DCIT, Circle, V. Pearay Lal & Sons (EP) Ltd.,

ITA 3707/DEL/2002

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 3539 (ITAT-DELHI)
• Duration Of Justice: 8 year(s) 9 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-07-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 06-06-2011
• Assessment Year: 1982-1983
• Appeal Filed On: 12-09-2002
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MRS ANUSHA KHURANA
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH A DELHI) BEFORE SHRI G.E. VEERABHADRAPPA, HONBLE VICE PRESIDENT AND SHRI A.D. JAIN, JUDICIAL MEMBER ITA NOS. 3737 & 3738(DEL)2002 ASSESSMENT YEARS: 1982-83 & 1983-84 M/S. PEAREY LAL & SONS(EP)LTD. JOINT COMMISSION ER OF IT, 63, RAMA ROAD, (NAJAFGARH ROAD), V. SPL. RANGE , ROHTAK. NEW DELHI. ITA NOS. 3707 & 3708(DEL)02 ASSESSMENT YEARS: 1982-83 & 1983-84 DY.COMMISSIONER OF M/S. PEAREY LAL &SONS (EP)LTD. INCOME TAX, CIRCLE, ROHTAK. V. 63, RAMA ROAD, (NAJ AFGARH ROAD), NEW DELHI. (APPELLANT) (RESPONDENT) ASSESSEE BY: SHRI SATYAN SETHI, ADVOCATE DEPARTMENT BY: MRS. ANUS HA KHURANA, SR. DR ORDER PER A.D. JAIN, J.M. THESE ARE CROSS APPEALS FOR ASSESSMENT YEARS 1982-8 3 AND 1983- 84 AGAINST THE ORDERS DATED 1.7.2002, PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS), ROHTAK. ITA NOS. 3737, 3738,3707&3708 2 2. THE FACTS ARE THAT THE ASSESSEE IS A DEALER OF A SHOK LEYLAND. DURING THE YEARS 1980 TO 1987 DUE TO DIFFERENCE IN DEMAND AND SUPPLY, THE VEHICLES OF ASHOK LEYLAND WERE REQUIRED TO BE B OOKED. THE ASSESSEE USED TO RECEIVE BASIC DEPOSITS FROM CUSTOM ERS AGAINST BOOKING OF THE VEHICLES. ON THE DEPOSITS, THE CUSTOMERS WE RE PAID INTEREST @ 12%. THE DEPOSITS, IN TURN, USED TO BE KEPT WITH ASHOK LEYLAND. THE ASSESSEE USED TO GET INTEREST @ 13% THEREON. THE ASSESSEE WAS OF THE VIEW THAT THE DEPOSITS BELONGED TO ASHOK LEYLAND. THEREFORE, THE ASSESSEE NEITHER CLAIMED INTEREST PAID TO THE CUSTO MERS AS EXPENDITURE, NOR CREDITED THE INTEREST RECEIVED FROM ASHOK LEYLA ND, TO ITS PROFIT AND LOSS ACCOUNT. BOTH INTERESTS WERE SHOWN IN THE BA LANCE SHEET OF THE ASSESSEE. VIDE ORDER DATED 20.1.1984 PASSED U/S 1 43(3) OF THE I.T. ACT, THE ASSESSMENT FOR ASSESSMENT YEAR 1982-83 WAS COMP LETED. THE INCOME WAS ASSESSED AT ` 6,25,730/-, AS AGAINST THE RETURNED INCOME OF ` 5,58,450/- AND NO DISALLOWANCE OR ADDITION ON ACCO UNT OF INTEREST ON DEPOSITS FROM THE ASSESSEES CUSTOMERS WAS MADE. VIDE ORDER DATED 27.12.1984, THE REGULAR ASSESSMENT FOR ASSESSMENT Y EAR 