M/s. Dev Dharam Textiles, Surat V. The Income tax Officer, Ward-9(1), Surat

ITA 38/AHD/2009

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 6288 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 5 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-06-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 06-05-2011
• Assessment Year: 2003-2004
• Appeal Filed On: 02-01-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: G D BALVA
• Assessee Lawyers: J P SHAH
• Keywords: Unexplained cash credit; Capital receipt
• Section: 68; 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH : AH MEDABAD ( BEFORE HONBLE SHRI T.K.SHARMA, J.M. & HONBLE SHRI A.N.PAHUJA, A.M.) M/S.DEV DHARAM TEXTILES SHED NO.11, 12, 13 GOPAL ESTATE LAXMI TILES COMPOUND A.K. ROAD, SURAT VS. ITO, WARD-9(1), SURAT PAN/GIR NO. : AACFD 7406 K ( A PPELLANT ) .. ( RESPONDENT ) APPELLANT BY : SHRI J.P.SHAH, A.R. RESPONDENT BY: SHRI G.D. BALVA, D.R. O R D E R PER SHRI T.K.SHARMA, JUDICIAL MEMBER : THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LEARNED CIT(APPEALS)-V SURAT DATED 11/10/2008 PASSED FOR A SSESSMENT YEAR 2003-04 CONFIRMING THE PENALTY OF RS.4,49,893/- LEVIED BY T HE ASSESSING OFFICER U/S.271/(1)(C) OF THE I.T.ACT, 1961. 2. BRIEFLY STATED, THE FACTS ARE THAT THE ASSESSEE -FIRM WAS ENGAGED IN THE BUSINESS OF MANUFACTURING AND JOB WORK OF CLOTH. FOR THE AS SESSMENT YEAR UNDER APPEAL, IT FILED THE RETURN OF INCOME ON 27.11.2003 SHOWING TOTAL I NCOME AT RS.NIL AND CLAIMING CARRY FORWARD LOSS OF RS.51,21,082/-. THE ASSESSIN G OFFICER FRAMED THE ASSESSMENT U/S.143(3) R.W.S. 145(3) OF THE I.T.ACT ON 30/03/20 06 WHEREIN HE REJECTED THE BOOKS OF ACCOUNT AND MADE THE FOLLOWING THREE ADDITIONS:- ITA NO.38/AHD/2009 ASSESSMENT YEAR : 2003-04 2 ITA NO.38/AHD./2009 (1) UNACCOUNTED PRODUCTION OF CLOTH RS.9,66,680/- (2) OUT OF MANUFACTURING EXPENSES RS.1,45,520/- (3) UNEXPLAINED SQUARED UP DEPOSITS RS.1,12,000/- 2.1. SUBSEQUENTLY, THE ASSESSING OFFICER LEVIED THE PENALTY U/S.271(1)(C) OF THE I.T.ACT AMOUNTING TO RS.4,49,893/- IN RESPECT OF A LL THE AFORESAID THREE ADDITIONS/DISALLOWANCES. 3. ON FURTHER APPEAL BY THE ASSESSEE IN THE IMPUGNE D ORDER, THE LEARNED CIT(APPEALS) CONFIRMED THE PENALTY LEVIED BY THE AS SESSING OFFICER FOLLOWING THE DECISION OF UNION OF INDIA & ORS. VS. DHARMENDRA TE XTILE PROCESSORS & OTHERS REPORTED AT [2008] 306 ITR 277 (SC). AGGRIEVED WIT H THE ORDER OF THE LEARNED CIT(APPEALS), ASSESSEE IS IN APPEAL BEFORE THE TRIB UNAL. 4. AT THE TIME OF HEARING BEFORE US, ON BEHALF OF A SSESSEE, SHRI J.P.SHAH, LEARNED AR OF THE ASSESSEE APPEARED AND POINTED OUT THAT A DDITION OF RS.9,66,680/- BEING THE PRESUMED SALE CONSIDERATION ON PRESUMED UNACCOUNTED PRODUCTION OF GREY CLOTH FROM THE TOTAL YIELD CONSUMED IS DELETED BY THE ITAT D BENCH AHMEDABAD IN ASSESSEES OWN CASE BEARING ITA NO.716/AHD/2007 FOR ASSESSME NT YEAR 2003-04, VIDE ORDER DATED 29/04/2009. THEREFORE, IN RESPECT OF THIS AD DITION, PENALTY LEVIED BE CANCELLED. 