Poonam Dyeing & Printing Mills Pvt.Ltd., Surat V. The Income tax Officer,Ward-1(4), Surat

ITA 3181/AHD/2011

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 1297 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 10 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-11-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 23-09-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 15-12-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NARENDRA SINGH
• Keywords: Business income; Additional evidence; Corroborative evidences
• Section: 143(3); 142(1); 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD B BENCH AHMEDABAD BEFORE S/SHRI RAJPAL YADAV, JM, & MANISH BORAD, AM. ITA NO.3181/AHD/2011 ASST. YEAR: 2006-07 POONAM DYEING & PRINTING MILLS PVT. LTD., 286, GIDC, PANDESARA, SURAT-394221 VS INCOME-TAX OFFICER, WARD 1(4), SURAT. (APPELLANT) (RESPONDENT) PA NO.AABCP6272B APPELLANT BY MS. URVASHI SHODHAN, AR RESPONDENT BY SHRI NARENDRA SINGH, SR.DR DATE OF HEARING: 23.9.2015 DATE OF PRONOUNCEMENT: 04/11/2015 O R D E R PER: MANISH BORAD, ACCOUNTANT MEMBER THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER OF CIT(A) I, SURAT, DATED 23.09.2009 IN APPEAL NO.CAS -I/249/08-09. THE PENALTY ORDER U/S.271(1)(C) OF THE INCOME-TAX A CT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) FOR A.Y. 2006-07 WAS FRAMED ON 25.3.2011 BY ITO, WARD-1(4), SURAT. ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL:- (1) THAT ON THE FACT AND CIRCUMSTANCES OF THE CASE , LEARNED ASSESSING OFFICER HAS ERRED IN LEVYING PENALTY OF RS.38,94,37 2/- ON ACCOUNT OF ADDITION OF WORK-IN-PROGRESS, UNSECURED LOAN, SUNDR Y CREDITORS AND DISALLOWANCE OF VARIOUS EXPENSES AMOUNTING TO RS.1, 38,87,687/- DUE TO NON PRODUCTION OF EVIDENCE OF ABOVE DURING ASSES SMENT PROCEEDING; (2) THE APPELLANT CRAVES LEAVE TO ADD, ALTER, DELET E OR MODIFY ANY GROUND APPEAL. ITA NO. 3181/AHD/2011 (POONAM DYEING & PRINTING MIL LS PVT. LTD. VS. ITO) ASST. YEAR 2006-07 2 2. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT TH E ASSESSEE IS A PRIVATE LIMITED COMPANY ENGAGED IN THE BUSINESS OF DYEING AND PRINTING OF ART SILK CLOTH. THE RETURN OF INCOME W AS FILED ON 30.12.2006 AT A TOTAL INCOME OF RS.4,87,760/-. ASSESSEES CAS E WAS SELECTED FOR SCRUTINY AND NOTICE U/S 143(2) OF THE ACT WAS ISSUE D ON 10.09.2007 AND DULY SERVED UPON THE ASSESSEE. HOWEVER, NOBODY ATTENDED AND SUBMITTED ANY DETAILS IN RESPONSE TO THE SAID NOTIC E AND SUBSEQUENTLY, NOTICE U/S. 142(1) OF THE ACT WITH DE TAILED QUESTIONNAIRE WAS ISSUED ON 12.11.2008 AND SERVED UPON THE ASSESS EE ON 28.11.2008. APART FROM RECEIVING THE PART SUBMISSI ON FROM ASSESSEE, NOTHING ELSE WAS SUBMITTED IN REPLY TO THE QUESTION NAIRE ISSUED BY THE ASSESSING OFFICER AND HE HAD NO OTHER OPTION EXCEPT TO PROCEED TO FRAME THE ASSESSMENT U/S.144 R.W.S 143(3) OF THE AC T AND ACCORDINGLY ASSESSED THE INCOME OF THE ASSESSEE AT RS.1,49,02,4 50/- AFTER MAKING THE ADDITION OF RS.1,44,14,687/-. 