Gujarat State Road Transport Corpn. Ltd., Ahmedabad V. The ACIT., Circle-4, Ahmedabad

ITA 2597/AHD/2009

• Counselvise Citation: 259720514 RSA 2009
• Duration Of Justice: 2 year(s) 4 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-01-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 10-01-2012
• Assessment Year: 2004-2005
• Appeal Filed On: 16-09-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ALOK JOHRI
• Keywords: Business income; Depreciation; Earning of tax free income; Wrong claim; Revised return
• Section: 43B; 143(3)

Judgement Text

ITA NO.259 7 & 2384/AHD/2009. ASSESSMENT YEAR 2004-05. 1 IN THE INCOME TAX APPELLATE TRIBUNAL BBENCH, AHME DABAD (BEFORE SHRI MUKUL KUMAR SHRAWAT & SHRI A.L. GEHLO T) I.T.A. NO. 25 97/AHD/2009 (ASSESSMENT YEAR: 2004-2005) GUJARAT STATE ROAD TRANSPORT CORPORATION, VAHAN VYAVHAR BHAVAN, ASTODIA, AHMEDABAD. (APPELLANT) VS. ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-4, NAVJIVAN TRUST BUILDING, OFF. ASHRAM ROAD, AHMEDABAD. (RESPONDENT) I.T.A. NO. 27 84/AHD/2009 (ASSESSMENT YEAR: 2004-2005) ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-4, KENDRIYA PRATYAKSHA BHAVAN, OPP. OLD SACHIVALAYA, AMBAWADI,AHMEDABAD. (APPELLANT) VS. GUJARAT STATE ROAD TRANSPORT CORPORATION, VAHAN VYAVHAR BHAVAN, ASTODIA, AHMEDABAD. (RESPONDENT) PAN: AAACG 5587H ON BEHALF OF THE ASSESSEE: SHRI SUNIL TALATI. ON BEHALF OF THE REVENUE : SHRI ALOK JOHRI, CIT D.R . ( )/ ORDER DATE OF HEARING : 10-1-2012 DATE OF PRONOUNCEMENT : 31-1-2012 ITA NO.259 7 & 2384/AHD/2009. ASSESSMENT YEAR 2004-05. 2 PER: SHRI A.L. GEHLOT,A.M. THESE ARE CROSS APPEALS AGAINST THE ORDER OF LD. CI T (A)-VIII, AHMEDABAD IN APPEAL NO. CIT (A)-VIII/AC-4/100/08-09 DATED 25-6- 2009 FOR THE ASSESSMENT YEAR 2004-05. 2. THE GROUND RAISED IN BOTH THE APPEALS IS PERTAIN ING TO LEVY OF PENALTY U/S.271 (1)(C ) OF THE ACT. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE, G UJARAT STATE ROAD TRANSPORT CORPORATION ENGAGED IN THE BUSINESS OF MASS TRANSPORT FACILITIES AND ALLIED SERVICES. THE ASSES SEE FILED ORIGINAL RETURN U/S. 139(1) ON 1-11-2004 DECLARING TOTAL LOS S OF RS.68,93,31,623/- WHICH WAS PROCESSED U/S. 143(1) O F THE ACT ON 3- 1-2005 ACCEPTING THE RETURNED LOSS. THE ASSESSEE FI LED A REVISED RETURN ON 30-10-2005 THEREBY REDUCING THE LOSS TO T HE TUNE OF RS. 5,19,68,772/-. IN THE NOTE ATTACHED TO THE STATEMEN T OF TOTAL INCOME FILED ALONG WITH RETURN OF INCOME STATING THE REASO NS THAT REVISED RETURN FOR THE ORIGINAL RETURN WAS FILED ON THE BAS IS OF TENTATIVE/PROVISIONAL ACCOUNTS OF THE CORPORATION A ND REVISED RETURN IS BASED ON AUDITED FINAL ACCOUNTS. THE REVI SED RETURN WAS ASSESSED U/S. 143(3) THEREBY REDUCING THE LOSS ON A CCOUNT OF DISALLOWANCE OF RECONDITIONING EXPENDITURE OF OLD B USES, GUEST HOUSE EXPENDITURE AND DEPRECIATION CLAIMED. THE ASS ESSEE FILED APPEAL BEFORE THE CIT (A). THE CIT (A) DELETED THE DISALLOWANCE MADE BY THE AO AND RESTRICTED THE LOSS AS PER REVISED RE TURN FILED BY THE ASSESSEE. SUBSEQUENTLY THE CASE WAS REOPENED BY IS SUING NOTICE ITA NO.259 7 & 2384/AHD/2009. ASSESSMENT YEAR 2004-05. 3 U/S. 148 ON 28-12-2008 ON THE GROUND THAT THE ASSES SEE COLLECTED EMPLOYEES CONTRIBUTION OF PF TO THE TUNE OF RS.54, 46,39,114/- AGAINST WHICH THE ASSESSEE PAID ONLY RS.20,91,23,88 7/- TO THE GOVERNMENT ACCOUNT LEAVING BALANCE OF RS. 33,55,15, 227/- AS UNPAID. THE AO WAS OF THE VIEW THAT PROVISIONS OF S ECTION 2(24)(X) R.W.S 36(I)(VA) OF THE ACT AND IT HAD VIOLATED THE PROVISIONS OF SECTION43B OF THE ACT. IN COMPLIANCE TO THE NOTICE U/S. 148 THE ASSESSEE FILED RETURN ON 2-7-2008 REDUCING THE LOSS OF RS.35,55,15,227/-. THE AO COMPLETED THE ASSESSMENT ON THE BASIS OF THE RETURN FILED BY THE ASSESSEE