4.1. WITH REGARD TO PENALTY LEVIED IN RESPECT OF DI SALLOWANCE TOWARDS OUT OF MANUFACTURING EXPENSES A SUM OF RS.1,45,520/-, THE LEARNED AUTHORISED REPRESENTATIVE OF THE ASSESSEE POINTED OUT THAT THI S ADHOC ADDITION WAS MADE ON THE GROUND THAT SUPPORTING VOUCHERS OF THE ASSESSEE WER E DEFECTIVE. FOR ROUTINE DISALLOWANCE, PENALTY U/S.271(1)(C) OF THE I.T.ACT IS NOT LEVIABLE AS HELD BY THE HON'BLE SUPREME COURT IN THE CASE OF RELIANCE PETR O PRODUCTS (P) LTD. REPORTED AT (2010) 322 ITR 158 (SC). 3 ITA NO.38/AHD./2009 4.2. IN RESPECT OF CONFIRMATION OF CASH CREDIT U/S .68 OF THE I.T.ACT AMOUNTING TO RS.1,12,000/-, THE LD. COUNSEL OF THE ASSESSEE PRO DUCED THE CONFIRMATION ACCOUNT OF SIX CREDITORS. THE LD. COUNSEL OF THE ASSESSEE EXPL AINED THAT LOAN FROM ALL THESE SIX CREDITORS WAS RECEIVED IN CASH AND REFUNDED IN CASH DURING THE ACCOUNTING YEAR ITSELF. CONFIRMATION CONTAINED THE NAME OF THE CREDITORS V ILLAGE, ADDRESS ETC. THE ASSESSING OFFICER COULD HAVE MADE NECESSARY ENQUIRY AND SINCE THIS WAS NOT DONE PENALTY U/S.271(1)(C) IS NOT LEVIABLE AS PER RATIO LAID DO WN IN THE JUDGMENT OF HON'BLE GUJARAT HIGH COURT IN THE CASE OF NATIONAL TEXTILES VS. CIT REPORTED AT [2001]249 ITR 125 (GUJ.). THE LD. COUNSEL OF THE ASSESSEE ALSO TOOK U S THROUGH THE REPLY DATED 26.03.2008, FILED BEFORE THE AO AND POINTED OUT THA T THE FACTS OF THE DECISION OF THE HONBLE APEX COURT IN THE CASE OF SUMATI DAYAL VS- CIT REPORTED IN 214 ITR 801, RELIED ON BY THE AO ARE VERY MUCH DIFFERENT FROM TH E FACTS OF THE CASE OF THE PRESENT ASSESSEE. IN THE SAID CASE, PLAINTIFF HAS CREDITED THE SALE PROCEEDS OF LOTTERY TICKET TO HER CAPITAL ACCOUNT, BEING CAPITAL RECEIPTS. THE AS SESSEE FAILED TO EXPLAIN PURCHASE OF THE TICKETS AND THEREFORE, SALE CONSIDERATION CREDI TED TO HER CAPITAL ACCOUNT WERE ADDED AS UNEXPLAINED RECEIPT. IN THE INSTANT CASE, THE AS SESSEE HAS EXPLAINED THE DEPOSIT AMOUNT ALONG WITH THE CONFIRMATION FROM THE DEPOSIT ORS. THE ADDITION IS CONFIRMED ON TWO COUNTS WHICH DO NOT AMOUNT TO FURNISHING OF INA CCURATE PARTICULARS OF INCOME. IF AT ALL, THE AO WAS HAVING ANY DOUBT ABOUT THE CREDI TWORTHINESS OF DEPOSITORS, HE COULD HAVE SUMMONED THEM AND ENQUIRED ABOUT THE CREDITWOR THINESS. THE ASSESSEE HAS DISCHARGED THE ONUS OF PROVING BY GIVING CONFIRMATI ON FROM THE DEPOSITORS. THE RELIANCE WAS ALSO PLACED ON RECENTLY HELD DECISION OF THE ITAT, DELHI BENCH IN THE CASE OF ITO VS- RAVI KHURANA REPORTED IN 114 TTJ 5 61 (DEL), WHEREIN IT WAS HELD BY THE TRIBUNAL THAT AS REGARDS UNPROVED LOANS, THOUG H THE ASSESSEE DID NOT FILE ANY CONFIRMATION BEFORE THE AO, HE FILED CONFIRMATIONS BEFORE THE CIT(A) DURING THE COURSE OF PENALTY PROCEEDINGS. CIT(A) HAD CALLED FO R A REMAND REPORT FROM THE AO WHO HAS NOT REPORTED ANYTHING ADVERSE IN THE MATTER . THEREFORE, NO CASE IS MADE OUT FOR LEVY OF PENALTY. 