The DCIT, Circle-4, Baroda V. M/s. S.I. Works Quarry Pvt.Ltd., Baroda

ITA 455/AHD/2012

• Counselvise Citation: 45520514 RSA 2012
• Duration Of Justice: 3 year(s) 7 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-09-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 31-08-2015
• Assessment Year: 2005-2006
• Appeal Filed On: 17-02-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DINESH SINGH
• Keywords: Initiation of penalty proceedings; Wrong claim; Bad and doubtful debts; Bonafide mistake
• Section: 143(3); 27

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD A BENCH BEFORE: S H RI ANIL CHATURVEDI , ACCOUNTANT MEMBER A ND SHR I S. S. GODARA , JUDICIAL MEMBER DEPUTY COMMISSIONER OF INCOME TAX, CIR - 4, BARODA (APPELLANT) VS M/S. S.I. QUARRY PVT. LTD, TIMBA ROAD, TAL. SAVLI, BARODA (AACCS5493C) (RESPONDENT) M/S. S.I. QUARRY PVT. LTD, TIMBA ROAD, TAL. SAVLI, BARODA (AACCS5493C) (APPELLANT) VS DEPUTY COMMISSIONER OF INCOME TAX, CIR - 4, BARODA (RESPONDENT) DEPUTY COMMISSIONER OF INCOME TAX, CIR - 4, BARODA (APPELLANT) VS M/S. S.I. QUARRY PVT. LTD, TIMBA ROAD, TAL. SAVLI, BARODA (AACCS5493C) (RESPONDENT) I T A N O . 48 / A HD/20 12 A SSESSMENT YEAR 200 2 - 03 CO NO. 60/AHD/2012 (IN ITA NO . 48 /AHD/20 12 ) ASSESSMENT YEAR 200 2 - 03 ITA NO. 455 /AHD/20 12 A SSESSMEN T YEAR 2005 - 06 I.T.A NO S . 48 & 455 /AHD/20 12 & CO 60/AHD/2012 A.Y. 2002 - 03 &05 - 06 PAGE NO DCIT VS. M/S. S. I. QUARRY PVT. LTD 2 REVENUE BY : S H RI DINESH SINGH , SR. D . R. ASSESSE E BY: S H RI BHAVIN MARFATIA , A.R. DATE OF HEARING : 31 - 08 - 2 015 DATE OF PRONOUNCEMENT : 30 - 09 - 2 015 / ORDER P ER : S. S. GODARA , JUDICIAL MEMBER : - THESE TWO R EVENUE S AP PEAL S FOR A.Y. 2002 - 03 AND 2005 - 06 AND ASSESSEE S CROSS OBJECTION IN THE FORMER CASE, AR ISE FROM ORDER S OF THE CIT(A) - III, BARODA DATED 12 - 10 - 2011 AND 02 - 11 - 2011 PASSED IN APPEAL NO S . CAB/III - 17/ 09 - 10 AND CAB/III - 222/07 - 08, IN PROCEEDINGS UNDER SECTION 27 1(1)(C) AND 143(3) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT ; RESPECTIVELY. 2. WE PROCEED ASSESSMENT YEAR - WISE FOR THE SAKE OF CONVENIENCE AND BREVITY. THE REVENUE S FORMER APPEAL 48/AHD/2012 AND ASSESSEE S CROSS OBJECTION 60/AHD/2012 RELATE TO ASS ESSMENT YEAR 2002 - 03. THE REVENUE S SOLE SUBSTANTIVE GRIEVANCE CHALLENGES THE CIT(A) S ORDER DELETING PENALTY OF RS. 3,51,199/ - IMPOSED ON ACCOUNT OF ASSESSEE S SUPPRESSION OF SALES. THE ASSESSEE S CROSS OBJECTION PLEAD S THAT BOTH THE LOWER AUTHORITIES HAVE WRONGLY IMPOSED PENALTIES ARISING FROM DISALLOWANCES/ADDITIONS OF RS. 3,20,000/ - ON SALE OF STOR E S AND SPARES RS. 3 LACS RELATING TO REPAIR AND MAINTENANCE AND I.T.A NO S . 48 & 455 /AHD/20 12 & CO 60/AHD/2012 A.Y. 2002 - 03 &05 - 06 PAGE NO DCIT VS. M/S. S. I. QUARRY PVT. LTD 3 SHORT TERM CAPITAL GAINS OF RS. 54,67,547/ - ARISING FROM SALE OF FIXED ASSETS HAVING WRITT EN DOWN VALUE; RESPECTIVELY. 3. BOTH PARTIES REITERATE THEIR GROUNDS TO PRAY FOR ACCEPTANCE OF APPEAL AND CROSS OBJECTION. THEY ALSO SUPPORT THE CIT(A) S ORDER TO THE EXTENT IT SUPPORTS THEIR CASE. 4. THE ASSESSEE - COMPANY IS ENGAGED IN QUARRY BUSINES S, GRIT MANUFACTURING AND KAPACHI ETC. THE ASSESSING O FFICER RECORDS IN ASSESSMENT ORDER THAT IT HAS CARRIED OUT NEGLIGIBLE PRODUCTION, SOLD ITS STOCK AVAILABLE. THE ASSESSEE FILED ITS RETURN ON 28 - 10 - 2002. THE ASSESSING OFFICER NOTICED IN THE COURSE OF SC RUTINY THAT THE ASSESSEE S TURN - OVER WAS RS. 36,72,680/ - AS AGAINST COST OF GOODS TO BE RS. 46,57,824/ - . THE ASSESSEE SUBMITTED TO HAVE ENTERED INTO DISTRESS SALE OF GOODS IN STOCK, PLANT AND MACHINERY, SPARES, STORES ALONG WITH FINISHED GOODS. THE AS SESSING OFFICER OBSERVED IN ASSESSMENT ORDER DATED 30 - 03 - 2005 THAT THE ASSESSEE S CLIENT BASE WAS REGULAR SINCE IT WAS CARRYING OUT THE VERY BUSINESS FOR A LONG TIME. HE REJECTED ASSESSEE S BOOKS, AVERAGED ITS GP IN PRECEDING TWO ASSESSMENT YEARS @ 17% AN D ADDED THE SAME TO ITS COSTS OF GOODS; COMING TO RS. 56,1 1,836/ - RESULTING IN ADDITION O F RS. 19,39,768/ - ON ACCOUNT OF SUPPRESSION OF SALES. THE SECOND DISALLOWANCE/ ADDITION MADE WAS ON ACCOUNT OF SALE OF STORE AND SPARE ON ACCOUNT SALE OF STORES AND SP ARES. THE ASSESSING OFFICER REJECTED ASSESSEE S PLEA TO HAVE SOLD STORES AND SPARES FOR SCRAP VALUE IN CASH CAUSING OF RS. 21,15,296/ - ON THE GROUND OF NON FILLING I.T.A NO S . 48 & 455 /AHD/20 12 & CO 60/AHD/2012 A.Y. 2002 - 03 &05 - 06 PAGE NO DCIT VS. M/S. S. I. QUARRY PVT. LTD 4 OF QUANTITATIVE DETAILS EXCEPT CASH VOUCHERS NOT VERIFIABLE. THEREAFTER THE ASSESSING OFFI CER PROCEEDED FURTHER AND DISALLOWED YET ANOTHER ITEM OF RS. 3,03,815/ - CLAIMED UNDER REPAIR AND MAINTENANCE TO THE RUNE OF RS. 3 LACS BY HOLDING IT ONLY A GENERAL ENTRY WITHOUT ANY DETAILS IN SUPPORT THEREOF. THE CASE FILE FURTHER REVEALS THAT THE ASS ESSING OFFICER ADDED LAST AMOUNT OF SHORT TERM CAPITAL GAINS TO THE TUNE OF RS. 54,67,547/ - UNDER SECTION 50 OF THE ACT. THIS COMPRISED OF A SUM OF RS. 4,86,650/ - QUA FACTORY BUILDING AND RS. 49,80,897/ - RELATING TO PLANT AND MACHINERY. THE ASSESSEE SOLD THE ABOVE STATED ASSETS, REDUCED SALE CONSIDERATION AGAINST WDV OF THE RESPECTIVE BLOCK OF ASSET RESULTING IN SURPLUS WHICH IN TURN WAS FURTHER ADJUSTED AGAINST WDV OF OTHER BLOCKS OF ASSETS. THE ASSESSING OFFICER ACCORDINGLY FRAMED A REGULAR ASSESSMENT MA KING ALL ABOVE STATED DISALLOWANCES/ADDITIONS. HE INITIATED IMPUGNED PENALTY PROCEEDINGS AS WELL ALLEGING CONCEALMENT AND FURNISHING OF INACCURATE PARTICULARS OF INCOME AGAINST THE ASSESSEE. 5 THE ASSESSEE PREFERRED APPEAL. THE CIT(A) IN HIS ORDER DAT ED 27 - 09 - 2007 PARTLY ACCEPTED ITS CORRESPONDING GROUND RELATING TO SUPPRESSION OF SALES. HE OBSERVED THAT ASSESSEE S CONDUCT OF SELLING ALL OF ITS STOCK DEMONSTRATED REGULAR TRANSACTIONS THROUGHOUT THE YEAR AND NOT DISTRESS SALE. HOWEVER, HE REDUCED THE IMPUGNED ADDITION OF RS. 19,39,768/ - (SUPRA) TO THAT OF RS. 9,83,756/ - ARISING FROM DIFFERENCE BETWEEN COST OF GOODS AMOUNTING TO RS. 46,57,824/ - AS I.T.A NO S . 48 & 455 /AHD/20 12 & CO 60/AHD/2012 A.Y. 2002 - 03 &05 - 06 PAGE NO DCIT VS. M/S. S. I. QUARRY PVT. LTD 5 REDUCED BY THE SALE PRICE OF RS. 36,72,068/ - FOR WANT OF SUBSTANTIATION OF CLAIM. THE CIT(A) CONFIRMED THE OTHER TWO ADDITION ON SALE AND STORES/SPARES AND THE ONE PERTAINING TO REPAIRS AND MAINTENANCE (SUPRA). WE FIND THAT THE ASSESSEE HAD NOT CHALLENGED THE SHORT TERM CAPITAL GAI NS ADDITION BEFORE THE CIT(A). QUANTUM PROCEEDINGS ACCORDINGLY APPEAR TO HAVE ATTAINED FINALITY. EVEN THE ASSESSEE IS FAIR ENOUGH IN NOT DISPUTING THIS FACTUAL POSITION. 6. WE COME PENALTY PROCEEDINGS NOW. THE ASSESSEE DOES NOT SEEM TO HAVE OFFERED ANY EXPLANATION. THE ASSESSING OFFICER HEAVILY RELIED ON SCRUTINY DEVELOPMEN T AND FINDINGS THEREIN FOR TREATING THE ABOVE STATED DISALLOWANCES /ADDITIONS AS AN INSTANCE OF CONCEALMENT AND FURNISHING OF INACCURATE PARTICULARS OF INCOME AS PROVIDED U/S. 271(1) (C) . THIS RESULTED IN THE IMPUGNED PENALTY OF RS. 11,36,181/ - VIDE ORDER D ATED 30 - 03 - 2009. 