1983-84 WAS COMPLETED. THEREIN, AGAINST THE RETURNED INCOME O F ` 5,07,520/-, THE TOTAL INCOME WAS ASSESSED AT ` 6,42,871/-. AGAIN, NO ADDITION OR DISALLOWANCE ON ACCOUNT OF INTEREST ON DEPOSITS FRO M CUSTOMERS, ITA NOS. 3737, 3738,3707&3708 3 REMOVED. WHILE COMPLETING THE ASSESSMENT FOR ASSE SSMENT YEAR 1984- 85, ADDITION OF DIFFERENTIAL INTEREST OF 1% WAS MAD E ON THE BASIS THAT THE SAME HAD NOT BEEN SHOWN AS THE ASSESSEES INCOME. THE ASSESSEE APPEALED BEFORE THE CIT(A), CONTENDING THAT THERE W AS A TIME GAP BETWEEN THE PASSING OF THE DEPOSITS TO ASHOK LEYLAN D; THAT DURATION FOR WHICH THE DEPOSITS REMAINED WITH ASHOK LEYLAND WAS MUCH LESS THAN THE PERIOD FOR WHICH THE DEPOSITS REMAINED WITH THE ASSESSEE; AND THAT IT WAS THEREFORE, THAT THE ASSESSEE HAD TO PAY HIGHER INTEREST ON DEPOSITS KEPT WITH IT, THAN THE INTEREST/SERVICE CHARGES REC EIVED FROM ASHOK LEYLAND. 3. THE LD. CIT(A), FOR ASSESSMENT YEAR 1984-85, DEL ETED THE ADDITION MADE BY THE AO. WHILE DOING SO, IT WAS O BSERVED THAT THE 1% EXCESS INTEREST WAS SHOWN, BUT THE OVER-ALL POSITIO N FOR INTEREST LIABILITY AND THE INTEREST RECEIVED HAD TO BE CONSIDERED; AND THAT THE ASSESSEE HAD KEPT PROPER BOOKS OF ACCOUNT, WHEREIN EACH AND EVER Y DEPOSIT WAS ACCOUNTED FOR, THE INTEREST LIABILITY SHOWN AND THE AMOUNT OF INTEREST FROM ASHOK LEYLAND DISCLOSED. 4. THE COMPLETED ASSESSMENTS FOR ASSESSMENT YEARS 1 982-83 AND 1983-84 WERE REOPENED. VIDE ASSESSMENT ORDERS DAT ED 28.7.89, ITA NOS. 3737, 3738,3707&3708 4 ADDITIONS OF ` 1,28,301/- AND ` 6,82,052/- ON ACCOUNT OF 1% DIFFERENTIAL INTEREST RECEIVED BY THE ASSESSEE FROM ASHOK LEYLAN D WERE MADE. 5. AGAINST THE LD. CIT(A)S ORDER FOR ASSESSMENT YE AR 1984-85, THE DEPARTMENT PREFERRED APPEAL BEFORE THE ITAT. IT WA S CONTENDED THAT THE RECEIPTS AND PAYMENTS OF INTEREST WERE TWO PART S OF THE ASSESSEES BUSINESS; THAT WHATEVER WAS RECEIVED BY THE ASSESSE E FROM ASHOK LEYLAND WAS ITS INCOME AND THE INTEREST PAID TO THE CUSTOMERS WAS ITS EXPENDITURE. 6. THE ITAT, VIDE ORDER DATED 25.6.90, FOR ASSESSME NT YEAR 1984-85, HELD THAT THE ASSESSEE WAS NOT AN AGENT OF ASHOK LEYLAND FOR RECEIVING DEPOSITS FROM THE CUSTOMERS AND THE A MOUNT DEPOSITED WITH ASHOK LEYLAND DID NOT BELONG TO THE CUSTOMERS; AND THAT THEREFORE, THE ENTIRE AMOUNT OF INTEREST RECEIVED B Y THE ASSESSEE WAS THE ASSESSEES INCOME AND THE INTEREST PAID BY THE ASSESSEE TO THE CUSTOMERS WAS ITS EXPENDITURE. THE TRIBUNAL DIRECT ED THE ISSUE TO BE RE-EXAMINED BY THE AO IN THE LIGHT OF THE SAID OBSE RVATIONS. 