4.3 IN THE PRESENT CASE, THE ASSESSEE HAS FILED CON FIRMATION FROM ALL THE DEPOSITORS. THE AO HAS NOT SHOWN ANY ADVERSE INFERENCE IN THE S QUARED-UP LOAN. THEREFORE, THE 4 ITA NO.38/AHD./2009 PENALTY UNDER SECTION 271(1)(C) IS NOT LEVIABLE. HE ACCORDINGLY CONTENDED THAT THE PENALTY LEVIED UNDER SECTION 271(1)(C) IN RESPECT O F CASH CREDIT AMOUNTING TO RS.1,12,000/- CONFIRMED BY THE LD. CIT(A) BE CANCEL LED. 5. ON THE OTHER HAND, SHRI G.D. BALVA, LD. DEPARTME NTAL REPRESENTATIVE APPEARED FOR THE REVENUE AND IN RESPECT OF DISALLOWANCE OF 1 0% OF THE MANUFACTURING EXPENSES AMOUNTING TO RS.1,45,520/- HE POINTED THAT IN THE Q UANTUM APPEAL, THE TRIBUNAL HAS CONFIRMED THE SAID DISALLOWANCE ON THE GROUND THAT MOST OF THE VOUCHERS DID NOT CONTAIN THE NAMES OF THE PERSONS TO WHOM THE PAYMEN TS WERE MADE. IN SOME VOUCHERS, THE DATES WERE RECTIFIED OR AMENDED. THE REFORE, THE VOUCHERS REMAIN UNVERIFIABLE, UNRELIABLE AND DEFECTIVE. ON THESE F ACTS, THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF RELIANCE PETRO PRODUCT S PVT. LTD. ( SUPRA ), RELIED ON BY THE LD. COUNSEL OF THE ASSESSEE, IS NOT APPLICABLE. THEREFORE, THE PENALTY LEVIED IN RESPECT OF THIS DISALLOWANCE BE CONFIRMED. WITH REG ARD TO LEVY OF PENALTY UNDER SECTION 271(1)(C) IN RESPECT OF ADDITION OF RS.1,12 ,000/- MADE BY THE AO UNDER SECTION 68 OF THE I.T. ACT, 1961, LD. D.R. DREW OUR ATTENTION TO PAGE NO.13 OF THE ORDER OF THE ITAT, D BENCH IN ITA NO.716/AHD/2007(SUPRA ), IN QUANTUM APPEAL, WHICH READS AS UNDER:- 13. WE HAVE HEARD BOTH THE PARTIES AND PERUSED T HE RECORD. DURING THE ASSESSMENT, THE ASSESSING OFFICER FOUND THAT THE AS SESSEE FIRM HAD CLAIMED SQUARED UP ACCOUNTS AMOUNTING TO RS.1,12,000 IN RES PECT OF FIVE PERSONS. THE ASSESSING OFFICER ASKED THE ASSESSEE TO PROVE THE I DENTITY AND CREDITWORTHINESS OF THE DEPOSITORS. THE ASSESSING OFFICER CLEARLY O BSERVED IN HIS ORDER THAT THE ASSESSEE HAS NEITHER PRODUCED ALL THESE CLAIMED SQU ARED UP DEPOSITORS PERSONALLY NOR FILED ANY EVIDENCE WHICH PROVED THE IDENTITY AND CREDITWORTHINESS OF CLAIMED DEPOSITORS IN SUPPORT O F GENUINENESS OF TRANSACTIONS CLAIMED IN THEIR NAMES TILL THE DATE O F PASSING OF ORDER. THE LEARNED AR OF THE ASSESSEE COULD NOT PRODUCE ANY EV IDENCE CONTRARY TO THE OBSERVATION OF THE LEARNED ASSESSING OFFICER. BEFO RE THE LEARNED CIT(A) AS WELL AS BEFORE THE TRIBUNAL, NO SUCH EVIDENCE WERE PRODUCED. THEREFORE, SINCE THE ASSESSEE FAILED TO PROVE THE GENUINENESS OF THE TRANSACTIONS AND ALSO THE IDENTITY AND CREDITWORTHINESS OF THE DEPOSITORS, WE UPHOLD THE IMPUGNED ORDER OF THE LEARNED CIT(A) CONFIRMING THE IMPUGNED ADDIT ION OF RS.1,12,000 MADE BY THE ASSESSING OFFICER AND DISMISS THE GROUND NO. (IV) OF THE ASSESSEE. 