Saurabh Bansal, Surat V. The Income tax Officer,Ward-2(3), Surat

ITA 351/AHD/2008

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 5795 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 4 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-06-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 26-05-2010
• Assessment Year: 2002-2003
• Appeal Filed On: 31-01-2008
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: H P MEENA
• Assessee Lawyers: SAPNESH SHETH
• Keywords: Bogus purchase; Unexplained cash credit; Unexplained investment; Gift
• Section: 133(6); 147; 68; 28; 144

Judgement Text

- 1 - IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH D AT SURAT CAMP BEFORE S/SHRI T.K.SHARMA, JM AND D.C.AGRAWAL, AM SHRI SAURABH BANSAL, PROP. OF M/S BANSAL ENTERPRISE, B-4137 RAGHUKUL MARKET, RING ROAD, SURAT. VS . INCOME-TAX OFFICER, WD 2(3), SURAT. (APPELLANT) .. (RESPONDENT) APPELLANTS BY :- SHRI SAPNESH SHETH, AR RESPONDENT BY:- SHRI H. P. MEENA, SR. DR O R D E R PER D. C. AGRAWAL, ACCOUNTANT MEMBER . THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER OF LD. CIT(A) IN WHICH HE HAS CONFIRMED THE PENALTY OF RS. 2,08,380/- UNDER SECTION 271(1)(C) OF THE ACT. THE ASSESSEE RAISED F OLLOWING GROUND :- 1. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AS WE LL AS LAW ON THE SUBJECT, THE LD. CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF THE AO IN LEVYING PENALTY OF RS.2,08,380/- U/S 271( 1)(C) OF THE I.T. ACT. 2. THE FACTS OF THE CASE ARE THAT ASSESSEE HAS DECL ARED IN THE RETURN AN INCOME OF RS.1,88,020/-. IN THE COURSE OF ASSESSMEN T PROCEEDINGS FOLLOWING ADDITIONS WERE MADE :- ITA NO.351/AHD/2008 ASST. YEAR:2002-03 2 A. RS.3,75,984/- ON ACCOUNT OF BOGUS PURCHASES B. RS.2,45,000/- ON ACCOUNT OF UNEXPLAINED CASH CREDIT . C. RS.40,154/- ON ACCOUNT OF BROKERAGE EXPENSES. IN RESPECT OF BOGUS PURCHASES OF RS.3,75,984 THE AS SESSEE CLAIMED THAT THESE PURCHASES ARE MADE FROM M/S CHANDRAKALA PRINT S FOR RS.1,92,036/- AND FROM M/S NEMINATH SILK MILLS FOR RS. 1,83,948/- . PAYMENTS WERE CLAIMED TO HAVE BEEN MADE THROUGH ACCOUNT PAYEE CHE QUES. THE AO ENQUIRED BY ISSUING LETTERS UNDER SECTION 133(6) TO THE SAID PARTIES BUT THESE PARTIES FAILED TO RESPOND. EVEN THOUGH THE AS SESSEE FURNISHED COPIES OF ACCOUNT OF THESE PARTIES IN HIS BOOKS BUT NO BIL L OR VOUCHERS WERE FILED AS EVIDENCE. THE AO CARRIED OUT FURTHER ENQUIRIES F ROM THE BANK AND TRACED THE CHEQUES ISSUED BY THE ASSESSEE TO THE BA NK ACCOUNT OF SHREE SAI TEX AND MANN TRADERS. ON EXAMINATION OF THESE ACCOU NTS IT SHOWED THAT CASH HAD BEEN WITHDRAWN IMMEDIATELY AFTER CHEQUES W ERE DEPOSITED. THE AO REQUIRED THE ASSESSEE TO FURNISH EXPLANATION BUT NO EXPLANATION WAS FURNISHED BY THE ASSESSEE. ACCORDINGLY THE AO TREAT ED THESE PURCHASES FROM M/S CHANDRAKALA PRINTS AND M/S NEMINATH SILK M ILLS AS BOGUS AND AMOUNTS PAID BY CROSSED CHEQUES WAS RECEIVED BACK B Y THE ASSESSEE AND ACCORDINGLY THE ADDITION WAS MADE IN THE TOTAL INCO ME. 3. IN RESPECT OF UNSECURED LOAN THE AO NOTICED THAT ASSESSEE HAS RAISED LOANS OF RS.1,35,000/- AND RS.1,10,000/- FRO M HIS TWO MINOR SONS. THE AO NOTICED THAT CASH WAS DEPOSITED IN THEIR BAN K ACCOUNTS BEFORE THE CHEQUES WERE ISSUED IN FAVOUR OF ASSESSEE. THE ASSE SSEE CLAIMED THAT SUCH DEPOSITS REPRESENTED GIFTS RECEIVED BY HIS SONS. TH E AO REQUIRED THE ASSESSEE TO EXPLAIN THE SOURCE OF SUCH GIFTS AND CR EDITWORTHINESS OF THE DONORS BUT NO EXPLANATION WAS FURNISHED AND DONORS WERE ALSO NOT PRODUCED FOR VERIFICATION. HE ACCORDINGLY TREATED T HE LOAN AMOUNT OF 3 RS.2,45,000/- AS BOGUS AND ADDED THE SAME IN THE TO TAL INCOME OF THE ASSESSEE UNDER SECTION 68. 4. REGARDING BROKERAGE EXPENSES THE AO REQUIRED THE ASSESSEE TO PROVE THE EXPENSES AS INCURRED WHOLLY AND EXCLUSIVE FOR THE PURPOSES OF BUSINESS AND FURTHER THAT SUCH EXPENSES WERE NOT CL AIMED IN EARLIER YEARS. THE AO REQUIRED THE ASSESSEE TO PRODUCE CONFIRMATOR Y LETTERS FROM THE RECIPIENTS AND PRODUCE THE PERSONS WHO HAVE RECEIVE D THE PAYMENTS. BUT THE ASSESSEE FAILED TO FURNISH ANY EVIDENCE. THE AO ACCORDINGLY TREATED THE EXPENSES AS BOGUS AND ADDED THE SAME IN THE TOT AL INCOME OF ASSESSEE. THE MATTER TRAVELED TO THE TRIBUNAL IN QUANTUM ADDI TION. THE TRIBUNAL VIDE ITS ORDER IN ITA NO.718/AHD/2006 PRONOUNCED ON 28.10.2009 DELETED THE FIRST ADDITION AND CONFIRMED THE OTHER TWO AS UNDER :- (I) ADDITION IN RESPECT OF BOGUS PURCHASES (AT PAGES 4-5 OF THE TRIBUNALS ORDER) 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND TH E MATERIALS PLACED ON RECORD. AFTER CONSIDERING THE FACTS OF THE CASE, IT IS SEEN THAT ASSESSEE IS ENGAGED IN THE BUSINESS OF PURCHASE AND SALE OF CLOTH ON COMMISSION BASIS ONLY. THIS FACT IS EVIDENT ON PERUSAL OF PURC HASE AND SALE BILLS WHICH ARE ALSO ENCLOSED IN THE PAPER