7. VIDE ORDER DATED 28.5.97, FOR ASSESSMENT YEARS 1 982-83 AND 1983-84, THE TRIBUNAL DIRECTED THE AO TO COMPUTE TH E INCOME ON THE BASIS OF THE SAID ORDER DATED 25.6.90 PASSED BY THE TRIBUNAL FOR ASSESSMENT YEAR 1984-85. ITA NOS. 3737, 3738,3707&3708 5 8. GIVING EFFECT TO THE TRIBUNAL ORDER DATED 25.6.9 9 (SUPRA), THE AO MADE ADDITION IN ASSESSMENT YEARS 1982-83 AND 19 83-84. IN THE SAID ASSESSMENT YEARS, THE INTEREST INCOME WAS MORE THAN INTEREST EXPENDITURE. IN ASSESSMENT YEARS 1984-85 TO 1988- 89, HOWEVER, THE INTEREST EXPENDITURE WAS MORE THAN THE INTEREST INC OME AND ACCORDINGLY, FOR THESE YEARS, REFUND WAS ISSUED TO THE ASSESSEE. 9. FOR ASSESSMENT YEARS 1982-83 AND 1983-84, ADDITI ONS OF ` 2,17,935/- AND ` 1,36,010/-, WERE MADE. 10. VIDE ORDER DATED 21.8.2000, THE AO LEVIED PENAL TY @ 200%, U/S 271(1)(C) OF THE INCOME TAX ACT. 11. BY VIRTUE OF THE IMPUGNED ORDERS, THE LD. CIT(A ), WHILE UPHOLDING THE LEVY OF PENALTY, REDUCED THE RATE THE REOF TO 100%. 12. THE QUESTION BEFORE US IS AS TO WHETHER, AS PER THE DEPARTMENT, THE LD. CIT(A) HAS ERRED IN REDUCING TH E RATE OF PENALTY TO 100% OF THE TAX SOUGHT TO BE EVADED OR AS TO WH ETHER, ACCORDING TO THE ASSESSEE, THE LEARNED CIT(A) HAS NOT ERRED I N NOT DELETING THE PENALTY IN TOTO. 13. CHALLENGING THE IMPUGNED ORDERS, THE LEARNED CO UNSEL FOR THE ASSESSEE HAS CONTENDED THAT THOUGH THE PENALTY PROC EEDINGS WERE INITIATED ON THE PRESUMPTION THAT THE 1% DIFFERENTI AL INTEREST WAS THE ITA NOS. 3737, 3738,3707&3708 6 ASSESSEES INCOME, WHICH WAS NOT DISCLOSED BY THE A SSESSEE, YEAR AFTER AFTER, IN ALL YEARS SUBSEQUENT TO ASSESSMENT YEARS 1982-83 AND 1983-84, SINCE THE EXPENDITURE WAS MORE THAN INCOME , THE POSITION WAS QUITE THE OPPOSITE; THAT BESIDES, THE FINDING O F THE AO THAT THE 1% DIFFERENTIAL INCOME WAS NOT DISCLOSED BY THE AS SESSEE, WAS REVERSED BY THE CIT(A), DELETING THE ADDITION AND H OLDING THAT PROPER BOOKS WERE INDEED MAINTAINED BY THE ASSESSEE ; THAT THE INTEREST RECEIVED FROM ASHOK LEYLAND WAS HELD TO BE THE INCOME OF THE ASSESSEE AND THE INTEREST PAID BY THE ASSESSEE TO THE CUSTOMERS WAS HELD AS ITS EXPENDITURE; THAT THIS WAS BECAUSE THE TRIBUNAL HAD HELD THAT THE ASSESSEE WAS NOT THE AGENT OF ASHOK L EYLAND; THAT THE ORDER OF THE LD. CIT(A) WAS, NO DOUBT, SET ASIDE, H OWEVER, IT WAS SO DONE FOR ENTIRELY DIFFERENT REASONS; THAT RATHER, T HE TRIBUNAL HAD OBSERVED THAT THE PERIOD FOR WHICH THE ASSESSEE HAD