5 ITA NO.38/AHD./2009 5.1 FROM THE ABOVE, THE LD. D.R. POINTED OUT THAT N EITHER IN QUANTUM PROCEEDINGS NOR IN REPLY TO PENALTY NOTICE UNDER SECTION 271(1) (C), THE ASSESSEE NEITHER PROVED THE IDENTITY, CREDITWORTHINESS OR GENUINENESS OF THE TR ANSACTION. THE AO ASKED THE ASSESSEE TO PRODUCE ALL THE SIX DEPOSITORS PERSONAL LY. ADMITTEDLY, THESE WERE NEVER PRODUCED EITHER DURING THE COURSE OF ASSESSMENT PRO CEEDINGS OR PENALTY PROCEEDINGS. UNDER THESE CIRCUMSTANCES, IT CANNOT BE SAID THAT T HE ASSESSEE HAS DISCHARGED THE PRIMARY ONUS. THE LD. D.R. FURTHER POINTED OUT THAT DEPOSITS FROM ALL THE ALLEGED CREDITORS WERE ACCEPTED IN CASH, REFUNDED IN CASH, NONE OF THEM IS TAX-PAYER. NO PROOF OF IDENTITY I.E. VOTER CARD, PAN OR RATION CARD WAS PRODUCED. NO AFFIDAVIT WAS PLACED ON RECORD EITHER DURING THE COURSE OF ASSESSMENT PR OCEEDINGS OR PENALTY PROCEEDINGS. 5.2 THE LD. D.R. FURTHER DREW OUR ATTENTION TO THE REPLY OF PENALTY PROCEEDINGS FILED BEFORE THE AO AND POINTED OUT THAT IN THIS REPLY, T HE ASSESSEE RELIED ON VARIOUS DECISIONS WITHOUT POINTING OUT HOW THE FACTS OF THO SE DECISIONS ARE APPLICABLE TO THE FACTS OF THE ASSESSEES CASE. IN THE CASE OF NATION AL TEXTILES CORPORATION REPORTED IN 249 ITR 125, HE POINTED OUT THAT THIS JUDGMENT IS N OT APPLICABLE TO THE FACTS OF ASSESSEES CASE. IN THAT CASE, THE AO LEVIED THE PE NALTY UNDER SECTION 271(1)(C) IN RESPECT OF RS.80,000/- ON ACCOUNT OF UNEXPLAINED CA SH CREDIT IN THE NAME OF ONE MERCHANT BROTHERS AMOUNTING TO RS.90,000/- WAS SQU ARED UP ACCOUNT (ACTUAL AMOUNT SQUARED UP WAS RS.1,40,000/-) AND THE AO ACCEPTED T HE ASSESSEES EXPLANATION REGARDING TOTAL AMOUNT OF RS.50,000/- ON THIS BASIS , THE LD. CIT(A) HELD THAT ALL LOANS ARE ACTUALLY THE ASSESSEES UNDISCLOSED PROFIT AND HE DIRECTED THE AO TO WORK-OUT CASH CREDIT. IN RESPECT OF LOAN, THE AO ARRIVED AT A FIG URE OF RS.1,39,100/- INSTEAD OF RS.1,70,000/-. IN QUANTUM APPEAL, THE TRIBUNAL HELD THAT THE AO HAS NOT FULLY INVESTIGATED AND THERE WAS NO JUSTIFICATION FOR ADD ING LOAN OF RS.80,000/-. THE ADDITION OF ONLY RS.90,000/- AS UNEXPLAINED CASH CR EDIT WAS CONFIRMED. THUS, IN THAT CASE, THE IDENTITY WAS PROVED, PARTIAL CASH CREDIT WAS ACCEPTED AND IDENTITY OF THE CREDITOR IS PROVED WHEREAS IN THE ASSESSEES CASE, NEITHER THE IDENTITY, NOR GENUINENESS OF THE TRANSACTION IS PROVED. THEREFORE, THE RATIO OF THIS DECISION IS NOT APPLICABLE TO THE FACTS OF THE ASSESSEES CASE. 6 ITA NO.38/AHD./2009 6. HAVING HEARD BOTH THE SIDES, WE HAVE CAREFULLY G ONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. IT