BOOK. AFTER MA KING PURCHASES ON VARIOUS DATES FROM ABOVE TWO PARTIES I.E. M/S NEMIN ATH SILK MILLS AND M/S CHANDRAKALA PRINTS ASSESSEE HAS IMMEDIATELY RES OLD THE GOODS TO VARIOUS PARTIES ON COMMISSION BASIS. ON PERUSAL OF PURCHASE AND SALE BILLS, IT IS SEEN THAT THERE IS NO DIFFERENCE IN TH E QUANTITY AND QUALITY OF GOODS AND CONTENTION OF LD. AR IS FOUND TO BE CORRE CT. AS SUCH IF THE PURCHASES ARE NOT GENUINE WE AGREE WITH THE CONTENT ION OF LD. AR THAT IT WOULD NOT HAVE BEEN POSSIBLE TO MAKE CORRESPONDING SALE. BESIDES THIS, IT IS ALSO SEEN THAT ASSESSING OFFICER HAS ALSO FAILED TO BRING ANY EVIDENCE ON RECORD WHICH INDICATES THAT ASSESSEE HAS NOT MADE P URCHASES FROM ABOVE TWO PARTIES. HENCE, WE ARE OF THE CONSIDERED OPINIO N THAT LD. CIT(A) IS NOT JUSTIFIED IN CONFIRMING THE ADDITION MADE BY AO AND ACCORDINGLY THAT ADDITION MADE BY THE AO IS HEREBY DELETED. 4 (II) ADDITION IN RESPECT OF BOGUS GIFTS (AT PAGES 6-7 OF THE TRIBUNALS ORDER) 90. WE HAVE HEARD THE RIVAL SUBMISSIONS AND THE MA TERIALS PLACED ON RECORD. AFTER CAREFULLY GOING THROUGH THE OBSERVATI ONS OF THE AO AND THE ARGUMENTS OF LD. AR, IT IS SEEN THAT ALL THE DONORS WHO MADE GIFTS TO ASSESSEES MINOR SONS ARE FOUND TO BE PARTIES OF NO MEANS BY THE LD. AO. IT IS ALSO SEEN THAT AO HAS MADE INQUIRY BY DEPUTIN G THE WARD INSPECTOR AND IT WAS FOUND THAT THE DONORS WERE NOT RESIDING AT THE ADDRESSES GIVEN BY THE ASSESSEE. IT IS ALSO APPARENT ON THE PERUSAL OF THE RETURN OF INCOME FILED BY VARIOUS DONORS THAT THEY HAVE FILED THEIR RETURNS SHOWING MEAGER INCOME WHICH IS JUST ABOVE THE AMOUNT NOT CHARGEABL E TO TAX. IT IS ALSO SEEN THAT ASSESSEE HAS FAILED TO PRODUCE THE DONORS BEFORE AO AND THUS WE DO NOT FIND ANY REASON TO INTERFERE WITH THE FIN DINGS OF CIT(A) AND ACCORDINGLY THE ADDITION IS CONFIRMED. THE GROUND N O.2 OF ASSESSEES APPEAL IS DISMISSED. (III) IN RESPECT OF BOGUS EXPENSES (AT PAGES 8-9 OF THE TRIBUNALS ORDER) 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND THE MAT ERIALS PLACED ON RECORD. AFTER CONSIDERING THE ENTIRE FACTS OF THE C ASE, WE ARE OF THE OPINION THAT LD. CIT(A) HAS RIGHTLY CONFIRMED THE A CTION OF AO IN MAKING ADDITION AS ASSESSEE HAS FAILED TO PROVE THE NATURE OF SERVICE RENDERED BY THE BROKER. FURTHER, THE PAYMENTS HAVE BEEN MADE IN CASH AND ARE SUPPORTED BY SELF MADE VOUCHERS. THUS, THE GENUINEN ESS OF EXPENDITURE IS NOT FULLY VERIFIABLE AND THEREFORE, ADDITION IS CON FIRMED. THE GROUND NO.3 IS THEREFORE DISMISSED. 5. IN PENALTY PROCEEDINGS THE AO SENT A SHOW CAUSE NOTICE ON 13.2.2007. ASSESSEE WAS REQUIRED TO SHOW CAUSE WHY PENALTY UNDER SECTION 271(1)(C) SHOULD NOT BE LEVIED IN THIS CASE . IN RESPONSE TO THE SAME THE ASSESSEE DID NOT ATTEND NOR FILE ANY WRITT EN SUBMISSION OR REQUEST FOR ADJOURNMENT. THE AO ACCORDINGLY PROCEED ED TO LEVY THE PENALTY. THE LD. CIT(A) CONFIRMED THE PENALTY IN RE SPECT OF ALL THE THREE ADDITIONS. 5 6. BEFORE US, LD. AR FOR THE ASSESSEE SUBMITTED THA T NO PENALTY SHOULD BE LEVIED IN RESPECT OF FIRST ADDITION AS THE SAME IS DELETED BY THE TRIBUNAL. 7. THE LD. DR ON THE OTHER HAND SUBMITTED THAT PENA LTY SHOULD BE LEVIED BECAUSE ASSESSEE FAILED TO FURNISH ANY EXPLA NATION IN RESPONSE TO SHOW CAUSE NOTICE AND CASE OF ASSESSEE IS COVERED U NDER EXPLANATION -1 TO SECTION 271(1)(C). HE SUBMITTED THAT IN SPITE OF SP ECIFIC REQUEST THE ASSESSEE FAILED TO PRODUCE THE ALLEGED DONORS OR TO SHOW THAT HIS MINOR SONS HAD ACTUALLY RECEIVED GIFTS. THE EXPLANATION W AS BASELESS, IT WAS NOT SUBSTANTIATED AND ALL THE MATERIAL FACTS RELATING T O ASSESSMENT HAVE NOT BEEN DISCLOSED. 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE MATERIAL ON RECORD. IN OUR CONSIDERED VIEW PENALTY CANNOT BE LEVIED IN RESPECT OF FIRST ADDITION BEING BOGUS PURCHASES OF RS.3,45,984 /- AS THE ADDITION IS DELETED BY THE TRIBUNAL. 8.1 IT HAS BEEN HELD BY HON. ALLAHABAD HIGH COURT I N ADDL. COMMISSIONER OF INCOME-TAX V. BADRI KASHI PRASAD (1 993] 200 ITR 0206 (ALL)- THAT THE LEVY OF PENALTY WAS BASED ON THE ADDITION TO INCOME MADE BY THE INCOME-TAX OFFICER. THE ADDITION WAS DE LETED BY THE TRIBUNAL. HENCE, THE TRIBUNAL WAS JUSTIFIED IN CANC ELING THE PENALTY. 8.2 SIMILAR VIEW IS TAKEN IN PRABHAT OIL TRADERS V. INCOME-TAX OFFICER (NO. 3) (1996) 218 ITR (A.T.) 0039 ITAT, AH MEDABAD WHERE HEAD NOTES INDICATED FOLLOWING PROPOSITIONS :- 6 PENALTY-CONCEALMENT OF INCOME-AMOUNT ALLEGEDLY INVESTED IN PURCHASE OF COMMODITY AND PROFIT ON ITS SALE OUTSIDE THE BOOKS OF ACCOUNT ADDITION MADE TO INCOME ON THE GROUND THAT THE AMOU NT REPRESENTED UNEXPLAINED INVESTMENT AND ALSO SUPPRESSED PROFITS ON SALE OUTSIDE BOOKS OF ACCOUNT-NO EVIDENCE THAT EXPLANATION REGARDING P URCHASE WAS FALSE- ADDITION DELETED IN QUANTUM PROCEEDINGS-PENALTY COU LD NOT BE LEVIED- INCOME-TAX ACT, 1961, S. 271(1)(C). 