TO PAY INTEREST TO A CUSTOMER MIGHT BE MORE OR LESS THAN THE PERIOD FO R WHICH THE CORRESPONDING DEPOSITS REMAINED WITH ASHOK LEYLAND; THAT THE ADDITION IN TWO YEARS AND SUBSEQUENT REFUND IN LATE R FIVE YEARS CAME ABOUT DUE TO THIS CONCLUSION OF THE TRIBUNAL; THAT THERE WAS AN EXCESS OVER EXPENDITURE OF ` 1,18,929/- OVER THE PERIOD FROM 1982 TO 1988; THAT ALL FACTS CONSIDERED, IT WAS NOT A CASE OF CON CEALMENT OF INCOME ITA NOS. 3737, 3738,3707&3708 7 AND/OR FURNISHING OF INACCURATE PARTICULARS OF INCO ME; THAT RATHER, IT WAS A CASE OF ERROR OF JUDGMENT ON BEHALF OF THE AS SESSEE; THAT EVEN THE LD. CIT(A) HAD OBSERVED THAT THERE WAS SOME CON FUSION WITH REGARD TO THE SYSTEM AND METHOD OF ACCOUNTING FOLLO WED AND THE ADJUSTMENT ENTRIES MADE BY THE ASSESSEE; THAT THE S AID ADJUSTMENTS WERE REQUIRED SINCE FIRSTLY, DUE TO THE DURATION OF DEPOSITS, FOR WHICH, INTEREST WAS PAID TO THE CUSTOMERS AND THE D EFAULT FOR WHICH THE INTEREST WAS RECEIVED BY THE ASSESSEE FROM ASHO K LEYLAND AND SECONDLY, DUE TO ADJUSTMENT ON ACCOUNT OF DIFFERENT ACCOUNTING YEARS, AS ASHOK LEYLAND WAS FOLLOWING THE CALENDAR YEAR AND THE ACCOUNTING YEAR OF THE ASSESSEE WAS FROM NOVEMBER T O OCTOBER; THAT THE ASSESSEE BEING AN AUTHORIZED DEALER OF ASHOK LE YLAND, IT HARBOURED A BONA FIDE THAT THE DEPOSITS RECEIVED BE LONGED TO ASHOK LEYLAND AND THE INTEREST DID NOT REPRESENT ITS INCO ME; THAT UNDENIABLY, COMPLETE CUSTOMER-WISE DETAILS WERE MAI NTAINED BY THE ASSESSEE; THAT THE STAND TAKEN BY THE ASSESSEE BEIN G BONA FIDE STAND PROVED BY THE FACTUM OF COMPLETE DISCLOSURE BY THE ASSESSEE; AND THAT AS SUCH, NO PENALTY WAS LEVIABLE. 14. THE LEARNED DR, ON THE OTHER HAND, HAS SUBMITTE D THAT THE LD. CIT(A) HAS CLEARLY ERRED IN REDUCING THE PENALTY TO 100% OF THE TAX ITA NOS. 3737, 3738,3707&3708 8 SOUGHT TO BE EVADED, FROM THE PENALTY CORRECTLY LEV IED BY THE AO @ 200% OF THE TAX SOUGHT TO BE EVADED; THAT SINCE THE LD. CIT(A) HAD EVIDENTLY COME TO THE CONCLUSION THAT THE CORRECT I NCOME HAD NOT BEEN OFFERED FOR TAXATION BY THE ASSESSEE AND THE A SSESSEE HAD SUPPRESSED ITS INCOME, THERE WAS NO OCCASION FOR TH E LD. CIT(A) TO STILL REDUCE THE PENALTY; THAT WHILE SETTING ASIDE THE MATTER, THE TRIBUNAL ISSUED A DIRECTION TO TREAT THE INTEREST I NCOME RECEIVED BY THE ASSESSEE FROM ASHOK LEYLAND AS THE INCOME OF TH E ASSESSEE AND THE INTEREST PAID TO CUSTOMERS, AS THE ASSESSEES E XPENSES, DEPENDING UPON THE SYSTEM OF ACCOUNTANCY FOLLOWED; THAT THERE FORE, EVEN