Shri Milan R. Patel, V. The Income tax Officer, Ward-5(3),

ITA 382/AHD/2006

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 0454 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 8 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-11-2009
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 30-09-2009
• Assessment Year: 1999-2000
• Appeal Filed On: 16-02-2006
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SRUITI SAMANT
• Keywords: Bogus purchase; Unexplained cash credit; Revised return; TDS
• Section: 271(1)(c)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH C BEFORE SHRI T.K.SHARMA, JUDICIAL MEMBER AND SHRI D.C.AGRAWAL, ACCOUNTANT MEMBER DATE OF HEARING : 30/09/09 DRAFTED ON: 28/10/ 09 ITA NO.382/AHD/2006 ASSESSMENT YEAR : 1999-2000 SHRI MILAN R.PATEL 55,VIJAY SOCIETY R.V. DESAI ROAD BARODA VS. ACIT (OSD) WARD-5(3) BARODA PAN/GIR NO. : AGBPP6293M (APPELLANT) .. (RESPONDENT) APPELLANT BY : SHRI BHAVIN MARFATIA RESPONDENT BY: SMT. SRUITI SAMANT, 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 THE LEARNED CIT(APPEALS)-V, BARODA DATED 20/12/2005 FOR ASSESS MENT YEAR 1999-2000, WHEREIN THE LEARNED CIT(APPEALS) CONFIRMED A PENALT Y OF RS.2,71,520/- U/S.271(1)(C) OF THE I.T. ACT, 1961. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E FILED HIS RETURN OF INCOME FOR ASSESSMENT YEAR 1999-2000 ON 31/12/1999 ON A TOTAL INCOME OF RS.2,93,394/-. INITIALLY, THE RETURN WAS PROCESSED U/S.143(1) OF THE I.T. ACT, 1961, BUT LATER ON THE ASSESSING OFFICER NOTED FROM THE TDS CERTIFICATES FILED THAT TOTAL RECEIPTS AMOUNTED TO RS.46,16 LACS. BUT THE ASSESSEE HAS CREDITED IN THE PROFIT & LOSS,A ACCOUNT RECEIPT OF RS.36,27,6 01/- ONLY. HE ACCORDINGLY ITA NO .382/AHD/2006 SHRI MILAN R.PATEL VS. ACIT ASST.YEAR 1999-2000 - 2 - ISSUED NOTICE U/S.148 OF THE I.T. ACT, 1961 ON 03/0 5/2001 TO THE ASSESSEE. THE ASSESSEE FILED RETURN OF INCOME ON 16/01/2003 DECLA RING TOTAL INCOME AT RS.2,82,980/-, EVENTHOUGH IN THE RETURN FILED ON 31 /12/1999 INCOME DECLARED WAS RS.2,93,394/-. OUT OF THE EXPENSES CLAIMED IN THE RETURN FILED ON 16/01/2003, THE ASSESSING OFFICER IN THE ASSESSMENT ORDER MADE FOLLOWING DISALLOWANCES:- SL.NO(S) PARTICULARS AMOUNT (RS.) 1. ADDITION ON ACCOUNT OF DISALLOWANCE OF NON-GENUINE LABOUR PAYMENT 6,35,614/- 2. ADDITION ON ACCOUNT OF DISALLOWANCE OF NON-GENUINE PURCHASES 2,69,450/- 3. UNEXPLAINED CASH CREDIT 1,45,100/- 3. THE ASSESSING OFFICER NOTICED THAT VARIOUS EXPE NSES ORIGINALLY CLAIMED IN THE RETURN OF INCOME FILED ON 31/12/1999, WERE INFLATED AS UNDER:- S.NO. PARTICULARS ORIGINAL RETURN ON 31/12/99 RETURN U/S.148 ON 16/01/2003 DIFFERENCE 1. CONTRACT RECEIPTS 36,27,671 47,99,215 11,71,544 2. PURCHASES 20,74,625 24,74,685 4,00,060 3. LABOUR 8,40,985 14,76,599 6,35,614 4. MTI PURAN EXPENSES 3,30,839 2,61,183 (-)69,656 4. THUS, THE ASSESSING OFFICER NOTICED THAT PURCHAS E OF RAW-MATERIAL IS INCREASED FROM RS.20,74,625/- IN THE ORIGINAL RETUR N TO 24,74,685/- IN THE RETURN FILED U/S.148(1) OF THE I.T. ACT, 1961. THE ASSES SING OFFICER VERIFIED PURCHASES AND NOTICED THAT PURCHASES FROM SHRI RAMA NLAL HIRALAL SHAH