M/s. SILTEX INDIA LTD., MUMBAI V. ITO Wd. - 3(3)(2), MUMBAI

ITA 6124/MUM/2006

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 6616 (ITAT-MUMBAI)
• Duration Of Justice: 7 year(s) 5 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-04-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: I
• Next Hearing Date: 01-04-2014
• Assessment Year: misc
• Appeal Filed On: 20-11-2006
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: PITAMBER DAS
• Assessee Lawyers: A L SHARMAUSHA DALAL
• Keywords: Retrospective amendment; Initiation of penalty proceedings; Wrong claim; Bad and doubtful debts; Corroborative evidences; Reassessment proceedings
• Section: 68; 27; 144

Judgement Text

, INCOME TAX APPELLATE TRIBUNAL,MUMBAI - I BENCH. .. , ! , BEFORE S/SH.I.P.BANSAL, JUDICIAL MEM BER & RAJENDRA,ACCOUNTANT MEMBER /. ITA NO.6124/MUM/2006, ' ' ' ' # # # # / ASSESSMENT YEAR-1990-91 SILTEX INDIA LTD. HIMANK DESAI & CO. CHARTERED ACCOUNTANTS A/12, EVEREST, TARDEO, MUMBAI-400034 VS ITO WARD- (3)(3)(2), 6 TH FLOOR, AAYAKAR BHAVAN, MUMBAI-400020 PAN: AABCS5502P ( $% / APPELLANT) ( &'$% / RESPONDENT) '() '() '() '() * * * * / ASSESSEE BY : SHRI A.L.SHARMA/USHA DALAL + * / REVENUE BY : SHRI PITAMBER DAS ' ' ' ' + ++ + ), ), ), ), / DATE OF HEARING : 01-04-2014 -.# + ), / DATE OF PRONOUNCEMENT : 23-04-2014 ' ' ' ' , 1961 + ++ + 254 )1( )/) )/) )/) )/) 0 0 0 0 ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA,AM ! ! ! ! ' ' ' ' : CHALLENGING THE ORDER DT. 11.09.2006 OF THE CIT(A)- XXXII,MUMBAI,ASSESSEE-COMPANY HAS RAISED FOLLOWING GROUNDS OF APPEAL: 1.THE LD.CIT (A) ERRED IN CONFIRMING THE PENALTY O F RS.16,42.526/- LEVIED U/S.271(1) (C) OF INCOME TAX ACT,1961. 2.THE LD. CIT (A) ERRED IN RELYING ON THE RATIO LAI D DOWN BY THE HONBLE ALLAHABAD HIGH CURT IN THE CASE OF SHYAM BIRI WORKS (259 ITR 625) BY IGNOR ING THE RATIO LAID DOWN BY THE SUPREME COURT IN THE CASE OF CIT VS. ANJIDI CHETTIYAR.(44 I TR 759). 3.THE LD.CIT (A) ERRED BY NOT APPRECIATING THAT THE SATISFACTION CANNOT BE IN THE MIND OF AO,BUT MUST BE REFLECTED FROM THE RECORD. 4.THE LD. CIT (A) FAILED TO APPRECIATE THAT THE REC ORDING OF SATISFACTION IS CONDITION PRECEDENT FOR INITIATING PENALTY PROCEEDINGS U/S. 271(1)(C) O F INCOME TAX ACT, 1961. 5.THE LD.CIT (A) FAILED TO APPRECIATE THAT THE A.O. NOWHERE OBSERVED IN THE ASSESSMENT ORDER THAT PENALTY PROCEEDINGS ARE INITIATED EITHER FOR C ONCEALMENT OF THE PARTICULARS OF INCOME OR FOR FURNISHING OF INACCURATE PARTICULARS OF INCOME IN T ERMS OF SEC. 271(1)(C) OF INCOME TAX ACT, 1961. 6.THE APPELLANT SUBMITS THAT IN THE ABSENCE OF SUCH SATISFACTION, PENALTY PROCEEDINGS ARE VOID AB INITIO,AS IT IS HELD BY THE DELHI ITAT IN THE CASE OF SAROOP LAL ADLAKHA VS. DCIT (97 ITD 6) THAT RECORDING OF SATISFACTION IS A CONDITION PRECEDENT FOR INITIATING THE PENALTY PROCEEDINGS AND MERE OBSERVATION THAT PENALTY PROCEEDINGS ARE BEING INIT IATED SEPARATELY WAS NOT SUFFICIENT TO INITIATE VALID PENALTY PROCEEDINGS: 2 ITA NO. 6124/MUM/2006 SILTEX INDIA LTD. 7.THE LD. CIT (A) WRONGLY ERRED IN RELYING ON THE R ATIO LAID DOWN BY THE ALLAHABAD HIGH COURT IN THE CASE OF SHYAM BIN WORKS (259 ITR 625). THE A PPELLANT SUBMITS THAT THE LD. CIT (A) MISCONSTRUED THE PROVISIONS OF SEC.271(1)(C). 8.WITHOUT PREJUDICE TO THE ABOVE, EVEN ON MERITS TH E LD. CIT (A) OUGHT TO HAVE APPRECIATED THAT THE PENALTY PROCEEDINGS ARE SEPARATE FROM ASSESSMEN T PROCEEDINGS. THE APPELLANT SUBMITS THAT THE APPEAL OF QUANTUM PROCEEDINGS ARE STILL PENDING ON ALL ISSUES AT THE LEVEL OF ITAT AND HENCE NOT FINALLY CONCLUDED, AS A RESULT OF WHICH PENALTY APPEALS OUGHT TO HAVE KEPT IN ABEYANCE. 9.THE LD.CIT (A) FAILED TO APPRECIATE THAT MERE ADD ITION OF CASH CREDIT OF RS. 25 LACS WOULD NOT TENTAMOUNT TO CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME WHEN THE DETAILS OF CASH CREDITS WERE GIVEN TO THE AUTHORITIES. 10.THE L.D.CIT(A) FAILED TO APPRECIATE THAT EVEN ME RE DISALLOWANCE OF TRADING LOSS OF RS.3, 14, 715/-AND LOSS ON SHARE TRADING OF RS.2,17,277/-BY C IT(A)WOULD NOT TENTAMOUNT TO CONCEALMENT OF PARTICULARS OF INCOME OF FURNISHING OF INACCURAT E PARTICULARS. WHEN ALL THE DETAILS OF LOSS WERE GIVEN TO THE AUTHORITIES. 11.THE LD. CIT (A) OUGHT TO HAVE KEPT THE PENALTY A PPEAL IN ABEYANCE TILL THE QUANTUM APPEAL WAS FINALLY DECIDED BY ITAT. 12.THE APPELLANT CRAVES LEAVE TO ADD,AMEND,ALTER MO DIFY OR DELETE THE AFORESAID GROUNDS AT THE TIME OR BEFORE THE DATE OF HEARING. OUT OF THE TWELVE GROUNDS OF APPEAL GROUNDS 1-8 DEA L WITH ONE ISSUE ONLY AND THAT IS ABOUT NON RECORDING OF SATISFACTION OF INITIATING PENALTY PRO CEEDINGS BY THE AO.NEXT TWO GROUNDS ARE ABOUT PENALTY LEVIED BY THE AO WITH REGARD TO ADDITIONS M ADE BY HIM UNDER THE HEADS CASH CREDIT, BUSINESS LOSS AND LOSS ON SALE OF SHARES.LAST TWO G ROUND ARE GENERAL IN NATURE AND DO NOT REQUIRE ADJUDICATION.THUS,THERE ARE ONLY TWO EFFECTIVE TWO EFFECTIVE GROUNDS OF APPEAL. BRIEF HISTORY: ASSESSEE-COMPANY HAD FILED ITS RETURN OF INCOME ON 27.03.1992 DECLARING TOTAL INCOME OF RS.12, 500/-.ASSESSING OFFICER (AO) FINALISED THE ASSESSME NT