THE TRIBUNAL WAS OF THE OPINION THAT THE INTEREST @ 13% REPRESENTED THE INCOME OF THE ASSESSEE; THAT HOWEVER, THE ASSESSEE HAD NOT SHOWN THIS AMOUNT AS ITS INCOME EITHER IN ITS BOOKS OF AC COUNT, OR IN ITS RETURN OF INCOME; THAT AS SUCH, THERE WAS A COMPLET E CONCEALMENT OF BUSINESS ON THE PART OF THE ASSESSEE, SINCE IT FAIL ED TO DISCLOSE THE DIFFERENCE OF 1% BETWEEN THE INTEREST RECEIVED BY T HE ASSESSEE FROM ASHOK LEYLAND AND THE INTEREST PAID BY IT TO THE IN TENDING PURCHASERS; THAT REMARKABLY, THE ASSESSEE ITSELF AD MITTED THIS FACT IN REPLY TO THE SHOW CAUSE NOTICE ISSUED IN THE PENALT Y PROCEEDINGS, STATING THAT NEITHER THE INTEREST RECEIVED FROM ASH OK LEYLAND WAS ITA NOS. 3737, 3738,3707&3708 9 ROUTED THROUGH THE PROFIT AND LOSS ACCOUNT, NOR THE INTEREST PAID TO THE CUSTOMERS WAS CLAIMED BY THE ASSESSEE AS EXPEND ITURE; THAT IN THESE FACTS, THE AO WAS PERFECTLY JUSTIFIED IN LEVY ING THE PENALTY IN QUESTION; AND THAT THEREFORE, THE ORDERS OF LD. CIT (A) BE CANCELLED AND THOSE PASSED BY THE AO BE MAINTAINED. 15. WE HAVE HEARD THE PARTIES AND HAVE PERUSED THE MATERIAL ON RECORD. THE ORIGINAL ASSESSMENTS IN THE CONCERNED TWO YEARS WERE COMPLETED U/S 143(3) OF THE I.T. ACT. THE COMPLET ED ASSESSMENTS WERE REOPENED AND COMPLETED SUBSEQUENTLY. THE ASS ESSEE, DEALER OF ASHOK LEYLAND VEHICLES, RECEIVED DEPOSITS FROM THE CUSTOMERS. THE AMOUNTS RECEIVED WERE DEPOSITED WITH ASHOK LEYLAND, WHO ALLOWED INTEREST THEREON. THE ASSESSEE MAINTAINS THAT THI S INTEREST WAS PASSED ON TO THE CUSTOMERS AND AS SUCH, IT DID NOT CONSTITUTE THE ASSESSEES INCOME. THE ADDITIONS MADE BY THE AO W ERE CARRIED UP TO THE TRIBUNAL. THE TRIBUNAL, VIDE ORDER DATED 28 .5.97, FOR BOTH, ASSESSMENT YEAR 1982-83 AND ASSESSMENT YEAR 1983-84 , FOLLOWED ITS ORDER FOR ASSESSMENT YEAR 1984-85, WHEREIN, THE TRI BUNAL ACCEPTED THE DEPARTMENTS PLEA THAT THE RECEIPTS AND PAYMENT S OF INTEREST WERE TWO PARTS OF THE ASSESSEES BUSINESS AND THAT WHATEVER WAS RECEIVED FROM ASHOK LEYLAND WAS ITS INCOME AND THE INTEREST WHICH ITA NOS. 3737, 3738,3707&3708 10 WAS PAID TO THE CUSTOMERS, WAS ITS EXPENDITURE. S ETTING ASIDE THE ORDER OF THE LD. CIT(A), THE TRIBUNAL HAD HELD, FOR ASSESSMENT YEAR 1984-85, THAT THE ASSESSEE WAS NOT AN AGENT OF ASHO K LEYLAND FOR RECEIVING DEPOSITS FROM CUSTOMERS, NOR DID THE AMOU NT DEPOSITED WITH ASHOK LEYLAND BELONGED TO THE CUSTOMERS. ON THIS BASIS, THE ENTIRE AMOUNT OF INTEREST RECEIVED BY THE ASSESSEE WAS HELD TO BE ITS INCOME AND