IS PERTINENT TO NOTE THAT THE ADDITION OF RS.9,66,680/- HAS BEEN DELETED BY THE ITAT VIDE ORDER DATED 29/04/2009 (SU PRA). WHEN ADDITION, ON WHICH PENALTY U/S.271(1)(C) OF THE I.T.ACT IS LEVIED, ITS ELF IS DELETED, IN QUANTUM APPEAL, THERE REMAINS NOTHING TO LEVY THE PENALTY U/S.271(1 )(C). THEREFORE, THE PENALTY LEVIED U/S.271(1)(C) IN RESPECT OF ADDITION OF RS.9,66,680 /- WILL NOT SURVIVE AND IS HEREBY DIRECTED TO BE DELETED. 6.1. WITH REGARD TO LEVY OF PENALTY U/S.271(1)(C) OF THE I.T.ACT IN RESPECT OF AD HOC DISALLOWANCE OF 10% OF MANUFACTURING EXPENSES AMOUN TING TO RS.1,45,520/-, WE ARE OF THE VIEW THAT ON THIS DISALLOWANCE ALSO, PENALTY IS NOT LEVIABLE. FOR THIS, RELIANCE CAN BE PLACED ON THE DECISION OF THE HON'BLE SUPREM E COURT IN THE CASE OF RELIANCE PETRO PRODUCTS (P) LTD.(SUPRA). THE ASSESSING OFFI CER IS ACCORDINGLY DIRECTED NOT TO LEVY THE PENALTY IN RESPECT OF THIS ADDITION/DISALL OWANCE OF RS.1,45,520/-. 6.2. THE FACTS RELATING TO PENALTY LEVIED BY THE AS SESSING OFFICER IN RESPECT OF DISALLOWANCE OF ADDITION OF RS.1,12,000/- MADE U/S. 68 OF THE I.T.ACT ARE THAT THE ASSESSEE RECEIVED CASH LOAN OF RS.1,12,000/- FROM S IX INDIVIDUALS. THE ASSESSING OFFICER VIDE ORDER PARE-7 OF QUESTIONNAIRE DATED 15 /07/2005 ASKED THE ASSESSEE TO FILE CONFIRMATION OF EACH DEPOSIT PARTIES INCLUDING SQUA RED UP AND ALSO REQUESTED TO PROVIDE NAME, ADDRESS, PAN, A COPY OF LEDGE ACCOUNT APPEARING IN THE BOOKS OF ACCOUNT. THESE WERE NOT FURNISHED. THE ASSESSING OFFICER AGAIN SPECIFICALLY REQUESTED THE ASSESSEE TO PROVE IDENTITY AND CREDIT WORTHINESS OF THE CLAIMED DEPOSITORS AND ALSO REQUESTED TO PROVE THE GENUINENESS OF TRAN SACTION CLAIMED IN THEIR NAMES, NO EVIDENCE IN SUPPORT OF IDENTITY, CREDITWORTHINESS A S WELL AS GENUINENESS OF THE TRANSACTION WAS PRODUCED. THE ASSESSING OFFICER ON CE AGAIN RAISED THIS ISSUE VIDE PARA-3 OF LETTER DATED 16/01/2006 AND REQUESTED THE ASSESSEE TO PRODUCE ALL THIS CLAIMED DEPOSITORS PERSONALLY FOR VERIFICATION OF C ORRECTNESS OF CLAIM. THE RELEVANT PARA OF THE SAID LETTER IS REPRODUCED HEREINBELOW: 7 ITA NO.38/AHD./2009 3. IT IS NOTICED THAT YOU HAVE CLAIMED TO BE ACC EPTED SQUARED UP CASH DEPOSITS DURING THE YEAR UNDER CONSIDERATION, HOWEVER, NOT R EPORTED WHILE REPLYING RELEVANT QUESTION. SR.NO. DATE AMOUNT (RS.) NAME OF THE PERSON 1. 5.4.02 18,000 MANJIBHAI GANESHBHAI 2. 8.4.02 19,000 DEVRAJBHAI RAJUBHAI PATEL 3. 10.5.02 19,000 GAGJIBHAI JIVABHAI PATEL 4. 5.6.02 19,000 BABUBHAI RAJUBHAI 5. 7.6.02 19,500 GANESHBHAI MALODBHAI 6. 5.7.02 18,000 HIRALAL KUVERJIBHAI IN VIEW OF THE ABOVE, YOU ARE REQUESTED TO PRODUCE ABOVE CLAIMED DEPOSITORS PERSONALLY BEFORE THE UNDERSIGNED FOR VERIFICATION OF IDENTITY, CREDITWORTHINESS AS WELL AS THE GENUINENESS OF THE TRANSACTION. 