Maltiwal Duplex (P) Ltd, Kashipur V. ACIT, Kashipur

ITA 670/DEL/2009

• Counselvise Citation: [2009] 114 COUNSELVISE.COM (IT) 5593 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-01-2009
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 13-01-2010
• Assessment Year: 2005-2006
• Appeal Filed On: 23-02-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: G S SAHOTA
• Keywords: Depreciation; Tax effect
• Section: 271(1)(c)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : E : NEW DELHI BEFORE SHRI I.P. BANSAL, JUDICIAL MEMBER AND SHRI A.K. GARODIA, ACCOUNTANT MEMBER ITA NO. 670/DEL/2009 ASSESSMENT YEAR : 2005-06 MALTIWAL DUPLEX (P) LTD., VILL. GANGAPUR GOSAIN, KUNDESHWARI (KASHIPUR), DISTT. U.S. NAGAR. PAN : AABFM1457E VS. ACIT, KASHIPUR. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI K. SAMPATH, ADVOCATE REVENUE BY : SHRI G.S.SAHOTA, SR.DR. ORDER THIS IS AN APPEAL FILED BY THE ASSESSEE. IT IS DI RECTED AGAINST THE ORDER OF THE CIT (A) DATED 10 TH JULY, 2008 FOR ASSESSMENT YEAR 2005-06. GROUNDS O F APPEAL READ AS UNDER:- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE CIT (A) ERRED IN CONFIRMING THE PENALTY UN DER SECTION 271(1)(C) IN A SUM OF RS.16,75,533/- OUT OF A SUM O F RS.19,18,895/- AS ORIGINALLY IMPOSED. THE ORDER BEING ARBITRARY AND UNLAWFUL, IS PRAYE D TO BE QUASHED WITH DIRECTIONS FOR RELIEF TO THE APPELLANT . 2. THE RETURN OF INCOME IN THE PRESENT CASE WAS FIL ED AT A LOSS OF RS.2,38,31,817/- WHICH WAS ASSESSED AT A NET LOSS O F RS.38,83,654/-. THE ASSESSEE IS A PRIVATE LIMITED COMPANY ENGAGED IN TH E MANUFACTURE OF PAPER BOARD. DURING THE COURSE OF MANUFACTURING THE ASSE SSEE REQUIRED TO BURN HUSK AS FUEL. THE ASSESSING OFFICER NOTICED THAT THE AS SESSEE HAS BEEN PURCHASING ITA NO.670/DEL/2009 2 HUSK FROM VARIOUS PERSONS AND OUT OF SUCH PURCHASES A SUM OF RS.34,11,676/- WAS OUTSTANDING UNDER THE HEAD CREDITORS OF FUEL. THE DETAILS AS GIVEN IN THE ASSESSMENT ORDER ARE AS UNDER:- NAME OUTSTANDING LIABILITY MOHD. ASIL AHMAD RS.1,84,046.00 MOHD. IRFAN RS.3,03,064.00 ASHOK KUMAR RS.2,29,630.00 ASLAM RS.2,24,693.00 HABIBULLHA RS.1,37,535.00 HANEEF RS.2,90,900.00 LAKHVINDER SINGH RS.2,66,626.00 NASEEM RS.1,90,881.00 NAZAKAT RS.3,02,163.00 RAIS AHMAD RS.3,53,169.00 RIYASAT ALI RS.3,03,544.00 SUHAIL RS.4,16,358.00 YASSEN ALI RS.2,09,067.00 TOTAL RS.34,11,676.0 0 3. THE ASSESSEE WAS REQUIRED TO EXPLAIN AND IT WAS SUBMITTED THAT VOLUME OF ASSESSEES PRODUCT WAS SOLD THROUGH FUEL AND WASTE