7. THE ASSESSEE AN APPEAL. THE CIT(A) IN ORDER UNDER CHALLENGE DELETES PENALTY SUM OF RS. 3,51,191/ - PERTAINING TO SUPPRESSION OF SALE ADDITION OF RS. 9,83,756/ - (SUPRA) AND AFFIRMS ALL OTHER PENALTIES ARISING FROM DISALLOWANCES/ADDITI ONS OF SALE OF STORES AND SPARES, REPAIR MAINTENANCE AND SHORT TERM CAPITAL GAINS. IN THIS BACKDROP OF FACTS THAT THE REVENUE HAS FILED ITS APPEAL AND ASSESSEE PREFERS CROSS OBJECTION TO THE EXTENT INDICATED IN PRECEDING PARAGRAPHS. 8. WE HAVE HEARD BO TH THE PARTIES AND PERUSED THE CASE FILE. THE FIRST THREE ADDITIONS PERTAINING TO THIS LIS ARE OF SUPPRESSION OF SALES, I.T.A NO S . 48 & 455 /AHD/20 12 & CO 60/AHD/2012 A.Y. 2002 - 03 &05 - 06 PAGE NO DCIT VS. M/S. S. I. QUARRY PVT. LTD 6 SALE OF STORES AND SPARES AND REPAIRS AND MAINTEN AN CE. THE ASSESSING OFFICER HIMSELF OBSERVES IN ASSESSMENT ORDER THAT THE ASSESSEE - CO MPANY CARRIED OUT NEGLIGIBLE PRODUCTION AND SOLD ITS STOCK OF GOODS AVAILABLE AT THE BEGINNING OF TH E YEAR. HE FURTHER DISCUSSES THE FACT THAT IT HAS SOLD OUT ITS PLANT AND MACHINERY WITH SA ME MOVABLE/IMMOVABLE ASSETS. THIS GIVES CREDENCE TO ASSESSE E S P LEA O F HAVING ENTERED INTO DISTRESS SALE. BOTH THE AUTHORITIES BELOW HAVE PROCEEDED ON DIFFERENT CRITERIA FOR MAKING THE FIRST ADDITION OF SUPPRESSION OF SALES (SUPRA). THE OTHER DISALLOWANCE/ ADDITIONS OF LOSS ARISING FROM SALE STORES/SPARES AND REPAIR A ND MAINTENANCE HAVE BEEN MADE DUE TO UNVERIFIABLE CASH VOUCHERS AND SUPPORTIVE EVIDENCE; RESPECTIVELY. THERE IS NO DISPUTE ABOUT THE TRITE PROPOSITION OF LAW THAT QUANTUM AND PENALTY PROCEEDINGS ARE ON SEPARATE FOOTING AND EACH AND EVERY DISALLOWANCE/ADDI TION DOES NOT NECESSARILY RESULTING IN IMPOSITION SECTION 271(1) PENALTY AS HELD BY HON BLE A PEX COURT IN CIT VS. RELIANCE PETRO - PRODUCTS 322 ITR 158 (SC). WE FOLLOW THE SAME REASONING AND AFFIRMS THE CIT(A) S ORDER IN REVENUE S APPEAL AND REVERSE THE LO WER APPELLATE ORDER UNDER CHALLENGE TO THE EXTENT OF PENALTIES CORRESPONDING TO THE ADDITIONS OF LOSS ON ACCOUNT OF SALE OF STORES AND SPARES AND REPAIRS/MAINTENANCE. 9. THIS LEAVES US WITH THE ASSESSEE S THIRD SUBSTANTIVE GROUND IN ITS CROSS OBJECTION CHALLENGES PENALTY CORRESPONDING TO SHORT TERM CAPITAL GAIN ADDITION OF RS. 54,67,547/ - MADE IN THE COURSE OF I.T.A NO S . 48 & 455 /AHD/20 12 & CO 60/AHD/2012 A.Y. 2002 - 03 &05 - 06 PAGE NO DCIT VS. M/S. S. I. QUARRY PVT. LTD 7 ASSESSMENT . THE CIT(A) S FINDINGS UNDER CHALLENGE QUA THIS ISSUE READ AS FOLLOWS: 6.4 . THE LAST GROUND ON WHICH PENALTY HAS BEEN LEVIED REL ATES TO COMPUTATION OF SHORT TERM CAPITAL GAIN. IT WAS NOTED BY THE ASSESSING OFFICER THAT THE ASSESSEE HAD SOLD ASSETS FALLING IN BLOCK OF BUILDING, PLANT AND MACHINERY AND VEHICLES. AFTER REDUCTION OF SALES CONSIDERATION OUT OF WDV OF RESPECTIVE BLOCK, T HERE WAS SURPLUS OF SALES CONSIDERATION. THE ASSESSEE ADJUSTED SURPLUS TO THE WDV OF OTHER BLOCK OF ASSETS INSTEAD OF SHOWING THE SAME AS SHORT TERM CAPITAL GAIN. HE HELD THAT AS PER THE PROVISIONS OF SECTION 50 OF THE INCOME TAX ACT, IF SALES CONSIDERATIO N OF ANY ASSETS EXCEEDS FULL VALUE OF THE PARTICULAR BLOCK; SUCH EXCESS AMOUNT WOULD BE SHORT TERM CAPITAL GAIN. THE ASSESSEE HAD ADJUSTED WDV OF OTHER BLOCK ALSO AGAINST THE SURPLUS AMOUNT OF SALES CONSIDERATION OF ASSETS FALLING IN THESE BLOCKS OF ASSETS WHICH WAS OUT OF THE AMBIT OF THE PROVISIONS OF SECTION 50. AS THE ASSESSEE COULD NOT OFFER ANY EXPLANATION IN THIS REGARD, THE ASSESSING OFFICER COMP UTED THE SHORT TERM CAPITAL GAIN AT RS 54,67,547/ - . 