2.1 AGGRIEVED ASSESSEE WENT IN APPEAL BEFORE THE CI T(A) BUT ASSESSEE COMPANY FAILED TO FILE ANY PROPER SUBMISSI ON AND EVIDENCE DURING THE APPELLATE PROCEEDING. HOWEVER, ON THE B ASIS OF MATERIAL AVAILABLE ON RECORD, LD. CIT(A) GAVE A RELIEF OF RS .23,14,517/- AND SUSTAINED THE REMAINING ADDITION. THEREAFTER, ASSE SSEE PREFERRED THE APPEAL BEFORE THE CO-ORDINATE BENCH, WHEREIN APPEAL OF THE ASSESSEE WAS DISMISSED BY THE CO-ORDINATE BENCH ON THE QUANTUM PROCEEDING BY OBSERVING AS UNDER: 10. IT IS AN ADMITTED FACT THAT ASSESSEE DID NOT C OMPLY WITH THE STATUTORY NOTICES BEFORE THE A.O. AND NO DETAILS ARE FURNISHE D. IT IS ALSO ADMITTED THAT EVEN BOOKS OF ACCOUNTS WERE NOT PRODUCED BEFOR E THE A.O. OR THE LD. ITA NO. 3181/AHD/2011 (POONAM DYEING & PRINTING MIL LS PVT. LTD. VS. ITO) ASST. YEAR 2006-07 3 CITA (A). THE LD. COUNSEL OF THE ASSESSEE REFERRED TO THE STATEMENT OF FACTS IN WHICH IT IS STATED THAT ASSESSEE CAN PRODU CE BOOKS OF ACCOUNT AND OTHER RECORDS BEFORE THE A.O. BECAUSE THE BUSINESS ACTIVITY OF THE ASSESSEE WERE CLOSED AND NO DETAILS COULD BE FURNIS HED. IT IS ALSO STATED ON OTHER DETAILS, THAT DETAILS COULD BE FILED AND A .O. COULD HAVE VERIFIED THE FACTS FROM THE OTHER PARTIES. THIS STATEMENT OF FAC T WOULD SHOW THAT ASSESSEE DID NOT PRODUCE ANY DETAILS AND THE BOOKS OF ACCOUNTS BEFORE THE A.O. NO BOOKS OF ACCOUNTS AND DETAILS WERE FURN ISHED BEFORE THE LD. CIT (A). IF THE ASSESSEE WANTED THAT MATTER MAY BE REMANDED TO THE FILE OF THE A.O. ASSESSEE SHOULD HAVE MADE OUT A CASE ON TH E BASIS OF THE FACTS AVAILABLE ON RECORD BUT ASSESSEE DID NOT EVEN RAISE D ANY GROUND OF APPEAL BEFORE THE TRIBUNAL AND NO EVIDENCE OR MATERIAL IS PRODUCED AS TO WHY THE ASSESSEE DID NOT COMPLY WITH THE STATUTORY NOTICES BEFORE THE AUTHORITIES BELOW. EVEN BEFORE THE TRIBUNAL THE ASSESSEE DID NO T TAKE ANY STEPS IN BRINGING ANY EVIDENCE ON RECORD AND EVEN NO STEPS H AVE BEEN TAKEN FOR ADMISSION OF THE ADDITIONAL EVIDENCES. IN THE ABSEN CE OF ANY EXPLANATION OR REASONS AND EVIDENCE, NO CASE IS MADE OUT FOR RE MANDING THE MATTER TO THE FILE OF THE A.O. ON ALL THE GROUNDS OF APPEAL. THE ASSESSEE THROUGHOUT REMAINED NON CO-OPERATIVE AND DID NOT FURNISH ANY E VIDENCE OR MATERIAL. FOR CASH CREDIT/SUNDRY CREDITORS EVEN NO CONFIRMATI ON OF THE PARTIES HAVE BEEN FILED. THE RATIO OF THE ORDER OF THE TRIBUNAL OR THE HIGH COURT COULD BE APPLIED IF THE FACTS ARE AVAILABLE ON RECORD. IN TH E ABSENCE OF ANY FACTS, DETAILS AND EVIDENCES ON RECORD, NO RELIANCE COULD BE PLACED ON THE DECISION CITED BY THE LD. COUNSEL FOR THE ASSESSEE. CONSIDERING THE FACTS OF THE CASE AND IN THE ABSENCE OF ANY EVIDENCE OR M ATERIAL ON RECORD, WE DO NOT FIND ANY JUSTIFICATION TO INTERFERE WITH THE ORDERS OF THE AUTHORITIES BELOW. WE CONFIRM THE ORDER OF THE CIT (A) AND DISM ISS THE APPEAL OF THE ASSESSEE. FURTHER AS ASSESSEE COULD NOT SUCCEED BEFORE THE CI T(A), ASSESSING OFFICER PROCEEDED TO INITIATE THE PENALTY PROCEEDIN GS BY ISSUING A SHOW CAUSE U/S.274 R.W.S. 271(1)(C) OF THE ACT. DU RING THE COURSE OF PENALTY PROCEEDING, ASSESSEE SUBMITTED DETAILED REP LIES IN ORDER TO PROVE THAT THERE WAS NO CONCEALMENT OF