ORDER U/S.144 OF THE ACT,DETERMINING THE TOTAL INCOME AT RS.28.49 LAKHS/-.MATTER TRAVELLED U P TO TRIBUNAL AND WAS RESTORED BACK TO THE FILE OF THE AO FOR FRESH ADJUDICATION.AO COMPLETED THE ASSESSMENT U/S.143(3)R.W.S.254 OF THE ACT AT THE TOTAL INCOME OF RS.1.08CRORES.HE MADE ADDITIONS ON ACCOUNT OF CASH CREDITS(RS.1.02 CRORES), INTEREST ON LOAN(76,502/-),TRADING LOSS(3.14 LAKHS) ,LOSS ON SHARE TRADING LOSS(2.27 LAKHS),BAD DEBTS (RS.8,811/-).AO INITIATED PENALTY PROCEEDINGS FOR CONCEALMENT OF INCOME BY FURNISHING INACCURATE PARTICULARS AS PER THE PROVISIONS OF SEC TION 271(1)(C) OF THE ACT.AO ISSUED A NOTICE U/S.274 R. W.S.271(1)(C)OF THE ACT AND KEPT IT IN A BEYANCE AS THE APPEAL BEFORE THE FIRST APPELLATE AUTHORITY (FAA)WAS PENDING.FAA PARTLY ALLOWED THE A PPEAL AND THE ASSESSEE CHALLENGED HIS ORDER BEFORE THE TRIBUNAL.VIDE ITS ORDER DATED 28.0 9.2012(ITA/1089/MUM/2005),TRIBUNAL PARTLY UPHELD THE ORDER OF THE FAA.MEANWHILE,AO GAVE A FRE SH OPPORTUNITY TO THE ASSESSEE.AFTER CONSIDERING THE SUBMISSIONS OF THE COMPANY,HE HELD THAT THE ASSESSEE HAD UNDERSTATED ITS INCOME BY RS.1.08 CRORES,THAT IT WAS LIABLE FOR PENALTY FO R THE OTHER ADDITIONS.FINALLY,HE LEVIED PENALTY OF RS.16.42 LAKHS U/S.271(1)(C) OF THE ACT. 3 ITA NO. 6124/MUM/2006 SILTEX INDIA LTD. 2.1. ASSESSEE PREFERRED AN APPEAL BEFORE THE FAA.HE CONS IDERED THE SUBMISSIONS OF THE ASSESSEE AND THE PENALTY ORDER OF THE AO.RELYING ON THE ORDE R OF SHYAM BIRI WORKS DELIVERED BY THE HONBLE ALLAHABAD HIGH COURT (259 ITR 625),FAA HELD THAT RECORDING OF SATISFACTION IN CLEAR TERMS WAS NOT PRECONDITION OF LEVYING PENALTY,THT A CAREFUL PERUSAL OF THE ASSESSMENT ORDER ITSELF MADE IT CLEAR THAT THE AO HAD CONSCIOUSLY,AFTER REC ORDING FULL AND COMPLETE FACTS,HAD INITIATED PENALTY PROCEEDINGS U/S.271(1)(C) AGAINST THE ASSES SEE,THAT THE CASES RELIED UPON BY IT WERE DIFFERENT ON FACTS,THAT THE AO HAD DISCUSSED ALL T HE RELEVANT ISSUES AND ARGUMENTS RAISED BY IT AT GREAT LENGTH IN THE PENALTY ORDER. WITH REGARD TO THE ISSUE OF CONCEALMENT OF INCOME O N ACCOUNT OF CASH CREDIT OF RS.25 LAKHS, HE HELD THAT THE ASSESSEE DID NOT FURNISH ANY EVIDENCE OR EXPLANATION IN THE FORM OF THE CONFIRMATION LETTER FROM THE CONCERNED PARTIES,THAT IT HAD FAILED TO DISCHARGE THE ONUS WHICH WAS ON IT,THAT HIS PREDECESSOR HAD ALSO CONFIRMED THE A DDITION MADE BY THE AO ON THE ISSUE IN DISPUTE.ABOUT THE DISALLOWANCE OF TRADING LOSS OF R S.3,14,715/- AND LOSS ON SHARE TRADING OF RS.2,17,277/-,HE HELD THE ASSESSEE HAD NOT FURNISHE D THE RELEVANT SUPPORTING DOCUMENTARY EVIDENCE TO SUBSTANTIATE ITS CLAIM OF LOSSES DURING THE COURSE OF ASSESSMENT PROCEEDINGS,THAT IT HAD FAILED TO DISCHARGE THE ONUS OF PROVING THE GEN UINENESS OF THE LOSS CLAIMED BY IT IN ITS RETURN OF INCOME,THAT THE AO WAS JUSTIFIED IN LEVY OF PENA LTY U/S.271(1)(C) ON THE APPELLANT FOR FURNISHING THE INACCURATE PARTICULARS OF INCOME. 2.2. BEFORE US,AUTHORISED REPRESENTATIVE(AR)SUBMITTED TH AT SECTION 271(1B)WAS BROUGHT ON STATUTE RETROSPECTIVELY,THAT LOAN TO WESTERN WAS RE PAID,THAT ASSESSEE WAS NOT ABLE TO PRODUCE THE DETAILS,THAT ASSESSEE HAD GIVEN EXPLANATION ABOUT B USINESS LOSS,THAT REJECTION OF EXPLANATION BY THE AO SHOULD NOT HAVE RESULTED IN IMPOSING PENALTY FOR CONCEALMENT.AR FURTHER RELIED UPON THE CASE OF RATANLAL AGARWAL DELIVERED BY THE HONBLE A LLAHABAD HIGH COURT AND REFERRED TO PAGE NO.45TO 48 OF THE PAPER BOOK.DEPARTMENTAL REPRESETA TIVE SUBMITTED THAT ALL THE ESSENTIAL THREE INGREDIENTS FOR PROVING GENUINENESS OF CASH CREDIT WERE MISSING WITH REGARD TO LOAN TAKEN FROM WESTERN NUTRINONTS PVT. LTD.,THAT ASSESSEE HAD FAIL ED TO PRODUCE NECESSARY FACTS IN SUPPORT OF THE BUSINESS CLAIM LOSS,THAT THE TRIBUNAL DECIDED BOTH THE ISSUES AGAINST THE ASSESSEE.HE RELIED UPON THE CASE OF MAK DATA P. LTD.(358ITR593)DELIVERED BY THE APEX COURT. 2.3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.BEFORE DECIDING THE ISSUE ON MERITS,WE WOULD LIKE TO DEAL WITH THE FIRS T EFFECTIVE GROUND OF APPEAL AND THAT IS ABOUT NON RECORDING OF SATISFACTION BY THE AO.WE FIND THA T WHILE FINALISING THE ASSESSMENT,IN PURSUAN -CE OF ORDER OF THE TRIBUNAL,AO HAD INITIATED PENAL TY PROCEEDING AND HAD ALSO ISSUED A NOTICE U/S. 274R.W.S.271(1)(C)FOR FURNISHING INACCURATE PARTICU LARS OF INCOME.WE FIND THAT ISSUE OF RECORDING OF SATISFACTION FOR IMPOSING PENALTY U/S.271(1)(C) OF THE ACT WAS DEALT BY VARIOUS HIGH COURTS.IN OUR OPINION,AFTER INTRODUCTION OF SECTION 271(1B) A MBIGUITY IN THIS REGARD HAD ENDED AND NOW THE LEGAL POSITION IS VERY CLEAR. HONBLE DELHI HIG H COURT,IN THE MATTER OF MS. MADHUSHREE GUPTA, HAS DEALT WITH,THE PROVISIONS OF SECTION 271 (1B)OF THE ACT,IN LENGTH.