THE INTEREST PAID BY IT TO THE CUSTOMERS WAS HELD TO BE ITS EXPENDITURE. FOR ASSESSMENT YEARS 1982-83 AND 198 3-84, THE TRIBUNAL DIRECTED TO COMPUTE THE INCOME ON THE BASI S OF ITS ORDER FOR ASSESSMENT YEAR 1984-85, PASSED ON 25.6.90. FOR AS SESSMENT YEARS 1982-83 AND 1983-84, THE INTEREST INCOME OF THE ASS ESSEE WAS MORE THAN ITS INTEREST EXPENDITURE. HOWEVER, FOR ASSES SMENT YEARS 1984- 85 TO 1988-89, THE POSITION BEING REVERSED, I.E., T HE INTEREST EXPENDITURE BEING MORE THAN THE INTEREST INCOME, RE FUND WAS ISSUED TO THE ASSESSEE. FOR ASSESSMENT YEARS 1982-83 AND 1983-84, ADDITIONS OF ` 2,17,935/- AND ` 1,36,010/-, RESPECTIVELY, WERE MADE. 16. IN THE PENALTY ORDERS, WHILE LEVYING PENALTIES AMOUNTING TO ` 2,90,296/- AND ` 1,81,232/-, RESPECTIVELY @ 200% OF THE TAX TO BE EVADED, THE AO OBSERVED THAT IN VIEW OF THE ORDER OF THE TRIBUNAL THE INTEREST PAID @ 13% DID REPRESENT THE INCOME OF THE ASSESSEE AND ITA NOS. 3737, 3738,3707&3708 11 THAT THE ASSESSEE HAVING FAILED TO SHOW THE AMOUNTS AS INCOME IN ITS BOOKS OF ACCOUNT, THERE WAS CONCEALMENT OF INCOME O N THE PART OF THE ASSESSEE. 17. BY VIRTUE OF THE IMPUGNED ORDERS, THE LD. CIT(A ) REDUCED THE RATE OF PENALTY TO 100% OF THE TAX SOUGHT TO BE EVA DED. THE QUESTION IS AS TO WHETHER THE LD. CIT(A) HAS BEEN CORRECT IN DOING SO. 18. NOW, IT IS SEEN THAT THE CONCLUSION OF THE AO T HAT 1% DIFFERENTIAL INCOME HAD NOT BEEN DISCLOSED BY THE A SSESSEE, WAS REVERSED BY THE CIT(A), HOLDING THAT PROPER BOOKS H AD INDEED BEEN MAINTAINED BY THE ASSESSEE. THE TRIBUNAL HAD HELD THE ASSESSEE NOT TO BE AN AGENT OF ASHOK LEYLAND. IT WAS THEREFORE, THAT THE INTEREST RECEIVED BY THE ASSESSEE FROM ASHOK LEYLAND WAS HEL D TO BE ITS INCOME AND THE INTEREST PAID BY THE ASSESSEE TO ITS CUSTOMERS, WAS CONCLUDED TO BE ITS EXPENDITURE. WHILE SETTING AS IDE THE ORDER OF THE LD. CIT(A), THE TRIBUNAL OBSERVED THAT THE PERIOD FOR WHICH THE ASSESSEE HAS TO PAY INTEREST TO A CUSTOMER MAY BE M ORE OR LESS THAN THE PERIOD FOR WHICH THE CORRESPONDING DEPOSITS REM AINED WITH ASHOK LEYLAND. IT WAS FOR THIS REASON THAT THE OR DER OF THE LD. CIT(A) WAS SET ASIDE. ITA NOS. 3737, 3738,3707&3708 12 19. THE STAND TAKEN BY THE ASSESSEE, TO THE EFFECT THAT RATHER THAN BEING A CASE OF CONCEALMENT OF INCOME, IT WAS A MAT TER OF ERROR OF JUDGMENT ON THE PART OF THE ASSESSEE, IS JUSTIFIED BECAUSE OF THE DURATION OF DEPOSITS FOR WHICH INTEREST WAS PAID TO THE CUSTOMERS BY THE ASSESSEE AND THE DURATION FOR WHICH