M/S GARMENT CRAFT, Jaipur V. DCIT, Jaipur

ITA 652/JPR/2012

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 5627 (ITAT-JAIPUR)
• Duration Of Justice: 3 year(s) 6 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-01-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2004-2005
• Appeal Filed On: 02-07-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: RAJ MEHRA JCIT DHK
• Keywords: Business expenditure; Wrong claim; Commercial expediency

Judgement Text

ITA.NO. 652/JP/ 12 M/S GARMENT CRAFTS VS. DCIT,CIRCLE-, JAIPUR 1 VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S, JAIPUR J H VKJ-IH-RKSYKUH] U;KF;D LNL; ,OA JH FOE FLAG ;KNO ] YS[KK LNL; DS LE{K BEFORE: SHRI R.P. TOLANI, JM & SHRI VIKRAM SINGH YA DAV, AM VK;DJ VIHY LA-@ ITA NO. 652/JP/12 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2008-09 M/S GARMENTS CRAFT, F-46, MALVIYA INDUSTRIAL AREA, JAIPUR CUKE VS. DCIT, CIRCLE-6, JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ PAN NO. ABKPJ 0383L IHYKFKHZ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI ANIL SHARMA (C.A.) JKTLO DH VKSJ LS@ REVENUE BY : SHRI RAJ MEHRA (JCIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 19/10/2015 ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 05 /01/2016. VKNS'K@ ORDER PER SHRI VIKRAM SINGH YADAV, A.M. THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF CIT(A)-I, JAIPUR DATED 04.07.2014 WHEREIN THE ASSES SEE HAS TAKEN THE FOLLOWING GROUND: ITA.NO. 652/JP/ 12 M/S GARMENT CRAFTS VS. DCIT,CIRCLE-, JAIPUR 2 UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE THE L D. CIT(A) IS NOT JUSTIFIED IN CONFIRMING THE PENALTY OF RS. 2,59,783/ - LEVIED U/S 271(1)(C) FOR CONCEALMENT OF INCOME AND FURNISHING INACCURATE PARTICULARS THEREOF. 2. IN THIS CASE THE ASSESSEE FILED ITS RETURN OF IN COME FOR A.Y. 2004- 05 WHEREIN AN AMOUNT OF RS. 7,24,133/- HAS BEEN CLAIM ED AS BUSINESS EXPENDITURE INCURRED ON STUDIES OF MISS. MANGULA BHA LOTHIA AN EMPLOYEE OF THE FIRM ON THE UNDERSTANDING THAT SHE W OULD SERVE THE FIRM AFTER COMPLETION OF HER EDUCATION FOR MINIMUM PE RIOD OF 3 YEARS IN TERMS OF THE INDEMNITY BOND SIGNED BETWEEN THE FIR M AND MISS. MANJULA BHALOTHIA. IT WAS ALSO PROVIDED THAT IF SHE L EAVES THE SERVICES BEFORE COMPLETION OF 3 YEARS PERIOD, SHE WOULD PAY A SUM OF RS. 10,00,000/- AS COMPENSATION. THE AO HAS DISALLOWED T HE SAID EXPENDITURE ON THE GROUND THAT THE TRAINING EXPENDITU RE WAS NOT FOR THE PURPOSE OF BUSINESS AS MISS. MANJULA BHALOTHIA DID NOT JOIN THE FIRM ON HER RETURN AND NO EFFORTS WAS MADE TO RECOVER R S. 10 LACS AS AGREED INITIALLY WITH HER. ON APPEAL BY THE ASSES SEE, THE MATTER WENT UPTO THE TRIBUNAL WHICH HAD CONFIRMED THE DISALLOWANCE OF TRAINING ITA.NO. 652/JP/ 12 M/S GARMENT CRAFTS VS. DCIT,CIRCLE-, JAIPUR 3 EXPENSES, THE RELEVANT FINDING OF THE CO-ORDINATE BE NCH IN ITA NO. 1070/JP/07 FOR A.Y. 2007-08 WHILE DISPOSING OF THE SAI D APPEAL AS UNDER: AFTER CONSIDERING THE ARGUMENTS ADVANCED BY THE PART IES ON THE ISSUE WE ARE NOT INCLINED TO INTERFERE WITH THE FIRST APP ELLATE ORDER AS UNDISPUTEDLY AS PER THE TERMS OF INDEMNITY BOND EXEC UTED BY MS. MANJULA BHALOTHIA, THE ASSESSEE OUGHT TO HAVE RECO VERED THE AMOUNT SPENT ON HER EDUCATION ABROAD ON FAILURE OF HER IN JOINING BACK THE ASSESSEE FIRM AFTER COMPLETION OF HER TRAINING. IF I NCURRING OF EXPENDITURE ON HER TRAINING WAS CONSIDERED AS IN TH E INTEREST OF BUSINESS, THEN IT WAS ALSO IN THE INTEREST OF BUSIN ESS TO RECOVER THE AMOUNT FROM HER ON HER FAILURE TO REJOIN THE ASSESSEE FIRM AFTER COMPLETION OF HER STUDY AS PER THE TERMS OF THE INDE MNITY BOND EXECUTED BY HER. AS PER THE TERMS OF HER INDEMNIT Y BOND, THE ASSESSEE FIRM WAS ENTITLED FOR COMPENSATION OF RS. 10,00,000/ - ON HER NOT REJOINING THE ASSESSEE FIRM. THE LD. CIT(A) HAS OBSE RVED THAT NO ACTION OF ANY NATURE WAS TAKEN EVEN TO INITIATE RECOVERY O F SAME BY THE ASSESSEE. WE THUS DO NOT FIND REASON TO INTERFERE W ITH THE ORDER OF THE LOWER AUTHORITIES IN THIS REGARD IN DISALLOWING THE CLAIMED EXPENSES OF RS. 7,24,133/-. THE GROUND IS ACCORDINGLY REJECTED . THEREAFTER A FRESH SHOW CAUSE WAS ISSUED U/S 271(1) (C) OF THE ACT, AND VIDE ORDER DATED 30.03.2009, THE AO IMPOSED A PENALT Y OF RS. 2,59,783/- EQUIVALENT TO 100% OF TAX SOUGHT TO BE EVA DED. ITA.NO. 652/JP/ 12 M/S GARMENT CRAFTS VS. DCIT,CIRCLE-, JAIPUR 4 2.2 BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTE R BEFORE THE LD. CIT(A) WHO HAS CONFIRMED THE SAID LEVY OF PENALTY. 