8.3 IN CITY DRY FISH COMPANY V. COMMISSIONER OF INCOME-TAX (1999) 238 ITR 0063 (A.P.) IT HAS BEEN HELD, (I) THAT THE POINTS HAD BEEN DECIDED STRAIGHTAWAY INSTEAD OF DIRECTING THE CASE FOR REFERENCE AND THEN ORDERING THE REFERENCE, WHICH WILL TAKE ANOTHER DEC ADE; AND (II) THAT, IN THE INSTANT CASE THE ORDER OF THE TRIBUNAL WAS TO T HE EFFECT THAT THE SUM OF RS.85,622/- PERTAINED TO THE YEAR PREVIOUS TO THE A SSESSMENT YEAR 1980-81 AND WAS AVAILABLE AS RESERVE AND, AS SUCH THE ORDER OF THE INCOME-TAX OFFICER CLUBBING THAT AMOUNT OF RS.85,622/- AS THE INCOME FOR THE ASSESSMENT YEAR 1980-81 STOOD SET ASIDE. AS A NECES SARY COROLLARY, THE LEVY OF PENALTY ON THE ABOVE COMPONENT ALSO HAD TO BE SET ASIDE. 8.4 IN CIT VS. MOHD. BUX SOKAT ALI (2004) 265 ITR 326 (RAJ ) IT HAS BEEN HELD THAT WHERE ADDITION TO THE INCOME IS DELE TED BY THE TRIBUNAL THEN PENALTY IN RESPECT OF THAT AMOUNT OF ADDITION CANNOT BE SUSTAINED. 8.5 SIMILAR VIEW WAS TAKEN BY THE TRIBUNAL, MUMBAI, IN ACIT VS. VIP INDUSTRIES (2009) 122 TTJ 289 (MUM) WHEREIN IT HAS BEEN HELD THAT WHERE THE ADDITION WAS DELETED BY THE TRIBUNAL IN Q UANTUM APPEAL, THE VERY FOUNDATION FOR LEVY OF THE PENALTY CEASED TO E XIST. 8.6 ACCORDINGLY PENALTY LEVIED IN RESPECT OF ADDITI ON OF RS.3,45,984/- IS DELETED. 7 9. HOWEVER, IN RESPECT OF OTHER TWO ADDITIONS, THE POSITION IS DIFFERENT. THESE ADDITIONS ARE CONFIRMED BY THE TRI BUNAL AS ABOVE. THE ASSESSEE FAILED TO GIVE ANY EXPLANATION IN RESPONSE TO SHOW CAUSE NOTICE BEFORE LEVY OF PENALTY. THEREFORE, THE CASE OF THE ASSESSEE IS COVERED UNDER EXPLANATION-1 TO SECTION 271(1)(C). FOR THE S AKE OF CONVENIENCE WE REPRODUCE EXPLANATION -1 TO SECTION 271(1)(C) AS UN DER :- SEC. 271(1) IF THE ASSESSING OFFICER OR THE COMMISSIONER (APP EALS) [OR THE COMMISSIONER] IN THE COURSE OF ANY PROCEEDINGS UNDE R THIS ACT, IS SATISFIED THAT ANY PERSON (A). (B). (C) HAS CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHED INACCURATE PARTICULARS OF SUCH INCOME, OR (D) HE MAY DIRECT THAT SUCH PERSON SHALL PAY BY WAY OF PENALTY EXPLANATION -1 WHERE IN RESPECT OF ANY FACTS MATERIAL TO THE COM PUTATION OF THE TOTAL INCOME OF ANY PERSON UNDER THIS ACT,- (A) SUCH PERSON FAILS TO OFFER AN EXPLANATION OR OF FERS AN EXPLANATION WHICH IS FOUND BY THE ASSESSING OFFICER OR THE COMMISSIONER(APPEAL S) OR THE COMMISSIONER TO BE FALSE OR (B) SUCH PERSON OFFERS AN EXPLANATION WHICH HE IS N OT ABLE TO SUBSTANTIATE AND [FAILS TO PROVE THAT SUCH EXPLANATION IS BONA FIDE AND THAT A LL THE FACTS RELATING TO THE SAME AND MATERIAL TO THE COMPUTATION OF HIS TOTAL INCOME HAV E BEEN DISCLOSED BY HIM], THEN THE AMOUNT ADDED OR DISALLOWED IN COMPUTING TH E TOTAL INCOME OF SUCH PERSON AS A RESULT THEREOF SHALL, FOR THE PURPOSES OF CLAUSE (C) OF THIS SUB-SECTION BE DEEMED TO REPRESENT THE INCOME IN RESPECT OF WHICH PARTICULAR S HAVE BEEN CONCEALED. THUS PENALTY UNDER EXPLANATION-1 (A) CAN BE LEVIED BY HOLDING THE ADDITION AS A CASE OF DEEMED CONCEALMENT OF INCOME OR THE CASE WHERE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF IN COME IN RESPECT OF ADDITION SUSTAINED IF ASSESSEE FAILS TO FURNISH AN EXPLANATION BEFORE THE AO IN RESPONSE TO SHOW CAUSE NOTICE, ISSUED BY HIM BEFORE LEVY OF PENALTY. THE CASE OF THE ASSESSEE IS ALSO COVERED I N TERMS OF EXPLANATION - 8 1(B) IF WE TREAT THAT EXPLANATION FURNISHED BY THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS AS THE EXPLANATION ASSESSEE COULD HAVE FURNISHED IN RESPONSE TO SHOW CAUSE NOTICE BEFORE L EVY OF PENALTY. THE EXPLANATION WAS THAT ASSESSEES MINOR SONS HAVE REC EIVED GIFTS IN CASH WHICH WAS DEPOSITED IN THE BANK ACCOUNT AND MONEY W AS THEN TRANSFERRED TO THE ASSESSEE AS LOAN FROM MINOR SONS. THIS EXPLA NATION IS NOT SUBSTANTIATED INASMUCH AS NECESSARY EVIDENCE IN RES PECT OF THE CLAIM HAS NOT BEEN FILED. THE IDENTITY OF THE DONORS AND THEI R CREDITWORTHINESS WERE NOT EXPLAINED BEFORE THE AO. IF ASSESSEE WOULD HAVE DISCHARGED THE PRIMARY ONUS THEN THERE WOULD NOT HAVE BEEN ANY CAS E FOR HOLDING THAT ASSESSEE HAS NOT SUBSTANTIATED HIS EXPLANATION. BUT IN A CASE LIKE THIS, WHERE ASSESSEE CHOSE TO SIT QUIETLY AND DID NOT FUR NISH ANY SATISFACTORY EXPLANATION ABOUT CASH DEPOSITED IN MINORS ACCOUNT WHICH IS FINALLY TRANSFERRED TO ASSESSEES ACCOUNT, THEN IT COULD NO T SAID THAT ASSESSEE HAS DISCHARGED THE PRIMARY ONUS LYING ON HIM. SIMILARLY , WE HOLD THAT ASSESSEE HAS FAILED TO DISCLOSE ALL THE MATERIAL FA CTS NECESSARY FOR ASSESSMENT WHEN HE CHOOSES NOT TO DISCLOSE THE IDEN TITY OF DONORS THEIR ADDRESSES AND THEIR CREDITWORTHINESS AND PARTICULAR LY WHEN AO REQUIRED THE ASSESSEE TO PRODUCE THE DONORS AND ASSESSEE FAI LS TO DO SO. UNDER THE CIRCUMSTANCES EXPLANATION FURNISHED BY THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS CANNOT BE TREATED AS BONA FI DE. AS ALL THE THREE INGREDIENTS LAID DOWN IN EXPLANATION -1(B) ARE SATI SFIED THE ADDITION MADE BY THE AO CAN BE DEEMED AS THE INCOME IN RESPECT OF WHICH ASSESSEE HAS CONCEALED THE PARTICULARS OF INCOME OR FURNISHED IN ACCURATE PARTICULARS. 