(317 ITR107).IN THAT MATTER AO HAD MADE CERTAIN ADDITIONS TO THE INCOME OF THE ASSESSEE AND INITIATED PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) OF THE ACT BY M AKING THE FOLLOWING ENDORSEMENT AT THE FOOT OF THE ORDER : 4 ITA NO. 6124/MUM/2006 SILTEX INDIA LTD. INITIATE PENALTY PROCEEDING UNDER SECTION 271(1)(C) OF THE INCOME-TAX ACT SEPARATELY. AO AFTER CONSIDERING THE REPLY FILED BY THE ASSESSE E,IMPOSED PENALTY U/S.271(1)(C)OF THE ACT. BEING AGGRIEVED,THE ASSESSEE PREFERRED AN APPEAL TO THE FAA,WHO SUSTAINED THE PENALTY IMPOSED BY THE AO.ASSESSEE CARRIED THE MATTER FURTHER IN AP PEAL,TO THE TRIBUNAL.THE TRIBUNAL DELETED THE PENALTY IMPOSED ON THE ASSESSEE.ONE OF THE QUESTION DECIDED BY THE TRIBUNAL WAS WHETHER PENALTY UNDER SECTION 271(1)(C) OF THE ACT COULD BE IMPOSED IN THE EVENT THE SATISFACTION ARRIVED AT BY THE AO BEFORE INITIATION OF THE PENALTY PROCE EDINGS IS NOT RECORDED BY HIM ? TRIBUNAL WAS OF THE VIEW THAT WITHOUT RECORDING SATISFACTION,BEF ORE INITIATING PENALTY PROCEEDINS,AO WAS NOT AUTHORISED TO LEVY PENALTY. DEPARTMENT CHALLENGED THE ORDER OF THE TRIBUNAL BEF ORE THE HIGH COURT.AFTER ANALYSING THE PENAL PROVISIONS OF 1922 ACT AND THE ACT HONBLE COURT DI SCUSSED THE VARIOUS AMENDMENTS MADE IN SECTION 271(1)OF THE ACT.DISCUSSING THE AMENDMENT B ROUGHT BY THE FINANCE ACT,2008,WITH REGARD TO THE SECTION 271(1B)HONBLE COURT HELD AS UNDER: THE REASONS FOR BRINGING ABOUT THE AMENDMENT ARE C ONTAINED BOTH IN THE MEMORANDUM AND IN CLAUSE 48 OF THE NOTES ON CLAUSES.BEING RELEVANT TH EY ARE EXTRACTED HERE IN BELOW (SEE [2008] 298 ITR (ST.) 67, 171, 216) : NOTES ON CLAUSES TO THE FINANCE BILL, 2008. ' CLAUSE 48 SEEKS TO AMEND SECTION 271 OF THE INCO ME-TAX ACT, WHICH RELATES TO FAILURE TO FURNISH RETURNS, COMPLY WITH NOTICES, CONCEALMENT OF INCOME , ETC. UNDER THE EXISTING PROVISIONS CONTAINED IN CHAPTER XXI THE ASSESSING OFFICER IS REQUIRED TO BE SATISFIED DURING THE COURSE OF PENALTY PROCEEDINGS. LEGISLATIVE INTENT WAS THAT SUCH A SATISFACTION WAS REQUIRED TO BE RECORDED ONLY AT THE TIME OF LEV Y OF PENALTY AND NOT AT THE TIME OF INITIATION OF PENALTY. HOWEVER, SOME OF THE JUDICIAL INTERPRETATI ONS ON THIS ISSUE ARE FAVOURING THE VIEW THAT SATISFACTION HAS TO BE RECORDED AT THE TIME OF INIT IATION OF PENALTY PROCEEDINGS ALSO. IT IS, THEREFORE, PROPOSED TO INSERT A NEW SUB-SEC TION (1B) IN SECTION 271 OF THE INCOME-TAX ACT SO AS TO PROVIDE THAT WHERE ANY AMOUNT IS ADDED OR DIS ALLOWED IN COMPUTING THE TOTAL INCOME OR LOSS OF AN ASSESSEE IN ANY ORDER OF ASSESSMENT OR R EASSESSMENT AND IF SUCH ORDER CONTAINS A DIRECTION FOR INITIATION OF PENALTY PROCEEDINGS UND ER SUB-SECTION (1), SUCH AN ORDER OF ASSESSMENT OR REASSESSMENT SHALL BE DEEMED TO CONSTITUTE SATIS FACTION OF THE ASSESSING OFFICER FOR INITIATION OF THE PENALTY PROCEEDINGS UNDER SUB-SECTION (1). THIS AMENDMENT WILL TAKE EFFECT RETROSPECTIVELY FR OM APRIL 1, 1989.' MEMORANDUM EXPLAINING PROVISIONS IN THE FINANCE BI LL, 2008 ' SATISFACTION FOR INITIATION OF PENALTY UNDER SEC TION 271(1) SUB-SECTION (1) OF SECTION 271 OF THE INCOME-TAX ACT EMPOWERS THE ASSESSING OFFICER TO LE VY PENALTY FOR CERTAIN OFFENCES LISTED IN THAT SUB-SECTION. IT IS A REQUIREMENT THAT THE ASSESSING OFFICER IS REQUIRED TO BE SATISFIED BEFORE SUCH A PENALTY IS LEVIED. THERE IS A CONSIDERABLE VARIANCE IN THE JUDICIAL OP INION ON THE ISSUE AS TO WHETHER THE ASSESSING OFFICER IS REQUIRED TO RECORD HIS SATISFACTION BEFO RE ISSUE OF PENALTY NOTICE UNDER THIS SUB- SECTION.SOME JUDICIAL AUTHORITIES HAVE HELD THAT SU CH A SATISFACTION NEED NOT BE RECORDED. 5 ITA NO. 6124/MUM/2006 SILTEX INDIA LTD. HOWEVER, THE HON`BLE DELHI HIGH COURT IN THE CASE O F CIT V. RAM COMMERCIAL ENTERPRISES LTD. [2000] 246 ITR 568 HAS HELD THAT SUCH A SATISFACTIO N MUST BE RECORDED BY THE ASSESSING OFFICER. GIVEN THE CONFLICTING JUDGMENTS ON THE ISSUE AND TH E LEGISLATIVE INTENT, IT IS IMPERATIVE TO AMEND THE INCOME-TAX ACT TO UNAMBIGUOUSLY PROVIDE THAT WH ERE ANY AMOUNT IS ADDED OR DISALLOWED IN COMPUTING THE TOTAL INCOME OR LOSS OF AN ASSESSEE I N ANY ORDER OF ASSESSMENT OR REASSESSMENT ; AND SUCH ORDER CONTAINS A DIRECTION FOR INITIATION OF PENALTY PROCEEDINGS UNDER SUB-SECTION (1), SUCH AN ORDER OF ASSESSMENT OR REASSESSMENT SHALL B E DEEMED TO CONSTITUTE SATISFACTION OF THE ASSESSING OFFICER FOR INITIATION OF PENALTY PROCEED INGS UNDER SUB-SECTION (1). AFTER CONSIDERING SUBMISSIONS OF BOTH THE SIDES AND DECIDING THE WRIT PETITIONS FILED BY THE ASSESSEE,HONBLE COURT FINALLY HELD AS UNDER : BY A DEEMING FICTION IN SECTION 271(1B) INSERTED IN THE INCOME-TAX ACT, 1961 BY THE FINANCE ACT, 2008, WITH RETROSPECTIVE EFFECT FROM APRIL 1,1 989, WHERE ANY AMOUNT IS ADDED OR DISALLOWED IN COMPUTING THE TOTAL INCOME OR LOSS OF AN ASSESSE E IN ANY ORDER OF ASSESSMENT OR REASSESSMENT AND IF SUCH ORDER CONTAINS A DIRECTION FOR INITIATI ON OF PENALTY PROCEEDINGS UNDER SUB-SECTION (1), SUCH AN ORDER OF ASSESSMENT OR REASSESSMENT SHALL B E DEEMED TO CONSTITUTE SATISFACTION OF THE ASSESSING OFFICER FOR INITIATION OF THE PENALTY PRO CEEDINGS UNDER SUB-SECTION (1) . THE LEGAL POSITION THAT POWER TO IMPOSE PENALTY UND ER SECTION 271 OF THE ACT DEPENDS UPON THE SATISFACTION OF THE INCOME-TAX OFFICER IN THE COURS E OF THE PROCEEDINGS UNDER THE ACT REMAINS THE CASE EVEN AFTER THE INSERTION OF SECTION 271(1B). P RIMA FACIE SATISFACTION OF THE ASSESSING OFFICER AS REFLECTED IN THE RECORD AS AGAINST HIS 'FINAL CO NCLUSION' SHOULD BE DISCERNIBLE CLEARLY FROM