INCOME ON IT S PART BUT DUE TO OTHER CONSTRAINTS AND CLOSURE OF BUSINESS, WERE NOT ABLE TO SUBMIT AT THE TIME OF ASSESSMENT PROCEEDINGS. HOWEVER, ASSES SING OFFICER DID NOT GIVE ANY COGNIZANCE TO THE INFORMATION AND SUPP ORTING DOCUMENTS FURNISHED BEFORE HIM BY TAKING A VIEW THAT AS THE A SSESSEE FAILED TO DISCHARGE THE ONUS DURING THE ASSESSMENT PROCEEDING S, THEREFORE, ITA NO. 3181/AHD/2011 (POONAM DYEING & PRINTING MIL LS PVT. LTD. VS. ITO) ASST. YEAR 2006-07 4 THE SAME CANNOT BE ENTERTAINED DURING THE PENALTY P ROCEEDINGS U/S. 271(1)(C) OF THE ACT AND ACCORDINGLY, IMPOSED THE P ENALTY OF RS.38,94,372/-. 2.3. AGGRIEVED TO THE ORDER U/S.271(1)(C) OF THE AC T PASSED BY THE ASSESSING OFFICER, ASSESSEE WENT IN APPEAL BEFORE T HE LD. CIT(A). ASSESSEE FURNISHED DETAILED ARGUMENTS, SUPPORTING D OCUMENTS, VARIOUS JUDICIAL PRONOUNCEMENTS BEFORE THE CIT(A) A ND STATED THAT DUE TO HEAVY LOSSES IN ASSESSEES GROUP COMPANIES, BUSINESS HAS ALMOST BEEN CLOSED, WHICH THEREFORE, RESTRICTED TO SUPPLY THE NECESSARY INFORMATION BEFORE THE ASSESSING OFFICER AT THE TIME OF ASSESSMENT PROCEEDINGS, BUT HOWEVER, AS NOW ALL DET AILS HAVE BEEN SUBMITTED, THE SAME SHOULD BE DEALT ON MERIT, BUT A SSESSEE COULD NOT SUCCEED BEFORE THE LD. CIT(A), WHO WITHOUT LOOKING INTO THE MERITS OF THE EVIDENCES AND SUBMISSIONS PRODUCED BEFORE HIM, DISMISSED THE APPEAL OF THE ASSESSEE. 3. NOW, AGGRIEVED ASSESSEE HAS COME BEFORE THE TRIB UNAL AGAINST THE ORDER OF LD. CIT(A) CONFIRMING THE PENALTY U/S. 271(1)(C) OF THE IT ACT. AT THE OUTSET, LD. A.R. OF THE ASSESSEE HUMBL Y SUBMITTED THAT THE ASSESSEE COMPANY IS INTO BUSINESS SINCE 24.06.1993 AND REGULARLY ASSESSED TO INCOME TAX AND HAVE ALSO FACED SCRUTINY PROCEEDING BEFORE THE ASSESSING OFFICER IN PREVIOUS YEAR I.E. BEFORE A.Y. 2006-07 AND NONE OF THE PREVIOUS ASSESSMENTS HAVE BEEN PASS ED EX PARTE U/S.144 OF THE ACT. THE BUSINESS OF THE COMPANY WA S NOT RUNNING IN A GOOD SHAPE SINCE, 31.03.2005 DUE TO WHICH THE TUR NOVER OF THE ASSESSEE CAME DOWN FROM RS.12 CRORES IN F.Y. 2004-0 5 TO NIL TURN OVER IN F.Y. 2009-10 AND HEAVY LOSSES WERE INCURRED DUE TO WHICH ITA NO. 3181/AHD/2011 (POONAM DYEING & PRINTING MIL LS PVT. LTD. VS. ITO) ASST. YEAR 2006-07 5 COMPANY HAS TO SHUT DOWN ITS OPERATION AND MOST OF THE EMPLOYEES LEFT THE COMPANY. LD. A.R. FURTHER SUBMITTED THAT THE COMPANY WAS HAVING ALL BOOKS OF ACCOUNTS AND RECORDS FOR THE YE AR UNDER APPEAL BUT DUE TO LACK OF STAFF AND MISERABLE MENTAL AGONY BEING FACED BY THE DIRECTORS OF THE COMPANY, WHICH RESTRAINED THEM TO ATTEND VARIOUS PROCEEDINGS BEFORE THE LOWER AUTHORITIES AS WELL AS TO FURNISH EVIDENCES AND RECORDS. 3.1 LD. A.R. URGED UPON THAT THE ASSESSEE HAS ALREA DY LOST IN THE QUANTUM PROCEEDINGS UP TO THE LEVEL OF TRIBUNAL BUT NOW AS THE NECESSARY INFORMATION IS AVAILABLE ALONG WITH SUPPO RTING EVIDENCES WHICH ARE AMPLY CLEAR TO PROVE THAT THERE WAS NO CO NCEALMENT OF INCOME BY THE ASSESSEE AND THEREFORE, THE PENALTY I MPOSED U/S.271(1)(C) OF THE ACT SHOULD BE DELETED. ON THE OTHER HAND, LD. D.R. SUPPORTED THE ORDERS OF LOWER AUTHORITIES AND DID NOT CONTROVERT TO THE MERITS OF DOCUMENTS AND EVIDENCES SUBMITTED BY THE ASSESSEE IN THE PAPER BOOK FILED ON 18.09.2015. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ONLY ISSUE TO BE EXAMINED IS THAT W HETHER THE ASSESSING OFFICER WAS JUSTIFIED IN IMPOSING THE PEN ALTY U/S.271(1)(C) OF THE ACT. IN A SITUATION, WHERE ASSESSEE HAS FUL LY SUBMITTED PROPER EVIDENCES TO PROVE THAT THE ADDITIONS MADE BY THE A SSESSING OFFICER AT THE TIME OF FRAMING THE ASSESSMENT ORDER WERE NO T JUSTIFIED. 4.1 OUT OF TOTAL ADDITIONS MADE IN ASSESSMENT PROCE EDINGS COMPLETED U/S.144(4) R.W.S. 143(3) OF THE ACT, ASSE SSING OFFICER ITA NO. 3181/AHD/2011 (POONAM DYEING & PRINTING MIL LS PVT. LTD. VS. ITO) ASST. YEAR 2006-07 6 CONFIRMED THE PENALTY IN RESPECT OF CONCEALMENT OF INCOME AT RS.1,15,73,170/- ON ACCOUNT OF FOLLOWING: I. DISALLOWANCE ON ACCOUNT OF WORK-IN-PROGRESS RS. 5,67,708/- II. DISALLOWANCE ON ACCOUNT OF UNSECURED LOAN RS. 18,18,804/- III. DISALLOWANCE ON ACCOUNT OF SUNDRY CREDITORS RS . 46,16,297/- IV. DISALLOWANCE ON ACCOUNT VARIOUS EXPENSES RS. 45,70,661/- TOTAL RS.1,15,73,170/- 4.2 DURING THE COURSE OF PROCEEDINGS U/S.271(1)(C) OF THE IT ACT, ASSESSEE HAS SUBMITTED DETAILED REPLY ALONG WITH CO PIES OF LEDGER ACCOUNT, AUDITED FINANCIAL STATEMENTS, DETAILS OF V ARIOUS EXPENSES, CONFIRMATION LETTER ETC. AS AVAILABLE ON RECORD IN PAPER BOOK FROM PAGE NOS. 1 TO 225, WHICH IF HAD BEEN EXAMINED BY T HE LOWER AUTHORITIES ON MERITS, THEN THERE MAY HAD BEEN A SI TUATION, WHEREIN ASSESSING OFFICER EITHER MAY HAD RESTRAINED FROM IM POSING PENALTY OR REDUCED THE PENALTY. WE HAVE GONE THROUGH THE REPL Y OF THE APPELLANT AGAINST VARIOUS DISALLOWANCES MADE BY THE ASSESSING OFFICER AND FROM GOING THROUGH THE SAME, IT SEEMS T HAT ASSESSEE WAS HAVING SUFFICIENT EXPLANATIONS TO SATISFY THE ASSES SING OFFICER AND TO PROVE THAT THERE WAS NO INTENTION OF CONCEALMENT OF INCOME ON ITS PART. WE WILL LIKE TO DISCUSS THE REPLY MADE AGAIN ST THE ADDITION OF UNSECURED LOAN OF RS.18,18,804/-. DURING THE YEAR UNDER ASSESSMENT, ASSESSEE ACCEPTED UNSECURED LOAN FROM T WO PARTIES AT RS.13,68,804/- FROM ANIL GARG AND FROM FEMINA FASHI ON DESIGNER PVT. LTD. AND THIS TOTALING TO RS.18,18,804/-. DUR ING THE YEAR ITSELF, ASSESSEE REPAID RS.10,75,500/- TO MR. ANIL GARG AND RS.4,50,000/- TO FEMINA FASHION DESIGNER PVT. LTD. THIS FACT IS SUP PORTED BY ITA NO. 3181/AHD/2011 (POONAM DYEING & PRINTING MIL LS PVT. LTD. VS. ITO) ASST. YEAR 2006-07 7 ANNEXURE E OF TAX AUDIT REPORT APPEARING ON PAGE 26 OF THE PAPER BOOK. THE NET LOAN REMAINING AFTER THE RE-PAYMENT OF LOAN DURING THE YEAR COMES TO RS.2,93,304/- IN ABSENCE OF REQUISITE INFORMATION AT THE TIME OF ASSESSMENT PROCEEDINGS POSSIBLY DUE TO LACK OF PROPER INFORMATION, ASSESSING OFFICER MADE ADDITION OF RS. 18,18,804/-. HOWEVER, IF DURING THE PENALTY PROCEEDINGS U/S.271( 1)(C), THE ASSESSING OFFICER HAS GIVEN COGNIZANCE TO THE DETAI LS FURNISHED BEFORE HIM, THEN HE MAY NOT HAVE IMPOSED THE PENALT Y TO THAT EXTENT, WHICH HAS HITHER TO BEEN IMPOSED IN THE IMPUGNED PE NALTY ORDER. 