THE INTERES T WAS RECEIVED BY THE ASSESSEE FROM ASHOK LEYLAND, WAS DIFFERENT. MO REOVER, IT ALSO REMAINS UNDISPUTED THAT THERE WAS A DIFFERENCE BETW EEN THE ACCOUNTING FOLLOWED BY THE ASSESSEE AND THAT PURSUE D BY ASHOK LEYLAND. WHEREAS THE ASSESSEE WAS ACCOUNTING DURIN G THE YEAR FROM NOVEMBER TO OCTOBER, THE CALENDAR YEAR WAS BEING FO LLOWED BY ASHOK LEYLAND. THE STATED BELIEF OF THE ASSESSEE THAT THE DEPOSITS RECEIVED BELONGED TO ASHOK LEYLAND AND THE INTEREST DID NOT, ACCORDINGLY, REPRESENT ITS INCOME, HAS NOT BEEN EST ABLISHED NOT TO BE A BONA FIDE BELIEF, IN THE FACE OF THE FACT THAT CO MPLETE CUSTOMER- WISE DETAILS WERE MAINTAINED BY THE ASSESSEE AND TH ESE DETAILS WERE FULLY DISCLOSED IN THEIR ENTIRETY BEFORE THE AO. THAT BEING THE STATE OF AFFAIRS, THE EXPLANATION OFFERED BY THE ASSESSEE HAS NOT BEEN FOUND TO BE FALSE AND IT IS NOT THAT THE ASSESSEE HAS NOT BEEN ABLE TO SUBSTANTIATE SUCH EXPLANATION. RATHER, THE SAID E XPLANATION IS FOUND ITA NOS. 3737, 3738,3707&3708 13 TO BE BONA FIDE. ALL THE FACTS RELATING THERETO A ND MATERIAL TO THE COMPUTATION OF THE TOTAL INCOME OF THE ASSESSEE WER E DULY DISCLOSED BY THE ASSESSEE. THEREFORE, EXPLANATION 1 TO SECT ION 271(1)(C) OF THE ACT IS NOT ATTRACTED. SO AS TO JUSTIFY THE LEV Y OF CONCEALMENT PENALTY, THERE MUST BE SOME MATERIAL OR CIRCUMSTANC ES LEADING TO THE REASONABLE CONCLUSION THAT THE AMOUNT DOES REPRESEN T THE ASSESSEES INCOME. IT IS NOT ENOUGH FOR THE PURPOSE OF CONCEA LMENT PENALTY THAT THE AMOUNT HAS BEEN ASSESSED AS INCOME. EXPLANATI ON 1 BELOW SECTION 271(1)(C) HAS NO BEARING AND DOES NOT MAKE THE ASSESSMENT ORDER CONCLUSIVE EVIDENCE THAT THE AMOUNT ASSESSED WAS, IN FACT, THE INCOME OF THE ASSESSEE. NO PENALTY CAN BE IMPOSED IF THE FACTS AND CIRCUMSTANCES ARE EQUALLY CONSISTENT WITH THE HYPO THESIS THAT THE AMOUNT DOES NOT REPRESENT CONCEALED INCOME AS WITH THE HYPOTHESIS THAT IT DOES. IF THE ASSESSEE GIVES AN EXPLANATION WHICH IS UNPROVED BUT NOT DISPROVED, OR, IN OTHER WORDS, WHICH IS ACC EPTED BUT CIRCUMSTANCES DO NOT LEAD TO THE REASONABLE AND POS ITIVE INFERENCE THAT THE CASE OF THE ASSESSEE IS FALSE, THE EXPLANA TION CANNOT HELP THE REVENUE BECAUSE THERE WILL BE NO MATERIAL TO SHOW, AS IN THE PRESENT CASE, THAT THE AMOUNT IN QUESTION WAS THE INCOME OF THE ASSESSEE. ITA NOS. 3737, 3738,3707&3708 14 FURTHER, ABSENCE OF PROOF ACCEPTABLE TO THE DEPARTM ENT CANNOT BE EQUATED WITH FRAUD OR WILLFUL DEFAULT. 