THE ORDER PASSED DURING THE COURSE OF SUCH PROCEEDINGS. THE PROVISION ONLY PROVIDES THAT AN ORDER INITIATING PENALTY CANNOT BE DECLARED BAD IN LAW ON LY BECAUSE IT STATES THAT PENALTY PROCEEDINGS ARE INITIATED, IF OTHERWISE IT IS DISCERNIBLE FROM THE RECORD, THAT THE ASSESSING OFFICER HAS ARRIVED AT PRIMA FACIE SATISFACTION FOR INITIATION OF PENAL TY PROCEEDINGS.THE ISSUE IS OF DISCERNIBILITY OF THE 'SATISFACTION' ARRIVED AT BY THE ASSESSING OFFI CER DURING THE COURSE OF PROCEEDING BEFORE HIM. SECTION 271(1)(C) HAS TO BE READ IN CONSONANCE WITH SECTION 271(1B).THE PRESENCE OF PRIMA FACIE SATISFACTION FOR INITIATION OF PENALTY PROCEEDINGS WAS AND REMAINS A JURISDICTIONAL FACT. THE CONTENTION THAT PRIMA FACIE SATISFACTION OF THE ASS ESSING OFFICER NEED NOT BE REFLECTED AT THE STAGE OF INITIATION BUT ONLY AT THE STAGE OF IMPOSITION O F PENALTY WOULD RENDER THE PROVISION ARBITRARY.THE ASSESSING OFFICER WOULD IN SUCH A SIT UATION BE IN A POSITION TO PICK A CASE FOR INITIATION OF PENALTY MERELY BECAUSE THERE IS AN AD DITION OR DISALLOWANCE WITHOUT ARRIVING AT A PRIMA FACIE SATISFACTION WITH RESPECT TO INFRACTION BY THE ASSESSEE OF CLAUSE (C) OF SUB-SECTION (1) OF SECTION 271 OF THE ACT. 'PRIMA FACIE' SATISFACTION OF THE ASSESSING OFFICER THAT THE CASE MAY DESERVE THE IMPOSITION OF PENALTY SHOULD BE DISCERNIBLE FROM THE ORDER PASSED DURING THE COURSE OF THE PROCEEDINGS.OBVIOUSLY, THE ASSESSING OFFICER WOULD ARRIVE AT A DECISION, I.E., A FINAL CONCLUSION ONLY AFTER HEARING THE ASSESSEE.THE INITIATION OF P ENALTY PROCEEDINGS CANNOT BE SET ASIDE ONLY ON THE GROUND THAT THE ASSESSMENT ORDER STATES 'PENALT Y PROCEEDINGS ARE INITIATED SEPARATELY' IF OTHERWISE, IT CONFORMS TO THE PARAMETERS SET OUT.IF THERE IS NO MATERIAL TO INITIATE PENALTY PROCEEDINGS, AN ASSESSEE WILL BE ENTITLED TO HAVE R ECOURSE TO A COURT OF LAW.ON THE OTHER HAND, IF THE ASSESSING OFFICER'S PRIMA FACIE SATISFACTION IS DISCERNIBLE FROM THE RECORD ORDINARILY, AN ASSESSEE WOULD BE REQUIRED TO APPROACH THE AUTHORIT IES UNDER THE STATUTE. 6 ITA NO. 6124/MUM/2006 SILTEX INDIA LTD. AT THE STAGE OF INITIATION OF PENALTY PROCEEDINGS T HE ORDER PASSED BY THE ASSESSING OFFICER NEED NOT REFLECT SATISFACTION VIS-A-VIS EACH AND EVERY I TEM OF ADDITION OR DISALLOWANCE IF THE OVERALL SENSE GATHERED FROM THE ORDER IS THAT A FURTHER PRO GNOSIS IS CALLED FOR. THE INTER-RELATION OF ADDITIONS OR DISALLOWANCES, IF ANY, MAY BE UNRAVELL ED ONLY AT THE CONCLUSION OF THE PENALTY PROCEEDINGS. IT WOULD BE SUFFICIENT COMPLIANCE WITH THE LAW THAT THERE IS PRIMA FACIE EVIDENCE OF CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING INACCURATE PARTICULARS OF INCOME. THIS IS SO AS THE LEGISLATURE DOES NOT ENJOIN A FULL FLEDGED I NVESTIGATION AT THE STAGE OF INITIATION OF PENALTY PROCEEDINGS. TO THAT EXTENT THE CONTENTION THAT THE PROVISION GIVES ARBITRARY POWER TO THE ASSESSING OFFICER TO PICK AND CHOSE ASSESSEES AGAIN ST WHOM PENALTY PROCEEDINGS MAY BE INITIATED EVEN THOUGH SIMILAR ADDITIONS AND DISALLOWANCES ARE MADE OR THAT EVEN THOUGH THERE ARE FIVE OR SIX ITEMS OF ADDITIONS AND DISALLOWANCES AND INFRAC TION OF CLAUSE (C) OF SECTION 271(1) IS VIS-A-VIS ONLY ONE OR TWO SUCH ITEMS OF INCOME OR DEDUCTION, NOTICE FOR INITIATION UNDER THE IMPUGNED PROVISION WILL ISSUE IN RESPECT OF ALL, IS NOT TENA BLE AS PURPORTED HARDSHIP CANNOT BE A GROUND FOR STRIKING DOWN THE PROVISION. HOWEVER, THIS WOULD NO T DEBAR AN ASSESSEE FROM FURNISHING EVIDENCE TO REBUT THE 'PRIMA FACIE' SATISFACTION OF THE ASSE SSING OFFICER, SINCE PENALTY PROCEEDING ARE NOT A CONTINUATION OF ASSESSMENT PROCEEDINGS. UNDER SECTION 271(1)(C) TO INITIATE PENALTY PROCEED INGS THE FOLLOWING PRE-REQUISITES SHOULD OBTAIN : (I) THE ASSESSING OFFICER SHOULD BE 'SATIS FIED' THAT: (A) THE ASSESSEE HAS EITHER CONCEALED PARTICULARS OF HIS INCOME ; OR (B) FURNISHED INACCU RATE PARTICULARS OF HIS INCOME ; OR (C) INFRACTED BOTH(A)AND(B).(II) THIS 'SATISFACTION' SHOULD BE AR RIVED AT DURING THE COURSE OF 'ANY' PROCEEDINGS. THESE COULD BE ASSESSMENT, REASSESSMEN T OR RECTIFICATION PROCEEDINGS, BUT NOT PENALTY PROCEEDINGS. (III) IF INGREDIENTS CONTAINED IN (I) AND (II) ARE PRESENT A NOTICE TO SHOW CAUSE UNDER SECTION 274 OF THE ACT SHALL ISSUE SETT ING OUT THEREIN THE INFRACTION THE ASSESSEE IS SAID TO HAVE COMMITTED. THE NOTICE UNDER SECTION 27 4 OF THE ACT CAN BE ISSUED BOTH DURING OR AFTER THE COMPLETION OF ASSESSMENT PROCEEDINGS, BUT THE SATISFACTION OF THE ASSESSING OFFICER THAT THERE HAS BEEN AN INFRACTION OF CLAUSE (C) OF SUB-S ECTION (1) OF SECTION 271 SHOULD PRECEDE CONCLUSION OF THE PROCEEDINGS PENDING BEFORE THE AS SESSING OFFICER. (IV) THE ORDER IMPOSING PENALTY CAN BE PASSED ONLY AFTER ASSESSMENT PROCEED INGS ARE COMPLETED. THE TIME FRAME FOR PASSING THE ORDER IS CONTAINED IN SECTION 275 OF TH E ACT. DUE COMPLIANCE WOULD BE REQUIRED TO BE MADE IN RESPECT OF THE PROVISIONS OF SECTIONS 274 A ND 275 OF THE ACT. .