6 .4. 1 THE APPELLANT HAS SUBMITTED DURING THE COURSE OF APPELLANT PROCEEDINGS THAT THIS WAS A MISTAKE WHILE COMPUTING THE SHORT TERM CAPITAL GAINS. IT IS NOT A CASE OF SUPPRESSION OF SHORT TERM CAPITAL GAINS BUT A BONAFIDE MISTAKE WHICH HAD KEPT IN WHILE PREPARING THE RETURN OF INCOME. 6.4.2 I HAVE CONSID ERED THE APPELLANT'S SUBMISSION. THE COMPUTATION MADE BY THE APPELLANT OF SHORT TERM CAPITAL GAIN IS LEGALLY UNJUSTIFIED AND NOT TENABLE. THE CORRECT FACTS CAME TO NOTICE ONLY AFTER THE A.O. VERIFIED THE FACTS. THE APPELLANT ON ITS OWN DID NOTHING TO BRING TO LIGHT THIS ALLEGED MISTAKE. THE APPELLANT HAD ALSO NOT BEEN ABLE TO EXPLAIN AS TO UNDER WHAT CIRCUMSTANCES AND DUE TO WHOSE FAULT THE SHORT TERM CAPITAL GAME WAS NOT SHOWN IN THE RETURN OF INCOME. UNDER SUCH CIRCUMSTANCES, THE LEVY OF PENALTY BY THE AO ON THIS AMOUNT IS CORRECT. 6.4.3 ON THE BASIS OF ABOVE FACTS, IT IS EVIDENT THAT THE APPELLANT HAD NOT SHOWN THE CORRECT SHORT TERM CAPITAL GAINS BY FILING INACCURATE PARTICULARS. THE APPELLANT HAS NOT FILED ANY EXPLANATION AS TO WHY SUCH TYPES OF CLAIM S WERE MADE BY IT IN ITS RETURN OF INCOME EXCEPT CLAIMING THAT IT WAS A MISTAKE. HENCE, THE P ENALTY IMPOSED I.T.A NO S . 48 & 455 /AHD/20 12 & CO 60/AHD/2012 A.Y. 2002 - 03 &05 - 06 PAGE NO DCIT VS. M/S. S. I. QUARRY PVT. LTD 8 BY A.O. U/S 271(1 )(C) IS CORRECT. THIS IS AS PER THE RATIO LAID DOWN IN THE FOLLOWING DECISIONS: (A) DECISION OF HON'BLE DELHI HIGH COURT IN THE CASE OF ZOOM COMMUNICATION PVT. LTD. [191 TAXMAN 179(DELHI)] (B) DECISION OF ITAT, AHMEDABAD IN THE CASE OF GUJARAT STATE FINANCE CORPORATION LTD 39 SOT 570(AHD). IN BOTH THE DECISIONS, IT HAS BEEN HELD THAT WHEN AN APPELLANT MAKES A LEGALLY UNT ENABLE AND WHOLLY UNSUSTAINABLE CLAIM IN ITS RETURN OF INCOME, THEN, PENALTY U/S 271(L)(C) CAN BE IMPOSED. 6.4.4 HON'BLE DELHI HIGH COURT IN THE CASE OF ZOOM COMMUNICATIONS PVT LTD. REPORTED IN 191 TAXMAN 179 (DELHI) HAS HELD THAT THE RATIO OF HON'BLE SC DECISION IN THE CASE OF RELIANCE PETROPRODUCTS PVT LTD. IS NOT APPLICABLE IN THE PRESENT TYPE OF CASES. THE HON'BLE HC HAS HELD AS FOLLOWS: '19. IT IS TRUE THAT MERE SUBMITTING A CLAIM WHICH IS INCORRECT IN LAW WOULD NOT AMOUNT TO GIVING INACCURATE PARTI CULARS OF THE INCOME OF THE APPELLANT, BUT IT CANNOT BE DISPUTED THAT THE CLAIM MADE BY THE APPELLANT NEEDS TO BE BONA FIDE. IF THE CLAIM BESIDES BEING INCORRECT IN LAW IS MALA FIDE, EXPLANATION 1 TO SECT/ON 271(1) WOULD COME INTO PLAY AND WORK TO THE DISA DVANTAGE OF THE APPELLANT. 20. THE COURT CANNOT OVERLOOK THE FACT THAT ONLY A SMALL PERCENTAGE OF THE INCOME - TAX RETURNS ARE PICKED UP FOR SCRUTINY, IF THE APPELLANT MAKES A CLAIM WHICH IS NOT ONLY INCORRECT IN LAW BUT IS ALSO WHOLLY WITHOUT ANY BASIS AND THE EXPLANATION FURNISHED BY HIM FOR MAKING SUCH A CLAIM IS NOT FOUND TO BE BONA FIDE, IT WOULD BE DIFFICULT TO SAY THAT HE WOULD STILL NOT BE LIABLE TO PENALTY UNDER SECTION 271(L)(C) OF THE ACT. IF WE TAKE THE VIEW THAT A CLAIM WHICH IS WHOLLY UNTENABLE IN LAW AND HAS ABSOLUTELY NO FOUNDATION ON WHICH IT COULD BE MADE, TH E APPELLANT WOULD NOT BE LIABLE TO IMPOSITION OF PENALTY, EVEN IF HE WAS NOT ACTING BONA FIDE WHILE MAKING A CLAIM OF THIS NATURE, THAT WOULD GIVE A LICENSE TO UNSCRUPULOUS APPELLANTS TO MAKE WHOLLY UNTENABLE AND UNSUSTAINABLE CLAIMS WITHOUT THERE BEING ANY BASIS FOR MAKING THEM, IN THE HOPE THAT THEIR RETURN WOULD NOT BE PICKED UP FOR SCRUTINY AND THEY WOULD BE ASSESSED ON THE BASIS OF SELF - ASSESSMENT UNDER SECTION 143(1) OF THE ACT AND EVEN IF THEIR CASE IS SELECTED FOR SCRUTINY, THEY CAN GET AWAY MERELY BY PAYING THE TAX, I.T.A NO S . 