PAPER SUPPLIERS AND TO BE ON THE SAFER SIDE THE ASSESSEE MADE A POLICY TO RET AIN THE PAYMENT OF ITS SUPPLIERS THROUGH WHOM THE PRODUCTS OF THE COMPANY WAS SOLD TILL REALIZATION OF ITS SALES. THE AO MADE INQUIRIES WHICH, ACCORDING TO THE AO REVEALED THAT COMMON PRACTICE IN THE LINE OF BUSINESS OF THE ASSE SSEE WAS THAT SUPPLIERS OF HUSK ARE NORMAL PERSONS NOT HAVING SOUND FINANCIAL BACKGROUND AND PURCHASES ARE MADE IN CASH BY THE PAPER INDUSTRY. THE SUPPLI ERS ARE NOT ASSESSED TO INCOME-TAX AND, THEREFORE, THEIR FINANCIAL CREDENTI ALS WERE NOT ESTABLISHED. THE ASSESSEE WAS REQUIRED TO PRODUCE HUSK SUPPLIERS FOR EXAMINATION OUT OF WHICH THREE HUSK SUPPLIERS WERE PRODUCED. THEY WERE EXAM INED ON OATH AND THE ITA NO.670/DEL/2009 3 FINDINGS OF THE AO AS RECORDED IN THE ASSESSMENT OR DER WITH REGARD TO EXAMINATION OF THESE THREE HUSK SUPPLIERS ARE AS UN DER:- MOHD NAZAKAT S/O SHRI ABDUL GAFFAR, THAKURDWARA : SUPPLIES HUSK TO PAPER MILLS AND HAS 4 ACRES OF AGRICULTURAL LAND. FAMILY CONSISTS OF SELF, HIS WIFE AND TWO CHILDREN OF AGE 3 YEARS AND 2 YEARS. PURCHASES HUSK FROM PETTY SELLERS ON CASH P AYMENT AND SUPPLIES THE SAME ON CREDIT. SUPPLIED HUSK OF APPR OXIMATELY RS.8.00 LACS TO M/S MULTIWAL DUPLEX (P) LTD. AND GO T RS.3.00 LACS ONLY UPTO MARCH, 05. STATED THAT HE GOT THE REMAIN ING PAYMENT IN INSTALLMENT UPTO JUNE, 2005. HE OR HIS FAMILY MEMB ERS DOES NOT HAVE ANY BANK ACCOUNT. HE IS NOT INCOME TAX ASSESS EE. HANIF S/O SHRI ISHAQ HUSSAIN : HE IS A RESIDENT OF VILLAGE SULTANPUR PATTI, BAZPUR. DOES AGRICULTURAL OPERATI ON ON BATAI BASIS AND MAINLY SUPPLIES HUSK. FAMILY CONSISTS OF SELF, HIS WIFE AND TWO CHILDREN OF AGE 7 YEARS AND 4 YEARS. DURING THE YE AR UNDER CONSIDERATION HE PURCHASED HUSK FROM PETTY SUPPLIER S IN CASH AND SUPPLIED HUSK OF RS.10.00 LACS TO M/S MULTIWAL DUPL EX (P) LTD. HE DOES NOT KEEP ANY ACCOUNT OR DOCUMENT REGARDING SUP PLY OF HUSK AND PAYMENT FROM PAPER MILLS EXCEPT WEIGH BRIDGE SL IP. HE DOES NOT HAVE ANY BANK ACCOUNT. HE PURCHASES HUSK FROM P ETTY SUPPLIERS ON CASH PAYMENT. HE GOT PAYMENT OF RS.7. 00 LACS UPTO MARCH, 2005 AGAINST SUPPLY OF RS.10.00 LACS. HE FU RTHER STATED THAT HE GOT THE REMAINING PAYMENT UPTO THE MONTH OF JUNE , 2005. HE IS NOT AN INCOME TAX ASSESSEE. LAKHVINDER SINGH, S/O SHRI HARJEET SINGH : RESIDENT OF VILLAGE DHAKIA, HUNDESHWARI, KASHIPUR. FAMILY CONSISTS OF SELF, FATHER, HIS WIFE TWO DAUGHTER AND A SON. HE HAS NO OTHER SOURC E OF INCOME EXCEPT INCOME FROM HUSK SUPPLY. DURING