2.3 DURING THE COURSE OF HEARING THE LD. AR MADE THE FOLLOWING SUBMISSIONS BEFORE THE BENCH WHICH IS REPRODUCED AS U NDER:- THE AO IN RESPECT OF THE SAME HAS LEVIED A PENALTY O F RS.2,59,73/- U/S 271(1)(C) OF THE IT ACT, 1961, FOR CONCEALMENT O F INCOME. THE CLAIM OF THE ASSESSEE HAS NEITHER BEEN FOUND TO BE FALSE OR BOGUS NOR THE SAME HAS BEEN DISPROVED. THERE IS NO POSITIVE FINDING OR ANY OTHER MATERIAL A VAILABLE ON RECORD TO CONCLUDE THAT THE CLAIM OF THE ASSESSEE TOWARDS THE ABOVE SAID TRAINING EXPENSES IS BOGUS OR FALSE. THE RELEVANT DISALLOWANCE HAS BEEN MADE AND SUSTAIN ED SIMPLY ON THE GROUND THAT THE EXPLANATION FURNISHED BY THE ASSESS EE HAS NOT BEEN FOUND TO BE SATISFACTORY. MISS. MANJULA BHALOTHIA IS NEITHER ANY FAMILY MEMBER NOR ANY RELATIVE OF PARTNERS OF THE ASSESSEE FIRM, THEREFORE QUESTIO N OF CLAIMING ANY PERSONAL EXPENSES DOES NOT ARISE. THE BONAFIDE INACTION ON THE PART OF THE ASSESSEE O F NOT RECOVERING ANY COMPENSATION FROM MISS. MANJULA BHALOTHIA FOR NOT J OINING THE ASSESSEE FIRM AFTER COMPLETION OF FOREIGN EDUCATION DO NOT RENDER THE CLAIM OF THE ASSESSEE A BOGUS OR FALSE. IN THE ABSENCE OF ANY POSITIVE FINDINGS THAT THE CL AIM OF THE ASSESSEE IS BOGUS OR FALSE, IT IS NOT POSSIBLE TO HOLD THAT THE ASSESSEE HAS CONCEALED INCOME OR FURNISHED INACCURATE PARTICULARS THEREOF. ITA.NO. 652/JP/ 12 M/S GARMENT CRAFTS VS. DCIT,CIRCLE-, JAIPUR 5 ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS HAS DISCLOSED THE FULL PARTICULARS OF THE EXPENDITURE AND OTHER R ELEVANT FATS AND OFFERED BONAFIDE EXPLANATION IN RESPECT THEREOF. THE CONCEALMENT NECESSARILY REFER TO WILLFUL STATE O F MIND AND MEN REA. THE ASSESSEE CANNOT BE HELD GUILTY FOR CONCEALMENT O F INCOME IN THE ABSENCE OF ELEMENT OF BAD STATE OF MIND AND MENSREA UNLESS THE CASE FALLS WITHIN THE SCOPE OF CLAUSE (A) OR (B) OF EXPL ANATION 1 TO SECTION 271(1)(C) OF THE ACT. THE ASSESSEE HAS OFFERED BONAFIDE EXPLANATION AND D ISCLOSED ALL THE FACT RELATING TO THE SAME AND MATERIAL TO THE COMPUT ATION OF HIS TOTAL INCOME. THERE IS NOTHING IN THE ASSESSMENT ORDER SHO WING THAT ANY OF THE EXPLANATION OFFERED BY THE ASSESSEE WAS FOUND T O BE FALSE OR DISPROVED. THE CASE OF THE ASSESSEE DO NOT FALLS WITHIN THE SCOPE OF EITHER CLAUSE (A) OR (B) OF EXPLANATION 1 TO SECTION 271(1)(C) OF THE ACT. THE EXPLANATION FURNISHED BY THE ASSESSEE IN RESPEC T OF THE PAYMENT OF BROKERAGE HAS NOT BEEN DISPROVED. AS PER THE RULE O F EVIDENCE THERE IS DISTINCTION BETWEEN THE FACTS NO PROVED AND FACT DISPROVED AND FACT PROVED. WHERE FACT FINDING AUTHORITY REACH ES TO A STAGE WHERE IT CAN ONLY CONCLUDE THAT HE ALLEGED FACT IS NOT PROVED THE BENEFIT OF THE PRINCIPAL THAT MERE NON SATISFACTORY NATURE OF EXPLANATION FURNISHED NOT AMOUNT TO PROOF OF FALSITY OF THAT EX PLANATION SHALL APPLY, WHICH WOULD RESULT THAT EXCEPT REJECTION OF THAT F URNISHED BY THE ASSESSEE, THERE IS NO MATERIAL TO SUSTAIN THE PLEA O F CONCEALMENT THE ENQUIRY CONDUCTED BY THE AO. MAY LEAD TO ARRIVE AT THE FINDINGS THAT WHETHER THE PARTICULARS DISCLOSED ARE TRUTHFUL OR FALSE OR NOT PROVED TO BE SATISFACTORY. IN THE FIRST CASE IT WO ULD BE A POSITIVE CASE OF NO CONCEALMENT, IN SECOND CASE IT WOULD BE A POSITIV E CASE OF CONCEALMENT AND IN THIRD CASE BENEFIT OF DOUBT WILL GO IN FAVOUR OF THE ITA.NO. 652/JP/ 12 M/S GARMENT CRAFTS VS. DCIT,CIRCLE-, JAIPUR 6 ASSESSEE. THE CASE OF THE ASSESSEE FALLS WITHIN THI RD CATEGORY WHERE THE ALLEGED FACT OF INTRODUCTION OF CAPITAL IS FOUND TO BE NOT PROVED SATISFACTORILY. THEREFORE IT IS NOT A CASE OF POSIT IVE CONCEALMENT AND BENEFIT OF DOUBT GOES IN FAVOUR OF THE ASSESSEE . ( CIT VS. VIDHYGAURI NATVERLAL (1999) 238 ITR 91 (GUJ.) THE HON. SUPREME COURT IN THE CASE OF RELIANCE PETRO PRODUCTS (P) LTD. 189 TAXMANN 322, HAS HELD THAT MERELY BECAUSE T HE ASSESSEE HAD CLAIMED THE EXPENDITURE, WHICH CLAIM WAS NOT ACCEPTE D OR WAS NOT ACCEPTABLE TO THE REVENUE, THAT, BY ITSELF, WOULD N OT ATTRACT THE PENALTY U/S 271(1)(C). IF THE CONTENTION OF THE REVENUE WA S ACCEPTED, THEN IN CASE OF EVERY RETURN WHERE THE CLAIM MADE WAS NOT AC CEPTED BY THE ASSESSING OFFICER FOR ANY REASON, THE ASSESSEE WOUL D INVITE PENALTY UNDER SECTION 271(1)(C). THAT IS CLEARLY NOT THE IN TENDMENT OF THE LEGISLATURE. 2.4 THE LD. DR ARGUED THE MATTER AT LENGTH AND RELI ED ON THE ORDER OF THE LD. CIT(A) . 2.5 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE DISALLOWANCE OF RS. 7,24,133/ - OF TRAINING EXPENSES HAS BEEN CONFIRMED IN QUANTUM PROCEEDINGS ON THE GROUND THAT THE ASSESSEE HAS FAILED TO RECOVER THE AMOUNT OF RS. 10 LACS ON FAILURE OF MISS. MANJULA BHALOTHIA IN JOINING BACK THE ASSESSEE FIRM AS PER THE TERMS OF THE INDEMNITY BOND INITIALLY SIGNED WITH HER. IN THE CONTEXT OF PENALTY PROCEEDINGS, THE QUESTION THAT ARIS ES FOR CONSIDERATION IS WHETHER ASSESSEE HAS PROVIDED FULL PA RTICULARS OF THE SAID CLAIM BEFORE THE LOWER AUTHORITIES, WHETHER ASSE SSEE HAS A LEGAL BASIS FOR CLAIM OF SUCH EXPENSES AND WHETHER ASSESSEE IS ABLE TO PROVIDE APPROPRIATE DOCUMENTATION AND EXPLANATION IN SUP PORT OF ITS SAID CLAIM. IN