48 & 455 /AHD/20 12 & CO 60/AHD/2012 A.Y. 2002 - 03 &05 - 06 PAGE NO DCIT VS. M/S. S. I. QUARRY PVT. LTD 9 WHICH IN ANY CASE, WAS PAYABLE BY THEM. THE CONSEQUENCE WOULD BE THAT THE PERSONS WHO MAKE CLAIMS OF THIS NATURE, ACTUATED BY A MALA FIDE INTENTION TO EVADE TAX OTHERW ISE PAYABLE BY THEM WOULD GET AWAY WITHOUT PAYING THE TAX LEGALLY PAYABLE BY THEM' 6.4.5 SIMILARLY HON'BLE AHMADABAD ITTA IN ITS DECISION IN THE CASE OF GUJARAT STATE FINANCIAL CORPORATION (SUPRA) HAS HELD AS FOLLOWS: '5.2 AS IS EVIDENT FROM THE AFORESAI D CLAUSE (C) OF SECT/ON 271(1) OF THE ACT, THE WORDS USED ARE 'HAS CONCEALED THE PARTICULARS OF HIS INCOME' OR FURNISHED JRATE PARTICULARS OF SUCH INCOME'. THUS, BOTH IN CASE OF CONCEALMENT AND INACCURACY, THE PHRASE 'PARTICULARS OF INCOME' HAS BEEN USED. THE LEGISLATURE HAS NOT USED THE WORDS 'CONCEALED HIS INCOME'. FROM THIS IT WOULD BE APPARENT THAT PENAL PROVISION WOULD OPERATE WHEN THERE IS A FAILURE TO DISCLOSE FULLY OR TRULY ALL THE PARTICULARS. THE WORDS 'PARTICULARS OF INCOME' REFER TO THE FACTS WH ICH LEAD TO THE CORRECT COMPUTATION OF INCOME IN ACCORDANCE WITH THE PROVISIONS OF THE ACT. SO WHEN ANY FACT MATERIAL TO THE DETERMINATION OF AN ITEM AS INCOME OR MATERIAL TO THE CORRECT COMPUTATION IS NOT FILED OR THAT WHICH IS FILED IS NOT ACCURATE THEN THE APPELLANT WOULD BE LIABLE TO PENALTY UND ER SECTION 271(1 )(C) OF THE ACT. IN THE INSTANT CASE, THE ID, CIT(A) UPHELD THE LEV Y OF PENALTY UNDER SECTION 271(1 )(C) OF THE ACT SINCE THE APPELLANT FURNISHED INACCURATE PARTICULARS OF THE INCOME BY CLAIMING P ROVISION FOR BAD DEBTS AND PROVISION FOR DIMINUTION OF INVESTMENTS IN VIOLATION OF PROVISIONS OF THE ACT. RATHER THE PROVISIONS OF THE ACT EXPRESSLY DEBAR DEDUCTION OF SUCH PROVISION FOR BAD DEBTS AND PROVISION FOR DIMINUTION OF INVESTMENTS. THE EXPRESSION 'HAS CONCEALED THE PARTICULARS OF INCOME' AND 'HAS FURNISHED INACCURATE PARTICULARS OF INCOME' HAVE NOT BEEN DEFINED EITHER IN SECTION 271 OR ELSEWHERE IN THE ACT. HOWEVER, NOTWITHSTANDING THE DIFFERENCE IN THE TWO CIRCUMSTANCES, IT IS NOW WELL ESTABLISHE D THAT THEY LEAD TO THE SAME EFFECT NAMELY, KEEPING OFF A CERTAIN PORTION OF THE INCOME FROM THE RETURN. ACCORDING TO LAW LEXICON, THE WORD 'CONCEAL' MEANS : 'TO HIDE OR KEEP SECRET. THE WORD 'CONCEAL' IS CON+CE/ARE WHICH IMPLIES TO HIDE. IT MEANS TO HIDE OR WITHDRAW FROM OBSERVATION; TO COVER OR KEEP FROM SIGHT; TO PREVENT THE DISCOVERY OF; TO WITHHOLD KNOWLEDGE OF. THE OFFENCE OF CONCEALMENT IS, THUS, A DIRECT ATTEMPT TO HIDE AN ITEM OF INCOME OR A PORTION THEREOF FROM THE KNOWLEDGE OF THE INCOME - TAX AUTH ORITIES.' IN WEBSTER'S DICTIONARY, 'INACCURATE' HAS BEEN DEFINED AS : 'NOT ACCURATE, NOT EXACT OR CORRECT; NOT ACCORDING TO TRUTH; ERRONEOUS ; AS AN INACCURATE STATEMENT, COPY OR TRANSCRIPT.' I.T.A NO S . 48 & 455 /AHD/20 12 & CO 60/AHD/2012 A.Y. 2002 - 03 &05 - 06 PAGE NO DCIT VS. M/S. S. I. QUARRY PVT. LTD 10 5.3 IF THE DISCLOSURE OF FACTS IS INCORRECT OR FALSE TO THE KN OWLEDGE OF THE APPELLANT AND IT IS ESTABLISHED, THEN SUCH DISC LOSURE CANNOT TAKE IT OUT FROM THE P URVIEW OF THE ACT OF CONCEALMENT OF PARTICULARS OR FURNISHING INACCURATE PARTICULARS THEREOF FOR THE PURPOSE OF LEVY OF PENALTY. THE PENALTY UNDER SECTION 271 (1 )(C) OF THE ACT IS LEVIABLE IF THE ASSESSING OFFICER IS SATISFIED IN THE COURSE OF ANY PROCEEDINGS UNDER