FOR ITA NO .382/AHD/2006 SHRI MILAN R.PATEL VS. ACIT ASST.YEAR 1999-2000 - 3 - RS.2,69,450/- WERE BOGUS PURCHASE, IN THE SENSE THA T BILLS WERE ISSUED BY THIS PARTY ON A PLAIN NOTE BOOK PAPER, THERE WAS NO CST /GST NUMBER, THERE WAS NO EVIDENCE OF OCTROI AND TRANSPORTATION AND THE CH EQUE ISSUED IN THE NAMES OF S./SHRI PRAVINBHAI PATEL, MANU PARMAR, GOPALBHAI, SALIMBHAI AND SHABBURBHAI, WERE BOGUS AS ASSESSEE FAILED TO PRODU CE THESE PERSONS BEFORE THE ASSESSING OFFICER FOR VERIFICATION. THE ASSESSING OFFICER ALSO COLLECTED PHOTOCOPIES OF CHEQUES ISSUED BY THE ASSESSEE FOR T HE LABOUR PAYMENT AND FOUND THAT EVENTHOUGH CHEQUES WERE IN THE NAMES OF LABOURERS, BUT THEY WERE ENCASHED EITHER BY THE ASSESSEE OR BY HIS CLOSE ASS OCIATE OF FAMILY, NAMELY SHRI H.R. PATEL. IT WAS EXPLAINED BY THE ASSESSEE THAT THESE PERSONS WERE ILLITERATE COULD NOT SIGN OR DID NOT HAVE ANY FINAN CIAL BACKGROUND AND, THEREFORE, ASSESSEE HAD GONE TO THE BANK, SIGNED CH EQUES GOT THE PAYMENT DISBURSED THE SAME TO THEM. SHRI H.R.PATEL HAD SIG NED ON THE BACK OF HE CHEQUES FOR IDENTIFYING THOSE PERSONS. THE ASSESS ING OFFICER REJECTED THE CLAIM BY OBSERVING THAT SHRI MANUBHAI PARMAR HAD AC TUALLY SIGNED ON THE OTHER SIDE OF THE CHEQUE. THEREFORE, HE CANNOT BE TREATE D AS ILLITERATE. THE LD. ASSESSING OFFICER ALSO NOTICED THAT THE ADDITIONS S O MADE BY THE ASSESSING OFFICER WERE ALSO CONFIRMED BY THE LEARNED CIT(APPE ALS) FINDING THAT EXPENDITURE IS INFLATED TO SUPPRESS INCOME, THE AS SESSING OFFICER INITIATED PENALTY PROCEEDINGS. HE ISSUED SHOW-CAUSE NOTICE T O THE ASSESSEE IN RESPONSE TO WHICH A WRITTEN SUBMISSIONS WERE FILED ON 31/03/ 2005, BUT NO EXPLANATION WAS FURNISHED ON THE GROUND THAT HIS APPEAL IS PEND ING BEFORE THE LEARNED ITA NO .382/AHD/2006 SHRI MILAN R.PATEL VS. ACIT ASST.YEAR 1999-2000 - 4 - CIT(APPEALS) OR BEFORE THE TRIBUNAL. THUS, NO EXPL ANATION WAS FURNISHED EVENTHOUGH ADDITION WAS CONFIRMED BY THE LEARNED CI T(APPEALS). THE ASSESSING OFFICER, ACCORDINGLY, LEVIED PENALTY OF R S.2,76,000/-, WHEREAS MINIMUM PENALTY IMPOSABLE IS WORKED OUT AT RS.2,75, 948/-. 5. THE LD. LEARNED CIT(APPEALS) CONFIRMED THE LEVY OF PENALTY IN A DETAILED AND WELL-REASONED ORDER. IN THIS REGARD, WE REPRODUCE FOLLOWING PART OF HIS ORDER:- THE ASSESSING OFFICER HAD MADE THE FOLLOWING ADDIT IONS TO THE RETURNED INCOME. 1. ADDITION ON ACCOUNT OF DISALLOWANCE OF NON-GENUINE LABOUR PAYMENT : RS.6,35,614 2. ADDITION ON ACCOUNT OF DISALLOWANCE OF NON-GENUINE PURCHASES : RS.2,69,450 3. UNEXPLAINED CASH CREDIT : RS.1,45,100 OUT OF THE ABOVE ADDITIONS, THE LD.CIT(A)-V, BARO DA VIDE HIS ORDER DATED 12.09.2003 HAS CONFIRMED THE FIRST TWO ADDITI ONS. THE ASSESSING OFFICER HAS HELD THAT THE APPELLANT HAS CONCEALED I NCOME BY FURNISHING INACCURATE PARTICULARS TO THE EXTENT OF RS.919825 A ND HAS IMPOSED THE PENALTY OF RS.276000 U/S.271(L)(C) OF THE I T ACT, 1961. IT WAS FOUND BY THE ASSESSING OFFICER THAT IN THE ORIGINAL RETU RN OF INCOME, THE APPELLANT HAS SHOWN PURCHASES OF MATERIAL AT RS.207 4625 WHEREAS IN THE REVISED RETURN, HE HAS SHOWN PURCHASES OF RS.24 74685. IT WAS FOUND BY THE