THE INSTANT CASE, IT IS NOT DISPUTED THAT THE ASSESSEE HAS DISCLOSED THE FULL PARTICULARS OF ITS CLAIM OF TRAININ G EXPENSES. THE ASSESSEE HAS PRODUCED A COPY OF THE INDEMNITY BOND BY VIRTUE OF WHICH IT HAD INCURRED THE SAID TRAINING EXPENDITURE ON THE BELIEF THAT ITA.NO. 652/JP/ 12 M/S GARMENT CRAFTS VS. DCIT,CIRCLE-, JAIPUR 7 THE EMPLOYEE WILL RETURN ON COMPLETION OF HER HIGHER STU DIES AND WOULD BE OF BENEFIT TO THE COMPANY. AS PER LD. CIT(A) , THE INDEMNITY BOND WAS BACK DATED WITH AN ULTERIOR MOTIVE TO CLAIM TH E ALLEGED PERSONAL EXPENDITURE AS A BUSINESS EXPENDITURE. FUR THER LD. CIT(A) HAS STATED THAT THE SIGNATURE OF MISS. MANJULA BHALOTHIA ON THE INDEMNITY BOND AND ON THE COPY OF PASSPORT FURNISHED BY THE ASSESS EE DID NOT TALLY AND THEREFORE, IT TRANSPIRED THAT MISS. MANJUL A BHALOTHIA HAS NOT SIGNED THE INDEMNITY BOND AND IT IS SIGNED BY SOMEONE ELSE. BASIS THE SAID FINDINGS OF LD CIT(A) IN CONTEXT OF PENALTY PROCEE DINGS, LD DR HAS STRONGLY ARGUED THAT THE SO CALLED INDEMNITY BOND IS A FALSE AND FABRICATED DOCUMENT AND THE SAME CAN NOT BE RELIED UP ON TO FORM THE BASIS FOR ALLOWING RELIEF IN THE PENALTY PROCEEDINGS. IN RESPONSE, LD AR SUBMITTED THAT THE CLAIM OF THE ASSESSEE HAS NEITHER BEEN FOUND TO BE FALSE OR BOGUS NOR THE SAME HAS BEEN DISPROVED, THERE IS NO POSITIVE FINDING OR ANY OTHER MATERIAL AVAILABLE ON RECORD TO CONC LUDE THAT THE CLAIM OF THE ASSESSEE TOWARDS THE ABOVE SAID TRAINING EXPENSES IS BOGUS OR FALSE AND THE RELEVANT DISALLOWANCE HAS BEEN MADE AND SUSTAINED SIMPLY ON THE GROUND THAT THE EXPLANATION F URNISHED BY THE ASSESSEE HAS NOT BEEN FOUND TO BE SATISFACTORY. HOWEVER , THE LD. AR HAS NOT BEEN ABLE TO CONTROVERT THE SAID SPECIFIC FINDI NGS OF LD. CIT(A) IN RELATION TO FALSITY OF INDEMNITY BOND DURING THE COURS E OF PRESENT HEARING OR THROUGH ITS WRITTEN SUBMISSIONS BEFORE US. THEREFORE, IN OUR CONSIDERED VIEW, SUCH FINDINGS OF LD. CIT(A) ATTAINS FINALITY AND IT IS NOT A CASE OF AN INCORRECT CLAIM BUT IT IS CLEARLY A CAS E OF A FALSE CLAIM WHICH LACKS THE LEGAL BASIS AND IT WILL CLEARLY ATTRACT L EVY OF PENALTY U/S 271(1)(C) OF THE ACT. SECONDLY IT IS NOTED THAT THE ASSESSEE HAS NOT TAKEN A NY ACTIONABLE STEPS TO RECOVER THE EXPENDITURE BY WAY OF COMPENSATION ONCE IT WAS CLEAR THAT MISS. MANJULA BHALOTHIA HAS NOT JOINED BACK THE SERVICE OF THE FIRM AFTER COMPLETION OF HER STUDIES ABROAD. THERE IS NO EXPLANATION WHATSOEVER FROM THE ASSESSEE IN THIS REGA RD. THE ASSESSEE HAS REMAINED SILENT ON THIS ASPECT THROUGHOUT THE PROC EEDINGS BEFORE ITA.NO. 652/JP/ 12 M/S GARMENT CRAFTS VS. DCIT,CIRCLE-, JAIPUR 8 THE LOWER AND APPELLATE AUTHORITIES. IN THIS REGARD, IT WOULD BE RELEVANT TO NOTE WITH APPROVAL THE FINDINGS OF THE COOR DINATE BENCH IN THE QUANTUM PROCEEDINGS WHERE IT HAD SUSTAINED THE DISALLOWANCE STATING THAT IF INCURRING OF EXPENDITURE ON HER TRAI NING WAS CONSIDERED AS IN THE INTEREST OF BUSINESS, THEN IT WAS ALSO IN T HE INTEREST OF BUSINESS TO RECOVER THE AMOUNT FROM HER ON HER FAILURE TO REJOIN THE ASSESSEE FIRM AFTER COMPLETION OF HER STUDY AS PER TH E TERMS OF THE INDEMNITY BOND EXECUTED BY HER. THE LD AR, KNOWING FULLY WELL THE SAID FINDINGS OF THE COORDINATE BENCH, COULD HAVE COME OUT WITH AN APPROPRIATE EXPLANATION IN THE PRESENT PROCEEDINGS BU T HAS CHOOSEN TO REMAIN SILENT ON THIS CRITICAL ASPECT. THIS CLEARLY SHOWS THE LACK OF BONAFIDE ON THE PART OF THE ASSESSEE IN CLAIMING SUCH EXPENSES AT FIRST PLACE. FURTHER, THE ASSESSEE HAS RELIED UPON THE DECISION OF THE HONBLE SUPREME COURT IN CASE OF RELIANCE PETROPRODUCTS (SUPRA) . WE HAVE CAREFULLY PURSUED THE ORDER OF THE HONBLE SUPREME CO URT AND THE SAID DECISION NOWHERE APPROVES A SITUATION AS IN THE PRESEN T CASE WHERE THE BASIS OF CLAIM OF THE EXPENSES IS INCORRECT, ERRONE OUS AND INADMISSIBLE AT FIRST PLACE. THE DELHI HIGH COURT I N CASE OF NARESH KUMAR VERMA 89CCH 155, AFTER CONSIDERING THE DECISION OF HONBLE SUPREME COURT IN CASE OF RELIANCE PETRO, HAS HELD THA T EXPLANATION TO SECTION 271(1)(C) UNDERLINES THAT WHERE INACCURATE P ARTICULARS ARE FURNISHED BY THE ASSESSEE OR SOMETHING WHICH IS PLA INLY INADMISSIBLE, IS CLAIMED, PENALTY PROCEEDINGS ARE WARRANTED. CONSIDERING THE TOTALITY OF THE FACTS AND CIRCUMSTANC ES OF THE CASE, WE ARE OF THE CONSIDERED VIEW THAT IT IS A FIT CASE FOR LEVY OF PENALTY AND WE UPHOLD THE ORDER OF THE LD. CIT(A). HENCE LEVY OF PEN ALTY AMOUNTING TO RS. 2,59,783/- IS CONFIRMED AND THE GROUND TAKEN BY T HE ASSESSEE IS DISMISSED. ITA.NO. 652/JP/ 12 M/S GARMENT CRAFTS VS. DCIT,CIRCLE-, JAIPUR 9 IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 05/01/201 6. VKJ-IH-RKSYKUH FOE FLAG ;KNO (R.P.TOLANI) (VIKRAM SINGH YADAV) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER JAIPUR DATED:- 05/01 /2016 PILLAI VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT- THE DCIT, CIRCLE-6, JAIPUR 2. THE RESPONDENT- M/S GARMENT CRAFTS. JAIPUR 3. THE CIT(A).II, JAIPUR 4. THE CIT-II JAIPUR 5. THE DR, ITAT, JAIPUR 6. GUARD FILE (ITA NO.652/JP/12)` VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR. ITA.NO. 652/JP/ 12 M/S GARMENT CRAFTS VS. DCIT,CIRCLE-, JAIPUR 10 2. THE RELEVANT FACTS FOR THE ISSUE UNDER CONSIDERATI ON AS NOTED FROM THE RECORDS ARE AS FOLLOWS. DISALLOWANCE OF TRADING EXPENSES: THE ASSESSEE HAS DEBIT RS.7,24,133/- AS TRAINING EXPENSES IN ITS P&L COUNT. THE DETAILS OF THE EXPENSES WERE CALLED FOR . AS PER THESE DETAILS, IT WAS SUBMITTED THAT THE SAID EXPENSES W ERE INCURRED ON M/S MANJULA BHALOTHIA, WHO WAS IN SERVICE OF THE FIRM AND LOOKING AFTER THE INTERNATIONAL BUSINESS OF THE FIRM. LOOKING TO HER A BILITY, IT WAS DECIDED TO SEND HER FOR FURTHER STUDIES IN UK. THE A SSESSEE ALSO FURNISHED COPY OF INDEMNITY BOND WITH SMT. MANJULA BHA LTHIA. AS PER THE BOND, MS. BHALOTHIA WAS WORKING WITH THE A SSESSEE FIRM SINCE MAY, 2003 AND THE BOND WAS EXECUTED ON 26.08.2 003. THE ASSESSEE FIRM DECIDED TO SEND HER FOR FURTHER STUDIES TO THE LEEDS METROPOLITAN UNIVERSITY, UK FOR DOING MATERS COURSE IN INTERNATIONAL BUSINESS AND AGREED TO BEAR THE COST OF EDUCATION AND D ECIDED TO REIMBURSE THE TUITION FEE, COST OF BOOKS AND BOARDING AND LODGING EXPENSES WITH THE TRAVELING EXPENSES TO UK. MS. BH ALOTHIA AGREED TO DEVOTE HERSELF FOR STUDIES IN SUCH A MANNER SO AS TO P ROVE AN ASSET FOR THE EMPLOYER ON HER RETURN. ITA.NO. 652/JP/ 12 M/S GARMENT CRAFTS VS. DCIT,CIRCLE-, JAIPUR 11 AS PER CLAUSE E OF THE INDEMNITY BOND, THE EMPLOYEE UNDERTOOK TO SERVE THE EMPLOYER AFTER COMPLETION OF HER EDUCATION FOR A MINIMUM PERIOD OF THREE YEARS. AS PER CLAUSE F EMPLOYEE WAS BOUND BY THIS AGREEMENT TO SERVE THE EMPLOYER AFTER COMPLETION OF HER EDUCATION AND WOULD NOT LEAVE THE JOB. AS PER CLAUSE H IF THE EMPLOYEE LEAVES THE SERVICES BEFORE THE COMPLETION OF THE ABOVE MENTIONED PERIOD, THEN SHE WOULD PAY A SUM OF RS. 10 LACS AS COMPENSATION AND IF SHE FAILS TO PAY THIS AMOUNT, THE ASSESSEE FIRM HAS THE R IGHT TO LEGALLY PROCEED AGAINST THE EMPLOYEE FOR ITS RECOVERY. VIDE ORDER SHEET ENTRY DATED22.11.2006 THE FIRM WAS REQUIRED TO FURNISH CERTAIN INFORMATION. THE QUERIES AND THEIR R EPLY ARE DEALT AS UNDER: I) SINCE THE COPY OF INDEMNITY BOND FURNISHED BY THE LD. AR OF THE ASSESSEE VISDE SUBMISSION DATED 27.09.2006 WAS NOT H AVING ANY CONTENTS ON THE BACKSIDE OF THE PAGE, THEREFORE, DATE OF PURCHASE OF STAMP PAPER COULD NOT BE ASCERTAINED. FURTHER THERE WAS NO DATE UNDERNEATH THE SIGNATURES OF THE VARIOUS PERSONS. HENC E, THE ASSESSEE FILM WAS REQUIRED TO PRODUCE THE ORIGINAL INDEMNITY BON D. VIDE SUBMISSION FILED ON 27.11.2006, IT WAS REPLIED THAT THE ORIGINAL BOND IS LYING IN OLD FILES WHICH IS NOT TRACEABLE. I AM ASTONISHED THAT THE COPY OF INDEMNITY BOND AS PROV IDED ON 27.09.2006 AND IT BECAME NON-TRACEABLE IN JUST TWO MON THS. PERHAPS, THE ASSESSEE FIRM DELIBERATELY DID NOT FURNISH THE O RIGINAL BOND FOR THE REASONS BEST KNOWN TO IT. II) THE ASSESSEE WAS REQUIRED TO SUBMIT THE COPY OF PA SSPORT OF MS. MANJULA BHALOTHIA BUT IT WAS NOT PROVIDED ON THE PRETEX T THAT IT IS NOT AVAILABLE WITH THE ASSESSEE FIRM. III) THE ASSESSEE WAS ASKED THAT WHO APPLIED FOR THE SCHOLARSHIP. NO REPLY THIS QUERY WAS GIVEN. ITA.NO. 652/JP/ 12 M/S GARMENT CRAFTS VS. DCIT,CIRCLE-, JAIPUR 12 THE MOST SURPRISING THING CAME TO NOTICE THAT MS. MAN JULA AFTER COMPLETING HER MASTEER DEGREE PURSUED FURTHER STUDI ES IN THE UK AND NEVER JOINED BACK THE SERVICE OF THE ASSESSEE FIRM. A S PER THE INDEMNITY BOND, MS. MANJUILA WAS BOUND TO SERVE THE AS SESSEE FIRM FOR ATLEAST THREE YEARS AFTER COMPLETION OF MASTERS D EGREE IN LEEDS UNIVERSITY. HOWEVER, SHE DID NOT JOIN THE SERVICE A FTER COMPLETION OF MASTERS DEGREE AND IT HAS BEEN ADMITTED BY THE LD. AR OF THE ASSESEE VIDE ORDER SHEET ENTRY DATED 27.11.2006 THAT SHE DID NOT PAY ANY SUM AS COMPENSATION TO THE ASSESSEE FIRM. A PER THE INDEMN ITY BOND, THE ASSESSEE WAS TO BE COMPENSATED BY PAYING RS. 10 LAK HS BY MS. MANJULA AND IF SHE FAILED TO PAY THIS SUM, LEGAL PROC EEDINGS WERE TO BE IN INITIATED AGAINST HER. HOWEVER, IT HAS NOT BEEN B ROUGHT INTO NOTICE THAT ANY NOTICE FOR LEGAL PROCEEDINGS WAS GIVEN BY THE ASSESSEE FIRM. AS PER THE FACTS OF THE CASE, THE BEHAVIOUR OF THE AS SESEE FIRM IS VERY SURPRISING. MS. MANJULA HAS BEEN SHOWN TO HAVE JOINE D THE SERVICE IN MAY, 2003 AND INDEMNITY BOND WAS EXECUTED IN AUGUST, 2003,I.E. JUST WITHIN THREE MONTHS OF HER JOINING. IT IS NOT CLEAR THA T HOW THE ASSESSEE FIRM REALIZED THE POTENTIAL OF MS. MANJULA IN JUST 3 MONTHS, PARTICULARLY WHEN SHE WAS HAVING VERY COMMON DEGREE LIKE B.A.