10. IN RESPECT OF CLAIM FOR BOGUS EXPENSES LD. DR S UBMITTED THAT CASE IS COVERED UNDER EXPLANATION -1(B) TO SECTION 271(1 )(C) AS ASSESSEE FAILED TO PROVE THAT THE PAYMENTS WERE MADE FOR BUSINESS P URPOSES. ONCE THE CLAIM OF EXPENSES IS NOT SUBSTANTIATED AND ALL THE MATERIAL FACTS RELATING TO 9 THE CLAIM ARE NOT DISCLOSED TO THE AO INASMUCH AS N EITHER THE IDENTITY OF PERSONS TO WHOM THE PAYMENTS WERE MADE NOR THE EVID ENCE OF SERVICES HAVING BEEN RENDERED ARE FURNISHED THEN IT CANNOT B E SAID THAT EXPENDITURE WAS ACTUALLY INCURRED FOR THE PURPOSES OF BUSINESS. ON THE OTHER HAND, THE LD. AR FOR THE ASSESSEE HAS RELIED ON THE DECISIONS OF HON. GUJARAT HIGH COURT IN NATIONAL TEXTILE VS. CIT (2001) 249 ITR 12 5 (GUJ) AND CIT VS. JALARAM OIL MILLS (2002) 253 ITR 192 (GUJ) FOR THE PROPOSITION THAT WHERE EXPLANATION OFFERED BY THE ASSESSEE IS NOT AC CEPTED BY THE REVENUE IN RESPECT OF ADDITIONS PROPOSED U/S 68, THEN IT WO ULD NOT BE SUFFICIENT FOR LEVY OF PENALTY AS IT IS FOR THE REVENUE TO ADDUCE PROOF OF CONCEALMENT OF INCOME AND THAT IN ABSENCE OF ANY MATERIAL ON RECOR D THAT EXPLANATION FURNISHED BY THE ASSESSEE WAS FALSE OR THAT CASH CR EDITS CONSTITUTED INCOME OF THE ASSESSEE EXPLANATION-1 TO SECTION 271(1)(C) WOULD NOT BE APPLICABLE AND PENALTY UNDER SECTION 271(1)(C) CANNOT BE IMPOS ED MERELY BECAUSE ADDITIONS ARE SUSTAINED. 11. THE LD. DR IN REJOINDER HAD POINTED OUT THAT TH ESE TWO JUDGMENTS PERTAINED TO THE PERIOD PRIOR TO 1.4.1976; THE DECI SION OF HON. GUJARAT HIGH COURT IN NATIONAL TEXTILE (SUPRA) PERTAINED TO ASST. YEAR 1974-75 AND THE DECISION IN JALARAM OIL MILLS (SUPRA) PERTA INED TO ASST. YEAR 1971-72 WHEN EXPLANATION-1 TO SECTION 271(1)(C) WAS DIFFERENT THAN WHAT IS APPLICABLE FOR ASST. YEAR 2002-03. HE SUBMITTED THAT TAXATION LAWS AMENDMENT ACT, 1975 W.E.F. 1.4.1976 INSERTED NEW EX PLANATION-1 WHICH IS ALTOGETHER DIFFERENT IN PUTTING THE ONUS AND SAT ISFACTION OF INGREDIENTS. THEREFORE, THE DECISION OF HON. GUJARAT HIGH COURT IN THESE TWO CASES WOULD NOT BE APPLICABLE FOR THE ASSESSMENT FOR ASST . YEAR 2002-03. 10 12. IN ORDER TO EXAMINE THE ABOVE CONTENTION WE REF ER TO EXPLANATION - 1 TO SECTION 271(1)(C) WHICH EXISTED PRIOR TO TAXAT ION LAWS AMENDMENT ACT, 1975, WHICH READS AS UNDER :- EXPLANATION TO SEC. 271(1)(C) PRIOR TO 1.4.76 AS A PPLICABLE TO A.Y. 1971-72 EXPLANATION.--WHERE THE TOTAL INCOME RETURNED BY AN Y PERSON IS LESS THAN EIGHTY PER CENT. OF THE TOTAL INCOME (HEREINAFTER I N THIS EXPLANATION REFERRED TO AS THE CORRECT INCOME) AS ASSESSED UNDE R SECTION 143 OR SECTION 144 OR SECTION 147 (REDUCED BY THE EXPENDIT URE INCURRED BONA FIDE BY HIM FOR THE PURPOSE OF MAKING OR EARNING AN Y INCOME INCLUDED IN THE TOTAL INCOME BUT WHICH HAS BEEN DISALLOWED AS A DEDUCTION), SUCH PERSON SHALL, UNLESS HE PROVES THAT THE FAILURE TO RETURN THE CORRECT INCOME DID NOT ARISE FROM ANY FRAUD OR ANY GROSS OR WILLFUL NEGLECT ON HIS PART, BE DEEMED TO HAVE CONCEALED THE PARTICULARS O F HIS INCOME OR FURNISHED INACCURATE PARTICULARS OF SUCH INCOME FOR THE PURPOSES OF CLAUSE (C) OF THIS SUB-SECTION. 13. THE DECISIONS OF HON. GUJARAT HIGH COURT IN JAL ARAM OIL (SUPRA) AND NATIONAL TEXTILES (SUPRA) WERE BASED ON THE INT ERPRETATION OF ABOVE EXPLANATION-1 EXISTING PRIOR TO TAXATION LAWS (AMEN DMENT) ACT, 1976. IT WAS HELD THAT EXPLANATION RAISED REBUTTABLE PRES UMPTION 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. THE WORD USED IN SECTION 68 SUGGESTS THAT WHERE AN ADDITION IS WARRANTED THE N PENALTY UNDER SECTION 271(1)(C) WOULD NOT FOLLOW AS A NATURAL COR OLARRY. IN NATIONAL TEXTILES CASE IT WAS HELD THAT IN ORDER TO JUSTIFY THE LEVY OF PENALTY UNDER EXPLANATION-1 TO SECTION 271(1)(C) TWO FACTORS MUST CO-EXIST, THERE MUST BE SOME MATERIAL OR CIRCUMSTANCES LEADING TO THE RE ASONABLE CONFIRMATION THAT AMOUNT DOES REPRESENT ASSESSEES INCOME. IT IS NOT ENOUGH FOR THE PURPOSE OF PENALTY THAT THE AMOUNT HAS BEEN ASSESSE D AS INCOME AND SECONDLY THE CIRCUMSTANCES MUST SHOW THAT THERE WAS ANIMUS I.E. CONSCIOUS CONCEALMENT OR ACT OF FURNISHING INACCURA TE PARTICULARS ON THE 11 PART OF THE ASSESSEE. EXPLANATION-1 TO SECTION 271( 1)(C) AS ABOVE AND AS WAS EXISTING AT THAT TIME HAD NO BEARING AT FACTOR NO.1 BUT HAD BEARING ON FACTOR NO.2. THE EXPLANATION DOES NOT MAKE THE ASSE SSMENT CONCLUSIVE EVIDENCE THAT THE AMOUNT AS ADDITION WAS IN FACT IN COME OF THE ASSESSEE. NO PENALTY CAN BE IMPOSED IF THE FACTS AND CIRCUMST ANCES ARE EQUALLY CONSISTENT WITH THE HYPOTHESIS THAT THE AMOUNT DOES NOT REPRESENT