ASSESSING OFFICER THAT THE ASSESSEE HA D PURCHASED GOODS OF RS.269450 FROM RAMANLAL HIRALAL SHAH. IT WAS NOTE D THAT THE BILLS WERE ISSUED BY THIS PARTY ON A PLAIN NOTE BOOK PAPE R. THERE WAS NO MENTION OF CST/GST NUMBER. DURING THE CO URSE OF ASSESSMENT PROCEEDINGS AS ALSO PENALTY PROCEEDING, THE APPELLA NT FAILED TO PRODUCE THE CST/GST NUMBER OF THE SUPPLIER AS WELL AS ANY RECEIPTS OF PAYMENTS IN RESPECT OF OCTROI AND TRANSPORTATION. IT HAS BEEN CLAIMED ITA NO .382/AHD/2006 SHRI MILAN R.PATEL VS. ACIT ASST.YEAR 1999-2000 - 5 - BY THE APPELLANT'S REPRESENTATIVE THAT THE GOODS WE RE SUPPLIED AT THE SITE. THE APPELLANT HAS HOWEVER NOT BEEN ABLE TO S UBMIT ANY EVIDENCE THAT THE CEMENT PIPES WERE SUPPLIED AT THE SITE. IT WAS ALSO FOUND BY THE ASSESSING OFFICER THAT THE PAYMENT OF RS.30000 WAS THROUGH BEARER CHEQUE DATED 18.06.1998 WHICH WAS ENCHASE D BY THE APPELLANT HIMSELF. THERE IS NO PROOF OF RECEIPT OF MATERIAL NOR ANY PAYMENT WAS MADE. THE APPELLANT HAS NOT FURNISHED A NY JUSTIFICATION FOR THE ISSUE OF BEARER CHEQUE AND COLLECTING THE CASH HIMSELF. THEREFORE, THE APPELLANT HAD FAILED TO SUBSTANTIATE ITS CLAIM OF GENUINE PURCHASE. IT IS THEREFORE CLEAR THAT THE APPELLANT HAS .CONCEALE D HIS INCOME BY INFLATING HIS PURCHASES. THEREFORE, THE APPELLANT IS LIABLE FOR PENALTY FOR CONCEALING INCOME BY FURNISHING INACCURATE PARTICUL ARS OF INCOME OF RS.269450. IN THE ORIGINAL RETURN, THE APPELLANT HAD CLAIMED LABOUR PAYMENT OF RS.840985 WHEREAS IN THE RETURN FILED U/ S.148 HE HAS CLAIMED LABOUR PAYMENT EXPENSES OF RS. 1476599. IT WAS FOUND BY THE ASSESSING OFFICER THAT THESE PAYMENTS WERE MADE TO VARIOUS PERSONS, NAMELY SHRI PRAVINBHAI PATEL, SHRI MANU PARMAR, SHRI GOPALBHAI, SHRI SALIMBHAI AND SHRI SHABBURBHAI. THE ASSESSI NG OFFICER HAD ASKED THE APPELLANT TO PRODUCE THESE PERSONS FOR VE RIFICATION OF LABOUR PAYMENTS. HOWEVER, THE APPELLANT FAILED TO PRODU CE THESE PERSONS. IT WAS ONLY CLAIMED THAT THE LABOUR PAYMENTS WERE MADE BY CHEQUE. AS DISCUSSED ABOVE, DURING THE COURSE OF APPELLATE PRO CEEDINGS, THE APPELLANT'S REPRESENTATIVE HAS FILED AFFIDAVITS OF THREE OF THESE PERSONS. THESE AFFIDAVITS WHICH ARE DATED 13.07.2004 WERE N OT SUBMITTED BEFORE THE ASSESSING OFFICER DURING THE COURSE OF PENALTY PROCEEDINGS. THEREFORE, THE SAME HAVE NOT BEEN ADMITTED AS ADDIT IONAL EVIDENCES. THE APPELLANT HAS FAILED TO SUBMIT ANY EVIDENCE IN RESPECT OF THE OTHER TWO PERSONS. THE ASSESSING OFFICER COLL ECTED THE PHOTOCOPIES OF THE CHEQUES ISSUED BY THE APPELLANT FOR LABOUR P AYMENT FROM THE RESPECTIVE BANK. IT WAS FOUND THAT THESE CHEQUES WERE ISSUED IN THE NAME OF THE LABOURERS. HOWEVER, THE SAME WERE ENCAS HED EITHER BY THE APPELLANT OR BY SHRI H R PATEL, WHO IS A CLOSELY AS SOCIATED PERSON OF THE APPELLANT. IT HAS BEEN CLAIMED THAT SINCE THESE PERSONS COULD NOT SIGN AND WERE NOT HAVING BANK ACCOUNT, THE APPELLANT HAD TO GO TO THE BANK AND SIGN THE CHEQUES FOR GETTING THE PAYMENTS. I T WAS HOWEVER NOTICED BY THE ASSESSING OFFICER THAT THE CHEQUE DATED 27 .10.1998 FOR RS.35000 ISSUED IN FAVOUR OF MANUBHAI PARMAR WAS SI GNED BY SHRI PARMAR HIMSELF ON THE REVERSE