(HON S) AND WAS NOT HAVING ANY EXPERIENCE IN INTERNATIONAL BUSINESS. THE MAXIMUM SALARY GIVEN TO ANY EMPLOYEE IN THIS YEAR WAS JUST RS. 10,000/- AND THE FIRM INCURRED HUGE TRAINING EXPENS ES OF RS. 7,24,133/- ON MS. MANJULA BHALOTHIA. THE ASSESEE FIRM COULD HAVE EASILY RECOVERED RS. 10 LAKHS AS PER THE BOND, BUT IT DID N OT ASK FOR THE MONEY. THE ABOVE DISCUSSION MAKES IT CLEAR THAT THE ASSESSEE FIRM HAS EVADED THE PERTINENT QUERIES AND NOT PRODUCED THE NECESSARY DOCUMENTS. IT IS CLEAR THAT NO BUSINESS PURPOSE WAS SERVED BY SENDIN G MS. MANJULA TO THE UK, SINCE SHE DID NOT SERVE THE ASSESSEE FIRM EV EN FOR SINGLE DAY. ALL THE FACTS AND CIRCUMSTANCES SUGGEST THAT EXPEND ITURE ON HER EDUCATION WAS NOT FOR THE PURPOSE OF THE BUSINESS AND H ENCE CLAIM OF ITA.NO. 652/JP/ 12 M/S GARMENT CRAFTS VS. DCIT,CIRCLE-, JAIPUR 13 RS. 7,24,133/- AS TRAINING EXPENSES IS DISALLOWED AN D ADDED BACK TO THE INCOME OF THE ASSESSEE. PENALTY PROCEEDINGS U/S 271(1 )(C) ARE ALSO INITIATED FOR CONCEALMENT OF INCOME. 2.1 THE ASSESEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A) WHO HAS CONFIRMED THE LEVY OF PENALTY. THE RELEVANT FIND ING OF THE LD.CIT(A) ARE AS UNDER: CHALLENGING THE SAID VIEW OF ASSESSING OFFICER SHR I NUHAL HAS PRODUCED COPY OF BOND AND CONSIDERED THAT NO LEGAL ACTION WERE TAKEN AGAINST THE SAID LADY O RECOVER THE SAID AMOUNT . IT WAS FURTHER ARGUED THAT SINCE THE SAID EXPENDITURE WAS INCURR ED KEEPING IN VIEW THE BUSINESS INTEREST, THEREFORE, THE AO SHOULD HAVE ALLOWED THE SAME. I HAVE CONSIDERED FACTS OF THE CASE AND ARGUMENTS TAK EN BY SHRI NUHAL QUITE CAREFULLY. IT IS A FACT THAT NEITHER IN THE A SSESSMENT PROCEEDINGS NOR IN THE APPELLATE PROCEEDINGS THE ORIGINAL INDEMNIT Y BOND COULD BE PRODUCED THOUGH IN ORDER TO VERIFY THE VERACITY OF THE D OCUMENT THE AO HAD SPECIFICALLY REQUESTED THE APPELLANT FIRM TO PRODUCE THE SAME. FURTHER, IT IS SEEN THAT THE SIGNATURE OF MS. MANJUL A ON INDEMNITY BOND AND PASSPORT ARE ENTIRELY DIFFERENT. IT IS FU RTHER SEEN THAT WHEN AFTER COMPLETION OF THE STUDY SHE DID NOT JOIN THE APPEL LANT FIRM THEN THE APPELLANT FIRM WAS ENTITLED FOR A COMPENSATION OF R S. 10 LACS WHICH WAS NOT RECEIVED AS WELL AS NO ACTION OF ANY NATURE WER E TAKEN EVEN TO INITIATE RECOVERY OF THE SAME UNDER THESE CIRCUMSTANC ES IN MY CONSIDERED VIEW, THE ASSESSING OFFICER WAS FULLY JUST IFIED IN REJECTING THE SAID CLAIM OF TRAINING EXPENSES OF RS,. 7,24,133/- WH ICH IS HEREBY CONFIRMED BY REJECTING RELEVANT GROUND OF APPEAL. 2.2 THEREAFTER THE MATTER CAME UP BEFORE THE COORDINAT E BENCH IN ITA NO. 1070/JP/07 FOR A.Y. 2007-08: AFTER CONSIDERING THE ARGUMENTS ADVANCED BY THE PART IES ON THE ISSUE WE ARE NOT INCLINED TO INTERFERE WITH THE FIRST APPEL LATE ORDER AS ITA.NO. 652/JP/ 12 M/S GARMENT CRAFTS VS. DCIT,CIRCLE-, JAIPUR 14 UNDISPUTEDLY AS PER THE TERMS OF INDEMNITY BOND EXECU TED BY MS. MANJULA BHALOTHIA, THE ASSESSEE OUGHT TO HAVE RECOVERE D THE AMOUNT SPENT ON HER EDUCATION ABROAD ON FAILURE OF HER IN JOINI NG BACK THE ASSESSEE FIRM AFTER COMPLETION OF HER TRAINING. IF IN CURRING OF EXPENDITURE ON HER TRAINING WAS CONSIDERED AS IN THE INTEREST OF BUSINESS, THEN IT WAS ALSO IN THE INTEREST OF BUSINES S TO RECOVER THE AMOUNT FROM HER ON HER FAILURE TO REJOIN THE ASSESSEE FIRM AFTER COMPLETION OF HER STUDY AS PER THE TERMS OF THE INDEMNI TY BOND EXECUTED BY HER. AS PER THE TERMS OF HER INDEMNITY BOND, THE ASSESSEE FIRM WAS ENTITLED FOR COMPENSATION OF RS. 10,0 0,000/- ON HER NOT REJOINING THE ASSESSEE FIRM. THE LD. CIT(A) HAS O BSERVED THAT NO ACTION OF ANY NATURE WAS TAKEN EVEN TO INITIATE RECOVER Y OF SAME BY THE ASSESSEE. WE THUS DO NOT FIND REASON TO INTERFERE WITH THE ORDER OF THE LOWER AUTHORITIES IN THIS REGARD IN DISALLOWING THE CL AIMED EXPENSES O RS. 7,24,133/-. THE GROUND IS ACCORDINGLY REJECTED. 2.3 SUBSEQUENT TO THE TRIBUNALS ORDER A FRESH SHOW C AUSE WAS ISSUED TO THE ASSESSEE ON 03.03.2009, IN RESPONSE TO WHICH THE ASSESSEE FAILED TO OFFER AN EXPLANATION. THE RELYING ON DELHI H IGH COURTS DECISION IN CASE OF M/S ELECTRICAL ENGINS COR. VS. C IT (2002) REPORTED IN 255 ITR 619 WHEREIN IT WAS HELD THAT WHERE CLAIM OF DEDUCTION WAS CLEARLY UNTENABLE AND NON-GENUINE AND THEREFORE, THE ASSESSEE COULD NOT BE SAID TO HAVE BEEN REBUTTED THE PRESUMPTIONS W HICH ........ AGAINST IT IN LIGHT OF EXPLANATION TO SECTION 271(1)(C ) CONCEALED THE INCOME OF RS. 7,24,133/- AND LEVY OF PENALTY O RS. 2,5 9,783/- IS VALID. 