AGAINST NOTICE U/S. 148 WITHOUT DISTURBING THE LOSS DECLARED BY THE ASSESSEE IN THE RETURN. THE AO LEVIED PENALTY U/S. 271(1) (C) ON THE GROUND THAT T HE ASSESSEE HAS MADE A FALSE CLAIM U/S. 43B AS WELL AS THE ASSESSEE DECLARED INCOME OF RS.2 CRORE ON ACCOUNT OF EMPLOYEES CONTR IBUTION, IN RESPONSE TO NOTICE U/S. 148 OF THE ACT. THE AO LEVI ED MINIMUM PENALTY OF RS.12,75,41,087/-. THE BASIS OF HOLDING THAT THE ASSESSEE HAS CLAIMED FALSE CLAIM. THE AO IN HIS DISCUSSION H ELD THAT THE ASSESSEE WAS WELL AWARE ABOUT THE LAW THAT EMPLOYEE S CONTRIBUTION TO PF IS NOT DEDUCTIBLE U/S. 43B OF THE ACT AND ACC ORDING TO THE PROVISIONS OF SECTION 2(24)(X) R.W.S. 36(I) (VA) AR E ATTRACTED SO FAR AS THE CONTRIBUTION FROM THE EMPLOYEES IS CONCERNED. SIMILARLY THE ASSESSEE HAS DISCLOSED RS2 CRORE ADDITIONAL LOSS AN D CLAIMING DEDUCTION U/S. 43B. THE ASSESSEE COULD NOT SUBSTANT IATE THE PROOF OF BONAFIED CLAIM U/S.43B AS NO PAYMENT WAS CREDITE D TO GOVERNMENT ACCOUNT AS REQUIRED BY THE LAW. THE CIT (A) DELETED THE PENALTY IN RESPECT OF LOSS OF RS.33,55,15,227/- ON THE GROUND OF ITA NO.259 7 & 2384/AHD/2009. ASSESSMENT YEAR 2004-05. 4 BONAFIDENESS OF THE ASSESSEE, HOWEVER, THE CIT (A) CONFIRMED THE PENALTY U/S. 271(1)(C) OF RS.2 CRORE AS THE ASSESSE E DISCLOSED THIS AMOUNT OF LOSS ONLY IN RESPONSE TO NOTICE U/S. 148 AND THE ASSESSEE HAS FAILED TO DISCHARGE THE ONUS CAST UPON IT WITHI N THE MEANING OF EXPLANATION-1 TO SECTION 271(1) (C) OF THE ACT. 4. THE LD. DR AFTER NARRATING FACTS OF THE ISSUE SU BMITTED THAT THE PROVISIONS OF THE ACT ARE VERY CLEAR, REFERRING TO SECTION 2(24)(X) R.W.S.36 (I)(VA) OF THE ACT THAT EMPLOYEES CONTRIB UTION TO PF IS TO BE ADDED IN THE TOTAL INCOME OF THE ASSESSEE. THE LD. DR SUBMITTED THAT THE FACT OF THE ADDITION WAS BY DETECTION OF C ONCEALMENT BY THE DEPARTMENT AND BY ISSUING NOTICE U/S. 148.THE ASSES SEE REVISED ITS LOSS RETURN. THE LD. DR SUBMITTED THAT SECTION 43B IS NOT APPLICABLE IN CASE OF EMPLOYEES CONTRIBUTION TO PF ; THIS IS A CASE CLEAR FROM THE PROVISION OF THE ACT. THE AUDITOR A LSO DID NOT POINT OUT SUCH CLEAR PROVISION IN HIS REPORT. THE LD. DR SUBMITTED THAT ASSESSEE HAS CLAIMED FALSE CLAIM THEREFORE, THE AO HAS RIGHTLY LEVIED THE PENALTY U/S. 271(1) (C) OF THE ACT. HE FURTHER SUBMITTED THAT THE CIT (A) HAS TAKEN DOUBLE STAND AS WELL CONFIRMED TH E PENALTY ON RS.2 CRORE. THE CIT (A) HAS HELD THAT THE ASSESSEE HAS FAILED TO EXPLAIN THE BONAFIDENESS, WHEREAS WHILE DELETING TH E PENALTY ON RS.33,55,15,227/- ACCEPTED THE ASSESSEES CONTENTIO N THAT THE CLAIM OF THE ASSESSEE WAS A BONAFIED CLAIM. THE LD. DR IN SUPPORT OF THE CONTENTION RELIED UPON THE VARIOUS DECISIONS . IN SUPPORT OF THE CONTENTION THAT SECTION 43B IS NOT APPLICABLE I N CASE EMPLOYEES CONTRIBUTION THE LD. DR RELIED UPON ALOME EXTRUSION LTD., 319 ITR ITA NO.259 7 & 2384/AHD/2009. ASSESSMENT YEAR 2004-05. 5 306 (SC) AND CIT VS. P.M. ELECTRONIC LTD., 313 ITR 761,(DELHI), THE LD. DR IN SUPPORT OF HIS CONTENTION THAT IN CASE OF LOSS PENALTY IS LEVIABLE RELIED UPON A JUDGMENT OF SUPREME COURT IN THE CASE OF CIT VS. GOLD COIN HEALTH FOOD PVT. LTD., 304 ITR 308 (S C). THE LD. DR RELIED UPON FOLLOWING DECISIONS TO SUPPORT HIS CONT ENTION THAT AFTER CONSIDERING THE JUDGMENT OF THE APEX COURT IN THE C ASE OF RELIANCE PETROPRODUCTS LTD., 322 ITR 158 WHERE PENALTY U/S. 271(1)(C ) HAS BEEN CONFIRMED. (1) GUJARAT STATE FINANCIAL SERVICES LTD. VS. ACIT 39 SOT 570 (AHD). (2) SURVIDHI FINANCIAL SERVICES LTD. VS. ACIT 132 T TJ (DEL) 584. (3) SHRI PRAMOD MITTAL ITAT DELHI BENCH IN ITA NO.8 84/DEL/08 ORDER DT.15-2011. (4) PSB INDUSTRIES INDIA PVT. LTD. VS. CIT., ITAT D ELHI BENCH IN ITA NO.792/DEL/2011 JUDGMENT DATED 15-7-2011. 