED RELIANCE ON NATION AL TEXTILES VS CIT 164 CTR 209(GUJ.) WHEREIN IT IS HELD THAT PENALTY U/S.2 71(1)(C) COULD NOT HAVE BEEN IMPOSED WITHOUT THE DEPARTMENT MAKING ANY OTHER EFFORT TO COME TO A CONCLUSION THAT THE CASH CREDIT IN NO CIR CUMSTANCE WOULD HAVE BEEN AMOUNTS RECEIVED AS TEMPORARY LOANS FROM VARIO US PARTIES. IN THIS CASE, THE ASSESSEE IN THE QUANTUM PROCEEDINGS FAILE D TO PRODUCE HIS ACCOUNTANT BUT THE DEPARTMENT ALSO IN THE PENALTY P ROCEEDINGS MADE NO EFFORT TO SUMMON HIM. APPLYING THE TEST (II) AS DIS CUSSED IN THIS CASE I.E. THE CIRCUMSTANCES MUST SHOW THAT THERE WAS ANIMUS O R CONSCIOUS CONCEALMENT OR ACT OF FURNISHING INACCURATE PARTICU LARS, THEREFORE, IT WAS A CASE WHERE THERE WAS NO CIRCUMSTANCE TO LEAD TO A REASONABLE AND POSITIVE INFERENCE IN THE ASSESSEE'S CASE THAT THE CASH CREDITS WERE ARRANGED AS TEMPORARY LOANS, WAS FALSE.' THE RATIO OF THIS CASE WILL HELP THE APPELLANT AS IN THE INSTANT CASE THERE ARE NO S UFFICIENT EVIDENCE TO INDICATE THAT THERE WAS NO CIRCUMSTANCE TO LEAD TO A REASONABLE CAUSE TO INFER THAT IN THE ASSESSEE'S CASE, THE CASH CREDITS WERE ARRANGED AS TEMPORARY LOANS WAS FALSE. SECONDLY, THERE IS NOTHI NG ON RECORD TO PROVE THE ANIMUS I.E. CONSCIOUS CONCEALMENT OR ACT OF FUR NISHING INACCURATE PARTICULARS OF INCOME. THE HON'BLE ITAT IN THE CASE OF ADIT INTERNATIONAL TAXATION VS. PRECISION DRILLING (CYPRUS) LTD. IN IT A NO.1604/AHD/2009 DATED 17.9.2009 HAS DELETED PENALTY U/S.271(1)(C) W ITH THE FOLLOWING OBSERVATIONS:- 'IF THE ASSESSEE GIVES AN EXPLANATION WHICH IS UNPR OVED BUT NOT DISPROVED, I.E. IT IS NOT ACCEPTED BUT CIRCUMSTANCE S DO NOT LEAD TO REASONABLE AND POSITIVE INFERENCE THAT THE ASSESSEE 'S CASE IS FALSE, THE ASSESSEE MUST BE HELD TO HAVE PROVED THAT THERE IS NO MENS REA OR GUILTY MIND ON HIS PART. LIVEN IN THIS VIEW OF MATT ER, THE EXPLANATION CANNOT JUSTIFY LEVY OF PENALTY. ABSENCE OF PROOF AC CEPTABLE TO THE DEPARTMENT CANNOT BE EQUATED WITH FRAUD OR WILLFUL DEFAULT. 2.3 IN THE INSTANT CASE ALSO THE APPELLANT'S CONTEN TIONS REMAINED UNPROVED BUT THE SAME WAS NOT DISPROVED BY THE A.O. ACCORDINGLY, I AM OF THE CONSIDERED VIEW THAT PENALTY LEVIED U/S. 271 (1 )(C) IS UNTENABLE. 2.4 IT IS ALSO A MATTER OF RECORD THAT IN THE ASSES SMENT ORDER THE PENALTY U/S.271(1)(C) WAS INITIATED FOR FURNISHING OF INACCURATE PARTICULARS OF INCOME AND THEREBY CONCEALMENT OF IN COME. IT UNAMBIGUOUSLY PROVES THAT THE PENALTY U/S.271(1)(C) WAS INITIATED FOR FURNISHING OF INACCURATE PARTICULARS OF INCOME. THE A.O. LEVIED PENALTY U/S.271(1)(C) FOR CONCEALMENT OF PARTICULARS OF HIS INCOME AND A CLEAR- CUT FINDING HAS BEEN GIVEN IN THIS REGARD IN PARA 8 .2 OF THE PENALTY ITA NOS. 2498 & 2639 OF 2011 AND ITA NO. 2902 OF 2012 SANJAY M. MEHTA VS ITO, WD-6(3), AHD FOR A.Y. 2008-09 - 24 - ORDER. THESE FACTS CLEARLY INDICATE THAT THE A.O. H AS FAILED TO FRAME PRECISE CHARGE BEFORE IMPOSITION OF PENALTY. ON THI S REASONING ITSELF THE PENALTY IS UNTENABLE. RELIANCE IN THIS REGARD IS MA DE ON CIT VS LAKHDHIRLALJI (1972) 85 ITR 77 (GUJ.). 2.5 IN VIEW OF ABOVE FACTS, I HOLD THAT PENALTY LEV IED U/S. 271(1)(C) OF RS. 3,05,0007- IS UNTENABLE AND THE SAME IS ORDERED TO BE DELETED. THIS GROUND OF APPEAL IS ALLOWED. 15. THE LD. DR HAS RELIED ON THE ORDER OF THE ASSES SING OFFICER AND THE LD. AR OF THE ASSESSEE HAS RELIED ON THE ORDER OF L D. CIT(A). 16. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF LOWER AUTHORITIES AND MATERIAL AVAILABLE ON RECORD. WE FIND THAT NO SPECIFIC ERROR IN THE ORDER OF THE LD. CIT(A) COULD BE POINTED OUT BY THE LD. DR. WE FIND THAT THE PENALTY LEVIED BY THE ASS ESSING OFFICER WAS ON THE ADDITION OF RS 9,70,000/- CONFIRMED BY THE LD. CIT(A) IN QUANTUM APPEAL. WHILE DECIDING THE QUANTUM APPEAL OF THE A SSESSEE WE HAVE DELETED RS 4,00,000/- OUT OF THE QUANTUM ADDITION O F RS 9,70,000/-. HENCE, WE FIND NO INFIRMITY IN THE ORDER OF LD. CIT (A) AND ACCORDINGLY, THE SAME IS CONFIRMED AND THE GROUND OF APPEAL OF T HE REVENUE IS DISMISSED. 17. IN THE RESULT, IN ITA NO. 2498/AHD/2011 THE APP EAL OF THE ASSESSEE IS PARTLY ALLOWED AND IN ITA NOS. 2639/AHD /2011 AND 2902/AHD/2012 THE APPEALS OF REVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE COURT ON FRIDAY, THE 28 TH FEBRUARY, 2014 AT AHMEDABAD. SD/- SD/- (KUL BHARAT) JUDICIAL MEMBER ( N.S. SAINI) ACCOUNTANT MEMBER AHMEDABAD; DATED 28/02/2014 GHANSHYAM MAURYA, SR. P.S.