(II) THE POSITION OF LAW BOTH PRE AND POST-AMENDM ENT IS SIMILAR, IN AS MUCH AS, THE ASSESSING OFFICER WILL HAVE TO ARRIVE AT A PRIMA FACIE SATISF ACTION DURING THE COURSE OF PROCEEDINGS WITH REGARD TO THE ASSESSEE HAVING CONCEALED PARTICULARS OF INCOME OR FURNISHED INACCURATE PARTICULARS, BEFORE HE INITIATES PENALTY PROCEEDING S. (III) ' PRIMA FACIE' SATISFACTION OF THE ASSESSING OFFICER THAT THE CASE MAY DESERVE THE IMPOSITION OF PENALTY SHOULD BE DISCERNIBLE FROM THE ORDER PAS SED DURING THE COURSE OF THE PROCEEDINGS. OBVIOUSLY, THE ASSESSING OFFICER WOULD ARRIVE AT A DECISION, I.E., A FINAL CONCLUSION ONLY AFTER HEARING THE ASSESSEE. (IV) AT THE STAGE OF INITIATION OF PENALTY PROCEEDI NG THE ORDER PASSED BY THE ASSESSING OFFICER NEED NOT REFLECT SATISFACTION VIS-A-VIS EACH AND EV ERY ITEM OF ADDITION OR DISALLOWANCE IF OVERALL SENSE GATHERED FROM THE ORDER IS THAT A FURTHER PRO GNOSIS IS CALLED FOR. (V) HOWEVER, THIS WOULD NOT DEBAR AN ASSESSEE FROM FURNISHING EVIDENCE TO REBUT THE ' PRIMA FACIE' SATISFACTION OF THE ASSESSING OFFICER ; SIN CE PENALTY PROCEEDINGS ARE NOT A CONTINUATION OF ASSESSMENT PROCEEDINGS. [SEE JAIN BROTHERS V. UNION OF INDIA [1970] 77 ITR 107(SC)] 7 ITA NO. 6124/MUM/2006 SILTEX INDIA LTD. (VI) DUE COMPLIANCE WOULD BE REQUIRED TO BE MADE IN RESPECT OF THE PROVISIONS OF SECTIONS 274 AND 275 OF THE ACT. (VII) THE PROCEEDINGS FOR INITIATION OF PENALTY PRO CEEDING CANNOT BE SET ASIDE ONLY ON THE GROUND THAT THE ASSESSMENT ORDER STATES ' PENALTY PROCEEDI NGS ARE INITIATED SEPARATELY' IF OTHERWISE, IT CONFORMS TO THE PARAMETERS SET OUT HEREINABOVE ARE MET. WHILE DECIDING THE MATTER HONBLE COURT DISCUSSED C ONSIDERED MANY A CASES INCLUDING THE CASES OF ANJIDI CHETTIYAR AND SHAYAM BIRI WORKS,REFERRED IN THE GROUNDS OF APPEAL.IN OUR OPINION, HONBLE COURT HAS SETTLED THE LAW REGARDING RECORDI NG SATISFACTION ONCE AND FOR ALL.IT HAD TAKEN IN TO CONSIDERATION THE EARLIER JUDGMENTS OF DELHI HIG H COURT WHEREIN CONCEALMENT-PENALTY WAS DELETED BECAUSE OF NON RECORDING OF SATISFACTION. SIMILARLY,IN THE CASE OF B. DAMODAR VAMAN BALIGA JE WELLERS HONBLE KARNATAKA HIGH COURT HAS DEALT WITH THE ISSUE OF RECORDING OF SATISFACTION F OR INITIATION OF CONCEALMENT PENALTY(353 ITR 206).IN THAT MATTER PENALTY WAS IMPOSED BY THE AO U /S.271(1)(C)OF THE ACT AND SAME WAS CONFIRMED BY THE FAA AND THE TRIBUNAL.ASSESSEE CHAL LENGED THE ORDER OF THE TRIBUNAL BEFORE THE HONBLE HIGH COURT.ONE OF THE SUBSTANTIAL QUESTIONS OF LAW ADMITTED BY THE COURT READ AS UNDER: '(I) WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCE S OF THE CASE, THE TRIBUNAL IS JUSTIFIED IN CONFIRMING THE LEVY OF PENALTY IN THE ABSENCE OF RE CORDING OF SATISFACTION WITHIN THE MEANING OF SECTION 271(1)(C) BEFORE INITIATION OF THE PROCEEDI NGS UNDER SECTION 271(1)(C) OF THE ACT ? BEFORE THE HONBLE COURT IT WAS CONTENDS THAT THE O RDER OF THE TRIBUNAL AND THE LOWER AUTHORITIES WERE BAD IN LAW AND WERE LIABLE TO BE SET ASIDE,AS THERE WAS NO RECORDING OF ANY SATISFACTION WITHIN THE MEANING OF SECTION 271(1)(C) AND, HENCE, THE PROCEEDINGS INITIATED WERE BAD IN LAW. BY PLACING RELIANCE ON SECTION 271,IT WAS ARGUED TH AT THE AO HAD TO BE SATISFIED AND UNLESS THE SATISFACTION WAS BORNE OUT NO PROCEEDINGS COULD BE INITIATED THEREOF,THAT NO SATISFACTION WAS RECORDED WITH REGARD TO THE INITIATION OF THE PROCE EDINGS U/S.271(1)(C).DECIDING THE ISSUE AGAINST THE ASSESSEE,HONBLE HIGH COURT, REFERRING TO THE P ROVISIONS OF SECTION 271(1B)OF THE ACT,HELD AS UNDER: THE SAID AMENDMENT WAS INSERTED BY THE FINANCE ACT , 2008, WITH RETROSPECTIVE EFFECT FROM APRIL 1,1989.HENCE, THE SAID AMENDMENT IS APPLICABLE TO T HE CASE ON HAND. THE SAID AMENDMENT WOULD INDICATE THAT WHEREIN IN AN ORDER OF ASSESSMENT ; T HE SAME CONTAINS A DIRECTION FOR INITIATION OF PENALTY PROCEEDINGS UNDER CLAUSE (C) OF SUB-SECTION (1), SUCH AN ORDER OF ASSESSMENT OR REASSESSMENT SHALL BE DEEMED TO CONSTITUTE SATISFAC TION OF THE ASSESSING OFFICER FOR INITIATION OF THE PENALTY PROCEEDINGS.IN THE INSTANT CASE, THE PE NALTY PROCEEDINGS HAVE BEEN INITIATED IN THE REASSESSMENT PROCEEDINGS AND, HENCE, THAT ITSELF IS DEEMED TO CONSTITUTE SATISFACTION OF THE ASSESSING OFFICER IN TERMS OF SECTION 271(1B). A READING OF SECTION 271(1B) CLEARLY SHOWS THAT THE SATISFACTION OF THE AUTHORITY IS A DEEMED SATISFACTION WHEN IN AN ORDER OF ASSESSMENT OR REAS SESSMENT A DIRECTION FOR INITIATION OF PENALTY PROCEEDINGS IS MADE.HENCE, THE CONTENTION OF THE AP PELLANT THAT RECORDING OF A SATISFACTION IS ABSENT IN THE INSTANT CASE IS WHOLLY WITHOUT REASON . IN TERMS OF SECTION 271(1B), THE SATISFACTION BEING A DEEMED SATISFACTION, THE QUESTION OF RECORD ING OF SATISFACTION WITHIN THE MEANING OF SECTION 271(1)(C) DOES NOT ARISE FOR CONSIDERATION. ACCORDINGLY,QUESTION NO. 1 IS ANSWERED IN FAVOUR OF THE REVENUE AND AGAINST THE ASSESSEE. 