4.1 AT THE TIME OF HEARING BENCH ASKED LEARNED DR TO FILE RELEVANT ABSTRACT OF AUDITORS REPORT ETC WHICH HAV E BEEN FILED BY THE LD DR WHICH ARE PUT ON RECORD. ALONG WITH THOSE DO CUMENTS THE LD DR HAS ALSO REITERATED HIS SUBMISSIONS AND STATE D THAT THERE ARE CASES IN FAVOUR OF DEPARTMENT IN RESPECT OF DISALLO WANCE OF EMPLOYEES CONTRIBUTIONS AFTER DUE DATE AS PER SECT ION 36(1) (VA) AND SECTION 43B, AMENDMENT HAS NOTHING TO DO WITH THIS AMBIGUOUS POSITION OF LAW. THE LD DR RELIED UPON FOLLOWING DE CISIONS IN SUPPORT OF HIS CONTENTION, JCIT V ITC LTD 122 ITD 5 7 (SB) (KOL), CIT V PAMWI TISSUES LTD 313 ITR 137 (BOMB), CIT V GODAV ARI (MANNAR) SAHAKARI SKAR KARKHANA LTD 298 ITR 149 (BOMB) ,ACI T V VIRAJ ITA NO.259 7 & 2384/AHD/2009. ASSESSMENT YEAR 2004-05. 6 FORGINGS LTD 20 SOT 129 (MUM) AND THE ASSAM TRIBUN E V CIT 285 ITR 452 (GAU) 5. THE LD. AR ON THE OTHER HAND SUBMITTED THAT WHET HER SECTION 43B IS APPLICABLE FOR EMPLOYEES CONTRIBUTION OR NO T IS A CONTROVERSIAL ISSUE AND THERE ARE DECISIONS OF ITAT AS WELL AS OTHER HIGH COURTS FAVOUR AND AGAINST ON THE ISSUE. THE LD . AR SUBMITTED THAT THE FILING OF RETURN U/S. 148 REDUCING THE LOS S ON ACCOUNT OF EMPLOYEES CONTRIBUTION WAS A BONAFIDE CLAIM AND IN CASE OF BONAFIDENESS OF THE CLAIM PENALTY U/S. 271(1)(C ) I S NOT LEVIABLE. THE LD. AR RELIED UPON VARIOUS DECISIONS AS PER ASS ESSEES PAPER BOOK SR.NO.11 TO 16 OF THE PAPER BOOK WHICH ARE AS UNDER:- (1)CIT & ANOTHER VS. DESH RAKSHAK AUSHADHALAYA LTD. , 218 CTR 7 (2)CIT VS.VINAY CEMENT LTD., 213 CTR 268 (SC) (3)CIT VS.SABRI ENTERPRISES 213 CTR 269 (KAR.) (4)CIT VS. P.M. ELECTRONICS LTD., 15 DTR 258 (DEL) (5)CIT VS. NEXUS COMPUTERS (P) LTD. 219 CTR 54 (MAD .) (6)ITAT A-BENCH, AHMEDABAD IN ITA 1426/AHD/2005 DT. 7-4-2006. (7)ITAT B-BENCH, AHMEDABAD IN ITA NO.4162/AHD/08 DT .23-1- 2009. (8)ITAT A-BENCH, AHMEDABAD IN ITA NO.2262/A/2007 DT .10-8-2007 (9)CIT VS. DHARMENDRA SHARMA 213 CTR 609 (DEL) (10)NEW SORATHIA ENGG. CO. VS. CIT 282 ITR 642 (GUJ .) (11) ITAT C-BENCH, AHMEDABAD IN ITA NO.2667/AHD/200 8 DT.7- 11-2008. ITA NO.259 7 & 2384/AHD/2009. ASSESSMENT YEAR 2004-05. 7 (12) RELIANCE PETROPRODUCTS (P) LTD., 322 ITR 158 ( SC). 6. WE HAVE HEARD THE LEARNED REPRESENTATI VES OF THE PARTIES, RECORD PERUSED AND GONE THROUGH DECISIONS CITED. TH E PROCEEDINGS UNDER SECTION 271(1) (C) CAN BE INITIATED ONLY IF T HE A.O OR THE FIRST APPELLATE AUTHORITY IS SATISFIED IN THE COURSE OF A NY PROCEEDINGS UNDER THE ACT THAT ANY PERSON HAS CONCEALED THE PAR TICULARS OF HIS INCOME OR HAS FURNISHED INACCURATE PARTICULARS OF S UCH INCOME.HE MAY DIRECT THAT SUCH PERSON SHALL PAY BY WAY OF PEN ALTY THE SUM MENTIONED IN SUB-CLAUSE (III) OF CLAUSE (C). THE EX PRESSION USED IN CLAUSE (C) IS 'HAS CONCEALED THE PARTICULARS OF HIS INCOME' OR 'FURNISHED INACCURATE PARTICULARS OF SUCH INCOME. T HEREFORE, BOTH IN CASES OF CONCEALMENT AND INACCURACY THE PHRASE PAR TICULARS OF INCOME ARE USED. IT WILL BE NOTED THAT AS REGARDS CONCEALMENT, THE EXPRESSION IN CLAUSE (C) IS 'HAS CONCEALED THE PART ICULARS OF HIS INCOME' AND NOT 'HAS CONCEALED HIS INCOME'. THE EXP RESSIONS 'HAS CONCEALED THE PARTICULARS OF INCOME' AND 'HAS FURNI SHED INACCURATE PARTICULARS OF INCOME' HAVE NOT BEEN DEFINED EITHER IN SECTION 271(1)(C) OR ELSEWHERE IN THE ACT. ONE THING IS CER TAIN THAT THESE TWO CIRCUMSTANCES ARE NOT IDENTICAL ALTHOUGH THEY MAY LEAD TO THE SAME EFFECT, NAMELY, KEEPING OFF A CERTAIN PORTION OF INCOME. THE FORMER IS DIRECT AND THE LATTER MAY BE INDIRECT IN ITS EXECUTION. 6.1 THE WORD 'CONCEAL' IS DERIVED FROM THE L ATIN CONCELARE WHICH IMPLIES CON+CELARE TO HIDE. WEBSTER IN HIS NE W INTERNATIONAL DICTIONARY EQUATES ITS MEANING 'TO HIDE OR WITHDRAW FROM ITA NO.259 7 & 2384/AHD/2009. ASSESSMENT YEAR 2004-05. 