6.3. BEFORE THE ASSESSING OFFICER, THE ASSESSEE NEI THER PRODUCED ALL THE AFORESAID CLAIMED SQUARE UP DEPOSITORS NOR FILED ANY EVIDENCE WHICH PROVED THE IDENTITY AND CREDITWORTHINESS OF THE CLAIMED DEPOSITORS IN SUPPO RT OF GENUINENESS OF THE TRANSACTION TILL THE ASSESSING OFFICER PASSED THE ORDER ON 30/0 3/2006. THE ASSESSING OFFICER IN PARA-20 ON PAGE-26 CONCLUDED THAT THE ASSESSEE FAIL ED TO DISCHARGE ITS TO PROVE THE IDENTITY, CREDITWORTHINESS AND GENUINENESS OF THE T RANSACTION SHOWN IN THE NAME OF THE ABOVE SQUARED UP DEPOSITORS AMOUNTING TO RS.1,12,00 0/-. THEREFORE, THIS AMOUNT IS TREATED AS UNEXPLAINED CASH CREDIT U/S.68 OF THE I. T.ACT AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. ON APPEAL, THE TRIBUNAL CONFIRMED THIS ADDITION AND THE RELEVANT PORTION OF THE JUDGEMENT IS REPRODUCED HEREINABOVE AT PARAGRAPH NO.5 OF THIS ORDER. 7. IN THE AFORESAID BACKGROUND, LET US EXAMINE WHET HER THE PENALTY U/S.271(1)(C) OF THE I.T.ACT IS LEVIABLE. IN ASSESSMENT PROCEEDI NGS ONUS IS ON THE ASSESSEE TO SUBMIT EVIDENCE REGARDING IDENTITY OF THE CREDITOR, CREDIT WORTHINESS OF THE CREDITOR AND GENUINENESS OF THE TRANSACTION. IN PENALTY PROCEED INGS, THE ENTIRE BURDEN IS NOT ON THE DEPARTMENT TO SHOW THAT WHAT WAS ADDED IN FACT, CON CEALED INCOME OF THE ASSESSEE. EXPLANATION TO SEC.271(1)(C) PROVIDES FOR DEEMING A DDITION AS CONCEALED INCOME OR INCOME IN RESPECT OF WHICH INACCURATE PAR TICULARS HAVE BEEN 8 ITA NO.38/AHD./2009 FURNISHED PROVIDED CONDITIONS LAID DOWN IN EITHER O F THE CLAUSES ARE SATISFIED. IF ASSESSEE DOES NOT FURNISH ANY EXPLANATION, IN RESPE CT OF ADDITION MADE, OR EXPLANATION FURNISHED IS FOUND FALSE, THEN CLAUSE ( A) OF EXPLANATION-I CAN BE INVOKED. WHERE ASSESSEE FURNISHES AN EXPLANATION IN RESPECT OF ADDITION MADE, THEN AS PER CLAUSE (B) OF EXPLANATION-I., THE ADDIT ION WOULD BE DEEMED AS CONCEALED INCOME OR INCOME IN RESPECT OF WHICH INAC CURATE PARTICULARS HAVE BEEN FURNISHED, PROVIDED FOLLOWING THREE CONDITIONS ARE SATISFIED.:- (I) ASSESSEE IS NOT ABLE TO SUBSTANTIATE HIS EXPLAN ATION. (II) EXPLANATION FURNISHED BY HIM IS NOT BONA FIDE. (III) ALL THE MATERIAL FACTS, NECESSARY FOR ASSESSM ENT, OR IN RESPECT OF EXPLANATION, ARE NOT FURNISHED BY HIM. IF ASSESSEE IS ABLE TO SHOW PRIMA FACIE THAT HE IS NEITHER HIT BY CLAUSE (A) OR BY CLAUSE ( B) OF THE EXPLANATION-I, THEN ONUS WILL SHIFT TO THE A.O. THAT CONDITION LAID DOW N THEREIN ARE SATISFIED. FOR THE SAKE OF CONVENIENCE WE PRODUCE SEC.271(1)(C ) AS UNDER:- 271. (1) IF THE ASSESSING OFFICER OR THE COMMISSIO NER (APPEALS) OR THE COMMISSIONER IN THE COURSE OF ANY PROCEEDINGS UNDER THIS ACT, IS SATISFIED THAT ANY PERSON (C) HAS CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHED INACCURATE PARTICULARS OF SUCH INCOME. HE MAY DIRECT THAT SUCH PERSON SHALL PAY BY WAY OF PENALTY, (I)****** (II) ****** (III) IN THE EASES REFERRED TO IN CLAUSE (C), IN AD DITION TO ANY TAX PAYABLE BY HIM, A SUM WHICH SHALL NOT BE LESS THAN, BUT WHICH SHALL NOT EXCEED THREE TIMES, THE AMOUNT OF TAX SOUGHT TO BE EVADED BY REASON OF THE CONCEALMENT OF PARTICULARS OF HIS INCOME OR THE FURNISHING OF INACCURATE PARTI CULARS OF SUCH INCOME. 