4.3 WE HAVE DEALT WITH THE SAME ISSUE IN THE APPEAL OF ASSESSEES ANOTHER GROUP COMPANY M/S. ARIEL SAREES PVT. LTD IN ITA NO.3180/AHD/2011 FOR A.Y.2006-07, PRONOUNCED ON 23. 10.2015, WHEREIN WE HAVE HELD AS UNDER: 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND GONE TH ROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE AND PERUSED THE MATER IAL AVAILABLE ON RECORD. THE ISSUE IN APPEAL IS IMPOSITION OF PENAL TY OF RS.4,03,920/- BY THE A.O. AND CONFIRMED BY THE CIT(A) IN REGARD TO T HE CONFIRMED ADDITION OF QUANTUM OF RS.12LACS UP TO THE LEVEL OF ITAT. 6.1 ASSESSMENT PROCEEDINGS U/S.143(3) AND PENALTY P ROCEEDINGS U/S.271(1)(C) ARE SEPARATE PROCEEDINGS AND THE A.O. SHOULD PASS HIS ORDER ON THE BASIS OF FACTS AND SUPPORTING EVIDENCES AVAI LABLE AT THE PARTICULAR POINT OF TIME AND SHOULD NOT CO-RELATE THE TWO PROC EEDINGS AND NOR SHOULD HAVE A PRE-DETERMINED VIEW TAKEN BY HIM IN THE PREV IOUS PROCEEDINGS. IN THE CASE UNDER APPEAL, A.O. MADE ADDITION OF RS.12L ACS IN HIS ORDER PASSED U/S.144 ON ACCOUNT OF UNEXPLAINED CASH CREDI T DUE TO NON SUBMISSION OF ANY DETAILS BY THE ASSESSEE. HOWEVER , WHEN THE A.O. WAS PASSING THE ORDER U/S.271(1)(C), HE SHOULD HAVE GIV EN COGNIZANCE TO THE RELEVANT SUPPORTING EVIDENCE FURNISHED BY THE ASSES SEE TO PROVE THE IDENTITY, CREDITWORTHINESS AND GENUINENESS OF THE U NSECURED LOAN TAKEN. TO THE CONTRARY, A.O. DID NOT FIND IT RELEVANT TO E XAMINE THESE DOCUMENTS TO FINALIZE THE PENALTY PROCEEDINGS RATHER KEEPING THE SAME VIEW AS TAKEN DURING PROCEEDINGS U/S.144 OF THE ACT THAT THE ASSE SSEE HAS NOT FURNISHED THE REQUIRED DETAILS AT THE TIME OF REGULAR ASSESSM ENT PROCEEDINGS. ITA NO. 3181/AHD/2011 (POONAM DYEING & PRINTING MIL LS PVT. LTD. VS. ITO) ASST. YEAR 2006-07 8 FURTHER, HONBLE JURISDICTIONAL HIGH COURT IN THE C ASE OF NATIONAL TEXTILE VS. CIT (SUPRA) HAS HELD AS UNDER :- THE PROVISIONS OF SECTION 68 OF THE INCOME-TAX ACT , 1961, PERMITTING THE ASSESSING OFFICER TO TREAT UNEXPLAIN ED CASH CREDITS AS INCOME ARE ENABLING PROVISIONS FOR MAKING CERTAI N ADDITIONS WHERE THERE IS FAILURE BY THE ASSESSEE TO GIVE AN E XPLANATION OR WHERE THE EXPLANATION IS NOT TO THE SATISFACTION OF THE ASSESSING OFFICER. HOWEVER, THE ADDITION MADE ON THIS COUNT W OULD NOT AUTOMATICALLY JUSTIFY IMPOSITION OF PENALTY UNDER S ECTION 271(1)(C) OF THE INCOME-TAX ACT, 1961, BY RECOURSE ONLY TO EXPLA NATION 1 BELOW SECTION 271(1)(C). IN ORDER TO JUSTIFY THE LEVY OF PENALTY, TWO FACTOR S MUST CO-EXIST, (I) THERE MUST BE SOME MATERIAL OR CIRCUMSTANCES LEADIN G TO THE REASONABLE CONCLUSION THAT THE AMOUNT DOES REPRESEN T THE ASSESSEES INCOME. IT IS NOT ENOUGH FOR THE PURPOSE OF PENALTY THAT THE AMOUNT HAS BEEN ASSESSED AS INCOME, AND (II) TH E CIRCUMSTANCES MUST SHOW THAT THERE WAS ANIMUS, I.E. CONSCIOUS CONCEALMENT OR ACT OF FURNISHING OF INACCURATE PART ICULARS ON THE PART OF THE ASSESSEE. EXPLANATION 1 TO SECTION 271( 1)(C) HAS NO BEARING ON FACTOR NO.1 BUT HAS A BEARING ONLY ON FA CTOR NO.2. THE EXPLANATION DOES NOT MAKE THE ASSESSMENT ORDER CONC