8 OBSERVATION, TO COVER OR KEEP FROM SIGHT; TO PREVEN T THE DISCOVERY OF; TO WITHHOLD KNOWLEDGE OF'. THE OFFENCE OF CONCEALME NT IS THUS A DIRECT ATTEMPT TO HIDE AN ITEM OF INCOME OR A PORTI ON THEREOF FROM THE KNOWLEDGE OF THE INCOME-TAX AUTHORITIES. THERE IS STRICT LIABILITY ON THE ASSESSEE FOR CONCEALMENT OR FOR GIVING INACC URATE PARTICULARS WHILE FILING THE RETURN. THE PENALTY UNDER THAT PRO VISION IS A CIVIL LIABILITY. WILLFUL CONCEALMENT IS NOT AN ESSENTIAL INGREDIENT FOR ATTRACTING CIVIL LIABILITY. IT IS OBVIOUS THAT THE PENAL PROVISIONS WOULD OPERATE WHEN THERE IS CONCEALMENT OF PARTICULARS OF INCOME OR A FAILURE OF DUTY TO DISCLOSE FULLY AND TRULY PARTICU LARS OF INCOME, IMPOSED UNDER THE ACT AND THE RULES THERE UNDER. TH E DUTY IS ENJOINED UPON A PERSON TO MAKE A CORRECT AND COMPLE TE DISCLOSURE OF HIS INCOME AND IT IS ONLY WHEN HE FAILS IN HIS D UTY BY NOT DISCLOSING HIS INCOME OR PART THEREOF, HE CONCEALS THE PARTICULARS OF HIS INCOME. THE DUTY IS ENJOINED UPON HIM TO MAKE A COMPLETE DISCLOSURE OF HIS INCOME AS WELL AS A CORRECT DISCL OSURE. THEREFORE, IF THE DISCLOSURE MADE-OF THE PARTICULARS OF INCOME IS INCORRECT, THEN ALSO HE COMMITS BREACH OF HIS DUTY. SUCH DEFAULTS E NTAIL THE PENAL CONSEQUENCES CONTEMPLATED BY SECTION 271(1) (C)(III ) OF THE ACT. 6.2 THERE CANNOT BE A STRAIGHT JACKET FORMULA FOR DETECTION OF THESE DEFAULTS OF CONCEALMENT OR OF FURNISHING INAC CURATE PARTICULARS OF INCOME AND INDEED CONCEALMENT OF PAR TICULARS OF INCOME AND IN ACCURATE PARTICULARS OF INCOME MAY AT TIMES OVERLAP. IT DEPENDS UPON THE FACTS OF THE EACH CASE. IN THE ASSESSMENT PROCEEDINGS THE AO WHILE ASCERTAINING THE TOTAL INC OME CHARGEABLE ITA NO.259 7 & 2384/AHD/2009. ASSESSMENT YEAR 2004-05. 9 TO TAX WOULD BE IN A POSITION TO DETECT THE SPECIFI C OR DEFINITE PARTICULARS OF INCOME CONCEALED OR OF WHICH FALSE P ARTICULARS ARE FURNISHED. WHERE IN THE CONSTITUENTS OF INCOME RETU RNED, 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 A RE DETECTED AS INACCURATE, THEN SUCH FIGURE WILL ALSO MAKE THE TOT AL INCOME INACCURATE IN PARTICULARS TO THE EXTENT IT DOES NOT INCLUDE SUCH INCOME. IN OTHER, WORDS THE AO CANNOT INVOKE PROVIS ION OF SECTION 271 (1) (C) ON THE BASIS OF ROUTINE AND GENERAL PRE SUMPTIONS. WHETHER IT BE A CASE OF ONLY CONCEALMENT OR OF ONLY INACCURACY OR BOTH, THE PARTICULARS OF INCOME SO VITIATED WOULD B E SPECIFIC AND DEFINITE AND BE KNOWN IN THE ASSESSMENT PROCEEDINGS BY THE ITO, WHO ON BEING SATISFIED ABOUT EACH CONCEALMENT OR IN ACCURACY OF PARTICULARS OF INCOME WOULD BE IN A POSITION TO INI TIATE THE PENALTY PROCEEDINGS ON ONE OR BOTH OF THE GROUNDS OF DEFAUL T AS MAY HAVE BEEN SPECIFICALLY AND DIRECTLY DETECTED. 6.3 IN ADDITION TO MAIN PROVISIONS OF CONCEA LMENT 'HAS CONCEALED THE PARTICULARS OF HIS INCOME' OR 'HAS FU RNISHED INACCURATE PARTICULARS OF SUCH INCOME' THERE ARE DE EMED TO REPRESENT THE INCOME IN RESPECT OF WHICH PARTICULAR S HAVE BEEN CONCEALED .THE DEEMED CONCEALMENT IS PROVIDED IN EX PLANATIONS OFTEN A QUESTION AROSE WHETHER IN CASES WHERE ADDIT IONS OR DISALLOWANCES MADE BY THE AO THE PENAL PROVISIONS O F SECTION271 ITA NO.259 7 & 2384/AHD/2009. ASSESSMENT YEAR 2004-05. 10 (1) WOULD ATTRACT. EXPLANATION 1 TAKES CARE OF TH IS SITUATION. THE EXPLANATION TO SECTION 271(1) OF THE ACT READS AS U NDER:- 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 OFFERS AN EXPLANATION WHICH IS FOUND BY THE ASSESSING OFFICER OR THE COMMISSIONER (APPEALS) OR THE COMMISSIONER TO BE FA LSE, OR (B) SUCH PERSON OFFERS AN EXPLANATION WHICH HE IS NOT ABLE TO SUBSTANTIATE AND FAILS TO PROVE THAT SUCH EXPLANATI ON IS BONA FIDE AND THAT ALL THE FACTS RELATING TO THE SAME AND MAT ERIAL TO THE COMPUTATION OF HIS TOTAL INCOME HAVE BEEN DISCLOSED BY HIM, THEN, THE AMOUNT ADDED OR DISALLOWED IN COMPUTING THE TOT AL INCOME OF SUCH PERSON AS A RESULT THEREOF SHALL, FOR THE PURP OSES OF CLAUSE (C) OF THIS SUB-SECTION, BE DEEMED TO REPRESENT THE INC OME IN RESPECT OF WHICH PARTICULARS HAVE BEEN CONCEALED. 