CONCEALED INCOME WITH THE HYPOTHESIS THAT IT DOES. UNLESS CIRCUMSTANCES LEADING TO THE REASONABLE AND POSITIVE INFERENCE TH AT ASSESSEES EXPLANATION ARE FALSE, ASSESSEE MUST HAVE HELD TO H AVE PROVED THAT THERE WAS NO MENS REA OR GUILTY MIND. THUS ABOVE TWO JUDG MENTS INTERPRETED THE THEN EXISTING EXPLANATION WHERE IT BECAME NECES SARY FOR THE REVENUE TO PROVE THAT ASSESSEE HAD IN FACT A GUILTY MIND. I N OTHER WORDS THE RATIO LAID DOWN BY HON. APEX COURT IN CIT, WEST BENGAL VS . ANWAR ALIS CASE (SUPRA) IS STILL HELD THE FIELD EVEN WHERE EXPLANAT ION-1 WAS INVOKED. EVEN THOUGH THE WORDING OF EXPLANATION-1 APPARENTLY SHOW ED THAT ASSESSEE HAD TO PROVE THAT FAILURE TO RETURN CORRECT INCOME DID NOT ARISE FROM ANY FRAUD OR GROSS OR WILLFUL NEGLECT ON HIS PART, BUT HONBL E COURTS INTERPRETED PARTICULARLY IN THE ABOVE TWO JUDGMENTS, THAT THE O NUS STILL REMAINED ON THE REVENUE TO PROVE THAT THERE WAS AN ACT OF CONTU MACIOUS CONDUCT OR ANIMUS WHILE NOT RETURNING CORRECT INCOME. 14. BY INTRODUCING EXPLANATION -1( AS EXISTING PRIO R TO 1.4.1976) BY FINANCE ACT, 1964, THE BURDEN OF PROVING THAT OMISS ION TO DISCLOSE TRUE INCOME DID NOT PROCEED FROM ANY FRAUD OR GROSS OR W ILLFUL NEGLECT WAS PUT ON THE ASSESSEE. IT PROVIDED THAT WHERE INCOME RETU RNED BY ANY PERSON IS LESS THAN 80% OF THE AMOUNT OF THE INCOME ASSESSED ON REGULAR ASSESSMENT (INCLUDING RE-ASSESSMENT U/S 147 OF THE ACT) AS ADJUSTED BY BONA FIDE CLAIM OF AN EXPENDITURE WHICH HAS BEEN DI SALLOWED IN THE ASSESSMENT, THE ASSESSEE HAS TO PROVE THAT FAILURE TO RETURN CORRECT INCOME 12 DID NOT ARISE FROM ANY FRAUD OR FROM ANY GROSS OR W ILLFUL NEGLECT ON HIS PART. IF IT IS NOT SO PROVED THEN SUCH DIFFERENCE ( AS ADJUSTED BY BONA FIDE CLAIM OF EXPENDITURE DISALLOWED) WOULD BE DEEMED CO NCEALMENT OF INCOME OR DEEMED AS INCOME IN RESPECT OF WHICH ASSE SSEE HAS FURNISHED INACCURATE PARTICULARS. HOWEVER, IT WAS EXPERIENCED BY WANCHOO COMMITTEE THAT APPELLATE AUTHORITIES WERE NOT INCLI NED TO UPHOLD THE PENALTIES IMPOSED ON THE BASIS OF THIS EXPLANATION SINCE THEY WERE OF THE VIEW THAT DEPARTMENT WAS STILL UNDER OBLIGATION TO PROVE THE CONCEALMENT. THE ADJUSTED DIFFERENCE BETWEEN THE ASSESSED INCOME AND THE RETURNED INCOME CAN BE DUE TO A VARIETY OF REASONS, SOME TEC HNICAL LIKE ESTIMATE OF G.P. AND OTHER PURELY ARITHMETICAL AND IN VIEW OF T HE COMMITTEE IT WOULD NOT BE CORRECT TO INITIATE PENALTY PROCEEDINGS IN E VERY CASE WHICH THE DIFFERENCE EXCEEDED 20%. THE PROVISIONS IN THE UNIT ED KINGDOM RELATING TO LEVY OF PENALTY ON THE BASIS OF WHICH EXPLANATIO N-1 WAS FRAMED HAS BEEN DROPPED. THUS IT WAS EXPERIENCED THAT EXPLANAT ION-1 AS EXISTING AT THAT TIME HAS FAILED AND DID NOT SERVE ANY USEFUL P URPOSE. THE COMMITTEE FELT THAT PENALTY SHOULD NOT BE DRACONIAN BUT THOSE WHO ARE TEMPTED TO RESORT TO CONCEALMENT OF INCOME SHOULD NOT BE ALLOW ED TO GET AWAY TENUOUS OF LEGAL INTERPRETATION. THE COMMITTEE ACCO RDINGLY MADE FOLLOWING RECOMMENDATIONS WHICH BECAME THE BASIS FO R INSERTING EXPLANATION-1 TO SECTION 271(1)(C) BY THE TAXATION LAWS (AMENDMENT) ACT, 1976: (A) PRESUMPTION OF CONCEALMENT WHERE EXPLANATION FOUND FALSE SEVERAL OFFICERS OF DEPARTMENT INVITED OUR ATTENTIO N TO THE SUPREME COURT'S DECISION IN THE CASE CIT, WEST BENGAL VS. A NWAR ALI (76 ITR 696 ). IT HAS HELD BY THE COURT THAT PENALTY FOR CONCEALMENT OF INCOME CANNOT BE IMPOSED MERELY BECAUSE THE EXPLANATION GI VEN BY AN ASSESSEE IS FOUND TO BE FALSE. WHILE THIS DECISION WAS GIVEN IN THE CONTEXT OF CLAUSE (C) OF THE SUB-SECTION (1) OF SECTION 28 OF INDIAN INCOME-TAX ACT, 1922, IT IS NOT REASONABLY CERTAIN THAT IT WOULD NOT APPLY T O PENALTIES UNDER THE 13 INCOME-TAX ACT, 1961. WE WOULD, THEREFORE, RECOMMEND, AS A MEASURE OF ABUNDANT CAUTION, THAT AN EXPLANATION TO SUB-SECTIO N (1) OF SECTION 271OF THE INCOME-TAX ACT, 1961, MAY BE INSERTED TO CLARIF Y THAT WHERE A TAXPAYERS EXPLANATION IN RESPECT OF ANY RECEIPT, D EPOSIT, OUTGOING OR INVESTMENT IS FOUND TO BE FALSE, THE AMOUNT REPRESE NTED BY SUCH RECEIPT, ETC., SHALL BE DEEMED TO BE INCOME IN RESPECT OF WH ICH PARTICULARS HAVE BEEN CONCEALED OR INACCURATE PARTICULARS HAVE BEEN FURNISHED WITHIN THE MEANING OF CLAUSE (C) OF SUB-SECTION (1) OF SECTION 271 OF THE INCOME-TAX ACT, 1961. THIS LED TO INSERTION OF THE FOLLOWING EXPLANATION- 1 UNDER SECTION 271(1)(C): EXPLANATION AS INTRODUCED BY TAXATION LAWS (AMEN DMENT) ACT OF 1976 EXPLANATION 1.