THIS ACT THAT ANY PERSON HAS CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHED INACCURATE PARTICULARS OF SUCH INCOME. HERE WE MAY POINT OUT THAT T HE DECISIONS RELIED UPON BY THE APPELLANT ON THE ISSUE OF RECORDING OF SATISFACTION BY THE ASSESSING OFFICER BEFORE INITIATING PENALTY PROCEEDINGS UNDER SECTION 271(1 )(C) OF THE ACT ARE NO LONGER RELEVANT IN VIEW OF SUB - SECTION (IB) INSERTED IN SECTION 271 OF THE ACT BY FINANCE ACT, 2008. THE SAID PROVISION PURPORTS TO CREATE A FICTION BY WHICH SATISFACTION OF THE ASSESSING OFFICER IS DEEMED TO HAVE BEEN RECORDED IN CASES WHERE AN ADDITION OR DISALLOWANCE IS MADE BY THE ASSESSING OFFICER AND A DIRECTION FOR INITIATION OF PENALTY PROCEEDINGS IS ISSUED. THE SAID PROVISION IS MADE EFFECTIVE RETROSPECTIVELY WITH EFFECT FROM 1 - 4 - 1989. THE ID, AR ON BEHALF OF THE APPELLANT HAS NOT EXPLAINED AS TO HOW THE DECISIONS RELIED UPON BY HIM REGARDING RECORDING OF SATISFAC TION WERE RELEVANT IN VIEW OF THE SAID PROVISIONS OF SECTION 271(1B) OF THE ACT. IT IS WELL ESTABLISHED THAT SO LONG AS THE APPELLANT HAS NOT CONCEALED ANY MATERIAL FACT OR THE FACTUAL INFORMATION GIVEN BY HIM HAS NOT BEEN FOUND TO BE INCORRECT, HE WILL N OT BE LIABLE TO IMPOSITION OF PENALTY UNDER SECTI ON 271(1 )(C) OF THE ACT, EVEN IF THE CLAIM MADE BY HIM IS NOT SUSTAINABLE IN LAW, PROVIDED THAT HE EITHER SUBSTANTIATES THE EXPLANATION OFFERED BY HIM OR THE EXPLANATION, EVEN 'IF NOT SUBSTANTIATED, IS FOUND TO BE BONA FIDE. IF THE EXPLANATION IS NEITHER SUBSTANTIATED NOR SHOWN TO BE BONA FIDE , EXPLANATION 1 TO SECTION 271(1 )(C) WOULD COME INTO PLAY AND THE APPELLANT WILL BE LIABLE TO FOR THE PRESCRIBED PENALTY. IT IS TRUE THAT MERE SUBMITTING A CLAIM WHICH I S INCORRECT IN LAW WOULD NOT AMOUNT TO GIVING INACCURATE PARTICULARS OF THE INCOME OF THE APPELLANT, BUT IT CANNOT BE DISPUTED THAT THE CLAIM MADE BY THE APPELLANT NEEDS TO BE BONA FIDE. IF THE CLAIM BESIDES BEING INCORRECT IN LAW IS MALA FIDE, EXPLANATION 1 TO SECTION 271(1) COMES INTO PLAY AND WORK TO THE DISADVANTAGE OF THE APPELLANT. IN THE PRESENT CASE, DESPITE THE FACT THAT PROVISION FOR BAD AND DOUBTFUL DEBTS WAS EXPRESSLY MADE NOT DEDUCTIBLE IN IS OF THE REL EVANT PROVISIONS OF SECTION 36(1 )(VII) OF THE ACT, THE APPELLANT CLAIMED THE DEDUCTION, EVEN WHEN THE AMOUNT HAD NOT BEEN WRITTEN OFF. WE CANNOT OVERLOOK THE FACT THAT ONLY A SMALL PERCENTAGE OF THE I.T.A NO S . 48 & 455 /AHD/20 12 & CO 60/AHD/2012 A.Y. 2002 - 03 &05 - 06 PAGE NO DCIT VS. M/S. S. I. QUARRY PVT. LTD 11 INCOME - TAX RETURNS ARE PICKED UP FOR SCRUTINY. IF THE APPELLANT MAKES A CLAIM WHICH IS NOT ONLY INC ORRECT IN LAW BUT IS ALSO WHOLLY WITHOUT ANY BASIS AND THE EXPLANATION FURNISHED BY HIM FOR MAKING SUCH A CLAIM IS NOT FOUND TO BE BONA FIDE, IT WOULD BE DIFFICULT TO SAY THAT HE WOULD STILL NOT BE LIABL E TO PENALTY UNDER SECTION 271(1 )(C) OF THE ACT. IF W E TAKE THE VIEW, THAT A CLAIM WHICH IS WHOLLY UNTENABLE IN LAW AND HAS ABSOLUTELY NO FOUNDATION ON WHICH IT COULD BE MADE, THE APPELLANT WOULD NOT BE LIABLE TO IMPOSITION OF PENALTY, EVEN IF HE WAS NOT ACTING BONA FIDE WHILE MAKING A CLAIM OF THIS NATURE, THAT WOULD GIVE A LICENSE TO UNSCRUPULOUS APPELLANTS TO MAKE WHOLLY UNTENABLE AND UNSUSTAINABLE CLAIMS WITHOUT THERE BEING ANY BASIS FOR MAKING THEM, IN THE HOPE THAT THEIR RETURN WOULD NOT BE PICKED UP FOR RUTINY AND THEY WOULD BE ASSESSED ON THE BASIS OF SELF ASSESSMENT UNDER SECTION 143(1) OF THE ACT AND EVEN IF THEIR CASE IS SELECTED FOR SCRUTINY, THEY CAN GET