6.4 A CONSPECTUS OF THE EXPLANATION1 MAKES IT CLEAR THAT THE STATUTE VISUALISED THE ASSESSMENT PROCEEDINGS AND P ENALTY PROCEEDINGS TO BE WHOLLY DISTINCT AND INDEPENDENT O F EACH OTHER. IN ESSENCE, THE EXPLANATION IS A RULE OF EVIDENCE. PRE SUMPTIONS WHICH ARE REBUTTABLE IN NATURE ARE AVAILABLE TO BE DRAWN. THE INITIAL BURDEN OF DISCHARGING THE ONUS OF REBUTTAL IS ON TH E ASSESSEE. THE RATIONALE BEHIND THIS VIEW IS THAT THE BASIC FACTS ARE WITHIN THE SPECIAL KNOWLEDGE OF THE ASSESSEE. SECTION 106 OF T HE INDIAN EVIDENCE ACT, 1872, GIVES STATUTORY RECOGNITION TO THIS UNIVERSALLY ACCEPTED RULE OF EVIDENCE. THERE IS NO DISCRETION C ONFERRED ON THE ITA NO.259 7 & 2384/AHD/2009. ASSESSMENT YEAR 2004-05. 11 ASSESSING OFFICER AS TO WHETHER HE CAN INVOKE THE E XPLANATION OR NOT. EXPLANATION 1 COMES INTO OPERATION WHEN, IN RE SPECT OF ANY FACTS MATERIAL TO THE COMPUTATION OF TOTAL INCOME O F ANY PERSON, THERE IS FAILURE TO OFFER AN EXPLANATION OR AN EXPL ANATION IS OFFERED WHICH IS FOUND TO BE FALSE BY THE ASSESSING OFFICER OR THE FIRST APPELLATE AUTHORITY, OR AN EXPLANATION IS OFFERED W HICH IS NOT SUBSTANTIATED. IN SUCH A CASE, THE AMOUNT ADDED OR DISALLOWED IN COMPUTING THE TOTAL INCOME IS DEEMED TO REPRESENT T HE INCOME IN RESPECT OF WHICH PARTICULARS HAVE BEEN CONCEALED. A S PER THE PROVISION OF EXPLANATION 1 THE ONUS TO ESTABLISH TH AT THE EXPLANATION OFFERED WAS BONA FIDE AND A FACTS RELAT ING TO THE SAME AND MATERIAL TO THE COMPUTATION OF HIS INCOME HAVE BEEN DISCLOSED BY HIM WILL BE ON THE PERSON CHARGED WITH CONCEALME NT. THE EXPLANATION OF THE ASSESSEE FOR THE PURPOSE OF AVOI DANCE OF PENALTY MUST BE AN ACCEPTABLE EXPLANATION; IT SHOULD NOT BE A FANTASTIC OR FANCIFUL ONE. AS INDICATED ABOVE, THE CONSEQUENCE F OLLOWS AS A MATTER OF LAW. THE BURDEN IS ON THE ASSESSEE. IF HE FAILS TO DISCHARGE THAT BURDEN, THE PRESUMPTION THAT HE HAD CONCEALED THE INCOME OR FURNISHED INACCURATE PARTICULARS THEREOF IS AVAILAB LE TO BE DRAWN. 6.5 PART A OF THE EXPLANATION1 TO SECTION 27 1(1) (C) PROVIDES THAT IF ASSESSEE FAILS TO OFFER AN EXPLANATION OR O FFERS AN EXPLANATION WHICH IS FOUND BY THE ASSESSING OFFICER OR THE COMM ISSIONER (APPEALS) OR THE COMMISSIONER TO BE FALSE, THIS EXP LANATION CAN THEREFORE, BE APPLIED ONLY WHERE THE ASSESSEE HAS E ITHER NOT OFFERED ANY EXPLANATION OR WHERE HE HAS OFFERED ANY EXPLANA TION, THE SAME FOUND TO BE FALSE BY THE AO. IN OTHER WORDS, WHERE THE ASSESSEE ITA NO.259 7 & 2384/AHD/2009. ASSESSMENT YEAR 2004-05. 12 OFFERS SOME EXPLANATION, IT IS ONLY THE PROVING BY THE ASSESSEE OFFICER OF THE EXPLANATION TO BE FALSE, THAT PART A OF THE EXPLANATION MAY BE ATTRACTED, MERE NON ACCEPTANCE OF EXPLANATIO N OFFERED BY THE ASSESSEE CANNOT FORM A BASIS FOR THE SATISFACTI ON OF AO TO THE EFFECT THAT THE ASSESSEE HAS CONCEALED PARTICULAR O F HIS INCOME. THE AO MUST HAVE SOME DEFINITE EVIDENCE TO REFUSE THE A SSESSEE'S CLAIM OR EVIDENCE OR EXPLANATION. 