LUSIVE EVIDENCE THAT THE AMOUNT ASSESSED WAS IN FACT THE I NCOME OF THE ASSESSEE. NO PENALTY CAN BE IMPOSED IF THE FACTS AN D CIRCUMSTANCES ARE EQUALLY CONSISTENT WITH THE HYPOT HESIS THAT THE AMOUNT DOES NOT REPRESENT CONCEALED INCOME WITH THE HYPOTHESIS THAT IT DOES. IF THE ASSESSEE GIVES AN EXPLANATION WHICH IS UNPROVED BUT NOT DISPROVED, I.E. IT IS NOT ACCEPTED BUT CIRCUMSTANCES DO NOT LEAD TO THE REASONABLE AND POS ITIVE INFERENCE THAT THE ASSESSEES CASE IS FALSE, THE EXPLANATION CANNOT HELP THE DEPARTMENT BECAUSE THERE WILL BE NO MATERIAL TO SHO W THAT THE AMOUNT IN QUESTION WAS THE INCOME OF THE ASSESSEE. ALTERNATIVELY, TREATING THE EXPLANATION AS DEALING WITH BOTH THE I NGREDIENTS (I) AND (II) ABOVE, WHERE THE CIRCUMSTANCES DO NOT LEAD TO THE REASONABLE AND POSITIVE INFERENCE THAT THE ASSESSEES EXPLANAT ION IS FALSE, THE ASSESSEE MUST BE HELD TO HAVE PROVED THAT THERE WAS NO MENS REA OR GUILTY MIND ON HIS PART. EVEN IN THIS VIEW OF TH E MATTER THE EXPLANATION ALONE CANNOT JUSTIFY LEVY OF PENALTY. A BSENCE OF PROOF ACCEPTABLE TO THE DEPARTMENT CANNOT BE EQUATED WITH FRAUD OR WILLFUL DEFAULT. HELD, THAT IN THE INSTANT CASE THE CASH CREDITS WER E NOT SATISFACTORILY EXPLAINED BY EVIDENCE AND DOCUMENTS. THE PARTIES WH O HAD ADVANCED THE ALLEGED TEMPORARY LOANS WERE NEITHER D ISCLOSED NOR WERE THERE ANY SUPPORTING DOCUMENTS ON RECORD. THE ACCOUNTANT, WHO HAD ARRANGED THE LOANS WAS NOT PRODUCED AND IT WAS STATED ITA NO. 3181/AHD/2011 (POONAM DYEING & PRINTING MIL LS PVT. LTD. VS. ITO) ASST. YEAR 2006-07 9 THAT HE HAD LEFT THE SERVICE AS RELATIONS WITH HIM WERE STRAINED. IN THIS STATE OF ACCOUNTS AND EVIDENCE IN THE QUANTUM PROCEEDINGS, THE DEPARTMENT WAS JUSTIFIED IN TREATING THE CASH C REDITS AS INCOME OF THE ASSESSEE BUT MERELY ON THAT BASIS BY RECOURS E TO EXPLANATION 1, PENALTY UNDER SECTION 271(1)(C) COULD NOT HAVE B EEN IMPOSED WITHOUT THE DEPARTMENT MAKING ANY OTHER EFFORT TO C OME TO THE CONCLUSION THAT THE CASH CREDITS COULD IN NO CIRCUM STANCES HAVE BEEN AMOUNTS RECEIVED AS TEMPORARY LOANS FROM VARIO US PARTIES. ADMITTEDLY THE ASSESSEE IN THE QUANTUM PROCEEDINGS FAILED TO PRODUCE THE ACCOUNTANT BUT THE DEPARTMENT ALSO IN P ENALTY PROCEEDINGS MADE NO EFFORT TO SUMMON HIM. THEREFORE , IT WAS A CASE WHERE THERE WAS NO CIRCUMSTANCES TO LEAD TO A REASONABLE AND POSITIVE INFERENCE THAT THE EXPLANATION THAT CA SH CREDITS WERE ARRANGED AS TEMPORARY LOANS WAS FALSE. THE FACTS AN D CIRCUMSTANCES WERE EQUALLY CONSISTENT WITH THE HYPO THESIS THAT THEY COULD HAVE BEEN SUNDRY LOANS IN SMALL AMOUNTS OBTAI NED FROM DIFFERENT PARTIES. THEREFORE, THE IMPOSITION OF PEN ALTY WAS NOT JUSTIFIED. IN THE CASE OF CIT VS. JALARAM OIL MILLS (SUPRA), H ONBLE JURISDICTIONAL HIGH COURT HAS HELD AS UNDER :- THE EXPLANATION TO SECTION 271(1)(C) OF THE INCOME -TAX ACT, 1961, PROVIDES THAT IN CASE THERE IS A DIFFERE NCE, AS STATUTORILY PROVIDED, BETWEEN THE TOTAL INCOME RETURNED BY ANY PERSON AND THE INCOME ASSESSED, SUCH PERSON SHALL HAVE TO PROVE TH AT THE FAILURE TO RETURN THE CORRECT INCOME WAS NOT DUE TO