8 ITA NO. 6124/MUM/2006 SILTEX INDIA LTD. RECENTLY,HONBLE APEX COURT HAS DEALT THE SAME ISSU E,WHILE DECIDING THE MATTER OF MAK (SUPRA).UPHOLDING THE ORDER OF THE HONBLE DELHI CO URT,HONBLE COURT HAS HELD AS UNDER: ASSESSING OFFICER HAS TO SATISFY WHETHER THE PENAL TY PROCEEDINGS BE INITIATED OR NOT DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS AND THE ASSESS ING OFFICER IS NOT REQUIRED TO RECORD HIS SATISFACTION IN A PARTICULAR MANNER OR REDUCE IT IN TO WRITING. FROM THE ABOVE IT IS CLEAR THAT IT IS NOT NECESSARY FOR THE AO TO MENTION THE SATISFACTION IN A PARTICULAR MANNER.WHAT IS IMPORTANT IS HIS SATISFAC TION TO INITIATE PENALTY PROCEEDINGS.IN THE CASE UNDER CONSIDERATION,AO HAS MENTIONED THE FACT OF IN ITIATION OF PENALTY U/S.271(1) (C) OF THE ACT IN HIS ASSESSMENT ORDER.HIS PRIMA FACIE SATISFACTIO N,FOR IMPOSING PENALTY IS CLEARLY VISIBLE FROM THE BOTH THE ORDERS-I.E.ASSESSMENT ORDER AND PENALT Y ORDER.THEREFORE,IN OUR OPINION,GROUNDS NO.1-8 DESERVE TO BE DISMISSED. 3. NOW,WE WOULD LIKE TO DISCUSS GROUNDS NO.9 AND 10.WE FIND THAT IN THE ORIGINAL ASSESSMENT ORDER,PASSED UNDER SECTION 144 OF THE ACTON 15.03.1 993,AO HAD ADDED A SUM OF RS.23, 64,272/- TO THE TOTAL INCOME UNDER THE HEAD CASH CREDIT.ADDI TION MADE BY THE AO,UNDER SECTION 68 OF THE ACT,WAS CONFIRMED BY FAA.IN FURTHER APPEAL,THE ITAT ,VIDE ORDER DATED 01.10.2002,SET ASIDE THE ASSESSMENT TO BE MADE AFRESH.IN THE FRESH ASSESSMEN T PROCEEDINGS,THE AO NOTED THAT THE TOTAL NEW CREDITS APPEARING IN THE BOOKS OF ACCOUNTS DURI NG THE YEAR AMOUNTED TO RS.1,02,35,478/- AND NOT RS.23,64,272/-AS TAKEN IN THE ORIGINAL ASSE SSMENT.HE,THEREFORE,MADE AN ADDITION OF RS.1, 02, 35,478/-FOR THE FOLLOWING UNSECURED LOANS: (I) WESTERN NUTRINONTS PVT. LTD. RS.25,00,000/- (II) BETEXT INDIA LTD RS.10,53,040/- (III) POLYTEX INDIA LTD. RS. 3,99,360/- (IV) JUTEX INDIA LTD. RS.17,25,000/- (V) FORJET LEASING LTD. RS. 44,658/- (VI) FLAX INDIA LTD. RS.37,51,963/- (VII) SHIKHAR LEASING AND TRADERS LTD. RS.5,06,135/ - (VIII) ANKUSH ELECTRONICS AND ELECTRICALS LTD. RS.2 ,55,322/- FAA DELETED THE ADDITION AMOUNTING TO RS.77.35 LAKH S,BUT SUSTAINED THE ADDITION OF RS. 25 LAKHS MADE BY THE AO U/S.68 OF THE ACT. DECIDING THE APPE AL AGAINST THE ASSESSEE,TRIBUNAL,IN ITS ORDER DATED HELD AS UNDER: 3.7.WE HAVE PERUSED THE RECORDS AND CONSIDERED THE RIVAL CONTENTIONS CAREFULLY.THE DISPUTE RAISED IS REGARDING ADDITION ON ACCOUNT OF CASH CRE DITS. THERE WERE CASH CREDITS FOUND IN THE NAME OF THE PARTIES AGGREGATING TO RS.1,02,35,478/- ,DETAILS OF WHICH HAVE BEEN GIVEN IN PARA 3.1 EARLIER.THE AO HAD ADDED THE ENTIRE CASH CREDIT ON THE GROUND THAT THE PARTIES WERE NOT FOUND AT THE ADDRESS GIVEN AND THE ASSESSEE COULD NOT PRODUC E THE PARTIES.IN RESPECT OF PARTY AT SL.NO.(I) I.E.WESTERN, THE ASSESSEE HAD NOT FILED CONFIRMATIO N.CIT(A) HAD THEREFORE CONFIRMED THE ADDITION 9 ITA NO. 6124/MUM/2006 SILTEX INDIA LTD. IN RESPECT OF WESTERN BUT HAD DELETED THE ADDITIONS IN RESPECT OF REMAINING PARTIES AT SL.NO.(II) TO(VIII) AGGREGATING TO RS.77,35,478/-ON THE GROUND THAT THE PARTY HAS FILED CONFIRMATIONS GIVING THEIR INCOME TAX GIR NOS. 3.7.1.WE HAVE CAREFULLY CONSIDERED THE VARIOUS ASPE CTS OF THE MATTER. IT IS A SETTLED LEGAL POSITION THAT IN CASE OF CASH CREDIT, BURDEN IS ON THE ASSES SEE TO PROVE THE IDENTITY AND CREDIT WORTHINESS OF THE CREDITOR AS WELL AS GENUINENESS OF THE TRANS ACTION.IN THIS CASE,AS ASSESSEE HAS FILED CONFIRMATION GIVING NAME AND ADDRESS OF THE PARTY A ND ALSO THE INCOME TAX FILE NUMBER, THE ONUS PLACED ON THE PARTY IS DISCHARGED AS THE VERY ACT T HAT THE PARTY IS BEING ASSESSED TO TAX SHOWS ITS CREDIT WORTHINESS.THEREAFTER UNLESS THE AUTHORITIES BELOW MAKE FURTHER ENQUIRY AND PLACE ANY ADVERSE MATERIAL ON RECORD SUCH AS INCOME TAX FILE NUMBER BEING NOT CORRECT OR LOAN BEING NOT REFLECTED IN THE INCOME TAX FILE OF THE PARTY, THE CLAIM OF THE ASSESSEE CAN NOT BE MERELY ON THE GROUND THAT PARTY DID NOT RESPOND TO SUMMONS BY HON BLE SUPREME COURT IN THE CASE OF ORISSA CORPORATION (SUPRA).IN THE BACKDROP OF THIS LEGAL P OSITION,WE FIND THAT IN CASE OF WESTERN, ASSESSEE HAD NOT FILED EVEN THE CONFIRMATION FROM T HE PARTY WHICH IS A BASIC REQUIREMENT, NOT TO SPEAK OF GIVING INCOME TAX PARTICULARS OF THE PARTY .THE ASSESSEE COULD NOT FILE DETAILS AND CONFIRMATIONS NOT ONLY DURING ORIGINAL ASSESSMENT P ROCEEDINGS BUT ALSO DURING FRESH ASSESSMENT PROCEEDINGS ABOUT WHICH THERE IS NO DISPUTE.THE PAR TY WAS NOT FOUND AT THE ADDRESS GIVEN BY THE ASSESSEE.THE ASSESSEE GAVE NEITHER THE CORRECT ADDR ESS NOR PRODUCED THE PARTY.THE ONLY ARGUMENT ADVANCED IN FAVOUR OF THE ASSESSEE IS THAT LOAN HAD BEEN TAKEN BY ACCOUNT PAYEE CHEQUES AND ASSESSEE HAD FILED COPY OF BANK ACCOUNT IN WHICH LOAN WAS REFLECTED GIVING CHEQUE NUMBER, DATE OF ISSUE AND DATE OF CLEARANCE. IN OUR VIEW, THE CLAIM OF THE ASSESSEE CANNOT BE ACCEPTED OR CASH CREDIT CANNOT BE TAKEN AS EXPLAINE D SATISFACTORILY ONLY ON THE GROUND THAT LOAN HAD BEEN RECEIVED THROUGH BANKING CHANNEL. IN CASE ASSESSEE IS NOT ASSESSED TO TAX, THE BURDEN IS ON THE ASSESSEE TO SHOW SOURCE FROM WHICH THE LOAN HAD BEEN RECEIVED.BUT IN THIS CASE NO MATERIAL HAS BEEN PRODUCED TO SHOW CREDIT WORTHINES S OF THE CREDITOR. THE ASSESSEE MUST PROVE THE IDENTITY AND CREDIT WORTHINESS OF THE CREDITOR AND BANK TRANSACTIONS ARE NOT SACROSANCT. THIS VIEW IS SUPPORTED BY THE JUDGMENT OF HONBLE HIGH C OURT OF CALCUTTA IN THE CASE OF CIT VS PRECISION FINANCE PVT. LTD.