AWAY MERELY BY PAYING THE TAX, WHICH IN ANY CASE, WAS PAYABLE BY THEM. THE CONSEQUENCE WOULD BE THAT THE PERSONS WHO MAKE CLAIMS OF THIS NATURE, ACTUATED BY AN INTENTION TO EVADE TAX OTHERWISE PAYABLE BY THEM WOULD GET AWAY WITHOUT PAYING THE TAX LEGALLY PAYABLE BY THEM, IF THEIR CASES ARE NOT PICKED UP FOR SCRUTINY. THIS WOULD TAKE AWAY THE DETERRENT EFFECT, WHICH THESE PENALTY PROVISIONS IN THE A CT HAVE. WE FIND THAT THE APPELLANT BEFORE US DID NOT EXPLAIN EITHER TO THE ASSESSING OFFICER/ID. CIT(A) AND EVEN TO US AS TO IN WHAT CIRCUMSTANCES AND ON ACCOUNT OF WHOSE MISTAKE, THE AMOUNTS CLAIMED AS DEDUCTIONS IN THIS CASE WERE NOT ADDED BACK, WHILE C OMPUTING THE INCOME OF THE APPELLANT COMPANY. WE CANNOT IGNORE THE FACT THAT THE APPELLANT IS A COMPANY WHICH IS HAVING PROFESSIONAL ASSISTANCE IN COMPUTATION OF ITS INCOME, AND ITS ACCOUNTS ARE COMPULSORILY SUBJECTED TO AUDIT. IN THE ABSENCE OF AN Y DETAIL S/EXPLANATION FROM THE AP PELLANT, WE FAIL TO APPRECIATE HOW SUCH DEDUCTIONS COULD HAVE BEEN LEFT OUT COMPUTING THE INCOME OF THE APPELLANT COMPANY AND HOW IT COULD ALSO HAVE ESCAPED THE ATTENTION OF THE AUDITORS OF, ESPECIALLY WHEN THE DEDUCTION FOR PROVIS ION FOR BAD AND DOUBTFUL DEBTS AND PROVISIONS FOR DIMINUTION IN VALUE IF INVESTMENTS WERE CLAIMED IN FLAGRANT VIOLATION OF PROVISIONS OF LAW. IN THESE CIRCUMSTANCES, ESPECIALLY WHEN EXPLANATION GIVEN BY THE APPELLANT DURING THE PENALTY PROCEEDINGS HAS NOT BE EN SUBSTANTIATED NOR FOUND TO BE BONA FIDE AND THERE IS NO MATERIAL BEFORE US TO TAKE A DIFFERENT VIEW IN THE MATTER, WE ARE OF THE OPINION THAT THE ID, CIT(A) WAS JUSTIFIED IN UPHOLDING THE LEVY OF PENALTY ON ACCOUNT OF FURNISHING OF INACCURATE PARTICUL ARS OF INCOME IN RELATION TO I.T.A NO S . 48 & 455 /AHD/20 12 & CO 60/AHD/2012 A.Y. 2002 - 03 &05 - 06 PAGE NO DCIT VS. M/S. S. I. QUARRY PVT. LTD 12 PROVISION FOR BAD AND DOUBTFUL DEBTS AND PROVISION FOR DIMINUTION IN THE VALUE OF INVESTMENTS. IN TERM S OF PROVISIONS OF SECTION 271(1 )(C) OF THE ACT READ WITH EXPLANATION 1 THERETO AND THE JUDICIAL PRONOUNCEMENTS IN THE CASE OF B.A, BALASUBRAMANIAM & BROS. CO. V. CIT [1999] 236 ITR 977 (SC), CIT V. B.A. BALASUBRAMANIAM & BROS. CO. [1985] 152 ITR 529 (MAD.), CIT V. MUSSADILAL RAM BHAROSE [1987] 165 ITR 14 (SC); CIT V. K.R. SADAYAPPAN [1990] 185 ITR 49 (SC); ADD/. CIT V. JEEVAN LAL SAH [1994] 205 ITR 244 (SC) AND K.P. MADHUSUDANAN V. CIT [2001] 251 ITR 99 (SC), IT I S WELL ESTABLISHED THAT WHENEVER THERE IS DIFFERENCE BETWEEN THE RETURNED AND ASSESSED INCOME, THERE IS INFERENCE OF CONCEALMENT. THE EXPLANATI ON 1 TO SECTI ON 271(1 )(C) OF THE ACT RAISES A PRESUMPTION THAT CAN BE REBUTTED BY THE APPELLANT WITH REFERENCE TO FACT S OF THE CASE. THUS, THE ONUS IS ON THE APPELLANT TO REBUT THE INFERENCE OF CONCEALMENT. THE ABSENCE OF EXPLAN ATION ITSELF WOULD ATTRACT PENALTY. THE EXPLANATION OFFERED BY THE APPELLANT SHOULD NOT BE FALSE. THE ONUS LAID DOWN UPON THE APPELLANT TO REBUT THE PRESUMPTION RAISE D UNDER EXPLANATION 1 WOULD NOT BE DISCHARGED BY ANY FANTASTIC OR FANCIFUL EXPLANATION. IT IS NOT THE LAW THAT ANY AND EVERY EXPLANATION HAS TO BE ACCEPTED. SINCE THE APPELLANT FAILED TO SUBSTANTIATE THEIR EXPLANATION IN RESPECT OF AMOUNT IN RELATION TO DISALLOWANCE ON ACCOUNT OF PROVISI ON FOR BAD AND DOUBTFUL DEBTS - RS 1,62,81,557 AND PRO VISION FOR DIMINUTION IN VALUE OF INVESTMENTS RS. 21,98,638, THE ONUS LAID DOWN UPON THE APPELLANT IN TERMS OF EXPLAN ATION 1(B) TO SECTION 271(1 )(C) OF THE ACT REMAINS UN - DISCHARGED. THE APPELLANT NEITHER SUBSTANTIATED HIS EXPLANATION NOR PROVED THAT SUCH AN EXPLANATION IS BO NA FIDE BEFORE THE LOWER AUTHORI TIES. THUS, IT CANNOT BE SAID THAT IN SUCH A CASE, THERE COULD BE NO SCOPE FOR SAYING THAT THE APPELLANT IS GUILTY OF FURNISHING OF INACCURATE PARTICULARS OF INCOME, WARRAN TING PE NALTY UNDER SECTION 271(1 )(C) OF THE ACT. EVEN IF THE ASSESSING OFFICER/CIT(A) HAVE NOT SPECIFICALLY INVOKED THE EXPLANATION 1 T O SECTION 271(1 )(C), IT HAD TO BE CONSIDERED AT THE APPELLATE STAGE IN VIEW OF DECISION OF HON'BLE BOMBAY HIGH COURT IN CIT V. S MJ BUILDERS [2003] 262 ITR 60 AND OF HON'BLE APEX COURT IN K. P. MADHUSUDANAN'S CASE (SUPRA). THERE IS NO DISCRETION ON THE ASSESSING OFFICER AS TO WHETHER HE CAN INVOKE THE EXPLANATION OR NOT. WE AGREE WITH THE FINDINGS OF THE ID. CIT(A) THAT THERE IS NO M ATERIAL IN SUPPORT OF THE CLAIM FOR DEDUCTION OF ,THE AFORESAID PROVISIONS OR FOR NOT ADDING BACK THE PROVISIONS, DEBITED TO PROFIT AND LOSS ACCOUNT WHILE PREPARING THE STATEMENT OF TOTAL INCOME.' I.T.A NO S . 48 & 455 /AHD/20 12 & CO 60/AHD/2012 A.Y. 2002 - 03 &05 - 06 PAGE NO DCIT VS. M/S. S. I. QUARRY PVT. LTD 13 7. ON THE BASIS OF ABOVE DISCUSSION, THE PENALTY LEVIED B Y THE AO ON ACCOUNT OF ADDITION OF SHORT TERM CAPITAL GAIN IS UPHELD. 10. WE HAVE GIVEN OUR THOUGHTFUL CONSIDERATION TO THE ASSESSEE S ARGUMENT THAT ITS COMPUTATION OF SHORT TERM CAPITAL GAINS IS AN ARITHMETIC MISTAKE. IT HAS COME ON RECORD THAT ASSESSE E SOLD ITS FIXED ASSETS IN QUESTION, ADJUSTED SALE CONSIDERATION THEREOF AGAINST WDV OF THE CONCERNED BLOCK RESULTING IN SURPLUS WHICH WAS FURTHER ADJUSTED AGAINST WDV OF THE OTHER BLOCK OF ASSETS. NEEDLESS TO SAY, THIS LATTER COURSE OF ACTION IS NOWHERE PRESCRIBED IN THE ACT. THEREFORE , WE OBSERVE THAT THE SAME IS MUCH MORE THAN AN ARITHMETICAL MISTAKE BEING IN THE NATURE OF RAISING ALTOGETHER A FALSE CLAIM. WE ACCORDINGLY AGREE WITH THE CIT(A) S FINDINGS RELYING UPON HON BLE DELHI HIGH COURT DECISION IN CASE OF ZOON COMMUNICATION A N D THAT OF THE TRIBUNAL IN GUJARAT STATE FINANCE CORPORATION LTD (SUPRA). THE ASSESSEE S THIRD SUBSTANTIVE GROUND IN ITS CROSS OBJECTION FAILS ACCORDINGLY. THE REVENUE S APPEAL ITA 48/AHD/2012 IS DISMISSED AND ASSESSEE S CO 60/AHD/2012 IS PARTLY ALLOWED. 11. WE COME TO ASSESSMENT YEAR 2005 - 06 INVOLVING REVENUE S APPEAL ITA 455/AHD/2012 CHALLENGING THE CIT(A) S DELETING SECTION 40A(2)( B) DISALLOWANCE OF RS. 27,74,371/ - BY HOLDING ASSESSEE S SALE MADE TO ITS ASSOCIATE CONCERN AS UNDER INVOICED TO THE ABOVE STATED EXTENT. IT IS HELD IN THE LOWER APPELLATE ORDER THAT THIS STATUTORY PROVISION APPLIES TO AN EXPENDITURE CLAIM AND NOT THAT OF AN INCOME AS HELD IN THE CASE LAW OF UNITED EXPORTS VS. CIT (2010) 229 CTR 93 (DEL) AND AC IT VS. GRAND PRIX FAB PVT LTD. (2010) 128 TTJ 60 (DEL). I.T.A NO S . 48 & 455 /AHD/20 12 & CO 60/AHD/2012 A.Y. 2002 - 03 &05 - 06 PAGE NO DCIT VS. M/S. S. I. QUARRY PVT. LTD 14 THE REVENUE FAILS TO CONTROVERT THIS LEGAL PROPOSITION IN THE COURSE OF HEARING. ITS SOLE SUBSTANTIVE GROUND IS ACCORDINGLY REJECTED. 12. THESE REVENUE S TWO APPEAL ITAS 48 AND 455/AHD/2012 ARE DISMISSED. THE ASSESSEE S CROSS OBJECTION NO . 60/AHD/2012 IN THE FORMER APPEAL IS PARTLY ALLOWED. ORDER PR ONOUNCED IN THE OPEN C OURT ON 30 - 09 - 2015 SD/ - SD/ - ( ANIL CHATURVEDI ) ( S. S. GODARA ) ACCOUNTNAT MEMBMER JUDICIAL MEMBER AHMEDABAD : DATED 30 /09 /2015 AK / COPY OF ORDER FORWARDED TO: - 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER/ , / ,