SIDE OF THE CHEQUE. T HEREFORE, THE CLAIM OF THE APPELLANT THAT SHRI MANUBHAI PARMAR IS ILLIT ERATE AND THAT THE APPELLANT HAD TO GO WITH HIM TO THE BANK TO SIGN TH E CHEQUE IS NOT ACCEPTABLE. FURTHER, IDENTITY OF THE PERSON IS NO T REQUIRED TO BE VERIFIED EVERYTIME FOR ENCASHMENT OF CHEQUE. ALL TH ESE CHEQUES ARE BEARER CHEUQES FOR WHICH PAYMENT IS TO BE MADE BY T HE BANK TO THE ITA NO .382/AHD/2006 SHRI MILAN R.PATEL VS. ACIT ASST.YEAR 1999-2000 - 6 - HOLDER OF THE CHEQUE. HOWEVER, THE PAYMENTS WERE CO LLECTED EITHER BY THE APPELLANT OR BY SHRI H R PATEL BY SIGNING ON TH E BACKSIDE OF THE CHEQUES. THE APPELLANT HAS NOT PRODUCED ANY EVID ENCE THAT THE AMOUNTS WITHDRAWN IN CASH FROM THE BANK WERE PAID T O THE LABOURERS AS CLAIMED. FURTHER THESE PAYMENTS ARE NOT SUPPORTED BY ANY BILLS AND VOUCHERS. NO SUCH DOCUMENTS HAVE BEEN SUBMITTED DURING THE COURSE OF ASSESSMENT OR PENALTY PROCEEDINGS TO PROVE THE G ENUINENESS OF PAYMENTS. THEREFORE, IT IS CLEAR THAT THE APPELLAN T HAD INFLATED ITS EXPENSES. THE APPELLANT HAS ALSO NOT BEEN ABLE TO PROVE THAT ITS CLAIM OF LABOUR EXPENSES @ 31% OF THE TOTAL RECEIPTS WAS REASONABLE. IT IS THEREFORE CLEAR THAT THE APPELLANT HAS INFLATED ITS LABOUR EXPENSES AND HAS REDUCED HIS TAXABLE INCOME. THEREFORE, T HE APPELLANT HAS CONCEALED HIS INCOME BY FURNISHING INACCURATE PARTICULARS OF INCOME OF RS. 635614. IN VIEW OF THE ABOVE FACTS, THE ASSESSING OFFICER WAS JUSTIFIED IN HOLDING THAT THE APPELLANT HAS CON CEALED INCOME BY FURNISHING INACCURATE PARTICULARS TO THE EXTENT OF RS. 905065 (RS. 269451 + RS. 635614). THE ASSESSING OFFICER HAS WRONGLY TAKEN THE FIGURE OF CONCEALED INCOME AT RS.919825. IN VIEW OF THE ABOVE, THE ASSESSING OFFICER WAS JUSTIFIED IN IMPOSING THE PEN ALTY U/S.271(1)(C) OF THE I T ACT, 1961 IN RESPECT OF THE ABOVE CONCEA LED INCOME OF RS.905065. IN RESPECT OF THE ABOVE CONCEALED INC OME, THE MINIMUM PENALTY LEVIABLE U/S.271(1)(C) OF THE I T ACT, 1961 WORKS OUT TO RS.271520. ACCORDINGLY, THE PENALTY IMPOSED U/S.271(L)(C) OF THE I T ACT, 1961 IS REDUCED FROM RS.276000 TO RS.271 520. 6. AGAINST THIS, LEARNED AUTHORISED REPRESENTATIVE OF THE ASSESSEE SUBMITTED THAT ADDITION HAS BEEN MADE BY ESTIMATE O NLY. THEREFORE, NO PENALTY CAN BE LEVIED. HE SUBMITTED THAT THE TRIBU NAL HAS CANCELLED THE PENALTY LEVIED U/S.271-B OF THE I.T. ACT, 1961 FOR NON-MAIN TENANCE OF ACCOUNTS HOLDING THE REASON GIVEN BY THE ASSESSEE AS SATISFACTORY. THE REASON ADVANCED BY THE ASSESSEE WAS THAT ACCOUNTS WERE MAINTAINED BY SHRI PRAVINBHAI P.PATEL, ACCOUNTANT OF THE ASSESSEE. HE HAS COMMITTED MISTA KES AND HE IS OUT OF INDIA. THEREFORE, ACCOUNTS COULD NOT BE COMPLETED AND AUDI TED. ON RECEIPT OF NOTICE ISSUED U/S.148(1) OF THE I.T. ACT, 1961, THE ASSES SEE VERIFIED THE ACCOUNTS AND ITA NO .382/AHD/2006 SHRI MILAN R.PATEL VS. ACIT ASST.YEAR 1999-2000 - 7 - FILED A CORRECT RETURN. THEREFORE, THERE IS REASON ABLE CAUSE FOR NOT FILING THE CORRECT RETURN IN TIME. 7. AGAINST THIS, LEARNED DEPARTMENTAL REPRESENTATIV E SUBMITTED THAT IT IS A FIT CASE FOR LEVY OF PENALTY AND ASSESSEE HAS CONCE ALED THE PARTICULARS OF INCOME AND BONAFIDES OF THE ASSESSEE ARE NOT ACCEP TABLE. 