--WHERE IN RESPECT OF ANY FACTS MATER IAL TO THE COMPUTATION OF THE TOTAL INCOME OF ANY PERSON UNDER THIS ACT,-- (A) SUCH PERSON FAILS TO OFFER AN EXPLANATION OR OF FERS AN EXPLANATION WHICH IS FOUND BY THE INCOME-TAX OFFICER OR THE APP ELLATE ASSISTANT COMMISSIONER TO BE FALSE, OR (B) SUCH PERSON OFFERS AN EXPLANATION WHICH HE IS N OT ABLE TO SUBSTANTIATE, THEN, THE AMOUNT ADDED OR DISALLOWED IN COMPUTING T HE TOTAL INCOME OF SUCH PERSON AS A RESULT THEREOF SHALL, FOR THE PURP OSES OF CLAUSE (C) OF THIS SUB-SECTION, BE DEEMED TO REPRESENT THE INCOME IN R ESPECT OF WHICH PARTICULARS HAVE BEEN CONCEALED: PROVIDED THAT NOTHING CONTAINED IN THIS EXPLANATION SHALL A PPLY TO A CASE REFERRED TO IN CLAUSE (B) IN RESPECT OF ANY AMOUNT ADDED OR DISALLOWED AS A RESULT OF THE REJECTION OF ANY EXPLANATION OFFERE D BY SUCH PERSON, IF SUCH EXPLANATION IS BONA FIDE AND ALL THE FACTS RELATING TO THE SAME AND MATERIAL TO THE COMPUTATION OF HIS TOTAL INCOME HAV E BEEN DISCLOSED BY HIM. 15. THE NEW AMENDMENT BY TAXATION LAWS (AMENDMENT) ACT, 1976 INSERTING EXPLANATION-1 TO SECTION 271(1)(C) PROVID ED THAT WHERE IN 14 RESPECT OF FACTS MATERIAL TO THE COMPUTATION OF THE TOTAL INCOME OF THE ASSESSEE HE FURNISHES NO EXPLANATION OR HE COULD NO T SUBSTANTIATE THE EXPLANATION OFFERED BY HIM OR THE EXPLANATION OFFER ED BY HIM IS FOUND TO BE FALSE, THE RELEVANT ADDITION TO TOTAL INCOME SHA LL BE DEEMED TO BE HIS CONCEALED INCOME. THE PROVISO PROVIDED THAT IF EXP LANATION OFFERED BY THE ASSESSEE IS BONA FIDE AND THE FACTS RELATING TO THE EXPLANATION AND MATERIAL TO THE COMPUTATION OF TOTAL INCOME HAS BEE N DISCLOSED BY THE ASSESSEE EXPLANATION-1 WILL NOT BE APPLICABLE. IN O THER WORDS, ADDITION TO TOTAL INCOME WOULD BE THE DEEMED CONCEALED INCOME I N TWO SITUATIONS COVERED BY CLAUSE (A) AND CLAUSE (B). CLAUSE (A) PR OVIDES THAT WHERE AN ASSESSEE FAILS TO OFFER AN EXPLANATION OR WHERE EXP LANATION OFFERED IN RESPECT OF AMOUNT ADDED TO THE TOTAL INCOME IS FOUN D TO BE FALSE AND AS PER CLAUSE (B) WHERE IN RESPECT OF THE ADDITION TO THE TOTAL INCOME ASSESSEE OFFERS AN EXPLANATION WHICH HE IS NOT ABLE TO SUBSTANTIATE. AS PER PROVISO CLAUSE (B) WOULD NOT BE APPLICABLE WHERE EX PLANATION OFFERED BY THE ASSESSEE IS MERELY REJECTED IF SUCH EXPLANATION IS BONA FIDE AND ALL THE FACTS RELATING TO THE SAME AND MATERIAL TO THE COMP UTATION OF TOTAL INCOME HAVE BEEN DISCLOSED BY HIM. THUS OUT OF LARGER AREA WHERE AN EXPLANATION IS NOT SUBSTANTIATED A LARGE CHUNK OF CIRCUMSTANCES ARE TAKEN OUT WHERE EXPLANATION GIVEN IS CONSIDERED BONA FIDE AND ALL T HE MATERIAL FACTS NECESSARY FOR COMPUTATION OF INCOME HAVE BEEN DISCL OSED. THE EXPLANATION -1 IN THIS FORM CREATED DIFFICULTIES IN ASMUCH AS IT WAS FOUND THAT IT BECAME DIFFICULT TO INVOKE CLAUSE(B) OF EXP LANATION-1 TO SECTION 271(1)(C), IN MANY CASES WHERE EXPLANATION WAS NOT SUBSTANTIATED BECAUSE SUCH EXPLANATION COULD BE CONSIDERED AS BON A FIDE AND WITHOUT BRINGING EVIDENCE ON RECORD TO SUGGEST, AS TO WHAT MATERIAL FACT ASSESSEE DID NOT DISCLOSE THE ADDITION COULD NOT BE DEEMED A S CONCEALED INCOME WITHIN THE MEANING OF CLAUSE (B).TO OVER COME THIS DIFFICULTY TAXATION LAWS AMENDMENT ACT AND MISCELLANEOUS PROVISIONS ACT , 1986 AMENDED 15 EXPLANATION-1 TO SECTION 271(1)(C). IT WAS FELT THA T AS PER EXISTING EXPLANATION 1(B) AFTER TAXATION LAWS AMENDMENT ACT, 1976 THE FACT THAT EXPLANATION OFFERED WAS NOT SUBSTANTIATED WILL HAVE TO BE ESTABLISHED BY THE INCOME-TAX DEPARTMENT AND MERE FAILURE ON THE P ART OF ASSESSEE TO SUBSTANTIATE HIS EXPLANATION WOULD NOT BE ENOUGH TO WARRANT PENALTY IF SUCH EXPLANATION IS BONA FIDE. THE NOTES ON CLAUSES AND MEMORANDUM EXPLAINING THE AMENDMENT IN CLAUSE (B) OF THIS EXP LANATION IS AS UNDER :- THE AMENDING ACT IN CLAUSE (B) OF THIS EXPLANATION HAS SUBSTITUTED FOR THE WORDS NOT ABLE TO SUBSTANTIATE, THE WORDS NO T ABLE TO SUBSTANTIATE AND FAILS TO PROVE THAT SUCH EXPLANATION IS BONA FI DE AND THAT ALL THE FACTS RELATING TO THE SAME AND MATERIAL TO THE COMPUTATIO N OF HIS TOTAL INCOME HAVE BEEN DISCLOSED BY HIM. FURTHER, THE PROVISO M AKING THE EXISTING EXPLANATION INAPPLICABLE TO A CASE WHERE IN RESPECT OF ANY AMOUNT ADDED OR DISALLOWED AS A RESULT OF THE REJECTION OF ANY E XPLANATION OFFERED BY SUCH PERSON IF THE EXPLANATION IS BONA FIDE AND ALL THE FACTS RELATING TO THE SAME AND MATERIAL TO THE COMPUTATION OF HIS TOTAL I NCOME HAVE BEEN DISCLOSED BY HIM, HAS BEEN CAST ON THE PERSON WHO H AS COMMITTED THE DEFAULT. 16. WITH THESE AMENDMENTS, THE NEW EXPLANATION-1 WH ICH IS EXISTING AS AT PRESENT AND IS ALSO APPLICABLE FOR ASST. YEAR 2002-03, CAME OUT TO BE WHAT WE HAVE REPRODUCED IN PARA ABOVE. 