THE YEAR, M OST OF HUSK WAS SUPPLIED TO M/S MULTIWAL DUPLEX (P) LTD. HE PU RCHASES HUSK FROM PETTY SELLERS ON CASH PAYMENT AND SUPPLY THE H USK ON CREDIT. HE SUPPLIED HUSK OF RS.4.50 LACS TO MULTIWAL DUPLEX (P) LTD. DURING F.Y. 2004-05 AND GOT PAYMENT OF RS.2.65 LACS UPTO M ARCH 2005. HE OR ANY OF HIS FAMILY MEMBER MAINTAINS ANY BANK A /C. HE IS NOT INCOME TAX ASSESSEE. ITA NO.670/DEL/2009 4 4. TAKING NOTE OF THIS EXAMINATION, THE AO OBSERVED THAT THE FOLLOWING POINTS ARE COMMON IN ALL THE STATEMENTS:- (I) THAT ALL THE SUPPLIERS ARE OF POOR FINANCIAL BA CKGROUND AND SOURCE OF LIVELIHOOD IS HUSK SUPPLY OR MEAGER AGRICULTURE PRA CTICE. (II) NO HUSK SUPPLIER IS HAVING BANK ACCOUNT IN ANY BANK. (III) THAT THESE PERSONS ARE INTERMEDIARY SUPPLIERS AND THEY USED TO PURCHASE HUSK FROM PETTY SELLERS ON CASH PAYMENT AN D PAID THEM THE PURCHASE PRICE OF HUSK REGULARLY. (IV) THAT NONE OF THESE SUPPLIERS MAINTAINED ANY KI ND OF ACCOUNT OR BOOK, DIARY, ETC. RELATED WITH HUSK SUPPLY. (V) THAT THE MAJOR SUPPLY OF HUSK BY THESE SUPPLIER S IN THE RELEVANT PREVIOUS YEAR WAS MADE TO M/S MULTIWAL DUPLEX PAPER BOARD LTD. 5 THUS, IT HAS BEEN HELD BY THE AO THAT SUPPLIES AR E NOT HAVING SOUND FINANCIAL CREDIBILITY. THEY MIGHT NOT HAVE BEEN IN A POSITION TO SUPPLY HUSK TO THE ASSESSEE WITHOUT RECEIVING PAYMENTS FROM THE ASSESS EE REGULARLY. THE ASSESSEE COULD NOT FURNISH ANY DOCUMENTARY EVIDENCE IN SUPPORT OF ITS CLAIM THAT THE ASSESSEE MARKETED THE VOLUME OF ITS PRODUCTS TH ROUGH ITS SUPPLIERS AND, HENCE, THE ASSESSEES CLAIM TO KEEP SOME PAYMENTS O F HUSK SUPPLIERS IS NOT TENABLE. IT WAS OBSERVED BY THE AO THAT DURING THE ASSESSMENT PROCEEDINGS FOR ASSESSMENT YEAR 2003-04, SIMILAR PAYMENTS WERE OUTS TANDING TO THE TUNE OF RS.36,34,790/- WHICH LIABILITY WAS FOUND BOGUS AND ON BEING CONFRONTED THE ASSESSEE HIMSELF AGREED TO SURRENDER THE OUTSTANDIN G LIABILITY SHOWN AS INCOME OF THE ASSESSEE FROM OTHER SOURCES. THEREFORE, THE AO OBSERVED THAT THE LIABILITY SHOWN BY THE ASSESSEE IN THE YEAR UNDER CONSIDERATI ON WAS A BOGUS LIABILITY AND ADDITION OF THE SAME WAS MADE. THE ADDITION WAS SU STAINED BY THE CIT (A) IN QUANTUM AND, THEREAFTER, THE ASSESSEE DID NOT FILE APPEAL IN QUANTUM. THE PENALTY PROCEEDINGS U/S 271(1)(C) WERE INITIATED AN D THE IMPUGNED PENALTY WAS ITA NO.670/DEL/2009 5 LEVIED VIDE ORDER DATED 31 ST JANUARY, 2007. IN RESPONSE TO SHOW CAUSE NOTICE F OR LEVY OF PENALTY, THE SUBMISSIONS OF THE ASSESSEE WA S AS UNDER:- THE RELIANCE HAS