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIALS AVAILABLE ON RE CORD. IN OUR CONSIDERED VIEW, THE ASSESSEE HAS FAILED TO FURNISH CORRECT PA RTICULARS IN THE ORIGINAL RETURN FILED ON 31/12/1999. THE REASON ADVANCED WAS THAT THEY WERE PREPARED BY HIS ACCOUNTANT, SHRI PRAVINBHAI P.PATEL WHO IS NOW ABRO AD. NO FACTS ARE FURNISHED AS TO WHEN SHRI PRAVINBHAI P.PATEL WAS E MPLOYED, WHAT WERE THE DUTIES ENTRUSTED TO HIM, WHEN HE LEFT THE JOB OR WH ETHER HE WAS FIRED FROM THE JOB, WHEN HE LEFT INDIA AND TO WHAT DESTINATION, WHETHER ASSESSEE IS IN CONTACT WITH SHRI PRAVINBHAI PATEL DURING THIS PERIOD. A LL THESE FACTS ARE NOT DISCLOSED BY THE ASSESSEE. THE ASSESSING OFFICER AS WELL AS LEARNED CIT(APPEALS) HAS FOUND THAT CLAIM OF PURCHASE OF RA W-MATERIAL AND LABOUR PAYMENTS ARE INFLATED AND NOT PROVED. THE PAYMENT FOR PURCHASE OF RAW- MATERIAL WAS ISSUED THROUGH BEARER CHEQUES IN THE NAME OF THE SELLERS, AND WHICH WERE ENCASHED BY THE ASSESSEE OR HIS EMPLOYEE S. SIMILARLY, CHEQUES ISSUED FOR LABOUR PAYMENTS WERE ALSO ENCASHED BY TH E ASSESSEE OR HIS EMPLOYEES/ASSOCIATES. NO EVIDENCE IS FURNISHED TO SHOW THAT PAYMENTS HAVE ITA NO .382/AHD/2006 SHRI MILAN R.PATEL VS. ACIT ASST.YEAR 1999-2000 - 8 - BEEN RECEIVED BY OTHER PARTIES. THEY WERE NOT PRO DUCED BEFORE THE ASSESSING OFFICER TO PROVE THAT THEY HAVE RENDERED THE SERVIC ES OR SUPPLIED MATERIAL TO THE ASSESSEE. THEREFORE, THE CLAIM OF THE ASSESSEE MADE IN THE RETURN FILED ON 16/01/2003 ARE CLEARLY NOT GENUINE. THEY FALL IN T HE DOMAIN OF FURNISHING INACCURATE PARTICULARS. THE REASONS FOR DIFFERENC E IN CONTRACT RECEIPTS SHOWN IN THE ORIGINAL RETURN AND SHOWN SUBSEQUENTLY IN TH E RETURN FILED IN RESPONSE TO NOTICE U/S.148(1) WERE ALSO NOT FURNISHED. WHEN TDS IS CLAIMED AT THE ACTUAL FIGURE, THERE WAS NO REASON TO UNDERSTATE THE CONTR ACT RECEIPTS. IT IS APPARENT THAT EXPENDITURE ON PURCHASE OF RAW-MATERIAL AND LA BOUR PAYMENT ARE INFLATED TO SUPPRESS THE INCOME AND TO BRING IT AT THE LEVEL DECLARED IN THE ORIGINAL RETURN. EVENTHOUGH THE TRIBUNAL HAS CONFIRMED PART ADDITION BY ESTIMATING THE INCOME AT 10% OF THE TOTAL RECEIPTS, BUT THE FACT R EMAINS THAT THE ASSESSEE HAD ORIGINALLY NOT STATED CORRECT RECEIPT FROM THE CONT RACT AND IN ORDER TO BRING DOWN THE INCOME IN THE RETURN IN RESPONSE TO NOTICE U/S.148(1) TO THE LEVEL OF THE INCOME DECLARED IN THE ORIGINAL RETURN, ASSESSE E RESORTED TO INFLATION OF EXPENSES. THEREFORE, IT IS NOT A SIMPLE CASE OF SU BSTITUTING HIGHER ESTIMATE MADE BY THE ASSESSING OFFICER/APPELLATE AUTHORITIES IN PLACE OF ESTIMATE MADE BY THE ASSESSEE, BUT IT IS A CASE OF SUPPRESSED INC OME BY INFLATING EXPENSES. THE CASE OF THE ASSESSEE CLEARLY FALLS WITHIN THE M EANING OF EXPLANATION-1 TO SECTION 271(1)(C). FOR THE SAKE OF CONVENIENCE, WE REPRODUCE EXPLANATION-1 TO SECTION 271(1)(C) OF THE I.T. ACT, 1961. ITA NO .382/AHD/2006 SHRI MILAN R.PATEL VS. ACIT ASST.YEAR 1999-2000 - 9 - 271. FAILURE TO FURNISH RETURNS, COMPLY WITH NOTICES, CO NCEALMENT OF INCOME, ETC. (1) IF THE ASSESSING OFFICER OR THE COMMISSIONER (A PPEALS) OR