ANY FRA UD OR ANY GROSS OR WILLFUL NEGLECT ON HIS PART. IN THE ABSENCE OF S UCH BURDEN BEING DISCHARGED BY THE PERSON CONCERNED IT WILL BE DEEME D THAT PARTICULARS OF INCOME HAVE BEEN CONCEALED OR INACCU RATE PARTICULARS OF INCOME HAVE BEEN FURNISHED FOR THE PURPOSE OF SE CTION 271(1)(C). THE EXPLANATION RAISES A REBUTTABLE PRESUMPTION AND THE BURDEN WHICH IS CAST ON AN ASSESSEE IS AKIN TO A CIVIL BUR DEN WHICH MAY BE DISCHARGED ON A PREPONDERANCE OF PROBABILITIES. SEC TION 68 PROVIDES THAT WHERE A SUM IS FOUND CREDITED IN THE BOOKS OF AN ASSESSEE MAINTAINED FOR ANY PREVIOUS YEAR, AND WHER E THE EXPLANATION OFFERED BY THE ASSESSEE ABOUT THE NATUR E AND SOURCE OF SUCH CREDITS IS NOT FOUND TO BE SATISFACTORY, THE S UM SO CREDITED MAY BE CHARGED AS THE INCOME OF THE ASSESSEE FOR TH AT PREVIOUS YEAR. THE WORD MAY HAS BEEN USED IN SECTION 68 AN D SO IF AN ADDITION IS NOT WARRANTED IN EACH AND EVERY CASE, T HERE CANNOT BE A SITUATION WHERE, MERELY BECAUSE AN ADDITION HAS BEE N MADE BY INVOKING THE PROVISIONS OF SECTION 68 OF THE ACT, P ENALTY UNDER SECTION 271(1)(C) OF THE ACT WOULD FOLLOW AS A NATU RAL COROLLARY. HELD ACCORDINGLY, THAT IN THE PRESENT CASE, ON THE BASIS OF THE ASSESSEE AGREEING TO HAVE CREDIT ENTRIES IN ITS BOO KS OF ACCOUNT ITA NO. 3181/AHD/2011 (POONAM DYEING & PRINTING MIL LS PVT. LTD. VS. ITO) ASST. YEAR 2006-07 10 TREATED AS ITS INCOME BY VIRTUE OF THE PROVISIONS O F SECTION 68 OF THE ACT, THE SAID SUMS WOULD BE DEEMED TO BE INCOME OF THE YEAR UNDER CONSIDERATION. HOWEVER, DE HORS THE SAID PROV ISION, IT WAS NOT POSSIBLE TO STATE WITH CERTAINTY THAT THE SAID SUMS WOULD BE CONCEALED INCOME OF THE ASSESSEE FOR THE YEAR UND ER CONSIDERATION. THE TRIBUNAL HAD RECORDED A FINDING OF FACT TO THE EFFECT THAT THERE WAS NO PAST HISTORY OF THE ASSESS EE TO SHOW THAT THE ASSESSEE HAD BEEN EARNING BUSINESS INCOME OUTSI DE THE BOOKS, NOR WAS THERE IN THE BOOKS RELATING TO THE Y EAR UNDER CONSIDERATION ANY INSTANCE POINTED OUT INDICATING A NY TRANSACTION OUTSIDE THE BOOKS. THE TRIBUNAL WAS JUSTIFIED IN HO LDING THAT THE PENALTY OF RS.30,000 IMPOSED BY THE INSPECTING ASSI STANT COMMISSIONER UNDER SECTION 271(1)(C) COULD NOT BE S USTAINED. FROM THE RATIO OF ABOVE DECISIONS, IT EMERGES THAT IN ORDER TO JUSTIFY THE LEVY OF PENALTY TWO FACTORS MUST CO-EXIST; (I) THERE MUST BE SOME MATERIAL OR CIRCUMSTANCES LEADING TO THE REASONABLE CONCLUSION THAT THE AMOUNT DOES REPRESENT THE ASSESSEES INCOME. IT IS NOT ENOUGH FOR THE PURPOSE OF PENALTY THAT THE AMOUNT HAS BEEN ASSESSE D AS INCOME, AND (II) THE CIRCUMSTANCES MUST SHOW THAT THERE WAS ANIMUS, I.E. CONSCIOUS CONCEALMENT OR ACT OF FURNISHING OF INACCURATE PART ICULARS ON THE PART OF THE ASSESSEE. IN THE CASE OF ASSESSEE WHO WAS HAVING A SUFFICIENT REASON FOR HIS NON APPEARANCE BEFORE THE A.O. DURING ASSESSME NT PROCEEDINGS U/S.143(3) R.W.S 144 DUE TO HEAVY LOSSES, CLOSURE O F BUSINESS AND ACUTE SHORTAGE OF STAFFS, FOR WHICH, QUANTUM HAS BEEN DEC IDED AGAINST HIM UP TO THE LEVEL OF TRIBUNAL. HOWEVER, DURING PENALTY PRO CEEDINGS INITIATED