BEEN PLACED BY THE HONBLE ASSES SING OFFICER ON THE WRONGFUL ESTIMATE THAT THE HUSK SUPPLIERS HAVE A WEAKER FINANCIAL STANDING AND THEY CAN NOT SUPPLY HUSK ON CREDIT TO THE APPLICANT. WHILE CONTRARY, TO THE ESTIMATE, THESE HUSK SUPPLIERS HOLD A VERY SOUND FINANCIAL STANDING. THEY HOLD TH E AGRICULTURE FARMING AT THEIR OWN AND IN ORDER TO AVAIL THE OPPO RTUNITIES TO EARN ADDITIONAL INCOME, THEY IN FORM OF SMALL SYNDICATE (GROUP OF PERSON) INVEST THEIR SURPLUS AGRICULTURE SAVINGS IN TRADING OF HUSK SUPPLIES TO THE PAPER UNITS LIKE APPLICANT WHERE THEY GET ASSU RED AND PERMANENT HUSK SUPPLY ORDER. IN SUPPORT TO THIS ST ATEMENT, THE PERSONAL EVIDENCES OF HUSK SUPPLIERS WERE ALSO ADDU CED BY THE ASSESSEE. FURTHER, THE BOOKS OF A/C WERE PRODUCED BY THE ASSESSEE TO SHOW THE STATEMENT OF A/C OF EACH HUSK SUPPLIER WHICH WERE ALSO VOUCHED AND VERIFIED BY YOUR HONOUR. NO DISCREPANCY IN THE A/C OF ANY HUSK SUPPLIER WAS NOTICED DURING THE ASSESSMENT PROCEEDINGS. 6. THE AO OBSERVED THAT REPLY SUBMITTED BY THE ASSE SSEE WAS NOT TENABLE AND RELYING ON THE FINDINGS GIVEN IN THE ASSESSMENT ORDER, THE AO IMPOSED 150% PENALTY ON THE TAX SOUGHT TO BE EVADED. 7. SIMILARLY, THERE WERE ALSO DISALLOWANCES ON ACCO UNT OF EXCESSIVE DEPRECIATION AMOUNTING TO RS.2,43,362/- ON WHICH AL SO PENALTY @ 150% IS IMPOSED BY THE AO. THE PENALTY ON THE EXCESS CLAIM OF DEPRECIATION HAS BEEN DELETED BY THE CIT (A) AND SO AS IT RELATES TO PENA LTY ON OUTSTANDING BALANCE SHOWN IN RESPECT OF HUSK SUPPLIER, THE PENALTY HAS BEEN SUSTAINED BY THE CIT (A) ALMOST ON THE SIMILAR LINES ON WHICH THE PENALTY WA S LEVIED BY THE AO. THE ASSESSEE IS AGGRIEVED BY THE SUSTENANCE OF PENALTY, HENCE, IN APPEAL. 8. AFTER NARRATING THE FACTS, IT WAS SUBMITTED BY T HE LD. AR THAT THE FIRST TECHNICAL OBJECTION OF THE ASSESSEE IS THAT THE NOT ICES ISSUED FOR LEVY OF PENALTY ARE NOT A VALID NOTICE AS THE RELEVANT COLUMN IN TH E NOTICE HAS NOT BEEN EITHER STRUCK OR MARKED. HE CONTENDED THAT PENALTY NOTICE SHOWS THAT THE PENALTY IS LEVIABLE FOR CONCEALMENT OF PARTICULARS OF INCOME A ND ALSO FOR FURNISHING ITA NO.670/DEL/2009 6 INACCURATE PARTICULARS OF SUCH INCOME. HE SUBMITTE D THAT THE AO HAS TO BE SPECIFIC WHEN IT IS A CASE OF LEVY OF CONCEALMENT P ENALTY THAT WHETHER IT IS A CASE OF CONCEALMENT OF PARTICULARS OF INCOME OR IT IS A CASE OF FURNISHING INACCURATE PARTICULARS OF SUCH INCOME. THE LD. AR HAS PLACED BEFORE US COPY OF THE NOTICES ISSUED BY THE AO DATED 20 TH JULY, 2006 AND 20 TH OCTOBER, 2006 IN WHICH THE AO HAS NOT INDICATED THAT WHAT WAS THE FAULT OF THE AS SESSEE FOR WHICH THE CONCEALMENT PENALTY WAS TO BE LEVIED. THUS, IT WAS PLEADED THAT THE NOTICE ITSELF BEING NOT IN ACCORDANCE WITH THE LAW, THE PENALTY L EVIED COULD NOT BE SUSTAINED. 