THE COMMISSIONER IN THE COURSE OF ANY PROCEEDINGS UNDER THIS ACT, IS SATISFIED THAT ANY PERSON- (B) HAS FAILED TO COMPLY WITH A NOTICE UNDER SUB-SE CTION (1) OF SECTION 142 OR SUB-SECTION (2) OF SECTION 143 OR FAILS TO COMPLY WITH A DIRECTION ISSUED UNDER SUB-SECTION (2 A) OF SECTION 142, OR (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,- (II) IN THE CASES REFERRED TO IN CLAUSE (B), IN ADD ITION TO ANY TAX PAYABLE BY HIM, IN ADDITION TO ANY TAX PAYABLE FOR EACH SUCH FAILURE; (III) IN THE CASES REFERRED TO IN CLAUSE (C), IN AD DITION TO ANY TAX PAYABLE BY HIM, A SUM WHICH SHALL NOT BE LESS T HAN, BUT WHICH SHALL NOT EXCEED THREE TIMES, THE AMOUNT OF T AX SOUGHT TO BE EVADED BY REASON OF THE CONCEALMENT OF PARTICULARS OF HIS INCOME OR THE FURNISHING OF INAC CURATE PARTICULARS OF SUCH INCOME: EXPLANATION 1.-WHERE IN RESPECT OF ANY FACTS MATERI AL TO THE COMPUTATION OF THE TOTAL INCOME OF ANY PERSON UNDER THIS ACT,- (A) SUCH PERSON FAILS TO OFFER AN EXPLANATION OR 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 BONAFIDE AND THAT ALL THE FACTS RELA TING TO THE SAME AND MATERIAL TO THE COMPUTATION OF HIS TOTAL INCOME HAVE BEEN DISCLOSED BY HIM, THEN, THE AMOUNT ADDED OR DISALLOWED IN COMPUTING T HE TOTAL INCOME OF SUCH PERSON AS A RESULT THEREOF SHA LL, FOR THE PURPOSES OF CLAUSE (C) OF THIS SUB-SECTION, BE DEEM ED TO REPRESENT THE INCOME IN RESPECT OF WHICH PARTICULAR S HAVE BEEN CONCEALED. ITA NO .382/AHD/2006 SHRI MILAN R.PATEL VS. ACIT ASST.YEAR 1999-2000 - 10 - 9. IN RESPONSE TO NOTICE BEFORE LEVY OF PENALTY, TH E ASSESSEE DID NOT FURNISH ANY EXPLANATION EXCEPT PRAYING FOR MORE TIM E. IN OUR CONSIDERED VIEW, PRAYING FOR MORE TIME IS THE RIGHT OF THE ASSESSEE, BUT IT IS ALSO THE DUTY OF THE ASSESSEE TO SUBMIT AN EXPLANATION IN RESPONSE TO TH E NOTICE SO ISSUED BY THE ASSESSING OFFICER AND, THEREAFTER PRAY FOR MORE TIM E BEFORE THE ASSESSING OFFICER CONCLUDES THE PROCEEDINGS ON THE REASONS CO NSIDERED APPROPRIATE. BUT, IN THE PRESENT CASE, THE ASSESSEE DID NOT FURNISH A NY EXPLANATION. THEREFORE, THIS CASE ALSO FALLS WITHIN THE MEANING OF EXPLANAT ION-1 TO SECTION 271(1)(C) OF THE I.T. ACT, 1961. IN OUR VIEW, THE ASSESSING OF FICER CANNOT BE PROHIBITED TO FINALISE THE PENALTY PROCEEDINGS MERELY BECAUSE AS SESSEE DESIRES TO WAIT FOR THE DECISION OF THE TRIBUNAL IN QUANTUM PROCEEDINGS . IF ASSESSEE DOES NOT FURNISH ANY EXPLANATION, IN SPITE OF REASONABLE OPP ORTUNITY GIVEN BY THE ASSESSING OFFICER AND ONLY CHOSE TO BUY TIME, THEN ASSESSING OFFICER WOULD BE JUSTIFIED TO PROCEED BY PRESUMING THAT NO EXPLANATI ON IS FURNISHED. 10. FROM THE FACTS OF THE PRESENT CASE, WE NOTICE T HAT TOTAL CONTRACT RECEIPTS FOR THE YEAR UNDER CONSIDERATION AMOUNTED TO RS.47. 