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 FALLS TO OFFER AN EXPLANATION OR OF FERS AN EXPLANATION WHICH IS FOUND BY THE ASSESSING OFFICER OR THE COMMISSIONER (APPEALS) 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 A ND THAT ALL THE FACTS RELATING TO THE SAME AND MATERIAL TO THE COMPUTATION OF HIS TOT AL INCOME HAVE BEEN DISCLOSED BY HIM, THEN, THE AMOUNT ADDED OR DISALLO WED IN COMPUTING THE TOTAL INCOME OF SUCH PERSON AS A RESULT THEREOF SHALL, FO R THE PURPOSE OF CLAUSE (C) OF THIS SUB-SECTION, BE DEEMED TO REPRESENT THE INCOME IN RESPECT OF WHICH PARTICULARS HAVE BEEN CONCEALED. 9 ITA NO.38/AHD./2009 IN RESPECT OF EXPLANATION (1) THE DEEMING FICTION I S RAISED AND ADDED/DISALLOWED AMOUNT IS TREATED AS THE INCOME IN RESPECT OF WHICH PARTICULARS HAVE BEEN CONCEALED. EXPLANATION- I (B) WILL NOT APPLY IF THE EXPLANATION, GIVEN BY THE ASSESSEE IN THE QUANTUM P ROCEEDINGS WHICH HE COULD NOT SUBSTANTIATE IN THOSE PROCEEDINGS WAS (I) BONA FIDE AND (II) HE HAD DISCLOSED ALL THE FACTS RELATING TO THE SAME AND MATERIAL TO THE COMPUTATION OF HIS TOTAL INCOME. 7.1 IN THE CASE OF POONJABHAI VANMALI & SONS V/S. I TO (1989) 33 TTJ 91 (AHD.) THE HON. ITAT AHMEDABAD BENCH HELD THAT - ' IT IS Q UITE EVIDENT THAT IN ORDER TO DISCHARGE HIS BURDEN UNDER SECTION 68, AN ASSIGNEE IS REQUIRED TO OFFER AN EXPLANATION ABOUT THE (I) NATURE OF THE CASH CREDIT AND (II) TH E SOURCE OF SUCH CREDIT. ONCE AN ASSESSEE HAS DONE THAT HIS JOB IS OVER. THE ONUS OF PROOF SHIFTS TO THE ITO. NOW, IT IS FOR THE ITO TO SHOW THAT THE EXPLANATION OFFERED BY THE ASSESSEE IS NOT UPTO HIS SATISFACTION. IT IS THE SUBJECTIVE SATISFACTION OF THE ITO ABOUT THE NATURE AND SOURCE OF A CASH CREDIT, WHICH IS REQUIRED TO BE MADE UNDER THE SECTION. IT IS THE SATISFACTION OF A MAN ORDINARY PRUDENCE. IF THE EXPLANATION OFFERED B Y AN ASSESSEE ABOUT THE NATURE AND SOURCE OF A CASH CREDIT PROBABILISES THE EXISTENCE OF THE FACTS, WHICH MUST ATTEND ON THE CASH CREDIT IN DISPUTE IN DUE COURSE OF THE NATURE OF THE THINGS, THE ASSESSEE MAY BE SAID TO HAVE OFFERED A SATISFACTORY EXPLANATION. TH E ITO CANNOT INSIST UPON FOR MORE. BUT AT THE SAME TIME, AN ASSESSEE CANNOT GET HIMSEL F RID OF HIS BURDEN UNDER THIS SECTION BY OFFERING ANY SORT OF EXPLANATION, WHICH MIGHT SUIT HIM. IN ORDER TO BE 'SATISFACTORY' AND AS SUCH ACCEPTABLE, AN EXPLANATI ON UNDER SECTION 68 SHOULD BE 'REASONABLE' PROBABILISING