2.4 BEING AGGRIEVED THE ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A). THE LD. CIT(A) HAS GIVEN DETAILED FINDINGS BY PASSING AN ELABORATE ORDER WHEREIN EACH OF THE CONTENTIONS RAISED BY THE ASSESSEE HAVE BEEN CONSIDERED AT LENGTH. IT WAS THER EFORE TO IMPORTANT TO REPRODUCED THE DETAILED FINDINGS OF THE LD . CIT(A) WHICH ARE IMPORTANT FOR THE ISSUE UNDER CONSIDERATION. ITA.NO. 652/JP/ 12 M/S GARMENT CRAFTS VS. DCIT,CIRCLE-, JAIPUR 15 I HAVE DULY CONSIDERED THE SUBMISSIONS OF THE APPELLA NT. IN THIS CASE, THE ASSESSEE HAD CLAIMED TRAINING EXPENSES OF RS. 7,24,133/- ON SMT. MANJULA BHALOTHIA FOR HIGHER STUDIES IN UK. THE APPELLANT WAS ENGAGED IN THE BUSINESS OF EXPORT OF READYMADE GARMEN TS AND IT WAS NOT EXPLAINED AS TO HOW THE TRAINING EXPENSES OF RS.7 , 24,133/ SPENT ON SMT. MANJULA BHALOTHIA FOR HIGHER STUDIES IN UK COUL D HAVE BENEFITED THE APPELLANT IN ANY MANNER. THE AO OBSER VED THAT THE ASSESEE HAVE ENTERED INTO INDEMNITY BOND WITH SMT. MA NJULA BHALOTHIA HOWEVER THE DATE OF PURCHASE OF STAMP PAPER WAS NOT LEGIBLE. THEREFORE THE INDEMNITY BOND WAS BACKDATED WITH AN ULTERIOR MOTIVE TO CLAIM THE ALLEGED PERONAL EXPENDITURE AS A B USINESS EXPENDITURE. THE SIGNADURE OF SMT. MANJULA BHALOTHIA ON THE INDEMNITY BOND AND PASSPORT FURNISHED BY THE ASSESSE E DO NOT TALLY. THEREFORE IT TRANSPIRED THAT SMT. MANJULA BHLOTHIA H AD NOT SIGNED THE INDEMNITY BOND AND IT WAS SIGNED BY SOMEONE ELSE. AFT ER COMPLETION OF HER TRAINING, SHE WAS IN THE SERVICE WITH THE ASS ESSEE ONLY FOR THREE MONTHS AT A SALARY OF RS. 10,000/- PER MONTH. SINCE S HE HAD NOT BEEN IN THE SERVICE WITH THE APPELLANT FIRM FOR THE STIPU LATED PERIOD, SHE WAS LIABLE TO PAY COMPENSATION OF RS. 10,00,000/-. HOWEVER, THE ASSESSEE HAD FAILED TO RECOVER THE AMOUNT FROM HER. IN FACT NO ACTION OF ANY NATURE WAS TAKEN TO INITIATE THE RECOVERY FROM SMT. MANJULA BHALOTHIA. THE HONBLE JAIPUR TRIBUNAL ALSO OBSERVED WHILE CONFIRMING THE DISALLOWANCE OF TRAINING EXPENSES THAT AS PER THE TERMS OF ALLEGED INDEMNITY BOND, THE APPELLANT OUGHT TO HAVE RECOVERED THE AMOUNT SPENT BY IT ON THE TRAINING OF SMT. MANJULA BHALOTHIA. IT IS SETTLED LAW THAT INCOME CAN BE SUPPRESSED BY SPURIOUS ITEMS OF EX PENDITURE OR DEDUCTIONS AND TO ATTRACT SECTION 271(1)(C), IT IS SU FFICIENT IF AN ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF ITS INCOME. AS REGARDS LEVY OF PENALTY ON TRAINING EXPENSES CLAIMED BY THE A SSESSEE OFFERED AN EXPLANATION WITH REGARD TO SAID ADDITION AND THE RE VENUE FOUND THE EXPLANATION AS FALSE, THE ASSESEE WAS DEEMED TO HAV E CONCEALED THE PARTICULARS OF ITS INCOME TO THAT EXENT. IN THE PRE SENT CASE, REVENUE ITA.NO. 652/JP/ 12 M/S GARMENT CRAFTS VS. DCIT,CIRCLE-, JAIPUR 16 HAS PROVED THE EXPLANATION OF THE ASSESSEE TO BE FALSE BY TRAINING POSITIVE MATERIAL ON RECORD AS THE TRAINING EXPENSES WERE AN EYE-WASH. THE CONCOCTED STORY OF CLAIMING PERSONAL EXPENDITURE AS BUSINESS EXPENDITURE WAS TO BE FOOL REVENUE AUTHORITIES. THE INDEMNITY BOND AND ALLEGED SERVICE FOR 3 MONTHS WAS UNBELIEVABLE AS NO ATTEMPT WAS MADE BY THE ASSESSEE TO GET THE COMPENSATION. MOREOVER THE DEGREE OF PROOF REQUIRED BY THE REVENUE IS ONLY PREPONDERANCE OF PROBABILITIES AS INSISTED UPON IN THE CIVIL CASES AND NOT PROOF BEYOND DOUBT WHICH IS INSISTED UPON IN CRIMINAL CASES. THE A SSESEE HAD CONCEALED THE PARTICULARS OF ITS INCOME WHEN IT MADE THE RETURN. THIS STAND WAS ESTABLISHED BY THE FACT THAT THE ADDITION WAS CONFIRMED BY THE CIT(A) AND BY THE HONBLE TRIBUNAL THE ASSESEE S EXPLANATION THAT IT HAD INCURRED THE TRAINING EXPENSES FOR THE PURPOSE OF BUSINESS WAS DISBELIEVED AND REJECTED BY THE APPELLATE AUTHORITIE S. CLEARLY, THEREFORE, IT IS A CASE THAT COMES UNDER SECTION 271( 1)(C) OF THE ACT. EXPLANATION 1 THEREOF PROVIDES THAT IN A CASE WHERE T HE EXPLANATION IS OFFERED WHICH IS FOUND BY THE ASSESSING OFFICER TO B E FALSE OR AN EXPLANATION IS OFFERED WHICH COULD NOT BE SUBSTANTIATED . IN THE PRESENT CASE, THE EXPLANATION WAS NOT BONA-FIDE AND AL L THE RELEVANT FACTS HAD NOT BEEN DISCLOSED, THEREFORE THE AMOUNT OF RS . 7,24,133/- ADDED IN COMPUTING THE TOTAL INCOME OF THE ASSESSEE WA S DEEMED TO REPRESENT THE INCOME IN RESPECT OF WHICH PARTICULARS HAD BEEN CONCEALED. IN THIS CASE, THE ASSESSING OFFICER PROCEE DED TO TAKE NOTE OF THE ADDITION OF RS. 7,24,133/- AND PROCEEDED TO IMPOSE T HE PENALTY ON THAT BASIS AFTER DUE APPLICATION OF MIND. THERE SHOUL D BE A NEXUS BETWEEN THE EXPENDITURE AND THE BUSINESS. THE NEXUS SHOULD BE WITH THE EXISTING BUSINESS NEEDS AND THE NEXUS SHOULD NOT BE BETWEEN PERSONS. ONE OF THE TEST TO BE APPLIED IS WHETHER THE EXPENDITURE IS INCURRED BY THE ASSESSEE IN HIS CHARACTER AS A COMMON BUSINESSMAN OR PROFESSIONAL OR WHETHER IT IS INCURRED IN SOME OTHER CAP ACITY. IN THE PRESENT CASE, NO MATERIAL WAS BROUGHT ON RECORD OR EVIDENCE WAS SUBMITTED OR ANY COMPELLING REASON WAS GIVEN AS TO HOW THE HIGHER ITA.NO. 652/JP/ 12 M/S GARMENT CRAFTS VS. DCIT,CIRCLE-, JAIPUR 17 STUDIES OF SMT. MANJULA BHALOTHIA WERE INDISPENSABLE FOR THE ASSESEE FIRM AND ITS BUSINESS. IT WAS NOT UNUSUAL IN THE BUS INESS FOR AN EMPLOYER TO MEET