99 LACS THEREBY BRINGING THE CASE OF THE ASSESSEE WITHIN THE PURVIEW OF SECT ION 44AB AND ACCORDINGLY THE ASSESSEE WAS REQUIRED TO GET HIS ACCOUNTS COMPU LSORILY AUDITED. THE FACT THAT HE ORIGINALLY DECLARED RECEIPTS OF RS.346,27,6 71/- CLEARLY INDICATED THAT THERE WAS AN APPARENT INTENTION OF AVOIDING TAX AUD IT. IF ASSESSEE HAD BONA FIDE THEN PRIOR TO FILING THE RETURN UNDER SECTION 148(1 ) ON APPARENT DISCOVERY OF MISTAKE AS PLEADED BY HIM, COULD HAVE GOT THE ACCOU NTS AUDITED UNDER SECTION ITA NO .382/AHD/2006 SHRI MILAN R.PATEL VS. ACIT ASST.YEAR 1999-2000 - 11 - 44AB OF THE ACT AND OPTED TIME FROM THE A.O. FOR FI LING THE RETURN, BUT IT WAS NOT DONE. THE INTENTION OF THE ASSESSEE NOT TO GET THE ACCOUNTS AUDITED WHICH WAS SUPPORTED BY FACTS THAT THE A.O. ASKED THE ASSE SSEE TO PRODUCE THE BOOKS OF ACCOUNTS, WHICH WERE NOT PRODUCED ON SEVERAL HEA RINGS. THE EXPLANATION OF THE ASSESSEE THAT THE MISTAKE WAS DONE BY ACCOUNTAN T, WHO IS NOW IN U.S.A., IS CLEARLY A BALD EXPLANATION NOT SUPPORTED BY ANY EVI DENCE AND IS THEREFORE, NOT ACCEPTABLE. 11. NOTWITHSTANDING, THE CASE OF THE ASSESSEE FALLS UNDER EXPLANATION-1(B) ALSO. IF WE CONSIDER THE EXPLANATION IN RESPECT O F CLAIM OF EXPENDITURE SUBMITTED DURING ASSESSMENT PROCEEDINGS, WE NOTICE THAT SUCH EXPLANATION IS NEITHER BONA FIDE NOR SUBSTANTIATED. THE BURDEN SH IFTED TO THE ASSESSEE WHEN ASSESSING OFFICER INTIMATED TO HIM THAT CHEQUES ISS UED FOR PAYMENT FOR PURCHASE OF MATERIAL OR FOR LABOUR PAYMENTS ARE ENC ASHED BY THE ASSESSEE OR BY HIS ASSOCIATE. AT THAT POINT OF TIME, IT WAS REQUI RED FOR THE ASSESSEE TO PROVIDE COMPLETE IDENTITY OF ALL THE RECIPIENTS AND TO SHO W THAT PAYMENTS ARE ACTUALLY RECEIVED BY SUCH PERSONS OR HE SHOULD HAVE PRODUCE D THE RECIPIENTS BEFORE THE ASSESSING OFFICER TO PROVE HIS CASE THAT ALLEGED PA YMENTS WERE ACTUALLY RECEIVED BY THEM. ONCE IT IS SO DONE, ONUS WOULD B E AGAIN SHIFTED BACK TO THE ASSESSING OFFICER. BUT HAVING NOT DONE SO, IT CAN BE INFERRED THAT ASSESSEE HAS FAILED TO DISCLOSE ALL THE MATERIALS IN SUPPORT OF HIS EXPLANATION AND FOR THE COMPUTATION OF CORRECT INCOME. IN FACT, THE DIFFER ENCE BETWEEN THE CLAIM OF EXPENSES MADE IN THE ORIGINAL RETURN AND MADE IN TH E REVISED RETURN ARE NOT ITA NO .382/AHD/2006 SHRI MILAN R.PATEL VS. ACIT ASST.YEAR 1999-2000 - 12 - SUBSTANTIATED LEADING TO PRIMA-FACIE BELIEF THAT EX PENSES CLAIMED IN RETURN FILED IN RESPONSE TO NOTICE U /S.148(1) ARE INFLATED AND, THEREFORE, BURDEN WAS O N THE ASSESSEE TO PROVE THAT WHAT IS INFERRED IS NOT CORR ECT. ONCE IT IS NOT DONE SO, THE ASSESSEES CASE CANNOT GO OUT OF EXPLANATION-1(B) T O SECTION 271(1)(C) OF THE I.T. ACT, 1961 ALSO IF WE PRESUME THE EXPLANATION F URNISHED DURING ASSESSMENT PROCEEDINGS IS THE EXPLANATION FURNISHED IN PENALTY PROCEEDINGS, EVENTHOUGH THERE IS NO EXPLANATION FURNISHED BY THE ASSESSEE I N PENALTY PROCEEDINGS BEFORE THE ASSESSING OFFICER. THERE IS NO PROVISION IN SECTION 271(1)(C) OF THE I.T. ACT, 1961 ALLOWING THE ASSESSEE NOT TO FURNISH EXP LANATION REQUIRED IN RESPONSE TO NOTICE U/S.271(1)(C) OF THE I.T. ACT, 1 961 TILL THE DISPOSAL OF QUANTUM APPEAL BEFORE THE LEARNED CIT(APPEALS) OR T RIBUNAL. THIS FACILITY IS MADE AVAILABLE TO THE ASSESSING OFFICER SO AS TO TA KE INTO CONSIDERATION BEFORE LEVY OF PENALTY, THE VIEW OF APPELLATE AUTHORITIES ON QUANTUM ADDITIONS. SECTION 271(1)(C) PROVIDES ARE OPTION TO THE ASSES SEE TO FURNISH AN EXPLANATION, WHEREAS SECTION 275 PRESCRIBED LIMIT ATION FOR LEVY OF PENALTY. EVENTHOUGH