9. IN THE ALTERNATIVE, ON MERITS, IT WAS SUBMITTED THAT IT IS MENTIONED BY THE AO HIMSELF THAT THIS IS A PRACTICE PREVAILING IN TH E TRADE OF THE ASSESSEE TO PURCHASE HUSK FROM NORMAL PERSONS NOT HAVING SOUND FINANCIAL BACKGROUND AND SUCH PURCHASES ARE MADE IN CASH. IT WAS SUBMITTED THAT THE ASSESSEE IS A LOSS MAKING COMPANY WHICH WAS REFERRED TO BIFR. IT WAS SUBMITTED THAT ACCORDING TO USUAL PRACTICE, THE ASSESSEE WAS RETAINING CERTAIN AMOUNT OUT OF THE PAYMENT OF HUSK SUPPLIED WHICH STANDS TO THEIR CREDIT AT THE E ND OF THE FINANCIAL YEAR, BUT THE SAME WAS PAID IMMEDIATELY AFTER THE EXPIRY OF THE F INANCIAL YEAR ACCORDING TO THE AVAILABILITY OF THE FUND. HE SUBMITTED THAT THREE HUSK SUPPLIERS WERE EXAMINED BY THE AO AND ALL OF THEM HAVE ADMITTED THAT THEY HAVE SUPPLIED THE HUSK TO THE ASSESSEE AND THEY ARE EITHER OWNING THE AGRICULTURA L LAND OR THEY ARE CARRYING ON THE AGRICULTURAL OPERATION ON BATAI BASIS AND THEY ADMITTED THAT THEY PURCHASE HUSK FROM PETTY SELLERS ON CASH PAYMENT AND SUPPLY THE SAME ON CREDIT. IT WAS ALSO STATED BY THEM THAT OUT OF THE TOTAL SUPPLIES, ONLY PART OF THE SAME WAS REMAINING TO BE PAID IN MARCH AND THE BALANCE AMOUN T WAS RECEIVED IN INSTALMENTS UPTO JUNE. READING FROM THE FINDINGS O F AO ON EXAMINATION OF EACH OF THE HUSK SUPPLIER IT WAS SUBMITTED BY LD. AR THA T IN THE STATEMENT NOWHERE THE SUPPLIERS HAVE DENIED REGARDING SUPPLY OF HUSK TO T HE ASSESSEE. IT WAS SUBMITTED THAT IN THE CASE OF MOHD. ASIL AHMAD OUT OF SUPPLIE S OF RS.8 LAC, RS.3 LAC WERE PAID UPTO MARCH, 2005 AND THE REMAINING PAYMENT WAS MADE UPTO JUNE, 2005. IN THE CASE OF HANEEF AGAINST SUPPLIES OF RS.10 LAC , RS.7 LAC WAS PAID UPTO MARCH, 2005 AND THE BALANCE PAYMENT WAS MADE UPTO T HE MONTH OF JUNE, 2005 ITA NO.670/DEL/2009 7 AND SIMILAR IS THE POSITION WITH LAKHVINDER SINGH. HE SUBMITTED THAT HUSK IS BEING USED BY THE ASSESSEE AS A FUEL IN ITS MANUFAC TURING ACTIVITY. TOTAL HUSK SUPPLIED BY THESE SUPPLIERS IS CLAIMED AS A FUEL EX PENDITURE BY TAKING INTO ACCOUNT THE CLOSING BALANCE. NOWHERE IN THE ASSESS MENT ORDER THE AO HAS OBSERVED THAT SUCH FUEL EXPENSES CLAIMED BY THE ASS ESSEE WERE ON HIGHER SIDE OR WERE DISPROPORTIONATE. HE SUBMITTED THAT