6.6 THE ESSENCE OF PART B OF THE EXPLANATI ON IS THAT THE PERSON MUST PROVIDE AN EXPLANATION WHICH IS BON FIDE AND H E SHOULD SUBSTANTIATE THAT EXPLANATION BY SOME EVIDENCE WITH ; HIM. IF HE FAILS TO DO SO, HIS EXPLANATION MAY BE TREATED AS U NTENABLE. BUT WHEN THE ASSESSEE IS ABLE TO OFFER REASONABLE EXPLA NATION BASED ON SOME EVIDENCE, THE AO CANNOT INVOKE PART B OF THE E XPLANATION UNLESS HE HAS GIVEN FINDING BASED ON SOME CONTRADIC TORY EVIDENCE TO DISAPPROVE THAT EXPLANATION OFFERED BY THE ASSES SEE WHICH THE ASSESSEE IS NOT ABLE TO SUBSTANTIATE AND FAILS TO P ROVE THAT SUCH EXPLANATION IS BONA FIDE AND THAT ALL THE FACTS REL ATING TO THE SAME AND MATERIAL TO THE COMPUTATION OF HIS TOTAL INCOME HAVE BEEN DISCLOSED BY HIM 6.7 IN CASE PENALTY UNDER SECTION 271(1)(C ) GENERALLY REVENUE HAS RELIED UPON THE JUDGMENT OF THE APEX COURT IN T HE CASE OF DHARMENDRA TEXTILE PROCESSOR 306 ITR 277 (SC). THE FALLOUT OF THE DECISION IN UOI V. DHARAMENDRA TEXTILE PROCESSORS ( 2008) 306 ITR 277 (SC) QUESTIONING THE CORRECTNESS OF THE DECISIO N IN DILIP N. SHROFF V. JOINT CIT (2007) 291 ITR 519 (SC) HAS CAU SED GREAT ITA NO.259 7 & 2384/AHD/2009. ASSESSMENT YEAR 2004-05. 13 UNCERTAINTY AS TO THE PENALTY LAW FOR DIRECT TAXES. THE DECISION IN DHARAMENDRA TEXTILE PROCESSORS CASE (SUPRA) HAS BE EN EXPLAINED BY THE SUPREME COURT ITSELF IN UNION OF INDIA V. RA JASTHAN SPINNING AND WEAVING MILLS (2009) 224 CTR (SC)1, WHEREIN THE SUPREME COURT UNDERSTOOD DHARAMENDRA TEXTILE PROCESSORS CA SE TO BE NOT APPLICABLE, WHERE SECTION 11 AC OF THE CENTRAL EXCI SE ACT IS NOT APPLICABLE, ESPECIALLY SINCE THAT WAS NOT EVEN THE STAND OF THE REVENUE IN THIS CASE. THE SUPREME COURT HAD FURTHE R EXPLAINED THE DECISION IN CIT V. ATUL MOHAN BINDAL (2009) 317 ITR 1 (SC) POINTING OUT THAT DHARAMENDRA TEXTILE PROCESSORS C ASE HAS BEEN EXPLAINED IN RAJASTHAN SPINNING AND WEAVING MILLS CASE (SUPRA) AND CONCLUDED IN LINE WITH THIS DECISION THAT PENAL TY UNDER SECTION 11AC OF THE CENTRAL EXCISE ACT COULD NOT BE LEVIED IN EVERY CASE OF NON-PAYMENT OR SHORT PAYMENT OF DUTY AND THAT PENAL TY IN RESPECT OF SECTION 271(1)(C) OF THE INCOME-TAX ACT WOULD BE LEVIABLE, SUBJECT ONLY TO THE CONDITIONS THERE UNDER. IT REQUIRED TH E MATTER TO BE CONSIDERED NOT SOLELY WITH REFERENCE TO DHARAMENDRA TEXTILE PROCESSORS CASE BUT ALONG WITH THE DECISION OF RAJ ASTHAN SPINNING AND WEAVING MILLS CASE (SUPRA). IN THE CASE OF CI T V. RELIANCE PETROPRODUCTS PVT LTD 322 ITR 158 THE SUPREME COURT FURTHER EXPLAINED THE MATTER AND FINALLY SETTLED THE CONTRO VERSY CREATED IN DHARAMENDRA TEXTILE PROCESSORS CASE (SUPRA). THE SUPREME COURT IN THIS CASE HAS ANALYSED THE FACTS IN DILIP N. SHR OFFS CASE (SUPRA) AND FOUND FROM THE FACTS, THAT THE EXPLANATION GIVE N BY THE ASSESSEE WAS BONA FIDE THEREFORE THE ASSESSEE DID N OT FURNISH ANY INACCURATE PARTICULARS. HOWEVER IT WAS OBSERVED THA T THE ELEMENT OF ITA NO.259 7 & 2384/AHD/2009. ASSESSMENT YEAR 2004-05. 14 MENS REA WAS ESSENTIAL. THE SUPREME COURT IN DHARA MENDRA TEXTILE PROCESSORS CASE (SUPRA) HAD POINTED OUT ON LY TO THIS ASPECT OF THE DECISION IN THAT, THERE WAS NO NECESSITY TO PROVE MENS REA ON A PLAIN READING OF THE PROVISIONS OF SECTION 271(1) (C) IN THE CONTEXT OF A PENALTY BEING A COMPENSATION FOR LOSS OF REVEN UE LIKELY TO HAVE BEEN OCCASIONED BY THE ACCEPTANCE OF THE RETURN. I T WAS FURTHER POINTED OUT BY THE SUPREME COURT, THAT THE REASONIN G IN THE CONCLUSION ON THE MERITS IN DILIP N. SHROFFS CASE (SUPRA) HAD NOT BEEN QUESTIONED. IT WAS ONLY THE INFERENCE THAT ME NS REA WAS AN ESSENTIAL INGREDIENT FOR PENALTY, THAT WAS OVERRULE D. APPLYING THIS UNDERSTANDING OF LAW, THE SUPREME COURT FOUND THAT IN THE CASE BEFORE IT, THE ASSESSING OFFICER HAD FOUND THAT THE ASSESSEES CLAIM FOR DEDUCTION OF THE ENTIRE INTEREST ON A BORROWING , WHICH HAD BEEN PARTLY UTILISED FOR EARNING EXEMPT INCOME REQUIRED DISALLOWANCE OF THE PROPORTIONATE PART UNDER SECTION 14A. THE CLAI M OF THE ASSESSEE WAS THAT, BEING AN INVESTMENT COMPANY, THE CLAIM OF INTEREST NEED NOT BE PROPORTIONATELY APPORTIONED TO EXEMPT INCOME FROM DIVIDEND, CANNOT JUSTIFY PENALTY EVEN IF THE D ISALLOWANCE ITSELF WAS JUSTIFIED. THIS CONCURRENT VIEW OF THE COMMISS IONER (APPEALS), TRIBUNAL AND THE HIGH COURT WAS UPHELD BY THE SUPRE ME COURT. FROM ABOVE DISCUSSIONS WE FIND THAT THE CASES RELIE D UPON BY THE LEARNED DR DOES NOT HELP TO THE REVENUE. THOSE CASE S HAVE BEEN DECIDED AFTER CONSIDERING FACTS OF THE RESPECTIVE C ASE WHICH ARE NOT SIMILAR TO THE FACTS OF THE CASE UNDER CONSIDERATIO N. ITA NO.259 7 & 2384/AHD/2009. ASSESSMENT YEAR 2004-05. 