U/S.271(1)(C), ASSESSEE HAS FURNISHED COMPLETE DETA ILS OF THE UNSECURED LOAN OF RS.12 LACS TAKEN BY ACCOUNT PAYEE CHEQUE FR OM ITS SISTER CONCERN M/S POONAM DYEING & PRINTING MILLS PVT. LTD. BUT, A.O. AS WELL AS CIT(A) HAS NOT GIVEN COGNIZANCE TO THE DOCUMENTS AVAILABLE ON RECORD AND DECIDED THE ISSUE ON THE BASIS OF THEIR OBSERVATION S MADE DURING ASSESSMENT AND APPELLATE PROCEEDINGS IN REGARD TO O RIGINAL ADDITIONS MADE BY A.O. 6.2 WE, THEREFORE, RESPECTFULLY, RELYING UPON THE D ECISIONS OF HONBLE JURISDICTIONAL HIGH COURT IN CASE OF NATIONAL TEXTI LE VS. CIT (SUPRA) AND CIT VS. JALARAM OIL MILLS (SUPRA) AS WELL AS TO OUR DISCUSSIONS MADE ABOVE, ARE OF THE CONFIRMED VIEW THAT PROCEEDINGS U /S. 271(1)(C) OF THE ACT ARE SEPARATE PROCEEDINGS AND THE OBSERVATIONS AND F INDINGS MADE DURING THE ORIGINAL ASSESSMENT PROCEEDINGS, SHOULD NOT SHA DOW OVER THE PROCEEDINGS U/S.271(1)(C) OF THE ACT AND THE A.O. O UGHT TO HAVE ANALYZED THE EVIDENCES AND SUPPORTING DOCUMENTS FURNISHED BE FORE HIM DURING THE PENALTY PROCEEDINGS U/S.271(1)(C) AND EXAMINED THEM IN CONSONANCE TO THE PROVISIONS OF SECTION 271(1)(C) AND ONLY IF HE IS NOT SATISFIED WITH THEM, THEN ONLY HE SHOULD INITIATE THE PENALTY AGAINST TH E ASSESSEE. WE, THEREFORE, REMIT BACK THE ISSUE TO THE FILE OF A.O. WITH CLEAR DIRECTIONS TO EXAMINE ON MERIT THE EVIDENCES AND SUPPORTING DOCUM ENTS TO BE ITA NO. 3181/AHD/2011 (POONAM DYEING & PRINTING MIL LS PVT. LTD. VS. ITO) ASST. YEAR 2006-07 11 SUBMITTED BY ASSESSEE BEFORE HIM FOR PROVING THE ID ENTITY, CREDITWORTHINESS AND GENUINENESS OF THE CASH CREDIT TAKEN FROM ITS SISTER CONCERN M/S POONAM DYEING & PRINTING MILLS PVT. LTD . AND ACCORDINGLY, SHOULD DECIDE THE ISSUE OF IMPOSING PENALTY U/S.271 (1)(C) OF THE ACT. 4.4 AS THE ISSUE, WHICH HAS BEEN EXAMINED IN THE AB OVE REFERRED APPEAL IS SIMILAR TO THE ISSUE BEFORE US IN THIS AP PEAL, WE HEREBY HOLD THAT PROCEEDINGS U/S.271(1)(C) OF THE ACT ARE ALTOG ETHER SEPARATE PROCEEDINGS IN THE ACT AND SHOULD NOT BE OVER SHADO WED BY THE PROCEEDINGS HELD BEFORE DURING THE ASSESSMENT FOR T HAT YEAR AND ACCORDINGLY, WE HEREBY REMIT THE ISSUE BACK TO THE FILE OF ASSESSING OFFICER WITH A CLEAR DIRECTION TO GIVE PROPER OPPOR TUNITY OF BEING HEARD TO THE ASSESSEE TO EXAMINE THE REPLY OF THE ASSESSE E AGAINST VARIOUS DISALLOWANCES MADE BY THE ASSESSING OFFICER DURING THE ASSESSMENT PROCEEDINGS, SUPPORTING EVIDENCES, LEDGER ACCOUNTS AND OTHER RECORDS, WHICH THE ASSESSEE SHALL SUBMIT BEFORE THE ASSESSING OFFICER TO EXAMINE THAT WHETHER THERE WAS ANY CONCE ALMENT OF INCOME ON THE PART OF ASSESSEE. 5. ACCORDINGLY, THIS APPEAL IS ALLOWED FOR STATISTI CAL PURPOSES. THIS ORDER PRONOUNCED IN OPEN COURT ON 04 TH NOVEMBER, 2015 SD/- SD/- ( RAJPAL YADAV) (MANISH BORAD) JUDICIAL MEMBER ACCOUNTANT MEMBER TRUE COPY S.K.SINHA / COPY OF ORDER FORWARDED TO:- 1. / APPELLANT 2. / RESPONDENT 3. / CONCERNED CIT 4. - / CIT (A) ITA NO. 3181/AHD/2011 (POONAM DYEING & PRINTING MIL LS PVT. LTD. VS. ITO) ASST. YEAR 2006-07 12 5. , , / DR, ITAT, AHMEDABAD 6. !' / GUARD FILE. BY ORDER/ , / ,