(208 ITR 465). THEREFORE , IN OUR VIEW THE ASSESSEE IN THIS CASE HAS FAILED TO DISCHARGE THE ONUS PLACED ON IT TO PROVE THE IDENTITY, CREDIT WORTHINESS AND GENUINENESS OF TRANSACTION.WE, THEREFORE, SEE NO INFIRMITY IN T HE ORDER OF CIT(A) IN CONFIRMING THE ADDITION OF CASH CREDIT IN CASE OF WESTERN. WE FURTHER FIND THAT WITH REGARD TO THE REMAINING S EVEN PARTIES[(SN.II)TO(VIII)OF THE TABLE],TRIBUNAL PARTLY REVERSED THE ORDER OF THE FA A IN THE SENSE THAT IT SENT BACK THE MATTER TO THE FILE OF THE AO FOR FRESH ADJUDICATION.FROM THE ABOVE,IT IS CLEAR THAT ASSESSEE HAD NOT PRODUCED ANY EVIDENCE ABOUT THE LOAN RECEIVED BY IT ,FROM WESTERN NUTRINONTS PVT. LTD.,EVEN BEFORE THE TRIBUNAL AND THAT THE FAA HAD CONFIRMED THE PENALTY FOR RS. 25 LAKHS ONLY UNDER SECTION 68 OF THE ACT. 2.4.A. NOW,WE WOULD LIKE TO DISCUSS ABOUT THE REMAINING TW O ADDITIONS I.E. DISALLOWANCE OF TRADING LOSS OF RS.3.14 LAKHS AND LOSS ON SHARE TRA DING OF RS.2.17 LAKHS. AS STATED EARLIER,FAA HAD UPHELD THE ORDER OF THE A O,AS ASSESSEE HAD NOT PRODUCED ANY SUPPORTING EVIDENCE TO PROVE THE CLAIMS MADE BY IT WITH REGARD TO TRADING LOSS.IN QUANTUM APPEAL TRIBUNAL HAS DEALT THE SAID ISSUE AS UNDER: 5.2.WE HAVE PERUSED THE RECORDS AND CONSIDERED THE RIVAL CONTENTIONS CAREFULLY. THE DISPUTE RAISED IN THIS GROUND IS REGARDING ALLOWABILITY OF LOSS OF RS.3,14,715/-ON ACCOUNT OF TRADING IN CLOTH.THE AO DISALLOWED THE CLAIM ON THE GROUND THA T THE ASSESSEE COULD FILE ONLY DETAILS OF SALES 10 ITA NO. 6124/MUM/2006 SILTEX INDIA LTD. AND PURCHASES STATING NAMES OF PURCHASER AND SELLER BUT BOOKS OF ACCOUNT WERE NOT PRODUCED ALONG WITH BILLS AND VOUCHERS.CIT(A) HAS CONFIRMED THE DISALLOWANCE.IT HAS BEEN ARGUED BEFORE US THAT THE ASSESSEE HAD FILED DETAILS OF PARTIES T O WHOM SALES WERE MADE WHICH IS AVAILABLE AT PAGE-96 OF THE PAPER BOOK.IN OUR VIEW,LOSS CANNOT B E ALLOWED ONLY ON THE GROUND THAT THE ASSESSEE HAD GIVEN DETAILS OF PARTIES TO WHOM GOODS WERE SOLD.THE ASSESSEE HAS TO PRODUCE THE BOOKS OF ACCOUNT INCLUDING BILLS AND VOUCHER.IN THI S CASE THE TRANSACTIONS ARE STATED TO BE WITH SISTER CONCERNS.THEREFORE ASSESSEE IS ALSO REQUIRED TO PROVE THE MOVEMENT OF GOODS.THE LOSS CANNOT BE ALLOWED ON THE GROUND THAT SIMILAR LOSS H AD BEEN ALLOWED IN THE EARLIER YEARS BECAUSE EACH ASSESSMENT YEAR IS DIFFERENT.CONSIDERING THE F ACTS CIRCUMSTANCES OF THE CASE WE DO NOT SEE ANY INFIRMITY IN THE ORDER THE CIT(A) AND IN CONFIR MING THE DISALLOWANCE SAME IS, THEREFORE UPHELD. DECISION OF THE TRIBUNAL MAKES IT CLEAR THAT THE AS SESSEE HAD NOT PRODUCED ANY EVIDENCE IN SUPPORT OF ITS CLAIM OF TRADING LOSS BEFORE ANY AUT HORITY. 2.4.B. ABOUT THE SHARE TRANSACTION LOSS,AO HAD HELD THAT T HE ASSESSEE HAD DEBITED AN AMOUNT OF RS 2,17,277/-AS LOSS ON SALE SHARES IN THE P&L A/C. THAT THE ASSESSEE HAD NOT FILED ANY SUPPORTING EVIDENCE OF SALE OF SHARES AND RESULTANT LOSS,THAT IT HAD ALSO NOT FURNISHED THE LEDGER COPY OF BROKERS NOTE AND RELEVANT BANK STATEMENT.IN THE AP PELLATE PROCEEDINGS FAA HAD GIVEN A CLEAR FINDING THAT THE ASSESSEE HAD NOT PRODUCED THE EVID ENCE OF SALE OR PURCHASE OF SHARES.TRIBUNAL HAD DISCUSSED THE ISSUE OF LOSS ON ACCOUNT OF SHARE TRANSACTION AT LENGTH AND RESTORED BACK THE ISSUE TO THE FILE OF THE AO.IN THESE CIRCUMSTANCES WE ARE OF THE OPINION THAT NO PENALTY FOR CONCEALMENT CAN BE LEVIED FOR THE AMOUNT IN QUESTIO N I.E.RS.2.17 LAKHS.AO WILL BE FREE TO DECIDE THE QUESTION OF LEVY OR NON LEVY OF PENALTY,WHILE P ASSING FRESH ASSESSMENT ORDER.SO,WE DELETE THE PENALTY TO THAT EXTENT. 3. AS FAR AS REMAINING TWO ITEMS-CASH CREDIT (RS.25 LA KHS)AND BUSINESS LOSS(RS.3.14 LAKHS)-ARE CONCERNED,WE ARE OF THE OPINION THAT SAME SHOULD BE TREATED DIFFERENTLY.DURING THE FRESH ASSESSM -ENT PROCEEDINGS,ASSESSEE DID NOT PRODUCE ANY EVIDE NCE ABOUT THE UNSECURED LOAN AND BUSINESS LOSS.ONCE AN ASSESSEE MAKES A CLAIM THAT AFFECTS IT S TAX LIABILITY,IT HAS TO SUPPORT THE SAME WITH DOCUMENTARY EVIDENCES.SOVEREIGN HAS A SHARE IN THE INCOME OF THE ASSESSEE,SO IF ANYBODY DOES NOT SHOW ITS TRUE INCOME OR ATTEMPTS TO SHOW LESS I NCOME THAN IT HAS ACTUALLY EARNED,IT DEPRIVES THE STATE OF ITS DUE SHARE.COURTS ARE OF THE VIEW THAT THE OBJECT BEHIND THE ENACTMENT OF SECTION 271(1)(C)READ WITH THE EXPLANATIONS IS TO PROVIDE F OR A REMEDY FOR LOSS OF REVENUE.IN OTHER WORDS,SECTION 271 (1)(C) HAS TO BE STRICTLY APPLIED IN THE LARGER INTEREST OF DISCIPLINE IN FILING CORRECT RETURNS BY THE ASSESSEES.CLAIMING NON-GENUI NNE DEDUCTIONS/EXPENDITURE/REBATES IN THE RETURN OF INCOME IS ONE OF THE METHOD TO AVOID PAYM ENT OF DUE TAXES.TO DISCOURAGE SUCH PRACTICES,PENAL PROVISIONS HAVE BEEN INTRODUCED IN THE CHAPTER XXI OF THE ACT.IT IS SAID THAT IN VIEW OF PROVISIONS OF SECTION 271(1)(C) OF THEACT,P ENALTY FOR CONCEALMENT OF INCOME OR FURNISH - ING INACCURATE PARTICULARS CAN BE IMPOSED IF AN ASS ESSEE OFFERS AN EXPLANATION WHICH IS FOUND TO BE FALSE BY THE AO/FAA,OR IF THE ASSESSEE OFFERS AN EXPLANATION WHICH HE IS NOT ABLE TO SUBSTANTIATE AND FAILS TO PROVE THAT SUCH EXPLANATI ON IS BONA FIDE.IN SUCH MATTERS THE ONUS IS ALWAYS