NO ADV ERSE MATERIAL HAS BEEN BROUGHT ON RECORD BY THE AO TO HOLD THAT FUEL EXPEN SES CLAIMED BY THE ASSESSEE WERE EITHER NON-GENUINE OR BOGUS. THE ADDITION HAS BEEN MADE ONLY FOR THE REASON THAT PART OF THE AMOUNT WAS OUTSTANDING IN T HE NAME OF THE PERSONS WHO HAVE SUPPLIED THE HUSK TO THE ASSESSEE. HE SUBMITT ED THAT OTHERWISE OTHER PART OF THE SUPPLIES MADE BY THOSE PERSONS WHICH WAS REC EIVED BY THEM IN THE RELEVANT ACCOUNTING YEAR HAS NOT BEEN DOUBTED BY TH E AO. HE SUBMITTED THAT DUE TO NON-AVAILABILITY OF FUNDS, CERTAIN PART PAYM ENTS OF HUSK SUPPLIES WERE KEPT PENDING WHICH WERE PAID IN THE NEXT FINANCIAL YEAR IN THE MONTH OF JUNE, 2005 AND IT IS PREVALENT PRACTICE OF THE TRADE. HE SUBM ITTED THAT AN EXPLANATION WAS FILED BY THE ASSESSEE STATING ALL THESE FACTS. THE PERSONS WERE ALSO EXAMINED BY THE AO. THE EXPLANATION OF THE ASSESSEE HAS NOT BE EN FOUND TO BE FALSE. THE ASSESSEE DID NOT FURNISH ANY INACCURATE PARTICULARS AND, THEREFORE, LD. CIT (A) WAS WRONG IN CONFIRMING THE PENALTY SIMPLY ON THE B ASIS OF FINDINGS GIVEN BY THE AO IN THE ASSESSMENT ORDER. IT WAS SUBMITTED THAT THE ASSESSEE HAVING FILED EXPLANATION WHICH IS NOT FOUND TO BE FALSE AND ASSE SSEE HAVING FURNISHED ALL THE NECESSARY PARTICULARS, THE SUSTENANCE OF PENALTY BY CIT (A) IS NOT IN ACCORDANCE WITH THE LAW. HE FURTHER SUBMITTED THAT NON-FILING OF QUANTUM APPEAL IN ITSELF IS NOT SUFFICIENT TO ESTABLISH THE CONCEALMENT AS THE ASSESSEE IS RUNNING IN LOSSES AND THERE IS NO TAX EFFECT, BUT THAT DOES NOT MEAN THAT CONCEALMENT PENALTY CAN BE LEVIED SIMPLY FOR THE REASON THAT NO APPEAL HAS BEEN FILED. 10. ON THE OTHER HAND, RELYING ON THE FINDINGS GIVE N BY THE AO IN HIS ORDER, AND, RELYING UPON THE FINDINGS GIVEN BY CIT (A), IT WAS PLEADED BY LD. DR THAT IT IS A FIT CASE WHERE LEVY OF PENALTY HAS BEEN CONFIRMED BY THE CIT (A). IT WAS SUBMITTED THAT THE ASSESSEE REMAINED UNABLE TO PROV E THE AMOUNT SHOWN AS ITA NO.670/DEL/2009 8 OUTSTANDING LIABILITY IN RESPECT OF FUEL SUPPLIERS AND, THEREFORE, THE ORDER OF THE CIT (A) SHOULD BE UPHELD. 11. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS IN THE LIGHT OF THE MATERIAL PLACED BEFORE US. THE ASSESSEE IS RUNNING A PAPER INDUSTRY IN WHICH HUSK IS USED AS FUEL. NOWHERE IN THE ASSESSMENT OR DER THE AO HAS DOUBTED THE GENUINENESS OF THE CLAIM OF THE ASSESSEE REGARDING FUEL EXPENSES. THE ONLY OBJECTION OF THE AO IS THAT THE AMOUNT SHOWN UNDER THE HEAD CREDITORS OF FUEL WAS NOT A GENUINE AMOUNT. IN ORDER