THE HAPPENING OF THE THI NGS IN THE MANNER TOLD BY THE ASSESSEE. IT IS NOT EACH AND EVERY SORT OF EXPLANAT ION OFFERED BY AN ASSESSEE ABOUT THE NATURE AND SOURCE OF A CASH CREDIT, WHICH IS REQUIR ED TO BE ACCEPTED BY THE ITO UNDER SECTION 68. IT IS ONLY SUCH EXPLANATION WHICH APPEA LS TO HUMAN REASONS, WHICH REFERS TO SUCH HAPPENINGS THAT ARE QUITE PROBABLE TO TAKE PLACE IN THE NORMAL COURSE OF THE THINGS AND WHICH A PRUDENT MIND WOULD FEEL INCLINED TO ACCEPT UNDER THE GIVEN CIRCUMSTANCES, THAT WOULD FULFILL THE REQUIREMENT O F THE WORD 'SATISFACTORY' QUALIFYING THE REQUIRED EXPLANATION OF THE ASSESSEE UNDER SECT ION 68.' 10 ITA NO.38/AHD./2009 7.2 WHEN WE EXAMINE THE PRESENT CASE, WE NOTICE THA T THE ASSESSEE DID NOT FURNISH EVIDENCE ABOUT THE IDENTITY OF ALL THE SIX CREDITOR S/ GENUINENESS OF THE TRANSACTION. THE ALLEGED DEPOSIT FROM SIX CREDITORS WAS RECEIVED IN CASH AND IN THE ACCOUNTING YEAR ITSELF REFUNDED IN CASH. ALL THE ALLEGED SIX CREDIT ORS ARE NOT ASSESSED TO TAX. NEITHER AFFIDAVITS NOR IDENTITY PROOF OF ALL THE SIX CREDIT ORS WAS FURNISHED EITHER IN ASSESSMENT PROCEEDINGS OR PENALTY PROCEEDINGS. NONE WAS PRODUC ED BEFORE THE AO. DESPITE REPEATEDLY ASKING, BEFORE US, THE LD. COUNSEL OF TH E ASSESSEE COULD NOT POINT OUT HOW THE IDENTITY OF THE SIX CREDITORS WAS PROVED EITHER IN PENALTY PROCEEDINGS OR DURING THE COURSE OF ASSESSMENT PROCEEDINGS. THE COUNSEL OF TH E ASSESSEE COULD NOT POINT OUT HOW THE GENUINENESS OF THE TRANSACTION IS PROVED EX CEPT RELYING ON THE VARIOUS CASE LAWS WHICH ARE RELIED ON IN THE REPLY SUBMITTED BEF ORE THE AO. IN OUR CONSIDERED OPINION, THIS DOES NOT AMOUNT TO DISCHARGE OF ONUS AS ENVISAGED BY THE EXPLANATION-I TO SECTION 271(1)(C) OF THE I.T. ACT, 1961. THEREFO RE, WE ARE OF THE VIEW THAT THE PENALTY IN RESPECT OF DEPOSIT OF RS.1,12,000/- ALLE GED TO BE RECEIVED FROM SIX CREDITORS WAS RIGHTLY LEVIED AND CONFIRMED BY THE LD. CIT(A) IN THE IMPUGNED ORDER. HENCE, WE DECLINE TO INTERFERE. 7.3 TO SUM UP, IT IS HELD THAT PENALTY IS LEVIABLE ONLY IN RESPECT OF RS.1,12,000/- AND IN RESPECT OF REMAINING TWO ADDITIONS, WE DIREC T THE AO TO CANCEL THE SAME. THE AO IS DIRECTED TO RE-COMPUTE THE AMOUNT OF PENALTY @100% OF TAX SOUGHT TO BE EVADED ON ADDITION OF RS.1,12,500/- ACCORDINGLY. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER SIGNED, DATED AND PRONOUNCED IN THE COURT ON 30/06/2011. SD/- SD/- ( A.N. PAHUJA ) ( T.K. SHARMA ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED 30/06 /2011 11 ITA NO.38/AHD./2009 COPY OF THE ORDER FORWARDED TO : 1. THE ASSESSEE. 2. THE DEPARTMENT. 3. THE CIT CONCERNED 4. THE LD. CIT(APPEALS)-V, SURAT 5. THE DR, AHMEDABAD BENCH 6. THE GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT.REGISTRAR), ITAT, AHMEDABAD TALUKDAR/SR.P.S.