ON THE ASSESSEE TO OFFER AN EXPLANATION IN R ESPECT OF THE CLAIMS MADE BY HIM IN THE RETURN OF INCOME. IN THE CASE UNDER CONSIDERATION,IT WAS DUTY OF THE ASSESSEE TO PROVE THE GENUINENESS OF THE UNSEC 11 ITA NO. 6124/MUM/2006 SILTEX INDIA LTD. -URED LOANS.IF THE ASSESSEE DID NOT AVAIL OPPORTUNI TY TO PROVE IDENTITY,CREDITWORTHINESS OR REPAY - MENT OF THE LOAN AMOUNT BY PRODUCING CORROBORATING EVIDENCES,AO HAD NO OPTION BUT TO LEVY PENALTY FOR FURNISHING INACCURATE PARTICULARS RESUL TING IN CONCEALMENT OF PARTICULARS.SIMILARLY,FOR THE TRADING LOSS CLAIMED BY THE ASSESSEE,NO EVIDENC E OF SUFFERING OF LOSS WAS PRODUCED BY THE ASSESSEE AT ANY STAGE I.E. DURING ASSESSMENT/PENALT Y/APPELLATE PROCEEDINGS. MERE MAKING A CLAIM IS NOT ENOUGH-IT HAS TO BE SUPPORTED BY EVIDENCES.F AILURE OF THE ASSESSEE TO SUBSTANTIATE ITS CLAIM LED TO IMPOSITION OF PENALTY. WE ARE AWARE THAT PENALTY PROCEEDINGS ARE DIFFERENT FROM THE ASSESSMENT PROCEEDINGS AND AN ADDITION IN QUANTUM ASSESSMENT DOES NOT AUTOMATICAL LY BRINGS PENAL PROVISIONS IN TO PLAY.BUT, FURNISHING OF INACCURATE PARTICULARS IN THE RETURN OF INCOME ATTRACTS CONCEALMENT PENALTY.DURING THE PENALTY PROCEEDINGS ASSESSEE HAD NOT PRODUCED A NY POSITIVE EVIDENCE THAT PARTICULARS FILED BY IT IN THE RETURN WERE TRUE.ONCE A CLAIM WAS FILED B Y THE ASSESSEE ABOUT THE CREDITOR (RS.25LAKHS) AND BUSINESS LOSS,IT SHOULD HAVE LED SOME EVIDENCE THAT A REASONABLE AND PRUDENT PERSON WOULD CONSIDERED SUFFICIENT.IN THE APPEAL BEFORE US,THE I SSUE IS NOT ABOUT SUFFICIENCY OF EVIDENCES,BUT NON EXISTENCE OF BOTH THE CLAIMS THAT WERE PART OF THE BOOKS OF ACCOUNTS AND HAD BEEN VERIFIED TO BE TRUE IN THE RETURN FILED.A RETURN OF INCOME IS N OT A JUST PIECE OF PAPER.RETURN IS A DOCUMENT THAT GIVES DETAILS OF INCOME,POSITIVE OR NEGATIVE,O F AN ASSESSEE.IT IS CONSIDERED AN ADMISSIBLE EVIDENCE IN THE COURTS.THEREFORE,IT IS EXPECTED FRO M THE ASSESSEES THAT THEY WOULD FILE TRUE AND ACCURATE PARTICULARS OF THEIR INCOME.IN THE MATTER UNDER CONSIDERATION DETAILS FILED BY THE ASSESSEE WERE NOT TRUE AND SAME AMOUNTED TO FURNISH ING OF INACCURATE PARTICULARS.ONCE BASIC FACTS WERE CONSIDERED BY THE TWO APPELLATE AUTHORIT IES AND BOTH HAVE REACHED TO A LOGICAL CONCLUSION,THERE REMAINS NO DOUBT THAT IT IS A FIT CASE FOR LEVYING PENALTY.IT ALSO A FACT THAT IN THE PRESENT CASE,NO DETAILS WERE FILED BY THE ASSESSEE ON BOTH THE COUNTS-RATHER IT WAS THE INVESTIGATION MADE BY THE AO THAT REALITY OF THE CA SH CREDIT APPEARING IN THE NAME OF WESTERN NUTRINONTS PVT. LTD. AND BUSINESS LOSS CAME TO LIGH T.THEREFORE,WE ARE OF THE OPINION THAT THE PARTICULARS FILED BY THE ASSESSEE ABOUT THE CREDITO RS AND THE BUSINESS LOSS WERE NOT ACCURATE AND TO THAT EXTENT WERE FALSE.WE FIND THAT TWIN CONDITI ONS FOR LEVYING PENALTY U/S.271(1)(C)OF THE ACT-AMOUNT IN QUESTION TO BE PART AND PARCEL OF THE INCOME OF THE ASSESSEE AND FILING OF INACCURATE PARTICULARS/CONCEALING OF PARTICULARS OF SUCH INCOME-EXIST IN THE CASE UNDER CONSIDERATION. HERE,WE ALSO WANT TO MAKE IT CLEAR THAT IT IS NOT A CASE OF DEBATABLE ISSUE.IN OUR OPINION A NON GENUINE CLAIM AND DEBATABLE CLAIM ARE TWO DIFFERENT CONCEPTS.WHEN AN UNREAL THING OR UNTRUE FACT IS PROJECTED OR PRESENTED AS TRUE OR GENUINE S AME IS TERMED TO BOGUS. COURTS ARE UNANIMOUS THAT FOR A DEBATABLE CLAIM ASSESSEE CANNOT BE PENAL ISED,BUT WHEN HE MAKE A BOGUS CLAIM LEVY OF PENALTY IS JUSTIFIED.AS IN THE MATTER UNDER APPEAL, BOGUS CLAIMS HAVE BEEN MADE,SO AO WAS RIGHT IN INVOKING PROVISIONS OF SECTION 271(1)(C)OF THE A CT. NOW,WE WOULD LIKE TO CONSIDER THE CASE RELIED UPON BY THE ASSESSEE, .IN THAT MATTER ASSESSEE WAS DIRECTED TO PRODUCE THE CREDITORS AFTER A GAP OF 14 YEARS.IN THE PRESENT CASE NO EVIDENCE ABOUT THE EXISTENCE OF CREDITOR OR THE CASH CREDIT WAS PRODUC ED.ASSESSEE HAD AMPLE TIME TO COLLECT EVIDENCE TO SUPPORT ITS CLAIM,BUT IT CHOOSE TO REMA IN INACTIVE.FOR ITS FAILURE TO SUBSTANTIATE A 12 ITA NO. 6124/MUM/2006 SILTEX INDIA LTD. CLAIM MADE IN THE RETURN IT HAD TO BE PENALISED,AS PER THE PROVISIONS OF THE ACT.THRERFORE,IN OUR OPINION CASE RELIED UPON BY THE ASSESSEE IS OF NO H ELP. AS THE FACTS AND THE CONDUCT OF THE ASSESSEE CLEARL Y ESTABLISH THAT IT HAD FILED INACCURATE PARTICULARS OF INCOME AND HAD THUS CONCEALED PARTIC ULARS OF INCOME,SO WE DO NOT WANT DISTURB THE ORDER OF THE FAA.THEREFORE,UPHOLDING HIS ORDER, GROUNDS NO.9 AND 10 ARE DECIDED AGAINST THE ASSESSEE. AS A RESULT,APPEAL FILE D BY THE ASSESSEE STANDS DISMISSED. 1)2 '() 3 4 + / '5 + ) 6 7. ORDER PRONOUNCED IN THE OPEN COURT ON 23 RD APRIL,2014 . 0 + -.# 8 9' 23 &7 ,201 4 . + / : SD/- SD/- ( .. / I.P. BANSAL) ( ! ! ! ! / RAJENDRA) / JUDICIAL MEMBER /ACCOUNTANT MEMBER / MUMBAI, 9' /DATE: 23.04 . 2014. SK 0 0 0 0 + ++ + &); &); &); &); < ;#) < ;#) < ;#) < ;#) / COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE / $% 2. RESPONDENT / &'$% 3. THE CONCERNED CIT(A)/ = > , 4. THE CONCERNED CIT / = > 5. DR I BENCH, ITAT, MUMBAI / ;?/ &)' , . . . 6. GUARD FILE/ / 1 ';) ';) ';) ';) &) &)&) &) //TRUE COPY// 0' / BY ORDER, @ / 6 DY./ASST. REGISTRAR , /ITAT, MUMBAI