20. REMARKABLY, EVEN THE LD. CIT(A), IN HIS ORDER F OR ASSESSMENT YEAR 1984-85, OBSERVED, INTER ALIA, THAT THERE WAS SOME CONFUSION IN THE ASSESSEES SYSTEM OF ACCOUNTING. HOWEVER, IT W AS NOWHERE OBSERVED THAT THERE HAD BEEN ANY CONCEALMENT OF INC OME AND/OR FURNISHING OF INACCURATE PARTICULARS OF INCOME ON B EHALF OF THE ASSESSEE. 21. IN ACIT V. AGRI GOLD FOODS & FARM PRODUCTS LTD ., 45 SOT 24(VISK.), WHERE THE ASSESSEE WAS IN THE BUSINESS O F SELLING FARM PLOTS AND THE AMOUNTS COLLECTED UNDER VARIOUS SCHEM ES TOWARDS SALE OF PLOTS WERE SHOWN AS ADVANCE IN THE BALANCE SHEET , BUT EXPENDITURE WAS DEBITED TO THE PROFIT AND LOSS ACCOUNT AND ADDI TION WAS MADE THAT SUCH A METHOD WAS AGAINST THE MATCHING COST C ONCEPT, THE CONCEALMENT PENALTY WAS DELETED WITH THE FACTS THAT THE ASSESSEE HAD DISCLOSED ALL FACTS AND HAD RECORDED THAT ALL RELEV ANT RECEIPTS AND EXPENDITURE IN ITS BOOKS OF ACCOUNT AND THAT BY FOL LOWING A PARTICULAR METHOD OF ACCOUNTING, THE ASSESSEE COULD NOT BE SAI D TO HAVE FURNISHED INACCURATE PARTICULARS OF ITS INCOME. ITA NOS. 3737, 3738,3707&3708 15 22. IN CIT V. MUSHASHI AUTOPARTS INDIA P.LTD., 33 0 ITR 545(DEL), THE ASSESSEE DID NOT CREDIT INTEREST INCO ME TO ITS PROFIT AND LOSS ACCOUNT, BUT ADJUSTED THE SAME AGAINST PREOPE RATIVE EXPENSES, SHOWN IN THE BALANCE SHEET. THE ASSESSEE WAS HELD NEITHER TO HAVE CONCEALED ITS INCOME NOR TO HAVE FURNISHED INACCURA TE PARTICULARS OF ITS INCOME. 23. IN CIT V. J.H. PARABIA (TRANSPORT)P. LTD., 28 4 ITR 361 (GUJ), THE ASSESSEE WAS ENGAGED IN MATERIAL HANDLIN G. IT DID NOT CREDIT THE WORK IN PROGRESS IN THE PROFIT AND LOSS ACCOUNT. CERTAIN INCOME WHICH WAS NOT TAXABLE, WAS ALSO NOT CREDITED TO THE PROFIT AND LOSS ACCOUNT. IT WAS HELD THAT NO PENALTY WAS LEVIABLE. 24. IN VIEW OF THE ABOVE DISCUSSION, THE GRIEVANCE OF THE ASSESSEE IS FOUND TO BE JUSTIFIED AND CONVERSELY, THE GRIEVA NCE OF THE DEPARTMENT IS FOUND TO BE SHORN OF MERIT. AS DISC USSED, NO PENALTY IS LEVIABLE. 25. THEREFORE, THE ORDERS PASSED BY THE LD. CIT(A) ARE CANCELLED AND THE PENALTY IMPOSED FOR BOTH THE YEARS IS DELET ED IN TOTO. ITA NOS. 3737, 3738,3707&3708 16 26. IN THE RESULT, BOTH THE APPEALS FILED BY THE AS SESSEE ARE ALLOWED AND BOTH THE APPEALS FILED BY THE DEPARTMENT ARE DI SMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 8.07.2011. SD/- SD/- (G.E. VEERABHADRAPPA) (A.D. JAIN) VICE PRESIDENT JUDICIAL MEMBER DATED: 8.07.2011 *RM COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR TRUE COPY BY ORDER DEPUTY REGISTRAR