TO VERIFY THE G ENUINENESS OF THE OUTSTANDING AMOUNT, THE AO HAS EXAMINED THREE OF SUCH CREDITORS WHO APPEARED BEFORE HIM. ALL OF THEM HAVE STATED THAT THEY HAVE BEEN SUPPLYI NG THE HUSK TO THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION. ALL OF THEM HA VE RECEIVED SUBSTANTIAL PAYMENT DURING THE YEAR ITSELF AND THE BALANCE PAYM ENT HAS BEEN ADMITTED TO BE RECEIVED BY THEM UPTO THE MONTH OF JUNE, 2005 I.E., THE DATE PRIOR TO FILING THE RETURN OF INCOME AS THE RETURN OF INCOME WAS FILED IN THE PRESENT CASE ON 23 RD OCTOBER, 2005. NO MATERIAL HAS BEEN BROUGHT ON RECO RD TO SUGGEST THAT THE STATEMENT GIVEN BY THOSE SUPPLIERS WAS FALSE AND TH EY DID NOT SUPPLY HUSK TO THE ASSESSEE. THE SUPPLIERS MAY BE OF POOR FINANCIAL B ACKGROUND, BUT THE SOURCE OF THEIR LIVELIHOOD HAS BEEN ACCEPTED BY THE AO BEING HUSK SUPPLY AND MEAGER AGRICULTURAL PRACTICE. THE FINDINGS OF THE AO FOR MAKING ADDITION MAY OR MAY NOT BE SUFFICIENT, BUT THESE FINDINGS CERTAINLY CANNOT BE CONSIDERED TO BE SUFFICIENT FOR LEVY OF CONCEALMENT PENALTY AS THE ASSESSEE HAS NEI THER CONCEALED THE PARTICULARS OF HIS INCOME NOR FURNISHED INACCURATE PARTICULARS OF INCOME AS ALL THE NECESSARY PARTICULARS WERE DISCLOSED BY THE ASSESSE E WHICH WERE EVEN VERIFIED BY THE AO MAY BE ON TEST CHECK BASIS. CONCEALMENT PENALTY UNDER EXPLANATION 1 CAN BE LEVIED IN A CASE WHERE THE ASSESSEE FAILS TO OFFER AN EXPLANATION OR OFFERS AN EXPLANATION WHICH IS FOUND TO BE FALSE BY THE CONCERNED AUTHORITY OR IN A CASE WHERE THE ASSESSEE IS NOT ABLE TO SUBSTANTIATE HIS EXPLANATION AND FAILS TO PROVE THAT SUCH EXPLANATION IS BONA FIDE AND THAT A LL THE FACTS RELATING TO THE SAME AND MATERIAL TO THE COMPUTATION OF ITS TOTAL INCOME WAS DISCLOSED BY HIM. ITA NO.670/DEL/2009 9 12. ACCORDING TO THE FACTS OF THE PRESENT CASE, AN EXPLANATION WAS FILED BY THE ASSESSEE. THE EXPLANATION OF THE ASSESSEE IS REPRO DUCED IN THE IMPUGNED PENALTY ORDER AND ALSO IN PARA 5 OF THE ORDER. IT IS NOT THE CASE OF REVENUE THAT THE PERSONS IN WHOSE NAMES THE BALANCE AMOUNT WAS O UTSTANDING WERE NOT KNOWN. SOME OF THESE PERSONS WERE EXAMINED BY THE AO. THEY HOLD AGRICULTURAL FARMING AT THEIR OWN OR ON BATAI BASIS AND IN ORDER TO AVAIL THE OPPORTUNITIES TO EARN ADDITIONAL INCOME, THEY IN THE FORM OF SMALL S YNDICATE (GROUP OF PERSON) INVEST THEIR SURPLUS AGRICULTURE SAVINGS IN TRADING OF HUSK SUPPLIES TO THE PAPER UNITS LIKE APPLICANT. THE BOOKS OF ACCOUNT WERE PRO DUCED BY THE ASSESSEE TO SHOW THE