OF LIMITATION U/S.275(1) OR 275(1A) OR 2 75(2) DOES NOT ENABLE TO ASSESSEE NOT TO FURNISH EXPLANATION IN RESPONSE TO SHOW-CAUSE NOTICE ISSUED BY THE ASSESSING OFFICER. THERE IS ALSO NO PROVISION U/S.275 THAT LEVY OF PENALTY WILL HAVE TO BE DIFFERED BY THE ASSESSING OFFICER O N AN APPLICATION MADE BY THE ASSESSEE NOT TO LEVY PENALTY TILL THE DISPOSAL OF A PPEAL BY ITAT OR LEARNED CIT(APPEALS). ONLY REQUIREMENT IS THAT ASSESSEE WI LL BE HEARD A REASONABLE OPPORTUNITY WILL BE GIVEN BEFORE LEVY OF PENALTY. IN A CASE WHERE SHOW-CAUSE ITA NO .382/AHD/2006 SHRI MILAN R.PATEL VS. ACIT ASST.YEAR 1999-2000 - 13 - NOTICE IS ISSUED BY THE ASSESSING OFFICER BEFORE L EVY OF PENALTY, ASSESSEE DOES NOT FURNISH ANY EXPLANATION BUT REQUEST THE ASSESSI NG OFFICER TO DIFFER THE PROCEEDINGS TILL THE DISPOSAL OF QUANTUM APPEAL BY LEARNED CIT(APPEALS)/ITAT AND ASSESSING OFFICER ALSO DIVIDE S TO LEVY THE PENALTY AFTER DISPOSAL OF QUANTUM APPEAL BY LEARNED CIT(APP EALS)/ITAT, THEN BEFORE LEVY OF PENALTY AFTER RECEIPT OF THE ORDER FROM LEA RNED CIT(APPEALS)/ITAT IN QUANTUM PROCEEDINGS IT WOULD BE INCUMBENT ON ASSESS ING OFFICER TO PROVIDE A FRESH OPPORTUNITY TO THE ASSESSEE BEFORE LEVY OF PE NALTY. BUT THIS ALSO DOES NOT ENABLE THE ASSESSEE NOT TO FURNISH AN EXPLANATION I N RESPONSE TO INITIAL SHOW- CAUSE NOTICE ISSUED BY THE ASSESSING OFFICER PRIOR TO DECISION BY LEARNED CIT(APPEALS)ITAT IN QUANTUM PROCEEDINGS. ONCE NO E XPLANATION IS FURNISHED BY THE ASSESSEE AND ASSESSING OFFICER DECIDES TO CO NCLUDE THE PENALTY PROCEEDINGS PRIOR TO RECEIPT OF ORDER FORM LEARNED CIT(APPEALS)/ITAT IN QUANTUM PROCEEDINGS, THEN IT WILL BE A CASE OF NON- FURNISHING OF EXPLANATION COVERED UNDER CLAUSE A OF EXPLANATION-1 TO SECTION 271(1)(C) OF THE I.T. ACT, 1961. ACCORDINGLY, WE HOLD THAT ASSESSEE IS GUILTY OF CONTUMACIOUS CONDUCT AND IN ADDITION HIS CASE FALLS WITHIN THE EXPLANATI ON-1 TO SECTION 271(1)(C) OF THE I.T. ACT, 1961. 12. WE, HOWEVER, NOTICE THAT INCOME FINALLY ASSE SSED HAS BEEN REDUCED BY THE TRIBUNAL VIDE ITS ORDER DATED 20/03/2007 IN QU ANTUM PROCEEDINGS, WHEREIN TOTAL INCOME HAS BEEN WORKED OUT AT 10% OF TOTAL RE CEIPTS. THE TOTAL RECEIPTS ITA NO .382/AHD/2006 SHRI MILAN R.PATEL VS. ACIT ASST.YEAR 1999-2000 - 14 - DECLARED BY THE ASSESSEE ARE RS.46.16 LAKHS. TOTAL INCOME THEREON, THUS, COMES TO RS.4,61,600/- AS AGAINST DECLARED INCOME O F RS.2,93,394/-. THE ASSESSING OFFICER WILL CALCULATE MINIMUM PENALTY LE VIABLE IN ACCORDANCE WITH THE INCOME DECLARED AND THE INCOME ASSESSED, AFTER GIVING APPEAL EFFECT TO THE ORDER OF THE TRIBUNAL. WE, THEREFORE, CONFIRM THE ORDER OF THE LEARNED CIT(APPEALS) BUT MODIFY QUANTUM OF PENALTY AS ABOV E. 13. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER SIGNED, DATED AND PRONOUNCED IN THE COURT ON 13/11/2009. SD/- SD/- ( T.K.SHARMA ) ( D.C.AGRAWAL ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD; DATED 13 / 11 /2009 T.C. NAIR COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE LD. CIT(APPEALS)-V, BARODA 5. THE DR, AHMEDABAD BENCH 6. THE GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT.REGISTRAR), ITAT, AHMEDABAD