THE COST OF HIGHER EDUCATION OF ITS EMPL OYEES SO THAT THEY COULD ATTAIN PROFICIENCY WHICH WOULD HELP THE BUS INESS ON RETURN. WHERE THE PERSON DEPUTED FOR EDUCATION HAPPENED TO BE A RELATED PERSON OR DID NOT JOIN THE SERVICE ON RETURN, THE RET URN FOR INCURRING THE EXPENDITURE COULD BECOME A MATTER OF DOUBT S TO WHE THER IT WAS BONA FIDE AND INCURRED FOR PURPOSES OF BUSINESS. IN SU CH MATTERS, IT COULD ONLY BE A MATTER OF INFERENCE FROM THE RELEVANT F ACTS AS TO THE NATURE AND COURSE OF STUDY, ITS USEFULNESS FOR THE BUS INESS AND OTHER RELEVANT FACTORS. THE HONBLE MADRAS HIGH COURT IN M. SUBRMANIAM BROS. VS. CIT (250 ITR 769) DEALT WITH CLAIM RELATING TO EXPENDITURE INCURRED BY A FIRM ON EDUCATION OF ONE OF THE CHILDREN OF A PARTNER ON CONDITION THAT HE WOULD JOIN THE FIRM AS PARTNER ON RET URN ON COMPLETION OF THE STUDY. IN THE FACTS OF THE CASE, THE TRIBUNAL HAD FOUND THAT THE EXPENDITURE WAS PERSONAL IN NATURE AND THE HIGH COURT ENDORSED SUCH A FINDING UPHOLDING THE INFERENCE THAT THE AGREEMENT, DRAWN UP ONLY TO GIVE THE COLOUR OF COMMERCIAL EXPEDIENCY , COULD NOT BE RELIED UPON. IN THE PRESENT CASE THE FATS AND CI RCUMSTANCES ARE SIMILAR. THE ASSESSES EXPLANATION HAD ALSO BEEN FOUND TO BE FALSE AND IN VIEW OF THE FACT THAT NO MENSREA NEED BE SHOWN AND IN VIDE OF THE FURTHER FACT THAT CONSCIOUS CONCEALMENT NEED NOT BE ES TABLISHED AS EARLIER UNDERSTOOD, IT IS CLEAR THAT THE ASSESSING OFFICE WAS JUSTIFIED IN IMPOSING THE PENALTY IN THE PRESENT CASE. RECENTLY, A SIMILAR QUESTION AROSE BEFORE THE HONBLE DELHI HIGH COURT IN CIT VS. ESCORT FINANCE LT. (183 TAXMAN 453). THE HONBLE HIGH COURT UPHELD THE PENALTY IN RESPECT OF THE CLAIM U/S 35D WITH THE FOLLOWING OBSERVA TIONS. EVEN IF THERE IS NO CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS, BUT ON THE BASIS THEREOF THE CLAIM WHICH IS MADE IS EX FACIE BOGUS, IT MAY STILL ATTRACT PENALTY PROVISION. IT IS N OT THE CASE OF THE ASSESSEE THAT WHILE FILING THE RETURN, IT GOT ASSIST ANCE FROM THE CHARTERED ACCOUNTANTS WHO OPINED THAT THE AFORESAID EX PENSES ITA.NO. 652/JP/ 12 M/S GARMENT CRAFTS VS. DCIT,CIRCLE-, JAIPUR 18 QUALITY FOR AMORTIZATION OVER A PERIOD OF 10 YEARS U/S 35 D OF THE ACT. THAT APART, WHEN WE FIND THAT IT IS NOT A CASE WHERE TWO OPINIONS ABOUT THE APPLICABILITY OF SECTION 35D WERE POSSIBLE. THEREFORE IT CANNOT BE A CASE O A BONA FIDE ERROR ON THE PART OF THE ASSESSEE. AS HAS BEEN POINTED OUT ABOVE, THE RELIEF AVAILABLE UNDER SECTION 35D OF THE ACT TO FINANCE COMPANY IS EX FACIE INADMISSIBLE AS THAT IS CONFINED ONLY TO THE EXISTING INDUSTRIAL UNDERTAKING FOR THEIR EXTENSION OR FOR SETTING UP A NEW INDUSTRIAL UNIT. IT WAS, THUS, NOT A WRONG CLAIM PREFERRED BY THE ASSESSEE, BUT IS A CLEAR CASE OF FA LSE CLAIM. IN CIT VS. VIDYAGAURI NATVERLAL (238 ITR 91) THE HONBLE GUJARA T HIGH COURT MADE A DISTINCTION BETWEEN WRONG CLAIM AS OPPOSED TO FALSE CLAIM AND HELD THAT IF THE CLAIM IS FOUND TO BE FALSE, THE SAME WOUL D ATTRACT PENALTY. CONSIDERING THE FACTS, IT IS CLEAR THAT THE CLAIM MA DE BY THE APPELLANT IS NOT BONA-FIDE. IT IS NOT A WRONG CLAIM BUT A FALSE CLAIM AND NO TWO OPINIONS ON THE CLAIM ARE LEGALLY POSSIBLE. THE PROVISIONS OF EXPLANATION 1(B) TO SECTION 271(1)(C) ARE APPLICABLE BECAUSE THE AASESEE HAS OFFERED AN EXPLANATION WHICH HE IS NOT ABL E TO SUBSTANTIATE AND HAS ALSO FAILED TO PROVE` THAT SUCH EXPLANATION IS BONA-FIDE AND THAT ALL THE FACTS RELATING TO THE SAM E AND MATERIAL TO THE COMPUTATION OF HIS TOTAL INCOME HAVE BEEN DISCLOSED B Y HIM. IN VIEW OF THESE FATS. THE PENALTY IMPOSED U/S 271(1)(C) DESERVES TO BE UPHELD. THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. REL IANCE PETRO PRODUCTS PT. LTD.(SUPRA) HAS HELD THAT EVERYTHING W OULD DEPEND UPON THE RETURN FILED BY THE ASSESEE AS ONLY DOCUMENT WHE RE ASSESSEE CAN FURNISH THE PARTICULARS OF IT RETURN OF INCOME. IN THE PRESENT CASE, IN THE RETURN OF INCOME A CLEAR MISREPRESENTATION OF FACT S WAS INCORPORATED BY THE ASSESSEE BY CLAIMING DEDUCTION ON ACCOUNT OF TRAINING EXPENSES WHICH ALSO RESULTED IN DECLARING TOTAL INCOME LESSER BY RS. 7,24,133/-. MOREOVER THERE IS A CLEAR CUT FINDING THAT THE RETU RN OF INCOME WAS ERRONEOUS .HENCE PENALTY U/S 271(21)(C) WAS RIGHTLY IMPOSED BY THE AO. ITA.NO. 652/JP/ 12 M/S GARMENT CRAFTS VS. DCIT,CIRCLE-, JAIPUR 19 2.5 DURING THE COURSE OF HEARING THE LD. AR MADE THE FOLLOWING SUBMISSIONS BEFORE THE BENCH. THE AO IN RESPECT OF THE SAME HAS LEVIED A PENALTY OF RS.2,59,73/- U/S 271(1)(C) OF THE IT ACT, 1961, FOR CONCEALMENT OF I NCOME. THE CLAIM OF THE ASSESSEE HAS NEITHER BEEN FUND TO BE FALSE OR BOGUS NOR THE SAME HAS BEEN DISPROVED. THERE IS NO POSITIVE FINDING OR ANY OTHER MATERIAL AVAI LABLE ON RECORD TO CONCLUDE THAT THE CLAIM OF THE ASSESSEE TOWARDS THE AB OVE SAID TRAINING EXPENSES IS BOGUS OR FALSE. THE RELEVANT DISALLOWANCE HAS BEEN MADE AND SUSTAINE D SIMPLY ON THE GROUND THAT THE EXPLANTI0N FURNISHED BY THE ASSESSEE HAS NOT BEEN FOUND TO BE SATISFACTORY. MISS. MANJULA BHALOTHIA IS NEITHER ANY FAMILY MEMBER NOR ANY RELATIVE OF PARTNERS OF THE ASSESSEE FIRM, THEREFORE QUESTION OF CLAIMING ANY PERSONAL EXPENSES DOES NOT ARISE. THE BONAFIDE INACTION ON THE PART OF THE ASSESSEE OF NOT RECOVERING ANY COMPENSATION FROM MISS. MANJULA BHALOTHIA FOR NOT JOINING THE ASSESSEE FIRM AFTER COMPLETION OF FOREIGN EDUCATION DO N OT RENDER THE CLAIM OF THE ASSESSEE A BOGUS OR FALSE. IN THE ABSENCE OF ANY POSITIVE FINDINGS THAT THE CLAI M OF THE ASSESSEE IS BOGUS OR FALSE, IT IS NOT POSSIBLE TO HOLD THAT THE ASS ESSEE HAS CONCEALED INCOME OR FURNISHED INACCURATE PARTICULARS T HEREOF. ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS H AS DISCLOSED THE FULL PARTICULARS OF THE EXPENDITURE AND OTHER REL EVANT FATS AND OFFERED BONAFIDE EXPLANATION IN RESPECT THEREOF. THE CONCEALMENT NECESSARILY REFER TO WILLFUL STATE OF MIND AND MEN REA. THE ASSESSEE CANNOT BE HELD GUILTY FOR CONCEALMENT OF I NCOME IN THE ITA.NO. 652/JP/ 12 M/S GARMENT CRAFTS VS. DCIT,CIRCLE-, JAIPUR 20 ABSENCE OF ELEMENT OF BAD STATE OF MIND AND MENSREA U NLESS THE CASE FALLS WITHIN THE SCOPE OF CLAUSE (A) OR (B) OF EXPLANA TION 1 TO SECTION 271(1)(C) OF THE ACT. THE ASSESSEE HAS OFFERED BONAFIDE EXPLANATION AND DIS CLOSED ALL THE FACT RELATING TO THE SAME AND MATERIAL TO THE COMPUTAT ION OF HIS TOTAL INCOME. THERE IS NOTHING IN THE ASSESSMENT ORDER SHO WING THAT ANY OF THE EXPLANATION OFFERED BY THE ASSESAEE WAS FOUND TO BE FALSE OR DISPROVED. THE CASE OF THE ASSESSEE DONOT NOT FALLS WITHIN THE S COPE OF EITHER CLAUSE (A) OR (B) OF EXPLANATION 1 TO SECTION 271(1)(C) OF THE ACT. THE EXPLANATION FURNISHED BY THE ASSESSEE IN RESPECT OF THE PAYMENT OF BROKERAGE HAS NOT BEEN DISPROVED. AS PER THE RULE OF EV IDENCE THERE IS DISTINCTION BETWEEN THE FACTS NO PROVED AND FACT D ISPROVED AND FACT PROVED. WHERE FACT FINDING AUTHORITY REACHES TO A STAGE WHERE IT CAN ONLY CONCLUDE THAT HE ALLEGED FACT IS NOT PROV ED THE BENEFIT OF THE PRINCIPAL THAT MERE NON SATISFACTORY NATURE OF EX PLANATION FURNISHED NOT AMOUNT TO PROOF OF FALSITY OF THAT EXPLANAT ION SHALL APPLY, WHICH WOULD RESULT THAT EXCEPT REJECTION F THAT FURN ISHED BY THE ASSESSEE, THERE IS NO MATERIAL TO SUSTAIN THE PLEA OF CONCEALMENT THE ENQUIRY CONDUCTED BY THE AO. MAY LEAD TO ARRIVE AT THE FINDINGS THAT WHETHER THE PARTICULARS DISCLOSED ARE TRUTHFUL OR FALSE OR NOT PROVED TO BE SATISFACTORY. IN THE FIRST CASE IT WOULD BE A POSITIVE CASE OF NO CONCEALMENT, IN SECOND CASE IT WOULD BE A POSITIVE CASE OF CONCEALMENT AND IN THIRD CASE BENEFIT OF DOUBT WILL GO IN FAVOUR OF THE ASSESSEE. THE CASE OF THE ASSESSEE FALLS WITHIN THIR D CATEGORY WHERE THE ALLEGED FACT OF INTRODUCTION OF CAPITAL IS FOUND TO BE NOT PROVED SATISFACTORILY. THEREFORE IT IS NOT A CASE OF POSITIVE C ONCEALMENT AND BENEFIT OF DOUBT GOES IN FAVOUR OF THE ASSESSEE . (CIT V S. VIDHYGAURI NATVERLAL (1999) 238 ITR 91 (GUJ.) ITA.NO. 652/JP/ 12 M/S GARMENT CRAFTS VS. DCIT,CIRCLE-, JAIPUR 21 THE HON. SUPREME COURT IN THE CASE OF RELIANCE PETROPROD UCTS (P) LTD. 189 TAXMANN 322, HAS HELD THAT MERELY BECAUSE T HE ASSESSEE HAD CLAIMED THE EXPENDITURE, WHICH CLAIM WAS NOT ACCEPTE D OR WAS NOT ACCEPTABLE TO THE REVENUE, THAT, BY ITSELF, WOULD NOT ATTRACT THE PENALTY U/S 271(1)(C). IF THE CONTENTION OF THE REVENUE WAS A CCEPTED, THEN IN CASE OF EVERY RETURN WHERE THE CLAIM MADE WAS NOT ACC EPTED BY THE ASSESSING OFFICER FOR ANY REASON, THE ASSESSEE WOULD INVITE PENALTY UNDER SECTION 271(1)(C). THAT IS CLEARLY NOT THE INTE NDMENT OF THE LEGISLATURE. IN CIT VS. MEDIRATTA ENGINEERING CORPORATION 132 ITR 327 (DEL.) IT IS HELD THAT THE PENALTY U/S 271(1)(C) IS NOT JUSTIFIED WHERE THE EXPENSES CLAIMED BY THE ASSESSEE HAVE BEEN DISALLOWED FOR WANT OF COMPLETE PROOF. IN CIT V. GURUDAS RAM PAPSHI & BROS. 15 TAXMAN 567 (PAT) IT IS HELD THAT THE PENALTY U/S 271(1)(C) IS NOT JUSTIFIED WHER E ADDITIONS HAVE BEEN MADE AFTER DISALLOWING CERTAIN EXPENSES AND AFT ER NOT BELIEVING THE EXPLANATION OF THE ASSESSEE. IN CIT VS. NARENDRA KUMAR RAJENDRA KUMAR JAIN 174 I TR 479 (MP) IT IS HELD THAT THE PENALTY U/S 271(1)(C) IS NOT JUSTIFIED WHERE CLAIM IN RESPECT OF AN EXPENDITURE WAS NOT ALLOWED. IN CIT V J.K. JAJOO 181 ITR 410 (MP) IT IS HELD THAT MERE REJECTION OF CLAIM FOR EXPENSES WOULD NOT MEAN THAT THERE WAS CONCEA LMENT OF INCOME. IN CIT V. SUBHASH TRADING CO. (1996) 221 ITR 110, 11 7 (GUJ.) IT IS HELD THAT THE PENALTY NEED TO BE SUSTAINED U/S 271(1)(C) IN THE ABSENCE OF ANY EVIDENCE TO CONCLUDE A POSITIVE FINDING THAT THE RE WAS CONCEALMENT OF THE INCOME.