16.1 CLAUSE (A) OF EXPLANATION-1 REMAINED THE SAME AS IT WAS MADE BY THE AMENDMENT ACT, 1976 BUT CLAUSE (B) OF EXPLANATI ON-1 CREATED THREE INGREDIENTS TO BE SATISFIED SIMULTANEOUSLY AND CUMU LATIVELY FOR DEEMING THE ADDITION TO THE TOTAL INCOME AS CONCEALED INCOM E. THEY ARE - (1) THE ASSESSEE OFFERS AN EXPLANATION WHICH HE IS NOT ABLE TO SUBSTANTIATE; (2) HE FAILS TO PROVE THAT SUCH EXPLANATION IS BONA FID E; AND 16 (3) THAT ALL THE FACTS RELATING TO THE SAME AND MATERIA L TO THE COMPUTATION OF TOTAL INCOME HAVE BEEN DISCLOSED BY HIM. 16.2 EXPLANATION-1(B) HAS BEEN INTERPRETED BY ITAT LUCKNOW BENCH-B IN STAR INTERNATIONAL VS. ACIT (2008) 23 SOT 88 (LU CKNOW) WHEREIN IT IS HELD THAT BURDEN IS ON THE REVENUE TO SHOW THAT ALL THE THREE INGREDIENTS TO THE EXPLANATION-1 (B) ARE SATISFIED. IT IS HELD THAT THE FIRST INGREDIENT OF CLAUSE (B) IS SUCH PERSON OFFERS AN EXPLANATION WH ICH HE IS NOT ABLE TO SUBSTANTIATE DOES NOT MEAN THAT EXPLANATION IS NOT ACCEPTED BY THE CONCERNED AUTHORITIES BUT IT MEANS THAT THERE IS NO SUBSTANCE IN THE CLAIM MADE BY THE ASSESSEE. THE WORD SUBSTANTIATE IS OP POSED TO WORDS VAGUE OR FANCIFUL, OR WITHOUT ANY FOUNDATION OR BASIS. 16.3 THE SECOND INGREDIENT IS THAT ASSESSEE FAILS T O PROVE THAT SUCH EXPLANATION IS BONA FIDE WHICH MEANS THAT FACTS AND CIRCUMSTANCES EXIST AND THERE IS PREPONDERANCE OF PROBABILITIES THAT WH AT ASSESSEE STATES COULD BE TRUE OR COULD HAVE BEEN TRUE. IT IS PRIMARILY SU PPORTED BY MATERIAL ON RECORD, HISTORY OF THE CASE AND BOOKS OF ACCOUNTS O F THE ASSESSEE. THE CLAIM OF THE ASSESSEE IS APPARENTLY IN ACCORDANCE W ITH PRINCIPLES OF ACCOUNTANCY OR AS PER JUDICIAL PRONOUNCEMENT EXISTI NG AT THE RELEVANT TIME. 16.4 THE THIRD LIMB IS THAT ALL THE FACTS RELATING TO THE SAME AND MATERIAL TO THE COMPUTATION OF HIS TOTAL INCOME HAVE BEEN DI SCLOSED BY HIM WOULD MEAN THAT ALL THE MATERIALS WHICH ARE RELEVAN T FOR COMPUTING THE INCOME OF THE ASSESSEE HAVE BEEN DISCLOSED NOT ONLY DURING THE ASSESSMENT PROCEEDINGS BUT AT THE TIME OF FILING OF RETURN ITSELF. 17 17. THUS FROM A CAREFUL STUDY OF ABOVE PROVISIONS A MENDMENT IN EXPLANATION AND JUDGMENTS OF HON. GUJARAT HIGH COUR T IN THE TWO CASES ABOVE CLEARLY INDICATE THAT ABOVE TWO JUDGMENTS WER E APPLICABLE ONLY IN A CASE WHERE EXPLANATION-1 TO SECTION 271(1)(C) AS EX ISTING PRIOR TO ASST. YEAR 1975-76 WAS INVOKED. THE NEW EXPLANATION IS SU BSTANTIALLY AMENDED THE LIABILITY OF ONUS AND INGREDIENTS REQUI RED TO BE SATISFIED ARE DIFFERENT AND, THEREFORE, DIFFERENT DEGREE OF PROOF IS REQUIRED FOR BRINGING THE CASE WITHIN THE MISCHIEF OF NEW EXPLANATION-1 O R FOR GETTING OUT OF IT. HON. GUJARAT HIGH COURT HAS ALSO HELD THAT WHERE TH ERE IS AN AMENDMENT IN THE ACT THEN JUDGMENT GIVEN ON THE BASIS OF EARL IER PROVISION OF LAW WOULD NOT CREATE A BINDING PRECEDENCE. FOLLOWING AR E THE JUDGMENTS :- (I) ROSHANLAL S. JAIN VS. DCIT (ASST) (2009) 309 ITR 0 174 (GUJ) IN INCOME-TAX MATTERS WHICH ARE GOVERNED BY AN ALL- INDIA STATUTE, WHEN THERE IS A DECISION OF A HIGH COURT INTERPRETING A STATUTORY PROVISION, IT WOULD BE A WISE JUDICIAL POLICY AND PRACTICE NOT LO TAKE A DIFFERENT VIEW HOWEVER, THIS IS NOT AN ABSOLUTE PROPOSITION AND TH ERE ARE CERTAIN WELL- KNOWN EXCEPTIONS TO IT IN CASES WHERE A DECISION I S SUB SILENTIO, PER INCURIAM, OBITER DICTA OR BASED ON A CONCESSION OR TAKES A VIEW WHICH IT IS IMPOSSIBLE TO ARRIVE AT OR THERE IS ANOTHER VIEW IN THE FIELD OR THERE IS A SUBSEQUENT AMENDMENT OF THE STATUTE, OR REVERSAL OR IMPLIED OVERRULING OF THE DECISION BY A HIGH COURT, OR SOME SUCH OR SI MILAR INFIRMITY IS MANIFESTLY PERCEIVABLE IN THE DECISION, A DIFFERENT VIEW CAN BE TAKEN BY THE HIGH COURT. (II) ARVIND BOARDS AND PAPER PRODUCTS LTD. VS. CIT (198 2) 137 ITR 0635 (GUJ) IT IS SETTLED LAW THAT IF TWO INTERPRETATIONS OF A TAXING PROVISION ARE POSSIBLE, THE INTERPRETATION WHICH IS FAVOURABLE TO THE ASSESSEE SHOULD BE ACCEPTED IF ONE HIGH COURT HAS TAKEN A POSSIBLE VI EW WHICH IS FAVOURABLE TO THE ASSESSEE, EVEN IF ANOTHER POSSIBL E VIEW FAVOURABLE TO THE REVENUE CAN BE ADOPTED SUCH FUTILE EXERCISE IS TO B E AVOIDED FOR, ULTIMATELY, THE VIEW IN FAVOUR OF THE ASSESSEE MIGH T HAVE TO BE TAKEN IN THE INCOME-TAX MATTERS, WHICH ARE GOVERNED BY AN AL L INDIA STATUTE, WHEN 18 THERE IS A DECISION OF A HIGH COURT INTERPRETING A STATUTORY PROVISION, IT WOULD BE A WISE JUDICIAL POLICY AND PRACTICE NOT TO TAKE A DIFFERENT VIEW, BARRING, OF COURSE, CERTAIN EXCEPTIONS, LIKE WHERE THE DECISION IS SUB SILENTIO, PER INCURIAM, OBITER DICTA OR BASED ON A CONCESSION OR TAKES A VIEW WHICH IT IS IMPOSSIBLE TO ARRIVE AT OR THERE I S ANOTHER VIEW IN THE FIELD OR THERE IS A SUBSEQUENT AMENDMENT OF THE STATUTE OR REVERSAL OR IMPLIED OVERRULING OF THE DECISION BY A HIGH COURT OR SOME SUCH OR SIMILAR INFIRMITY IS MANIFESTLY PERCEIVABLE M THE D ECISION. IF ONE HIGH COURT HAS INTERPRETED THE PROVISION OR SECTION OF A TAXING STATUTE, WHICH IS AN ALL INDIA STATUTE AND THERE IS NO OTHER VIEW IN THE FIELD ANOTHER HIGH COURT SHOULD ORDINARILY ACCEPT THAT VIEW IN THE . THEREFORE, IN OUR HUMBLE VIEW THE ABOVE TWO JUDGMEN TS IN NATIONAL TEXTILE VS. CIT (SUPRA) AND CIT VS. JALARAM OIL MIL LS (SUPRA) WOULD NOT BE APPLICABLE IN RESPECT OF ADDITION MADE IN THE AS ST. YEAR 2002-03. 