15 6.8 IN THE LIGHT OF ABOVE DISCUSSIONS OF THE S CHEME AND PROVISIONS OF THE ACT REGARDING LEVY OF PENALTY UND ER SECTION 271(1) OF THE ACT ON CONSIDERATION OF THE FACTS OF THE C ASE UNDER CONSIDERATION WE FIND THAT THE ISSUE WHETHER PENALT Y UNDER SECTION 271(1)(C) IS LEVIABLE ON ACCEPTING ASSESSEES RETUR N OF INCOME IN RESPONSE NOTICE UNDER SECTION 148 OF THE ACT IN WHI CH THE ASSESSEE DISCLOSED AMOUNT OF EMPLOYEES CONTRIBUTION CONSID ERING SECTIONS 2(24),36(I) (VA) AND 43B OF THE ACT. WHETHER EMPLOY EES CONTRIBUTION IS ALLOWABLE DEDUCTION OR NOT IS CONTROVERSIAL ISSU E. THE CONTENTION OF THE REVENUE IN THIS REGARD IS THAT THE PROVISIO NS OF THE ACT ARE CLEAR IS NOT CORRECT AS LD DR HIMSELF FILED CERTAI N CASES WHICH ITSELF IS EVIDENT THAT ISSUE WAS CONTROVERSIAL ISSUE AND O N THE ISSUE THERE ARE TWO VIEWS, ONE VIEW WHICH IS IN FAVOR OF REVENU E AS PER THE DECISIONS CITED BY THE LEARNED DR AND OTHER VIEW I S AGAINST THE REVENUE AS IN THE CASE OF JMC PROJECTS, ITAT AHMADA BAD BENCH CANCELLED PENALTY UNDER SECTION 271(1) (C) ON THE G ROUND THAT IN ITA 2171/AHD/2007 QUANTUM ITSELF HAS BEEN DELETED ACCEP TING ASSESSEES CLAIM THAT EMPLOYEES CONTRIBUTION WAS D EPOSITED AFTER DUE DATE OF THE RELEVANT ACT BUT BEFORE DUE DATE OF FILING RETURN OF INCOME. IN FACT ONE OF THE ORDER ITAT ON WHICH THE LEARNED DR RELIED UPON IN THE CASE OF SHRI PRAMOD MITTAL ITAT DELHI B ENCH IN ITA NO.884/DEL/08 ORDER DT.15-2011, THE ITAT HAS CANCEL LED THE PENALTY UNDER SECTION 271(1) OF THE ACT ON THE GRO UND THAT EMPLOYEES AND EMPLOYERS CONTRIBUTION BOTH ARE ALL OWABLE CLAIM, MORE OVER THE ISSUE WAS DEBATABLE. ITA NO.259 7 & 2384/AHD/2009. ASSESSMENT YEAR 2004-05. 16 6.9 IN VIEW OF THE DEVELOPMENT OF LAW AT THE STAGE OF THE SUPREME COURT IN RELIANCE PETRO PRODUCTS CASE (SUP RA), ONE NEED NOT TAKE THE TROUBLE OF DISTINGUISHING DILIP N. SHR OFFS CASE, SINCE IT HAS NOT BEEN OVERRULED EXCEPT FOR ITS MENTION OF ME NS REA THEREIN. NOTWITHSTANDING THE RIPPLE CREATED BY DHARAMENDRA T EXTILE PROCESSORS CASE (SUPRA), THE HIGH COURTS HAVE FOLL OWED THE LONG- ESTABLISHED LAW, THAT A BONA FIDE OMISSION CANNOT J USTIFY PENALTY IN A NUMBER OF DECISIONS. FOR EXAMPLE WHERE AN ADDITIO N TO AN INCOME WAS ADJUSTED AGAINST THE VALUE OF CLOSING STOCK AND EXPLANATION THEREFORE WAS ALSO FOUND TO BE BONA FIDE, PENALTY W AS FOUND TO HAVE BEEN RIGHTLY DELETED AS IN THE CASE OF CIT V. HIN DUSTAN COMPUTERS LTD. (2010) 322 ITR 88 (ALL). CANCELLATION OF PENAL TY FOR A WRONG CLAIM OF DEDUCTION IN COMPUTATION OF NON-AGRICULTUR AL INCOME BONA FIDE MADE AND FOR A WRONG CLAIM OF RELIEF UNDER SEC TION 80P WERE FOUND TO BE DECISIONS ON THE FACTS ON WHICH NO QUES TION OF LAW WOULD ARISE AS HELD IN CIT V. SHAHBAD CO-OP. SUGAR MILLS LTD (2010) 322 ITR 73 (P&H). IN THE CASE OF CIT V. SIDHARTHA ENTERPRISES (2010) 322 ITR 80 (P&H) IT WAS HELD THAT A WRONG C LAIM AS BUSINESS INCOME OF WHAT SHOULD BE TREATED AS SHORT TERM CAPITAL GAINS ON THE ADVICE OF THE ASSESSEES COUNSEL, COUL D NOT BE TREATED AS AN INSTANCE OF DELIBERATE DEFAULT. IN THE CASE U NDER CONSIDERATION THERE ARE SUFFICIENT MATERIALS ON RECORD TO ESTABLI SH BONAFIDE OF THE ASSESSEE OUT OF WHICH SOME OF THE MATERIALS HAVE BE EN POINTED OUT BY THE REVENUE ITSELF THAT THE AUDITOR HAS ALSO FAI LED TO POINT OUT SUCH DISALLOWANCE IN THE TAX AUDIT REPORT. THE BONA FIDENESS OF THE ASSESSEE FURTHER SUPPORT BY THE FACT THAT THE REVEN UE ITSELF HAS GONE ITA NO.259 7 & 2384/AHD/2009. ASSESSMENT YEAR 2004-05. 17 THROUGH TWO PROCESS OF ASSESSMENT FIRSTLY PROCESSIN G RETURN OF INCOME FILED BY THE ASSESSEE AND SECOND TIME EVEN A T THE TIME OF SCRUTINY ASSESSMENT UNDER SECTION 143(3) OF THE ACT . WHEN THE ISSUE DID NOT COME TO THE ATTENTION OF ASSESSING OF FICER IN TWO ASSESSMENT PROCEEDINGS HOW REVENUE CAN CLAIM THAT R ELEVANT PROVISIONS WERE VERY CLEAR ON THE ISSUE AND ASSESSE E HAS VIOLATED CLEAR PROVISIONS OF THE ACT. THUS UNDER THE CIRCUMS TANCES OF THE CASE BONAFIDE OF THE ASSESSEE CANNOT BE DOUBTED, RA THER IT IS ESTABLISHED THAT THE ASSESSEE WAS UNDER THE BONAFID E BELIEF THAT HIS CLAM OF EMPLOYEES CONTRIBUTION IS ALLOWABLE CLAIM UNDER SECTION 43 B OF THE ACT. IT IS DIFFERENT THING WHETHER THE ASS ESSEE CHALLENGED THE ISSUE ON MERIT BEFORE APPELLATE AUTHORITY OR NO T MAY BE ON THE GROUND THAT THE ASSESSEE ENGAGED IN PUBLIC UTILITY SERVICES AND INCURRED HUGE LOSSES THEREFORE THERE WAS NO TAX AFF ECT OR ANY OTHER REASONS. IT IS SETTLED LAW THAT ASSESSMENT PROCEEDI NG AND PENALTY PRECEDING BOTH ARE SEPARATE PROCEEDINGS. WE FIND TH AT THE CASE OF THE ASSESSEE DOES NOT FALLS IN THE MAIN PROVISIONS OF SECTION 271(1)(C) OF THE ACT, 'HAS CONCEALED THE PARTICULAR S OF HIS INCOME' OR 'HAS FURNISHED INACCURATE PARTICULARS OF SUCH INCOM E'. FURTHER THE CASE OF THE ASSESSEE ALSO DID NOT HIT BY THE EXPLAN ATION 1 TO THE SECTION 271 (1)(C) OF THE ACT AS THE ASSESSEE PROVI DED REASONABLE EXPLANATION WITH SUPPORTING MATERIALS AND EVIDENCE S . THERE IS NO FINDING OF THE AO BASED ON SOME CONTRADICTORY EVIDE NCE TO DISAPPROVE THAT EXPLANATION OFFERED BY THE ASSESSEE WAS FALSE OR THE ASSESSEE WAS NOT ABLE TO SUBSTANTIATE THE EXPLANATI ON FURNISHED OR FAILS TO PROVE THAT SUCH EXPLANATION IS NOT BONA FI DE AND THAT ALL THE ITA NO.259 7 & 2384/AHD/2009. ASSESSMENT YEAR 2004-05. 18 FACTS RELATING TO THE SAME AND MATERIAL TO THE COMP UTATION OF HIS TOTAL INCOME HAS NOT BEEN DISCLOSED BY HIM. IN ABSE NCE OF SUCH STATUTORY REQUIRED FINDING BY THE AO WE FIND THAT T HE CIT (A) HAS RIGHTLY CANCELLED THE PENALTY OF RS.33,55,15,227- U NDER SECTION 271(1)(C) OF THE ACT BUT WRONGLY SUSTAINED THE PEN ALTY ON 2 CORERS . THEREFORE THE ORDER ON THE CIT (A) IS ACCORDINGLY M ODIFIED AND PENALTY ON RS 2 CORERS IS CANCELLED, THUS ENTIRE PE NALTY OF RS.12, 75, 41,087/- LEVIED BY THE AO IS NOT IN ACCORDANCE WITH LAW THEREFORE SAME IS CANCELLED. 7 IN THE RESULT APPEAL OF ASSESSEE IS ALLOWED AND APPEAL OF REVENUE IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 31 01 - 2012. SD/- SD/- (MUKUL KUMAR SHRAWAT) (A. L.GEHLOT) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD. S.A.PATKI/SELF. FIT FOR PUBLICAT ION (MUKUL KUMAR SHRA WAT) (A.L. GEHLOT) (J.M.) (A.M.) ITA NO.259 7 & 2384/AHD/2009. ASSESSMENT YEAR 2004-05. 19 COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS)-VIII, AHMEDABAD. 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHMEDABAD. 1.DATE OF DICTATION 10 - 1 -2012 2.DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE TH E DICTATING 12 / 1 / 2012 MEMBER.OTHER MEMBER. 3.DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S 30 -01 -2012. 4.DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT 31 - 01 -2012 5.DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR .P.S./P.S 31 - 1 -2012S 6.DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 3 1 - 1 -2012. 7.DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8.THE DATE ON WHICH THE FILE GOES TO THE ASSTT. REG ISTRAR FOR SIGNATURE ON THE ORDER 9.DATE OF DESPATCH OF THE ORDER..