STATEMENT OF ACCOUNT OF EACH OF THE HUSK S UPPLIER WHICH WERE ALSO VOUCHED AND VERIFIED. THERE WAS NO DISCREPANCY IN THE ACCOUNT OF ANY HUSK SUPPLIER. THEREFORE, EXPLANATION OF THE ASSESSEE H AS NOT BEEN FOUND TO BE FALSE BY THE AO AND THE EXPLANATION WHICH HAS BEEN SUBSTA NTIATED BY THE ASSESSEE BY PRODUCING THE HUSK SUPPLIERS WHICH CONFIRMED THE TR ANSACTIONS ENTERED INTO BY THEM WITH THE ASSESSEE AND NO ADVERSE MATERIAL HAS BEEN BROUGHT ON RECORD BY THE AO TO HOLD THAT THE STATEMENT GIVEN BY THEM VIS --VIS THE STATEMENT OF ACCOUNTS FURNISHED BY THE ASSESSEE WITH RESPECT TO HUSK SUPPLIES WAS INCORRECT OR FALSE. 13. THEREFORE, LOOKING INTO THE ENTIRETY OF FACTS, WE ARE OF THE OPINION THAT IT IS NOT A CASE WHERE THE ASSESSEE HAS FAILED TO OFFER A N EXPLANATION. THE EXPLANATION FURNISHED BY THE ASSESSEE HAS NOT BEEN FOUND TO BE FALSE. THE ASSESSEE HAS BEEN ABLE TO SUBSTANTIATE ITS EXPLANAT ION. THE EXPLANATION OF THE ASSESSEE WAS BONA FIDE AS AGAINST THE STATEMENT OF HUSK SUPPLIERS NO MATERIAL HAS BEEN BROUGHT ON RECORD BY THE AO THAT THE EXPLA NATION OF THE ASSESSEE WAS NOT BONA FIDE. ALL THE FACTS WERE DISCLOSED BY THE ASSESSEE WHICH WERE MATERIAL TO THE COMPUTATION OF ITS TOTAL INCOME AS DETAILS I N RESPECT OF EACH HUSK SUPPLIER WAS FILED BY THE ASSESSEE BEFORE THE AO. THE ACCOUN TS MAINTAINED BY THE ASSESSEE ARE ALSO NOT REJECTED AND NO DISCREPANCY W HATSOEVER HAS BEEN FOUND IN THE ACCOUNTS MAINTAINED BY THE ASSESSEE WITH REG ARD TO HUSK SUPPLY. ITA NO.670/DEL/2009 10 THEREFORE, WE FIND NO JUSTIFICATION IN LEVY OF PENA LTY AND WE HOLD THAT PENALTY HAS WRONGLY BEEN CONFIRMED BY LD. CIT (A). WE DELETE T HE SAME. 14. BEFORE PARTING WE MAY MENTION HERE THAT CONSIDE RING THE FACTS OF THE PRESENT CASE AND APPLYING THE STATUTORY PROVISIONS RELATING TO CONCEALMENT PENALTY, WE HAVE HELD THAT IT IS NOT A FIT CASE WHE RE LEVY OF CONCEALMENT PENALTY CAN BE HELD JUSTIFIED, THEREFORE, WE DO NOT CONSIDE R IT NECESSARY TO GO INTO THE TECHNICAL ASPECTS OF THE MATTER ACCORDING TO WHICH IT HAS BEEN THE CONTENTION OF LD. AR THAT ON THE BASIS OF DEFECTIVE NOTICE ALSO T HE PENALTY CANNOT BE HELD TO BE JUSTIFIED. 15. THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. . 16. THE ORDER PRONOUNCED IN THE OPEN COURT ON 29.01 .2010. [A.K. GARODIA] [I.P. BANSAL] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED, 29.01.2010. DK COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT TRUE COPY BY ORDER, DEPUTY REGISTRAR, ITAT, DELHI BENCHES