18. THUS WHEN WE APPLY EXPLANATION-1AS EXISTING FOR THE ASST. YEAR 2002-03 IN RESPECT OF SECOND ADDITION BEING BOGUS G IFTS, WE NOTICE THAT A FINDING OF FACT HAS BEEN GIVEN BY THE TRIBUNAL THAT DONORS WERE NOT PRODUCED BEFORE THE AO, AND THEY WERE NOT FOUND RES IDING AT THE ADDRESSES GIVEN BY THE ASSESSEE. THUS THE BASIC ING REDIENTS REQUIRED FOR ACCEPTING A GIFT AS GENUINE WERE NOT FURNISHED AND THUS THE EXPLANATION FURNISHED BY THE ASSESSEE THAT MONEY DEPOSITED IN T HE ACCOUNT OF MINOR SONS CAME OUT OF GIFTS IS NOT SUBSTANTIATED AND ALL THE PARTICULARS IN RESPECT OF THE EXPLANATION WERE NOT FURNISHED. NEIT HER THE CORRECT ADDRESSES OF THE DONORS WERE GIVEN NOT THEY WERE PR ODUCED BEFORE THE AO. EVEN THE WORTH OF THE DONORS WAS NOT ESTABLISHE D. FROM THESE FACTS IT IS APPARENT THAT NOT ONLY THE EXPLANATION WAS NOT S UBSTANTIATED, ALL THE MATERIAL FACTS RELATING TO EXPLANATION WERE NOT FUR NISHED. THE EXPLANATION OF THE ASSESSEE WAS ALSO NOT BONA FIDE INASMUCH AS IT WAS NOT EXPLAINED AS TO WHY HE WAS UNABLE TO PRODUCE THE DONORS OR GIVE THEIR CORRECT ADDRESSES. UNLESS THE CIRCUMSTANCES WHICH CREATED I NABILITY IN THE 19 ASSESSEE TO DISCLOSE THE MATERIAL FACTS NECESSARY F OR ASSESSMENT OR TO SUBSTANTIATE THE EXPLANATION FURNISHED BY HIM ARE E LABORATED AND CONVINCINGLY ESTABLISHED, EXPLANATION OF THE ASSESS EE CANNOT BE TREATED AS BONA FIDE. THUS PENALTY IS LEVIABLE WITHIN THE MEAN ING OF EXPLANATION- 1(B) TO SECTION 271(1)(C) IN RESPECT OF ALLEGED GIF TS RECEIVED BY THE MINOR SONS OF THE ASSESSEE WHICH FINALLY FOUND TRANSFERRE D TO THE ASSESSEES BOOKS. 19. HOWEVER, IN OUR CONSIDERED VIEW PENALTY WOULD N OT BE LEVIABLE IN RESPECT OF ADDITION OF RS.40,154/- BEING BROKERAGE EXPENDITURE IN RESPECT OF WHICH IT WAS HELD THAT GENUINENESS OF THE EXPEND ITURE IS NOT ESTABLISHED AND THAT THEY ARE NOT FULLY VERIFIABLE, PAYMENTS WE RE MADE IN CASH AND WERE SUPPORTED BY SELF-MADE VOUCHERS AND THERE WAS NO EVIDENCE OF SERVICES RENDERED. THE CLAIM IS CLEARLY UNSUSTAINAB LE AND, THEREFORE, ADDITION WAS CONFIRMED BY THE TRIBUNAL BUT FOR MAKI NG UNSUSTAINABLE CLAIM PENALTY CANNOT BE LEVIED AS HELD BY HON. SUPR EME COURT IN CIT VS. RELIANCE PETRO PRODUCTS 322 ITR 158 (SC) AS UNDER :- (I) S. 271(1)(C) APPLIES WHERE THE ASSESSEE HAS C ONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHED INACCURATE P ARTICULARS OF SUCH INCOME. THE PRESENT WAS NOT A CASE OF CONCEALMENT OF THE INCOME. AS REGARDS THE FURNISHING OF INACCURATE PARTICULARS, N O INFORMATION GIVEN IN THE RETURN WAS FOUND TO BE INCORRECT OR INACCURATE. THE WORDS INACCURATE PARTICULARS MEAN THAT THE DETAILS SUPP LIED IN THE RETURN ARE NOT ACCURATE, NOT EXACT OR CORRECT, NOT ACCORDING T O TRUTH OR ERRONEOUS . IN THE ABSENCE OF A FINDING BY THE AO THAT ANY DETAILS SUPPLIED BY THE ASSESSEE IN ITS RETURN WERE FOUND TO BE INCORRECT O R ERRONEOUS OR FALSE, THERE WOULD BE NO QUESTION OF INVITING PENALTY U/S 271(1)(C). (II) THE ARGUMENT OF THE REVENUE THAT SUBMITTING AN INCORRECT CLAIM FOR EXPENDITURE WOULD AMOUNT TO GIVING INACCURATE PARTI CULARS OF SUCH INCOME IS NOT CORRECT. BY NO STRETCH OF IMAGINATIO N CAN THE MAKING OF AN INCORRECT CLAIM IN LAW TANTAMOUNT TO FURNISHING INA CCURATE PARTICULARS. A MERE MAKING OF THE CLAIM, WHICH IS NOT SUSTAINABLE IN LAW, BY ITSELF, WILL NOT AMOUNT TO FURNISHING INACCURATE PARTICULARS REG ARDING THE INCOME OF 20 THE ASSESSEE . IF THE CONTENTION OF THE REVENUE IS ACCEPTED THEN IN CASE OF EVERY RETURN WHERE THE CLAIM MADE IS NOT ACCEPTED B Y THE AO FOR ANY REASON, THE ASSESSEE WILL INVITE PENALTY U/S 271(1) (C). THAT IS CLEARLY NOT THE INTENDMENT OF THE LEGISLATURE. (III) THE LAW LAID DOWN IN DILIP SHROFF 291 ITR 519 (SC) AS TO THE MEANINGS OF THE WORDS CONCEAL AND INACCURATE CO NTINUES TO BE GOOD LAW BECAUSE WHAT WAS OVERRULED IN DHARMENDRA TEXTIL E PROCESSORS 306 ITR 277 (SC) WAS ONLY THAT PART IN DILIP SHROFF WHE RE IT WAS HELD THAT MENS REA WAS AN ESSENTIAL REQUIREMENT FOR PENALTY U /S 271 (1)(C). 20. FOLLOWING THE DECISION OF HON. APEX COURT AS AB OVE, WE CANCEL THE PENALTY IN RESPECT OF ALLEGED BOGUS EXPENSES. IN TH E RESULT WE CONFIRM THE PENALTY ONLY IN RESPECT OF BOGUS GIFTS. THE AO WILL CALCULATE THE MINIMUM PENALTY LEVIABLE IN RESPECT OF ADDITION ON ACCOUNT OF BOGUS GIFTS ONLY. PENALTY IN RESPECT OF OTHER TWO ADDITIONS IS CANCELLED. 21. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER WAS PRONOUNCED IN OPEN COURT ON 25/06/2010 SD/- SD/- (T.K. SHARMA) (D.C. AGRAWAL) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD, DATED : 25/06/2010 MAHATA/- FIT FOR PUBLICATION. (T. K. SHARMA) (D.C. AGRAWAL) JUDICIAL MEMBER A CCOUNTANT MEMBER 21 COPY OF THE ORDER FORWARDED TO :- 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT(APPEALS)- 4. THE CIT CONCERNS. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD