Raj Kumar Khandelwal, Agra V. ITO, Agra

ITA 662/AGR/2008

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 6762 (ITAT-AGRA)
• Duration Of Justice: 1 year(s) 7 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-06-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 28-05-2010
• Assessment Year: 1999-2000
• Appeal Filed On: 07-11-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R C SHARMA
• Keywords: Unexplained investment; Business income; Reasonable cause
• Section: 133A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AGRA BENCH, AGRA BEFORE SHRI R.K. GUPTA, JUDICIAL MEMBER AND SHRI P.K. BANSAL, ACCOUNTANT MEMBER ITA NO.662/AGR/2008 ASST. YEAR: 1999-2000 SHRI RAJ KUMAR KHANDELWAL, VS. INCOME-TAX OFFIC ER, WARD 2(4), 45, JANTA COLONY, AGRA. SHAHGANJ, AGRA. (PAN : AGVPK 0645 A) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI ANURAG SINHA, ADVOCATE RESPONDENT BY : SHRI R.C. SHARMA, JR. D.R. ORDER PER P.K. BANSAL, A.M.: THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF THE CIT(A) DATED 29.08.2008 BY WHICH THE CIT(A) HAS CONFIRMED THE PE NALTY IMPOSED BY THE A.O. UNDER SECTION 271(1)(C) OF THE INCOME-TAX ACT, 1961 (THE ACT HE REINAFTER). 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E HAD FILED RETURN SHOWING INCOME OF RS.92,890/- FROM BUSINESS UNDER SECTION 44AF (RS.45 ,890/-), RENTAL INCOME (RS.12,000/-) AND INCOME FROM OTHER SOURCES (RS.35,000/-). THE BUSIN ESS PREMISES WERE SURVEYED UNDER SECTION 133A OF THE ACT ON 28.01.1999. THE SURVEYING AUTHO RITIES PREPARED INVENTORY OF STOCK FOUND IN THE PREMISES AND VALUED THE SAME AT RS.12,24,015/- AT MARKET PRICE. AFTER MAKING ADJUSTMENT FOR OPENING STOCK ETC., THE EXCESS STOCK WAS DETERMINED AT RS.8,34,182/-. THE ASSESSEE SURRENDERED UNDER CONFUSION AND PRESSURE RS.8,25,000/- FOR INCL USION IN INCOME. LATER, IT WAS REALIZED THAT 2 THERE WAS NO EXCESS STOCK IF VALUATION IS DONE AT C OST PRICE AND CERTAIN OBVIOUS MISTAKES IN THE INVENTORY ARE CORRECTED. ON THE VERY NEXT DATE AFT ER SURVEY THE ASSESSEE RETRACTED FROM THE STATEMENT OF SURRENDER. THE AO MADE ADDITION OF RS .8,25,000/- WHICH WAS SUSTAINED BY CIT(A). THE TRIBUNAL VIDE ORDER DATED 15 TH MAY, 2007 AGREED THAT VALUATION SHOULD HAVE DONE A T COST PRICE BUT SUSTAINED LUMP SUM ADDITION OF RS.3,50,00 0/-. THE A.O. INITIATED THE PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) AND ULTIMATELY IMPOSED PENALTY BY OBSERVING AS UNDER :- IN VIEW OF ABOVE FACTS, I AM SATISFIED THAT THE AS SESSEE HAS CONCEALED THE PARTICULARS OF HIS INCOME TO THE TUNE OF RS.4,60,96 8/- AND INACCURATE PARTICULARS OF SUCH INCOME HAS ALSO BEEN FURNISHED WITHOUT ANY REASONABLE CAUSE. THEREFORE, HE IS LIABLE TO PENALTY U/S 271(1)(C) OF THE INCOME TAX ACT, 1961. 3. THE ASSESSEE WENT IN APPEAL BEFORE THE CIT(A) AN D THE CIT(A) CONFIRMED THE PENALTY IMPOSED ON THE ASSESSEE, OBSERVING AS UNDER :- 6. VIDE ITNS 150 DATED 06.08.2007 INCOME U/S.1 43(3)/251/154/254 HAS BEEN COMPUTED AS UNDER: 'TOTAL INCOME AS PER ITNS 150 DATED 14.01.2004 RS .8,59,990/- LESS : RELIEF ALLOWED BY ITAT ORDER 15.5.07 RS.4 ,52,102/- R. 4,07,888/- (1) ON ACCOUNT OF UNDISCLOSED STOCK [RS.7,91,796/- (-) RS.3,50,000/-] RS.4,4 1,796/- (2) ON ACCOUNT OF PROFIT ON SALES [RS. 56,196/- (-) RS.45,890/-] RS. 10, 306/- RS.4 52,102/- ADD ON ACCOUNT OF UNDISCLOSED INVESTMENT AS PER DIRECTIONS OF HON'BLE ITAT ORDER RS. 1,00,000/- TOTAL INCOME RS. 5,52,102/- OR RS.5,52,100/- SUBSEQUENTLY, VIDE ORDER U/S.154 DATED 07.11.2007, TOTAL INCOME HAS BEEN RECOMPUTED AS REPRODUCED BELOW FROM ITNS 150 'TOTAL INCOME AS PER AO RS.12,84,620/- 3 LESS: RELIEF ALLOWED BY CIT(A) ORDER 1.1.03 RS. 3,46,735/- RS.9,40,885/- LESS : RELIEF BY ITAT RS.3,87,0 27/- RS.5,53,858/-' THE AO TOOK UP THE PENALTY PROCEEDINGS INITIATED U /S.271(1)(C) OF THE ACT IN THE ORIGINAL ASSESSMENT ORDER AND ISSUED A SHOW CAUSE N OTICE ON 06.08.2007 FIXING DATE OF HEARING ON 14.08.2007. HOWEVER, NONE ATTENDED ON THE APPOINTED DATE. ANOTHER SHOW CAUSE NOTICE WAS ISSUED U/S.2 71( L )(C) ON 10 .10.2007 FIXING THE DATE OF HEARING ON 22.10.2007. HOWEVER, NEITHER ANYONE ATTE NDED NOR ANY REPLY WAS FILED. THEREFORE, THE AO PASSED THE ORDER ON MERITS AND ON THE BASIS OF MATERIAL AVAILABLE ON RECORD. HE OBSERVED THAT DURING THE SURVEY CONDU CTED IN THE BUSINESS PREMISES OF THE APPELLANT ON 28.01.1999 STOCK WORTH RS.8,25, 000/- WHICH WAS NOT ENTERED INTO THE BOOKS OF APPELLANT. SINCE UNACCOUNTED STOC KS WERE FOUND, SALES AND NET PROFIT WERE ALSO ESTIMATED. THE APPELLANT FILED HIS RETURN OF INCOME DECLARING THEREIN INCOME OF RS.35,000/- ONLY WITHOUT INCLUDING SUCH U NEXPLAINED INVESTMENT IN STOCKS AND INCOME. HENCE, THE AO IMPOSED PENALTY OF RS.L,1 4,579/U/S.271(1)(C) OF THE ACT AS THE APPELLANT HAD CONCEALED PARTICULARS OF HIS I NCOME TO THE TUNE OF RS.4,60,968/- AND HAD BEEN UNABLE TO EXPLAIN REASONS FOR SUCH NON DISCLOSURE WITH EVIDENCE. 7. AGGRIEVED, THE APPELLANT HAS FILED PRESENT APPE AL. VIDE WRITTEN SUBMISSIONS DATED 20.08.2008 THE APPELLANT HAS ADVANCED VARIOUS ARGUMENTS WHICH ARE CONDENSED BELOW: AFTER MAKING THE SURRENDER ON THE DATE OF SURVEY , THE APPELLANT RETRACTED THE SURRENDER AS HE RELIES THAT THERE WAS NO EXCESS STO CK IF VALUE HAS DONE ON THE COST PRICE AND CERTAIN OBVIOUS MISTAKES IN STOCK CO RRECTED. THE AO MADE THE ADDITION OF RS.8,25,000/- WHICH WAS SUSTAINED BY TH E CIT(A). HON'BLE TRIBUNAL VIDE ORDER DATED 1.5.05.2007 AGREED THAT THE VALUE SHOULD HAVE BEEN DONE ON COST PRICE BUT SUSTAINED LUMP-SUM AMOUNT OF RS.3,50 ,000/-. IN THE COURSE OF SURVEY, A ROUGH NOTE BOOK WAS F OUND WHICH SHOWED SALE OF RS.3,30,809/- FOR THE PERIOD 20.10.1998 TO 29.12.19 98. ON THIS BASIS, SALES WERE WORKED OUT FOR THE ENTIRE YEAR AT RS.21,56,165 /-. ON THIS BASIS, APPLYING NET PROFIT RATE OF 10%, EXTRA PROFIT OF RS.1,69,727 /WAS WORKED OUT AND TREATED AS UNDISCLOSED INCOME OF THE APPELLANT. 4 HOWEVER, THE ADDITION WAS REDUCED PARTLY BY THE CIT (A) AND FINALLY BY THE HON'BLE ITAT SO THAT AGAINST THE ORIGINAL ADDITION OF RS.1,69,727/-, ONLY ADDITION OF RS.10,.968/- AS EXTRA INCOME REMAINS SUSTAINED. THE APPELLANT HAD DISCLOSED INCOME OF RS.35,000/ - FROM JOB WORK WHICH DOES NOT REQUIRE ANY INVESTMENT. INITIALLY, THE AO WARRANTED TO ESTIMATE SUCH INCOME AT RS.2 LACS AGAINST THE RETURNED AMOUNT OF RS.35,000/ -. HOWEVER, IN THE ASSESSMENT ORDER, HE MADE ADDITION OF RS.2 LACS FOR INVESTMENT. THE CIT(A) TOOK NOTE OF THIS FACT AND ALSO OF THE FACT THAT NO EVID ENCE OF SUCH INVESTMENT HAD BEEN FOUND IN APPEAL AND, THEREFORE, DELETED THE AD DITION OF RS.2 LACS. ON REVENUE'S APPEAL, THE TRIBUNAL WITHOUT DISCUSSING T HE NATURE AND ACTIVITIES, MADE ADDITION OF RS.L LAC BUT TELESCOPED AGAINST TH E ADDITION OF RS.3,50,000/- FOR EXCESS STOCK. NO SEPARATE ADDITION, THEREFORE, SURV IVES. THIS ADDITION CANNOT, THEREFORE, BE CONSIDERED SEPARATELY FOR IMPOSING PE NALTY AS HAS BEEN DONE BY THE AO. THE PENALTY ORDER SHOWS THAT THE FOLLOWING INCOM E HAS BEEN TREATED AS INCOME IN RESPECT OF WHICH INACCURATE PARTICULARS WERE FUR NISHED. ESTIMATED INVESTMENT FOR EARNING INCOME RS.1,00,000/- FROM OTHER SOURCES ADHOC ADDITION FOR EXCESS STOCK FOUND IN SURVEY RS.3,50,000/- EXCESS PROFIT ON SALES WORKED OUT ON THE BASIS OF RS.10,968/- ROUGH NOTE BOOK FOUND AT THE TIME OF SURVEY ON PERUSAL OF THE ASSESSMENT ORDER, IT IS APPARE NT THAT THE AO HAS NOWHERE RECORDED HIS PRIMA FACIE SATISFACTION THAT THE ADDI TIONS BEING MADE BY HIM REPRESENTED INCOME THE PARTICULARS OF WHICH HAD BEE N CONCEALED AND IN RESPECT OF WHICH INACCURATE PARTICULARS HAD BEEN FURNISHED. IN THIS CONTEXT, THE APPELLANT HAS CITED THE FOLLOWING DECISIONS: D.M. MASNASVI VS. CIT 86 ITR 557 (SC) CIT VS. RAM COMMERCIAL ENTERPRISES 246 ITR 565 (DEL HI) DIWAN ENTERPRISES VS. CIT 246 ITR 571 (DELHI) T. NAUIMAL HAIT CHAND VS. CIT 160 TAXMAN 49 (ALLD.) T. ASHOK PAI VS. CIT 292 ITR 11 (SC) DILIP N. SHROFF VS. JCIT 291 ITR 519 (SC) 5 8. I HAVE CONSIDERED THE ARGUMENTS OF THE APPELLANT AND THE CONTENTIONS OF THE AO AND MY OBSERVATIONS ARE THAT - THE ID, AR OF THE APPELLANT HAS CITED VARIOUS JUD ICIAL DECISIONS IN SUPPORT OF HIS CONTENTION THAT THE AO HAS NOT RECORDED HIS SAT ISFACTION WHILE INITIATING PENALTY PROCEEDINGS U/S.271(1)(C) OF THE ACT. IN TH IS CONTEXT, REFERENCE IS MADE TO EXPLANATION (1B) BELOW EXPLANATION (7) OF S ECTION 271(1)(C) OF THE ACT INSERTED BY THE FINANCE ACT, 2005 WITH RETROSPE CTIVE EFFECT FROM 01.04.1989 WHICH READS AS UNDER: 'SECTION Z71(1)(C) EXPLANATION 7 .. (IB) WHERE ANY AMOUNT IS ADDED OR DISALLOWED IN COM PUTING THE TOTAL INCOME OR LOSS OF AN ASSESSEE IN ANY ORDER OF ASSESSMENT OR R EASSESSMENT AND THE SAID ORDER CONTAINS A DIRECTION FOR INITIATION OF PENALT Y PROCEEDING UNDER SUB-SECTION (1), SUCH AN ORDER OF ASSESSMENT OR REASSESSMENT SH ALL BE DEEMED TO CONSTITUTE SATISFACTION OF THE ASSESSING OFFICER FO R INITIATION OF THE PENALTY PROCEEDINGS UNDER SUBSECTION (1). ' HENCE, THE OBJECTION OF THE ID. AR OF THE APPELLANT IS NOT SUSTAINABLE AND ACCORDINGLY, DISMISSED. AS REGARDS THE ADDITION OF RS.3,50,000/- SUSTAIN ED BY THE HON'BLE ITAT, AGRA ON ACCOUNT OF UNEXPLAINED INVESTMENT IN STOCK, IT I S SEEN THAT DIFFERENCE IN STOCKS WAS DETECTED AT THE TIME OF SURVEY U/S.133A OF THE ACT. BEFORE THE CIT(A)-I, AGRA, THE APPELLANT FURNISHED A RECONCILI ATION WHICH WAS DULY CONSIDERED BY HIM AND THE AO WAS DIRECTED TO REDUCE THE ADDITION MADE ON ACCOUNT OF UNEXPLAINED INVESTMENT IN STOCKS ACCORDI NGLY. THOUGH THE SAID ADDITION WAS REDUCED FURTHER BY THE HON'BLE ITAT, A GRA, IT WAS OBSERVED BY THEM IN UNEQUIVOCAL TERMS THAT THE APPELLANT DID HA VE STOCKS, THE SOURCE OF WHICH HE HAD FAILED TO EXPLAIN. IN SPITE OF CONSIDE RING THE OPENING STOCK, OPENING CASH BALANCE AND THE MARGIN OF PROFIT INCLU DED IN THE VALUE OF STOCKS INVENTORISED ON THE DATE OF SURVEY, THERE STILL REM AINED STOCKS WHICH THE APPELLANT FAILED TO EXPLAIN. IT WAS ON THESE FACTS THAT THE HON'BLE ITAT, AGRA CONFIRMED THE ADDITION OF RS.3,50,000/-. FROM THE R ELEVANT PARAGRAPH, REPRODUCED IN PARA 5 HEREINABOVE, IT IS EVIDENT THA T THE HON'BLE ITAT, AGRA HAS BASED THEIR DECISION ON FACTS AND HAVE NOT RESORTED TO ESTIMATION OR ADHOCISM AS ALLEGED BY ID. AR. UNDER NO CIRCUMSTANCES, DOES THE CONCLUSION ARISE THAT 6 THE ADDITION OF RS.3,50,000/- IS A LUMP-SUM ADDITIO N AND DOES NOT REPRESENT VALUE OF UNEXPLAINED INVESTMENT IN STOCKS. THE HON' BLE ITAT, AGRA HAS FURTHER CEMENTED THEIR FINDING BY ALLOWING TELESCOPING BENE FIT OF UNEXPLAINED INVESTMENT OF RS.L LAC ALSO AGAINST SUCH ADDITION. SIMILARLY, THE ADDITION OF RS.10,306/-, THOUGH SMALL, WAS SUSTAINED ON ACCOUNT OF PROFIT ON UNDISCLOSED SALES DETECTED AT THE TIME OF SURVEY U/S.133A ON TH E BASIS OF PRIVATE RECORDS MAINTAINED BY APPELLANT AND NOT ACCOUNTED FOR BY HI M IN THE REGULAR BOOKS OF ACCOUNTS. THIS ALSO CONFIRMS THE FACT THAT THE APPE LLANT WAS CARRYING ON TRADING ACTIVITY PARALLELY WHICH WAS NOT ACCOUNTED FOR AND NOT DISCLOSED IN THE RETURN OF INCOME. FOR THESE REASONS, THE AO WAS JUSTIFIED IN HOLDING THAT THE APPELLANT HAD FAILED TO DISCLOSE HIS INCOME TRULY AND CORRECT LY AND IN THAT, HAD CONCEALED PARTICULARS OF HIS INCOME AS WELL AS FURNISHED INAC CURATE PARTICULARS OF HIS INCOME. EVEN UNDER EXPLANATION 1 TO SECTION 271(1)( C) OF THE ACT, THE APPELLANT HAS FAILED TO FURNISH AN EXPLANATION TO SHOW AND PR OVE THAT IN RESPECT OF THE AMOUNTS ADDED BY THE AO AND CONFIRMED BY THE CIT(A) AND THE ITAT, AGRA HE HAD DULY FURNISHED ALL RELEVANT AND MATERIAL FACTS. IN VIEW OF THE ABOVE, IMPOSITION OF PENALTY U{S.271 (1)(C) OF THE ACT IS JUSTIFIED AND ACCORDINGLY UPHELD. HOWEVER, ON A PLA IN READING OF PARA 24 OF THE ITAT'S ORDER DATED 15.05.2007, IT IS APPARENT THAT THOUGH ADDITION OF RS.1,00,000/- WAS CONFIRMED ON ACCOUNT OF UNDISCLOSED INVESTMENT FOR EARNING INCOME OF RS.35,000/- UNDER THE HEAD 'INCOME FROM OTHER SOURC ES', THE SAME WAS DIRECTED TO BE TELESCOPED AGAINST THE INVESTMENT OF RS.3,50,000 /SUSTAINED ON ACCOUNT OF UNEXPLAINED INVESTMENT IN STOCKS AS DETECTED IN THE SURVEY U/S.133A OF THE ACT. INSOMUCH, WHILE PRINCIPALLY CONFIRMING ADDITION TO RS.1,00,000/- OUT OF THE ORIGINAL ADDITION OF RS.2 LACS, THE ITAT HAS PRACTICALLY END ORSED THE DELETION MADE BY THE CIT(A). SINCE SEPARATE ADDITION OF RS.1,00,000/- OV ER AND ABOVE RS.3,50,000/- HAS NOT BEEN CONFIRMED BY THE ITAT, PENALTY IMPOSED IN RESPECT OF SUCH ADDITION IS NOT SUSTAINABLE. HENCE, AO IS DIRECTED TO RECOMPUTE PEN ALTY U/S.271(1)(C) OF THE ACT IN RESPECT OF THE FOLLOWING ADDITIONS - UNEXPLAINED INVESTMENT OF RS.3,50,000/- IN STOCKS UNDISCLOSED PROFIT ON UNDISCLOSED SALES RS.10,306/- THE APPELLANT GETS RELIEF ACCORDINGLY. 7 8. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED. 4. LD. A.R. BEFORE US VEHEMENTLY CONTENDED THAT THE A.O. HAS NOT SPECIFIED THE DEFECT FOR WHICH THE PENALTY HAS BEEN IMPOSED. THE PENALTY HA S BEEN IMPOSED FOR CONCEALING THE PARTICULARS OF INCOME AND FOR FILING THE INACCURATE PARTICULARS. IN THIS REGARD, HE RELIED ON THE ORDER OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF NEW SORATHIA ENGINEERING CO. LTD., 282 ITR 642. HE ALSO CONTENDED THAT EVEN THE NATURE OF THE ADDITIONS ARE SUCH ON WHICH NO PENALTY CAN BE IMPOSED. THE TRIBUNAL HAS CONFIRMED THE ADH OC ADDITIONS. NO DOUBT THERE HAD BEEN SURVEY IN THE CASE OF THE ASSESSEE BUT NO CONTRARY MATERIAL OR EVIDENCE WAS FOUND. ADDITION SUSTAINED BY THE TRIBUNAL IS MERELY ON ADHOC BASIS. THIS CLEARLY PROVES THAT THE TRIBUNAL WAS ALSO SATISFIED WITH THE EXPLANATION OF THE ASSESSEE THAT THE DISCLOSURE OF RS.8,25,000/- MADE FOR THE EXCESS STOCK WAS UNDER PRESSURE AND THE RETRACT ION ON THE VERY NEXT DAY BY THE ASSESSEE WAS BONAFIDE. THE ADDITION SUSTAINED BY THE TRIBUNAL O N ADHOC BASIS IS ONLY RS.3,50,000/-. THE ASSESSEE HAS DULY SUBMITTED THE EXPLANATION AND THE EXPLANATION SUBMITTED BY THE ASSESSEE WAS NOT FOUND TO BE FALSE. EVEN INVENTORY LIST PREPARE D BY THE DEPARTMENT DURING THE COURSE OF SURVEY WAS NOT ACCEPTED IN PRINCIPLE BY THE TRIBUNA L. THUS, IT WAS CONTENDED THAT NO PENALTY UNDER SECTION 271(1)(C) CAN BE IMPOSED ON THE ASSES SEE. RELIANCE WAS PLACED ON THE DECISION OF THE HONBLE RAJASTHAN HIGH COURT REPORTED IN 251 IT R 373 (RAJ) AND THAT OF AGRA BENCH OF THE TRIBUNAL IN ITA NOS.152 & 118/AGR/2006 IN THE CASE OF SMT. SUSHMA VARSHANEY IN WHICH CASE ALSO THE PENALTY UNDER THE SIMILAR CIRCUMSTANCES WA S DELETED. 5. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS MAD E BY BOTH THE PARTIES. WE NOTED THAT IN THIS CASE DURING THE COURSE OF SURVEY A ROUGH NOTE BOOK WAS FOUND FOR THE PERIOD 24.10.1998 TO 29.12.1998 I.E. FOR 70 DAYS. THE A.O. WORKED OUT T HE SALES AT RS.3,30,809/-. ON THIS BASIS, HE 8 ESTIMATED THE TURNOVER FOR THE WHOLE PREVIOUS YEAR AT RS.17,24,932/- WHICH WERE FURTHER INCREASED BY 25% AND THE TOTAL SALES WERE FIXED AT RS.21,56,165/-. THE A.O. MADE AN ADDITION @ 10% AMOUNTING TO RS.1,69,727/- BY WAY OF NET PROFIT ON THE SALE WHICH WAS ULTIMATELY REDUCED BY THE TRIBUNAL AT RS.10,968/-. THE OTHER ADDITION WHICH WAS MADE RELATES TO THE UNDISCLOSED STOCK FOUND IN SURVEY. THE A.O. MADE AN ADDITION O F RS.8,25,000/- WHILE THE TRIBUNAL CONFIRMED THE ADDITION TO RS.3,50,000/-. THE A.O. LEVIED THE PENALTY ON THE ADDITION OF RS.3,50,000/- AND RS.10,968/- WHICH WAS SUSTAINED B Y THE CIT(A). WHILE IMPOSING THE PENALTY, THE A.O. UNDER PARA NO.6 OF HIS ORDER OBSERVED AS U NDER :- IN VIEW OF THE ABOVE FACTS, I AM SATISFIED THAT T HE ASSESSEE HAS CONCEALED PARTICULARS OF HIS INCOME TO THE TUNE OF RS.4,60,96 8/- AND INACCURATE PARTICULARS OF SUCH INCOME HAS ALSO BEEN FURNISHED WITHOUT ANY REASONABLE CAUSE. 6. SECTION 271(1)(C) READS AS UNDER :- 271.(1) IF THE ASSESSING OFFICER OR THE COMMISSION ER (APPEALS) [OR THE COMMISSIONER] IN THE COURSE OF ANY PROCEEDINGS UNDE R THIS ACT, IS SATISFIED THAT ANY PERSON - (A) .. (B) .. (C) HAS CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHED INACCURATE PARTICULARS OF SUCH INCOME, OR (D) .. HE MAY DIRECT THAT SUCH PERSON SHALL PAY BY WAY OF PENALTY, - EXPLANATION 1- WHERE IN RESPECT OF ANY FACTS MATERI AL TO THE COMPUTATION OF THE TOTAL INCOME OF ANY PERSON UNDER THIS ACT, - (A) SUCH PERSON FAILS TO OFFER AN EXPLANATION OR OF FERS AN EXPLANATION WHICH IS FOUND BY THE ASSESSING OFFICER OR THE COMMISSIONER (APPEA LS) OR THE COMMISSIONER TO BE FALSE OR 9 (B) SUCH PERSON OFFERS AN EXPLANATION WHICH HE IS N OT ABLE TO SUBSTANTIATE AND [FAILS TO PROVE THAT SUCH EXPLANATION IS BONA FIDE AND THA T ALL THE FACTS RELATING TO THE SAME AND MATERIAL TO THE COMPUTATION OF HIS TOTAL INCOME HAV E BEEN DISCLOSED BY HIM], THEN, THE AMOUNT ADDED OR DISALLOWED IN COMPUTING T HE TOTAL INCOME OF SUCH PERSON AS A RESULT THEREOF SHALL, FOR THE PURPOSES OF CLAUSE (C ) OF THIS SUB-SECTION BE DEEMED TO REPRESENT THE INCOME IN RESPECT OF WHICH PARTICULAR S HAVE BEEN CONCEALED. 7. FROM THE PERUSAL OF THE AFORESAID SECTION, IT IS APPARENT THAT PENALTY U/S 271(1)(C ) IS LEVIABLE IF THE A.O. IS SATISFIED IN THE COURSE OF ANY PROCEEDINGS UNDER THIS ACT THAT ANY PERSON HAS CONCEALED THE PARTICULARS OF HIS INCOME OR FURN ISHED INACCURATE PARTICULARS OF THE INCOME. THE PENALTY PROCEEDINGS AND THE ASSESSMENT PROCEEDI NGS, BOTH ARE DIFFERENT. EXPLANATION 1 TO SECTION 271(1)(C) STATES THAT THE AMOUNT ADDED OR D ISALLOWED IN COMPUTING THE TOTAL INCOME OF THE ASSESSEE SHALL BE DEEMED TO BE THE INCOME IN RE SPECT OF WHICH PARTICULARS HAVE BEEN CONCEALED. THIS DEEMING PROVISION IS NOT ABSOLUTE ONE BUT IS REBUT TABLE ONE. IT ONLY SHIFTS THE ONUS ON THE ASSESSEE. EXPLANATION 1 REFERS TO THE TWO SITUATIONS IN WHICH PRESUMPTION OF THE CONCEALMENT OF THE PARTICULARS OF INCOME IS DEEMED. THE FIRST SITUATION IS WHERE THE ASSESSEE IN RESPECT OF ANY FACT MATERIAL TO THE COMPUTATION OF HIS TOTAL INCOME FAILS TO OFFER AN EXPLANATION OR OFFERS AN EXPLANATION, WHICH IS FOUND BY THE A.O. O R THE COMMISSIONER TO BE FALSE. THE SECOND SITUATION IS WHERE THE ASSESSEE IN RESPECT OF ANY F ACTS MATERIAL TO THE COMPUTATION OF HIS TOTAL INCOME OFFERS AN EXPLANATION, WHICH, THE ASSESSEE I S NOT ABLE TO SUBSTANTIATE AND ALSO FAILS TO PROVE THAT SUCH EXPLANATION WAS BONAFIDE ONE AND TH AT ALL THE FACTS RELATING TO THE COMPUTATION OF TOTAL INCOME HAVE BEEN DISCLOSED BY HIM. THE PRESU MPTION AVAILABLE UNDER EXPLANATION TO SECTION 271(1)(C), CANNOT BE DRAWN UNLESS THE CASE OF THE ASSESSEE FALLS UNDER EITHER OF THE CLAUSES (A) OR (B). 10 8. IN THIS CASE, WE NOTED THAT THE A.O. HAS NOT BRO UGHT OUT ANY SPECIFIC CHARGE FOR WHICH THE PENALTY HAS BEEN IMPOSED ON THE ASSESSEE UNDER SECT ION 271(1)(C) OF THE ACT. HE HAS NOT BROUGHT OUT WHETHER THE ASSESSEE HAS CONCEALED THE PARTICUL ARS OF INCOME OR WHETHER THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF INCOME. 9. WE HAVE GONE THROUGH THE DECISION OF THE GUJARAT HIGH COURT IN THE CASE OF NEW SORATHIA ENGINEERING CO. LTD., 282 ITR 642, IN WHICH IT WAS HELD AS UNDER: IT IS INCUMBENT UPON THE ASSESSING OFFICER TO STATE WHETHER THE PENALTY WAS BEING LEVIED FOR CONCEALMENT OF PARTICULARS OF INCOME BY THE ASSESSEE OR WHETHER ANY INACCURATE PARTICULARS OF INCOME HAD BE EN FURNISHED BY THE ASSESSEE. HELD, THAT THE PENALTY ORDER AND THE ORDER OF THE C OMMISSIONER (APPEALS) SHOWED THAT NO CLEAR CUT FINDING HAD BEEN REACHED. THE TRI BUNAL HAD FAILED TO APPRECIATE THIS LEGAL. ISSUE. THE RATIO IN CIT V. MANU ENGINE ERING WORKS 132 ITR 306(GUJ) WAS APPLICABLE AND THE ORDER OF PENALTY COULD NOT B E UPHELD BY THE TRIBUNAL. THE ORDER WAS INVALID. 10. WE NOTED THAT SIMILAR VIEW HAS BEEN TAKEN BY A BENCH OF ITAT DELHI IN ITA NO.2275/DEL/2009 IN THE CASE OF RAJ RANI MITTAL TO WHICH THE UNDERSIGNED IS THE AUTHOR. SINCE THE A.O. HAS NOT BROUGHT OUT ANY SPECIFIC CHARGE WH ETHER THE PENALTY HAS BEEN IMPOSED ON CONCEALMENT OF INCOME OR FOR FURNISHING OF INACCURA TE PARTICULAR OF INCOME. IN OUR VIEW, THE PENALTY CANNOT BE SUSTAINED. WE HAVE ALSO GONE THR OUGH THE DECISION OF THIS BENCH IN ITA NO.296/AGR/2007 IN THE CASE OF SHRI CHANDRA SHEKHAR GUPTA VS. ITO AND ITO VS. CHHAIL BEHARI REPORTED IN 20 DTR (AGRA) 453 AND NOTED THAT THE CA SE OF THE ASSESSEE IS ALSO COVERED BY THOSE DECISIONS. WE ACCORDINGLY SET ASIDE THE ORDER OF T HE CIT(A) AND DELETE THE PENALTY IMPOSED UNDER SECTION 271(1)(C) OF THE ACT. EVEN ON MERIT, WE NOTED THAT THE PENALTY CANNOT BE SUSTAINED 11 AS RELIANCE HAS BEEN MADE IN THE PENALTY PROCEEDING S MERELY ON THE ADDITIONS SUSTAINED IN APPELLATE PROCEEDINGS. THE TRIBUNAL HAS SUSTAINED THE ADDITION ONLY ON ESTIMATE BASIS. THE ASSESSEE HAS SUBMITTED THE EXPLANATION WHICH WAS NO T FOUND TO BE FALSE. FALSE IS OPPOSITE TO THE TRUE AND ONCE THE ASSESSEE HAS SUBMITTED THE EXPLAN ATION, THE ONUS GETS SHIFTED ON THE REVENUE TO PROVE THAT THE EXPLANATION IS FALSE. THE PENALTY P ROCEEDINGS AND THE ASSESSMENT PROCEEDINGS BOTH ARE DIFFERENT. HONBLE ALLAHABAD HIGH COURT H AS HELD IN THE CASE OF CIT VS. MATA PRASASD, 278 ITR (ALL) THAT IT IS SETTLED THAT THE FINDING R ECORDED ON THE QUANTUM SIDE IN THE ASSESSMENT ORDER IS ONLY A PIECE OF EVIDENCE AND THE TRIBUNAL IS WELL WITHIN ITS JURISDICTION TO RECORD FRESH FINDINGS IN PENALTY PROCEEDINGS AND IT WILL NOT AMO UNT TO REVIEWING OF ITS EARLIER ORDER. WE ACCORDINGLY DELETE THE PENALTY. 11. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS ALLOWED. (ORDER PRONOUNCED IN THE OPEN COURT ON 25.06.2010). SD/- SD/- (R.K. GUPTA) (P.K. BANSAL) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: AGRA DATE: 25 TH JUNE, 2010. PBN/* COPY OF THE ORDER FORWARDED TO: 1. APPELLANT 2. RESPONDENT BY ORDER 3. CIT CONCERNED 4. CIT (APPEALS) CONCERNED 5. DR, ITAT, AGRA BENCH, AGRA 6. GUARD FILE ASSIST ANT REGISTRAR INCOME-TAX APPELLATE TRIBUNAL, AGRA TRUE COPY